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Public Spending

Volume 511: debated on Thursday 17 June 2010

With permission, I wish to make a statement on the Treasury’s review of the public spending commitments made by the last Government between 1 January 2010 and the general election. In the review, we examined the £34 billion of spending that was approved in their final few months of office. The aim was to test in each and every case whether those commitments are affordable, whether they deliver value for money and whether they remain genuine priorities for this Government.

The review is now complete, and my decisions on those commitments fall into three categories—projects where spending will be approved, because they are a high priority or because the money has largely been spent; projects that will be cancelled; and projects whose long-term affordability will be considered as part of the wider spending review process over the coming weeks and months.

A detailed list of the projects that have been cancelled or suspended until the spending review has been laid in the Libraries of both Houses.

For those projects that offer value for money and meet the Government’s priorities of fairness and responsibility, or for those that it is simply too late to withdraw, we have acted quickly to confirm approval in order to avoid disruption. For example, we have approved the funding for essential medicines in the case of a flu pandemic, some hospital projects and support to post offices, as well as for spending on crucial equipment for military operations in Afghanistan. The House will be aware, however, that as a country today we have the biggest peacetime budget deficit in our history. We have a choice: we can act fairly, responsibly and decisively now, or we can follow the approach of the previous Government—deny and delay—which would only end in greater cuts being forced upon us. Given our priority to get the deficit under control, the Government collectively have looked at each project, and I am grateful for the support of Cabinet colleagues in this process.

Some commitments are simply unaffordable, do not meet Government priorities and will be cancelled. We have taken the decision to cancel immediately 12 projects that would have cost nearly £2 billion over their lifetime. They include the Department for Communities and Local Government’s regional leader boards; the Department for Business, Innovation and Skills’ loan to Sheffield Forgemasters; the Department for Work and Pensions’ low-value employment programmes, including the extension of the young person’s guarantee to 2011-12 and the jobseeker’s two-year guarantee; the Department of Health’s active challenge routes, county sports partnerships and the North Tees and Hartlepool hospital project; the local authority business growth incentive; and the withdrawal of Government funding for the Stonehenge visitors’ centre. Many of those are difficult decisions and, I fully understand, painful ones for some of the communities affected—communities whose hopes were irresponsibly raised by the previous Government. However, they are decisions that a responsible Government must face up to in these difficult economic times.

Other decisions should be weighed up against all the other significant pressures on public spending within the context of the spending review—a spending review that the Labour Government delayed because they did not want to admit that painful decisions had to be made. For this reason, I can announce that there are a further 12 projects, with a total value of £8.5 billion, approved since 1 January that we will suspend and refer for consideration to the spending review process over the coming weeks and months. They include the health research support service, the Kent Thameside strategic transport programme, and the libraries modernisation programme. Any other new major hospital schemes will be assessed in the context of the spending review to ensure that they are affordable and represent the highest possible value for money. Only the highest priority schemes will be able to go forward. We will do this in the context of the approach set out in our spending review framework, which will include a fundamental review of all capital investment plans, to identify those areas that will achieve the greatest economic returns.

The Secretary of State for Education has already announced that he is looking at the whole Building Schools for the Future programme and will shortly set out the outcome of this work. That programme has been very heavily overcommitted, and we are in agreement that tough decisions need to be taken. Departments have also independently reviewed projects with budgets within delegated limits approved since 1 January, and they will report the results of those reviews in due course. Together, these decisions will significantly relieve burdens on departmental budgets that will be under major pressure in the spending review.

While conducting this review, I have discovered yet another black hole in the books that we inherited. I can tell the House that billions of pounds of spending commitments were made for this financial year that relied upon underspends or access to the reserve. There was no reason to suppose that underspends would have occurred on anything like that scale and there is insufficient contingency in the reserve to cover the remainder. I will therefore be cancelling at least £1 billion of commitments where there simply is not the money to pay for them. We will announce the action that we will take to tackle this further hole in the accounts in next week’s Budget. As far as the reserve is concerned, I am sure the House will agree that our priority is that we keep this for genuine emergencies and new pressures that may result from military operations in Afghanistan.

