Osborne: cutting the NHS, not the deficit

Conservatives ordered to correct NHS spending claims as Osborne prepares to announce higher borrowing this year.

"I'll cut the deficit, not the NHS", declared the Conservatives' memorable poster of David Cameron at the last election. But today, as he prepares to deliver his Autumn Statement at 12:30pm, George Osborne stands accused of doing the reverse: cutting the NHS, not the deficit.

With exquisite timing, the chair of the UK Statistics Authority, Andrew Dilnot, has written to the Health Secretary, Jeremy Hunt, challenging his claim that spending on the NHS has risen in real terms "in each of the last two years". In response to a complaint from the shadow health secretary, Andy Burnham, Dilnot concludes that, contrary to recent Conservative statements, "expenditure on the NHS in real terms was lower in 2011-12 than it was in 2009-10". The most recent Treasury figures show that while real terms spending rose by 0.09 per cent between 2010-11 and 2011-12, it fell by 0.84 per cent between 2009-10 and 2010-11. In other words, Hunt is wrong to claim that the NHS has received real-terms increases "in each of the last two years".

In fairness, Dilnot rightly goes on to note that "given the small size of the changes and the uncertainties associated with them, it might also be fair to say that real terms expenditure had changed little over this period." But the point stands: the Tories promised real terms increases in NHS spending in each year of this Parliament (routinely attacking Labour and the Liberal Democrats for refusing to do the same) and they failed to deliver.

As for the deficit, Osborne will almost certainly be forced to announce that he'll miss his deficit target for this year (£119.9bn) by as much as £30bn. For the first time since the Chancellor entered No. 11, borrowing is set rise in annual terms, a significant blow to his narrative of "balancing the books". Worse, confronted by OBR forecasts showing already anaemic growth becoming even weaker, he'll likely abandon his target to have the national debt falling as a share of GDP by 2015-16 and announce that an austerity programme originally intended to last for five years (2010-2015) will now last for eight (2010-2018).

The Tories will now enter the election with debt rising as a percentage of GDP, not falling. The Chancellor is right to abandon his second fiscal rule (the first - to eliminate the structural deficit over a rolling, five-year period - is likely to be narrowly met), rather than announce even greater tightening, but he has indisputably failed on his own terms. Based on the current trend, Osborne will announce in his 2014 Autumn Statement that austerity will last for another full parliament - until 2020. To paraphrase Cameron, the bad news will keep coming.

George Osborne pictured at the launch of the Conservatives' general election campaign on 4 January 2010. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.