Public Expenditure: Review of Commitments

Lord Howarth of Newport Excerpts

Thursday 17th June 2010 Lords Chamber

[Lord Howarth of Newport]

My Lords, we all agree that the UK’s fiscal deficit needs to be reduced, but is there not a crucial issue about timing? If you attack the deficit too fast, you abort recovery. If you deal with it too late, you risk inflation and possibly a downgrading of Britain’s credit rating. What is the reason for the Government’s hasty attack on public spending in an increasingly deflationary global environment? We see Governments withdrawing stimulus all across the world. China is seeking to slow its economy. Germany is deflating. Demand is imploding in the eurozone, which is such a crucial market for our exports. The noble Lord did not answer the question posed by my noble friend Lord Eatwell as to what the sources of growth will be to enable the private sector to drive the recovery of the UK economy. Is not the explanation for the Government’s zeal and impatience in cutting public spending that they are born not of a pragmatic judgment about how to secure sustainable economic recovery for this country but of a doctrinaire determination to cut back the role of the state without proper regard for the state’s own essential contribution to the promotion of innovation, for the quality and reliability of public services, for fairness to the poor and vulnerable in our society and for national self-respect? I strongly endorse the point made by my noble friend Lord Eatwell about Stonehenge. Stonehenge is an emblem of this country. It will be extraordinarily important for us in 2012. The Government’s decision announced today means that we shall present ourselves shoddily to the world.

[Lord Sassoon]

I thank the noble Lord, Lord Howarth, for his comments, but we really do need to get back to the central point today, which is that the previous Government left us with a series of projects that are unaffordable and in many cases present poor value for money. We need to do this. There are huge pressures on public expenditure, which are going to be looked at in the round through the spending review, but we have to take off the further pressures that have been put on by projects that simply cannot be justified. That will provide us with a much better baseline from which decisions made in the Budget next week and then in the spending round going forward can be taken to protect what really matters—projects that present good opportunities to invest in sustainable growth in the future. That is absolutely central and the announcement today helps to contribute to it.

In the short term, I cannot stress enough that to pay for these projects the previous Government were relying on an assumption that £7 billion of underspend would be made in the current year. That is approximately 1.8 per cent of DEL expenditure, but the evidence of recent years shows that the underspend has been reducing to what is estimated to be less than 1 per cent of DEL in 2009-10. The issue is not whether these projects stack up as value for money but that there is simply no money left to pay for them.

I would like to make a point about Stonehenge. I would hate anyone to be left with the thought that we are somehow abolishing Stonehenge or knocking it down—I see that the noble Lord agrees with that. Of course it would be nice to enhance the visitor centre, but unfortunately this is a project that does not stack up in the current circumstances.