The last Government committed to spend money that they simply did not have. They made commitments that they knew the next Government could not fulfil and in doing so cynically played politics with the hopes of our communities. The actions that I have set out today show that this Government will take responsible spending decisions, which, although sometimes difficult, will be guided by fairness and the overriding need to tackle the deficit. We did not make this mess, but we will clean it up. I commend this statement to the House.

I thank the Chief Secretary for early sight of his statement, which arrived a few moments ago. We were all impressed not to read his conclusions in the newspapers this morning. I congratulate him on his first statement to the House as Chief Secretary. I think that it was George Bernard Shaw who said that sometimes to succeed in politics one must rise above one’s principles—and few have risen so fast and, I now see, so far as the right hon. Gentleman.

I start with a word of thanks to the Chief Secretary for finally nailing the myth that Labour generated some kind of scorched-earth policy, of which we heard so much in the first days of the coalition. The projects that he has decided to outline this afternoon amount to just 0.05% of this year’s Government spending. At the beginning of the week, we heard from Sir Alan Budd, who told us that the outlook for public finances is £30 billion better than expected, but now the Chief Secretary, who cannot even claim the defence of independence, has smashed the coalition’s claim that Labour spent unwisely. The House is united in its ambition to see the deficit paid down quickly. The defence of our country from the global recession did not come cheap, and now the bill must be paid, which is why we set out with such clarity £19 billion of tax increases and £20 billion of detailed spending cuts over the next two years alone.

I, too, have reviewed the spending decisions taken since January, and my thanks go to the Treasury staff for facilitating this review. I am glad that the decisions that we took on green energy, university modernisation, Airbus, Nissan, Ford, the automotive assistance programme, royal research ships, phase III of the Diamond science programme, the Tyne and Wear metro, the Leeds next generation transport scheme, Manchester Metrolink, the regeneration of Blackpool, accelerated development zones, Olympic park restructuring, hundreds of millions of pounds for the Ministry of Defence, £30 million for children’s hospices and three new hospitals have been reaffirmed.

The country and the Liberal Democrats beyond, however, will be aghast this afternoon at the Chief Secretary’s attack on jobs, his attack on construction workers, his attack on industries of the future and the cancellation of a hospital. What could be more front line than that? In five minutes this afternoon, he has reversed three years of Liberal Democrat policy, of which he was the principal author. What a moment of abject humiliation! He will no doubt claim that the markets forced his hand. These were the markets in which interest rates were falling, not rising, throughout the winter and spring. He claims there is no reason why the Government can assume to carry forward underspends from previous years, despite the fact that, as he well knows, billions are underspent each year, including last year.

It is customary on these occasions to ask the Minister a wide range of questions, but I will give him the luxury of answering only one, although I expect a straight answer: how many people will lose their jobs this year as a consequence of what he has just told the House? Do not beat about the bush—tell us how many.

I am grateful to the shadow Chief Secretary for his response and for welcoming me to my post. He is right that a number of projects have been approved, and Departments will set out details of those projects, or where they are seeking further savings within those approvals, over the next period. They are also, of course, reassessing those approvals given within delegated limits, as I said in my statement, so there will be further announcements to make on that.

The right hon. Gentleman’s characterisation of the Office for Budget Responsibility’s report was surprising, given that the report showed that, in fact, growth was expected to be significantly lower than was forecast by his Government in the last Budget and that the structural deficit—that part of the deficit that can be paid down only by Government policy action—was considerably higher. He set out what he said were Labour’s plans. We look forward to hearing more detail about that. If he is committed to a shared deficit reduction plan, I look forward to his party finally setting out in detail what it would take to meet the £50 billion of cuts that it proposed to set out.

As for consistency with the approach of the Liberal Democrats, which the right hon. Gentleman asked me about, the position is entirely consistent with the approach that we took during the election campaign, in common with our coalition partners, on ensuring that firm action is taken to reduce the deficit. That must be the overriding priority. He said that end-year flexibility is used year by year to meet commitments, but the volume of commitments that were made under the previous Government is so large that it calls into question the Government’s ability to have a reserve at all. Therefore, we have to take action to reduce those claims in early course, and that is what we are going to do in the Budget.

The single biggest risk to jobs in this country is not taking action to reduce the deficit. If we fail to take action to reduce the deficit, we will see jobs lost across the country. We need to restore confidence to the economy.

