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3 December 2014

Balls uncovers black hole in Osborne’s NHS spending plan

Plan to fund extra £2bn a year through future underspends means spending promise is "a con", says shadow chancellor. 

By George Eaton

Where will George Osborne find the extra £2bn a year that he has promised the NHS? That was the question that most animated Ed Balls at his usual post-Autumn Statement briefing with journalists in parliament this afternoon. Osborne’s pledge, trailed at the weekend, had already been attacked by Labour as “spin” after it emerged that £750m of the £2bn due next year was money reallocated from within the Department of Health budget (for that reason p.65 of the Autumn Statement Green Book only lists £1.2bn of new funding). 

And with the sharp eyes of a former chief Treasury adviser, Balls spotted a new sleight of hand today. He noted that after the £1.2bn allocated in 2015-16 no further funding was detailed and that Osborne appeared to be relying on future underspends. 

The shadow chancellor said: 

They seem to have said today that this is going to come from underspends. But it’s very hard to spend prospective underspends as opposed to underspends that you have now, especially departmental underspends. How can you know if a department’s going to underspend in the future?

When you look at the table in their Autumn Statement 2.1, the memo item below the policy decisions, what you see is they’re raising slightly over £1bn from the foreign exchange fines and they’re spending that over four years, £295m a year on their GPs’ bit. But George Osborne said on Marr that was additional to the £2bn. When you look at the £2bn what you find is that in 2015-16 they’ve actually only allocated £1.2bn for the NHS, well, that makes sense because it’s not £2bn because the other £700m or so is reallocated. 

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But the question I asked Danny Alexander is ‘If you allocate £1.2bn there and then next year you have a gap, you have a gap every year, how can that be permanent? Where’s the money? If they’re doing stamp duty they allocate money ever year, on corporation tax they allocate money every year. On the NHS, they allocate £1.2bn and there’s a gap in each of the four years. Well, the answer is that they made no allocation for the NHS in future years, just £1.2bn. I asked Danny what was going on, are these underspends? He said ‘This will just be money that will be found in the overall numbers. 

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Balls went on to say that the tighter spending settlement announced by Osborne today meant it would be impossible to increase NHS spending by £2bn each year without even deeper cuts elsewhere. “The thing you can say absolutely, categorically: £2bn a year, permanently? It’s not here, it doesn’t exist, it’s a con,” he concluded.

Here’s the full quote: 

Question one: are they saying they’re going to give the NHS flat-real, like in this parliament, and they’re now going to give flat-real plus £2bn or £1.2bn? I’ve no idea. Secondly, for the future years, where’s the money going to come from?

It can’t come from departmental underspends in future years. The reality is, within what we now know is a tighter spending settlement than yesterday, there will be bigger cuts to disability benefits, or to police numbers, or to schools, or social care in order to pay for extra money for the NHS if in fact they’re doing this. The thing you can say absolutely, categorically: £2bn a year, permanently? It’s not here, it doesn’t exist, it’s a con.

It’s also worth noting Table 1.12 on p.8 of the OBR document, which reveals that the new money for the NHS in 2015-16 was allocated “after the economy forecast had been closed”, suggesting that it was a last-minute decision.