Comprehensive Spending Review

Alan Johnson Excerpts

Wednesday 20th October 2010 Commons Chamber

[Mr Speaker]

Order. I call Alan Johnson.

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

Mr Speaker—[Interruption.]

[Mr Speaker]

Order. The House needs to calm down. It is getting a little over-excited and there is a long way to go.

[Alan Johnson]

Mr Speaker, we remember well the cheers at the end of the emergency Budget in June, when the Chancellor finished on a peroration about his Budget being progressive and fair. It took the Institute for Fiscal Studies only 48 hours to show that it was totally unfair, and that the burden of the emergency Budget fell two and half times more on the poorest than on the richest. We have seen today hon. Members cheering the deepest cuts to public spending in living memory. For some Government Members, that is their ideological objective—[Interruption.] Not all of them, but for many, that is what they came into politics for—[Interruption.]

[Mr Speaker]

Order. Ms Bray, you are getting quite over-excited. You must calm yourself—and remain calm. It is in your interest and the House’s interest.

[Alan Johnson]

Today is the day that abstract figures and spreadsheets turn into people’s futures, people’s jobs, people’s pensions, people’s services and their prospects for the future, and the day when the statistics that were nestling comfortably in the lap of the Chief Secretary yesterday actually become the uncomfortable truth for many people and families throughout this country.

We hear the chant on every occasion, but Government Members are deficit deceivers. They have peddled a whole series of myths to the British public. The most incredible myth of all is that the biggest global economic crisis since the great depression is the fault of the previous Government—[Interruption.] You see? The strings are pulled and away they go.

The Chancellor said that the Government have brought Britain back from the brink of bankruptcy. Perhaps he will confirm three facts. Fact No. 1: when the global crisis hit, the UK had the second-lowest debt of any G7 country. Fact No. 2: the previous Government inherited a debt interest level of 10p in every £1 of tax received, and even after a world recession, we bequeathed a figure that was 15% lower. Fact No. 3: the interest rates that the UK pays on its debt have been falling since the beginning of the year. Perhaps the Chancellor, in the interests of accuracy, can confirm those statistics.

When the last comprehensive spending review took place in 2007, the Chancellor was the shadow Chancellor. Was he calling for reduced public spending? Read the Hansard. Was he calling for regulation of the banking industry? I have two things to say about 2007. I have read his contribution to the debate. First, instead of arguing for reduced public spending, he argued that we were spending too little. He complained that we were slowing the growth in health and education expenditure. Indeed, the Conservative party supported every penny of our spending plans until well after the collapse of Lehman Brothers in America, which set off the disastrous chain reaction that caused the global recession.

In 2007, far from calling for regulation of the banks, the Conservatives were calling for deregulation of the banks. The right hon. Member for Wokingham (Mr Redwood) produced a report on behalf of the then Leader of the Opposition who had called for greater regulation of the banking industry. We need to get the facts right.

The Chancellor described his emergency Budget in June as being unavoidable and fair. We know that it was unfair, because the IFS produced the statistics with devastating and forensic accuracy a few hours later, and we also know that it was avoidable. The deficit has to be paid down—[Hon. Members: “Ah!”] Here they go again. The Chief Whip’s spreadsheet tells them when to stand up and what to say. Where is he? He does not need to move to have influence on his Back Benchers. So we do need to bring the deficit down.

Today’s reckless gamble with people’s livelihoods runs the risk of stifling the fragile recovery. The ridiculous analogy with credit card debts insults the intelligence of the British public. If countries around the world had not run up debts—that is what the fiscal deficit is, by the way—to sustain their economies, people would have lost not their credit cards, but lost their jobs, lost their houses and lost their savings. The Liberal Democrats know that, and they argued that when seeking the support of the electorate. The Deputy Prime Minister argued that, and then he discovered Greece. In the period between the ballot box closing and his ministerial car door opening, the Deputy Prime Minister discovered a different approach.

Like us, the Liberal Democrats—every single one of them—were elected to this House on a platform that said, in the context of reducing the deficit, that speed kills. The Chancellor repeats a long list of those who support his swift cuts; he mentions it all the time. Curiously, he failed to mention the other countries in the United Kingdom—Scotland, Wales and Northern Ireland—which do not support these measures. Perhaps that is why he calls himself a one-nation Tory. Here is another supportive quotation that he missed out, and he can take this down and use it in future briefings:

“The measures we have taken have been commended by international bodies such as the European Central Bank, the European Commission, the IMF and the OECD. They have also won the approval of the international markets.”

That was the Irish Minister of Finance last December, when he told the Irish Parliament that his austerity plan meant that they had turned the corner. Four months later, they slid back into recession.

