Summary
- George Osborne has taken an early swipe at departmental budgets announcing £4.5bn of savings in this financial year through a sell-off of national assets – including the remaining stake in Royal Mail – and spending cuts. As Patrick Wintour reports, departments have been ordered to find £3bn in savings, and the chancellor says he will also raise £1.5bn from the sale of the government’s remaining 30% stake in Royal Mail. The cuts are in addition to the £13bn of cuts already announced for 2015-16 and the £30bn of cuts Osborne is due to announce in the emergency budget on 8 July for the following two years. Here is Larry Elliott’s analysis.
- Ed Miliband has spoken from the backbenches of the House of Commons for the first time in nine years, making an impassioned address about the need to tackle inequality. As Rowena Mason reports, the former Labour leader, who resigned in the wake of the party’s election defeat, made clear he had no intention of stepping away from frontline politics altogether as he took part in the Queen’s speech debate on the economy. He spoke first about his deep disappointment about Labour’s loss and added that it was “right that the party comprehensively examines the reasons for that defeat”.
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Kenneth Clarke, the Conservative former chancellor, has told MPs that Osborne he will have produced an economic miracle if Britain keeps growing for another five years in the face of its “appalling” deficit, “dreadful” productivity and “dismal” export performance. In his speech in the Queen’s speech debate Clarke said:
If I’m sounding a bit foreboding about what might go wrong, it’s not because I see anything going wrong. But we will be very lucky if we have no global shocks hitting us, we’ll be very lucky given that we’ve had five years of growth since 2010, with only a minor blip not a recession in 2012, another five years. Ten years of uninterrupted growth would be pretty well a post-war miracle. That does not happen in the real world.
- Jeremy Hunt, the health secretary, has outlined changes to the way the results of controversial performance targets such as waiting times for A&E and cancer treatment are published. As the Press Association reports, Hunt, speaking at the NHS Confederation’s annual conference in Liverpool, agreed a “much more consistent approach” was needed to make sense of the figures and ensure they are helping patients. He referred to a letter written by NHS England’s national medical director, Sir Bruce Keogh, which said a “confusing set of standards” was leading to “perverse incentives” regarding the 18-week target for patients from when they are referred by their GP to when they receive treatment.
- Charlotte Church’s status as a prominent anti-austerity campaigner has taken another step after the singer announced she would happily pay tax at a rate of 70% if it would protect public services. Church, who last month won praise for defending herself as a “prosecco” socialist after some media reports accused her of hypocrisy for protesting against cuts while being personally wealthy, was speaking at the launch of another anti-austerity demonstration.
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Anna Soubry, the business minister, has accused Alex Salmond of sexism after he told her to “behave yourself, woman” in a debate. On Twitter she said:
Alex Salmond seems to think women should be seen not heard His attitude belongs firmly in the 19th century
— Anna Soubry MP (@Anna_Soubry) June 4, 2015
Salmond can dish it out but he can't take it!
— Anna Soubry MP (@Anna_Soubry) June 4, 2015
- The Labour MP Rob Marris has come first in the annual private member’s bill ballot. The Conservative Chris Heaton-Harris was second, followed by fellow Tory Sir Gerald Howarth in third place. The full results are here.
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The former German foreign minister Joschka Fischer has warned David Cameron not to lose himself in “wishful thinking” about Germany’s potential support for reform of the EU. As Frances Perraudin reports, Fischer stressed that the German chancellor, Angela Merkel, would do nothing to “endanger the basic principles of the common market, of the EU” and that it would be an illusion to presume the UK could get special treatment because of its large contribution to the EU budget. “[Merkel] has a much bigger problem to address: how to find a compromise in the currency union with Greece,” Fischer told the BBC. “That’s her priority number one now.” But Merkel has expressed confidence that sufficient EU reforms can be agreed to persuade the UK to vote to remain a member. Angela Merkel told the BBC:
Some of the things that David Cameron is asking for I can support ... There are other points where we have a different opinion, but we have always been able also to pursue a Europe at different speeds, to find opt-out solutions for example.
She said it was “not about losing sleep over this, but about doing our work and creating the necessary preconditions for Britain to remain in the EU.”
That’s all from me for today.
Thanks for the comments, particularly to those who responded to my question about the Labour leadership candidates.
Updated
Ukip says Osborne's share sale will leave 'a completely destroyed Royal Mail'
Ukip is opposed to the sale of the government’s remaining stake in Royal Mail. This is from Paul Nuttall, its deputy leader.
Under EU state aid rules the UK government is strictly forbidden from helping the Royal Mail with taxpayers’ money and this means that in future it could go bust and completely disappear.
This final part of the privatisation means we will be left with a completely destroyed Royal Mail, once a proud British institution that did so much more than just deliver letters. We can thank the EU for that.
Even if it does survive I fear that Royal Mail could well end up 100% in foreign ownership, just like much of our utility companies and railways. What a sad outcome for this historic business.
Labour says spending cuts are 'chaotic'
In the Commons debate, as soon as George Osborne announces his cuts/savings, Labour’s Chris Leslie stood up to say that he should be announcing something as significant as this in a proper oral statement. Osborne replied by saying it was odd for Labour to criticise him for making a spending announcement in the Commons chamber.