What we have learned from today’s statement is that the shadow Chief Secretary went on a pre-election spending spree when in office, in the full knowledge that the Government had long since run out of money. The House will be familiar with the shadow Chief Secretary’s now infamous letter to his successor, but allow me to contrast that with the letter that I received on my desk from my right hon. Friend the Member for Yeovil (Mr Laws). The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) wrote:

“I’m afraid there is no money…good luck!”

However, my right hon. Friend’s advice was rather more helpful. On leaving the Treasury, he left me a note saying:

“good luck, carry on cutting…with care.”

Contrast the previous Government’s approach with ours. They raised false hopes by promising the public that they would spend money on local projects that they could never afford to get off the ground, even under their own spending plans. We on the other hand have been candid about the scale of the task. We have made it impossible to fiddle the economic figures to suit our Budgets, and we are taking responsible and measured action on historically unprecedented levels of borrowing.

Order. Many hon. Members wish to get in. We have another statement to follow and there is business after that. I will certainly try to call as many hon. Members as possible, but if we can have quick questions and succinct answers, that will be of benefit to all.

Is it not pretty clear that some of those projects were hastily scribbled cheques on a long overdrawn account? Would not today’s painful announcement have been completely unnecessary if Labour had carried out a proper comprehensive spending review last autumn, building into it a sustainable reserve?

The hon. Gentleman is absolutely right. If there had been a spending review, we would not be in this position now. As it is, out of the £34 billion of commitments that the previous Government made in that period, we have had to cancel £2 billion and put £9 billion into the spending review. The choice is obvious: profligacy on the one side, responsibility on the other.

There will be fury in Wakefield and my constituency, where people are expecting schools to be rebuilt and where we absolutely must have the 70 additional hospital beds to make proper provision. Any cancelled patient operations as a result of today’s decisions will be laid entirely at the right hon. Gentleman’s door. His party have joined with the other coalition party in being the party of mass unemployment. Some 300,000 building workers are already out of work. What is his estimate of the increased unemployment that he will produce as a result of his statement today?

I understand that some of these decisions are difficult for communities and that there will be genuine anger, which the hon. Gentleman has expressed. However, that anger should be directed at those on his own Front Bench who took irresponsible decisions that could not be afforded. We are now putting that matter right.

Will the Chief Secretary accept my thanks for finding the money for the private finance initiative for roads in my constituency?

The previous Labour Government agreed launch-aid investment for the Airbus A350, which will help to secure tens of thousands of jobs in the UK. Can the Chief Secretary confirm that that will be paid in full and that he will not revisit the matter?

As I said in my statement, spending Departments will make announcements themselves about the projects that have been approved.

I had hoped to hear the words “better health care closer to home” and “St Helier hospital” in the Chief Secretary’s statement. Can he update us on the position in relation to that hospital project?

We have considered a number of hospital projects against affordability and value for money criteria. It has been agreed that the Epsom and St Helier, Royal Liverpool, Royal National Orthopaedic and Pennine acute hospital schemes will go ahead.

There is a curious part in the right hon. Gentleman’s statement on the successor deterrent extension to concept phase long-lead items on Trident. What is the value of that, and can he explain why he did not tell the House that he is reviewing Trident? Does he not know what he is doing, or is he embarrassed and ashamed?

The hon. Gentleman knows perfectly well that, in the context of renewing the deterrent, the coalition has agreed a value-for-money review. In the context of that, spending £67 million on long-lead items in advance of the value-for-money review being completed would be utterly irresponsible.

I thank the Chief Secretary for outlining Labour’s cuts. Will he take this opportunity to remind the House just why we face such a difficult spending round?

We are facing a difficult spending round for two reasons: first, we have the largest peacetime budget deficit since the war—£155 billion—with an 8% structural deficit, which is larger than had previously been estimated; and secondly, the previous Government took irresponsible spending decisions at the end of their time in office and that has added to the pressure on Departments in the spending review. I am seeking to relieve that pressure in today’s statement.

