As-it-happened: Spending review 2013 and PMQs
George Osborne is extending austerity Britain's spending cuts for another year later, as he unveils the coalition's spending review for 2015/16 after prime minister's questions. Follow it all with our live blog.
13:30 – Ed Balls v George Osborne
13:42 – I'm going to step away from the Commons chamber now. Time to start delving into the detail now. Come back in an hour or so to see all of our marvellous content: comment, analysis, news, and more. Thanks for following our coverage today.
13:40 – "We've set out our plans. Those who disagree with them advance an alternative or retreat from thebattlefield," Osborne continues. He is ramming home the advantage here. Balls performed well, as usual, but his reply was missing any substantial alternatives.
13:38 – "No hope for the future," Balls concludes. And the chancellor stands up to respond. "After that performance one thing's for certain: he's the worst chancellor in a generation," Osborne declares. He mocks Balls for not being prepared to admit he can't borrow any more. The temporary VAT cut, the five-point plan, have been abandoned, Osborne says – but then the Speaker rebukes the chancellor for asking questions of the opposition. He's not happy and says it needs to stop now. "Others, including those at the very highest level, need to take note of that for future weeks." He's talking about the prime minister, of course. Cameron has a bemused grin on his face.
13:33 – Balls has been pressing on with aplomb, with the opposition frontbench listening rapt. Ed Miliband looks particularly amused. The Balls style is very sweeping – he's all over Whitehall, jumping from health to schools to police and crime commissioners. It takes a good ten minutes for him to calm down and observe: "There is a lot of detail he didn't provide for the House."
13:28 – Ed Balls hits back at the 'Ernie and Bert' jibe from Cameron earlier. "His friends call him George, the president calls him Jeffrey, but to everyone else he's just Bungle, Mr Speaker!" Osborne and Cameron look at each other, grinning. "Even Zippy on the front bench can't stop smiling, Mr Speaker! Calm down, Zippy, calm down!"
12:30 – 13:30 – George Osborne unveils the 2015/16 spending review
13:26 – A fairly quick conclusion from Osborne there – I had barely realised he was wrapping up. And as quick as a flash, Ed Balls is up. Because it's not the Budget it's the shadow chancellor who replies, of course. "This chancellor has been forced to come to the House today to make more cuts to our public services," Balls fumes, looking a little redder in the face than usual. He quotes Osborne telling the British public "we do not need to ask for more".
13:24 – Moving on to welfare now. Is it me, or is the chancellor going faster than usual? Iain Duncan Smith is looking very severe as he concentrates hard from the bar of the House. After an exposition of the government's welfare reforms (Clegg fiddles with his tie) Osborne suggests three new welfare reforms.
- A new welfare cap, controlling the overall cost of the benefit bill, is being introduced. It's "a limit on the nation's credit card". It's being shifted from AME to DEL, presumably – this is a major, huge development. It starts from April 2015. So when the cap is being breached, the OBR will issue a public warning and the government has to take action to cut welfare costs or publicly breach the cap and explain it to parliament. Hmmm. Sounds very… breachable. The basic state pension is not being included in this cap, however.
- Winter fuel payments will be stopped for expats living abroad. This involves defying European law. It's "not a fair use of the nation's cash", Osborne declares. So a "temperature test" will apply. "People in hot countries will no longer get it." That prompts something close to uproar in the Commons chamber.
- On jobseekers' allowance, something called up-front work search is being introduced. This will make claimants actively look for work before they get their benefits. It will be much harder to pretend you're doing it, basically. Claimants will have to show up every week, not every fortnight. Those claimants not speaking English "will have to attend language courses until they do". A big cheer for that from Tory backbenchers.
13:15 – Next, Osborne says the "compassionate society" needs to do better at looking after old people. Funding for care helps savings in the NHS, so Osborne says a "significant chunk" of the health and social care budget is being united. "Let's stop the tragedy of people being dropped in A&E on a Friday night… because we can't look after them properly in social care," he says. This will see £3 billion of spending – "a huge and historic commitment of resources on social care," Osborne says.
13:13 – This is the ring-fenced section of the statement, now, as we move on to international development. "We comply with internationally policed rules," he says. And then on to the NHS. This is "much more than the government's priority – it is the people's priority," he declares. Not that they won't have to make "tough choices" – they still have to make efficiency savings, but there will be new investment in mental health and new funding for treatments to cancers.
13:12 – Time for 'fairness' now – and the top fifth of the population are losing the most after this spending round, Osborne declares. "The rich will pay a greater proportion of income tax revenues than in any one of the 13 years under the last Labour government," he declares. An important point countering Labour's complaints about the 'millionaires' tax cut'.
