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These hasty spending decisions have ripped up any pretence of a long-term plan

These hasty spending decisions have ripped up any pretence of a long-term plan
5 min read

Shadow Chancellor Chris Leslie says George Osborne's announcement of £3bn further spending reductions last week represents a "shambolic approach" to public services, and calls for an independent assessment of the impact of cuts on living standards and productivity.

The Government began this new parliamentary session with significant question marks hanging over their direction of travel. Ministers have tried in vain to make the right noises about ‘fairness’ and even a ‘one nation’ approach, but it is already becoming clear that the Queen’s Speech was just the tip of an iceberg, with 90 per cent of their real agenda hidden from public view. 

Last week George Osborne added to the sense of a hidden agenda when he sprung £3bn of spending cuts on a parliament. On Thursday the Chancellor was due to respond to my opening remarks in the Queen’s Speech debate on the economy. Instead the day descended into chaos when he decided to use the occasion to announce a series of in-year cuts, as well as the sale of the taxpayer’s remaining stake in Royal Mail.

Coming fewer than three months after his first Budget of the year, and just five weeks before his next one, it ripped up any sense of a long-term plan.

Nobody disagrees with sensible savings, because spending should be controlled, but why was the Chancellor so determined to hide the detail? This was a shabby way to treat Parliament, slipping out announcements of £500m cuts to defence, £200m to public health, £450m to skills and business, £249m to justice and more besides – and with almost no detail of the impact. If the Chancellor shows no interest in explaining whether these are genuine efficiencies then the suspicion will only grow that he is hitting public services and harming economic productivity.

Who will bear the burden of these changes? Announced in haste and shrouded in vagueness, the government has provided a paltry amount of information on these savings, for example the Department for Work and Pensions could only tell the BBC that the “specifics” of how it will make the cuts will be announced “in due course”.

Similarly, when asked about its £83m of savings, the Department for Environment, Food and Rural Affairs admitted it needed to “go through a process” before listing them and could only point to a planned £250,000 cut to a study of the behaviour of urban seagulls.

This decision to apparently reverse out of allocations set out just weeks ago is a shambolic approach to planning public services. Any announcement like this should only be made after thinking through reforms based on the evidence.

Yet now we have an emergency Budget looming in July, when the Chancellor will have to address the questions raised by the independent Institute for Fiscal Studies – first, why David Cameron gave a “misleading impression” by saying the Government need only take ‘just one per cent’ out of department spending and, secondly, how he can set out a fair approach to the remaining 85 per cent of George Osborne’s currently planned £12bn of welfare cuts while keeping his promises to protect child benefit and the disabled.

The Conservatives have secured a majority, but they did not secure a mandate for specific cuts to departments or services – because these were never explained or set out before the election. Nor have we ever had an explanation of how they will pay for their multi-billion-pound pledges on tax, public services or crucially, the NHS.

Last week the OECD were right to say that a “fair” approach is needed to reducing the deficit – and to me this means sensible savings and protection for those on middle- and lower incomes. Cuts that decimate public services would be too big a price to pay, especially as they may even result in higher costs in the longer term.

In a sobering reality check for the Chancellor, the OECD said that “continued weak productivity” could lead to “a higher-than-expected budget deficit” and warned of the risks posed by the Treasury’s uneven profile of their planned fiscal pathway.

So I want the Chancellor to set out a sensible approach to eliminating the deficit. He said he would balance the books by 2015 and he failed to meet his own deadline. Now, as he makes further cuts, he must prioritise the areas of public spending that raise productivity.

And this is why I believe the time is now right to ask the independent Office for Budget Responsibility to report on how the options for the Spending Review might impact on productivity and living standards. If Britain could raise its level of productivity then it would give greater scope to protect working families at the same time while still balancing the books.

If George Osborne rejects such a reasonable and measured approach, and gives into the demands of his backbenchers, then it will prove beyond doubt that he is influenced more by conservative ideology than economic judgement.

Is he focusing on securing the long term needs of the economy, or securing his own long term future by paving the way for a move to Number 10?  The test is whether this Chancellor will put the ambitions of Britain above his own.

Chris Leslie is shadow Chancellor of the Exchequer

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