Examination of witnesses (Questions 280
TUESDAY 20 MARCH 2001
O'DONNELL and MR
280. Thank you for those figures; they were
not the figures I was actually asking for.
(Mr Brown) What figures would you like? If you want
the share of national income then the expenditure was 5.7 per
cent. in 1996-97; and next year it will be 6.4 per cent. rising
to 6.7 per cent. In both cases, to be absolutely clear, there
are substantial increases taking place in spending on health.
I was able to put additional expenditure into the National Health
Service in the Budget so the spending figures for health in 2001-02
will now be £59.1 billionand that compares with £40.8
billion the year we came into power; and in the year after that
2003-04 it will rise to £69 billion.
281. Chancellor, thank you for that. The figures
I asked you for were the average spend in the last Parliament
as a proportion of national income. The figure I have from the
House of Commons Library is 5.5 per cent. If you ask the House
of Commons Library for the average spend by this Government in
this Parliament as a proportion of national income it is less
than that, it is 5.4 per cent. The Health Service over this Parliament,
compared to last Parliament, has had on average a smaller share
of the national income. Could you confirm that?
(Mr Brown) No, I do not accept that. I have just given
you the figures showing that the growth rate of health in the
last Parliament was 2.6 per cent; the growth rate in this Parliament,
even taking into account our first two years when we had to deal
with problems of the deficit, is 4.9 per cent. As a result of
the Spending Review, it will be rising by 5.6 per cent. As a share
of national income, I think you would agree with me, when you
have figures that show that the share of health in national income
is rising from 6.2 per cent. to 6.4 per cent. to 6.7 per cent.,
it is now quite wrong for you to deny that there is an increase
in spending taking place both in cash terms, in real terms, as
a share of national income and as a growth rate as compared with
the previous Parliament.
282. Chancellor, you accuse me of doing something
I was not trying to do. What I was trying to ask you for was a
figure of the average in the last Parliament and the average for
this Parliament. The figures I gave are from the House of Commons
Library and they show that, on average, we are spending less than
we did in the last Parliament. Can I give you the figures, Chancellor.
For education in the last Parliament
(Mr Brown) You do not want to continue to talk about
283. My question is about education, Chancellor.
(Mr Brown) Can I just put into the record the figures
on health. In 1996-97and this is the most generous to the
previous Government, the last year5.7 per cent. In 2000-01
the figure is 6.2 per cent. of national income. 2001-02 6.4 per
cent. of national income. 2003-04 6.7 per cent. of national income.
I hope that the questioner will accept that is a rising trend
of national income.
284. Now we can go on to education. The average
spent in each year as a proportion of national income on education
in the last Parliament was 5 per cent; in this Parliament to the
end of this financial year it is 4.6 per cent. How can you explain
that on average in this Parliament we are spending a smaller share
of national income on education?
(Mr Brown) The figures I have for expenditure are
5 per cent. in 2001-02, and 5.4 per cent. in 2003-04. The reason
that that is the case is because education expenditure (and I
do hope you will look at the actual figures) is rising from the
£36 billion we inherited to £46 billion in 2000-01,
that is this year, and then rising again to £49.8
billion in 2001-02; and rising to £58.1 billion in 2003-04.
The growth rate for educational expenditure is 5.4 per cent. as
a result of the Spending Review, compared with 1.6 per cent. in
the last Parliament and 1.5 per cent. in the Conservative years.
You can produce as many figures as you like, Mr Davey, but you
cannot deny the fact that educational expenditure is rising by
something in the order of £4-5 billion a year, and it is
going to do that consistently for the next four years; and that
is far higher than could ever have been achieved simply by a one
penny change in Income Tax, but is twice as much as could be achieved
285. Chancellor, the only reason I was drawing
attention to the figures as a share of national income was because
in your manifesto you said you would increase them and in the
first three years of this Parliament it actually fell.
(Mr Brown) The figures I have got, Mr Davey, are 4.7
per cent., which we inherited, then rising to 4.9, then 5 to 5.4.
286. I would like to know which years you are
(Mr Brown) These are figures rising to 2003-04, 2001-02,
2000-01, but starting in 1996-97.
287. Chancellor, you have read out your series,
can I just read out my series. I agree with you that in 1996-97
it was 4.7 per cent. of national income; it then went down to
4.6; it then went down to 4.5; and in 1999-2000 it was 4.5. In
this year, and in the years that you have predicted for the future,
is it increasing?
(Mr Brown) Can I read out the figures for the future
288. No, you have already done that.
(Mr Brown) You accept my figures.
289. What you have done is cut expenditure in
the first three years and then you are having a boom at the end.
Schools and colleges are being deprived of money for the first
three years of your stewardship, and now you are giving them money.
I am afraid that the standards have fallen for the first three
years and you have deprived the schools.
(Mr Brown) It seems to me that this member of the
Committee is working on the assumption that it would have been
right to do nothing about the deficit we inherited, and right
to do nothing about the overall level of debt we inherited. I
do not apologise to the Committee for taking the action that was
necessary to deal with both deficit and debt. The result of that
is that we have a solid foundation on which to build; and the
solid foundation is shown by the figures that he did not read
out, which is that educational expenditure will rise to 5 per
cent. and then to 5.4 per cent. of national income. The actual
figures for expenditure are 2001 £46 billion; rising to 2001-02
£49.8 billion; rising to 2003-04 £58.1 billion. That
is a very substantial rise in educational expenditure over the
next few years built on a solid platform from which we can actually
have sustainable rises in educational expenditure. I would like
the Committee to note that, as far as my view is concerned, it
would not have been possible to have these substantial rises in
educational expenditure if we had not dealt with the problems
of the deficit and debt in our first two years.
