Spending Round 2019

Lord Fox Excerpts

Wednesday 25th September 2019 Lords Chamber

[Lord Fox (LD)]

My Lords, it seems like we were never away. In fact, if we listened to the Lord Speaker earlier, apparently we were not; we were here all along. I trust that the Minister did not have to break off a family holiday to be here, and I look forward to this debate.

The spending review was presented amid a febrile day in Parliament—a febrile day in a chaotic week—so a take-note debate would be something of a novelty were the Chancellor here, because quite frankly no one took any notice of the spending round when it was announced. It disappeared almost without trace. It should have been the Chancellor’s big day but, to be honest, No. 10 had already ridden roughshod over his moment. It selectively leaked the contents—contents which, in most cases, had been inserted by the Prime Minister’s chief of staff in the first place. Then at short notice, it cancelled his speech the weekend before. Finally, the announcement itself was eclipsed by all the unconstitutional activity that was going on around it. However, I have one concern. Since that time, the Chancellor seems not to have been seen in public. Perhaps the Minister can use this opportunity to assure your Lordships that Mr Javid is safe and well—that he is all right—because, frankly, we have seen no sign of him since this announcement was made. A take-note debate gives us a chance to scrutinise the Statement and, thanks to this unexpected debate, we now have that opportunity.

In truth, though, as the noble Lord, Lord Tunnicliffe, said, this spending round was never really intended as a serious projection of public finances. It is an uncosted manifesto, a launch for the next election, and its best-before date is before Christmas. If noble Lords had any doubt about that, the subsequent activities of the Prime Minister proved that this was the launch of an election campaign. Perhaps the most surreal was his speech in front of the police recruits in West Yorkshire, but each appearance, right up to his stunt at Whipps Cross Hospital, were part of a timetabled election launch.

That is one reason why we should suspect these numbers and the document that they appear in. The other is that they have been built on very shaky ground. This spending round was, in the words of the independent Office for Budget Responsibility in the letter that it sent to the Treasury Select Committee on 9 September,

“unusual in two respects: first, it covers only one full fiscal year”—

as has already been mentioned—

“second, the aggregate limits and departmental allocations have been announced together”,

making them very difficult to unpick. Due to the OBR’s primary legislation, it was not asked to issue a forecast because this spending round did not cover the statutory five years needed for a forecast. I am not the only person disturbed by that sidelining of the OBR; Ben Zaranko, research economist at the IFS, said:

“Making major fiscal announcements without new OBR forecasts risk a return to the bad old days when chancellors could make fiscal claims not based on the best available independent forecasts”.


His colleague Rowena Crawford added detail, saying:

“Based on OBR forecasts from the spring it looks like the Chancellor has plenty of room to meet his spending pledges … But growth has slowed since the spring and in reality he may have a lot less than the £15 billion of headroom he seemed to have back then”.


In more detail, the IFS has projected the public sector borrowing for the fiscal year 2020-21. The OBR forecast for March was £21.2 billion. If you add in the reclassification of student loans—for which I am not blaming anyone on the Benches opposite—that takes borrowing up to £32.8 billion. Add in the cost of the spending review as in the booklet at the moment, and that takes borrowing for that fiscal year to £46.2 billion. However, if you also factor in weakening growth, which is already happening, that takes the borrowing requirement to over £50 billion. That is not my projection but that of the IFS. This is why we need the OBR’s input before a spending round. I would be very interested to hear the Government’s justification for deliberately cutting out the OBR in the way that they did. What was going on?

In his speech, the Chancellor of the Exchequer announced that he would review the Government’s fiscal rules. That smacks of closing the stable door after the horse has bolted because it is quite clear that the fiscal rules are already up in the air. What is the timetable for this review? What criteria will the review adopt? And, beyond the Prime Minister’s chief of staff, who will be conducting the review?

Lastly, these numbers do not add up because they completely ignore the budgetary elephant in the room, which is the event of a no-deal Brexit. There most decidedly would not be money to spend on any of this in the event of a no-deal Brexit. The OBR said around three months ago that a no-deal Brexit, even of the most benign kind, would add around £30 billion a year to borrowing from 2021 onwards and around 12% of GDP to net debt by 2023-24. Adding that to the IFS projections that I mentioned earlier—that is, the OBR March number, the student loans re-evaluation, the Chancellor’s costs in the spending round document and no deal—raises the public sector borrowing requirement for 2021 to £76.2 billion. Where is the contingency for this in this document? To ignore this financial risk is very reckless.

I look forward to this debate, but it comes with a warning: this is not a normal spending round. It is a sham, full of imaginary numbers that do not pass the normal tests and have not met the normal safe- guards. It does not take into consideration the current economic weakness and does not weigh the perils of a no-deal Brexit. It is further evidence of the sort of shameless behaviour that we have come to expect from the Government.