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Comprehensive Spending Review

Volume 496: debated on Tuesday 14 July 2009

Departmental budgets are set until April 2011. As I said in the Budget statement, the current economic uncertainty means that it would not make any sense to try to set departmental budgets now for every year to 2014. However, as I said in the Budget, we will return to that issue at the pre-Budget report and then again in the Budget.

Given the economic difficulty and the background, can the Chancellor tell us whether there is any difference in principle between setting the overall expenditure envelope and setting the departmental total?

There is quite a big difference I would have thought, but the hon. Gentleman has helped to draw attention to the fact that in the Budget I had two principal aims. One was to ensure that we continued to support the economy now, by ensuring that we maintain spending at its present levels, as we intended from 2007. The second aim was to ensure that we halve the deficit over a five-year period. Both those things were important: it is important to support the economy now, but it was also important that we set out a clear sense of direction, so that we can get borrowing down. That was the strategy that we set out, and it remains our policy.

There is clearly much uncertainty, but does the Chancellor accept the estimate of the OECD, which is that we now have a structural deficit on the budget of around 7 per cent. of GDP, which the public spending review will have to incorporate? As he agrees with us, I think, that it would be foolish and counter-productive to resort to fiscal tightening in a recession, how many years does he think it would take thereafter to eliminate that structural deficit?

First, my forecasts have not changed since I set them out in April in the Budget; and as the hon. Gentleman knows, we will update our forecasts at the pre-Budget report. He is quite right too to identify the fact that there is still quite a lot of uncertainty. Although there have been some encouraging signs in this country and other parts of the world that we are on course to recovery, the problems in world trade are affecting exports. Although oil prices have come down over the past few days, the fact that they have risen poses another threat that we will have to deal with. However, as for making further forecasts or further judgments on what else we can do on spending, that is something to which I said I would return at the pre-Budget report and the Budget next year.

I would like to conduct an intragovernmental sight test. The Schools Secretary has claimed to be able to see the spending on schools and hospitals rising in real terms after 2011. If the Chancellor focuses carefully, can he see that too, or is his vision of the future altogether blurrier?

I think that I have made our position absolutely clear as far as spending beyond 2011 is concerned. However, if the hon. Gentleman wants to play at sight games, perhaps he could explain why one moment we get the Conservatives promising tax cuts and another moment we are told that they are off for six years. One moment we are told that the Conservatives want to spend more; then we are told that they want to cut more. The hon. Gentleman ought to attend to some of his own difficulties before he addresses anything else.

The Chancellor just said that it was his priority to halve the scale of the public deficit. How can that possibly be realistic, and how can he be taken seriously, if he defers indefinitely the comprehensive spending review that must be the essential building block for delivering the policy that he has just told us from the Dispatch Box is a priority?

I do think that it is important that we reduce the deficit, which is why I have set out plans to reduce it by half over a five-year period. That is a reasonable period of time, given where we are at the moment. I said in reply to the hon. Member for New Forest, West (Mr. Swayne) that, at this stage, it would not make any sense to set out detailed departmental totals in the midst of what are still pretty uncertain conditions. I said that we would come back to that at the PBR and the Budget, and that remains our position.