Leslie has now put out a statement with a more polished version of the same critique. He said:
Nobody disagrees with sensible efficiencies because spending does need to fall in unprotected areas, but why is the chancellor hiding the detail? George Osborne needs to spell out urgently who is paying the price in this chaotic process. This is a shambolic approach to planning public services, ripping up his own ‘long-term plan’ set out just weeks ago in the March budget. Savings need to be made through proper reform not short-term salami slicing.
The Tories’ botched privatisation of Royal Mail in the last parliament short-changed taxpayers by hundreds of millions of pounds. The government now needs to explain how it has learned the lessons of last time so that the same mistakes aren’t simply repeated.
Swinney says £170m cuts for Scotland are 'completely and utterly unacceptable'
John Swinney, Scotland’s deputy first minister, says George Osborne’s new cuts will take £170m from his government’s budget and are “completely and utterly unacceptable”. In a statement he said:
This cut of around £170m to the Scottish budget this year is completely and utterly unacceptable. The Scottish parliament has already agreed our budget for this year and that should be respected, not slashed as part of George Osborne and David Cameron’s ideological obsession with austerity.
The people of Scotland made perfectly clear in the recent UK election that they rejected the Tories’ plans for more and harsher cuts, yet the UK government is planning to inflict £170m of even deeper austerity on Scotland this year.
Scotland has already seen our overall budget cut by nine per cent and our capital budget cut by 25% since 2010. Further cuts risk more damage to public services and will hold back economic growth, as underlined in the latest report from the OECD.
There has been no prior discussion with the Scottish government about these plans – and all parties in the Scottish Parliament should now make clear that these cuts are unacceptable.
John Mann, the Labour MP and a member of the Commons Treasury committee in the last parliament, told BBC News that he was opposed to George Osborne selling the government’s remaining stake in the Royal Mail without a consultation.
The [feedback] that I get is that the public prefers a universal system and will not be happy to have [the royal name] claimed by a private company.
The Lib Dems say George Osborne’s cuts announcement shows that, without the Lib Dems in government, the Tories are lurching to the right. This is from the Lib Dem MP Tom Brake.
Without Liberal Democrats in government, Osborne has taken the first opportunity to lurch recklessly to the right.
Tory plans to balance the books will be met by excessive spending cuts and don’t ask the wealthiest to pay a penny extra to save the services we all rely on.
To choose to cut the deficit in this way is simply not fair. It means cuts to education, social care and public services.
Defence cuts - What they will mean
A Ministry of Defence spokesman said the £500m amounted to 1.5% of the overall defence budget. It will not lead to the UK dropping below its present Nato commitment to spend 2% of GDP on defence.
The spokesman said: “This agreement will not impact on the baseline defence budget, manpower numbers or current operations. The UK will continue to spend 2% of GDP on defence in this financial year.”
Communities cuts - What they will mean
The Department for Communities and Local Government, whose key responsibilities are housing and local councils, has been asked to cut £230m from its nearly £8bn budget this year.
Some of these ‘savings’ will in fact be money raised by selling land for housing developments, though the department has not yet said how much it hopes to raise. Nor is it clear whether land can be sold competitively in such a short time frame, unless sales are already underway - in which case this is not a new announcement.
A spokesman said no cuts would be made to local authority budgets, implying that the remaining savings are expected to come from admistation at Eland House. A key concern about this will be the department’s ability to see through the promised and much needed housebuilding revolution in coming years.
Sadiq Khan, who is seeking to win the election to become Labour’s candidate for London mayor, has condemned George Osborne’s decision to sell off land around King’s Cross. He said:
London is facing a chronic housing crisis, with land being bought and sold at a premium. The chancellor and the government should not be making a fast buck out of land they own but handing this over to the people of London so we can build affordable housing to buy and rent for future generations – anything else will be a betrayal of Londoners.
Environment cuts - What they will mean
The Environment Department has already suffered some of the steepest cuts across Whitehall, with a 30% cut in 2010 against the government average of 19%, followed by a further 10% in 2013, leaving observers wondering what’s left to axe. Under the plans announced today, it’ll have to save an extra £83m in 2015-16, or nearly 4% of its £2.1bn budget.
The only named project for the axe is £250,000 for research on urban seagulls, along with other similarly-designated “low priority” work. Further savings are expected from efficiencies, a spokeswoman said.
Spending on flood defences, which was boosted following the damaging 2014 floods in England, is likely to be unofficially ring-fenced, said Dustin Benton of think tank Green Alliance. Other areas unlikely to be affected are money to support British farmers and funding to ensure the UK’s food security.
Obvious candidates in the firing line among Defra’s 28 arms-length bodies include its waste programme, Wrap. The agency, which works to reduce food waste and plastic bag use, has already been gutted, with its budget reduced to £17.9m in 2014, down from £37.7m in 2011.
Justice cuts - What they will mean
The latest round of savings imposed on the Ministry of Justice, amounting to £249m off the annual budget, is likely to come from delaying capital projects and underspends in legal aid.
Having sliced around £800m a year - about 10% overall - off the annual MoJ budget during the last parliament, lawyers and prison governors believe resources have already been cut to the bone.
