Comprehensive Spending Review

Lord Higgins Excerpts

Wednesday 20th October 2010 Lords Chamber

[Lord Bilimoria]

My Lords—

[Lord Higgins]

My Lords—

[The Lord Bishop of Blackburn]

My Lords, very many of us are eager to see the big society, with its vision of neighbourliness, prevail. Neighbourliness requires a particular care for children, who are a gift and not a commodity, and for poorer families. Given that many children and poorer families will be badly affected by the reduction in benefits, can the Minister tell us where this lost support may be found in the future for children and poorer families?

--- Later in debate ---

[Lord Higgins]

My Lords, one thing is absolutely clear, which is that Mr Gordon Brown inherited the most favourable economic situation of any Chancellor since the war and left behind an enormous problem for the coalition to deal with. However, as anyone who has had experience of this sort of exercise will know, it is remarkable that the Treasury, officials and Ministers have managed to produce such a comprehensive review in such a short time, dealing with everything from Equitable Life to coastal erosion to measures overseas to deal with malaria and so on. What is being overlooked is that the Statement mentions not only cuts but a number of increases in public expenditure. It is really, apart from dealing with the deficit, a reappraisal of the priorities that we ought to have. From that point of view, it does exactly the right thing. Indeed, there is no cut. Public expenditure, as I understand it, is to go up from £651 billion to £693 billion. That is scarcely a cut by any standard. That is the kind of number that the noble Lord on the Front Bench was asking for.

May I put this question to my noble friend? It is difficult to ascertain from the Statement what the effect will be on aggregate demand. Will it reduce aggregate demand in the economy or will it increase it? If it is going to increase it, clearly the Bank of England will need to take that into account. If it is going to reduce it, it is important that action should be taken to offset the cuts that are being made by quantitative easing or whatever may seem appropriate. Could the noble Lord tell us: is this something that increases or decreases aggregate demand?

[Lord Sassoon]

My Lords, I am grateful to my noble friend Lord Higgins. I will relay to my right honourable friend the Chancellor and to all the very hard-working officials in the Treasury his generous words, which confirm that this is indeed a radical, fair and comprehensive spending review. In answer to his question about demand, clearly, with the independent projections from the Office for Budget Responsibility and all the other commentators of consistent growth going forward, demand will indeed increase. The question of what role the aggregate increase in the money supply plays is one on which, as we know, the Governor of the Bank of England continues to be very much focused as he leads on the conduct of monetary policy.