Public Spending: Borrowing Increase

Question

Asked by

To ask His Majesty’s Government what are the implications for public spending of the increase in borrowing announced by the Chancellor of the Exchequer on 23 September.

My Lords, the Government’s growth plan set out the important steps we are taking to drive growth. This will help to improve living standards and fund high-quality public services. Sustainable long-term growth depends on a disciplined approach to public finances that includes focusing our spending on core priorities and working efficiently. The Government will set out more details on their approach to public spending at the medium-term fiscal plan on 31 October.

I thank the noble Lord for that expert reply. Has the Prime Minister any idea what on earth she is doing? The Institute for Fiscal Studies estimates she must slash public spending by some £62 billion, on top of the £180 billion of public spending cuts since 2010, or forego the tax cuts. The NHS is on its knees, social care hangs by a thread, and schools and local government are tottering, while millionaires will be much better off. Then, just yesterday, the Prime Minister claimed, “All is well. There’s no need for cuts”. Is it any surprise that the markets are spooked?

I do not take the view that the noble Lord has. The Government are focused on increasing economic growth to boost living standards through supply-side reform. This will create new, better-paid jobs, allowing people to keep more of what they earn, and ensure that people from across all spectrums of society, including the most vulnerable, will benefit. On the noble Lord’s question, the detail of the growth plan will be rolled out on 31 October. It is intended that we should show that we are fiscally responsible.

Does my noble friend think that the noble Lord, Lord Hain, did not notice that this week the Labour Party voted for the reversal of the national insurance increase? He asks what the Government are doing; what they have done is save people from energy costs that would have been £6,500 a year and save businesses from bankruptcy. Is that not the case? That is something which the Labour Party is unable to match, because its guarantee was for only six months while ours is for two years. Most people in the country will cheer that, will they not?

My noble friend is right. The Government are reducing the tax burden by delivering tax cuts worth around £45 billion by 2026-27. We know that is for both individuals, through the EPG, and businesses, through reversing the increase in corporation tax from 19% to 25%. It is an ambitious first step towards this mission of cutting taxes. However, as I said earlier, this includes looking at the public sector and liberating, in particular, the private sector.

Yesterday, the Prime Minister was very clear that there would be no cuts in funding for public services. Could the Minister clarify whether she meant no cuts in real or nominal terms? Public services will be very badly hit if this is protection in only nominal terms and they have to absorb all the costs of inflation, well in excess of 10%.

I am well aware of what the Prime Minister said yesterday. I reiterate that the 2021 spending review set out the departmental budgets for three years and overall departmental spending is still growing in real terms. It also cited that 5% efficiency savings against day-to-day budgets would be looked at for 2024-25. Having said all that, a reprioritisation, efficiency and productivity review has been announced and will be undertaken.

My Lords, according to the ONS, since 2010 this Government have borrowed more in real terms than all Labour Administrations combined—and Labour created the National Health Service, the welfare state and many new industries. In contrast, the Government, despite borrowing an extra £1.5 trillion, have created poverty and homelessness and destroyed public figures. Can the Minister publish a paper explaining how this £1.5 trillion has been wasted?

I have spoken about an efficiency review and a reprioritisation, and that is under way. I say that it is not all as the noble Lord paints; for example, we have got unemployment down to its lowest level for about 40 years, at 3.5%, which is excellent, and there is much more we can do to that extent. The economy is actually in a pretty robust state, despite what the noble Lord might be indicating.

My Lords, can my noble friend confirm that the Government will be rigorous in looking for efficiency savings across the board where we can do things more efficiently and save taxpayers’ money?

That is absolutely right. The message has gone out that all departments need to look at where they can reprioritise and make efficiency savings. That is the case for any new Government coming in, by the way, and that is under way.

My Lords, as somebody who spent much of their career in the public sector, I know that, at the shop-floor level, “efficiencies” is a euphemism for “cuts”; that is what we are effectively talking about. But let us get down to the nitty-gritty of this debate. Volatility in bond markets continues to feed through to the mortgage market, where the average two-year fixed interest rate has jumped by around half a percentage point in the last week alone. Can the Minister confirm whether the Government have conducted, or at least commissioned, any assessment of how many repossessions we are likely to see in the coming months? If not, will he commit to taking this back to the department?

On the mortgage market, I am very aware of the pain that many people are suffering at the moment. Interest rates have been going up—this is not just a matter for the UK; it is a global issue, particularly among the developed countries—and interest rates link into mortgage rates. We very much hope that they will come down. This is very much a matter that the Bank of England is taking decisions on, and we are all aware of the announcements that have been made to stabilise the markets.

May I take the Minister back to his response on the issue of public service expenditure? In response to the noble Baroness, Lady Kramer, he said that he was very well aware of what the Prime Minister said. I think many of us would like to know what the Prime Minister said actually means. Does it take into account the effects of inflation?

We will obviously have to wait for the fiscal statement that is coming on 31 October. We, and she, expect departments to continuously be identifying opportunities to bring down the cost of delivering public services through better use of technology and by reducing bureaucracy. It is also important to praise the level of service and the hard work that public services and the public sector undertake.

My Lords, what does the Minister have to say to his noble friend Lord Finkelstein, who has just said on the BBC News channel regarding the Prime Minister and these policies: “They can keep pressing on with this policy but the consequences are obvious to see and will be paid for by lots of people, and therefore also electorally by the Conservative Party in the end”?

I am not going to be drawn into responding to that. What I will say is that we are set on announcing the medium-term fiscal plan—as I have mentioned at least three times—on 31 October, and that of course is linked to the OBR giving its view on the Government’s plans. We are confident that we will be able to roll out in detail our growth plan, what it means and how it will get this country moving.

My Lords, the pandemic involved a huge increase in public spending and borrowing, which I thought had the general support of all parties. Stopping the bleeding over energy prices was the same, and yet another colossal amount. As everyone knows, combatting climate change is going to require still more. These are huge increases in borrowing and surely now we are having to pay the price. If in America the Fed is putting up its interest rates, we will have to do the same. Can the Minister clarify where the Opposition stand on that, because they sound as if they are going back on this whole sensible analysis?

I thank my noble friend. I think the Opposition probably do understand that. The Government launched the independent review into the delivery of the net-zero climate commitments with a focus on ensuring that the UK’s fight against climate change remains undiminished. I have shied away from saying it so far because everybody has been saying it but many of the issues that we are having to deal with stem from the tail end—the sting—of the pandemic and from the war in Ukraine. We all know that.