Downing Street Says » Public Spending

Asked if the Prime Minister had made a mistake at PMQs this morning when he said that there would be a 0% rise in public spending, the Prime Minister s Spokesman (PMS) said that the Prime Minister had meant to refer to a 0.7% rise in current spending, which was clear when you looked at his second answer. The transcript showed clearly that the Prime Minister had meant to refer to a 0.7% rise in current spending, at which point he got interrupted and was unable to finish what he was saying. The Prime Minister then replied to the second question from David Cameron by saying that current spending would rise.

Put that the Prime Minister misspoke, the PMS said that that was correct and that the Prime Minister did not have an opportunity to correct what he had said because it was noisy in the Chamber and he was interrupted. However, when he replied to the second question he had an opportunity to clarify what he had said and made it clear that he had been referring current spending.

Asked to clarify the percentages that were talked about at PMQs, the PMS said that they were assumptions that changed and had changed in every Budget and Pre Budget Report (PBR). The assumptions that the projection for spending for the period beyond 2011 were based on was an assumption that public sector current expenditure would grow at 0.7% on average in real terms from 2011/12 to 2013/14.

Put repeatedly that that didn t explain why the Prime Minister had said 0% rather than 0.7%, the PMS said that the Prime Minister had been talking about a rise and the rise he referred to was the rise in current expenditure, which he made clear when he had an opportunity to reply to the second question when he said that he had told Mr Cameron previously that current spending would rise.

Put that the Prime Minister was not interrupted and that he misspoke, the PMS said that when the Prime Minister was talking about 0.7% he was referring to current spending. The first opportunity he had to clarify that current spending was what he had been referring to was during his answer to the second question. The interruption meant that he didn t have a chance at that point to finish what he had been saying.

Asked if the figures that the percentages were based on were the same figures the Prime Minister gave at PMQs three weeks ago, the PMS said that they were all based on the assumptions that were set out in the Red Book.

Asked what the difference was between an assumption and a projection, the PMS said that we made projections on the basis of assumptions and we made assumptions about individual components. The difference was that we had set an envelope for total spending for the period up to 2010/11 but we had not yet set an envelope for the period beyond 2010/11; we would do that at the time of the spending review when we were in a better position to be able to forecast debt interest and social security benefit for unemployment.

It was important to remember that projections could change, for example in the 2009 Budget the assumption for public sector current expenditure was a growth of 0.7% and in the 2008 PBR public sector current expenditure was projected to grow at 1.2%. Assumptions moved around from PBR to Budget but they only got set when we did the spending review and set the total limits on public spending and the division between departmental spending and other spending.

Asked what an envelope was, the PMS said that an envelope was the total limit of expenditure, which we set at the time of spending reviews.

Asked what the assumptions were based on, the PMS said that they were based on the forecasts that were set out at the time of the Budget, which were also assumptions that underpinned the public finance projections. It was all interrelated as we based public finance projections on the basis of assumptions about growth, which changed as well.

Asked when the spending review would happen, the PMS said that it was a matter for the Chancellor.

Put that the Government s assumptions assumed that total spending would in real terms be static, the PMS said that the figures were set out in the Red Book; these were assumptions that changed between Budgets and PBRs.

Put that the assumptions showed that there would be cuts, the PMS said that we had always made clear that we set our spending totals up to 2010/11. The period beyond that was a matter for the Chancellor and the spending review.

Put that there were no spending figures to rely on after 2010/11, the PMS said that we hadn t set the spending totals beyond 2010/11 and we had been clear that this would be the wrong time to have a spending review.

Put that there was no point saying the Government hadn t set out spending for beyond 2011 because the Prime Minister read out figures in the House of Commons three weeks ago, the PMS said that the Prime Minister read out the projections that were in the Red Book. We had not claimed that the figures the Prime Minister read out would determine what the spending review was going to be; we said at the time that we would not be setting the spending review. If you look back at the practise of all the previous spending reviews there was always a clear moment when we set out the total spending envelope and that was normally done in a Budget or a PBR.

Put that the figures had not come out of the Red Book and it was the first time anyone had heard them, the PMS said that they could be derived from the Red Book. We had not set the envelope for the total spending for the period beyond 2010/11.

Asked for some examples of the assumptions, the PMS referred journalists to the Budget, page 218, paragraph C4, Annex C, which set out the assumptions that underpinned the fiscal projections.

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» Wednesday, July 1, 2009

Public Spending

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