290. Chancellor, at the time of the pre-Budget
Report 2000 you estimated total managed expenditure to come out
at £371.6 billion. You told us in the Budget that would in
fact be £368.3, an undershoot of about £3.3 billion.
What money was not spent, and what were the principal reasons
for the undershoot on that?
(Mr Brown) The numbers result obviously, first of
all, from the substantial cut in debt interest payments, and that
has made it possible for us to reallocate resources to health
and education; but it also comes from the substantial cut in the
amount of money we are spending on unemployment benefits. There
have been two big changes that have diminished the pressure on
one section of our budget. They are actually set out on page 27,
Table 2.3 of the Budget Report. They show that over the period
we have saved about a billion pounds on social security benefits,
indeed, £2 billion in 2001-02; and on debt we have saved
something over £4 billion. These are big changes as a result
of a reduction in the share of debt in national income.
291. There were no significant instances of
spending departments failing to deliver on their programmes?
(Mr Brown) We had an issue that I raised right at
the beginning of my opening remarks, where we are determined to
push up the levels of public investment in those services that
have been under-invested in over a long period of time. That is
why we have Departmental Investment Strategies. We have to do
more, and we have to do better, and our aim is to raise the share
of national income taken by public investment to 1.8 per cent.
We are making progress, but there is still more to do.
292. That is on the capital side rather than
on the revenue side.
(Mr Brown) On the revenue side, if this were under
the old system and there was now end year flexibility, one might
be disappointed if there was money left at the end of the year;
but this is money that can be carried over by the departments.
We are avoiding a end year rush to spend money perhaps not on
the best projects, so the money is carried over. The important
thing, as I said to Mr Davey, is that expenditure on health, education,
policing and transport, all the key public services which people
rely on, is rising very substantially this year, next year and
the year after. Indeed, I might have made the point to Mr Davey
that expenditure in real terms on education in the last year has
risen by more than 10 per cent.
293. Is it fair to say that the money the Treasury
is saving as a result of lower unemployment and lower debt interest
payments is money released and made available for spending on
health and education? Are you simply transferring savings from
that area to those services?
(Mr Brown) I have made the point in the Budget itself
that, whereas in the years 1979-1997, of every additional pound
spent 42p (and indeed in the early 1990s it was 50 per cent. of
every additional pound) went to debt, unemployment or social security;
it is now only 17 per cent; therefore that leaves 80 per cent.
free for health and education. Can I just emphasise one comparison:
the average for the years 1979-97 was that more money was spent
on debt and unemployment than on the National Health Service.
We are now able next year to spend £30 billion more on the
National Health Service than the combined requirements for debt
and unemployment. We are now spending twice as much on the Health
Service as we are on the bills for debt and unemployment. It is
that change in the composition of overall spending that is making
it possible to answer the points that have been made to put more
money into health and education.
294. Is the Treasury adding more to the spending
on health and education, for example, than the amount simply released
by the saving on lower debt interest payments and unemployment?
(Mr Brown) Overall, yes.
295. Is it a transfer from one saving account
to another spending account?
(Mr Brown) Overall, yes, because as you know we plan
public spending to rise by 3.7 per cent. a year over the next
three years. The substantial additions in Health Service spending
of around £5 billion a year, and then the extra money on
top of that, that was put in in the Budget, and the extra money
on education I have just read out the figures for, are in excess
of some of the savings we made on unemployment and debt. There
is a reallocation of money, but of course there is more money
going to public spending as a whole.
296. As you say, average annual public spending
is set to rise 3.7 per cent. a year for a number of years through
the next part of the Comprehensive Spending programmethat
is considerably higher than the trend rate of growth in the economy.
Are you comfortable with that difference?
(Mr Brown) I think it is the right thing to do. As
you know, current spending is rising but public investment is
rising even faster. I think that is the necessary means by which
we correct the long-term under-investment in Britain's infrastructure,
in our hospitals, in our schools, in transport generally and even
in policing and in other areas. I believe it can be both justified
in macroeconomic terms, because we meet all the fiscal rules that
are required of us; but also it is an essential element of rebuilding
the fabric of British society.
297. Chancellor, you will recall a couple of
years ago that this Committee reprimanded you for triple counting.
Just to confirm we have got you off this habitthe education
spending of a billion is over three years, that is right, is it
(Mr Brown) The educational expenditure is over three
years as I have made absolutely clear in the Budget Statement.
298. It is also right, is it not, that the Secretary
of State has written probably to you as well as me. He wrote to
me on 14 March, "Dear Michael, As a result of the Budget
there will be £100 million more per year for direct grants
to schools, and £100 million more for capital funding".
That is right, is it not?
(Mr Brown) There is actually around £300 million
more a year for eduction. Some of the money is going to direct
payments to the schools, and this is to increase the direct payment
that was announced in the last Spending Review. So some schools
will get about £110,000. Additional money will go to the
recruitment of teachers. You will have seen the measures announced
by the Secretary of State for education.
299. The capital funding that the Secretary
of State says will boost schools' capital, for example, for new
classroomshow does £2,000 get you a new classroom?
(Mr Brown) The capital funding allows some of the
renovation work to be done. Equally, he has announced a new programme
of PFI credits, a new programme of increasing the amount of repair
work and renovation done in schools. I think it is now the case
that nearly 20,000 schools have been repaired and renovated under
the New Deal Programme, which is in addition to what you are talking