Under scrutiny... Conservative Education Policy

Transcription

1 Under scrutiny... Conservative Education Policy

2 INDEX 2 Summary 3 George Osborne s judgement on health spending 6 George Osborne's judgement on the global financial crisis 6 Northern Rock 7 Banking (Special Provisions) Bill 8 Bradford and Bingley 9 Deregulation of the Mortgage Market 10 Short-selling and bankers 11 Increasing fuel duty by 5p Under Scrutiny George Osborne s Judgement 1

3 Summary George Osborne's judgement Whenever George Osborne has faced a test on the economy, his judgement has been wrong. Even on the most basic sums, he has made schoolboy errors in his health plans. As Shadow Chancellor, George Osborne has shown a willingness to create headlines on the hoof without care for the consequences to families and businesses. Nowhere is this clearer than in his approach to the global financial crisis: o Opposing the action we have taken on Northern Rock to stabilise the economy and ensure depositors are protected; o Opposing the Banking Bill; o Opposing the safeguarding of Bradford and Bingley; o Launching and welcoming a Conservative Party report at the start of the global financial turmoil which advocated the wholesale deregulation of the mortgage market; o Defending short selling as a function of capitalist markets" then suddenly attacking the failings of the bankers ; o Launching a fuel duty policy which garnered good headlines in July but which would mean today increasing fuel duty by 5p a litre hitting families and businesses hard at a time when they need our help. George Osborne s schoolboy errors and lack of judgement show why this is no time for a novice. Under Scrutiny George Osborne s Judgement 2

4 George Osborne s judgement on health spending 8 billion schoolboy error in health plans George Osborne has staked his economic reputation on the basis that every spending commitment that you will hear from the Conservative Party is fully costed. First of all on spending commitments, every spending commitment that you will hear from the Conservative Party is fully costed and paid for people know where the money s coming from. George Osborne, GMTV, 9 December 2007 The Conservatives have recently made a commitment to build 45,000 new single rooms across the NHS costing this proposal at 1.57 billion. So today I am announcing that within five years, under a Conservative Government, every patient will be given the opportunity to choose a single room when booking an operation in hospital. Andrew Lansley, speech to Conservative Party Conference, 29 September 2008 'Dignity and safety' - A major programme to ensure that single rooms are available for all patients who need one on grounds of medical safety or to maintain personal dignity... 'Real room choice' - All patients admitted to hospital for planned care will be able to choose whether they want to stay in a single room or on a bay while they are treated in hospital. Together these two commitments will mean: * Nearly doubling in the number of single rooms in the NHS after five years 45,000 more single rooms * An increase in the proportion of single rooms in NHS hospitals from 28 per cent to 55 per cent. * 1.57 billion of capital funding over five years to allow NHS hospitals to be able to provide patients with the accommodation that they choose. Conservative press release, 29 September 2008 However, George Osborne has made fundamental and basic errors in the costing of this proposal and subsequently made an 8bn unfunded spending commitment. George Osborne assumed that 45,000 new single rooms would cost 1.57bn. In fact the true cost of this policy, even on a cautious estimate, would be at least 9.51bn nearly 8bn more than he has budgeted for, as revealed in an answer to a Parliamentary Question asked by Shadow Treasury Minister Mark Hoban MP on 21 October Under Scrutiny George Osborne s Judgement 3

