Phil Taylor

Ealing Council Leader Julian Bell is often ridiculed by the Conservative group on the council because he once claimed to be a trained economist.

For myself I am not a trained economist, unless you count a grade C O-level taken in the seventies. I can read though and I have a good memory and figures don’t scare me so it is very easy for me to take apart someone who really does not know what they are talking about.

Yes, you Cllr Bell.

This week the Ealing and Acton Gazette published piece from Cllr Bell which underlines how far from any connection with economic reality Cllr Bell is. The piece is a defence of the Labour cabinet’s decision to turf the IMPACT Theatre Company out of their current premises. Cllr Bell uses the “big picture” to justify this move and in doing so comprehensively demonstrates that he doesn’t get it. The next few postings look at some of his statements in detail.

After a couple of introductory paragraphs Cllr Bell says:

Firstly let me say that this was just the first of many very difficult decisions that we as a Labour Council will have to make in the next four years. They are decisions that we would prefer we did not have to make but we are being forced into them by the Coalition government who have embarked on this ideologically driven and reckless plan to clear off the national debt in five years.

Bell’s first mistake is to confuse the national debt (what we owe) with the deficit (how much we are adding to what we owe in the year). In his budget speech Tory chancellor George Osborne talked about eliminating the structural deficit by the next election.

The structural deficit is not the whole deficit but an estimate of what part of it is “built in” and will not be squeezed out by resumption of trend economic growth. The structural deficit is the irresponsible bit of the deficit – the spending your kids’ inheritance bit of the deficit.

In May the OECD reckoned that the UK had the worst structural deficit in the OECD. Not quite sure what is “ideologically driven and reckless” about tackling that! Funny how easily the evil Tories got the lovable LibDems to sign up to their deficit reduction plan. Maybe Cllr Bell is just on the wrong side of the argument?

Does Cllr Bell know what the deficit is? Probably not. In the last financial year it was £155 billion. Don’t glaze over. That is about £5,000 for everyone who works in the UK. Let me repeat, the Labour legacy to the working people of Britain was to borrow £5,000 on each of their behalfs in just one year. In the current year it is due to be £149 billion. Pretty much another £5,000.

Cllr Bell then reaches for his tin helmet and starts making references to the Second World War:

Incidentally by comparison the national debt after the Second World War was a much higher percentage of GDP than we have now and it took until 2003 to pay it off. Did the 1945 Labour government start slashing public investment to cut the national debt? Of course not – it built the National Health Service and the welfare state in the teeth of Tory opposition.

Thankfully our debt now is only a fraction of what is what at the end of the Second World War although it is rising with shocking speed, at a rate of £155 billion per annum (the deficit). But then we had just fought the defining conflict of the 20th century and lost about half a million killed. How can Labour have ramped up our debts so high in peacetime? Whatever you think about the world wars they were BIG. How have a few five-a-day co-ordinators got us to this? It is not as if the Iraq and Afghan wars are what is driving our debt.

Bell is right that we stopped re-paying war debt in 2003 but that did not mean that we had paid off the national debt. Coincidentally it was in about 2003 that Labour started to really open the spending sluices.

Bell is just wrong about public spending at the end of the war; it fell precipitously. It fell as low under the post-war Labour government as a proportion of GDP as it did under Margaret Thatcher in the early eighties. Incidentally the reason that Labour could “afford” to create the NHS is that it merely appropriated the existing health infrastructure from charities and local authorities. Much of the “Tory opposition” related to this appropriation. Imagine if the government turned around today and said we are going to appropriate your pension assets and give you a state provided pension instead. Would you feel that the government had done you a favour or merely stolen your assets?

Finally, one of the main reasons that our exploding debt is so dangerous is the similarly exploding debt service costs. The budget papers showed these doubling in five years from £31 billion in 2009/10 to £63 billion in 2014/15.

Cllr Bell then goes on to talk about schools, or particularly Ealing part of the BSF programme. He says:

On top of this we have had the majority of our “Building Schools for the Future” funding brutally cut, meaning that we do not have any government money for the new High School in the north of the Borough or for 15 other High School building improvements including much needed Special Educational Needs provision – a particularly mean and cruel aspect of the Secretary of State’s decision.

He does not say who “brutally” halved the country’s capital spending plans so “meanly and cruelly”. It was of course the previous Labour chancellor Alastair Darling. Darling will I think be judged by history as one of the more honourable members of the Labour government. Unfortunately he was not quite honourable enough to spell out the implications of halving the country’s capital spending in December last year when he had the chance at the Pre-Budget Report.

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 halved by Alastair Darling, see below (click to enlarge).

Darling made such a shocking cut to the country’s capital spending programme that during George Osborne’s budget speech 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.

But we will still make careful choices about how that capital is spent. The absolute priority will be projects with a significant economic return to the country. Assessing what those projects are will be an important part of the autumn spending review.

BSF was always going to get axed whoever won the election. It was a dumb programme – its objective was to replace every secondary school in the country regardless of its current state and regardless of whatever other priorities there were. In addition to being unaffordable it was also unecessarily complicated and produced expensive, over-engineered but dull looking schools but that is another argument. Michael Gove’s mistake in announcing the curtailing of this programme was not to spell out that it was Darling’s cut. A much smarter, and necessarily smaller, schools building programme will emerge from the autumn spending review.

Cllr Bell goes on to attempt to evoke a spurious folk memory of the dark days of the Tories:

We have a shortage of High School places of over 3,000 and a need for an extra 29 – 34 forms of entry at Primary level (each costing £4.5 m to accommodate) in the coming years. As a Council we have a legal and moral duty to provide school buildings for our children and we do not want to go back to the Tory past of freezing, leaking portable cabins but we are going to have our work cut out given our lack of financial resources.

As with most of the rest of what he says this is nonsense too. Go and look at Treasury figures for public sector gross investment as a percentage of GDP here.

You will see that whilst the Tories probably cut investment too much in the late nineties (a trajectory maintained by Labour for four years after they came into power) they consistently invested much more than Labour under the mendacious Gordon Brown ever did. Of course Brown always confused current spending with capital spending. But the facts are that in eighteen Tory years average public sector gross investment was 4.3% of GDP. Under the first twelve years of Labour it was 2.7% of GDP. Cllr Bell is wrong again but by now we are perhaps not surprised.