Spending Round 2019

Wednesday 25th September 2019 Lords Chamber

Motion to Take Note

17:09

Moved by

[Lord Duncan of Springbank]

That this House takes note of the Spending Round 2019.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)]

My Lords, I would like to begin by paying tribute to my noble friend Lord Young, who as ever is in his place; I would much rather that he was in my place, but here we are. He has an extraordinary record of five decades of service—a parliamentary career that is almost unrivalled in recent history—an extraordinary achievement. I can assure the noble Lord that I would welcome him back with open arms. I would also like to thank my colleagues, the noble Earl, Lord Courtown, and the noble Lord, Lord Bethell, for helping with this particular brief. It has its own challenges.

I want to say also that, thanks to the decisions that the coalition and Conservative Governments have taken since 2010 and the hard work of the British people, we can now afford to turn the page on austerity and move forward from a decade of recovery to a decade of renewal. This spending round does that by delivering on the people’s priorities across the NHS, education and police, giving certainty to all departments—and I emphasise all departments—about their budgets for the coming year, and clearing the decks for government to focus on delivering Brexit.

Next year, the Government will add £13.4 billion to the plans for total public spending, including £1.7 billion added to capital spending. Those extra funds take the real increase in day-to-day spending to £13.8 billion, or 4.1%. That means that we are delivering the fastest increase in day-to-day spending for 15 years. Importantly, we will do so while continuing to meet our existing fiscal rules. That additional funding will ensure we build the Britain of tomorrow: a safer Britain; a healthier Britain; a better-educated Britain; and a more global Britain.

In terms of safer Britain, we are reducing crime. That must be one of the Government’s top priorities. At this spending round, the Government announced a 6.3% real-terms increase in Home Office spending, the biggest in 15 years. That will mean £750 million to fund the first year of our plan to recruit 20,000 new police officers. We will start recruiting immediately, with an extra £45 million this year so that that recruitment can start at once. Further, the Government will carry out a formal review into how we handle serious and organised crime, ahead of the full spending review next year. We will provide additional funding to tackle online child sexual exploitation. We will double the places of worship fund to ensure greater protection for synagogues, mosques and other religious buildings. We announced more investment in our criminal justice system to address increased demand, with a 5% real-terms increase in the resource budget for the Ministry of Justice, an increase in their capital budget to £620 million next year and an extra £80 million for the Crown Prosecution Service.

In terms of creating a healthier Britain, this spending round provides further support for our NHS. Last year, we increased NHS spending by an extra £34 billion a year by 2023-24. In this spending round, we affirm our commitment to the NHS with a £6.2 billion increase in NHS funding for the next year. We are investing more in training and professional development for our doctors and nurses, with over £2 billion of new capital funding—starting with an upgrade to 20 hospitals this year and £250 million for ground-breaking new artificial intelligence technologies to help solve some of healthcare’s toughest challenges. In addition, councils will have access to new funds of £1.5 billion for social care from next year. Councils will also see the largest increase in local government spending power since 2010 and on top of the existing £2.5 billion of social care grants already announced.

On ensuring that we have a better-educated Britain, alongside providing for the health of our people, the next most important task of government is to educate the next generation. That is why we are delivering on our pledge to increase school spending. By the financial year 2022-23, we will have increased funding by £7.1 billion in cash terms compared to this year. Next year, we will make sure that day-to-day funding for every school can rise at least in line with inflation, with the schools that have been historically underfunded benefiting the most. That funding will mean that teachers’ starting salaries can rise to £30,000 per year by 2022-23, to ensure that we can attract more of the best graduates to the teaching profession. We will provide over £700 million more to support children and young people with special educational needs next year—an 11% increase compared to this year. This spending round also provides a £400 million increase in 16 to 19 year-old education funding next year, and the Government will increase early years spending by £66 million.

Turning to other departments, this spending round took bold action right across government. We have made available an additional £2.2 billion of funding for the Ministry of Defence, a real-terms increase of 2.6% for their budget from next year. We have increased our support for the Diplomatic Service, with £90 million of funding for 1,000 diplomats and overseas staff, and 14 new and upgraded diplomatic posts. We have ensured that we continue to protect our environment, with new funding to tackle the crisis in air quality. We are increasing our funding for biodiversity and to help develop new programmes to help meet our net zero commitment by 2050. We have also provided more than £200 million to transform bus services around the country.

Let me stress that every government department has had its budget for day-to-day spending increased at least in line with inflation for the first time since the spending review of 2002. As for the wider infrastructure and fiscal framework, we will build on the announcements we made in the spending round at the Budget before my right honourable friend the Chancellor will review our fiscal framework to ensure it meets the economic priorities of today, not the priorities of a decade ago. Central to the Government’s new economic plan will be rebuilding our national infrastructure to ensure that we invest in the long-term growth of this country. We will bring forward detailed plans at the Budget later this year alongside an ambitious strategy for new investment.

On that basis, I hope we can open what will be an interesting debate and perhaps a pleasant sorbet before the courses that are yet to come.

17:15

[Lord Tunnicliffe (Lab)]

My Lords, I welcome the noble Lord, Lord Duncan of Springbank, to his role—I am not sure how long he is going to occupy it. I join in his remarks about the noble Lord, Lord Young of Cookham, who filled the role for some months in an entertaining and very meaningful way. In this House, we do not have much of an impact on Treasury matters, but with his help we have had the odd little success and variation. That is the end of my nice words.

Before turning to the subject of this debate, it would be remiss of me not to acknowledge the circumstances in which it is taking place. The Supreme Court judgment issued yesterday morning was clear: the Prime Minister’s advice to Her Majesty the Queen was unlawful. Those are words I never thought I would say out loud, and I am sure that many noble Lords across the House share my deep discomfort with the present situation. The attempt to prorogue Parliament was the latest in a long line of questionable decisions by the current occupants of Downing Street. It was a decision that the Labour Party opposed. The Prime Minister’s intention, to run down the clock and prevent Parliament taking action on Brexit, was clear to all. I am pleased that my noble friend the Leader of the Opposition and the leader of the Liberal Democrats declined to participate in the late-night prorogation ceremony. Their decision has been vindicated. In their determination to get their own way and try and force Brexit on 31 October or secure an early election, the Government tore up all the rulebooks.

So we find ourselves here today, opining on an unconventional one-year spending round that had been intended as the starting gun for a general election campaign. It is important to emphasise that, ordinarily, such an exercise is very important and provides central government departments with their allocations across multiple years. Doing this provides certainty for the public and those that serve us. It would normally be backed up with a revised economic forecast from the Office for Budget Responsibility. However, by dispensing with standard practice, the Chancellor has failed to provide the investment that our public services so badly need or to give departments any long-term security after years of cuts.

Despite claims that austerity is over, the truth is that this spending round is nothing more than a sticking plaster intended to mask years of mismanagement of our public services. Nowhere is this truer than in the case of the NHS and social care. More than half the funds given to the NHS had already been announced. Councils face a social care spending gap of £2.6 billion this year alone, and the additional funds come nowhere near reversing the £7 billion of cuts since 2010. Overall, the £13.8 billion announced earlier this month is less than a third of the £47 billion of cuts this Government have voted through since 2010. There was nothing for social security, despite there being yet more cuts to come. There was no meaningful help for low-income families. Indeed, the Joseph Rowntree Foundation argues that, despite the spin:

“Austerity isn’t over for the 14 million locked in poverty”.


The Women’s Budget Group claimed that this spending round,

“wasn’t enough to make up for the damage by 10 years of austerity, which has hit women, particularly lone parents, disabled and BME women the hardest”.

As my right honourable friend the shadow Chancellor said when responding to the Commons Statement earlier this year, this Government should,

“not insult the intelligence of the British people”.—[Official Report, Commons, 4/9/19; col. 189.]

They know that this was a stunt, and this is backed up by expert opinion, which quickly expressed concern that the promised funds may never materialise.

