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Lord Livermore (Lab)
My Lords, I take this opportunity to join others in welcoming the noble Lord, Lord Duncan of Springbank, to his new role.
This spending round claims to turn the page on austerity. Certainly, following the global financial crisis, a period of fiscal retrenchment was undoubtedly necessary. In the decade since the era of austerity began, Britain’s budget deficit has fallen from a peak of £153 billion in 2009-10 to a forecast, prior to this spending review, of £21 billion in 2020-21; the lowest level in 17 years. This is a considerable achievement and the result, as the previous Prime Minister put it and as the Minister repeated, of the hard work of the British people. But it is worth reflecting on who in society worked the hardest, because even in an era of austerity, there are still choices to be made about who should bear the greatest burden. The reality is that the distribution of austerity in the years after 2010 hit the most vulnerable disproportionately hard.
The impact of the austerity implemented between 2010 and 2015 meant that the poorest decile of working-age families was more than 6% worse off. The second poorest decile was more than 5% worse off and the third poorest more than 4% worse off. Meanwhile, money was found to cut the top rate of income tax and, as the Institute for Fiscal Studies put it, households in the sixth to ninth wealthiest income deciles were protected over this period to a remarkable degree. After 2015, as austerity continued, with cuts to universal credit and a four-year benefits freeze, we again saw a distribution impact that was strongly regressive. A couple with children that is out of work and most in need is now more than £4,000 a year worse off, and a lone parent out of work is £3,500 worse off every year. Even in work, which the benefits system should reward, the cuts to family incomes are large. A lone parent is nearly £1,500 a year worse off, and a couple with children with one earner is £1,000 a year worse off. Yet over this period, while the poorest decile has lost an average of £1,100 a year, the richest decile has actually gained £400 a year. While some of the richest working-age families gain £1,000 a year, the poorest lose £3,000 a year, or 15% of their income.
The consequences of these choices to reallocate available resources away from the bottom half of the income distribution are all around us. Household debt now stands at 139% of disposable income and is forecast to reach 146%. Rough sleeping, which fell by three-quarters under the last Labour Government, has risen by 169% since 2010. Nearly 1,000 Sure Start children’s centres have closed and child poverty is projected to rise a further six percentage points by 2023 to its highest ever level. Given the scale of the sacrifice asked for in this era of austerity, and given that it hit the poorest in our society disproportionately hard, we might hope that the Government would now honour this sacrifice by showing caution in the years ahead. We might hope that they would not take risks with the public finances such that the hard work of the British people is undone, their sacrifices were for nothing and we are taken right back to square one.
However, in his spending review three weeks ago, the Chancellor appeared not to be showing caution but instead to be playing fast and loose with the nation’s finances. Presumably laying the ground for a potential general election, the Chancellor announced an extra £13.4 billion of spending for next year, but as the noble Lord, Lord Young of Cookham, pointed out, this spending round was not accompanied by new economic forecasts from the Office for Budget Responsibility. Making such major spending decisions without the latest economic and fiscal forecasts is a risky move. As Paul Johnson, director of the Institute for Fiscal Studies, commented:
“By making major spending decisions without having the most up-to-date forecasts for the economy and public finances, the Chancellor is taking a gamble”.
Given that the next set of forecasts from the OBR, due later this year, are likely to reflect a deterioration in the outlook for the UK economy, it is easy to see why the Chancellor decided to hold this spending review before the updated forecasts were published, because the 2019 spending round also had significant implications for the Government’s fiscal rules. The Chancellor’s fiscal mandate, inherited from Philip Hammond, requires him to ensure that borrowing is below 2% of GDP in 2020-21. At the Spring Statement in March, the OBR declared that the Chancellor would have £27 billion of headroom against that rule—a figure subsequently reduced to £14 billion by the decision of the Office for National Statistics on student loans. However, in reality, the Chancellor’s headroom is likely to be much lower even than that. We have already seen a marked deterioration in the borrowing figures for 2019-20, such that his £14 billion of headroom could be reduced by around £5 billion. If we add in the impact of the weaker than expected economic performance since the Spring Statement, that could take off a further £5 billion. Taking these together, the Chancellor’s assumed £14 billion borrowing headroom actually comes in at closer to £4 billion.
All of this means that, while the additional £13.4 billion announced in the spending review might have come within the fiscal mandate limit as calculated back in March, it is very unlikely to be consistent with the fiscal mandate had the OBR been asked to update its forecasts. Indeed, the Resolution Foundation, the independent think tank, has calculated that the Government could in fact break their fiscal mandate by some £10 billion.
Rather than show prudence in their fiscal announcements and be honest about the likelihood of tax rises needed to make this new spending affordable, the Chancellor hinted that he would simply jettison his existing mandate, declaring that he would set out a new fiscal framework ahead of the Autumn Budget—not shaping his spending decisions to fit his fiscal rules but bending those rules to fit his political goals.
