Comprehensive Spending Review

Liz Kendall Excerpts

Thursday 28th October 2010 Commons Chamber

[Liz Kendall (Leicester West) (Lab)]

I shall address two issues: first, whether the Government have kept their commitment to protect the NHS budget, and secondly, how their proposed reforms will affect the NHS’s ability to live within its budget in the next four years.

Before the election, the Government promised that the NHS budget would increase in real terms over the spending review period, and last week the Chancellor announced the headline figure that the NHS will receive 0.1% more than inflation in each of the next four years. That is the lowest four-year increase for the NHS since 1951 to 1956.

The Chancellor also announced that £1 billion from the NHS budget will be transferred to local councils to spend on social care. Social care services play a vital role in improving health and reducing NHS costs, for example by helping older people to stay mobile and independent in their own homes. However, the £1 billion going to local councils is not ring-fenced, so there is no guarantee that it will be spent on social care, especially when councils face a 28% cut in their budgets over the next four years. The spending review removed a further £5.5 billion from the NHS by taking its underspend. The NHS has accumulated £1.8 billion of capital underspend and £3.7 billion of revenue underspend—money that it would normally be allowed to keep to reinvest in patient care or to help deal with future overspends. But the spending review abolished the year-end flexibility for the first time.

Far from the Government protecting the NHS budget, the fine print of the Green Book shows that they will reduce the NHS’s budget by 0.5% during the spending review period. These cuts come after a period of significant increases in NHS funding, from some 6.6% of GDP in 1997 to 8.7% in 2009-10. While those increases are substantial, NHS spending as a proportion of GDP remains below the OECD average, and pressures on the NHS budget will increase because of our ageing population, new technologies and rising expectations. Meeting those challenges while continuing to provide universal health care free at the point of use means that the NHS will need to make big improvements in productivity over the next four years. The chief executive of the NHS has said that that will be the equivalent of £20 billion of savings or some 5% of the NHS’s budget in each of the next four years. The NHS has never achieved that, under any Government.

The question for coalition Members is whether the proposed reforms to the NHS will help or hinder in making those substantial productivity and efficiency savings. The Government are about to embark on major structural change to the NHS, despite promising before the election that there would be no more top-down reorganisations in the NHS. GPs will be given responsibility for commissioning £80 billion of NHS services, and PCTs and strategic health authorities will be abolished. Even when major reorganisations are well organised, they usually mean that health services stand still for a period, rather than progress. If structural change is poorly managed, patient care and finances suffer.

I fully support involving clinicians more in decisions about how services are shaped, but changes such as GP fundholding took time and significant management support to develop. The scale and pace of change that the Government are pressing ahead with pose significant risks. Major structural reforms are not cost-free, and the King’s Fund estimates that these reforms will cost £3 billion over the next four years. Many patient groups and professional organisations are rightly worried that having yet another major structural reorganisation, when the NHS faces the biggest financial challenge of its life, will not be good for patient care or for finances. I ask the Government to think again.

Savings Accounts and Health in Pregnancy Grant Bill

Liz Kendall Excerpts

Tuesday 26th October 2010 Commons Chamber

[Mr Hoban]

My hon. Friend makes an important point. The Government have had to go through this challenging spending process with care, examining both spending and welfare decisions. We have had to take decisions that are not straightforward, not easy and not ones that we would have wanted to take, but we have had to do so because of the financial problem that we inherited from our predecessors.

Let me give another example of targeted support that is available, because the hon. Member for Washington and Sunderland West (Mrs Hodgson) talked about means-tested grants. I am sure that she will be aware of the Healthy Start scheme, which is a statutory scheme providing a nutritional safety net and encouragement for breastfeeding and healthy eating to more than 500,000 pregnant women and to children under the age of four in low-income and disadvantaged families across the UK. The scheme is tied carefully because, unlike the health in pregnancy grant, it provides vouchers for people to put towards the cost of milk, fresh fruit and vegetables, and infant formula milk at 30,000 retail outlets. So measures are in place to support the groups that she is most concerned about, and it is right that that is so. The health in pregnancy grant is unfocused and untargeted.

[Liz Kendall (Leicester West) (Lab)]

The Healthy Start scheme is a good, targeted one, but will the Minister admit that the Government are also restricting the Sure Start maternity grant, abolishing the baby element of the tax credit and not going ahead with the toddler tax credit? Pregnancy and the first year of life is vital for a child’s development; if we can give children the best start in life, it saves us all in the long run. So will he reconsider his abolition of these schemes?

Comprehensive Spending Review

Liz Kendall Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

I agree with my hon. Friend.

[Liz Kendall (Leicester West) (Lab)]

Cutting funds for local councils by 28.4% over four years will decimate services in Leicester West, and allowing councils to borrow against business rates will further widen inequalities, as areas with more private businesses can borrow more to improve services. Can the Chancellor explain to me, and to my constituents, how that is fair?

[Mr Osborne]

I am sorry that the hon. Lady is opposed to more freedom for local government—[Interruption.] Well, that is what my increment financing proposal means. Along with our other decisions about grants, it means more freedom for local government. As I have said, this is a challenging settlement for local government. [Interruption.] Let me repeat that the Labour party created the budget deficit, and if the Labour party does not have a plan, it is in no position to criticise those who are trying to sort out this mess.