Changing economic conditions have substantially reduced the headroom available to the Chancellor, perhaps by £10 billion. As a result, the Institute for Fiscal Studies does not believe the commitment will fit within the Government’s fiscal framework once the OBR has produced and published its updated economic forecasts. The Resolution Foundation argued that the settlement is neither,

“consistent with the government’s fiscal rules nor well timed given the uncertainty about the nature of the UK’s imminent exit from the European Union”.

It is true that the Chancellor has announced his intention to review the fiscal framework with a view to easing constraints on borrowing, but this should have been done alongside a full spending review. Instead, we are left with the possibility that this flimsy document will, like the recent Prorogation order, simply be torn up at a later stage.

While we are critical of the Government’s approach to this spending round, we are by no means opposed to a fresh approach. We are clear that the best route to sustainable economic growth is to invest in our economy and public services. Our fiscal credibility rule means that a Labour Government will not borrow for day-to-day spending but will take advantage of low interest rates to support vital long-term infrastructure projects. Labour would provide much-needed capital funds to the NHS. We have already pledged an additional £8 billion for social care and to create a new national care service. Our national transformation fund and regional investment banks will work to support jobs while tackling the climate change emergency. They will help meet Labour’s commitment to reach zero emissions on an accelerated timetable by 2030. We will introduce a national education service to provide free and high-quality education to people of all ages, from cradle to grave. We will invest in infrastructure across the country, including drastically improving transport links across northern England through a Crossrail for the north.

That is the level of ambition this country needs. Such a programme would truly mark the end of austerity. It is, unsurprisingly, a level of adventure that is severely lacking from this Government. Nowhere is that clearer than in this spending round.

17:22

[Lord Fox (LD)]

My Lords, it seems like we were never away. In fact, if we listened to the Lord Speaker earlier, apparently we were not; we were here all along. I trust that the Minister did not have to break off a family holiday to be here, and I look forward to this debate.

The spending review was presented amid a febrile day in Parliament—a febrile day in a chaotic week—so a take-note debate would be something of a novelty were the Chancellor here, because quite frankly no one took any notice of the spending round when it was announced. It disappeared almost without trace. It should have been the Chancellor’s big day but, to be honest, No. 10 had already ridden roughshod over his moment. It selectively leaked the contents—contents which, in most cases, had been inserted by the Prime Minister’s chief of staff in the first place. Then at short notice, it cancelled his speech the weekend before. Finally, the announcement itself was eclipsed by all the unconstitutional activity that was going on around it. However, I have one concern. Since that time, the Chancellor seems not to have been seen in public. Perhaps the Minister can use this opportunity to assure your Lordships that Mr Javid is safe and well—that he is all right—because, frankly, we have seen no sign of him since this announcement was made. A take-note debate gives us a chance to scrutinise the Statement and, thanks to this unexpected debate, we now have that opportunity.

In truth, though, as the noble Lord, Lord Tunnicliffe, said, this spending round was never really intended as a serious projection of public finances. It is an uncosted manifesto, a launch for the next election, and its best-before date is before Christmas. If noble Lords had any doubt about that, the subsequent activities of the Prime Minister proved that this was the launch of an election campaign. Perhaps the most surreal was his speech in front of the police recruits in West Yorkshire, but each appearance, right up to his stunt at Whipps Cross Hospital, were part of a timetabled election launch.

That is one reason why we should suspect these numbers and the document that they appear in. The other is that they have been built on very shaky ground. This spending round was, in the words of the independent Office for Budget Responsibility in the letter that it sent to the Treasury Select Committee on 9 September,

“unusual in two respects: first, it covers only one full fiscal year”—

as has already been mentioned—

“second, the aggregate limits and departmental allocations have been announced together”,

making them very difficult to unpick. Due to the OBR’s primary legislation, it was not asked to issue a forecast because this spending round did not cover the statutory five years needed for a forecast. I am not the only person disturbed by that sidelining of the OBR; Ben Zaranko, research economist at the IFS, said:

“Making major fiscal announcements without new OBR forecasts risk a return to the bad old days when chancellors could make fiscal claims not based on the best available independent forecasts”.


His colleague Rowena Crawford added detail, saying:

“Based on OBR forecasts from the spring it looks like the Chancellor has plenty of room to meet his spending pledges … But growth has slowed since the spring and in reality he may have a lot less than the £15 billion of headroom he seemed to have back then”.


In more detail, the IFS has projected the public sector borrowing for the fiscal year 2020-21. The OBR forecast for March was £21.2 billion. If you add in the reclassification of student loans—for which I am not blaming anyone on the Benches opposite—that takes borrowing up to £32.8 billion. Add in the cost of the spending review as in the booklet at the moment, and that takes borrowing for that fiscal year to £46.2 billion. However, if you also factor in weakening growth, which is already happening, that takes the borrowing requirement to over £50 billion. That is not my projection but that of the IFS. This is why we need the OBR’s input before a spending round. I would be very interested to hear the Government’s justification for deliberately cutting out the OBR in the way that they did. What was going on?

In his speech, the Chancellor of the Exchequer announced that he would review the Government’s fiscal rules. That smacks of closing the stable door after the horse has bolted because it is quite clear that the fiscal rules are already up in the air. What is the timetable for this review? What criteria will the review adopt? And, beyond the Prime Minister’s chief of staff, who will be conducting the review?

Lastly, these numbers do not add up because they completely ignore the budgetary elephant in the room, which is the event of a no-deal Brexit. There most decidedly would not be money to spend on any of this in the event of a no-deal Brexit. The OBR said around three months ago that a no-deal Brexit, even of the most benign kind, would add around £30 billion a year to borrowing from 2021 onwards and around 12% of GDP to net debt by 2023-24. Adding that to the IFS projections that I mentioned earlier—that is, the OBR March number, the student loans re-evaluation, the Chancellor’s costs in the spending round document and no deal—raises the public sector borrowing requirement for 2021 to £76.2 billion. Where is the contingency for this in this document? To ignore this financial risk is very reckless.

I look forward to this debate, but it comes with a warning: this is not a normal spending round. It is a sham, full of imaginary numbers that do not pass the normal tests and have not met the normal safe- guards. It does not take into consideration the current economic weakness and does not weigh the perils of a no-deal Brexit. It is further evidence of the sort of shameless behaviour that we have come to expect from the Government.

17:30

[Lord Ricketts (CB)]

My Lords, apart from my delight at being back in this House doing our constitutional duty of holding the Government to account, I rise to participate in the debate with a slightly different intention, primarily to say thank you. I will give the noble Lord a clue what I will thank him about when I say that I am chairman of the Normandy Memorial Trust. I thank the Government for the generosity of finding a way of granting the trust the £7 million that we needed to complete the memorial we are building in Normandy.

This is very welcome news, not least to the veterans for whom this is so important. They were determined to have a British memorial to commemorate all those under British command who fell in 1944—as far as possible while they could still visit it. They wanted to see all their comrades who lived, fought and died together brought into one place.

It is not a straightforward task to construct a British memorial on foreign soil—I think it is unprecedented in modern times. We were greatly helped by a contribution from the LIBOR fund to get us started. We have made great progress since then: we have a roll of honour of 22,442 names from many different nations, a fantastic site overlooking Gold Beach where many of the veterans landed and a moving design by a British architect. We also unveiled our sculpture, which will be the centrepiece of the memorial, on 6 June this year. We are now under way with construction.

We have had generous support from members of the public and one private donor. However, we were still well short of the funds needed to complete this to a standard that people would expect of a national memorial. In this 75th anniversary year of D-Day, we were therefore enormously grateful that the Chancellor was able to make this grant. I know that it is small in the overall scheme of things, but it makes a huge impact to be able to complete this project, which is about ensuring that the memory of that great generation is transmitted into the future. It will also include a memorial to French civilians who were killed in their thousands during the battle. In that sense, it stands as a very powerful memory and celebration of the ties that bind this country to our nearest neighbours on the continent. That is not without its force and relevance at this particular moment.

