Comprehensive Spending Review

Angela Smith Excerpts

Thursday 28th October 2010 Commons Chamber

[Angela Smith (Penistone and Stocksbridge) (Lab)]

In 2007-08, the UK debt stood at 36.5% of GDP. In 1997, at the end of the last Tory Government, it was 42%. Does that fact not expose as meaningless spin the Government’s line on the record of the Labour Government?

[Danny Alexander]

I think that that is a classic statement of deficit denial. The hon. Lady has to recognise that we are spending £150 billion more than we raise in tax—the largest budget deficit in the European Union and the largest in our country’s history.

[Angela Smith]

Will the Chief Secretary give way?

[Danny Alexander]

I will not.

We also have the largest budget deficit in the G20. Those are the facts that the hon. Lady should understand.

[Angela Smith]

Will the Chief Secretary give way?

[Danny Alexander]

I will not give way again, I am going to press on.

The Chancellor’s statement set out the level of departmental spending for the next four years. I will not repeat every decision now, but of course I am happy to take interventions. [Hon. Members: “You’re not!”] I have taken a great deal of interventions, and I will take a few more later. Instead, I want to focus on our priorities: growth, fairness and reform.

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[Ms Eagle]

The key point about our approach to the difficulties in the world economy was that we spent and invested money to keep people in work. We know that the cost of every 100,000 people on the dole is half a billion pounds. The difference between us and the Government is that we were keeping people in work whereas they are taking people out of work. We know from PricewaterhouseCoopers that half a million jobs in the private sector that are directly connected to public sector contracts will also be lost as a result of the Chancellor’s statement last week.

[Angela Smith]

Is it not the case that the stimulus put into the economy by the Labour Government saved more than 200,000 jobs?

[Ms Eagle]

Yes, according to the OBR. We saw the undisguised glee of Members opposite as they celebrated the hardship and misery that the Chancellor proposes to inflict on so many people in our society. These are not just numbers; they are police constables, care workers, teaching assistants and dinner ladies. In the private sector, they work in small businesses which rely on public sector contracts at a time when order books are empty. All those people are being asked by this Conservative-led Government to shoulder the burden of a crisis made in the banks and the dealing rooms.

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[Angela Smith (Penistone and Stocksbridge) (Lab)]

Last Wednesday, the Chancellor took a huge gamble on the future of the UK economy. The CSR statement, coupled with the June Budget, will take a staggering £80 billion out of our economy over the review period. Never before has any Chancellor cut so deeply and so quickly.

The people who will pay the price for that squeeze on the state will not be the 18 or so millionaires who sit around the Cabinet table. No, the price for the Chancellor’s gamble will be paid by people on council estates who will see rents rise dramatically, civil servants in my constituency who will lose their jobs and students who will see their debts treble.

We all agree that the deficit needs to be reduced to a sustainable level, but that should not be at the risk of weakening an already fragile economic position, and it must be based on a strategy for growth and jobs—a strategy absent from the Chancellor’s statement. The facts are that the Chancellor is hoping that export volumes will rise significantly over the period covered by the review. At the same time, according to the Chancellor’s own figures, the economy will have to find an extra 2.5 million private sector jobs in the next five years.

To put that into perspective, during the last recession the UK managed to create 1.2 million jobs between 1993 and 1999. To get anywhere near the target that the Government have set themselves will require investment and an export boom on a scale that has never been achieved before—a point underlined recently by many political and economic commentators, including the well respected Will Hutton.

Although the £200 million to establish the elite research centres is certainly welcome and nothing new to us in south Yorkshire, where we already have the advanced manufacturing research centre, this investment is nowhere near enough, in the context of the sheer scale of the growth required, to rebalance the economy.

It is also important to remember at this point that the Government have already failed a key test on the support that they are prepared to give the private sector. In June they withdrew a Government commitment to fund the £80 million loan to Sheffield Forgemasters. Although I will not go into the stupidity of that decision now, it is clear, as the Business Secretary said in the Select Committee recently, that the nuclear reactor components at the heart of the proposed investment will now have to be manufactured abroad, and the UK will lose millions of pounds of exports to our international competitors. Surely that is not the way to go about rebalancing our economy.