In the last Parliament, the then Secretary of State for Transport agreed to part-fund the A6 bypass—a road that is important in relieving congestion on the A6 in my constituency. Will the Chief Secretary agree to meet me and other Members of Parliament who have an interest in the scheme, so that we can discuss with him the merits of the project?

A meeting would be better held with Ministers from the Department for Transport, who, I am sure, would be willing to agree to such a meeting.

Will the Chief Secretary enlighten us as to the number of projects that were approved by the previous Government in the month before the general election?

A significant number of projects—with a significant cash value—were agreed in the last month before the election, and I will happily give the hon. Gentleman more details later.

I note from the right hon. Gentleman’s statement that a commitment has been given on crucial equipment for military operations in Afghanistan. However, can he confirm to the House today that he will also give a full commitment to the announcement that I made before the election on the £30 million for the Army’s recovery capabilities, the costs of the armed forces compensation scheme and the extension of the veterans mental health pilots?

As I said in my statement, Departments will make clear the projects that have been approved, but protecting spending on front-line services in the armed services and support for our troops on the front line in Afghanistan is a priority for this Government.

Does not the shadow Chief Secretary’s delay in coming to the Chamber for today’s statement characterise the previous Government’s delay in taking the tough decisions that are needed, and did not his response characterise their refusal to say sorry for the mess that they left this country in?

The hon. Gentleman makes a good point, although I would not wish to cast aspersions on the shadow Chief Secretary’s reasons for the timing of his arrival in the Chamber. That would be discourteous. However, it is fair to say that a spending review was delayed by the previous Government because they did not want to face up to the fact that some difficult decisions had to be made.

The Sheffield Forgemasters loan would have helped place the UK at the forefront of global nuclear production and enabled Forgemasters to install the country’s first 15,000-tonne forging press, thus reducing our dependence on foreign imports. Is the Government’s decision not a political one, made out of spite because South Yorkshire voted Labour, rather than a decision based on the long-term interest of UK manufacturing?

No, none of the decisions was motivated in the way that the hon. Lady suggests. I have received representations from Members from a number of political parties on this matter. The key issues are affordability and value for money, and that project does not meet those tests. However, we continue to be supportive of it and officials will continue to work with the company to help it to try to secure private investment, which we think is perfectly justifiable for that worthwhile project.

In the run-up to the general election, Labour Ministers trotted up the M1 to my constituency to make all sorts of promises on issues that they had done nothing about for 13 years. Does the Chief Secretary agree that, instead of coming here and feigning anger today, Labour Members should walk out of that door and go to constituencies such as mine to apologise for raising people’s hopes about projects that they never intended to fund?

The hon. Gentleman is absolutely right. It is easy for people to write cheques when they know they are going to bounce. Labour raised hopes in communities that certain projects would go ahead, for which there simply is no money left. As the shadow Chief Secretary said, there is no money left, and that should have been the approach that guided those decisions, not the need of Members to save their own seats.

Order. Questions must be addressed—and the Minister must respond—not to the former Government, but to this Government and to today’s statement.

How much does this review bring into question private finance initiatives or public-private partnerships that, at their inception, had bogus public sector comparators and have cost the public purse a lot more over the period? Will the Chief Secretary also ensure that there is no threat to the service provided by search-and-rescue helicopters, despite the suspension of procurement for helicopters? That service is vital to island communities such as mine.

I will say two things to the hon. Gentleman. First, his point about PFI is not within the scope of this statement. However, in the context of the spending review, we will have to look at every single way in which public money is spent—including the operation of PFI—to ensure that we are getting value for money and not spending taxpayers’ money unnecessarily when the spending settlement is going to be so tight.

The hon. Gentleman will see, when he reads the statement in the Library, that the search-and-rescue helicopter replacement is one of projects whose cost-effectiveness will be reviewed by the Ministry of Defence and the Department for Transport. Obviously, they will produce their report as and when that process has been completed.

In the light of the Chief Secretary to the Treasury’s statement and of the fact that this will be a fixed-term Parliament, will he introduce constraints to prevent a similar spending spree in the run-up to the next general election?

I am grateful to the hon. Gentleman for his question, and I understand the motivation behind it. Given the scale of the challenge that we face in the form of the enormous structural deficit and the need to bring down that deficit further and faster than the previous Government proposed, I suspect that that task will consume all our time in the Treasury over the next five years, without having to worry about the question that he has raised.