5 Mr. Hoban: To ask the Secretary of State for Health whether (a) his Department's officials and (b) NHS officials have been instructed to review the cost to the public purse of providing more single rooms within the NHS estate since 27 September [229048] Ann Keen: In October 2008 the Department's officials reported a capital cost estimate of about 9.51 billion (at Quarter prices) for providing 45,000 more single rooms, 211,401 per bed, while maintaining the existing bed capacity of the national health service estate. This costing was based on standard NHS costing methodologies. NHS organisations make decisions locally based on practical considerations such as site restrictions, affordability as well as clinical and operational limitations. Any national estimate must therefore make assumptions regarding the methods likely to be used for providing more single rooms and the likely cost effects of such methods. NHS officials have not been instructed by the Department to review the cost to the public purse of providing more single rooms within the NHS estate. Hansard, 28 October 2008, cmn 922W George Osborne used an inadequate method to cost their proposals. He based their estimate on a small number of FOI requests to NHS hospitals about the cost of recent single room conversions. A Conservative party press release gives details of six such requests, with a total net increase of 81 single rooms some way short of the 45,000 they want to build. "On the basis of the above examples, we have assumed that 35,000 per bed would be a cautious estimate of the cost of single room conversions. Therefore we have cautiously estimated the cost of building 45,000 single rooms would to be 1.57 billion, or 314 million a year over five years." Conservative press release, 29 September 2008 George Osborne s back-of-an-envelope costing method fails to take into account obvious factors which ought to have been considered: o The recent single room conversions they refer to are the most straightforward and cost-effective. All of them are in NHS Trusts which already have space suitable for conversion, and all are small in relation to each trust s total number of beds. In effect, they have estimated the cost of the low-hanging fruit, and assumed that this can be scaled up across the NHS. Small changes like these are fundamentally different from, and much cheaper than, making wholesale changes across the NHS estate. o George Osborne has failed to take into account the need to replace existing ward space and beds which would be disrupted when wards are converted into single room accommodation. This would be very expensive, but unless new temporary accommodation, as well as staff offices and admin rooms, are provided, the Tory plans would result in a massive and dangerous fall in the capacity of the NHS while building work was carried out. o George Osborne ignored the land costs of increasing NHS single room capacity. Some hospitals would be able to build additional capacity on existing sites but others, particularly in London, would incur significant extra capital costs. (Note that this extra cost is not part of the Under Scrutiny George Osborne s Judgement 4

6 government s 9.51bn costing so the true cost of the Tory plans could be substantially higher). Why has George Osborne allowed an 8bn unfunded spending commitment when he has staked his economic reputation as Shadow Chancellor on all Conservative spending commitments being fully costed? What does George Osborne expect to cut in public expenditure in order to pay for his error of judgement? Under Scrutiny George Osborne s Judgement 5

7 George Osborne's judgement and the global financial crisis Northern Rock After the Conservatives had shifted position a number of times, George Osborne introduced a policy of complete opposition to any nationalisation of the bank, saying he was not in favour of nationalisation, full stop. Instead, the Conservatives would have allowed Northern Rock to enter administration, with disastrous consequences for savers and for financial stability. Jim Cousins: Does he believe that a brief period of public ownership days, weeks or months would be in the taxpayer s interests? George Osborne: I am not in favour of nationalisation, full stop. Banking (Special Provision) Bill, House of Commons, 19 February 2008, Cmn185/ 186 Given the risks involved to depositors, other banks and the wider economy, does George Osborne regret being against nationalisation, full stop? As Shadow Chancellor, George Osborne, led the Conservatives opposition at Second and Third Readings of the Banking (Special Provision) Bill which gave the Government the powers to save Northern Rock by taking it into public ownership. Source: Second Reading of the Banking (Special Provision) Bill, 19 February 2008, Cmn 231, Division 81, Third Reading of the Banking (Special Provision) Bill, 19 February 2008, Cmn 295, Division No. 085 Does George Osborne acknowledge that he should have allowed his party to support the Government over the Banking (Special Provision) Bill to safeguard our financial system? Under Scrutiny George Osborne s Judgement 6

8 Banking (Special Provisions) Bill During the debate of the Banking (Special Provisions) Bill, George Osborne tried to amend the legislation to limit the time period with which the government could nationalise a failing bank from a month instead of a year. This would have prevented the Government from taking the action that it did over Bradford and Bingley. We will also try to reduce the extraordinary scope of this legislation, so that it will be exactly for the purpose for which we are told it is intended. If it is simply intended to bring about the nationalisation of Northern Rock and to get around the hybrid Bill procedures, the Government could easily reduce the length of time for which the legislation is to be active from one year to one month. We shall table an amendment to that effect. George Osborne, Banking (Special Provisions) Bill, House of Commons, 19 February 2008, Cmn 188 Whatever else we do, Sir Michael, I suggest that we cannot concede to this Government or to any Government the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) made this point earlier a standing power to nationalise banks and building societies. Shadow Chief Secretary to the Treasury, Philip Hammond, Banking (Special Provisions) Bill House of Commons, 19 February 2008, Cmn 255 Conservative amendment: Banking (Special Provisions) Bill, 19 February 2008, Cmn 259, Division No. 083 Does George Osborne acknowledge that if the Conservative amendment had been successful, it would have prevented the action the Government has taken on Bradford and Bingley? George Osborne s Shadow Treasury colleague Philip Hammond has now accepted that nationalising Northern Rock and Bradford and Bingley stabilised the structural problems which these banks were experiencing. We have a rather different situation in the UK, the banks which had structural problems have, I hope, largely been dealt with HBOS, Bradford & Bingley, Northern Rock we are looking now at banks which are basically perfectly sound institutions but they are caught up in the worldwide freeze of inter-bank lending and it is to deal with that problem that the British government has to focus on rather than I think individual institutions which is very much where the Irish and the German governments have been. Philip Hammond, BBC News, 06 October 2008 Why did George Osborne oppose all of the Government s actions to ensure financial stability even though his Shadow Treasury colleague now admits that, as a result, the banks which had structural problems have largely been dealt with? Under Scrutiny George Osborne s Judgement 7

