Chancellor runs out of road – FactCheck
The claim
“We are spending more on capital than the plans set out by Alistair Darling.”
George Osborne, chancellor, House of Commons, 29 January 2013
The background
How much we invest on roads, rail and construction has sparked the latest war of words between the three parties.
Last week, Nick Clegg said he was going to be “self critical” and admit that the government hadn’t spent enough on infrastructure. “We comforted ourselves at the time that it was actually no more than what Alistair Darling spelled out anyway,” he said.
Not true, said Labour. At Treasury Questions on Tuesday, Rachel Reeves, the shadow chief secretary to the treasury, brandished figures suggesting the coalition government was spending less on infrastructure than Labour had planned to.
She said: “It is simply not correct to say that the Government have matched the plans of [Alistair Darling]. The Office for Budget Responsibility say that in the first three years this Government is spending on infrastructure £12.8bn less than the plans that they inherited. It is £6.7bn lower in this year alone.”
The Tories didn’t like it. George Osborne even accused Ms Reeves of “not being completely straight” and was rebuked by the speaker for it. You can watch the exchange here:
He corrected himself and said she’d been “creative in the use of the numbers that she’s put before this parliament”.
“The number she’s using is the amount of money Labour was spending on capital before the General Election, but they set out plans to cut capital spending after the general election,” he said.
“We have exceeded those plans,” he said, “and it is completely hypocritical for the Labour party to claim that it would have spent more on capital when it clearly would not have.”
Who’s right? FactCheck’s done some sums.
The analysis
Labour are using figures from the Office for Budget Responsibility (OBR) and Treasury figures contained in the public finances databank to make their claim.
Economists are divided on what defines infrastructure spending – is it just new projects such as energy investment and roads, or is maintenance included? Civil servants and politicians tend to refer to capital spending – which covers both.
Labour said that from 2010-11 to 2012-13, it had planned to spend £160.4bn on public sector gross investment, as set out in the OBR’s June 2010 pre-budget report.
They’ve then used the Treasury’s figures to show that in their first year, the coalition government spent £58.1bn on the same thing.
For the next couple of years, according to the OBR’s Economic and Fiscal Outlook, spending on capital investment was £47.8bn in 2011-12, and forecast to be £41.7bn for 2012-13.
Which means that in the first three years, if the OBR’s forecast for the current year is correct, their spending on infrastructure has been £147.6bn.
That’s the “£12.8bn less on infrastructure” to which Ms Reeves refers.
It is, however, slightly unfair to include the current year’s figures. After all, the current year is still ongoing – essentially, the coalition’s spend for 2012-13 remains a forecast until April.
It would be more accurate to compare 2010-11 and 2011-12, which are complete.
For the first year, Labour had planned to spend £61.3bn, and £50.7bn in 2011-12 – a total of £112bn. The public finances database and the OBR suggest that during these years, the coalition had spent £105.9bn.
Which means that the coalition has spent £6.1bn less over the last two years than what Labour had planned for over the same period.
It’s also worth mentioning that these figures are updated all the time, and the OBR concedes that the figures produced in their December 2012 report had since been revised by the Office for National Statistics.
The revised figures show that during 2010-11, £58.151bn was spent on public sector gross investment. The following year, £49.137bn was spent – a total of £107.288bn.
Which means that for up to date figures, the coalition has spent £4.712bn less than what Labour had said they intended to spend.
The verdict
Latest figures from the ONS show that Mr Osborne’s claim to have spent more on infrastructure than what Labour had planned is wrong.
Labour had forecast £112bn for infrastructure for the previous two years; the coalition has spent £107.3bn over the same period.
We put this to the Treasury, who said that they’d boosted spending on infrastructure by £17.9bn since coming to power. FactCheck pointed out that even after the “extra spend” over the completed years was taken into account, they’d still come up with a lower total. It’s also more accurate to say they’d cut less deeply than to claim they’d boosted spending.
The Treasury also said that it wasn’t fair to compare Labour forecasts with actual coalition spend. Until we pointed out that that’s what Mr Clegg, Ms Reeves and Mr Osborne had all done.
