Government Spending

Lord Eatwell Excerpts

Wednesday 26th May 2010 Lords Chamber

[Lord Eatwell]

My Lords, I am most grateful to the noble Lord, Lord De Mauley, for repeating the Answer given by his right honourable friend in another place. I congratulate him on his new responsibilities, and express the hope that he will display the same forensic ability in economic affairs displayed by the noble Baroness, Lady Noakes, in the previous Parliament.

It is an axiom of sound financial management that actions have consequences. What is striking about the Statement made by Mr Laws is that the consequences of the expenditure cuts are not spelt out at all. Instead we are presented with £6 billion-plus of cuts in government expenditure, but not told what the true consequences will be. Of course I can understand the sheer delight with which the Chancellor imposed swingeing cuts on the Department for Business—or should it now be called the department for closure? That will teach Vince Cable to declare earlier this year that,

“cutting spending further … would be extremely dangerous”.

Try a cut of £836 million on for size, Vince!

The rationale for the cuts is declared to be,

“to start tackling the UK deficit and secure the recovery”.

The Chief Secretary cites the United States as following a similar policy. That is arrant nonsense. On the very day that Vince Cable suffered the unkindest cut of all, President Obama announced a £30 billion new initiative to support small businesses. Has the noble Lord read the speech of Professor Christina Romer, chair of President Obama’s Council of Economic Advisers, delivered at the William and Mary College last week? Professor Romer said:

“I worry that policymakers may take the return of growth as license to withdraw the support that has been essential to the recovery. That is exactly what happened in 1936 and 1937. President Roosevelt, Congress and the Federal Reserve switched to fiscal and monetary contraction before the recovery from the Great Depression was complete. The result was a second recession in 1938 that pushed unemployment back up to 18 percent and delayed the return to normal for another three years”.

That is the potential cost of this Government’s deficit hysteria.

So will the noble Lord tell us, first, what is the Treasury’s estimate of the increase in unemployment directly attributable to these spending cuts? Secondly, what is the Treasury’s estimate of the number of business failures that will be directly attributable to these spending cuts?

The Government claim continuously to be protecting front-line services—a laudable objective. To enable your Lordships' House to assess the Government’s achievement, will the noble Lord give the House a precise definition of what is a front-line service? A precise definition would enable your Lordships to assess whether the £1.7 billion of the contracts and projects delayed or stopped are front line. Can the noble Lord tell us exactly what the contracts and projects to be stopped might be? Can he also tell us exactly what are the £1.7 billion of local authority services that are no longer to be ring-fenced? Are they front line? Is the removal of funding to underwrite children's futures in the children's trust fund front line—they look jolly front line to me.

The Government have presented a policy without consequences, because they are unwilling to spell out the true consequences. It is a pretty poor start to open, transparent government. What is transparent is the evident relish with which Mr Laws wields the budgetary axe. He revels in the policy of shock and awe. Mr Laws is the Donald Rumsfeld of economic policy, and we can expect his activities to achieve equally constructive consequences. Lloyd George would be ashamed of him.