The missing £1500 million

I was pleased to hear this morning that my Parliamentary question on where the money is coming from to build the new homes has been followed up by the media, only to discover the Communities Department has not identified the cuts to pay for the houses.

On The Today programme on Monday morning Mr Mandelson said that there could be reductions in the budgets of Transport and the Home Office. Later briefing told us the cuts were to come in the Communities and Local Government department.

As some of you have pointed out, none of this should come as a surprise. The announcement on new homes may be spin, and may not result in the extra “planned” spending any time soon. Alternatively, there could be extra spending and the increase will be lost amidst the giddy escalation of the deficit. Why worry about £1500 m you might ask when they are printing £125 billion?

So why do I go on about it? Because at some point government in this country has to get some discipline into public spending. The rules are simple. If the government wishes to spend more on something, it has to spend less on something else. That requires two decisions which need to be reported to Parliament. You shouldn’t just report the increase without reporting the decrease as well and in the same amount of detail. Or if the government wishes to increase its borrowing stilll further we need to be told that and debate the wisdom of yet more on the never never.

The government is in disarray over whether to have a “Comprehensive” Spending review or not. We are due one, and were promised one. Mr Mandelson yesterday told us the Chancellor had decided against one. When MPs sought confirmation of this in the Commons yesterday the Prime Minister told us it was a “matter for the Chancellor”. As the Chancellor was on the front bench at the time, it would have been an easy task for the PM to ask Mr Darling what his decision was.

Constitutionally, something as important as a thorough review of spending and future budget levels should be a matter for the whole cabinet, a decision taken by them under the chairmanship of the PM on the advice of the Chancellor. Under the rules of collective government, even if a spending review is the Chancellor’s sole decision, any Minister should know the Chancellor’s answer and give it when asked.

I can only conclude they are having a big row about shelving a spending review. The argument that all their economic forecasts are likely to be wrong so they cannot have one is bizarre. The Treasury has often made wrong forecasts in the past but has still recognised the need to set out how much it plans to spend and borrow. It is especially important to guide markets on this issue today, given the high level of the deficit. If markets think this government do not care how large the deficit is after 2010 it will make raising the money they need even more difficult.

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42 Comments

  1. Javelin
    Posted June 30, 2009 at 6:34 am | Permalink

    Listening to the Today programme at 6 this morning it struck me quite how docile their political correspondent was. Whilst the news anchor questioned the budget the field correspondent was saying “in Leeds the council will not have to give money to central Government because of the new rules” He did not mention any council that would get a bigger shortfall or where the money was coming from.

    The Government Is taking the line that it’s just about budget allocation and focusing on the few net gainers.

  2. Mick Anderson
    Posted June 30, 2009 at 6:36 am | Permalink

    It’s not a surprise that Government figures don’t add up – they never do under Labour. Double-counting and hiding the truth is all they seem to understand. If they don’t have a review, they don’t have to worry about what it might reveal to them.

    As for why the PM didn’t ask the Chancellor about a spending review; Mr Mandelson wasn’t on the bench beside him to give an answer, so there was no point in asking the question.

    Important statements are hardly going to be made in the Commons when the decisions are made by a member of the House of Lords. The best you can do is listen to the BBC for any new announcement.

    • jean baker
      Posted June 30, 2009 at 12:44 pm | Permalink

      The decisions, questions and answers relevant to John’s point were not made in the House of Lords, nor is this the purpose of the House of Lords.

      The BBC is blatantly left wing biased with it’s ‘announcements’.

  3. alan jutson
    Posted June 30, 2009 at 7:23 am | Permalink

    I can only liken the present situation to one that many households (increasing in number) unfortunately find themselves in.

    They know they are in debt.
    They are not sure how much.
    They know it is more than they can afford.
    So the final demand envelopes remain unopened, and are put away in a drawer.
    Its a closed mentality, with sadly the unfortunate result, often being bankruptcy.

    The correct action as we all know is to sit down, work out how much you owe, prioritise the debts, cut expenditure, and then get an additional job or income.

    Sounds easy, but first you have to have the courage to make the decision to quantify the situation.

    The Government either is not aware (difficult to believe)
    Is hiding the true picture from the electorate (more likely)
    It has a thought of a plan but is too frightened to admit the scale of the problem and its solution (most likely)

    In short what we have is a Government which is either deluded, or bordering on the criminal (non disclosure to the population)

    The longer they are in power the worse it will get.