So that this speech is not entirely thanking the Government, I wanted to extend the point about funding Britain’s international commitment given the uncertainties in the years ahead. I welcome the uplift to the MoD’s budget—in this dangerous world, that makes great sense. The single intelligence vote has had a real-terms increase, as has the DfID budget, in line with the Government’s commitment to 0.7% of GDP.

My question is about the funding of the Foreign and Commonwealth Office. Here again, I suppose I should declare an interest as a former Permanent Secretary—a diplomat for 40 years. The details on the Government’s website suggest that the FCO settlement is what they call in the trade a flat real settlement—that is what the figures show here—apart from a contribution from the DfID budget which is subject to the OECD rules on aid spending and so is quite tightly constrained to being spent in lower-income economies.

I do not see how that is consistent with the Government’s ambition—implied in the term “global Britain”—for Britain to be an active, engaged partner in the world after Brexit. Can the Minister say anything about the Government’s intentions to have a real step change in FCO funding, perhaps in a comprehensive spending round to come, to make sure that we have the strong and confident Foreign Office we need for the years ahead?

17:35

[The Lord Bishop of Durham]

My Lords, like others, I welcome the fact that we are able to hold a debate on the spending round 2019. When the political point-scoring is redacted from the Chancellor’s original Statement, as I note it is on the GOV.UK website, there are aspects to welcome in the overall spending increase and some of the specific commitments. I am pleased that the Chancellor recognised in his speech that in the nation there are anxieties and divisions,

“between regions and communities, rich and poor, rural and urban, young and old”,—[Official Report, Commons, 4/9/2019; col. 180.]

and between black and white. The test for me is always around the impact of spending on the most vulnerable in our society. It is this that leads me to ask some questions.

Our infrastructure certainly needs major investment. This needs to be joined up and target those most in need of the improvements. So the northern powerhouse, yes, but simply the Manchester-Leeds connection, no—that is not enough. It must impact the whole of the north and help more marginal towns, such as Hartlepool, Barrow-in-Furness and Middlesbrough, not just the bigger cities. Although I speak from the north-east, the south-west and other regions need investment too.

On prisons, is spending on 10,000 extra prison spaces really the best way to improve safety from crime? The existing estate needs serious investment, especially the women’s estate. Rehabilitation of criminals is key. Short prison sentences do not work well. Would this money not be better spent on better alternatives to prison sentences of up to 12 months? This would ensure that really good rehabilitative services are available for these criminals. They are far more likely to then be good, helpful citizens than if they spent time in a smart, new prison cell. Improving the existing estate and reducing the numbers in prison by better rehabilitative services for short sentences would be a better way to create a safer and healthier Britain, alongside returning police numbers closer to the level they were before the cuts of a few years ago. The chief constable of Durham assures me that numbers will not be back to the levels they were at before the cuts.

Increased spending on the NHS is welcome, as is the £1.5 billion to local authorities for social care, but we all know that this goes only part of the way to meeting the increased need for social care across our nation. Better economic planning surely demands that the NHS and social care are properly linked and joined up. We need thought-through funding for all who need social care, in particular for those known to need long-term social care that will, at points, need particular health spending. The proper linking of health and social care is long overdue. We must have the courage to act. It is in the best interests of the most vulnerable and it makes economic sense.

The increased spending on education is welcome, especially on the per-pupil funding and the increase for the vital FE sector. Early years also needs significant investment beyond the £66 million announced. The increased per-pupil spending, however, should be focused on improving the educational experience of every child, and not on buildings. There is also a concern that the flat-rate scheme might still fail to meet the particular challenges faced by small rural schools.

Noble Lords would expect me to comment on places of worship. We welcome the doubling of the places of worship protective security fund, but emphasise that the core need is to tackle the underlying reasons why such hostility occurs. We are also grateful for the continuation of the Listed Places of Worship Grant Scheme until 2021-22. This is an important support for many of these important community assets.

There is nothing at all in the Statement about unaccompanied children. Can the Minister confirm that the necessary regulations to bring unaccompanied children back within the scope of legal aid will be brought forward swiftly, as has been indicated to my noble friend the right reverend Prelate the Bishop of Derby? These vulnerable children need such support.

I turn now to international development. It is very welcome to have the commitment to 0.7% of GDP being spent on overseas aid. The Statement itself is encouraging on how this will be spent. However, CP 170 raises some warning signs for me. Paragraph 2.22 states:

“The UK’s spending on … ODA … needs to be in the country’s national interest and every pound spent should deliver value for taxpayers”.


What has happened to supporting the most vulnerable for its own sake? Where is generosity? Surely it is the poorest in our world to whom we want to deliver value; we do not do this for our own benefit. Our self-interest should not be central in this budget.

My concern is further exacerbated by the creeping use of ODA money for what should be FCO or even MoD spending. This is highlighted in paragraph 2.25. By stealth, if we are not careful, the wonderful work done through ODA is being undermined by the loss of the sense of generosity, care for the poorest and giving for its own sake. Would the Minister like to comment on this concern?

Finally, my biggest concern of all lies with the proposals for DWP spending. Yes, there are some small helpful increases, but where is the commitment to stop the freeze on benefits? Where is the tackling of the need to improve the work taper to increase help for people returning to work? Where is the analysis of the unfairness of the two-child limit? Where, in short, is the commitment to the neediest children in our land, those with long-term disabilities and those unable to work? We need to tackle the reality of child and family poverty. The benefits freeze needs to go now and there needs to be a significant uplift in benefits and tax credit levels. Sadly, this spending round has failed to address this at all, which leads me to conclude that while aspects of it are welcome and to be applauded, it ultimately fails the test of remembering the most vulnerable and giving them the priority that justice, compassion and love demand.

17:42

[Lord Horam (Con)]

My Lords, as I was about to say before we were all rudely—and apparently unlawfully—interrupted, I am an economist and economics is usually regarded as the dismal science. Being somewhat contrary by nature, I was interested to see an article in the Times the other day by Paul Johnson, who, the House will know, is director of the Institute for Fiscal Studies. He wrote it because it is 50 years since the IFS was created. It interests me because it is nearly 50 years —49, actually—since I became a Member of Parliament. My noble friends Lord Cormack and Lord Howell are, I think, the only two here of similar longevity. Even my good noble friend Lord Young of Cookham, wonderful character though he is—we will miss him and his great gifts on the Front Bench—became a Member of Parliament in, I think, 1974.

Remembering that 50-year period, Paul Johnson made comparison between now and approximately 50 years ago—1970. He pointed out, for example, that then male life expectancy was 69 years; now it is 79, which is astonishing. In 1970, 38% of adults had no teeth; now that figure is down to 6%. In that 50-year stretch, average incomes have gone up by a multiple of three; they are three times what they were 50 years ago. The equipment with which we live our lives—smartphones, televisions, dishwashers and all the rest of it—is manifold. Pensioner poverty has been hugely reduced during that 50-year period. University education has expanded to a level one could hardly have imagined when I went to university; 4% of the population went to university then. Women’s rights have hugely expanded, as I think they would acknowledge, during that period. Greenhouse gasses have been reduced massively.

There has been huge progress over the last 50 years, but that has encompassed the entire 45 years that we have been in the European Union. I make no cause and effect, but I point out that it has certainly been no obstacle to the sort of progress that we have made in the last 50 years. Of course, as we all have acknowledged in this debate, there are problems today, and I am glad that the spending plan recognised this. We are now in a situation where, while in 2010 we had a 10% annual deficit in relation to GDP, it is now down to 1%—although that is slightly damaged by the latest figures showing that if you include student loans and public sector pensions, it becomes 2% of GDP. None the less, it is massively more favourable than it was at the end of the last Labour Government. Therefore, we can afford to splash the cash, and we should do that in a sensible and appropriate way.

