Budget 2010 - Treasury Contents

Examination of Witnesses (Question Numbers 200-219)


30 MARCH 2010

  Q200  Mr Fallon: I just want to be absolutely clear, you are ruling out any change that would not index automatically any of the benefits this September?

  Mr Darling: What I said to you was that I have made no proposals of the sort that you describe, cutting back or disadvantaging people like that at all. The judgments I reach in relation to pensions and all the rest of it will continue to be governed by fairness, and I point to what I have done in the past and that is where people would have been worse off had we followed rigorously the normal indexation rules I made sure that did not happen. I have no intention whatsoever of disadvantaging people who on any view are on a modest income. Indeed, everything I have done so far, especially when it comes to raising money, has been at the top end of the income scale, not at the other end.

  Q201  Mr Fallon: But would it not be less evasive just to say now that all benefits and pensions and credits will be automatically indexed?

  Mr Darling: That is what happens and that has happened throughout the time that we have been in government.

  Q202  Mr Fallon: What about the departmental spending totals? Why can you not come clean on those?

  Mr Darling: Because we have not had a spending review yet. I repeat the point that I have made on many occasions at this Committee and elsewhere, that had I done a spending review in the course of last year, as many were urging me to do, the assumptions that I would have to have made on unemployment, on debt interest and so on would have been very different from the assumptions that I have made this year. Given that spending runs until April 2011 (at least that is our intention), you would have to do a spending review before this autumn, but things are getting more settled now than they were 12 months ago and when you do that spending review you decide on your overall spending envelope so you then know what your DEL limit is and that is driven to a large extent by your judgment as to what your AME spending is likely to be. That position has not changed at all.

  Q203  Mr Fallon: But your officials confirmed to us yesterday that there would be savings or cuts of as much as £15 billion to £20 billion in the NHS budget annually. Would it not be more honest to come clean on those cuts before the election?

  Mr Darling: No. What you are talking about are the efficiency targets that we have set every department, Health included.

  Q204  Mr Fallon: Those are budget cuts, are they not?

  Mr Darling: I certainly do not think efficiencies are budget cuts if you are doing something more efficiently. Indeed, as I understand it, there is now something of a cross-party agreement on the fact that efficiencies are necessary and they can be carried out in frontline services without damaging the services they are providing. Take the NHS. We are committed to protecting about 95% of its spending in real terms. Nobody is arguing that each hospital or doctor's practice or any aspect of the NHS cannot be more efficient; of course it can be more efficient. There may be some things that you decide not to do. For example, I think it was last autumn we decided that we were not going to proceed with one aspect of an IT system in the Health Service. You may have to take decisions like that. What matters is that you can protect the outcomes, for example the pledge that people will be referred to see a specialist within two weeks if they are suspected of having cancer, or some of the waiting time targets and so on, so yes, you can be more efficient. Efficiency is rather like painting the Forth Rail Bridge. It is something where, when you have finished the process, you start it again. You can always be more efficient. I do not think my officials at any stage suggested that we were going to "cut" health spending in the way that you describe.

  Q205  Mr Fallon: They said though that you were going to remove £20 billion from the Budget.

  Mr Darling: No, I do not think they said that either. As I say, I was not here, and because the transcript did not arrive until I was otherwise engaged I have not read exactly what they said, and they will correct me or you will correct me if I am wrong about this. In relation to the NHS, for the protected parts of it these savings will be available to be recycled to spend in the Health Service. Is that what you said?

  Mr Ramsden: That was the point I was making yesterday, Chair, that the Budget documents refer to the NHS delivering annual efficiency savings of £15 billion to £20 billion by 2013-14, and I explained that those savings which arise at the frontline will be recycled into patient care to enable the NHS to continue to meet pressures and improve services consistent with the level of funding that the Government committed to.

  Mr Darling: Mr Fallon, you will find this set out—you maybe have it in front of you—in paragraph 6.14 of the Red Book. This is where I assume you got the figure of £15 billion to £20 billion efficiency savings from. It then goes through in headline terms some of the things that will help contribute to that. As I said to you, that money will be available in the protected parts of the budget to be recycled so that what you save in being more efficient you can spend on better treatments, better outcomes.

  Q206  Mr Fallon: So it is not a budget reduction?

  Mr Darling: No. It is being more efficient with what you have got.

  Q207  Mr Fallon: It is either a reduction in the budget or it is not.

  Mr Darling: By being more efficient you can spend that money in the Health Service. The NHS budget will go up in line with inflation over the next Parliament. That is the undertaking that we have given.

  Q208  Mr Tyrie: Could I follow up a little on this, Chancellor? Can you think of any precedent for a government going into an election? A moment ago you were saying you agreed that your cuts were going to have to be heavier than those of the Thatcher administration. Can you think of any precedent for a Government not setting out its full plans?

  Mr Darling: It is only relatively recently in the great scheme of things that governments have set out three-year rolling programmes of spending. The previous governments used to do this on an annual basis.