This lack of caution is all the more extraordinary given not just the uncertainty over Brexit but the Government’s clear desire to pursue a no-deal outcome. As the Office for Budget Responsibility has pointed out, even a relatively benign no-deal Brexit would further weaken the economy and push up borrowing by around £30 billion a year. A more disorderly no-deal scenario is estimated by the Bank of England to reduce the level of GDP by 8% by 2024. The Treasury’s own figures show that even if we avoid a no-deal outcome, any Brexit scenario that leaves the UK outside the single market will reduce GDP in the longer term by 6.7%, with very clear consequences for the public finances.
Nowhere in the Chancellor’s spending plans does an appreciation of these risks appear. Instead, in the face of such economic uncertainty, now is the time the Chancellor chooses to gamble with the nation’s finances; now is the time the Prime Minister chooses to commit to a further £9 billion of income tax cuts for the wealthiest in society. An improvement hard-won over the course of a decade, and borne disproportionately by the poorest in society, is now gambled for short-term political gain and jeopardised by the Government’s inability to tell the truth about the consequences of their Brexit policy. Once again, we know that it will not be the wealthiest who pay the price: once again, it will be the most vulnerable in our society who are left to pick up the pieces.
Baroness Stroud (Con)
A Government have two key opportunities to really change the fabric of our society structurally: one is the Budget and the other is the spending review. To do that effectively, however, it is important to understand the shape of our nation, what is working and what is not.
The Legatum Prosperity Index—in which I declare an interest—tells a really interesting story about the UK. Economically, where so much of our energy rightly goes, we have a relatively strong story to tell: an open economy that is performing particularly well in enterprise conditions and the investment environment. Socially, however, where many in this House have been arguing that greater investment is needed, we are held back by weakening social capital. There comes a time when the economy cannot do all the heavy lifting on its own. To build prosperity, there needs to be equal focus on the economic and social well-being of our nation. I suggest that that time is now.
The spending review rightly calls this out with a significant investment in our key public services such as education and health. However, where this money will go and how it is to be spent will be crucial in determining how successful an investment this will prove. As the Prime Minister stood on the steps of No. 10, amid the Brexit narrative, one recurring theme of his speech struck me. “We will level up”, he said, over and over again. He has inherited a deeply uneven and divided Britain, where two halves of the same country see and experience life very differently, where one half feels there is opportunity ahead of them and the other feels left behind. Rarely has there been a more important time to “level up”.
Looking back, there have been many attempts at this. We had Tony Blair’s focus on the country “for the many and not the few”, and Gordon Brown’s “future fair for all”. We had David Cameron’s “big society” and Theresa May’s “burning injustice”, but since 2001 the number of people in poverty has remained remarkably static at just over 20%. Our approach to rebuilding the fabric of our society—of levelling up—has to be about more than rhetoric. I welcome the investment in our children’s education announced in this year’s Spending Review. The gap in educational achievement between those in poverty and those adults with GCSEs is too great at 13%. If the focus is on levelling up, could the Minister outline the strategy for ensuring that it is our most disadvantaged children who will benefit? I welcome the investment in our police; the difference between the level of safety felt by those in poverty and those who are not is too great at 7%. If the focus is on levelling up, could the Minister outline the strategy for ensuring that it is our most disadvantaged communities that will benefit?
What is needed is a levelling-up strategy, where the focus is on genuinely improving the lives of those left behind. The latest figures show that 14.3 million people are struggling to make ends meet at any given moment —this is just over one-fifth of the UK’s population. We are the fifth-richest nation in the world, and our prosperity can be converted into better outcomes for all of us. We should not tolerate the extreme poverty we see in the UK. If the narrative of levelling up is to be fulfilled, these are the people who should benefit first, as others have already said.
To do this, I suggest, three pressing social issues urgently need attention, and I ask the Minister to identify how these are being addressed in the spending review. The first is wages. It now takes two full-time wages to ensure that a family is not in poverty. Our Prime Minister talks about,
“higher wages, higher living wage”.
It is a tantalisingly attractive phrase in an inspiring speech, but what does it mean? Raising the national living wage has been a hugely positive step forward, but what is the Government’s strategy at this time for addressing this structural challenge.
The second is health: half of all families living in poverty have a disabled adult or child living in the home, compared to a third of people not in poverty. This makes it much harder to work and, more importantly, to work full-time. The investment in health in the spending review is hugely welcome, but could the Minister outline how much of this will go to supporting those with physical and mental health challenges to get into work and stay in work? This would be a real levelling up. The third is the 7 million people who live in persistent poverty: just under half of those in poverty now have also been in poverty for at least two of the last three years. There is an urgent and immediate need to ensure that they do not stay there. What is the Government’s poverty strategy in this spending review that will break this cycle?