The one thing I am particularly pleased the Government are splashing the cash on is technical education. All three parties—and I am afraid that I cannot exclude the Liberal Democrats, because they were in coalition for five years—have been guilty of not giving appropriate priority to technical education, apprenticeships, further education colleges and all the rest of it in comparison with universities. They have been the Cinderella of our education system for far too long. In fact, I was delighted by a thought which the noble Lord, Lord Hennessy of Nympsfield—that great friend of all of us in the House of Lords—had when he saw all the banners outside. He wanted to have a new banner, though modest as he is, he thought it should be called a bannerette. He wanted three things on the banner: technical education, social care and social housing. These are, in his view, the things that we should really be looking at rather than the Brexit stuff, for or against. I entirely agree with him. Money, of course, is not enough. We need plans and policies and we need the drive of ministerial application. The real tragedy of the last three years has been the total diversion of the Government into Brexit, and the opportunity cost of doing all that has been enormous.

We need to get this resolved and there is no doubt that the issue de nos jours—if I might put it like that—is resolving the Irish question. There are clearly two elements in current thinking that could provide a possible resolution of this issue. One is the idea—spelled out by, among others, my good friend the noble Lord, Lord Empey, in a recent debate—of an all- Ireland committee to look at border issues, including representations from Northern Ireland, the European Union, the United Kingdom and the Irish Government. I would welcome that. The second idea is to build on the already existing regulations covering trade between Northern Ireland and the rest of the United Kingdom. Those two elements are the “landing zone”, to use the Prime Minister’s phrase, which we need. We now need to make sure that we do not just have a landing zone but that we actually land.

In my view, what we need above all is a willingness on all sides to compromise and political skill. We Brits used to be rather good at compromising in a sensible and skilful way. The European Union has long experience in forging compromises. We even once had Prime Ministers who were good at compromising and showing political skill. Thinking back over the last 50 years, to continue my little theme, I remember Harold Wilson, my second Prime Minister in Parliament—Ted Heath was my first, and I have to confess that he was not quite so good at compromising. My favourite comment about him was uttered by a very good friend of mine, Tom Urwin, who was the Member of Parliament for Houghton-le-Spring. He was a carpenter and he said of Harold Wilson, “That man: if he swallowed a nail, he’d defecate a corkscrew”. He did not use the word, “defecate”, but the House will get what I mean. Wilson was crafty and guileful. Frankly, at this present juncture, we need that sort of skill and willingness to compromise. I hope, above all, that the Prime Minister understands that confrontation will not get us anywhere. What we need is political skill and compromise. If he does not display that in the coming weeks, I am afraid that we will be stuck in this dreadful limbo for a lot longer.

17:49

[Lord Davies of Stamford (Lab)]

My Lords, I want to make three points. The first is not about the spending review at all; in that, I shall be following a precedent already established in this debate. It seems to me extraordinary—completely mad—that we should summon Parliament because there is a major constitutional crisis and then for Parliament not to discuss it. We should not be talking about the spending review today; we should be having a debate on drawing the right lessons from the constitutional crisis. Ministerial Statements, in which Ministers can answer questions with well-prepared, brief, non-committal and necessarily limited responses, are no substitute; that is not a proper debate. We need a situation in which the feelings of the country can be expressed through Parliament about the traumatic experience we have been through. It is our greatest constitutional crisis—actually, our only constitutional crisis—since 1789. We should certainly pause and think about it.

If a visitor from Patagonia asked any of us what the British political system was about or consisted of, we should probably say at least two things: that we believe in the rule of law, which means that everybody is subject to the law and everybody is equal before the law; and that we have a parliamentary democracy. No one in this House would disagree with either of those two answers to that question. A couple of weeks ago, the Prime Minister put it about through Mr Cummings that he was not subject to the law—indeed, that he proposed to break it. That was unprecedented in our history. As for parliamentary democracy, it cannot exist if the executive branch feels that it wants to get rid of Parliament because it is a bit of a nuisance—simply to suspend Parliament by Prorogation for however long the Prime Minister of the day may want. That is not a parliamentary system; it is despotism with a purely ornamental parliament. There are lots of examples in history and in the present world of that sort of political system, but it is not one that any of us would want to identify with. But Mr Cummings was not putting around dark hints about that; the Prime Minister himself was committed to the idea of a Prorogation that we know now was illegal.

We have come very close to a precipice. I feel a wonderful sense of relief that we have not fallen over it, as we could well have done so without really being conscious of the political and constitutional consequences of what we were doing. It would have been very difficult to retrieve the position. That is my first comment, which has nothing to do with the spending round, as colleagues will have noticed.

Let me turn to the spending round. A classical way of making yourself popular in this life is spending a lot of money. If you can spend a lot of money at somebody else’s expense, you are doing very well. That is what the Government are doing, to try to create popularity. Of course, some of their causes are very good ones—defence, the NHS—so the Government are being quite successful, according to the opinion polls. I am, however, very frightened by the whole process. One of the two key figures has been mentioned already this afternoon: we are increasing public spending by 4% per annum. The whole House will be aware that the rate of growth of output in this country is not 4% or 1% but less than 1% per annum. Which of us would run a business or our family’s budget based on spending 4% more every year when one’s income is increasing by 1%? It can lead to only one outcome—a very difficult one. States do not go through the bankruptcy court, but we know from our experience in the 1970s what happens if we overspend.

Public debt in this country has now reached a frightening level. For 20 years before 2010, public debt was 40-something per cent of GDP; it varied between the low and the high 40s, but it always stayed in the 40s. It is now nearly 100%. That is an absolutely terrifying turnaround. Then you have a position where the Government are proposing now to go ahead with these spending plans, without any clear forecast of what the economic rate of growth will be. I totally agree with the comments that have already been made and I never make economic predictions, but it would be a brave man or woman who excluded the possibility of a recession in the event of a hard Brexit. There could be a recession in other circumstances as well; there is an awful lot of investment already flowing out of this country, which is extremely worrying. The Bank of America has moved hundreds of its staff, most of whom earn hundreds of thousands of euros every year, to Paris and installed them there. That is one small example, but there is a big loss of demand. There are people setting up in financial services in Amsterdam and Dublin in preparation, not just for a hard Brexit but for any Brexit. We are being very complacent at the moment and the Government are being utterly irresponsible in committing themselves to this level of spending without having the courage to answer the question about what they predict the rate of growth of the economy will be in the future.

My third point is about Brexit, but also about Brexit and public spending. The British public have been defrauded over Brexit in a number of contexts, not least over public spending. Many of the public were persuaded by Mr Johnson’s dishonest campaign that Brexit was a cash generator and that we would get lots cash out of Brussels, including £350 million a week—or whatever it was—for the health service. In fact, we now find that, far from being a cash generator, it is a very considerable consumer of cash. We are having to spend hundreds of millions subsidising Welsh farmers, particularly lamb farmers, who would otherwise go broke. We are spending billions on subsidising Scotland to protect it from some of the potential impact of Brexit. We are spending a lot of money in Northern Ireland for the same purpose. This includes overt bribes for the DUP, which, as the House knows, I deeply disapprove of. It is a form of corruption and nothing else, and nevertheless very expensive.

There may be many other such things, but then there is the obscenity of spending £140 million, I believe, building a vast lorry park in Dover. This kind of expenditure does not yield a penny in increased output and it is not, under any circumstances, an investment. On the contrary, it is part of simply making our commerce —our external trade—more difficult and expensive. It is an anti-economic move and a way of spending money to deprive the public of future wealth, rather than spending money to try to enhance future wealth. It is a crazy policy, and one that involves, as I said, the defrauding of the British people, who were led to believe one thing about Brexit and are now, sadly and uncomfortably, discovering something very different.

17:58

[Lord Howell of Guildford (Con)]

My Lords, I listened to the noble Lord, Lord Davies of Stamford, with a certain amount agreement, which is, frankly, extremely unusual. But there it is—in the extraordinary situation we find ourselves in, many new alliances are formed. A certain madness seems to have gripped the discussion on public expenditure in recent years, and aspects of this are what I want to talk about. My noble friend Lord Horam confessed that he had been an economist; I confess that I am an economist apostate. I was in the Treasury as an economist, and since then I have become more and more convinced that modern, liberal economics seriously distorts the way the world works, seriously misguides our public policy and seriously undermines a great many of the developments that good governance requires for a modern society in the digital age. In fact, I think liberal economics has not at all come to terms with the total transformation of the internet and digital age, leading to much grief and misunderstanding.