Proposed Public Expenditure Cuts

Liz Kendall Excerpts

Monday 13th September 2010 Commons Chamber

[Mr Osborne]

My hon. Friend is absolutely right. The Labour party has opposed the £13 billion VAT increase, even though we now know that the shadow Chancellor, Tony Blair and Peter Mandelson all supported that increase; and it has opposed some of the other measures to which my hon. Friend refers. There is a difference when it comes to the NHS: I believe it is the official policy of the Labour party that the NHS should not be protected from cuts and should not have a real increase in funding. I happen to disagree with that policy, and we will see what the public think about it.

[Liz Kendall (Leicester West) (Lab)]

The Chair of the Treasury Committee asked the Chancellor to publish new details of the distributional impact of the Budget, including the proposed cuts to housing benefit and disability living allowance. Is the Chancellor aware that the Institute for Fiscal Studies produced such an analysis last month? Is he aware that it says that

“the overall effect of the new reforms announced in the June 2010 Budget is regressive, whereas the tax and benefit reforms announced by the previous Government” —

for the same period—

“are progressive”?

In the light of that evidence, will he explain whether he still claims that his Budget and his Government are progressive?

[Mr Speaker]

Order. There were three questions there, but one answer will suffice.

Capital Gains Tax (Rates)

Liz Kendall Excerpts

Wednesday 23rd June 2010 Commons Chamber

[Vince Cable]

The Government did look at the possibility of raising capital gains tax further. They did serious analysis and the conclusion was that it would not raise any more revenue. That was the problem. It certainly would not have raised anything remotely like £10 billion. That is why we cannot evade this issue.

Let me turn to the central concern about value added tax, which is expressed on both sides of the House: the worry about regressiveness. I checked back on what independent analysts were saying about value added tax and its income distribution effects. It is worth looking at the work of the Institute for Fiscal Studies, which has conducted a distributional analysis based on expenditure. It came to the conclusion—this is its word, not mine—that value added tax was fairly “progressive” because of the exemptions that are given for zero rating, as food, children’s clothing and other essentials are key items in the expenditure patterns of poorer people. [Interruption.] The top 10% of the population pay three times as much in value added tax as the bottom 10%. [Interruption.]

Opposition Members are expressing righteous indignation about what they regard as regressive measures. Let me tell them which is the most regressive tax: it is council tax. Do they remember what happened to council tax under the Labour Government? On average, it went up 70%. Taking into account rebates, for the poorest 10% of the population it rose by 93%. It is the most regressive tax of all, yet they lecture us in this sanctimonious way about regressive taxation. They have no basis for doing that.

Finally, let me turn to the crucial issue of growth, which the shadow Chancellor raised. He is right that growth does not happen automatically; of course it does not. How do we proceed from the austerity that has to happen—from cuts in public spending—to growth in business investment and net exports, which we want to see? That is a genuinely important question, to which there are no simple answers. The perfectly fair point has been made that there are risks involved here, just as there are risks, which we judge to be bigger, in doing nothing, so let me try to answer this question seriously. If we are going to get growth, it will come partly through demand and partly through supply. How do we sustain demand? Essentially, we do so through monetary policy. That is what happened under the last Government. The reason why the economy kept on going through the recession was not Government fiscal stimulus. That was trivial, and it has now been withdrawn anyway. It was not for that reason; it was because we had very low interest rates, the expansion of money through quantitative easing and, of course, a big devaluation.

Those factors drove the economy in terms of demand and they will continue to do so. There is a reason for believing that that is what will happen: the Governor of the Bank of England called for this Budget and has now got it, and he has every reason to understand the need for monetary policy to support recovery.

[Liz Kendall (Leicester West) (Lab)]

Will the right hon. Gentleman give way?

[Vince Cable]

Is it on that point?

[Liz Kendall]

Yes.

[Vince Cable]

Okay.

[Liz Kendall]

The right hon. Gentleman says that the Budget will increase growth, but the Office for Budget Responsibility says in the Red Book, at paragraph C.18, that

“economic activity is weaker than in the pre-Budget forecast…this reflects Budget measures which restrain government spending and real household disposable income, holding back consumer demand.”

Does he agree with the OBR or does he now admit that the Budget will not increase growth?

[Vince Cable]

That was not on the point I was speaking about. I know that the hon. Lady is a new Member, but I am sorry that she felt the need to read out her question in the way that she did. Nevertheless, there is a very simple answer on page 94 of the Red Book. It is a technical point made by Sir Colin Budd, who drew up this part. These issues are not comparable. Had the Labour plans been implemented, interest rates would have been higher than they now are, which would have dragged down the rate of growth and pushed up the level of unemployment beyond what it is. That is the distinction he makes. He also refers to the fact that there is a basic confusion. I noticed that the Chancellor did not repeat the point in his speech, but it was raised yesterday. That explains the hon. Lady’s genuine misunderstanding.

In addition to issues about how to stimulate demand, there is an issue about how to get business investment moving—how to get supply, and an understanding of the supply side of the economy. A lot of the Budget’s stronger points were about that issue. The Budget was about creating a tax environment within which business is confident to invest. It is about doing the things that my Department is now starting to do in conjunction with the Cabinet Office, such as looking at the 20,000-plus additional regulations that were built in by the last Government and which are shackling small business. It is about addressing the issue of bank credit that was lamentably neglected by our predecessors, and investing in things like apprenticeships, which we have started to do even within our few weeks in office.