The MoJ said the new round of Treasury-requested economies would come from administrative efficiencies, slowing down investments and reductions in the use of agency staff and consultants. No further legal aid cuts are immediately contemplated.
Fraught negotiations over previously scheduled reductions to criminal solicitors’ legal aid fees are still continuing and legal aid barristers have already threatened the new justice secretary, Michael Gove, with mass walkouts.
A Ministry of Justice spokesperson said: “The department is committed to playing its part in the government’s deficit reduction plans and delivering significant savings for the taxpayer.
“Following the chancellor’s request to find additional in-year savings, we have put together a package that will enable us to drive underspends and efficiencies across the department, including savings from commercial contract negotiations.”
Steve Hynes, director of the Legal Action Group which closely monitors MoJ spending, said: “It’s going to be difficult to shave money off the prisons budget without serious consequences. People are already being locked up for too long.
“But there has been a real underspend in the legal aid budget because fees are so low and people are not picking up cases because the work is not profitable.”
David Sparks, chair of the Local Government Association, told the World at One that George Osborne’s announcement amounted to “an opening shot in another war on local government”.
The announcement in parliament of a 5% cut, when it is translated into the real world of local government, is a 7% cut in real terms. And it is also in addition to the 40% cut we have had over the last five years.
Local government has been disproportionately singled out for cuts and we thought we had got away from that. This is an opening shot in another war on local government.
Our calculations suggest that should these cuts go ahead, it will probably mean that the ability of local councils to help the health service to remove bed-blocking and prevent people becoming ill in the first place will be jeopardised. This is a false economy.
Culture cuts - What they will mean
Given that some on the political right wing wanted the Department of Culture, Media and Sport to be axed altogether ahead of the general election, its employees will be relatively pleased with the £30m cut to its annual budget of £1.2bn.
With Ukip’s manifesto pledge to scrap the DCMS no longer even a pipedream, the 2.5% overall cut will fall hardest on arms-length funding bodies or quangos. This is especially so as the number of departmental civil servants has been cut in recent years to fewer than 500.
Quangos including English Heritage, the British Film Institute, the Equalities and Human Right Commission, the Royal Parks Agency, Sports Ground Safety Authority, UK’s Sport’s admin budget and UK Anti-Doping all bore the brunt of the 7% overall cuts in 2013 and are expected to do so again.
Other likely targets could also include digital projects such as the DCMS body responsible for spending £250m to roll out superfast broadband nationwide by 2017.
In 2013 funding for the Arts Council, national museums and galleries was cut by less than the 7% total, largely because of arguments made by Arts Council England, among others, that the creative industries are a growth story for the economy. Chairman Peter Balazgette’s argument that the creative industries contribute 5% to the economy while growing twice as fast as the national average and creating five times as many jobs won support from George Osborne and could be expected to do so again.
TUC says Osborne is cutting too fast
The TUC says that George Osborne’s decision to accelerate cuts is dangerous. This is from the its general secretary, Frances O’Grady.
The chancellor failed to meet his deficit targets in the last parliament because he chose cuts over investment for growth, and he’s about to make the same mistake again. Despite the OECD warning this week that fast cuts are a danger to growth, he’s rushing ahead and putting education and innovation in the frontline for some of the largest cutbacks.
This is the wrong plan. We need an investment-led approach to deliver the strong recovery needed for wage rises, productivity gains and higher living standards. But the chancellor’s plan for fast and extreme cuts will hold back growth, and it will slash the tax credits and vital services that workers and their families rely on.
Transport cuts - What they will mean
While the headline cut sounds extreme, there is some chicanery here. The department ostensibly has the biggest savings to find at £545m - but will generate £345m of this by selling off land around King’s Cross valued at £345m. More than half of the remaining £200m will be in reduced “contingency”, cutting by £124m the financial buffer for overspend or things going wrong - although presumably a true contingency would render the spending necessary again.
London gets its budget further cut, by £31m, which TfL will have to find in its day-to-day spending - possibly forcing the next mayor to push up fares. £16m is saved by not subsidising further regional air links - the kind of money that has kept planes going to Newquay and Dundee (whose flights stay protected). Cycling takes a hit: £23m of the money promised to boost cycling cities won’t be spent. Nor will £5m pledged to keep train stations spruce, or another £1m earmarked for Sheffield’s tram trains.
This morning Number 10 said it would be writing to Ipsa urging it to reconsider its plan to increase MPs’ pay. Chris Grayling, the leader of the Commons, has written on behalf of the government. The letter probably did not take him long to draft, because it is very short. Here it is.
Dear Sir Ian [Kennedy, Ipsa chair]
Thank you for your letter of 2 June, informing me of the launch of IPSA’s statutory review of MPs’ Pay.
A comprehensive response to your original consultation on the issue of MPs’ pay was submitted by the coalition government during the last Parliament. The government opposed the suggestion that there should be a pay rise of this nature at that time, and the view of the government remains that a pay rise of this nature at this time is not appropriate.
You will be aware that as part of the government’s commitment to cutting the cost of politics, the prime minister has announced that we have frozen ministerial pay for a further five years saving an estimated £4m. While the government notes the welcome economic indicators since December 2013, highlighted in Paragraph 29 of your consultation, we continue to believe that despite the welcome signs of progress, the continuing structural deficit shows the job is far from done. The government has an ongoing commitment to responsible fiscal policy and returning the public finances to a sustainable position.