When it comes to public expenditure, we are treated by analysts and the media to a sort of Punch and Judy pantomime show between polarised extremes. Either public spending is depicted by one side as a mass of ruthless cuts, making austerity a dirty word—that is what it has become in the language of both political debate and outside as well—or, from the other pole, as a sea of extravagant waste of taxpayers’ money, driving us all ever deeper into debt and so on. In fact, in this digital age, a rough practical balance is asserting itself throughout the world’s economies between obvious and growing public spending needs and the capacities of the private sector and private finance on the market with a good deal of co-operation between the two.

Much of our political debate is manufactured—it is the way it comes out with party politics as we have played it in recent years—but it has very little influence on what is really happening in the trend of public expenditure. These deeper forces all around the world bring about a sort of figure for total public spending—as a proportion of all spending, investment and GDP—that hovers between a percentage in the mid-30s and the high 40s. Although, of course, it is always with upward pressure and with endless political promises, which all politicians and Governments make, to spend on favourite causes and lobbies, many of them highly deserving—they come up all the time. It depends on what gets included in definitions of public spending, what is deemed off budget and what is simply ignored.

Again, we have to realise that, in the world of economic statistics, there is chaos, because all the traditional views are being undermined. The very concept of GDP and all the aggregates that were invented by Simon Kuznets in the 1930s—taken up by Lord Keynes—which were very relevant to the pre-digital economy, do not fit into the arrangements and patterns of business, economics and wealth creation that we have today. Even the Asian miracle economies, where all the growth will be in the next 10 to 20 years—including even the autocracies—find that the state, markets, public spending and private enterprise cannot do without each other when it comes to finance, resources and national objectives. Even China, with its swollen state-ownership sector—wildly inefficient in many areas—finds that it has to grope all the time for a new public-private balance with its belt-and-road initiative and in its tax policies.

My advice to Chancellors, past and present—not listened to, of course, in any way, except perhaps by Ian Macleod, but that was a long time ago—is not to talk about austerity or ending austerity, but to talk much more about balance and constant control, which is always necessary on all public spending, whether it is growing or shrinking. All public spending programmes always grow, unless a hand is kept on them. All public spending has to have a very tight hand kept on it, so the idea that you can stand back and say, “Austerity is over, now we can let everything rip”, is a recipe for disaster. It is a serious imbalance in how the economy and society work.

Back in the 1970s, some of your Lordships will recall—I am afraid noble Lords would have to be rather old because I am talking about 50 years ago—that we sought new controls on the then hopelessly swollen and inefficient public sector, inherited by the Conservatives in 1970 and again in 1979, by means of what we called programmed budgeting, an approach pinched from the Americans. The idea was to focus much more on results and actual outputs of public policies, and on questioning whether the right systems were in place to deliver, rather than simply on whether they should be state or private systems, or whether certain estimates had been exceeded. Indeed, we had no OBR in those days and our forecasts were very primitive. In some ways, there was a questioning of whether a particular public expenditure programme was the right one to deliver the results required for the consumer and the public effectively. That was the genesis of privatisation; it was rapidly concluded that many of these operations should not only be contracted out but put into the private sector.

The Treasury did not like that at all at the time. The Treasury was and is very good and very sharp at cutting existing spending programmes, or occasionally, as now with the spending round, letting its budgets rise. It may be very good about fiscal rules—though whether they are being revised or not, I am not so sure—and with deficit headroom, which does or does not exist. However, even 50 years ago—I fear that this applies still today—it was much less good at ensuring and delivering quality government programmes and seeing the best and most efficient ways of meeting vital social and infrastructure needs, which are always changing and evolving, and where constant innovation is required. Just cutting—or not cutting—is fine, but what is really required in the handling of all public expenditure programmes is constant innovation, to see that they are delivering what we want. It is not just a question of more schools, as in the spending round being put forward now, but of having really well built and efficiently designed schools, which match modern ideas of efficient education for the technical society that we are going to live in. It is not just a question of more prisons, though heaven knows we have enough prisoners, but of better prisons, run in entirely new and better ways. It is not just a question of having more police, but entirely new police methods, which are needed to combat the kind of crime that is developing in our country so rapidly, particularly knife crime on the streets.

Hearing the distinguished former Foreign Office Permanent Secretary, the noble Lord, Lord Ricketts, prompts me to make a further spending round point. The whole balance of our international resource allocation has gone awry; it is completely dotty. The Foreign and Commonwealth Office is meant to be the spearhead of our international standing, prosperity and security, and needs to be. Yet while the two other great international departments—DfID and the MoD—have budgets respectively of £14 billion-plus and £37 billion-plus, the FCO budget is £2.3 billion at the most, and the core number of discretionary expenditures in the FCO is much less. It makes no sense to have our foreign policy, our foreign reach and our security for the future run on a shoestring. I know that there is £90 million more expenditure in the current spending round, but that is small compared with what we really need. We should bite the bullet and re-merge the whole DfID operation and the FCO into a really powerful and punchy overseas department, which would then have a budget of £16 billion and far more impact round the world. It would be far better for world development as well. That could build up our role in the giant worldwide Commonwealth network, and in all the other new Asian networks with which we have to engage, in a way that reflected our changed national direction and purpose, as it is not being reflected now. I do not believe that our development aims would be in any way compromised. The whole concept of development aid is anyway patronising and out of date, and needs rethinking. So, in this transformed global system, I look forward to a much more balanced discussion of the role of public spending in our growth and direction, with less ideology and more practicality.

I had further words to say on the public expenditure implications of the Brexit drama. Like the most reverend Primate, I am absolutely bewildered about why we are discussing no deal when no deal is now illegal. What we should be discussing is the withdrawal agreement, which I think is attainable. The key to that is of course Ireland, which my right honourable friend the Prime Minister is working on—how much that will cost and what the implications will be. I believe they will be reasonably limited, but there is the question of the £39 billion transfer and at what point it has to go over. We will see how all this works out. I know that all the experts are saying that there will not be an agreement with Ireland. I believe that there will and that they will be wrong, but we will have to see what happens in a few weeks’ time.

When it comes to public spending now, I say open wide the crystal fountain, by all means. Just make sure that the fountain works well and delivers top-quality flow in places and in ways that people really want it. We should look for balance between public finance and private enterprise investment, harnessing both in delivering quality government with public infrastructure and social care programmes, which will always expand through need and demand. Above all, in the digital age now upon us, we need to remember that the best levels of public spending and the best programmes to meet people’s real need will be decided by technology advancing ever more rapidly every day—not by politics, yesterday’s tired ideologies or economic and political theories.

18:10

[Lord Greaves (LD)]

My Lords, I would like to apologise for not hearing most of the Minister’s opening speech. I am afraid that the change in the arrangements passed me by completely. I apologise for that and ask for the House’s forgiveness.

The noble Lord talked about the Foreign Office and foreign matters; I want to talk about local government, in particular about the spending figures for the Ministry of Housing, Communities and Local Government. The Treasury booklet about the spending round reports that the local government departmental expenditure limit,

“will increase by £1.1 billion in cash terms”,

which is a lot and is very welcome.

“With this increase in grant, Local Government Core Spending Power”—

which is a mystical figure that everybody in local government talks about and nobody understands—

“is estimated to increase by £2.9 billion in total in 2020-21”.

Again, on the face of it, this is very welcome—and indeed it is.

“Combined with the £2.9 billion increase in Core Spending Power, these announcements mean local authorities can benefit from more than £3½ billion of additional resources”,

with increases in council tax, other grants and so on. This sounds a lot. It sounds as though things are going to be okay. I would suggest that it is not that simple, because a large proportion of that money will go towards the problems of social care and social care funding. These are pretty much in crisis in many places.