In the run-up to the election, we could hardly move for Labour Ministers making all sorts of spending commitments. Will the Chief Secretary tell us how many of them were subjected to value-for-money tests?

Having found the piece of paper that I was looking for earlier, I can tell the hon. Gentleman that a substantial number of those projects were agreed to very close to the election. In the week before the election was called, the Kent Thameside strategic transport programme was agreed, as were the Birmingham magistrates court programme, the Outukumpu project, Building Schools for the Future in Cumbria and the Sheffield retail quarter. That was all done in that one week before the election.

The Chief Secretary has made a serious accusation in saying that Labour Ministers deliberately agreed expenditure or programmes of action that were not properly funded. If that were the case, the permanent secretary would have asked for a ministerial letter of direction. Will he place before the House the ministerial letters of direction for all the projects that he has referred to?

Having looked at the state of the books and seen the plans that the previous Government set out—at least in headline terms—to cut £50 billion from public spending over the course of this Parliament, I do not see how any Minister could responsibly have made those spending commitments and expected them all to be met after the election.

Is the Minister aware that, under the previous Government, the Department for Communities and Local Government spent £134,000 on luxury sofas? Is not that an example of the obscene waste that has led to the tough decisions that we have to make today?

I was not aware of that Department’s spending on luxury sofas—perhaps I should have been. It is precisely that kind of expenditure on which we need to bear down heavily in the context of the spending review and through the efficiency and reform group that we have established, to ensure the maximum amount of space in Departments’ budgets to spend on the front-line services that Members on both sides of the House care about.

Can I try to get a straight answer to a straight question? What assessment has been made of the impact of this announcement on jobs and growth, and will the Chief Secretary publish that assessment and put it in the Library?

The position on that is as I set out to the shadow Chief Secretary: the biggest risk to jobs and growth in this country is failing to take appropriate action to deal with the deficit. That is the context of this Government’s policy. If we continued with the irresponsible habits of the previous Government, we would soon be in a great deal worse a position than the one in which we now find ourselves.

Does my right hon. Friend agree that job losses are the tragic consequence of 13 years of misgovernment and massive overspending?

That is at least partly the case. The challenge that we now face is how to tackle the fundamental economic problems that this country faces. The most serious economic challenge that we face is the scale of the deficit. We have seen in countries elsewhere in Europe and further afield the consequences of failing to act on fiscal consolidation. If we fail to act, the problems for jobs and growth and the prospects for our economy will be a great deal worse than they are today.

In 1979, the then Government started destroying South Yorkshire’s industry, and the right hon. Gentleman is truly an heir of that Government. Does he realise that the name of liberal democracy must hang its head in shame in Sheffield, now that Sheffield Forgemasters has no future? His right hon. Friend the Deputy Prime Minister can now send back his Independent Parliamentary Standards Authority travel allowances, because he will never be welcome in Sheffield or South Yorkshire again.

I would say two things to the right hon. Gentleman. If he looks at the programmes in the Department for Business, Innovation and Skills, he will see that a number of grants to industry have been approved, having been judged on the tests of value for money and affordability. Also, as the Government make progress over the next few months and years, he will see that protecting areas that are particularly dependent on the public sector and that have been disproportionately affected will be a key priority for us.

It would be invidious to choose between some of the projects on the list. I realise that each of the decisions has difficult consequences for the communities affected. My surprise is not at an individual project but at the general approach to spending that was taken in the run-up to the general election.

In the light of the bizarre suspension of the successor deterrent programme, will the Chief Secretary tell us whether the Trident value-for-money review will consider the overall question of whether the successor to Trident remains the most effective form of deterrent?

The hon. Gentleman has no doubt studied carefully the coalition programme for government, and he will know that we have agreed to proceed with the successor deterrent to Trident. The value-for-money review will do precisely what it says on the tin: we want to get the best value for money from the project and not waste taxpayers’ money unnecessarily on the renewal.

I was surprised, but glad, to hear that Treasury staff have been able to help the shadow Chief Secretary to the Treasury to review the projects mentioned in the statement. It is a shame that he did not do that while he was in office. Will the Chief Secretary consider seconding some of his staff—if he can spare them—to help to educate Labour Members and to get them on the same page as the rest of the country, given the state that they have left the economy in?