With best wishes,
Chris Grayling
DWP cuts - What they will mean
The Department for Work and Pensions will have to make a £105m cut this year, which comes in addition to the £2 billion savings to the department’s running costs made between 2009/2010 and 2014/15.
These “efficiency savings” will be to departmental spending rather than cuts to benefits payments and are separate from the planned £12bn of welfare cuts, the details of which are yet to be revealed by the government.
But the savings will still be generated by increasing pressure on claimants and ex-claimants. Officials said they would be stepping up “debt recovery”, taking extra efforts to secure the repayment of loans issued under the social fund – the system by which benefits claimants are given a loan when they are deemed to be facing a crisis situation. Currently this money is repaid by deducting money from benefits payments, but there is no system to reclaim money from ex-claimants who have found work and are therefore no longer claiming benefits. The DWP will be given new powers to get that money repaid, a spokesperson said, although details of how this new system will work have not yet been released. It was not clear how much money could be saved by this measure given that the social fund is not well-advertised by the DWP, and fewer loans are being given out as a result.
The rest of the money would come from making administrative savings, focused on back office functions – with officials looking at ways they can reduce IT contracts and telephone costs. There would be no impact on staff levels at JobCentre Plus offices this year, a spokesperson said.
“During the last Parliament, we improved the efficiency of the department, reducing DWP running costs by £2 billion in 2014/5 compared to 2009/10. DWP will be contributing £105m of efficiency savings this year, through departmental budgets and increasing debt recoveries,” a DWP spokesman said.
Here’s a Guardian video of Ed Miliband speaking in the economy debate.
Ed Miliband started his speech with a nice, self-deprecating story about how his son told him he “used to be famous”. (See 1.18pm.) Guido Fawkes has posted the quote in full on his blog.
In the time since the election I can report to the House that I have found some small consolations of losing. Spending time with my two boys, who feel that they have thier dad back. Though I confess that my eldest, who’s just turned six, did bring me further down to earth last week. He suddenly turned to me out of the blue and said ‘Dad, if there’s a fire at our house I think we’ll be ok’.
I said ‘why’s that Daniel?’
And he said, ‘if we ring the fire brigade, they’ll recognise your name because you used to be famous’.
‘Thanks very much,’ I said.
Departmental cuts - Full list
Here is the department-by-department breakdown, from the Treasury press release, showing how George Osborne is achieving £3bn from cuts and efficiency measures.
Education (non schools) - £450m
Health (non-NHS) - £200m
Transport, including sale of King’s Cross property - £545m
Communities - £230m
Business - £450m
Home Office - £30m
Justice - £249m
Defence - £500m
Foreign Office - £20m
Energy - £70m
Environment - £83m
Culture - £30m
Work and pensions - £105m
HM Revenue and Customs - £80m
Treasury - £7m
Cabinet Office - £17m
Total - £3.066bn
Departmental cuts/savings worth £3bn -Detail
And here are more details of the £3bn in “cuts” announced by George Osborne.
I’ve put “cuts” in inverted commas because that is a pejorative term and the Treasury is quite deliberately avoiding it. Its press notice is headlined “Chancellor announces £4½ billion of measures to bring down debt”, and it describes these measures as “savings”.
The thinking is obvious: “savings” are good; “cuts” are bad.
But are savings the same as cuts? We probably need an IFS ruling on this, but a quick answer would be - sometimes. George Osborne is going to achieve some of his savings through asset sales, which may be wise or foolish, but which are not what you would normally describe as a cut. And, if departments achieve genuine efficiency savings (for example, by smart procurement) that hardly counts as a cut either. But headline budget figures are coming down, which does make the word “cut” appropriate, and it would be naive to think that all of this could be achieved without some impact on what is being delivered (which fits the conventional definition of a cut).
- The Treasury says the £3bn cuts/savings announced today will be “a significant first step” towards further cuts/savings.
- It says this amounts to 3% of unprotected departmental spending.
- It says some of the money will come from getting departments to underspend, instead of allowing them to spend all their budget. It describes this as “tightly managing departmental budgets in-year”.
- It says some of the money will come from “efficiency savings”. The departments affected include Business, the Home Office, Work and Pensions, and Environment and, among other areas, the savings will come from “higher education and further education budgets in BIS, and savings in the administration of arms lengths bodies in the Department for Education and the Department for Culture, Media and Sport”.
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Asset sales will include the sale of land around King’s Cross owned by the Department of Transport valued at £345m. (That’s near Guardian HQ. It’s a good job George Osborne can’t sell us off too.) The Department for Communities will also sell land it owns.
Osborne's announcement - Summary
The chancellor has announced a total of £4.5bn-worth of “measures to bring down debt”, including savings and asset sales, to take place in the current year:
- He expects to raise £1.5bn by selling the government’s remaining stake in Royal Mail.
- Whitehall departments have found a total of £3bn in savings, ranging from £7m at the Treasury, to £545m at Transport - a figure that includes a sell-off of property around Kings Cross, which it hopes will raise £345m.
