Fraser Nelson

The claim that Labour won’t cut spending is just Balls

The claim that Labour won't cut spending is just Balls
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When Gordon Brown sends ministers out to lie about his spending plans, he can only really depend on Ed Balls to do it effortlessly. Some, like Andy Burnham, don’t understand his elaborate scam – and tie themselves in knots trying to. But Liam Byrne is a former businessman who does understand a balance sheet (and understands the concept of cooking the books). Yet he was instructed to hold a press conference today on Cameron’s cuts. Sadly, I wasn’t invited* but Byrne was ably grilled by the hacks who were present – and the following exchange with Nick Watt of The Guardian (which he has blogged) is worth repeating here. In it, Byrne concedes that spending post-2011 will fall.

NW: Can I ask you a question and if you could give me a yes or no answer that would be very helpful. When Gordon Brown set out the spending envelope in the House of Commons last week from now to 2014, that amounted to, as you said, a cash increase of £86bn. But if you use the Treasury forecast [of inflation], that will amount to real terms cuts of 0.1%. Yes or no?

LB: Well, you've got to separate two kinds of spending here. You've got to separate current spending, that is the day-to-day cash in hand. In real terms that grows by 0.7%.

NW: That is for current period spending period. I'm talking about post-2011.

LB: I'm talking about the post-2011 period in which current spending grows by 0.7% a year. If you look at capital spending – so building police stations, building schools, building hospitals – if you look at the share of capital spending in the economy that does come down to 1.25% by 2014 for the very simple reason that we have moved it all forward. So 1.25% of GDP is something like twice the level of capital spending that we inherited in 96-97. But it is simply a matter of arithmetic. If you bring it all forward you are going to get a peak which is the peak that you get in this year. It spikes up to just over 3%. So it is a bit of a red herring, I think, to try and mix up capital spending and current spending. You know, if you put the two things together you get the numbers that you talk about.  The translation: “Guilty as charged”. Byrne heroically tries to blow smoke, introducing new metrics of “1.25% of GDP” etc. I do love his preposterous claim that the concept of total spending is somehow a “red herring”.

 

The issue is quite simple: those spending figures the Prime Minister read out in PMQs last week represent a real-terms cut. Spending after April 2011 is falling. Factor in debt interest, and public service budget will fall by an ever sharper amount – 7% say the IFS. Protect health and its 10%. This is not complex. There will be cuts: the only question is whose.

 

Byrne was also asked about on Balls’ own-goal claim that education spending would go up after 2011. Balls said: “But if we can get the economy right, as I believe we are doing, I think we can see spending on schools and hospitals rising in real terms after 2011”.

 Byrne’s response:-“There is an ‘if’ in that sentence. The right time to set out our position on tax spend and departmental budgets is either at the time of the Pre-Budget Report or at the time of the Budget.  The Chancellor will set out the position.”

 

Good to see even Byrne doesn’t place much store on HM Treasury’s official estimates of a trampoline recovery, the claim that the economy will grow by an average 3.5% in the three years to April 2014. But for his information, this is the official position of the government and its debt repayment schedule is dependent on such a recovery. A joke, of course, but Byrne really should try a little harder to take it seriously. If the debt markets realise that his repayment schedule is a joke, there will be a price to pay.

 

*The press conference was announced on email yesterday, then cancelled on email. But when they put it back on again, they didn’t send an email. They only telephoned daily lobby journalists – and so columnists like myself were excluded. Labour later claimed they didn’t want to send out another email, as journalists don’t always check email.

Written byFraser Nelson

Fraser Nelson is the editor of The Spectator. He is also a columnist with The Daily Telegraph, a member of the advisory board of the Centre for Social Justice and the Centre for Policy Studies.

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