13:11 – We will not make our children pay for the mistakes of the past," Osborne says – a very lengthy section on education there.
13:08 – Time for education. Another compliment to Michael Gove – and Balls causes trouble again because Gove is only called "brilliant" – and then it's confirmed schools spending will be protected in real terms throughout this parliament. School funding across the country is being shifted, too. A national funding formula is being introduced – it's something Robin Walker, the MP for Worcester, has been pushing on. Meanwhile the pupil premium is being protected, too. An opportunity for Nick Clegg to nod furiously, but he contents himself with scratching his neck and fiddling with his collar.
13:06 – Vince Cable settled on a six per cent cut – less than most, it's now emerging. Looks like it worked out well for him. There will be a nine per cent increase in capital investment, too, including lots more in science. Again, the pledge is to maintain the increase in capital spending on science "until the end of this decade".
13:04 – Time for energy stuff. Osborne says tax and planning changes are being made to help shale gas. "We will provide our country with the energy of the future at a price they can afford." He wants to see £100 billion of investment in energy as a result But Defra gets a ten per cent cut and Decc an eight per cent cut. Flood defences will get investment, however.
13:02 – Now on to capital spending, after a lengthy partisan point which wasn't very effective. On infrastructure, the Department of Transport gets a nine per cent cut in its daily saving, with rail administration and Transport for London paying the price. But it gets a five per cent rise for capital spending, and that will be repeated every year until 2020. It's the largest road investment programme "for half a century". This will feature Crossrail 2 – crikey.
13:00 – Justice is getting a ten per cent cut – a trend developing here.
12:59 – Ouch – a six per cent saving in the policing budget in 2015/16. That is tough. As expected, the police counter-terrorism budget isn't being cut.
12:58 – Osborne is rattling through these cuts. Time for the Home Office, with Cameron smiling behind. He probably shouldn't be grinning. "Yes, she is the best home secretary in a generation!" Osborne responds after a lot of ribbing from Ed Balls. Balls is loving it. May looks miffed.
12:56 – On defence, Osborne acknowlegdes the tenacious negotiations of the defence secretary. Osborne sparks outrage by promising he won't cut the number of service personnel. The frontline won't be hit in terms of equipment either, while there will be more money spent on cyberspace. The defence budget is being maintained in cash terms at £24 billion. The military covenant is being made 'permanent'. And the intelligence services will be protected with a 3.4% increase in their combined budget. William Hague, "the best foreign secretary we've had in a generation", gets a pile of praise. And an eight per cent cut.
12:53 – DCMS is cut by seven per cent, not five per cent as previously expected – but the arts budget escapes with the five per cent cut. They'll get more freedom from state control, though. "While we're at it," he adds, the government will ensure the site of the Battle of Waterloo is revamped in time for the bicentenary in 2015. Osborne wants to mark a "great victory of coalition forces over a discredited former regime that impoverished millions". Amazing.
12:51 – Local government has to make "sacrifices", though – a ten per cent cut in 2015/16. Oof. Overall it's about two per cent though, he adds. Pickles looks triumphant. That figure is bound to be the subject of a big fight later.
12:49 – After an extension on the water bills rebate, Osborne announces a "greater integration of local emergency services". There will be major reforms to the way money is spent locally with Heseltine's £2 billion local growth fund.
12:49 – The council tax freeze is extended further – meaning it becomes a big deal for the 2015 general election campaign.
12:47 – Eric Pickles is praised by George Osborne as "the model of lean government". This is HILARIOUS, if rather harsh, from the chancellor.
12:45 – Every job lost in the public sector has been offset by three in the private sector, Osborne says. That gets a big cheer from the government backbenches. This has "completely demolished" the opposition's arguments on the issue.
12:44 – 'Automatic progression pay', in which public sector employees move up pay grades every year, have been singled out. It's "antiquated", Osborne says – and it's being scrapped altogether by 2015/16. Schools, NHS, prisons and police will all lose out on automatic pay rises for "time served" – but the armed forces are keeping this perk.
12:43 – There have already been general cost-cutting savings of £5 billion; and there's the same amount achieved in t his latest round, Osborne announces.
12:42 – Osborne pays "personal tribute" to Danny Alexander, the Lib Dem chief secretary to the Treasury. Just making sure everyone realises this is a coalition, there.
12:40 – The biggest saving, Osborne says, is the £6 billion less being paid "to service our debts", Osborne says. "If we abandoned our deficit plan, Britain would be back in intensive care." Total managed expenditure (TME) is going down at the same rate in 2015/16, he says. Time to get down to the nitty-gritty… £745 billion will be up to total managed expenditure – instead of the £865 billion it would have been (he has to add that because, of course, TME is going up).