9 Bradford and Bingley Like Northern Rock, when confronted with Bradford and Bingley, George Osborne was clear that the Conservatives would oppose nationalisation. But in the end what nationalisation means, nationalisation of the mortgages means, is that we are bailing out the very large institutions who took a bet, who lent money to B&B when times were good and made money out of it, and now that times have turned hard and the bets have turned bad, we re going to step in as taxpayers and bail them out, and I don t think that s the right thing to do. George Osborne, Sky News, 29 September 2008 George Osborne said his alternative plans for the failing bank would mean that at the end of the day if money had been lost, then it would be the big city institutions who had lent the money who would pay the price, not the people watching this programme. Charlie Steyt: So what would you have the government do? Let that part of the bank fold, I mean how would that work? George Osborne: Well I would put that part of the bank, the mortgages into a Bank of England organised administration in effect, and run the mortgage book down, and then at the end of the day if money had been lost, then it would be the big city institutions who had lent the money who would pay the price, not the people watching this programme. BBC Breakfast, 29 September 2008 However, directly contradicting George Osborne, Alan Duncan accepted that the Tory proposals would involve taxpayer liability. James Lansdale : But is there in your policy of Bank of England reconstruction an element still of taxpayer liability in the structure or do then creditors take all the risk? Alan Duncan: There s no way that there can not be some kind of tax liability, taxpayer liability but we want to minimise that and you know, that s what the government has a duty to do and we think this would be tidier. BBC News Channel, 28 September 2008 If George Osborne was right to say that the Conservatives policy on Bradford and Bingley would mean no taxpayer involvement, why did Alan Duncan say there would be taxpayer liability under the Conservatives proposals? Under Scrutiny George Osborne s Judgement 8

10 Deregulation of the Mortgage Market As the global financial turmoil began last year, George Osborne launched a report from his Party s Economic Competitiveness policy review which advocated the complete deregulation of the mortgage industry. "Mortgage regulation. We see no need to continue to regulate the provision of mortgage finance, as it is the lending institutions rather than the client taking the risk." Freeing Britain to Compete, Final Report of the Conservative Party Economic Competitiveness Policy Group, Published 17 August 2007 In financial services we should allow people to buy and sell products that are not regulated if they have signed to do so. Economic Competitiveness Policy Group, Chairmen s Presentation to David Cameron and Colleagues 26 September 2006 by John Redwood and Simon Wolfson George Osborne even highlighted the report in his speech to Conservative Conference. "The report from John Redwood and Simon Wolfson sets out how we liberate our economy to compete with the likes of India and China. Cut government regulation, planning restriction and red tape." George Osborne, Speech to Conservative Party Conference, 1 October 2007 Why did George Osborne specifically welcome John Redwood s plan to deregulate the economy when it included the complete deregulation of the mortgage industry? Under Scrutiny George Osborne s Judgement 9