From my own experience, I know that the Treasury and the OBR are predominantly focused on economic and not social outcomes. It will take a really committed and visionary Treasury team to refocus it on building genuine prosperity and economic and social well-being, and to build social strength back into the fabric of our nation. A fairer and kinder country would make us all proud. Our Prime Minister has said that this will be done by physically, and literally, renewing the ties that bind us together—by levelling up. There is a huge hunger in the country for this genuinely to happen. This spending review has a massive opportunity to be a force for good, but could the Minister give us insight into the strategy that sits behind the numbers?
Lord Kirkhope of Harrogate (Con)
My Lords, this is a slightly anticlimactic situation after the business that has gone on in the middle of this debate. I want to concentrate on two areas, neither of which are given much space in the spending round, but which, to me, are of great importance. My arguments will be more to do with realignment of resources rather than suggesting any increase in public spending per se. I am not an economist and do not have my noble friend’s qualifications, although I note that he was at one stage an economic adviser to the Post Office Corporation—I think that was just before it started to increase the cost of stamps, but I will not hold that against him.
I want to talk first of all about mental health. I had the honour of being one of the founder members of the Mental Health Commission, which was set up in 1983 under the chairmanship of my noble friend Lord Glenarthur. We were formed primarily to improve standards in mental health care and in particular to protect the interests of mental patients, especially those who were detained within closed establishments. Even then, over 30 years ago, it became obvious that facilities were inadequate and improvements were needed, but our work highlighted the particular need for greater co-operation between the health authorities and the providers of social care in the community to manage those who were released or encouraged to rejoin the community, particularly those from special hospitals. There was a key move by that commission to try to make sure that facilities nevertheless continued to be provided for those who needed to be protected within a secure environment. Sadly, I am afraid that some of the policies of government were to move people out into the community even though they did not have adequate resources available in the community from other providers, particularly local authorities and those in social care, to look after them. That was 30-odd years ago.
The five-year plan produced in 2016 by the independent Mental Health Taskforce again recommended improvements, all those years later, in community resources, as currently 90% of adults with mental health problems are supported in primary care at one point or another in their needs. The so-called care programme still has many deficiencies, and I am therefore rather disappointed to see that within the spending round, although the health service resources are referred to, there is no understanding that one in four people in this country will in their lifetime suffer from some mental illness which needs to be dealt with. I believe we should therefore be looking specifically at mental health care, rather than simply allotting up to 10% of spending on it. That is one thing I wanted to press very hard on my noble friend the Minister.
For my second point, which follows almost on from that of the right reverend Prelate the Bishop of Durham, I want to talk about devolution for a second. We find the only direct reference to resources for devolved powers on page 16 of the spending round, under the Ministry of Housing, Communities and Local Government. It talks of,
“continued funding for the Midlands Engine and Northern Powerhouse”.
I happen to be currently the co-chair of the All-Party Parliamentary Group for One Yorkshire, which is very strongly supporting devolution from the centre to our regions, particularly to Yorkshire. I am getting more and more concerned about the rather confusing number of organisations, and the financial support for them, which are supposedly looking at the issue of devolution.
In a recent Institute for Government paper on devolution, most of the discussion, needless to say, is on Scotland and Wales, but it also acknowledges the less cohesive and successful attempts in England to bring about devolution. I remind my noble friends that, in 2004, 80% of voters rejected in the north-east of England a proposed assembly, which virtually killed off proposals for assemblies across the whole of England, which were at that time at least in the Government’s mind. Eight metro mayors have been created since 2015, with very mixed outcomes and not always adequate resources to do the things they have been asked to do. The criterion has been that “functional economic areas” must be the basis on which devolution is allowed, leaving the door open for new ideas and new designs. There is little clarity on funding or responsibilities.
We have the northern powerhouse covering the north-east, Yorkshire, the Humber and the north-west. Under that umbrella sits Transport for the North, advocating better infrastructure—which is needed in that part of the country—and a northern powerhouse investment fund. That fund is currently benefiting not only from the British Business Bank but from the EU, through European funds. I hope my noble friend will confirm that in this case, as the Government have attempted to do in other cases, the funds that will be lost to these organisations and to our local enterprise partnerships will actually be provided by central government in the event of our leaving the EU. There is considerable concern about that.
There is a lot of confusion about future devolution and the relationships between different organisations. The people of Britain outside London have shown interest in this but, even if there is a will by the Government to proceed, the funding is certainly unclear and should be better defined. I find it disappointing that it is not specifically located within the spending round, and I hope that to some extent my noble friend and his colleagues are going to rectify that situation soon.