I agree with the hon. Lady that the people of this country are ahead of the Labour party in realising the seriousness of the economic problems that we face. That consensus is now a global one—people will have seen the statement from the G20 summit on the need for faster fiscal consolidation. That is right, and the Opposition are wrong.

Order. I remind Members to try to keep to the subject of the statement; the Minister is not responsible for previous Government policies.

If the Chief Secretary thinks that the biggest risk to jobs is the deficit, why does Britain have a better employment rate among all other European countries than America?

The risk that we face is the fact that we have the largest budget deficit in the EU, with the exception of Ireland, that we have a very substantial structural deficit and that growth is lower than forecast. All those things argue for what we are going to do, which is implement a programme to reduce the deficit faster and further than the previous Government proposed. That is the only responsible course to take; profligate spending of the sort we saw in the final days of the previous Government is not responsible.

Does my right hon. Friend agree with me that, after their cynical attempts to buy the last election, the crocodile tears of Labour Members do nothing to raise the standing of this House in the public’s eyes?

I share the hon. Gentleman’s hopes for higher standards in Parliament, but Ministers of the previous Government ought to have known in the context of the financial situation that the country faces and of their own plans to cut £50 billion from public spending that these additional spending commitments and claims on the reserve were simply unaffordable. That chicken is coming home to roost today.

I note that £1.2 billion-worth of the cancelled projects, as they are called, are from the future jobs fund—for the young people of the right hon. Gentleman’s constituency and mine. I wonder what the consequences will be for the Scottish budget. Can he tell us what impact there will be on my constituents in Scotland, or have his Conservative bosses—let us be quite frank—done a deal with the tartan Tories in the SNP in Scotland?

The hon. Gentleman will know that benefit and Department for Work and Pensions spending is a reserved matter, so does not have a Barnett consequential. He will also know that the Government have set out plans to establish a Work programme, which will replace those programmes during next year. That will be a more targeted, quicker and effective programme, based on paying suppliers by results to ensure that people get back into work quickly. I welcome that programme and I hope that he will, too.

Can the Chief Secretary confirm the good news for Reading and for my constituents—that the Government are fully committed to the Reading station upgrade, because it offers excellent value for money?

I have heard what the hon. Gentleman has said. It will be for the Department for Transport to announce the details of projects that have been approved.

I and the people whom I represent will be desperately disappointed that the new North Tees hospital is not going ahead. My understanding is that it was not promised in the last weeks before the election, but had been planned, committed to and expected for five years. The decision will have a massive impact on the Tees area, Cleveland and Durham. The hospital was to provide specialist services for the whole of that area. How does that sit with the promises made by Government Members not to cut health spending?

The hon. Lady will know that it is a foundation trust which is coming to the Government for additional funding. She may not be aware, however, that consent for the project was given on 10 March 2010, so it is within this period. Of course I accept that the decision will be very disappointing for people who have worked on the project for that time—I do not wish to belittle that at all—but in the context of the economic situation that we face and the decisions that we have to make, it is right and proper to judge such projects on the strict value-for-money and affordability grounds that we have applied.

It was the fact that there is no substantive evidence that it has had any effect on doing the job that it was supposed to do or set out to do—to encourage local authorities to work with business.

We have already heard from the new Prime Minister that the north-east of England can expect to suffer hardest from the cuts, so I want to know precisely why the North Tees and Hartlepool NHS Foundation Trust hospital, which is in my constituency, is not going ahead, particularly as we have seen tremendous progress in reducing health inequalities in my area, and that hospital was going to complete the job.

In the context of tighter budgets, it is essential that all major hospital buildings must be affordable and provide value for money. On that basis, the Government decided not to proceed with that scheme. It was assessed against a number of other major build projects that were at the same stage of development; those schemes are more urgent. The hon. Gentleman will be aware that the previous Government set out plans to halve capital spending over the next few years. We have to make judgments about capital spending in the context of budgets that are a great deal tighter. I appreciate that that is disappointing, and I do not wish in any way to belittle the point that the hon. Gentleman is making quite fairly on behalf of his constituents, but in judging these things we have to apply the value-for-money criteria as we have.