11 Short-selling and bankers With the practices of City banks coming under greater scrutiny, George Osborne defended short-selling as the function of financial markets. Jeremy Paxman: When you see institutions short selling stocks and thereby aggravating the crisis, what do you feel? George Osborne: Well look no one takes pleasure form people making money out of the misery of others but that is a function of capitalist markets. Jeremy Paxman: I didn t ask you what the causes were, I asked you what you felt when you saw institutions short-selling and thereby aggravating an already serious crisis, is it acceptable or not? George Osborne: Well I just said at the very beginning of my answer to you that it is not pleasant to watch people making loads of money out of the misery of others but.. Jeremy Paxman: Is it acceptable? George Osborne: That is a function of financial markets. Look what is not acceptable is spreading of malicious rumour in markets and benefiting off short-selling. Newsnight, 17 September 2008 David Cameron joined George Osborne promising that he wouldn t just follow the crowd and say let us beat up the entire market system, let's beat up the City of London. It is very important in the midst of this crisis that politicians don't just follow the crowd and say let us beat up the entire market system, let's beat up the City of London. I don't begrudge people who earn a lot of money. You don't make the poor richer by making the rich poorer. David Cameron, Daily Mail, 27 September 2008 However, George Osborne s message to bankers was very different at Conservative Party Conference. But in the end the failures of the banking industry are the failings of the bankers. Perhaps there are some market ideologues who think that the money men can do no wrong. But I tell you this right now: I am not one of them. George Osborne, Speech to Conservative Party Conference, 29 September 2008 But I say this too. If you take risks, then you must bear the cost. If you pay yourself sums far beyond what anyone else does in any other walk of life, then be prepared to lose it when you make mistakes. If you pay out big dividends when you should be rebuilding balance sheets, then you will be held to account. George Osborne, Speech to Conservative Party Conference, 29 September 2008 Why have the Conservatives changed their rhetoric on the City of London despite David Cameron saying this is something they would not do? Under Scrutiny George Osborne s Judgement 10

12 Increasing fuel duty by 5p In July 2008, George Osborne launched a fuel duty stabiliser policy which would vary taxation on fuel based on changes to petrol prices. He said that, at that time, it would lead to a 5p cut in fuel duty. Andrew Marr: Sure, what would that mean for prices now? George Osborne: Well if for example we had introduced this system at the time of the last budget in March then fuel duty would currently be 5p less than it is today erm, that would be a substantial help to families who are struggling to fill up their car, struggling with food bills fuel bills and so on. The Andrew Marr Show, 6 July 2008 The principle of their plan is that "when fuel prices go up, fuel duty would fall. And when fuel prices go down, fuel duty would rise" (Conservative Party Policy Document, published by George Osborne, 6 July 2008, p3). This is regardless of the wider economic situation. Given the volatility of the global economic turmoil we are currently seeing, do the Conservatives still believe it is wise to set tax policy in such a way, regardless of the wider economic situation? The announcement received headlines such as: "TORIES VOW TO SLASH FUEL DUTY" Press Association, 6 July 2008 "TORY TAX CUT TO BEAT HIKE IN FUEL" The Sun,7 July 2008 "TORY TAX PLEDGE TO SHARE PAIN OF FUEL RISES" Financial Times, 7 July 2008 "WE'LL SLASH 5P OFF FUEL DUTY TO HELP FAMILIES SAY TORIES" The Express, 7 July 2008 Today, with the price of a litre of unleaded petrol at an average of around 98p, George Osborne s policy would force the Conservatives to put up fuel duty by 5p. This was calculated on the same basis as George Osborne s claim of a 5p cut. "The average price of unleaded petrol in the UK rose from 108p in April to 118p in June....if a Fair Fuel Stabiliser had been in operation that reduced the overall sensitivity of the public finances to oil prices, the Government could have used the windfall revenues from higher oil prices to reduce the tax of fuel by 5p. So instead of going up by 10p, pump prices would only have risen by 5p." Conservative Party Policy Document, p4 Current petrol prices are now on average around 98p (Source: cited by the Conservatives on page 7 of their Policy Document). Under Scrutiny George Osborne s Judgement 11

13 Calculating on the same basis as the Conservatives, this is 10p lower than in April. Under the Conservative policy, this would mean that the Conservatives would have to increase fuel duty by 5p. Do the Conservatives accept that if their policy had been introduced, as discussed by George Osborne, it would force them to now raise fuel duty by 5p? In their policy paper the Conservatives claim that in June their policy "would save up to 3.50 on each tank of fuel for a Ford Mondeo, or 2.60 for a Vauxhall Astra". Now, based on the same assumptions, rather than cutting the cost of each tank of fuel, their policy would increase the cost by 3.50 on each tank of fuel for a Ford Mondeo or 2.60 for a Vauxhall Astra. Will the Conservatives be highlighting this tax increase plan to the extent they were highlighting the policy when it was first launched? What do the Conservatives believe will be the impact on inflation? To what extent will the costs of this policy be borne by families? To what extent would the cost be borne by small businesses? Under Scrutiny George Osborne s Judgement 12

14 Under scrutiny... George Osborne s Judgement 0349_08 Promoted by Ray Collins, General Secretary, the Labour Party, on behalf of the Labour Party and reproduced from electronic media supplied by The Labour Party all at 39 Victoria Street, London SW1H 0HA.