Baroness Kramer (LD)
My Lords, I am the first of the winding speakers, and I think I recognise a House that is, frankly, exhausted so I will try to limit my comments on this occasion. However, I cannot resist welcoming the noble Lord, Lord Duncan of Springbank, to his position. He knows how well-respected he is in this House and we are delighted to see him picking up this not-easy portfolio. The noble Lord, Lord Young of Cookham, may be relishing his freedom but, my goodness, the rest of us relish it as well. He made a speech of which I could not disagree with a single word.
What has struck me today, in such contrast to the Statement that we have heard from the Prime Minister, is the common voice across the House from different Benches. It strikes me that in pulling together we can find so much to do in order to take forward the prosperity and success of the nation. It makes you begin to think that perhaps we should be pulling party politics out of a lot of the activities that we are engaged with. I say that, of course, as I am about to become somewhat more political.
I have had many disagreements with Philip Hammond over the years but I always respected the fact that in looking forward to Brexit, whether with a deal or not, he recognised the significance of leaving fiscal headroom for a contingency. I say that because I have often talked from these Benches about the mistakes made by Gordon Brown, thinking that boom and bust were over and spending without leaving any kind of contingency so that when the financial crisis hit there was essentially no cushion to use to try to get over that immediate hurdle. Now I see the Benches that always applaud me when I make that statement proposing a spending review that destroys the contingency that had been identified by Philip Hammond. Between taking the student loan portfolio on to the books—that strikes me as appropriate and it should probably always have been there—and the £13.8 billion in this spending round, the contingency now disappears entirely.
Most of us in this House know that Brexit is going to do damage. We might disagree on the amount of damage but the OBR has looked at even a mild form of no-deal Brexit and said that it is basically a blow of £30 billion a year for at least four years. We know that the Treasury in looking forward, even when it thought in terms of a deal, saw the economy running essentially at a much lower benchmark than it has done historically. While many people talk about the economy doing relatively well, because globally all economies are struggling at this time, we have also seen drops in investment and we know of the plans by many businesses to gradually move a great deal of activity overseas. Productivity is a problem that has not been tackled but underpins our economy; the rate of productivity growth is appalling. When you look at all those issues, it is nearly impossible to understand why that contingency has been dissipated. I assume as a consequence that this is simply the opening saga of a series of election pledges that, as far as I can tell, are going to be unfunded.
Others in this House—the noble Lord, Lord Livermore, hinted at it; the noble Lord, Lord Liddle, was more explicit; and we heard some of this from the noble Lord, Lord Young, and others—have talked about the importance of more public spending, because we need more of it on a wide range of priorities, but making sure that it is paid for. Borrowing is not the answer to paying for it. Now, I always disagreed with Philip Hammond over the funding of infrastructure; there I think you can argue for borrowing and we should have done much more of it to support infrastructure, particularly with interest rates being low. I pick up a point made by the noble Lord, Lord Liddle: as we look forward to a very different kind of economy, there may be other kinds of what is typically considered as soft spending—education could be one example—that could also go into that category of long-term investment. There are some issues there to explore and look at.
However, after all the years that we have spent bringing the deficit into line and all the pain that has been experienced in doing so, to look at a situation now where we have spent the entire contingency, when we know that we are about to receive a whole series of economic blows, strikes me as, frankly, quite extraordinary. Let us be clear: even if it is Brexit with a deal—and things will be far worse if it is a no-deal Brexit—we will be into at least seven more years of negotiation, uncertainty, stress and change. This is not a situation, as I think the Prime Minister sometimes would have us believe, where you carry through Brexit and then the world returns to normal immediately, or perhaps within three to six months. This is going to be a long struggle involving suffering and pain, and we have to be financially prepared for that.
I am not afraid to say on behalf of my party that we want to spend more, but we know that it has to be paid for by raising some taxes. We have argued for a hypothecated tax for health, for restoring capital gains taxes and for raising corporation tax. We will never present to the country a manifesto that is unfunded in the way that I fear, as I listen to the Spring Statement, this Government are intending to do.
As I said, I do not want to keep talking. There have been many outstanding speeches today. It has been stressed that the spending review covers some issues but ignores others. The noble Baroness, Lady Stroud, talked about the importance of levelling up. The noble Lord, Lord Young, talked about the importance of housing, which is really not provided for in the review. Critical statements were made by the right reverend Prelate the Bishop of Durham, the noble Lord, Lord Liddle, and others demonstrating the failure to pick up universal credit and deal with the impossible situation faced by so many of the poorest, including the working poor. Not to have addressed that situation within a spending review is extraordinary. Then again, I think the items have been chosen because they are thought to have political appeal to a particular sector of the electorate, which tells us everything.
