George Osborne settles defence budget ahead of Spending Review

A deal was done between the Chancellor and the Defence Secretary to settle the Ministry of Defence's budget for 2015-16 late on Saturday night.

The Ministry of Defence budget for 2015-16 has been agreed ahead of the Spending Review, George Osborne has said.

Speaking on the BBC's Andrew Marr Show this morning, he told stand-in presenter Sophie Raworth that the deal was done "last night" and defended how close to the wire these decisions are being made, saying that "in the past these things were often done the night before the spending round." To stick to his own economic plan, the Chancellor must announce £11.5bn of Whitehall cuts to Parliament on Wednesday.

The cuts agreed to by the MoD will result in the civilian headcount being reduced while the armed forces remain at the same level, BBC Political Editor Nick Robinson reported. Osborne has also said that the fines from the Libor bank interest rate-fixing scandal will go to schemes to benefit war veterans and their families.

Further complications became apparent this morning as seven former defence chiefs published a letter in the Observer, calling on the Prime Minister to resist pressure from the MoD to allow the military to dip into the aid budget to make up shortfalls elsewhere. They describe the ring-fenced aid budget as "critical to the UK's national interests".

Agreeing the cuts to the defence budget was a major hurdle for the Treasury to clear ahead of the Spending Review - as my colleague George Eaton wrote back in February, the idea that the MoD must find cuts while the aid budget remains ringfenced was a difficult pill to swallow for many Conservative MPs.

However, defence is not the last department to settle - Vince Cable's Department of Business, Innovation and Skills is still holding out. On the Marr Show, Osborne claimed that he and Cable were still "arguing about the small details" but denied that there was a "massive argument" going on with his Lib Dem cabinet colleague.

That isn't quite the story coming out of the Cable camp, however - the Observer reports today that the Business Secretary was in "no mood to back down in a dispute he regards as crucial to the government's economic credibility". The problem, it is suggested, is that the differences between Vince Cable and the Treasury run deeper than just quibbles over a few numbers here or there. Cable insists the coalition needs "a strong story to tell on growth" as well as emphasis on the necessity to cut. In accordance with this, he is reportedly pushing for investment in science, skills and training.

This is not a new direction for Cable. In an essay for the New Statesman in March 2013 entitled "When the facts change, should I change my mind?", he set out his hesitations with the coalition's economic policy, particularly in the area of growth and capital spending. He wrote:

The more controversial question is whether the government should not switch but should borrow more, at current very low interest rates, in order to finance more capital spending: building of schools and colleges; small road and rail projects; more prudential borrowing by councils for housebuilding.

Osborne is expected to put some emphasis on infrastructure spending in Wednesday's Spending Review, but Cable seems to be holding out for specific investment for his own department.

Exactly when, and how, Cable and Osborne will be able to resolve what appear to be fundamental intellectual differences, remains to be seen.

George Osborne. Photograph: Getty Images

Caroline Crampton is assistant editor of the New Statesman. She writes a weekly podcast column.

Photo:Getty
Show Hide image

Why isn't Labour putting forward Corbynite candidates?

Despite his successes as a candidate, the organisational victories have gone the way of Corbyn's opponents. 

The contest changes, but the result remains the same: Jeremy Corbyn’s preferred candidate defeated in a parliamentary selection. Afzhal Khan is Labour’s candidate in the Manchester Gorton by-election and the overwhelming favourite to be the seat’s next MP.

Although Khan, an MEP, was one of  the minority of Labour’s European MPs to dissent from a letter from the European parliamentary Labour party calling for Jeremy Corbyn to go in the summer of 2016, he backed Andy Burnham and Tom Watson in 2015, and it is widely believed, fairly or unfairly, that Khan had, as one local activist put it, “the brains to know which way the wind was blowing” rather than being a pukka Corbynite.

For the leader’s office, it was a double defeat;  their preferred candidate, Sam Wheeler, was kept off the longlist, when the party’s Corbynsceptics allied with the party’s BAME leadership to draw up an all ethnic minority shortlist, and Yasmine Dar, their back-up option, was narrowly defeated by Khan among members in Manchester Gorton.

But even when the leadership has got its preferred candidate to the contest, they have been defeated. That even happened in Copeland, where the shortlist was drawn up by Corbynites and designed to advantage Rachel Holliday, the leader’s office preferred candidate.

Why does the Labour left keep losing? Supporters combination of bad luck and bad decisions for the defeat.

In Oldham West, where Michael Meacher, a committed supporter of Jeremy Corbyn’s, was succeeded by Jim McMahon, who voted for Liz Kendall, McMahon was seen to be so far ahead that they had no credible chance of stopping him. Rosena Allin-Khan was a near-perfect candidate to hold the seat of Tooting: a doctor at the local hospital, the seat’s largest employer, with links to both the Polish and Pakistani communities that make up the seat’s biggest minority blocs.  Gillian Troughton, who won the Copeland selection, is a respected local councillor.

But the leadership has also made bad decisions, some claim.  The failure to get a candidate in Manchester Gorton was particularly egregious, as one trade unionist puts it: “We all knew that Gerald was not going to make it [until 2020], they had a local boy with good connections to the trade unions, that contest should have been theirs for the taking”. Instead, they lost control of the selection panel because Jeremy Corbyn missed an NEC meeting – the NEC is hung at present as the Corbynsceptics sacrificed their majority of one to retain the chair – and with it their best chance of taking the seat.

Others close to the leadership point out that for the first year of Corbyn’s leadership, the leader’s office was more preoccupied with the struggle for survival than it was with getting more of its people in. Decisions in by-elections were taken on the hop and often in a way that led to problems later down the line. It made sense to keep Mo Azam, from the party’s left, off the shortlist in Oldham West when Labour MPs were worried for their own seats and about the Ukip effect if Labour selected a minority candidate. But that enraged the party’s minority politicians and led directly to the all-ethnic-minority shortlist in Manchester Gorton.

They also point out that the party's councillor base, from where many candidates are drawn, is still largely Corbynsceptic, though they hope that this will change in the next round of local government selections. (Councillors must go through a reselection process at every election.)

But the biggest shift has very little to do with the Labour leadership. The big victories for the Labour left in internal battles under Ed Miliband were the result of Unite and the GMB working together. Now they are, for various reasons, at odds and the GMB has proven significantly better at working shortlists and campaigning for its members to become MPs.  That helps Corbynsceptics. “The reason why so many of the unions supported Jeremy the first time,” one senior Corbynite argues, “Is they wanted to move the Labour party a little bit to the left. They didn’t want a socialist transformation of the Labour party. And actually if you look at the people getting selected they are not Corbynites, but they are not Blairites either, and that’s what the unions wanted.”

Regardless of why, it means that, two years into Corbyn’s leadership, the Labour left finds itself smaller in parliament than it was at the beginning.  

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.