  4. Brian Tomkinson
    Posted June 30, 2009 at 7:24 am | Permalink

    The county’s economy is in dire straits and yet the maniacs in charge are talking about spending more money they haven’t got whilst refusing to carry out a spending review which would be prudent at any time but essential under present circumstances. Two thoughts spring to mind to explain such bizarre behaviour: one is that they are quite mad and the second is that they don’t care what damage they inflict on the country’s economy as they prepare to leave a poisoned pill for an incoming Conservative government.

    • pipesmoker
      Posted June 30, 2009 at 8:08 am | Permalink

      Absolutely, a scorched Earth policy?

    • Javelin
      Posted June 30, 2009 at 12:44 pm | Permalink

      Yes agree. Brown knows he’s lost and is now setting traps for the Conservatives. If he promises lots of spending after the election he knows the Conservatives can’t deliver, so his successor (as opposition leader) will be able to stand up and PMQ and tell Cameron that the cuts Cameron is making are “Tory Cuts”.

      The obvious way to counter this is to use the (put off) spending review to your advantage. Now that Brown has put it off until after the election Cameron has the perfect excuse for a post-Labour post-mortem. The spending review can reveal New Labour’s destruction of the economy in all it’s grim glory.

      So when Cameron is asked by Brown’s successor about “Tory cuts” – Cameron can reply the Labour Party’s own spending review told us in detail how they destroyed the economy and the cuts were necessary. Lovely.

      • jim
        Posted June 30, 2009 at 3:09 pm | Permalink

        We aren’t going to get to the next election unscathed. Consider a few figures over at itulip.com. When Argentina collapsed in 2001, their fiscal deficit was 3% of GDP, external debt was 55% of GDP. By comparison, the UK’s fiscal deficit is projected to be 14% next year, the external debt will be about 90%. That excludes unfunded state pensions, equal to 80% of GDP.
        Sorry but any day now the markets are going to puke and run out of sterling. When they do we are going to be in the middle of a humanitarian disaster, it is going to be a real struggle to afford food imports. And we import over 50% of our food. If the Labour party survives the coming riots I’ll be staggered, but most people are ony 3 meals away from starvation. Not good, not good at all.

  5. TomTom
    Posted June 30, 2009 at 7:54 am | Permalink

    An incoming government cutting public expenditure should take an axe to the BBC budgets so they can share the pain – the public would like to feel that the elites are suffering with them

    • SJB
      Posted June 30, 2009 at 11:00 am | Permalink

      Is the BBC still an elite? The News side seems to be populated by autocuties these days.

      Did you see their reporting on recent events in Iran? The clips I watched just accepted that the tweets [text-based messages on the Twitter network] emanated from Iran. Yet a significant number of the tweets (in English) were fixated on the Iranian President’s alleged Holocaust denial, which raises the possibility whether the communications were generated outside of Iran by those promoting Israeli interests.
      http://www.chartingstocks.net/2009/06/proof-israeli-effort-to-destabilize-iran-via-twitter/

    • jean baker
      Posted June 30, 2009 at 12:49 pm | Permalink

      The BBC is funded by licence payers.

      Taxpayers also fund the millions spent on ITV government advertizing and ‘social engineering’ programmes.

  6. Richard
    Posted June 30, 2009 at 8:09 am | Permalink

    I’m afraid I think its simpler than a row – they just lie. Balls was asked on Andrew Marr’s programme whether there would be a spending review and said he didn’t know. All Andrew Marr could do was ask him again – he can hardly accuse him of lying – but Balls did so just the same. Of course Ed Balls is intimately involved with these decisions and knew full well they would duck a review. Brown has done the same – lied to David Cameron in the Commons over spending. With all the old House of Commons traditions going out of the window perhaps its time to ditch the tradition of not accusing ministers of lying when they clearly are. An MP should be able to say ‘I think the minister has lied’ (either in the Commons or in some other public forum). Then there should be an independent commitee of MPs, assisted by a lawyer to investigate. If the minister is cleared the MP gives a written public apology, if he has lied he resigns immediately. If its a really serious lie (eg in connection with starting a war) he should stand down from Parliament and face criminal charges. That way public confidence in politics might be restored.

  7. jean baker
    Posted June 30, 2009 at 8:34 am | Permalink

    It seems the lack of transparency, ‘ducking and diving’ – confounding Constitutional rules with serious issues which “need to be reported to Parliament” continues.

    Unsurprisingly, the appointment of a new Speaker has made absolutely no difference, whatosoever, to Constitutional procedures. In fact, Mr Bercow’s refusal to acknowledge and wear the Constitutional ‘badge of office’ – the wig – shows contempt for historic protocol. The Speaker is acting on ‘his own terms’.