I declare my interest as a member of Pendle Borough Council, which is an ordinary shire district in the two-tier area of Lancashire. My concern is with street-level services and local community services, which district councils concentrate on providing. Obviously, unitaries provide them as well, and some county council services come into this category, such as highways and libraries. I want to give some figures from my own council in Pendle, not because is it particularly special—although I think it is—but because it is not special but typical of districts in urban areas, old industrial towns in areas such as Lancashire and many other districts around the country. A report—which goes to councillors tomorrow evening, in fact—points out that the four-year spending settlement, the funding settlement for local government, comes to an end at the end of this financial year. It also points out that there will be a real-terms increase in funding for local government overall—the “core spending power”—which is quite substantial. However, the implementation of the fair funding review and move to 75% business rates retention appear to have been put back, because people are too busy doing other things at the moment. The referendum limit for council tax increase is going back down to 2%. For councils such as Pendle, this will have a fairly disastrous effect.

The detailed implications and figures are obviously not yet known and will not be until the local government settlement comes out in perhaps two or three months’ time. However, making reasonable assumptions, the position in Pendle is that, compared with the present year, there will be a shortfall in 2020-21 of nearly £900,000 that has to be found from cuts and what are called “savings requirements” but are actually cuts. By 2022-23, in three years’ time, the requirement in that year, compared with the present year’s spending, will be around £4 million. Of course, £4 million may be a lot or it may be not so much, depending on the present level of revenue spending. In this year’s revenue budget for Pendle, the aggregate spending level is about £13 million. Over the next three years, £4 million has to be cut from £13 million-worth of spending. By any standards that is a lot, and it is typical of many districts—some will be higher, some will be lower, but it is typical. These are at current prices. This is to an authority which, over 10 years, will have cut its spending in real terms by half, or perhaps more, and in which over the period since 2010 the number of people working for it, without any substantial changes in what it is trying to do and what services it provides, has been halved. The position is dire.

These are not unimportant services. They are perhaps not as important as education, social care or the health service, which gets the high-profile headlines. They are things such as street cleansing, town-centre cleansing and work in the town centres, tackling litter and fly-tipping—if people fly-tip on verges, someone has to clear it up—refuse services, recycling services, and all the things a council tries to do in town centres to keep them as prosperous as possible, and some of ours are doing fairly well. There are also leisure facilities, the deficit on running all the swimming pools and all the rest of it, environmental health and the vital anti-social behaviour work that local authorities newly took over under the anti-social behaviour Act that came in about seven years ago. There are parks and miniparks, open space, playing fields and sporting facilities. Even if you have not got your own council housing, which we no longer do, there are the issues of housing standards and tackling empty properties, bringing them back into use, which we have been quite successful at, and planning and development services. There is also a new one: action on carbon reduction. We have a meeting next Monday evening, which I shall be at, where we will set up a working group on how we in Pendle can do our bit to help solve the climate emergency. The only problem is that we have lots of ideas for things we can do but no staff to do them. It is one of those instances where councils will have to roll up their sleeves and get much more involved.

The position on authorities like this is dire, but it does not matter that the authorities are in dire straits; what matters is that the street-level, town-centre and local community services and facilities that they provide are being stripped away to the extent that they are having a dreadful effect on the community infrastructure in a lot of places. These are places that some people call “left behind” in many cases, places that have not shared in the prosperity of Greater London and the south-east, or even the big towns and cities of regions such as the north of England. I suppose the old cliché of life in the north is that “Life is hard”, but keeping communities going in these areas is hard work. We are not being helped by the fact that, when the Government say, “Austerity is over”, whether it may be or not, the money that is available to other services and areas is not coming to us.

18:19

[Lord Young of Cookham (Con)]

My Lords, I congratulate my noble friend Lord Duncan on his new responsibilities in your Lordships’ House, which have substantially increased the length of the frontier that he has to patrol. I thank him also for his kind words in his opening remarks. He will enjoy these set-piece debates on Budgets and spending reviews, which are always well-informed. I wish him well in summing up and in trying to reconcile his instinctive wish to be as generous as possible to all the requests that are made for more public spending with the unyielding notes that come from the Box telling him not to concede one penny of extra money.

Both the language and the substance of this spending review are different from their predecessors, as other noble Lords have said. Like others, I welcome the recognition that the time has come to be more generous with key public services. In particular, I hope that the extra resources in areas such as education, health and prisons will help to restore the morale of those who work in those services by enabling more generous pay settlements for them than have been possible in the past.

Other noble Lords have confessed to being economists. I fear I have two degrees in economics, which will doubtless devalue even further my comments on the review itself. I read the review and my only doubt about it—now that I am on the Back Benches, I am allowed the luxury of doubts—was what caught my eye on the Government’s website, “Spending Round 2019: what you need to know”. The quote is this:

“This Spending Round provides more money to support vital public services while being delivered within the government’s existing fiscal rules”.


Perhaps it is because I was once a Treasury Minister that the word “existing” caught my eye. I remember as a parliamentary candidate referring to the Labour incumbent as “the current MP”, with the clear implication that he was not going to be there for very long—hence my interest in the insertion of the word “existing” as a qualification for the Government’s fiscal rules. As the noble Lord, Lord Fox, and others have said, whether or not these rules are actually being met would normally be clear, as we would have had simultaneously an OBR report that would have given an independent authoritative assessment of whether or not that was the case. One of the welcome reforms of the coalition Government was the introduction of the OBR, which moved away from the self-justificatory forecasts that we used to have from earlier Governments. However, because of the timing of this spending review, the OBR was unable to do that.

The next set of OBR forecasts—perhaps my noble friend will tell us when they are expected—are almost certain to reflect some deterioration in the short-term outlook both for the economy and for the public finances, and the £15 billion headroom that we heard about earlier may indeed have evaporated. The claim that next year’s borrowing is being kept below 2% of national income was based on earlier forecasts, which may need updating. We read in today’s papers that the ONS has reclassified some expenditure as borrowing, which the OBR reckons will add some £15 billion a year to borrowing.

Why is the 2% rule important? Without sounding pompous, I think it is crucial to maintain international confidence in the management of the economy. Our budget deficit was the same as Greece’s not so long ago, but we did not experience its problems because we were seen in 2010 to be on top of it. In the words of the Governor of the Bank of England, though, we are dependent on “the generosity of strangers” to borrow the funds that we need, and we should not risk losing a reputation that has been hard-won by taking too many risks with market confidence. Could my noble friend expand on the insertion of the word “existing” and whether we will take in our stride the changes in definition that I have referred to or whether the 2% target will have to be amended?

Having said that, I want to focus on one particular aspect of the spending review, namely housing, touched on briefly by my noble friend Lord Horam. Between February 1974 and May 1983—nine years—there were two Housing Ministers: Reg Freeson and John Stanley. Between 1990 and 1994, there was one Housing Minister. Since January 2015, less than five years ago, there have been five. However able you are, you simply cannot build relationships with local authorities, social landlords, financial institutions and then drive through the necessary reforms if you are a bird of passage. While we may not be able to return to the stability of past decades, we should aim at longer tenures of Ministers, and I think the same applies to other posts where we have seen a high turnover—Lord Chancellor and Secretary of State for Work and Pensions, for example.

The Government have to make choices, and page 1 of the spending review has a heading “choices and priorities”. Now, housing is not one of these priorities, which are health and social care; education and skills; and crime. However, the spending review is basically about increased revenue support for the next year. The most important spending review, covering subsequent years, is still to take place. My plea today is for housing to be up there with the other three. I have a high regard for the new Secretary of State at Housing, Communities and Local Government, Robert Jenrick, who came from the Treasury. I know he will want to build on some of the initiatives introduced earlier in this Government: the lifting of capital controls on local government borrowing, renewed focus on social housing as well as affordable housing, the Housing Infrastructure Fund and disposal of public land for housing, to mention but a few. There was one sentence in the spending review inserted by a cautious Treasury official, I quote:

“Investing in the people’s priorities inevitably means difficult decisions elsewhere”.—[Official Report, Commons, 4/9/19; col. 188.]


But no more difficult decisions for housing, please.