I have one last question to ask the Minister before I sit down. This is a genuine question because it is something that I do not know the answer to. Having realised that HMRC has revised corporation tax credit data and discovered that it is £4 billion worse off in cash terms than it expected, I do not understand how that translates into government accounting. Do we have even less headroom than we anticipated because of this correction to the accounts?
Lord Davies of Oldham (Lab)
My Lords, I too welcome the noble Lord, Lord Duncan, to his role. I warn him, however, that I have been at the Dispatch Box for the Opposition for almost a decade, and I think I have faced 10 Finance Ministers. Longevity is not easy; if he wants to make a mark in the field he has to get cracking fairly quickly. This is not the most auspicious of starts for him. How on earth did the Prime Minister persuade the Chancellor that his first major speech to Parliament should be to introduce this spending round? It is not, of course, a review: reviews were introduced to identify spending patterns and resource allocations over several years. They might be annual, but they built up a pattern. This one is defined as a one-off. It is certainly a spending round. Of course it is a one-off, because it has a pretty limited objective, which is to give some substance to the Government’s economic position in the early forthcoming election that we all anticipate.
This spending round meant that no serious political analyst, nor Member of either House of Parliament, saw this as anything more than a rush job—a mere substitute for a Budget. As the noble Lord, Lord Young, pointed out, with a budget the OBR produces some independent advice and analysis of its role. With this spending round, there was nothing from the Government except a series of throwaway lines on what they thought would be attractive to the electorate in terms of expenditure.
It is a pity, therefore, that we have devalued the concept of economic strategy. The country is in a difficult enough position on politics at present; we have all endured the crisis days of the last week. But for the economy to be treated with throwaway lines is a most unfortunate development. For a great deal of this debate, serious Members of this House sought to give some substance to this flimsy document, as my noble friend Lord Liddle called it, to try to translate it into something of substance. I give full credit to the noble Lord, Lord Fox, who also identified just how inadequate this spending round would prove to be and the difficulties of thinking about anything else, except in short-term electoral terms.
There is no attempt at long-term analysis. That is why all the complaints about fundamental issues that have obtained over the last decade are so much wasted air against a background where this document has no ambition with regard to laying future foundations, but is really looking at the way in which it can bring to an end, it hopes, the concept of austerity and go on a spending spree. It is obvious that the problem of austerity is a good deal more rooted than is suggested by those—the Chancellor, in particular—who felt they could get away with a speech of this kind in a document of this type. So many of the issues are so deep-rooted, and people have suffered for such a considerable period in the age of austerity, that there is no way that even the most resourceful Government could turn things round in the space of a year or so, which is what this spending round attempts to suggest. It requires a firm commitment to very significant economic plans, which, as the Labour Party, we intend to put before the electorate when that election occurs.
The problem has been identified again in this debate. Every spending commitment that has been portrayed in this document as a real advance has in fact fewer resources committed to it than is suggested. NHS spending, for instance, boasted by the Chancellor to rise by £1.8 billion, soon proved to contain £1 billion that was not new money at all. The Institute for Fiscal Studies said that to give a real increase to the health service, £3.8 billion was needed. That superficial approach to the problem of the health service runs through the whole of the document. In education, school heads and staff soon saw that there would be little new money except that for meeting rising costs that are unavoidable—the rising costs associated with employee pensions and the number of school pupils who have to be taught in our schools. Therefore, there is no real growth in school expenditure in this spending round.
There is some advance and I give credit to the Government for it, as did the noble Lord, Lord Young, and the right reverend Prelate the Bishop of Durham. Other aspects of education need real attention. There is no doubt that the Government have long battled to increase productivity, but they have lost that battle year after year for almost a decade. Serious attention needs to be paid to vocational education. Yet we have had a slashing onslaught on further education colleges. They are due to receive £400 million extra in the coming year. That is obviously welcome and shows that the Government have learned some lessons of their own, but it is against a backdrop of £3.3 billion of cuts over the last decade in this crucial education sector, which sets out to improve skills in industry and business and would give some hope to reducing the regional disparities that we all recognise represent a real problem for Britain.
Other areas of expenditure produce the same problem. It is claimed that 20,000 new policemen are to be afforded on the streets. But no allowance was made for the fact that out of that 20,000, 7,000 will be nowhere near the streets. They will be in the National Crime Agency and other national agencies; they will not be bobbies on the beat, which is what the concept of 20,000 new policeman sought to convey.
In this ineffectual document one of the outstanding omissions—the noble Lord, Lord Greaves, probably knows about it in relation to his local community—relates to the terrible local authority funding gap. We cannot pretend to reduce gross inequalities in our society if in fact we precipitate despair, and not only among Labour or Liberal local authorities—the first outrage was expressed by Northamptonshire County Council, which is a Conservative authority. This year alone, the social care spending gap is destined to be £2.6 million. How can we say that the resources are there to meet real needs?