12:39 – I notice Theresa May has hot-footed it out of the Commons chamber – to be replaced by one of the government's more zealous spending-cutters, Eric Pickles.
12:38 – A lot of despatch-box-thumping from Osborne at the outset. And a fair amount of ideology here, who gets in an early jibe against Labour by declaring "the opposition has collapsed into incoherence".
12:36 – "From the brink of bankruptcy," Osborne declares at the outset. There's a sense we've heard it all before. And we have – in the Budget, in weekend interviews, etc. The political rhetoric is all very familar. Osborne declares his three principles: Reform, growth and fairness.
12:28 – OK, chaps and chapettes, it's about to happen. Time to see what the chancellor has up his sleeve.
11:45 – 12:30 – Prime minister's questions
12:35 – "They have absolutely no credibility whatsoever," Cameron finishes on Labour's spending plans. And that's that.
12:33 – Speaker John Bercow is keeping us all waiting, with PMQs running over-time. George Osborne is taking a surreptitious sip of water as Tory John Baron gets in another question – this week, on the cancer drugs fund's replacement. "I am looking at this as a matter of urgency," Cameron says.
12:29 – A very awkward question near the end from Labour no-nonsense non-pugilist Stephen Pound, about the cash for dinners scandal. Cameron dodges the question. What, you're surprised?
12:27 – Tall Tory Daniel Kawczynski gives Virgin Rail a helping hand as he calls for a direct train service to London for his Shrewsbury town. Cameron says: "We have to recognise there is a lot of congestion on our existing main lines and High Speed rail will help free up services so we can have important connections to towns like Shrewsbury." Quite a decent point, there, which will send a message to the Tory nimbyists.
12:24 – Here's an important statement from Sesame Street, delivered in 2011, on a key political issue:
Bert and Ernie are best friends. They were created to teach preschoolers that people can be good friends with those who are very different from themselves. Even though they are identified as male characters and possess many human traits and characteristics (as most Sesame Street Muppets™ do), they remain puppets, and do not have a sexual orientation.
12:22 – Charlotte Leslie, the Tory backbencher who has made a name for herself as a champion of NHS accountability reform, presses the PM after the CQC cover-up. Cameron doesn't hold back in attacking Labour here, too, saying there was a "culture that went wrong" of covering things up. He quotes Baroness Young saying there was "huge pressure" from ministers. Andy Burnham looks deeply distressed. "There was a culture problem under Labour, and as soon as they admit it the better."
12:21 – After a question about armed forces day (it's this Saturday, isn't it?) we get a question from William Bain, a Scottish MP who should only be referred to as 'Willie'. He asks a very good simple question about the PM's broken promise on fixing borrowing by 2015. The PM's response, as always, is to attack Labour. No wonder politicians have a bad name.
12:18 – Behind Cameron Nick Clegg is pestering George Osborne. Some last-minute tinkering perhaps? This is unusual from the deputy prime minister, who is making distinctly suspicious facial expressions at the chancellor. Clearly, not everything is completely resolved right now.
12:15 – The Cabinet frontbench line-up is quite an interesting one. To Cameron's left we have Osborne and Danny Alexander (of course) and then Theresa May and Philip Hammond (National Union of Ministers ringleaders) and Maria Miller (culture sec who thinks 5% cuts is a good deal).
12:13 – I have no idea what's going on in the Commons right now. Labour MPs have broken into song. Backbencher David Winnick is being cheered because it's his birthday. The world is losing its mind.
12:12 – Oh my – here's another joke from the prime minister. "No wonder it's not just people at Wimbledon saying 'new balls please'." That is, by Commons standards, HILARIOUS
12:10 – I have lost interest in the main exchanges now and instead have this to quote from Wikipedia: "Bert is a hand-rod puppet, which means that while the puppeteer's right arm is inserted into Bert's head to control the mouth, the puppeteer's left hand uses rods to control the arms of the puppet."
12:09 – All sorts of chaos now, as Miliband leaps and bounds between government departments like a mountain goat hopping from crag to crag. On housing, Cameron makes a generalised defence. Osborne is jibber-jabbering away next to Cameron. And then comes the first new line from this session:
"Half the country thinks he's Bert from the Muppets, because they think he belongs in Sesame Street, not Downing Street!"