One final point I want to make on housing, which I hope the Government will address, and which was touched on by the right reverend Prelate the Bishop of Durham, is the local housing allowance. LHAs are meant to cover the lowest 30% of rents in an area so people in housing need on low incomes can live in decent rented accommodation. LHAs were frozen in 2016, whereas rents have continued to rise. Fewer homes are now within the limit and so more people are having to top up with other benefits, fall into arrears or move. Evidence from Shelter and Crisis shows that this is leading to homelessness. In Bath, for example, only 7% of homes are within the LHA level, instead of the planned 30%, and in central London there are none. We need the private rented sector to continue to do some heavy lifting in meeting housing need for those on low incomes until such time as our reforms have real impact and other tenures are available, and these LHAs are standing in the way.

To conclude, I hope my noble friend will convey two messages to the Chancellor, who was himself a former Secretary of State at Housing and Local Government, and so should be receptive. First, with the next spending review, housing must be a priority, and secondly, in the meantime, the local housing allowances need urgent review.

18:27

[Lord Liddle (Lab)]

My Lords, it is very enjoyable to hear the noble Lord, Lord Young, having the freedom of the Back Benches, and I hope we are going to hear far more from him in that capacity. We should, of course, be debating the great crisis we are facing in our nation’s affairs, but he was very pungent in his remarks on BBC News yesterday about what the Government should be doing, with which I agree.

This has actually been a very enjoyable debate. I would also like to say how much I enjoyed listening to my old friend, the noble Lord, Lord Horam—I learned a lot from him in his very long political career, particularly in the earlier stages—and he had a lot of interesting things to say.

The document we are discussing is very flimsy, and not backed up by any economic analysis from the OBR. The question is: does it represent a turning point in our attitudes to public spending and tax? Are we finally getting away from the policy of the last decade, which has basically been to hold public spending down below the rate of economic growth so we can achieve a gradual reduction in the ratio of debt to GDP when we think we can get away with that, but cutting taxes instead when we face political trouble? So the question is, are we moving away from that framework? Are we now accepting that both infrastructure investment and some types of social investment by the public sector make economic sense because they add to economic growth potential? One should not just be looking at the pure number of the deficit but should be asking oneself how much within the public spending envelope will add to growth potential and is therefore a sound investment.

Are we facing up—I think none of the political parties is--to the great demographic challenge we will face in the next 10 years?. According to the IFS and the Resolution Foundation, if we are to maintain present standards of pensions, health services and social care, tax as a proportion of GDP will have to rise by 5% because of the challenge of demography. I think that this is where the Government ought to open a public debate.

As we were discussing at the Labour conference in Brighton, the tax burden on the top 1% or 5% can certainly go up a bit; the broadest backs should bear the heaviest burdens. However, the fact is that we will not enjoy a decent quality of welfare state and public services in this country unless we can make the case to the public overall for a general increase in taxation. This is going to be difficult in an environment of Brexit—

[Lord Davies of Stamford]

I am listening to my noble friend with great attention—he is a great expert on these matters. As an alternative to increasing tax, would it not be possible to consider some compulsory universal insurance system, such as happens on the continent?

[Lord Liddle]

I would include compulsory social insurance or hypothecated taxes as part of the general remark that I made. However, we are going to have to find new ways of funding our welfare state because of the demographic challenge. This is going to be difficult if Brexit goes ahead because, even if we avoid no deal, which we have legislated against, the kind of medium-term deal that Boris Johnson has in mind—the Canada-plus, free trade agreement—is not the smooth Brexit that the economic forecasts of the OBR have relied upon. It is a much tougher, harder Brexit than the customs union and regulatory alignment that Mrs May was aiming for. It will have more serious economic consequences for the country, and I worry about that a great deal.

Of course, you could not possibly justify, as a result of Brexit, a temporary increase in the government deficit, but you can only do that for a time. We saw in the 1970s that there had to be an adjustment for the higher price of oil, and we saw after the 2008 financial crisis that there had to be an adjustment for the fact that the deficit had risen as a result of the cost of saving the financial system.

If that will be the case, who will bear the pain? The people who cannot afford to bear the pain, and the people whom this document completely neglects, are poor working families. There is nothing in this document to relieve the burden that they have faced in the last 10 years. This is a gross generational unfairness: I get a nice real-terms increase in my pension every year, but what do the young mother and her children get? They get their benefits frozen as a direct result of the Government’s policy.

Most of these people are not people who do not work. They are not, to use that horrible language, scroungers; they are people who work the living daylights out of themselves, sometimes with two or three jobs, in order to meet the family budget. This squeeze on working families is having a dreadful impact. The Resolution Foundation, one of the best independent think tanks of the past few years, suggests that we will have something like 1.5 million children in poverty— 37% of all children—if we continue on our present policy path on tax credits, universal credit and the rate of benefits. That is unacceptable. Even in the period that we are talking about, there is a 4.1% increase in departmental expenditure in the coming year but further cuts in benefits are going on. It cannot continue. I notice in Cumbria the dreadful impact that is having on the ground. We have a great increase in demand for our children’s services, from parents who cannot cope with bringing up their children themselves, and the costs of our children’s services are rising dramatically. This will become as big a challenge as social care unless we address it.

The big question is: is this a turning point? I hope that the noble Lord, Lord Duncan, from his new position will be able to say positively that the policies of the past nine years have been abandoned.

[Lord Ashton of Hyde (Con)]

My Lords, to make sure that there is time available and that people are here to question the Leader of the House, we propose in agreement with the usual channels to take two more speakers in this debate and then take the Prime Minister’s Statement, followed by the Iran Statement, and then conclude the remainder of this debate.

18:38

[Lord Cormack (Con)]

My Lords, I am glad, at least, that I get in.

[A noble Lord]

So are we.

[Lord Cormack]

You have not heard what I have to say yet!

As I was listening to the noble Lord, Lord Liddle, I could not help but remember a speech that I heard at my first State Opening of Parliament way back in 1970. The Address was moved by the then John Nott, later Sir John Nott, and he made a remark that has always stuck in my mind: he said that the real poor of the 20th century are those without hope. You can repeat that statement and advance the century, because it is still those who have no hope—who do not feel that they have a future—who are the real poor. I very much hope that the various promises made in this document, unsubstantiated in some ways as it is, can be carried forward and expanded.

I really want to talk about something else, because this is an extraordinarily artificial debate. The noble Lord, Lord Davies of Stamford, hit the nail on the head in his opening remarks. Here we are, back from a brief September session that was, it turns out, illegally brought to a close. I am very glad that, like the Leader of the Opposition, I boycotted what turns out to have been not the Prorogation ceremony. We are now in the middle of a constitutional crisis, the like of which this country has not seen for a very long time indeed. I am not sure I would go back to 1789, with the noble Lord, Lord Davies—

[Lord Davies of Stamford]

I said 1689.

[Lord Cormack]

The noble Lord actually said 1789, but we will not bandy this across the Chamber. One could say that 1911-12 was a great constitutional crisis. However one looks at it, and whatever one’s views of the decision that was unanimously reached yesterday, I do not think that anybody can deny that this is a great constitutional crisis. I pay tribute to the Justices of the Supreme Court. I think that they did indeed act without fear or favour; they were not taking sides on the Brexit issue. They were ruling—and I say this with some feeling of embarrassment and shame—on the conduct of a Conservative Prime Minister who should not have played fast and loose with Parliament and who should not have sent us packing on 9 September, having himself even said that he might keep us here until 12 September. I believe that the matters we have been discussing today, in an unsatisfactory form, through Statements and now this debate, illustrate the fact that there is indeed an agenda that would have kept us more than busy for most of the five weeks. Now we still do not know what is going to happen. I imagine that there will be a short and perfectly proper Prorogation in a couple of weeks, followed by a state opening and a Queen’s Speech on 14 October. However, we do not even know for certain whether that is going to happen. We have an extraordinary situation: a Government who are in a significant minority and discussing financial plans and promises that they do not know whether they will be able to discharge.