Some 10,000 new prison places have been promised, but after all, these were promised two years before in the election manifesto of 2017, so this is merely a rehashing of a previous activity by the Government, which has not been realised to the extent they were suggesting. There is no suggestion about how any of this will be paid for.
Noble Lords on my side of the House, in particular, were keen to emphasise the fact that this country has an acute problem of poverty—it has an increasing problem of child poverty—and yet Conservative Chancellors have been concerned, as the noble Lord, Lord Livermore, pointed out, to reduce the tax on higher-income taxpayers three times more than taxpayers on the basic rate. There are an awful lot of people in work on the very low rates in this gig economy in which the question of taxation plays a relatively minor part—they do not earn enough to actually qualify for it. The right reverend Prelate the Bishop of Durham emphasised this point in a strong moral plea for some degree of fairness for those who are in poverty. In one of the world’s richest economies, the dependence of so many of its citizens on food banks, as well as sleeping rough and having continual problems with the operation of universal credit is something which the Government ought to be thoroughly ashamed of.
There have been not inconsiderable economic resources devoted in these last few years to a no deal Brexit, as the Government wrestle with the consequence of the strategy they have been pursuing, which is clearly fraught and has divided the nation in a very dramatic and sad way. We all know that we have a society which requires some very constructive and important solutions to its needs. It is necessary that we have budgetary approaches which, in fact, tackle those needs. This spending round is not one of those documents.
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 thank all your Lordships for your warm welcome on my new role. It is nice to be here for a brief time—I am not wholly convinced it will be my permanent future—but, none the less, I am interested in each of the comments made by noble Lords this evening.
I think there has been far more consensus than there has been division on some of the issues affecting wider society. I am reminded of some remarks, again, by Benjamin Disraeli, which he would have written in Sybil, a book subtitled Two Nations. He said:
“Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets”.
He spoke not of different parts of this kingdom, nor indeed of different social classes; he spoke simply of the rich and the poor—a reminder again that some challenges are with us and must be addressed even now afresh.
I have also thought how we might frame this debate, and I was struck by the comments made by the right reverend Prelate the Bishop of Durham. It put me in mind of some remarks by a former Vice-President of the United States, Hubert Humphrey, who simply said that,
“the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped”.
That is a test that we need to embrace now.
In lots of ways, this particular spending review does a number of things, but it does not seek to do everything. We need to recognise the difference between what a spending review is destined to try to achieve and what a Budget is setting out to try to achieve. I take for example, one aspect, which I know a number of Lords have touched on this evening: education. It is very easy to talk about education in simple, glowing terms or in simple statistics and headlines. However, it is important to recognise that we made great strides forward in collaboration with the Liberal Democrats in our coalition Government back in the day: 85% of pupils are in good or outstanding schools, compared with 66% in 2010; there are 10,000 more teachers and 921,000 new school places since then; and there are 160,000 more six year-olds on track to become fluent readers compared even with last year.
When we look at the money we put into education, we begin to see how that money can make a difference. Money spent wisely is money well spent. I will touch upon the comments of the noble Lord, Lord Davies. The minimum per pupil funding for a primary school pupil will become £4,000, for a secondary school pupil £5,000. We are putting £66 million into early years spending, and £400 million more will go into further education. Each of these elements should create a positive pathway to move issues forward.
Social care is perhaps one of the shadowy areas that Hubert Humphrey spoke of. In many respects, this is a new area as we begin to explore how funding will work. The money we are putting into social care is significant, but it is only to stabilise the system until we can begin to understand how best we can tackle the wider challenges that exist within the social framework. For too long we have seen these simply as issues to be dealt with by the individual; there is a wider community interest which we have recognised. That is why I expect that the Budget itself, which will come later, will look at this head-on and should, I hope, begin to make a significant difference.
I will try to answer all questions in the time available, but I hope noble Lords will appreciate that there were quite a few. I will begin by picking on the right reverend Prelate, just because I happen to have the notes at hand. I hope he will forgive me. The question of health and social care that I have already touched upon will become important. The £1 billion will make a difference. There is an additional £500 million which should begin to stabilise the system. It does not solve the problems but begins to take us in the right direction.
The right reverend Prelate asked very specifically about unaccompanied children and legal aid. Unaccompanied children were brought into the scope of legal aid in immigration matters when the Ministry of Justice’s Legal Support action plan was published in February 2019. I hope that will go some way to addressing that particular issue. We are committed to ensuring that everyone can get the timely support that they need to access that justice system. If you cannot access justice, you cannot secure it. It is very simple.