  8. Sir Graphus
    Posted June 30, 2009 at 8:42 am | Permalink

    “Later briefing told us the cuts were to come in the Communities and Local Government department.”

    In other words; we’re going to pay for this through increases in Council Tax.

  9. Posted June 30, 2009 at 8:51 am | Permalink

    Help me compile a list of NuLabour’s cuts.

    Are they cutting or deceiving in the marginals?

  10. Adam Collyer
    Posted June 30, 2009 at 9:22 am | Permalink

    I don’t believe they have any intention at all of spending any of this money. It really is all spin. So many of their great announcements about new initiatives have not been followed up with action. Another example was the much-trumpeted scheme to help families who were otherwise going to lose their homes – the last I heard two families had benefited. And of the help they announced for the motor industry with great fanfare several months ago, not one penny has yet materialised. (Some may say that’s a good thing too!)

    They have no intention of increasing spending. They will be cutting spending. And there will also be higher taxes. MUCH higher taxes. When you are heading for a deficit of 14% of GDP, there are bound to be both cuts and tax increases. The people understand this very well, which is why Labour are heading in my view for meltdown at the next general election. All we will be able to promise is blood, sweat and tears. But at least the job of getting things back in shape will have begun.

  11. Cardinal Richelieu's mole
    Posted June 30, 2009 at 9:33 am | Permalink

    It is time you and Dave took the gloves off.

    There is not much point in being the next government, just to preside over a rescue (should it prove possible) from state bankruptcy while being blamed for the sins of the last 12 years of New Labour misrule as the consequences become unconcealable.

    The most frightening thing, which would leave devastated both New Labour and the electorate, would be for the Conservative Party to say it would refuse the Queen’s invitation to form the next government, rather it would use its Commons votes to sustain Brown and his gang.

  12. Posted June 30, 2009 at 9:44 am | Permalink

    I too listened to the Today programme this morning and heard an interview with Balls. What struck me, apart from his insistence on talking brusquely over difficult questions in the hope that they would go away, was that every point he made was accompanied by a derogatory reference to what he saw as the Conservative party’s alternatives. It all came across as if Labour’s ‘new initiatives’ had actually been designed for no better reason than to be a stick with which to beat the opposition.

    This approach is what you get when a political party is stuffed with professional politicians with little or no experience of the real world: They think the voters are stupid.

    • Posted June 30, 2009 at 6:57 pm | Permalink

      Figurewizard,
      You highlight a change of tactic ever since the European Elections. On the Today programme you had exactly the same tactic from both Ed Balls today and Peter Mandleson yesterday. That is
      1) Announce a policy that might be costly, but most of the costs can be delayed until after the election (extra housing), or commitments that will hamper a future government (extra “rights”).
      2) Any questions about total spending plans are answered with comments about how concerned the Labour Party are for the people of this country, and then attacking the Tories for threatening cuts.

      There are too many in Government who think thank the message is the most important aspect of policy. Faced with a crisis and knowing they cannot win an election, this is all the government have left.

  13. Mark M
    Posted June 30, 2009 at 9:47 am | Permalink

    Might I be so bold as to suggest that Mr Darling has accepted that Labour might well be out of power come the next election and, instead of trying to spite the Tories as Brown and Balls are, is preparing an honourable handover.

    He wants a spending review so that we know where we stand. Brown and Balls don’t because they want to blame the Tories once the books are opened and all manner of horrors are found. Mandelson is in the Brown/Balls camp because he’ll be out of a job once the Tories come in.

    • jean baker
      Posted June 30, 2009 at 1:07 pm | Permalink

      Mandleson’s unlikely to have sacrificed his position and future in the EU and returned to our shores to simply help his (reported) adversary Brown, taking, presumably a massive paycut in the process, loss of EU pension, perks, expenses and whatever else the taxpayer funded gravy train provides.

      Mandleson told the media he wants the abolition of sterling in favour of the Euro; those favouring Federal Europe are always ‘favoured’ by EU dictators.

  14. Posted June 30, 2009 at 10:03 am | Permalink

    Mr Redwood, I despair of your references to “this Government”. That is the last thing they are. Printers, Spenders, Bullies, Princes of Mendaciousness, yes, Government, no!

  15. alan jutson
    Posted June 30, 2009 at 10:19 am | Permalink

    I have just listened to an hour long programme on Radio Five about the Country’s debt, and which Party to believe.

