On 9th December 2009 Alistair Darling, the then Labour chancellor, delivered his pre-budget report. This was effectively a budget update or minibudget.
Darling’s speech on the pre-budget report was a massive snow job. He mentioned the word investment 21 times but failed to spell out that he was more than halving net public investment. Darling talked about the 2009/10 peak in public investment but didn’t care to mention that it was about to come to a juddering halt.
This year public sector investment reached a 30-year high and has delivered over 70 road and motorway schemes, and improved journey times across the rail network.Work is now underway on Crossrail, the Thameslink project, and from this month, the upgrade of the M1. All this work will continue.
In a fiscal crisis capital spending programmes are always an easy target. You can make a big impression on the finances without visiting any immediate pain on electors. In order to reclaim some financial credibility Darling savaged the capital programme in the dying days of the Labour government. He failed though to identify which programmes would be trimmed or by how much.
If you go to table B13 on page 189 of the December 2009 Pre-Budget Report you can see how public sector net investment was due to be more than halved by Darling, see below (click to enlarge). Look at the net investment line which goes from £50 billion in 2009/10 to £22 billion in 2013/14. £28 billion a year of spending is taken out of the economy. This was the equivalent of taking net public investment from 3.5% of GDP to 1.3%. This was the first, rather obscure plank, of Darling’s three point austerity plan for a 2010 Labour government.
Darling’s cuts were so shocking that in his own budget speech in June 2010 the new Tory chancellor George Osborne 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.
To give you an idea of how venal Labour was in discussing capital take this piece from the Guardian which starts “Michael Gove today cancelled Labour’s school building programme”. It confirms that the ludicrous Building Schools for the Future (BSF) programme was to be ended and confirmed that the overall scope of the programme was to spend a colossal £55 billion over 20 years. You can read about what a mess BSF was in the James Report. Note the quote from Ed Balls:
Today is a black day for our country’s schools, it is a damning indictment of this new Tory/Liberal coalition’s priorities and a shameful statement from this new secretary of state.
As the previous secretary of state and a former treasury minister he knew exactly who had savaged the capital programme and it wasn’t Michael Gove.