- Other big losers include defence, which will have to find £500m in savings, and the non-schools part of the education budget, which will be cut by £450m.
- In total, the savings average 3% across “non-protected” departments, ie outside the NHS, the schools budget and overseas aid.
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The Treasury says these up-front savings will help to “smooth the ride towards the overall saving target” deliberately taking on the Office for Budget Responsibility’s claim that Osborne was planning a “roller-coaster” for public spending.
Sale of £1.5bn stake in Royal Mail - Details
Here are more details of the sale of the government’s remaining stake in Royal Mail from the Treasury press release.
The stake currently has a market value of c.£1.5 billion. The Department for Business, Innovation and Skills (BIS) will sell its remaining holding of shares, completing the privatisation begun with an Initial Public Offering of shares in October 2013.
The government has appointed Rothschild to advise BIS on the transaction. The government holds a 30% stake in the company, with the remaining 70% held by a combination of employees (10%) and private investors.
The transaction will be designed to deliver best value for money to the taxpayer, with further detail on the form of the sale to be announced in due course.
Shares in the Royal Mail were initially floated at 330p per share, and were trading at 526p at market close yesterday.
Updated
Miliband says fighting an election is winning is some achievement. But how Cameron uses this mandate will determine his legacy.
He says Cameron does not have to worry now about fighting another election.
Instead, he should live up to his own one nation rhetoric, he says.
If that is where the battleground of politics lies ahead, then I welcome that, and will play my part, Miliband says.
And that is it.
Kenneth Clarke, the Conservative former minister, is speaking now. I will not be covering that minute by minute, but will post the highlights later.
Miliband says the low-paid need social protection.
He says people should read some of David Cameron’s early speeches. In a speech to mark the anniversary of the Scarman report, Cameron said that we should not think of poverty just in absolute terms and that relative poverty mattered too.
Miliband says Cameron should adopt this approach now.
Miliband says in-work poverty is a specific problem.
I would say this is now the scourge of our time.
If you go to work, you should not be in poverty, he says.
In Doncaster 28% of men and more than a third of women are paid less than the living wage, he says.
He says the Low Pay Commission has become “too much a recipe for the lowest common denominator”.
In the US some states are addressing this, by raising the living wage. He suggests the same should happen here.
Miliband says the OECD said recently that high inequality harms economic growth and social mobility.
People used to think inequality was necessary for growth.
But now it is seen that this is bad for productivity. Some on the right are addressing this, he says.
He says Steve Hilton, David Cameron’s former head of strategy, recently called for a cap on bankers’ pay.
Miliband jokes that he finds this “anti-aspiration” and that will have no truck with it.
Miliband quotes the passage from Disraeli’s Sybil that prompted the notion of one nation Conservatism.
This issue still applies, he says.
A huge issue for all countries will be how they address the issue of rising inequality, he says.
These gaps are not just bad for the poor, he says. They are bad for all of us.
Miliband says losing has had it consolations.
He has been able to spend more time with his sons. And recently his six-year-old son said they would be save if there was a fire. Why, he asked. Because, when they rang the fire brigade, they would come because Miliband “used to be famous”, Miliband’s son said.
Ed Miliband's speech
Ed Miliband is speaking now.
He says he takes full responsibility for Labour’s defeat.
He says he congratulated the prime minister after the election, and he repeats those congratulations today.
Osborne announces £3bn in extra savings from departments
Osborne has also announced extra cuts to public spending this year.
- Osborne says government will save £4.5bn from departmental budgets this year. These savings are in addition to the £13bn already planned, he says. They will include savings from asset sales.
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Osborne says £3bn of the £4.5bn will come from finding “efficiencies” in Whitehall departments. That will include “good housekeeping”, and departments coming in under budget, he says.
Osborne says government to raise £1.5bn by selling remaining stake in Royal Mail
Osborne says the government will sell its remaining stake in the Royal Mail.
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Osborne says government to raise £1.5bn by selling its remaining 30% stake in the Royal Mail.
Osborne says government departments kept spending under budget in the last parliament.
Osborne is now turning to public spending.
As with any challenge, the sooner you get on with it, the better.
Here’s Ed Miliband listening to the debate.
Osborne says Labour has taken the unusual step of erecting the headstone before completing the post mortem.
Referring to Chris Leslie’s interview in the Observer at the weekend, he says Leslie has now abandoned most aspects of his party’s platform.
Leslie intervenes, and asks Osborne if he will keep the 45% top rate of tax.
Osborne says his tax priorities will be raising the basic rate threshold to £12,500, and raising the higher rate threshold to £50,000.
Osborne says we learnt yesterday that the UK has now the third highest employment rate of all the major economies.
Here is a live feed of Osborne’s speech.
Osborne says MPs will vote on the Queen’s speech tonight. He says at one point people thought there would be a minority government, which might not be able to win this vote. But now, thanks to the British people, he is confident of winning the vote.
Osborne also says it is good to see Ed Miliband in the chamber. He says Miliband is expected to speak later, and he commends Miliband for coming to the House of face MP. He also says that no one doubted Miliband’s “personal integrity”.
George Osborne's speech
George Osborne, the chancellor, is speaking now.
He says the government’s programme will bring security for working people.