    All of the experts said that our debt is massive, and that Labour are cutting at the moment, and will have to continue to cut in real terms.

    The Tories we going to cut, but would not give any real details.

    All said that the revised figure for the last 3 months published period was a drop of 2.4% in GDP not the original 1.9% which all thought was the probable position, so its worse than all thought.

    Virtually all viewers who rang in said they they thought Gordon Brown was telling lies about the true state of our debt, and the fact was that he would have to cut public services in the future to some degree.

    But half said they would still vote for him at the next election !!!!.

    They are either absolutely barking mad, or the Conservatives have to yet convince this element of the public of their arguments.

    Let us hope that either this was not a true cross section of public thinking, or it was blind faith and support from the labour die hards, who will not vote for anyone else, at any cost.

    Let us for the sake of future survival, hope that it is the first element.

    In the meantime the Conservatives have a lot of work to do with regard to informing the general public of the astonishing size of our debt liabilities.

    Not including your site here John, as you have pointed this out many times here, but clearly your Party is failing to get its message across with regard to how much we are in debt, the serious position we are in, and how much more Brown is going to spend and has spent already.

    • Paul
      Posted June 30, 2009 at 11:58 am | Permalink

      Alan,

      This is the problem, our nation consists of far to many “telly” watching people who are fed sound bites, that they then choose to believe without any further investigation or thought.

      Our politics are still driven by 19th century “class war”.

      As with the 1970’s Labour administration that destroyed the country it’s left to a Conservative govt to try to pick up the pieces.

      The problem is that ALL of the incoming Tory offerings are negative ( as there’s mostly no other rational option) so they continue to get stuck with the epitaph of the “nasty party” because the majority of the voting public can’t work it out for themselves.

      • alan jutson
        Posted June 30, 2009 at 4:27 pm | Permalink

        Certainly agree to a degree, but the Tories have not to date run a very successful campaign.
        I can only hope that nearer the General Election the message will be more clear, and the arguements more precise.

  16. Posted June 30, 2009 at 10:44 am | Permalink

    I think that not only do we need a new Bill of Rights to act as constitutional limitation but that it should contain something like the Balanced Budget Amendment that America looked at & backed away from.

    Currently there no constitutional limit on Parliament’s power (the traditional description is that if Parliament declared that a man was a woman that would be the law which no longer seems the height of improbability). However reality is worse than that in that an irresponsible government can borrow, or print money or sign PFIs commiting prudent successors to repaying it. Thus a balanced budget law would actually enhance the sovereignty of competent Parliaments.

    • SJB
      Posted June 30, 2009 at 11:18 am | Permalink

      Except that no Parliament can bind its successors so the next Parliament could simply repeal the law. I think what you are really driving at is the need to have constitutional laws (originally endorsed by at least two-thirds of the electorate in a referendum) that Parliament cannot override.

      • Posted June 30, 2009 at 2:57 pm | Permalink

        Agreed. Such an Act would have to have written into it a requirement that it could only be repealed by 2/3rds majority or I would suggest something like 60% plus a referendum plus both being ratified 5 years later (otherwise it would revert). I don’t know if Parliament could bind its successor but but I think a referendum would make it politicaly impossible to ignore it. If absolutely necessary the oath could be altered to bind successors.

      • Adrian Peirson
        Posted June 30, 2009 at 6:49 pm | Permalink

        We already have a Constitution, Do you seriouslt want to give these Despots a reason to draft a Binding constitution.
        we already have a constitution, the reason why we are in this mess is because they have ignored it.

      • Denis Cooper
        Posted July 1, 2009 at 10:36 am | Permalink

        Or we could get to the crux of the matter, and work out how we can vote better people into Parliament.

        And, with all due respect to JR, that can’t be achieved simply by voting for the Conservative candidate, rather than for the Labour or Liberal Democrat candidates.

        Ultimately all the problems can be traced back to the way those three political arties are run, and how they pre-select and then select the official candidates they offer to the electorate.

  17. Paul
    Posted June 30, 2009 at 10:47 am | Permalink

    If the government were required to produce a set of audited accounts each year like the rest of us are in business then the public would have some definate information to go on.

    • Tara
      Posted June 30, 2009 at 11:40 am | Permalink

      Add to that the application of the same standards of probity and honesty that directors of companies are obliged by law to abide by.

