Spending Review

Lord Davies of Oldham Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Davies of Oldham]

My Lords, as the Minister indicated, we are considering a spending review that the Chancellor of the Exchequer said represents reform, growth and fairness, but there is little in the Statement to back up any of those assertions. In fact, the real reason we are here today is because of this Government’s economic failure. They have been forced back, begging for more: more cuts to the police, more cuts in the defence budget and more cuts to local services. This Government have failed on living standards, growth and the deficit, and families and businesses are paying the price. We have been told—in fact, it has even been boasted by the Government—that there was no intention for it to turn out like this. The Chancellor told the other place in his first Budget in the halcyon days of 2010 that the economy would grow by 6%, but in fact the economy has grown by 1%.

The Government pledged to get the banks lending, but at this stage lending is still down, month by month. There has been no reform of the banking industry, and competition and lending to individuals and small and medium-sized enterprises has gone backwards. The Government made keeping the AAA credit rating the No. 1 test of their economic credibility. However, on its watch Britain has been downgraded not once but twice. The Government promised that living standards would rise, but they have fallen year on year. They said that they would balance the books, but the end to austerity is being pushed further and further into the future, way beyond the next general election, which of course was their original target date. This is all because of failure. What a legacy to leave. What a straitened inheritance for the next Labour Government to sort out—and we will sort it out, in a fairer way.

Plan A has failed. The need for this Statement today could not demonstrate that more clearly. However, where is the change of course? Where is the plan for growth and jobs that we—and, of course, the International Monetary Fund—called for? It does not have to be this way. Instead of planning cuts in 2015, two years ahead, surely the Government should be taking bold action now to boost growth this year and the next—investment that would get our economy going and bring in the tax revenue to get the deficit down. More revenue would mean that our police, Armed Forces and public services would not face cuts. Housebuilding is at the lowest level since the 1920s, so where do the Government plan to build 400,000 affordable homes this year and the next? There is no point in the Government boasting about infrastructure investment in five or seven years’ time when we need action now.

What a boast that is. The Green Book reveals that capital expenditure by departments will actually be cut. So much for the Prime Minister’s assurances at this morning’s Question Time that a great deal of progress is being made in this area. Year on year, real departmental capital budgets have been cut. Where do we see these figures? The book shows, in black and white, a 1.7% cut. If I am not believed, PricewaterhouseCoopers surely will be, because it said the same thing. There is a pattern here. Investment has fallen in real terms under this Government. It fell an astonishing 50% in the first three months of this year. Projects such as Labour’s successful Building Schools for the Future programme have been cancelled, and developments promised by the Government have never materialised. Just seven projects have been completed and 80% of projects have not even been started.

We need action now, not more empty promises for the years ahead. The Chancellor in his Statement insisted that we must plan for the long term, look to the future and secure a recovery for future generations. However, there is no substance to these statements. Where is the proper British investment bank that business clearly needs and wants? Where is the 2030 decarbonisation target to give energy companies the certainty they need to make their long-term investment for the future? Where is the backstop power to break up the banks, which the parliamentary commission called for? What happened to the plan of the noble Lord, Lord Heseltine, and its much-heralded £49 billion single-pot growth fund for the regions? A measly £2 billion is all that has been announced today.

Instead of action to boost growth and long-term investment, all we have today is more of the same failing plan and more of the same on social security and welfare spending. We have had plenty of tough talk and divisive rhetoric, but on the Chancellor’s watch the benefits bill is still rising. Social security spending is £21 billion higher than he planned. This is because the Government have failed to get growth going and to get people back into work—work that pays decent wages and does not discriminate, work that holds a compulsory job guarantee, paid for by a tax on bank bonuses. We hear the call for a cap on social security spending. Will the Minister enlighten the House with a few more details on this and how it will be administered? Why not get our housing benefit bill down by tackling high rents and the shortage of affordable homes? Why not stop the winter fuel allowance for the richest 5% of pensioners, while keeping the triple lock for basic state pensions? Why not make work pay with a 10% tax rate paid for by a mansion tax, instead of huge tax cuts for millionaires?

This Government are making the wrong choices on growth and social security spending—decisions that are unfair and do not reflect the sort of society we want to live in. The Government are also making the wrong choices on departmental spending. When thousands of front-line police officers are being cut, why are they spending more on police commissioners than on the old police authorities? Why have the Government wasted £3 billion on a reckless reorganisation of the NHS, when there is a crisis in our social care system that needs to be addressed, and which they are now somehow going to spatchcock by transferring resources? Why are they funding new free schools in areas with enough school places, while parents in other areas cannot get their children into a local school? Will this spending review mean fewer police officers in 2015-16, on top of the 15,000 we have lost in this Parliament? Will it mean fewer nurses on top of the 4,000 we have lost from the NHS? Will it mean fewer Sure Start children’s centres on top of the 500 that have already closed?

It is clear that the Government will continue to impose deeper cuts on local authorities in areas with the greatest need. It is the areas with the greatest need that continue to suffer the deepest cuts. People up and down the country need to know about this Government’s real intentions. The Government have comprehensively failed on living standards, on growth and on the deficit. That is why the Chancellor was before the House of Commons earlier today. We see prices rising faster than wages, families worse off, long-term unemployment up, welfare spending soaring, the economy flatlining and the slowest recovery for a century. The result of this failure is not balancing the books as promised, but in 2015 a deficit of £96 billion. That is why there is a need for more borrowing to pay for the coalition’s economic failure. That is why the Government have been forced to make this Statement and impose these cuts on our public services.

Two years ago, when the intake of breath was so severe at the cuts at that time, the Chancellor said that,

“we have already asked the British people for what is needed, and … we do not need to ask for more”.—[Official Report, Commons, 23/3/11; col. 951.]

—another broken promise.