We were elected as the party for working people and we will govern as a government for working people.
Chris Leslie is winding up now, with a soundbite.
[George Osborne] is cold and calculating. He is the iceberg chancellor, with hidden dangers beneath the surface.
Ed Miliband is in the chamber for the economy debate. Colleagues tell me that he is expected to speak in the debate. If he does, it will be the first time he has spoken in public since he resigned.
Ed Miliband looking very combative, a couple of rows back from the front bench, before Osborne begins to speak
— James Forsyth (@JGForsyth) June 4, 2015
Ed Miliband is back in chamber for Osborne's speech pic.twitter.com/yblVIsTR1q
— Emily Ashton (@elashton) June 4, 2015
Updated
The IFS produced its assessment of the impact of spending cuts on the basis of the plans already announced by the Conservatives. (See 11.41am.) Their assessment did not include the figures that George Osborne is set to announce within the next few minutes.
Here is the IFS chart saying what’s coming. I’ve taken it from the IFS slide presentation (pdf).
Leslie tells Osborne he should publish a Treasury risk analysis of the impact of leaving the EU.
Leslie describes the benefits cap as “necessary”.
And he asks Osborne to say whether he will keep the 45% top rate of tax. He offers to sit down, to let Osborne respond in an intervention. But Osborne stays silent.
My colleague Patrick Wintour says George Osborne will announce cuts worth £200m to local government, alongside the expected 5% cuts to non-protected departmental budgets.
£200m cuts to local government alongside the 5 % cuts to other non protected departments this year due to be announced George Osborne.
— Patrick Wintour (@patrickwintour) June 4, 2015
Economy debate
Chris Leslie, the shadow chancellor, is opening the Queen’s speech economy debate.
In a reference to George Osborne’s leadership ambitions, Leslie says that very few people serve two full terms as chancellor and that people will be glad that Osborne is not planning to do that himself.
In the Commons earlier Andy Burnham, the shadow health secretary, said the government was scrapping its 18-week referral-to-treatment target.
Raising a point of order, he said:
During this exchange, news has reached me that the secretary of state is in Liverpool announcing the scrapping of the 18-week target, presumably because they know they can no longer meet it.
Ben Gummer, the junior health minister, was in the chamber, but John Bercow, the Speaker, would not let him respond. Bercow told Burnham:
You have expressed your own concern forcibly in your own way and it’s on the record. It would not be appropriate to ask the minister to respond because we can’t have interrogation through point of order and the continuation of debate.
On the Daily Politics Lord Forsyth, the Conservative peer, said that MPs should accept their proposed pay rise.
Tory Lord Forsyth says "of course" MPs should accept payrise; should "bite the bullet" though he admits "difficult presentationally"
— Tim Reid (@TimReidBBC) June 4, 2015
Lord Forsyth on MPs taking pay rise: "Of course they should." Otherwise MPs will be people who "couldn't find a job anywhere else" #bbcdp
— Sam Macrory (@sammacrory) June 4, 2015
Osborne set to announce departmental spending cuts
The Queens speech economy debate is due to start in about 10 minutes.
George Osborne, the chancellor, will be speaking, and he is expected to announce some details of proposed spending cuts.
I will be covering his speech in detail.
Hearing that Osborne is about to announce five per cent cuts to all non-protected budgets this year. Statement coming at twelve.
— oliver wright (@oliver_wright) June 4, 2015
The 5% figure first emerged in this story in the Times last week (paywall).
George Osborne is seeking to cut the budgets of most government departments this year by an extra 5 per cent in a move that raises the chances of Britain missing a crucial Nato target for defence spending.
The Treasury has told each ministry, with the exception of health, education and international development, to find savings amounting to £3 billion or more before the budget on July 8.
The Ministry of Defence has been asked to find £1 billion of the savings, a move that defence sources warned would result in military training and possibly operational deployments being curtailed or cut. “The department is on budget so you would have to stop doing a lot of stuff,” one defence source with knowledge of the situation said. A saving of £1 billion by the end of March next year “would not be a thing you could just swallow and carry on”, the source said.
IFS accuses government being 'misleading' about impact of proposed spending cuts
Here are the main points he made.
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The IFS says the proposed departmental spending cuts will be more severe than the government suggests.
The cuts that the government announces later this year in next month’s Budget and the following Spending Review may turn out to be deliverable. But they certainly will not feel like is just 1% being taken out of each area of spending, nor will it require merely “£13 billion from departmental savings” as the Conservative manifesto described. While not inaccurate, these numbers give a misleading impression of what departmental spending in many areas will look like if the manifesto commitment to eliminate the deficit by 2018–19, largely through spending cuts, while not cutting spending in many areas, is to be met.
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It says David Cameron’s pledge this week to protect child benefit means other welfare cuts will be even deeper.
As this IFS observation published last week points out, finding the sought after £12 billion of cuts in just two years will not be easy. Cuts of this scale amount to almost 10% of unprotected benefits. Finding such a reduction without cutting child benefit, which has been pledged this week, would mean that even more significant cuts would likely be required to spending on one or more of tax credits, housing benefit and disability & incapacity benefits.
- It says departmental spending cuts will be deeper than in the last parliament.