  18. David Logan
    Posted June 30, 2009 at 11:02 am | Permalink

    They continue to live in fantasy land. Balls this morning firstly cut the education budget by £400M then announced £200M was going to pay for social housing. How can he do this? Well the £400M was set aside to make provision for PFI contracts where finance might not be available. As the Government is now underwriting the risk of PFI that is no longer needed. In other words rather than cutting expenditure another £400M is to be incurred off balance sheet for future generations to underwrite and another £200M is to be spent on housing- an increase in Government expenditure! Don’t they get it? The other £200M was being used to fund some £950M promise about tutors or something. I couldn’t work that one out but neither did Sarah Montague.

  19. NickW
    Posted June 30, 2009 at 11:53 am | Permalink

    Mandelson deliberately announced the cancellation of the review, knowing that Darling disagreed with him.

    The public announcement was intended to ensure that Darling was forced to toe Mandelson’s line.

    The question is, How long will Darling tolerate being stabbed in the back by Mandelson, Brown and Balls, at regular intervals.?

    How can a Government function with the Cabinet stabbing each other in the back nearly every day.?

    No wonder no one wanted to be in the Cabinet at the last rearrangement.

    • Colin D.
      Posted June 30, 2009 at 3:50 pm | Permalink

      You could be right. Does Darling want to be remembered as the worst ever Chancellor who was party to all the lies being promulgated about the financial state of the country, or does he want to come out and side with the B of E Governor and be remembered as the courageous Chancellor who told us ‘as it was’ and would not be silenced?
      If Darling is a man of courage and integrity then he needs to speak out, sooner rather than later.

    • alan jutson
      Posted June 30, 2009 at 4:31 pm | Permalink

      Nick

      How long?

      Until the last drop of blood escapes.

      Then, you cannot get blood out of a stone/corpse.

  20. Brian E.
    Posted June 30, 2009 at 12:11 pm | Permalink

    Labour know that whatever they do, it is unlikely to affect their core vote. When you reach the position where the government is paying out more in benefits than they are taking in income tax, what person on benefit is going to vote for change or cuts in government expenditure; they don’t care where the money comes from as long as they can get their beer and fags money each week. And with all these extra NEETS all wanting money, why should they vote Tory? They don’t care if it means extra taxes for those in work. Maybe Cameron is right about potential riots; what I do know is that quite a few youngish, well educated, friends or children of friends, are actively seeking long term employment abroad in the belief that they will find a better future for their own children.
    A government spending review is unlikely to change the minds of either group; indeed it is likely to harden their positions as one thing that won’t be mentioned is the need to cut benefits.

  21. Posted June 30, 2009 at 3:28 pm | Permalink

    While all this clever political stuff is going on, allow me to remind you that our Bank has printed £100 billion already and that we have a deficit growing which “is not only precarious it is dire” (Telegraph).
    Look, if I know this, surely Standard and Poors must know it too?
    And if they know it too, what do potential gilt buyers think of their chances of a great investment in UK plc?
    Argentinian tango anyone?

  22. not an economist
    Posted June 30, 2009 at 3:43 pm | Permalink

    For 12 years now we have had a Labour Govt mocking the Tories whenever they say they can make cuts in Govt spending thru efficiencies rather than reducing levels of service.

    Now, all of a sudden, Labour is at it, proclaiming increases in spending on high profile areas that will be funded by supposed savings elsewhere but absent any detail.

  23. John Wild
    Posted June 30, 2009 at 4:04 pm | Permalink

    Mr Redwood

    You have the paitience of a Saint. It’s like pulling teeth talking to these guys!

    John Wild

  24. john miller
    Posted June 30, 2009 at 5:00 pm | Permalink

    I’m always amazed how a government can have accouting policies that it makes illegal for commercial companies.

    The government accounting for PFI and pensions would not be tolerated under the Companies Acts, or by HMRC rules.

    Similarly, a company is unable to withhold its annual accounts merely because the directors or shareholders consider it expedient.

    Perhaps ministers could explain why the rules they construct for others are best not followed by their own administration?

  25. Martin
    Posted June 30, 2009 at 6:37 pm | Permalink

    I have found where the money is coming from! Comrade Johnson (of the Home Office – not Boris) is anticipating that lots of people in Manchester will go rushing down to the local Stasi office to buy a voluntary ID card at 30 Pounds ago!

    An easy campaign for the Opposition parties “Save £30 don’t buy an ID card!” or “Save £30 don’t buy an ID card and use less plastic and save the planet!”

    Of course Comrade Home Secretary Johnson still thinks ID cards will improve airport security. Just like stopping 200ml tubes of toothpaste getting on Planes does!

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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