12:07 – And so it continues. Miliband takes Cameron's bait and defends Labour's record on infrastructure. They sure did spend lots! "More promises, no delivery," Miliband concludes. Next comes the new buy guarantee scheme. Cameron says it's been welcomed by the entire industry… but the prime minister is just starting to struggle a bit now. "We all know the one question he has to answer is he now has to put borrowing up – will he admit it?" This prompts a bit of contempt from Miliband. This is all a bit scattergun.
12:06 – Miliband can't cope with anything deviating off the script, so he just keeps ploughing on with a broader question about infrastructure. This prompts Cameron to respond with a statistics firewall, and the opposition is losing its impetus. "You cannot build a nuclear power station overnight!" Cameron declares, choosing to switch to energy.
12:05 – Only one of the promised 261 schools have started construction, Miliband says. Cameron blames Labour's Building Schools for the Future programme in response – rather desperate. He pre-empts the spending review by saying there are going to be an extra 500,000 school places funded. Significant!
12:04 – Here's Ed Miliband then, greeted with a big cheer. He's kicking off with the government's priority schools building programme. An interesting decision – linked to the spending review, but not directly addressing it.
12:03 – We begin with the gentlest of openers, a very soft question on interest rates from Tory backbencher Gordon Henderson. Cameron uses words I've heard before in reply.
12:02 – I have just realised with horror I need to go to the toilet. But it's too late. I am locked into the office for the next… 90 minutes, at least. Help!
12:00 – Crikey – it's midday already. The prime minister is in his seat and George Osborne has just sat down next to him. We're all ready to go.
11:45 – A PRIME MINISTERIAL WARM-UP ACT
Before we get on with George Osborne's spending review statement, there's the small matter of prime minister's questions to get through. David Cameron had a rather poor outing last time round and will be hoping to take advantage of the big occasion to bounce back this time. His partisan attacks against Labour on spending cuts will be of particular interest this time. In fact, I'd go so far as to say all the pressure is going to be on Ed Miliband (and his hand-waving shadow chancellor Ed Balls) in this session.
10:00 – 12:00: Drawn-out buildup LIVE
11:44 – TWITTER TIME
Here's a few choice selections from the Twitter machine:
— BBC News (UK) (@BBCNews) June 26, 2013
Today’s Spending Review shows British people paying the price for govt’s failure on growth, failure on living standards and failure on debt
— Ed Miliband (@Ed_Miliband) June 26, 2013
Spending review: thinking of cutting George Osborne. #wasteofmoney
— Elizabeth Windsor (@Queen_UK) June 26, 2013
Why is the Spending Review being held now? So Osborne can try and beat up Ed Balls http://t.co/13Q0FL7z2d
— New Statesman (@NewStatesman) June 26, 2013
— Allister Heath (@AllisterHeath) June 25, 2013
— Comment is free (@commentisfree) June 25, 2013
Today i will set out the next stage of our plan to move from rescue to recovery. Britain is a country that tackles its problems head on
— George Osborne (@George_Osborne) June 26, 2013
(the lowercase 'i' obviously indicating he is a man of the people)
— George Osborne (@George_Osborne) June 25, 2013
A BBC guide to the UK economy in a 90-sec visual guide of graphics and statistics ahead of Spending Review speech http://t.co/ZcsjybRg3c
— DailySunday Politics (@daily_politics) June 26, 2013
11:25 – 'I WROTE THIS YESTERDAY, BUT IT STILL APPLIES'
Between 2010/11 and 2017/18 spending is going to be slashed by 18.4%. So far 8.9% of that has already been achieved, according to the Institute for Fiscal Studies (IFS). After 2016 there will be a further 7.6% of reductions to be allocated. The decisions we'll be looking at in this one-year spending review amount to cuts of just 2.8%.
This isn't to say that cuts of £11.5 billion aren't significant. They are. Still, it's wrong to view them in isolation. The low-hanging fruit of the initial cuts have all now been plucked, and that initial two-year period of political momentum has now come to an end.
11:10 – OUT-OF-CONTROL SPENDING VS BARELY CONTROLLED SPENDING
Here's a little piece of wisdom which it's only taken me about five years to figure out: the difference between departmental expenditure limits (DEL) and annually managed expenditure (AME). It really matters – especially because, for the first time, one is becoming much bigger than the other.
All of the negotiations we've seen so far have focused on DEL – the budgets set for each government department which can be planned many years ahead. AME is much harder to predict – the kind of cash which governments have to stump up, even though they don't know exactly how much they will come to. The Department for Work and Pensions is a good example of the perils of AME. Its DEL spending is a lowly £7 billion, making it one of the cheaper government departments. But add AME to the mix and it is by far the most expensive department. The benefits bill is now up to £157 billion, towering over the next biggest department's AME (Health, at £20 billion).