There was a question on whether we should be in any way rejoicing that there are 10,000 more prison officers. In some respects, the answer to that should simply be no. That is not a way we should measure things, but it is not the only way we seek to measure things. It is about ensuring that those who find themselves in prison find a way out of prison without returning, looking at the recidivism rates themselves to ensure that people who have found their way into that troubled area are able to find their way out of it. In order to do that, we have to take the pressure off the system itself. Those 10,000 extra guards should, I hope, make some difference. However, it should not be a metric by which we measure the success of our society; it is simply a reflection of the need that these aspects have for us.
The right reverend Prelate will be aware that many aspects relating to benefits will appear in the Budget more sensibly because that is where they will rest. What we are looking at here is the departmental spending aspects. The Government are increasing spending on universal credit: it will be £2.5 billion higher in 2023-24 than when the decisions were taken in 2016.
Overseas aid is an issue very dear to my heart. The 0.7% of GDP is an important measure of our society. We are one of the few developed nations actually to try to meet that. However, we have got to make sure that the money spent works. It cannot be based upon return to the United Kingdom, although we must make sure it is value for money. Money spent unwisely is, in some respects, money lost. It should look at issues around poverty but should also begin to question the notion of how we address the wider global climate change and look at some of the wider issues that rest underneath that. I am proud that we managed to commit that fund. However, I want to make sure that it works for everybody here at home, to make sure that there is support among those who seek to continue the spending, so that it does not get undermined by people saying, “Why are we spending money on foreign people doing foreign things?” We are all part of a global community, and I think we should be able to recognise that.
A number of noble Lords touched on the north, but my noble friend Lord Kirkhope in particular touched on devolution. We often think about devolution within the nations of this United Kingdom but in truth—he is absolutely right in flagging this up—the question is: how does it break through to the parts of Great Britain? It is true that we need further investment, and this spending review looks at investing in a new towns schemes, bringing substantial funds into the north to try to bring this about. This cannot be tokenistic, it must come from the ground up, it must be money spent wisely and it needs to be accountable. We need to see value for money—it is not about headlines, it is about making sure that the people themselves experience the benefit.
Returning to the issues raised by my noble friend Lord Kirkhope, I am also aware that that question of mental health is absolutely vital. For too long our health service has seen this as a separate issue to be encountered later—it is not. It is at the heart of so many of the problems experienced by wider communities. A number of noble Lords have raised this matter, and that is why the Government have been willing to commit money directly into the mental health area. Is it enough money? I do not think there could ever be enough money committed into this area, but I hope it is a beginning, to move us in the right direction. I welcome my noble friend’s comments in this regard. It is important that as a community we recognise, as we pull these things together, that nobody should be left behind.
The noble Lord, Lord Tunnicliffe, raised a number of issues, including some put forward by the Labour Party itself. I do not want to be overly political here because each party must decide how it wishes to promote wider ideas. However, I note that some of the aspects appear to be broadly uncosted and unfunded. One of the challenges when you are trying to address wider austerity issues is to make sure your books are balanced and you can deliver what is most important—the sustainability of support. Those very elements are critical to giving confidence that we can deliver against them. I admire each of the aspects of the issues he raised, but they must be sustainable in the way they are delivered. Again, I respect the comments made by the Liberal Democrat Benches, recognising that we cannot spend our way out of a problem. We need to find the right balance in the way we address this. It is not always going to be easy, but I hope that we can find the right dynamic to do it.
If you will forgive me, I will work my way through my notes. The noble Lord, Lord Tunnicliffe, was also asking about the timing—and a number of noble Lords raised this question. Is this a pre-election attempt—a would-be pre-election attempt—to interest the wider community? In truth, I think noble Lords will recognise that 31 October is a watershed moment. Whatever you make of that, there needs to be a recognition that after that point there will need to be a brave new tomorrow. Exactly what that looks like will depend on how we enter that point, but we need to be in a position to look at that in a different fashion—a way of seeing how we can begin to budget. That is why, in looking at the spending review, every attempt was made to ensure that it was as up to date as could be, but it does not replace the Budget, which is yet to come later this year. The OBR will have the full details of that material, allowing for a detailed analysis of how money will be spent, and there will be a greater ability to interrogate that. We recognise that a number of issues have lain dormant as we have tackled Brexit. A number of noble Lords this evening and on other occasions have been very clear that we have, in the past, been guilty of becoming indulgent in regard to Brexit and not looking at what we need to be getting our hands dirty with, which is the issues of the people. This spending review aims to try to achieve that as best we can.
The noble Lord, Lord Livermore, asked a number of very detailed questions, particularly in regard to the lower deciles. He is absolutely right to flag this up, because one of the challenges is that if we cannot address the lower deciles the disparity between the rich and the poor—the very thing that Disraeli was talking about—becomes ever greater. In some respects, we have made progress in looking at the living wage, which has made a difference, but to secure the living wage you have to be in work. More people are in employment, which is important, but not enough people are in employment. We need to make sure that not only those on the living wage but those living and working in poverty are recognised. This will be explored further in the Budget itself, but I take away from the points he made the absolutely critical point: we cannot have people left behind who are getting poorer through no fault of their own, and we need to be very careful to achieve that.