During the general election campaign, the Prime Minister said that any Minister who went to him to propose front-line cuts would be sent back to the drawing-board, so may I suggest that the Minister goes back to the drawing-board, because that is exactly what he is doing? The people of the north-east, in Teesside and south Durham, want the Hartlepool and North Tees hospital, which has been under development for five years and is clinically-led but has been cancelled. On 6 May, people might have voted for the Liberal Democrats because they thought they stood for something; today they know that they do not.

I understand the hon. Gentleman’s concerns on behalf of his constituents, but the anger should be directed at Labour Front Benchers, who irresponsibly agreed to spend money that, as the former Chief Secretary said in his letter, simply is not there.

I ask the right hon. Gentleman to look again at his decision on Sheffield Forgemasters. That £80 million, which is spread over some years, is in the form of a loan and has a huge multiplier effect for the nuclear industry, particularly in the north-west. Is he trying to make sure that if the expansion of the nuclear industry takes place, which I hope it does, the infrastructure for it will have to come from overseas? Will he look at this again, because he is doing what he has accused the banks of doing—not providing loans for investment?

I have looked very carefully at this and all the projects that we are cancelling or suspending. I believe that the decision that we have made is the right one on value-for-money and affordability grounds. I have discussed it with my right hon. Friend the Secretary of State for Business, Innovation and Skills. In the context of the pressures on budgets and the affordability and value-for-money criteria that we have applied, I am afraid I am not able to go back and reconsider. Officials from the Department for Business, Innovation and Skills will work with the company to try to ensure that it gets access to a private sector solution. As to the nuclear industry, the hon. Gentleman will know that the coalition agreement commits us to no public subsidy for nuclear power.

This afternoon, the Chief Secretary has taken a further £1 billion out of the Department for Work and Pensions and the fact that one of the cuts is to the young person’s guarantee demonstrates how empty is the Government’s rhetoric about being concerned about the vulnerable. Moreover, both the Tories and the Liberals voted with the Government for the legislation in March that provided for the two-year jobseeker’s guarantee. How can the Chief Secretary defend saying one thing in March and another thing today?

Well, there is no money left. The more important point is that we are cancelling programmes that we believe are ineffective and replacing them with the Work programme, which will start during next year and will be more effective at helping people who need help to get back into work quickly. That is an objective that we share; I believe our programme will be more effective in doing that. The hon. Lady will know that in the £6.2 billion announcement that we made a few weeks ago, one of the areas to which money was recycled was additional funding for 50,000 more apprenticeships. That is valuable additional support to help young people find jobs now.

Will the Chief Secretary remind us once again why we face such a difficult spending review? It is clearly something that the Labour party has failed to understand.

As I said earlier, the reason we face such a tough spending round is the overriding need to bring our deficit down further and faster than was planned by the previous Government. That is necessary to restore confidence in our economy and restore balance to our public finances. It is the overriding priority, and it will restore jobs and growth in this country faster than the last Government would have managed.

I wonder whether I can help the Chief Secretary by providing the answer that he failed to provide in response to an earlier question about value for money. Will he acknowledge that over the three years for which the Sheffield Forgemasters loan was under consideration, the Treasury conducted an extremely robust value-for-money exercise? This Government talk a great deal about consultation, but before the statement I spoke to the chairman of Sheffield Forgemasters, who confirmed that over the period of the Government’s review there has been no contact whatever with the company. Will the Chief Secretary confirm that fact?

What I can confirm to the hon. Gentleman is that we have applied value-for-money grounds to this as to all the other projects. With a restricted budget, however, we must make choices about where we can spend money, and unfortunately we simply cannot afford to provide funds for this project any longer. As I have said, officials from the Department for Business, Innovation and Skills will continue to work with the company in helping to find a private sector solution to the challenge.

Will the Chief Secretary remind the House of the size of the structural deficit, and perhaps remind Opposition Members that these are Labour cuts caused by the state in which the last Government left the country’s finances?

That is not a matter for my judgment; it is a matter for the judgment of the independent Office for Budget Responsibility, which we established to restore independence to the statistics on which budget judgments are based. According to the OBR, the structural deficit has risen to 8%, while the overall deficit is £155 billion. That is a vast sum. If we are to restore health to our economy we must narrow that gap, and do so quickly.