Such is the escalating nature of welfare spending – fuelled by the struggling economy, of course – that for the first time ever AME has actually begun exceeding DEL. As this graph shows…
It's all rather awkward. Because the out-of-control bit is now getting bigger and bigger, Osborne is determined to do something about it. This is the context for benefit cuts. If the Tories are being ruthless, it's because they feel they have to.
10:55 – LISTEN TO ME SPEAK
All this typing is making me tired. So I advise you to listen to me on BBC Radio 5 Live this morning, in the primetime 5am slot on Morning Report, instead.
10:45 – SOME LOSERS ARE BIGGER THAN OTHERS
Next, the losers. And in a spending review where virtually every government department is a bit of a loser, that's just about everybody.
The clever bit therefore comes in working out who are the relative winners from the losers. Culture, media and sport, for example, are feeling very chirpy after agreeing cuts of 'just' five per cent – a number which will have artsy types seeting with fury but is a lot better than it could have been.
The 'national union of ministers', those big-beast troublemakers with half an eye on the Conservative leadership, all seem to have found ways to make a deal with the Treasury possible.
Philip Hammond, the defence secretary, has dodged cuts to the frontline (unlike in other departments, 'frontline' here really does mean 'frontline) by securing cuts in procurement.
While Theresa May, the home secretary, has won a partial ringfence for counter-terrorism policing.
The real fighter, it's turned out, has been business secretary Vince Cable, who held out longest of all before reaching an accommodation with Osborne. Business, innovation and skills isn't actually that big a spender in the general scheme of things, but Cable's re-emergence as a troublemaker is reassuring news for everyone who enjoys a healthy dose of coalition infighting.
10:30 – WE NEED TO TALK ABOUT THE NUMBERS
There is no point putting it off any longer. It's time to talk about the spending review.
Beginning with the winners. The list of likely beneficiaries was always going to be rather small, but predictable. The ringfence on the NHS is continuing to hold. There are holes appearing in international development spending, though – will parts of it be hived off to the Foreign Office and Ministry of Defence, which are both facing cuts? And will schools really be protected? There could be cuts in the education budget of £2 billion, ending the UK's steady climb up the international education investment league tables.
Aid spending is worth focusing on in a bit more detail here. Most government departments have made substantial cuts, but still have more to get done than they have already completed. It's different with the aid budget, which is going up in line with the UK's international commitments. Interestingly, it hasn't actually gone up yet. It's like all the other departments, but in reverse.
10:10 – MEANWHILE…
Don't be fooled into thinking this is the only big news story around. It's a sad fact that something as tedious as the big spending decisions of the future trump the really important developments of June 26th.
- In north London, two Tory MPs have been playing a cricket match against each other. "It brings two wasted talents against each other," the loser said.
- In Coventry, the new head of the Labour group on the council has been facing "cheap shots" for taking a trip to Dubai to see her family.
- And in the womb of a Liberal Democrat MP, a new liberal life-form is slowly developing. Congratulations to Jo Swinson, the employment relations minister, who is doing her bit to boost her party's membership levels by procreating with another Lib Dem MP, Duncan Hames.
10:00 – TWO-FACED OSBORNE
It's a bit of a misleading title, isn't it? This afternoon George Osborne will actually be presenting us with the coalition's plans for 2015/16, a financial year which will cover the last three weeks of this government and the first 11 months of the next. And yet the '2013' bit is just as important as '2015/16'. Today is an event defined as much by the state of British politics right now as it is by what lies ahead. We've got aaaages until the main event starts – plenty of time to explore what I mean by that.
Meanwhile, there are two ways of looking at today's events.
1 – Today is a humiliation for the chancellor
The original idea was that austerity would never last this long. In 2010 the original plan was for the belt-tightening to last for four years and no longer; yet because of miserable economic growth we are still four years away from the end right now. It's like setting off to climb Mount Everest and being told when you're halfway up the mountain's just grown another 15,000 feet. Not good.
2 – Today is one of Osborne's clever tricksy strategems
The "part-time chancellor", as Labour insist on calling Osborne, likes to spend his spare time politicking away with the prime minister. The pretext for this spending review (we've got to get those three weeks sorted, guv'nor) is paper-thin and barely disguises the actual twin motives. These are tying the coalition together into the next parliament to try and help it stick together at the end of this one, and making Labour feel as uncomfortable as possible.
I would tentatively suggest both interpretations are entirely valid. It's a clever humiliating tricksy showpiece, all in one. And it's coming up at 12:30, right after the warm-up act of prime minister's questions at noon.