How will 40% of cuts in funding to the higher education sector help to rebalance the economy? All that will do is damage our economic future. Also in further education, the Government are abolishing the education maintenance allowance, which has been recognised by many as a success. The Institute for Fiscal Studies, which is so obviously a thorn in the side of the Deputy Prime Minister, said that since the allowance was introduced, attainment at GCSE and A-level by recipients of EMA has risen by five to seven percentage points, and by even more for those living in the most deprived neighbourhoods.

That evidence is reinforced by college principals, who believe that many young people will not be able to stay in education and training without EMA, so why have the Government withdrawn a scheme which, in the great scale of things, costs relatively little and helps to give so many young people the skills desperately needed, if the Government are genuine about rebalancing the economy?

It is clear that the Government believe that private sector growth will, over the period, pull our economy on an upwards trajectory. I hope the Government have got that right, but I fear not. I fear that in a few months they will come back to the Chamber to revise the figures as the economy goes into a death spiral, and they will tell us that they cannot deliver the £17 billion savings and the cuts that they announced last week. That will not be achievable because unemployment will rise. The CSR is bad for Britain and bad for our economy. They should think again.

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[The Economic Secretary to the Treasury (Justine Greening)]

We have had a very good debate on the Government’s spending review, and I thank all hon. Members who have contributed.

Last week my right hon. Friend the Chancellor stood in the House and set out a clear plan to pull Britain back from the brink, to deal with our debts and to put our nation’s finances back on a sustainable path. When we came to power, we inherited an economy that was on its knees and took over from a Government with no clear plan for getting it up and running. There was no strategy for recovery and no ideas for reform, and not a single penny of savings had been identified. If Opposition Members would like to intervene to tell me which of our spending cuts they would like to support, I would be very happy to take the intervention right now.

The right hon. Member for Delyn (Mr Hanson) talked about the March Budget, but it was a Budget and a plan that the British people rejected at the ballot box. While the Opposition are in denial, they will have no prospect of coming up with a plan to solve the grave problems that this country faces following 13 years of their being in government.

We took over when our country was borrowing £1 for every £4 it spent. We were running the highest deficit in our peacetime history and the highest in the G20. Britain was not living within her means, and the world knew it, as my hon. Friends the Members for Spelthorne (Kwasi Kwarteng) and for Central Devon (Mel Stride) pointed out. In fact, the previous year, the International Monetary Fund warned that we needed to accelerate deficit reduction. As my right hon. Friend the Member for Wokingham (Mr Redwood) said, that was critical to getting our country’s finances back on track.

In May we announced immediate reductions in in-year spending, avoiding the sovereign debt crisis that was engulfing the eurozone. In June, we set out our emergency Budget, returning credibility to the nation’s finances, and this October we have had the spending review, bringing years of irresponsible borrowing to an end and giving our country the best chance of keeping interest rates low, stimulating business investment and keeping mortgage rates low, and so helping families.

We have had to tackle the deficit—it has been unavoidable. However, we have chosen to spend the money that we have on the areas that matter most to Britain, which are the education of our children, the health care of our people and the infrastructure that sustains a prosperous economy. As my right hon. Friend the Chief Secretary said, underpinning all our decisions have been three guiding principles: first, the need to support growth; secondly, that our choices are fair; and thirdly, that we deliver reforms to our public services, making them fit for the 21st century. As the hon. Member for Redcar (Ian Swales) pointed out, those principles were entirely missing in the last Government’s comprehensive spending review of 2007.

[Angela Smith]

Can the Economic Secretary give us any indication of the evidence that the Government have used to rely on the creation of 2.5 million new jobs in the private sector over the next five years?

[Justine Greening]

As the hon. Lady will be aware, we have set up the Office for Budget Responsibility, which is an independent office. It is the OBR that is predicting year-on-year falling unemployment and rising employment. I hear Opposition Members talking about 480,000 or 490,000 public sector job losses, but I am afraid they have to consider that the same report assesses that 1.6 million jobs will be created in the private sector. They cannot have it both ways.