Cutting the NHS to fund defence is bad politics and bad policy

Raiding £500m from the health and schools budgets to fund defence might please Tory MPs but the voters won't like it.

David Cameron and George Osborne have long rejected calls from figures such as Vince Cable and Liam Fox to end the protection of health spending in order to limit cuts elsewhere. But the NHS ring-fence is looking less secure today. Ahead of June's Spending Review, the Telegraph reports that Philip Hammond is in talks with the Treasury about transferring up to £500m from the health and schools budgets to reduce the expected cuts to defence. The Defence Secretary, you'll recall, has previously publicly demanded that welfare is cut again to protect the MoD. But with the Lib Dems vetoing any further cuts to welfare (bar those to pensioner benefits, which David Cameron has pledged to protect), Hammond has been forced to look elsewhere. 

Cameron has already demonstrated his willingess to raid other departments' budgets to fund defence by suggesting that aid spending could be used to meet the cost of peacekeeping and other defence-related projects. It's thought that the government would justify any decision to divert resources from health and education to defence by pointing to the hundreds of millions of pounds a year the MoD spends on health care for armed forces personnel and the education of their children. But while the move will prove popular with Tory MPs, who are furious that defence is being cut by 7.5 per cent, while aid is being increased by 37 per cent, it is likely to be judged less favourably by the public. 

As a ComRes/ITV News poll published in February showed, health and education are the two most popular spending areas, with defence trailing in sixth place (behind police and law enforcement, welfare and transport). It was partly for this reason that Cameron and Osborne chose to ring-fence the NHS and schools budgets. At last week's PMQs, Cameron made much of his commitment to protect health spending, contrasting it with Labour's decision not to pledge to do so before the 2010 election. "The right hon. Gentleman’s answer is to cut NHS spending, whereas we are investing in it," he declared. A decision to now do otherwise would offer Labour an easy political hit. 

It is also doubtful whether the NHS, which is already required to make unprecedented efficiency savings of £20bn over four years, should be cut for the purpose of reducing cuts to defence. The above-average levels of inflation in the health service mean that it requires real-term increases in spending just to stand still. But under pressure from his recalcitrant backbenchers and the National Union of Ministers, Cameron may yet give away. 

David Cameron with British soldiers based at Lashkar Gah in Helmand Province, Afghanistan. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.