To meet its overall spending target, even delivering the £12 billion of cuts to social security spending would still leave the government needing a slight acceleration of cuts to departmental spending, compared to what we have seen since 2010–11. As shown in the figure, the cuts would need to increase from the 2.0% a year seen over the five years from 2010–11 to 2015–16, to 2.2% a year over the three years from 2015–16 to 2018–19. This would give a total cut of £23.8 billion across all departments between 2015–16 and 2018–19. That’s on top of the £2.2 billion of cuts taking place in 2015–16 and the £49.2 billion of cuts delivered between 2009–10 and 2014–15.
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It says achieving departmental spending cuts will be harder in this parliament than it was in the last parliament.
The coalition government was successful in keeping (broadly) to the spending plans set out in 2010. However it was helped by lower-than-forecast nominal growth in private sector wages, which made it easier (at least economically) to constrain the public sector pay bill.
There are further reasons to think the next phase of cuts will be harder to deliver than those achieved since 2010. Presumably efficiencies that were easy to identify and to deliver have already been made. Similarly programmes judged to be low-value have already been scrapped. And, from next April, public sector employers will find the cost of offering their staff public service pensions rises as reduced National Insurance payments for contracting out end (£3.3 billion) and new scheme valuations push up the required employer contribution rate (£1.1 billion). On top of this, new spending commitments – such as the extension of free childcare (costed by the Conservatives at £350 million), the new tax-free childcare scheme (£0.8 billion), the removal of the cap on higher education student numbers (£0.7 billion) and the Dilnot social care funding reforms (£1.0 billion) – will further increase the cuts required elsewhere. Meanwhile demand for some public services – including social care – continues to rise as the population grows (and ages).
My colleague Heather Stewart has been at the Institute for Fiscal Studies and Institute for Government’s briefing about the spending review. She has been tweeting the highlights.
Carl Emmerson @TheIFS: Conservatives' welfare cuts target implies 10% a year cuts to "unprotected" areas - ie outside pensioner benefits.
— Heather Stewart (@heatherstewart3) June 4, 2015
Carl Emmerson cites cuts that cd meet target. eg. cutting child element of tax credits saves £5bn but wd increase child poverty by 300,000.
— Heather Stewart (@heatherstewart3) June 4, 2015
Carl Emmerson @theifs Cam's claim we just need to save £1 in every £100 "seriously underestimates the size of the challenge that we face".
— Heather Stewart (@heatherstewart3) June 4, 2015
Julian McCrae from @instituteforgov: greater pressures on spending now than in 2010. eg. public concern about NHS is growing.
— Heather Stewart (@heatherstewart3) June 4, 2015
David Miliband to address IoD conference in October
The Institute of Directors is not an organisation known for its keen interest in international development. But someone there had the bright idea of inviting the head of the American aid organisation, the International Rescue Committee, to speak at its annual conference in London in October. And he has accepted.
The IRC chief is, of course, David Miliband.
Miliband will be talking about globalisation. But his speech will be dissected for any sentiments relevant to the plight of Labour, and it will be hard not to see this as Miliband sticking his toe in the waters of domestic politics again, although he is likely to focus on the EU referendum. Some pro-Europeans would like to see him play a leading role in the what we now know will be the Yes camp (yes to staying in).
This is from Simon Walker, the IoD director general.
After a general election campaign which focussed narrowly on domestic issues, now is the time to look up at the global trends affecting business. With a referendum on Britain’s membership of the EU due before 2017, Greece lurching from crisis to crisis, and conflict on Europe’s borders, it couldn’t be a better time to review what globalisation means in 2015.
There are few people better placed than David Miliband to explore these issues, and we are delighted he will be joining us at the IoD’s annual convention. His time as foreign secretary and work with the IRC give him a unique perspective on the challenges of the modern world, and what they mean both for established businesses and entrepreneurs.
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ComRes unveils new polling method to better assess likelihood to vote
We have not heard much from the polling companies since the election, but ComRes has been in touch this morning, with the results of the first poll it has conducted since polling day.
It gives the Tories a 12-point lead. But what’s more interesting than the result is the methodology. ComRes has developed a new voter turnout model, which is intended to better assess how likely respondents are to vote. Like other polling companies, ComRes used to use a form of turnout weighting before the general election which involved asking people how likely they were to vote. If someone said 10 (out of a scale for 10), their “vote” counted for twice as much as someone saying their chance of voting was 5 out of 10.
But that form of turnout weighting clearly did not work particularly well for pollsters at this election. The new ComRes version is more sophisticated. This is how ComRes explains it in its news release.
This is the first poll using the new ComRes voter turnout model. The model simulates the likelihood of each respondent to vote based on their age and social grade. This has been calculated using actual general election turnout data on a constituency level and matches it with the known age and social grade profiles of the constituencies taken from the census. This will provide a more accurate reflection of the actual voting public.
And this is from Tom Mludzinski, ComRes’s head of political polling.
The polls at May’s general election tended to overestimate Labour’s support. At ComRes our review has uncovered that much of Labour’s backing was coming from groups that were less likely to actually turnout and vote than others. We’ve used this, along with official turnout data to build a voter turnout model which more accurately predicts who is more and less likely to vote, to ensure we’re getting the most accurate reflection of the voting public. The new Labour leader would do well to learn similar lessons, and concentrate on targeting those groups who are actually going to vote and where Labour has struggled in the past.