My predecessor, my noble friend Lord Young, asked a number of questions, some related to those of the noble Lord, Lord Livermore. He will know far better than I, I do not doubt, that the majority of DWP spend is annually managed expenditure—AME—and the spending review deals with resource spending, so we will see a slight difference in the way this comes forward. The local housing allowance is part of that AME spending, but this is an important issue and I do not want to lose sight of it. I want to make sure that this is absolutely at the heart of the housing question addressed in the Budget and I will ensure that my right honourable friend the Chancellor does that very thing. It would be short-sighted were we to lose track of what that could mean.
The noble Lord also asked when the next OBR forecast will be. The answer is that I do not know—that was an easy one; good—but the Chancellor will know, and I do not doubt that in due course he will tell me, and I will pass it on that further information if I am blessed by retaining this position.
My noble friend Lady Stroud asked a number of quite difficult questions about health, particularly on how those with disabilities are affected. The spending review included £7 million to expand Jobcentre Plus advisory support in schools for young people with special educational needs, and to extend eligibility for access to work to cover internships for disabled people. I would like to know more about that so I will write to my noble friend—I would like more information to understand that as well. The Government will continue to support the most vulnerable: spending on benefits to support disabled people will be higher in every year to 2023 than it was in 2010, which is not unimportant. As for question of wages, the living wage has risen and that is not to be lightly set aside. The total increase in annual earnings should be higher, by a factor of some significance, than they were in 2016. The lowest earners had the fastest pay rises in the last 20 years, but they have not risen far enough, because they started from a lower point—we cannot lose track of that either.
I shall touch briefly on some of the wider questions in the spending review. Local government spending was raised by a number of Peers, particularly recognising the challenges faced in the settlement for local government. Clearly, there are moneys coming in different areas. There will be a 4.3% core spending power increase. We will see real-terms increases: there will not be just a levelling down in that regard. The extra £1 billion grant for social care, which will affect adults and children, with an additional £500 million, should provide some respite for the budgets of local government. The estimated increase in core spending powers is £2.9 billion, including reference to later consultation of the 2% core council tax referendum threshold and a 2% adult social care precept. That should go some way, again.
On the wider question of housing, and particularly the absence thereof—homelessness—we have put forward £422 million to help reduce homelessness and rough sleeping, including an additional £54 million in 2020-21, a real-terms increase of 13% from 2019-20. Is that enough? I suspect not, but I hope it makes some difference and begins a journey as we try to improve these aspects.
The question of the Foreign and Commonwealth Office was raised by some noble Lords.
Lord Greaves
The Minister might like five seconds’ rest. He has not tackled the point I raised, which is that none of this new money—or extra money, if that is what it is—for local government appears to be coming to ordinary district councils and unitary councils for their ordinary local, street-level, neighbourhood services. In many places these are in a state of potential collapse.
Lord Duncan of Springbank
The noble Lord raises an important issue. We talk about millions and billions, and various other ways of assessing money, but if people in the street and in their homes do not experience the benefit of that, it simply seems to wash over them. I will explore further how that money will arrive in the very council forums he discusses, I will write to him on that basis and put that letter in the Library.
Before I forget, the noble Baroness, Lady Kramer, asked a very technical question. My team simply said that we will have to write to her. If she will allow me, I will write to her on that point and put that letter in the Library.
I am running slightly short of time. I am not trying to short-change anyone, but if I end up leaving anyone out, or they feel they have not had full value, I will happily respond to any points beyond that.
The important points I want to stress, as I try to draw my remarks to a close, will be twofold. One is that the spending review itself is based on the best forecasts available at the time. The question of how they go forward is short-term; it will last for one year but the important thing is that it sets a new direction. We have turned a page. We often use “austerity” as a pejorative term, and for many people it is to live through that, but in truth it is about living within means and spending wisely. From hereon in, we must make sure that the money we spend delivers and that those in receipt of it see the benefit of it. I hope that this spending review will do that very thing. Importantly, going forward, the Budget will also begin to put the flesh on to the wider bones which we have set out here. I hope that will give noble Lords some confidence that the system itself, and the approach we are adopting, has not been jerry-rigged or in any way seeks to undermine what has been going forward.
I know that I have left a number of questions unanswered but I shall not be able to find the questions and answers at this moment. I realise that it is now slightly late and that some of your Lordships, like me, may be a little wearier than we would have been otherwise. If noble Lords will forgive me, on that basis—if I have left anything out, please come back to me and I will respond formally—I shall sit down and let your Lordships all go home.