The concerns of those watching this announcement today went beyond the misrepresentation of figures and the clever Punch and Judy stuff in which we all engage—including myself at times. They will be interested in whether they will stay in work, whether they will stay in their homes and whether they will stay safe on the streets. We are told that the expected job losses from this spending review—and the Chancellor confirmed it—will be some 490,000. PricewaterhouseCoopers reported last week that 1 million jobs were at stake because the impact on the private sector is just as severe. Is it not the case that at the same time as the Government are throwing people out of work, they are reducing the support to help people return to the workplace?

I applaud the ideas and the efforts of the Secretary of State for Work and Pensions to do what we were seeking to do and make work pay—[Interruption.] He often gives credit to what we did when we were in government. The fact is, however, that today’s proposals will make it harder for people to return to work because of the changes to working tax credit; because of the changes to support for working parents; and because of the huge increase in fares for those who have to travel to get the jobs. The Secretary of State has had his job made harder by today’s announcement.

On housing, the Chancellor has announced the retreat of central Government from any role in building new affordable homes. Can he tell the House how many jobs will be lost in the construction sector as a result of his decision to all but end capital funding for house building? Crime has fallen dramatically in the last 13 years. I heard what the Chancellor said about the report from Her Majesty’s inspectorate of constabulary, but the Home Office is not a protected Department. As it deals with counter-terrorism and policing, the public will be worried that they will lose more police on the streets.

Spending has to be reduced—[Interruption.] Yes, spending has to be reduced, but the front-line services on which people rely must be protected. We support moves to ring-fence the health budget—[Hon. Members: “Ah!”] The point about the health service is not that its budgets will be protected, it is the taking of £2 billion to £3 billion out of those budgets to pay for a top-down structural reorganisation that the Conservatives told the public in their manifesto would not happen. This is the top-down reorganisation to end all top-down reorganisations, and we are already seeing the loss of jobs in the NHS as a result.

On education, the Chancellor mentioned that the pupil premium would be funded. There are stories already about teachers and teaching assistants losing their jobs as a result of today’s announcement. We will have to look at the statistics carefully, including the small print, before we can see what is happening on education. The Chancellor said that they will keep a version of education maintenance allowance. That is good, because it has been the biggest single contributor to lifting the number of children from poorer homes who stay in education—and it was introduced by the Labour Government. He told us that it will be introduced in some form, but he did not say how. Nor did he say what effect the removal of ring fences will have on Sure Start, which is crucially important to ensuring that we have a more progressive society.

On the NHS, we believe that the real-terms increase will be more than swallowed by the cost of the reorganisation. It would be good if the Chancellor could confirm that the baseline for the NHS will exactly reflect its actual budget this year. It seems to us from the statistics that there may be some smoke and mirrors.

Without growth, the job of getting the deficit down becomes impossible. A rising dole queue means a bigger welfare bill and less tax coming in—a cost of at least half a billion pounds for every 100,000 people thrown out of work by the Government’s approach. To get the deficit down, the starting point must be jobs, jobs, jobs. That remains the core of the difference between us and the Government. We were told that the Ministry of Justice will see 14,000 jobs cut. Does the Chancellor agree with the Department’s assessment that the vast majority of those—11,000—will be from the front line? Can he confirm that £230 million of taxpayers’ funds have been earmarked for redundancy costs in that Department alone? What is the total scale of redundancies expected across the public sector? What will the total redundancy bill be? Thanks to the Chief Secretary’s gaffe yesterday, we know that the Treasury has provided the Chancellor with estimates: he should share them with the House. Can the Chancellor confirm that the poorest will still bear a greater burden than the richest, with the middle squeezed even further, and that women will shoulder three quarters of the cuts? Does he still claim that these measures are progressive and fair?

There is an alternative approach. The Chancellor finished by suggesting that their cuts were the same as ours—[Hon. Members: “Less.”] Less than ours? That is even more utter and complete nonsense, for two reasons. First, the Conservatives calculated the 20% figure by some very dodgy formulae that stretched the limit of credibility for the protected Departments. Secondly, the Chancellor has not caught up with the fact that we have listed a series of measures with which we agree—for instance, the increase in capital gains tax and the changes to welfare. The Chancellor has not caught up with the statements that we have made about the welfare bill. We will look at the further measures that the Chancellor has announced today, but if we take the statements that we have made into account, we came into this debate with departmental cuts half the level of those that the Government are proposing.

This spending review is not about economic necessity; it is about political choices. The Chancellor argues that Labour would have done nothing about the deficit; he goes on to say that his cuts are no worse than ours. He cannot have it both ways. He cannot be right in both arguments, although he does manage to be wrong on both counts. The difference between us is that the Government are removing almost twice as much from Department budgets, while we were looking for a much more gradual, much slower reduction, which would not stifle the very low levels of growth in our economy. It is our firm belief that the rush to cut the deficit endangers the recovery and reduces the prospects for employment in the short term and for prosperity in the longer term. We believe that we can and should sustain a more gradual reduction, securing growth. I do not believe that the Chancellor or the Prime Minister sufficiently understands the worries and concerns of families up and down this country. Those worries will have multiplied considerably as a result of the Chancellor’s statement today.