  Q209  Mr Tyrie: Can I clarify that, Chancellor? Forward three-year plans for public expenditure were made throughout the Conservative years.

  Mr Darling: There was an indicative total but what was new was we gave each department and other public sector bodies how much they had in each Budget for a three-year period. That three-year period runs out in April next year. What I was going to say to you was that what is pretty unprecedented, certainly in recent times, is the depth of the downturn, and that is why it would not have made any sense when you had all that turbulence, all that uncertainty, to do a spending review in the last year. Even if we had not had a recession, in the normal course of events spending reviews tend to be done in the year before they come to an end, for obvious reasons.

  Q210  Mr Tyrie: You are the Government though, Chancellor. Do you not think it is reasonable for the electorate to expect you to have made a bit more effort to work out where this considerable pain is going to fall?

  Mr Darling: At the risk of repeating myself, I think it would not have been sensible to do a spending review in the last 12 months. We did at the PBR say there were some areas that we wanted to protect, the Health Service and schools and so on, but I have always been clear that we needed to do a spending review before the current period runs out, and, as I say, people are pretty clear generally that we are going to have to make some quite difficult decisions. In times of uncertainty it does not make any sense, especially halfway through the spending review period, to make these plans. I seem to remember in 1992, whatever was set out by the then government before the election turned out to be rather different immediately after it.

  Q211  Mr Tyrie: So you feel a better idea therefore is not to say anything at all?

  Mr Darling: A better idea is to be straightforward with people, explain why you have taken your decisions and why you believe your judgment is right, whether it is on supporting the economy, reducing the deficit or public spending. That is what people expect.

  Q212  Mr Tyrie: These savings in the Health Service are £15 billion to £20 billion annually. Do you really think that is something the electorate will find plausible?

  Mr Darling: Yes. The NHS has a budget of about £100 billion and I do not think it is unreasonable to put very demanding targets on it. Indeed, there is fairly robust agreement both within the NHS and, as I understand it (as of yesterday at least), between the major political parties that these are deliverable.

  Q213  Mr Tyrie: Just to be clear, when that question about the cuts from the Thatcher administration came last night there were two unequivocal answers, one from George Osborne and one from Vince Cable. We are clear, are we not, Chancellor, that if you were to be re-elected and put back in the Treasury you would be cutting public expenditure faster and deeper than Mrs Thatcher?

  Mr Darling: What I said when I was asked the question, and let me see what I said when asked it by Mr Robinson of the BBC last week, was that the spending review would be the toughest for decades.

  Q214  Mr Tyrie: Is that a "yes"?

  Mr Darling: It is what I said.

  Q215  Mr Tyrie: I think everyone is asking you to go a little bit further than what you said and answer the question that was asked of you last night.

  Mr Darling: I appreciate, for understandable reasons on my part, your obsession with Lady Thatcher, but I choose my words carefully and I said, "This is going to be tough, it is going to be difficult, but I think we can do it in a way that you say you can protect frontline services and you can do it in a way that does not damage the fabric of our economy".

  Q216  Mr Tyrie: So when the interviewer said last night, "So the answer from all three of you is yes", as his summary of your three replies, he was mistaken?

  Mr Darling: No, you are, rather pointlessly, I think, dancing on the head of a pin here. Surely what is of concern to people—

  Q217  Mr Tyrie: I am not quite sure who is doing the dancing. It sounds to me like you are doing the dancing, Chancellor. Why do you not just say yes like the other two participants in the debate did?

  Mr Darling: What I said last week, last night, today, and I will say it next week as well, was that the spending review will be tough; it will be the toughest for decades", and that is what I said in the Budget speech.

  Q218  Ms Keeble: I want to ask about the fiscal consolidation as well. If the spending review is going to be after the election in the autumn then presumably the papers would have to be published quite soon after the election. There must have been some thinking going on about what the scale of spending reductions would look like.

  Mr Darling: It is set out that in cash terms between now and the end of the forecast period we would be reducing spending by £78 billion. We have also set out what we have proposed on tax, which is about £19 billion, and then there is the balance coming from reductions in expenditure. The thing that has not yet been decided and which will determine the answer to the question, "How much are you going to cut?", is how much we as a Government think we can spend over the next three-year spending period. We have not done that, for all the reasons I have set out.

  Q219  Ms Keeble: What I wanted to ask about was, given that you must have some figures, and indeed I asked your officials yesterday about this, what then happens if you have to take out an extra £6 billion because somebody decides not to do the National Insurance contribution increase, which is one of the key platforms, is it not, of your plan?

  Mr Darling: Yes. The answer is that if you make a commitment to forgo income from a tax and you do not compensate for that because of the £6 billion of efficiencies that you think you might get but you have not got in the bank, it means that if you do not get them in you either have to cut something else to the tune of £6 billion (it is actually £6.6 billion by the end of the period) or you have to put up another tax. It is a simple mathematical calculation.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2010
Prepared 16 April 2010