When we asked the Treasury for a response as to why Mr Osborne had claimed the coalition government had “exceeded the plans” set out by the last government, they offered none, simply saying that it was clear the chancellor had been referring to spending plans for the entire Parliament.
What is worth a look, however, is how much the two sides had planned to devote to infrastructure spending as a proportion of GDP, as that indicates the economic context and takes inflation into account.
Alastair Darling’s March 2010 budget shows that Labour had forecast a cut in spending on infrastructure, from 4.1 per cent of GDP in 2010-11 to 3.3 per cent the following year.
In the event, just under 4 per cent of GDP was invested in infrastructure in 2010-11 under the coalition government, dropping to 3.1 per cent the following year. A difference of 0.2 per cent, which on that scale, means relatively little.
So in the bigger picture, no-one can really claim the crown of being the greatest cheerleader for investment in infrastructure.
By Fariha Karim
Update:
On Wednesday evening, Chris Leslie, Labour MP for Nottingham East, referred to the above post in the House of Commons and asked the deputy speaker, Nigel Evans, whether he had been “given any notice that the Chancellor is available to come to the House this evening to apologise again for getting his facts completely incorrect”.
Doesn’t look like it. “I have been given no notification that the Chancellor…will make a statement from the dispatch box this evening,” Mr Evans replied.
There are 5 comments on this post
When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean – neither more nor less.’
Apologies to Lewis Carrol but it looks like Humpty Dumpty and George Osborne have much in common.
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That is becoming increasingly true across the political spectrum. Regrettably politicians, who are supposed (he wrote with a cynical scepticism) to represent us, seem to think that this sort of thing encourages them (a) to vote (b) for them, when actually it just turns people off. I don’t think any politician udnerstands that the first party to tell the truth – unvarnished, without spin, misleading claims, exaggeration, etc – would walk the next election.
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Cathy/Fariha,
This is getting monotonous: Thank you for telling the truth and exposing politicians lies yet again.
Actually, we can all save ourselves a lot of time by assuming all politicians are liars in everything they say. There may be a few honourable exceptions (Tom Watson, Chris Bryant, George Galloway) but for the most part they are lying, bullshitting humbugs. The higher they get in the pecking order the worse they get.
So far not one of the tory/LibDem/New Labour paymaster bankers has seen the inside of a jail cell. And they are the ones who bankrupted Europe and the USA.
But please do keep up these FactChecks. You may get it wrong occasionally or sometimes indulge in sophistries, but they are of inestimable help to non-politicians and other citizens trying to get on with their lives in the face of the shysters, liars and spivs who infest the Houses of Parliament.
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Aren’t Labour and you using the wrong baseline?
The Labour plans surely were in the 2009 PBR? This was when Darling slashed public sector net investment by half (the budget was for gross investment to reduce 35% and net investment to reduce 55%).
If you look at Table B13 on page 189 then the baseline has to be £158 billion for 2010/11 to 2012/13 – click here:
http://www.official-documents.gov.uk/document/cm77/7747/7747.pdf
In his June 2010 budget Osborne said that as the Labour capital budget cuts were so extreme he couldn’t cut here and put a couple of £ billion back in. He said:
“We have faced many tough choices about the areas in which we should make additional savings, but I have decided that capital spending should not be one of them.
There will be no further reductions in capital spending totals in this Budget.”
If you have been around public sector finances you will know that capital always slips. You put a budget in and you rarely spend it because projects always take longer than you think.
What has happened here is that Osborne knows he has increased the capital budget over Darling’s harsh cuts (that Labour deny). Speaking off the…
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Continued: .. top of his head he may not have realised that capital slippage has meant that the out turn is slightly worse than the Darling capital budget. Labour would have underspent too. You always do.
Osborne should have had a better grasp of his facts. Labour are trying to obfuscate the fact that it was Darling that halved public sector net investment. Every time that Labour people talk about capital spending cuts they lie about it being them that took the axe to the capital budget in the first place. When Darling made the cuts he knew that it was a way to be financially prudent without the public feeling the pain until after the election. Great plan. It worked. The Tories get blamed for Darling’s capital budget cuts.
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