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Government Expenditure

Volume 712: debated on Wednesday 15 July 2009


Asked By

To ask Her Majesty’s Government what they anticipate are the future increases in Government expenditure in real terms.

My Lords, Budget 2009 set assumptions for spending growth from 2011-12 onwards which will enable continued improvements in front-line public services while also ensuring that public finances are sustainable in the medium term.

Public sector current expenditure will grow by an average of 0.7 per cent per year in real terms between 2011-12 and 2013-14, with additional efficiency savings allowing the Government to focus resources on key front-line public service priorities. Public sector net investment will move to 1.25 per cent of GDP by 2013-14, twice as high as in 1997-98.

My Lords, I thank my noble friend for that reply, which was very useful and dealt with a number of points of concern. In contrast to the post-war years, however, government expenditure in real terms is continuing as productivity declines. Is it not clear that we had one of the largest deficits of the 20 leading countries, with £3 billion per year being spent in Afghanistan, which comes from our contingency reserve, and a further £1 billion that could go on the swine flu epidemic? Will my noble friend comment on the expectation that the deficit could continue until 2017?

My Lords, my noble friend makes a number of interesting observations, but he misses the point that we entered this global recession with the second lowest public sector borrowing as a percentage of GDP of the G7 countries. Accordingly, we are in a position to do precisely what we are doing, which is supporting the economy and providing real help now to British businesses and families. However, we are committed, through a very clear statement by my right honourable friend the Chancellor of the Exchequer, to reduce public sector borrowing as a percentage of GDP, once we have passed the worst of the global recession.

My Lords, does the Minister accept that he is becoming the House’s Paul Collingwood figure, playing with a straight bat as one by one his ministerial colleagues quit the crease and retire hurt, desperately waiting for the Government’s own Monty Panesar in the unlikely form of Sir Alan Sugar? Does he accept that the figures produced at the time of the Budget have lost all credibility in this House and in the country? We are now looking for an urgent reassessment of the Government’s spending plans, and for some firm indication of how public expenditure will be brought under control.

My Lords, the noble Lord knows that we have strength in depth on our side of the House. We can all anticipate what our soon-to-be-ennobled Sir Alan Sugar will say to him, in terms of his key phrase. The Chancellor of the Exchequer made it very clear in Treasury Questions yesterday that he stood by the economic forecasts that he made during the Budget, in terms of what he anticipates will happen in the economy and its impact on public expenditure.

My Lords, can the Minister explain why the Government keep saying that they will increase public expenditure by 0.3 per cent when the Budget shows very clearly that, after taking inflation into account, there is no real growth in total spending? There is, in fact, a reduction of 0.3 per cent which, if we take into account debt interest and other expenditure, such as benefits, is equivalent to a 7 per cent cut—seven whole percentage points—in departmental spending.

My Lords, the noble Baroness really must do her homework before she asks questions. I did not say that public expenditure would increase by 0.3 per cent; I said 0.7 per cent. That is an increase in real terms and will maintain public sector capital expenditure at a higher level than achieved in any of the 18 years when the party opposite was last in power; a party opposite that is ashamed of its past in economic management, has no plans for the present and no ambition for the future.

My Lords, can I confirm that I, too, heard 0.7 per cent, not 0.3 per cent? As it is the party opposite that asked the Question about the rise in unemployment, would my noble friend not agree that you do not need to be a totally signed-up Keynesian economist to know that at present, but for the substantial commitment to a rising level of public expenditure, there would have been a lot more unemployed and even more crocodile tears from the main opposition party?

My Lords, I completely agree, again, with the observations from my noble friend. Those opposite who subscribe to voodoo economics, which will cut back public expenditure precisely at the time when the public sector should be supporting the economy, are showing significant shortcomings in their knowledge of economics and sound management of the government economy and the broader economy.

My Lords, I fear the Minister telling me to go and do my homework, but can he explain how he can say that government expenditure is going to go up while the noble Lord, Lord Mandelson, says that it is going to go down?

My Lords, I stand by my statement. I do not think my noble friend Lord Mandelson said that public expenditure will go down. What he said was entirely consistent with the Government’s position, which is that there will be a need to rebalance the economy once we come out of the recession, precisely to react to the bringing forward of capital expenditure, which has been such a significant feature of the Government’s action as we take assertive and successful steps to address the impact of the global economy on our domestic economy.