[Mr Osborne]

He’s a nice guy, but he’s in the wrong job. The truth is this: frankly, either member of the Balls family would have done a lot better than that, and they might even have asked me a question or two, but let me try to respond to what he said.

The right hon. Gentleman keeps talking about a plan B, but he has not even got a plan A. There was a complete denial of the fact that this country has the largest budget deficit in the G20. He made no acknowledgement of the fact that the credit rating agencies were looking at this country when he was in the Cabinet and no acknowledgement of the fact that our market interest rates were the same as Spain rather than others. Frankly, he spent half his statement defending the economic policy of the last Labour Prime Minister—who perhaps could have turned up to hear it—but that is totally irrelevant to the questions put before the House today and the proposals that we have set out.

The right hon. Gentleman kept saying, “We want to reduce the deficit.” As far as I could tell, he did not agree with a single measure that I set out. He did not propose a single saving. He is a deficit denier, and the truth is this. We have been told for a whole year that we would get Labour’s deficit reduction plan. Before the election, let us remember, we were told in the debates, “Don’t worry, it’ll come after the election.” During the leadership contest, we were told that it would come after the leadership contest. After the leadership contest, we were told that it would come before the spending review, and then this morning, a member of the shadow Cabinet said on the radio, “We are not going to do an alternative to the spending review.” I then got this message in the Chamber that said that at eight minutes past 1 this afternoon, when the shadow Chancellor was actually in the Chamber, he sent an e-mail to members of the public saying:

“I’m going to be honest with you, being in opposition does mean”

we have to set out “a clear alternative”, and he then said, “Please share your thoughts with us.” Labour Members were in government until six months ago. They sat round the Cabinet table as the deficit increased. Six months later, they have not put forward a single idea for reducing the budget deficit. It is absolutely pathetic.

Despite the fact that the right hon. Gentleman says that he is relatively new to the subject, he dismisses, with a sweep of the hand, the verdict of the IMF, the OECD, the CBI, the chambers of commerce, the European Commission and everyone else who has looked at the British economy. I do not know whether he saw the letter from 35 leading employers in this country, but they included people such as the leaders of Asda and Microsoft—I know that the business community of this country is totally irrelevant to Labour now—and the person who founded the Carphone Warehouse, who I think used to be a supporter of the Labour party. All those people wrote to the national newspapers saying:

“Addressing the debt problem in a decisive way will improve business and consumer confidence.”

If the right hon. Gentleman wants to ignore all those people, what about Tony Blair? There is total silence on the Labour Benches for the man who won Labour three general elections. I think that the right hon. Gentleman was in the Cabinet when Tony Blair was Prime Minister, and he has said:

“The danger now is this: if governments don’t tackle deficits, the bill is footed by taxpayers, who fear that big deficits now mean big taxes in the future, the prospect of which reduces confidence, investment and purchasing power. This then increases the risk of prolonged slump”.

The right hon. Gentleman used to be a Blairite—[Interruption.] Well, at least the right hon. Member for Morley and Outwood (Ed Balls) has been fighting Tony Blair all his career and says he is wrong, but the shadow Chancellor used to be a supporter.

The right hon. Gentleman has dismissed all the leading businesses of Britain, all the international organisations and Tony Blair, but let me answer a couple of his specific questions—[Interruption.] Well, to be fair, in the space of about 10 minutes he asked three, so I will answer them. First, he asked about police numbers. Of course this is a challenge for the Home Office, but we believe that with the advice from the inspectorate of constabulary and Tom Winsor’s report, there will be no reduction in the availability and visibility of policing. However, the right hon. Gentleman was asked during the election—[Interruption.] He was the Home Secretary. [Interruption.] The new Leader of the Opposition asks—[Interruption.] This is what the man who was Home Secretary before the election said in the election, when he was asked a question on the “Daily Politics” show:

“Can you guarantee if you form...the next government that police numbers won’t fall?

Johnson: No”.

So what is the basis on which he makes his argument?

The right hon. Gentleman talks about the national health service, and he said that he agreed with our decision to ring-fence it. Presumably this is the same shadow Chancellor who said recently, “There is no logic, sense or rationality to this policy.” He has done a complete U-turn.

The right hon. Gentleman says that he rejects the minus 20% definition of the Labour cuts. At the same time, he began his statement by praising the Institute for Fiscal Studies, but that number comes from the IFS. He suggests that I have not paid attention to the announcements that he has been making this week. Well, it is true that I have been quite busy, but I have paid attention to what he has said. I understand that not many people got a chance to question him about his policies, but he said that taxes needed to be increased. However, when he was asked which taxes, he said that he was open-minded about it. That is a polite way of saying he hasn’t got a clue.

The right hon. Gentleman was once the great force of modernisation in the Labour party, and he has now ended up reading out the policies dreamed up by the new Leader of the Opposition. He said in that press conference earlier this week that being in opposition was not about “pretending to be in government.” Now we know how right he was.