When the cuts that the Chief Secretary has announced today—which his boss will no doubt announce again on Tuesday—lead to lower growth, higher unemployment and the collapse of the construction industry, with consequential reductions in the Government’s revenue and increases in their benefit bills and, as a result, an increase in the deficit, what will he cut next?

I think that what the hon. Gentleman and, if I may say so, many Opposition Members fail to recognise is that the country faces a choice: a choice between taking the robust action which is needed and which we will take to bring responsibility to the public finances and reduce the deficit, and failing to take that action. The risk posed by the latter course is clear from what has happened in other countries. I believe that the action that we are taking today, and will no doubt take in future weeks and months, is necessary to ensure that in future we have the jobs and growth that we need.

Before his right hon. Friend the Member for Yeovil (Mr Laws) wrote the Chief Secretary his “Carry On Cutting Regardless” letter, he came to the House and told Members that he had been advised that the future jobs fund element of the young person’s guarantee did not provide value for money. The former Secretary of State for Work and Pensions, my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), said that that conflicted with what she had been told when in office. Will the Chief Secretary now publish both sets of advice and place them in the Library of the House so that Members can make up their own minds about who is telling the truth?

What I know is that according to the Department for Work and Pensions the programme provides poor value for money, and that the Work programme with which we will replace it next year will give better, more targeted, quicker and more effective support to the people who are most in need. It will do what I hope every Member wants, and help those people to return to work.

In the days when the Liberal Democrats were in a separate party from the Conservatives, did they not say in their campaign that they would not make cuts this year and pull the rug from under the feet of the economic recovery? Did the right hon. Member for Sheffield, Hallam (Mr Clegg) make any representations to the Chief Secretary about Sheffield Forgemasters, and when he stood for election did he make his constituents in Sheffield aware that a vote for the Liberal Democrats would lead to hundreds more people in Sheffield losing their jobs?

The hon. Gentleman has asked about four questions in one. I will answer the first. As he knows, the risks facing the country have changed over the past few months. Any survey of the evidence across the world suggests that the risks of sovereign debt crises are huge in other countries. That is reflected in the G20 communiqué, which agreed that faster fiscal consolidation was what was needed in major economies. I think that that is right. Only the Labour party is out of step with that international consensus.

Again and again, the Chief Secretary, his predecessor and the Secretary of State for Work and Pensions come to the House and assert that the future jobs fund is an ineffective scheme. How can the Chief Secretary say that when the Department for Work and Pensions has not collected the data concerned? The first cohort of young people to take part in the scheme have only just finished, and the data are not yet available.

According to my information, the programme represents poor value for money and is not delivering on the objectives set out for it, and our Work programme—which the Secretary of State for Work and Pensions will be announcing—will give people a more effective, quicker and more direct route back into work by paying providers by results, and ensuring that people receive the support that they need.

Has my right hon. Friend received one piece of slightly useful advice from Labour Members about how to sort out the mess that they created?

This morning, when I asked the Under-Secretary of State for Transport, the hon. Member for Lewes (Norman Baker), for clarification of the Government’s commitment to funding for the reinvigoration of the Tyne and Wear metro, I was told to wait for the statement from the Chief Secretary to the Treasury. Unfortunately, his statement has made it no clearer to the people of Tyne and Wear whether that vital transport infrastructure will be given the investment that it needs in order to survive—investment that has not been made for 30 years—or whether it will be left to die on its feet.

The Department for Transport will be in a position to provide clarity on the approvals that it has. I suggest that the hon. Lady redirect her inquiries to that Department.

On 11 March, the Deputy Prime Minister came to Newcastle and announced an investment of half a billion pounds in wind power in the north-east. Does the fact that that project is not included in the list of cuts in industry, jobs and front-line hospitals mean that it is going ahead, or was it never intended to proceed in the first place?

The last Government announced a project for a competition in the area. It is still undergoing a process with the European Union involving state aid, approval and so forth. I shall not be in a position to offer approval or otherwise until that process has been completed, but once it has been completed, we shall be able to make an announcement.