No one wishes the Prime Minister greater success in reaching a deal than I do. As I made public on many occasions, I would have accepted the deal that Prime Minister May achieved, all those months ago. I very much hope that we can have a deal and that we can be out on 31 October, much as I will greatly regret that, because this long saga has to be brought to a close. The fact is that Parliament has now decreed—rightly, in my view; I strongly supported the Benn Act, as it is now called—that we should not leave without a deal. What I have been concerned about this afternoon, in answers to two Statements delivered by my noble friend Lord Callanan, is that he has not come absolutely clean, by saying what will happen if, on 31 October, the deal has not been concluded. I hope that the Leader of the House will be able to do so in a few moments’ time. Parliament has decreed that it should be concluded before we come out. Having had one constitutional crisis because of the way in which the generally accepted rules of Prorogation were neglected, we do not want another crisis because an Act passed in Parliament through both Houses is ignored. I hope that, tonight or before we rise tomorrow—though we are of course back next week—we will have a clear and unequivocal statement. I would appeal to the Prime Minister, though I do not suppose that he will necessarily read—

[Baroness Manzoor (Con)]

Forgive me, but I remind my noble friend that this debate is about the spending review. There will be an opportunity to address those other issues when the Leader is here so that we can hear her response. As a courtesy to the Minister, it would be useful to address the question of the spending review.

[Lord Cormack]

These things are inextricably connected; it is very important that we recognise that.

[Baroness Manzoor]

The—

[Lord Cormack]

My noble friend can chunter, but the fact is—

[Baroness Manzoor]

The only reason that I said that is that the Leader is not here. Therefore, she is not able to answer the question. It would be very helpful, if there were questions, for us to be able to hear her response. That was my only point.

[Lord Cormack]

The Leader is perfectly able to read Hansard tomorrow. She is not here at the moment, but the fact is that we need answers to certain questions.

I very much hope that we will have a deal. But I appeal to the Prime Minister. If he wants to enact this spending review—and I hope that he can, with some embellishments and improvements—I hope that he will recognise that with a little bit of compromise, and if he would relax his absolute insistence on a particular date and time of day, there is a chance that we could move forward. I also appeal to him to bring back into the Conservative fold 21 of its finest members who were so peremptorily dismissed a couple of weeks ago. That would be a very real contribution.

The spending review, yes, with some embellishments such as money for the police and education of course and, as my noble friend Lord Horam said, for apprenticeships; all of these things are crucial, as are other points made by the noble Lord, Lord Liddle. But none of that can come to pass unless and until we have a stable Government and a stable relationship with our European friends and neighbours.

18:47

[Lord Robathan (Con)]

My Lords, I see the House filling up, although I am not sure that it is filling up for my speech. I know that it is traditional to say this but, having listened to almost all the speeches, I genuinely heard some very interesting ones. The noble Lord, Lord Liddle, with whom I do not agree entirely on everything, made some interesting points. I reassure my noble friend Lord Cormack that I agree with him that this is a very serious constitutional crisis—perhaps not on everything else.

It has also been interesting to see that the Opposition—the Liberal Democrats and the Labour Party—are opposing the end of austerity. I thought that they had been against it from the very beginning. I will say one thing about the reason that we had the unfortunate—I agree that it was unfortunate—austerity programme, for want of a better term. When we took office in 2010—I was a Minister at the time—there was a serious issue with the public finances. The Liberal Democrats agreed at the time that we had to sort it out. To a certain extent, although not totally, we have done pretty well on that over the last nine years. Some mistakes were made and I will turn to a couple now. On the spending round, there are two issues that I want to particularly concentrate on.

[Lord Tunnicliffe]

The Opposition, as far as I know, have not said that they do not welcome an end to austerity. They just have a very different vision of what it looks like.

[Lord Robathan]

Various people from the other side have commented that the Government need to be careful about how much money they spend. I agree with that, as it happens.

The first point that I want to make is about the police and the criminal justice system. I have had experience of the criminal justice system from going to courts recently, and Westminster Magistrates’ Court in particular; I hasten to add that I was not in the dock. It was quite shocking because of cuts to the court services. In particular, there were temporary staff who did not know the answers to pretty simple questions. I found that pretty worrying.

With regards to the police, I think all noble Lords can agree that the police were cut far too far and, while I do not necessarily make a direct correlation, there has been, it appears to me—noble Lords may contradict me—an upsurge in knife crime. Every day we see, particularly in London, young people being killed with knives. There must be some small connection, if not direct correlation, between that and the fact that the police are rather overstretched. After all, we have pretty full employment and, traditionally, that has led to fewer idle hands and less petty crime, so I welcome the extra spending—a 6.3% increase. It should never have been reduced so far and the idea of having 20,000 extra police officers, assuming that they are well employed and well directed, is one that we can all welcome.

I take the point made by the right reverend Prelate—I think it was his point—that we need to make sure that we think not just about prison places but about rehabilitation as well. We have this day Long Lartin rioting and that, again, to a certain extent, must be because prison officers are stretched. We also see, interestingly, that the Prison Service, as I read today in the Times, I think, is in the top 100—possibly number 49—professions chosen by graduates today, a rather encouraging sign.

The second point I would like to introduce is defence. I was a Minister during the SDSR in 2010. I argued against some of the savage cuts; indeed, I even raised the matter with the then Prime Minister. I welcome the extra £2.2 billion as a good start—but where shall we start? We are looking now at Iran and the threat from drones that appear to have been used to attack tankers in the Middle East, and that will affect us all. We are looking at Yemen and the attacks on Saudi Arabia. Again, this has the potential to spread. We are looking at a belligerent Russia in Crimea, the Ukraine and Salisbury. We are looking at China, which is not an enemy, but it is spreading in the Spratly Islands. I was not here at the beginning of this month because I was in Ethiopia, and I can tell you that China is buying Africa. It is quite straightforward: it is throwing money at Africa, Sri Lanka and other places, and buying them. We need to be very cognisant of that, and be prepared for it and for all eventualities. We do not want another Cold War with Russia, but the behaviour of President Putin is—I think all noble Lords will agree—fairly worrying. I do not want to go into the topic of North Korea, but again, there are problems. An old Latin adage is, “Si vis pacem, para bellum”—that is how we pronounced it in my prep school anyway—“If you want peace, prepare for war”. I think we need to consider that a bit further, so I welcome the spending, although I would probably go further.

Finally, on spending, I will turn to the £2 billion put aside for Brexit funding for 2020-21. We are in a mess. I think every noble Lord can agree with that—indeed, my noble friend Lord Cormack and I agree about that. The country is divided. We have those within, if I might say so, the London metropolitan elite bubble who cannot understand why anybody would vote to leave. I will briefly say that I went to the funeral last week of a long-standing councillor in my erstwhile constituency in the village of Countesthorpe—a man called David Jennings. He had been a parish councillor for 49 years. He was not a grand ex-guardsman like myself. He had been a milkman and a carer—he did all sorts of jobs—and was a pillar of the community. I looked around the Church—I did not know which way they voted in the referendum—and I saw the decent, ordinary people that is Middle England. London does not always understand that.

I will turn briefly, without upsetting my noble friend in front of me, to the legal judgment: we do not want to move to judge-made law. I was taught about the separation of powers: the Executive, the legislature and the judiciary. It seems to me that the legislature is trying to take over from the Executive and the judiciary from the legislature. This is a very dangerous route to follow. The courts are there to uphold the law, not to make it. By the way, I will be agnostic on whether they are right or wrong on the actual judgment, but I heard Lord Sumption, whom I do not know and with whom I expect I do not agree about one or two things, today describe the ruling as “revolutionary”. I suggest that is worrying. Courts should restrict themselves to upholding justice, and not interfere in political decisions with which they do not agree, as indeed the High Court in London did earlier this month.

I am very concerned about the ruling. I do not consider judges—I see the noble and learned Lord, Lord Judge, down there—enemies of the people, but many will see this judgment as a political one, not a legal one. I mention this because I think we should not be here today in Parliament. Should the courts rule on the impartiality of the Speaker, for instance? We know he is not impartial—he has said as much. Or should they rule on the breaking of conventions by Parliament when it has taken over the business of the House of Commons? This is a dangerous road down which we proceed.