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Don't let Osborne wield his axe

The choice between the parties remains clear: prudence with a conscience from Labour, or indiscrimin

Whether it goes up or down, public spending will probably be the issue that dominates the next election, the outcome of which will determine whether the huge investment made over the past decade will be rolled back. We are fast approaching a moment of truth that will shape what sort of society Britain becomes.

Meanwhile, Labour has been falsely accused by the Tories, and by many in the media, of planning cuts in public investment. The last Budget, they claim, predicts severe cutbacks after 2011.

Public investment will indeed be higher this year than in each of the next four years. But Labour's critics have failed to notice that public investment is currently at a 30-year peak. As a proportion of national income, it is the highest it has been since the 1970s. In real terms, public investment spending is greater than in any of the past 40 years.

Bringing forward public investment projects has lifted capital spending a full 25 per cent higher than we expected in the 2008 Budget. Raising investment today means restraining it tomorrow. But the care homes and the schools still get built, only earlier, creating jobs and aiding economic recovery. After 2011 public investment will ease off. But in real terms, it will remain higher than in any year between 1977 and 2005 until 2013-2014, when it will still be double the share of national income that the Tories managed in their last year in office.

As we pull out of recession, slower public spending growth has to be the best strategy. The second decade of the 21st century cannot sustain the record rate of investment that the first one did, especially given the necessary spending on bank bailouts and coping with the global financial crisis. We need patience as well as prudence: some things will have to wait, although we will push hard for efficiency gains to ensure we have resources for the most pressing priorities. These are the kinds of difficult choices that every family, every firm, is facing now.

Labour's mission is to protect the most vulnerable, to do everything possible to protect people from the ravages of recession. That is what sets us apart from the Tories, who would leave everyone to cope on their own as best they could.

The global credit crisis has led to a dramatic drop in UK private-sector spending, putting jobs in jeopardy everywhere. At the start of this year, UK business investment was nearly 10 per cent lower than at the start of 2008. But David Cameron will not acknowledge that, had Labour not increased public spending to offset much of this fall in private-sector spending, the UK economy could now be sliding into a 1930s-style collapse: it does not fit his dogma. Yet tax cuts and public investment, along with stabilisers such as social security, have made the difference between a slowdown and a slump, between Labour constraint and Tory catastrophe.

The massive and immediate public spending cuts the Tories are demanding would choke off economic recovery before it had fully settled, condemning millions to needless suffering and increasing the very government borrowing and debt they say they want to reduce. And who knows exactly where Tory cuts would fall? Andrew Lansley, the shadow health secretary, let slip plans for 10 per cent cuts everywhere except health and international development. Schools, for example, would not be exempt from George Osborne's axe.

While David Cameron claims that the Tories would match some Labour spending plans, he also insists that Tory spending would always be less than Labour's. Their track record bears this out. In their last years in office they starved the public services of funds, investing only one-sixth of the amount Labour is committing this year.

Prospects for public investment are much brighter under Labour: trebling investment in affordable housing; bolstering UK flood defences; offering personalised care plans to people with chronic health conditions; providing more one-to-one support in schools for English and maths - and so on.

The choice between the parties remains clear: prudence with a conscience from Labour, or indiscriminate cuts from the Tories. Cuts would be only the start of rolling back Labour's achievements: shorter hospital waiting times, better schools, the 600,000 extra nurses, teachers
and other public service workers. It is high time progressive opinion awoke to this stark reality.

Peter Hain is Secretary of State for Wales and MP for Neath

Peter Hain is MP for Neath and a former Labour cabinet minister

This article first appeared in the 27 July 2009 issue of the New Statesman, On tour with the far right

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.