And here are the poll results.
Conservatives: 41%
Labour: 29%
Ukip: 10%
Lib Dems: 8%
Greens: 5%
Here is a chart from the latest Ipsa document (pdf) showing how MPs’ pay compares to the pay of other senior professionals.
These figures are based on MPs’ current pay.
The figures for total reward include, as well as annual salary, pension, medical benefits and company car benefits (where they apply).
IPSA first proposed a large pay rise for MPs in a long report in July 2013.
I covered the contents in great detail on a blog at the time. Here is the post explaining in detail why Ipsa said MPs should receive £74,000 a year.
Ipsa recently published a fresh consultation document on this (pdf). It runs to just 17 pages, and it considers whether anything has changed since 2013 that should affect its recommendations. It concluded that nothing had.
We remain of the view that it is right to increase MPs’ pay to £74,000 for all the reasons we set out in December 2013 and which we summarise above. Subject to any new and compelling evidence arising from this review, we therefore intend to implement the determination as currently drafted, with a one-off adjustment in MPs’ pay to £74,000 and subsequently linking it to changes in average UK earnings for the remainder of this Parliament. The increase would be backdated to 8 May 2015.
Angus Robertson, the SNP’s leader at Westminster, is also saying he would refuse to take the proposed pay rise for MPs.
SNP's @AngusRobertson will donate MP pay rise to charity. Labour leadership contenders will too. No wonder No10 submitting fresh IPSA letter
— Paul Waugh (@paulwaugh) June 4, 2015
I’d be interested to know what readers think about the candidates for the Labour leadership. I have seen people discussing this BTL for a few days now, but I would like to hear more views because I’m thinking of posting a round-up of reader opinion at some point in the future (if it’s doable and worthwhile).
I’m particularly keen to hear from people who are party members and planning to vote, but others are welcome to contribute too.
So I guess Philip Blond won’t be signing the change.org online petition opposing the proposed pay rise for MPs.
Philip Blond, head of the ResPublica thinktank, thinks Ipsa should be paying MPs even more.
Well done to @ipsaUK but in order to preserve democracy and make sure Parliament is not just the province of the already wealthy - pay more
— Phillip Blond (@Phillip_Blond) June 4, 2015
Indeed the wish to pay MP's less is a wish to emasculate democracy and deny it to successful talented people https://t.co/wYgIm9DOYX
— Phillip Blond (@Phillip_Blond) June 4, 2015
This inverse biding war by labour & lid dem leadership candidates on MPs pay is deeply depressing:- raising the barriers to political entry
— Phillip Blond (@Phillip_Blond) June 4, 2015
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There will be an urgent question in the Commons this morning on health.
An Urgent Commons Question has been granted to @andyburnhammp at 1030am to ask Jeremy Hunt for a statement on the NHS 'success regime'.
— Paul Waugh (@paulwaugh) June 4, 2015
Simon Stevens, the NHS chief executive, discussed his “success regime” - a plan for regulators to take charge of health services in three regions were hospitals are performing poorly - in a speech yesterday.
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No 10 to write to Ipsa demanding rethink over proposed 10% pay rise for MPs
We start the day with a mini U-turn. Earlier this week Downing Street indicated it would not be writing to the Independent Parliamentary Standards Authority again re-stating its opposition to the proposed 10% pay rise for MPs. But this morning, with public opposition to the planned pay hike getting stronger, Number 10 has changed its mind, and decided that someone will be putting pen to paper. A source said:
We’re writing a letter to Ipsa to reiterate we stand by the detailed submission we had already made to them last year saying we think this rise is wrong.
What prompted the change of heart? Perhaps this.
Thursday's Telegraph front page: MPs' pay rise splits Cameron Cabinet #tomorrowspaperstoday #bbcpapers pic.twitter.com/WCRvyw3vz7
— Nick Sutton (@suttonnick) June 3, 2015
And here are the stories that illustrate how the pressure is mounting up for David Cameron.
- Nicky Morgan, the education secretary, has criticised the planned pay rise and said that, if it gets implemented, she will give the money to charity. According to the Daily Telegraph, two unnamed cabinet ministers and Sir Eric Pickles, the former communities secretary, have said they would do the same. Cameron has not said that.
I will be reporting more on this row as it develops.
Here is the diary for the day.
9am: Ballot held to determine which MPs are given slots to present a private member’s bill.
10am: The Institute for Fiscal Studies and the Institute for Government holds a briefing on the spending review and the budget.
11am: Len McCluskey, the Unite general secretary, and Amelia Womack, the deputy leader of the Green party, are among the speakers at a briefing about the People’s Assembly anti-austerity demonstration on 20 June.
Around 11.30am: George Osborne, the chancellor, opens the Queen’s speech economy debate.
12pm: Nicola Sturgeon, Scotland’s first minister, takes questions in the Scottish parliament.
As usual I will be covering the breaking political news as it happens, as well as bringing you the best reaction, comment and analysis from the web. I will post a summary at lunchtime and another in the afternoon.
If you want to follow me on Twitter, I’m on @AndrewSparrow
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