Our number one priority in Government has been to fix the economic mess we inherited from Labour. Today, we set out a Spending Round that delivers Liberal Democrat priorities on investment and improving our public services while making responsible choices to deal with the financial problems Labour left us. It demonstrates that the Liberal Democrats will remain firm in our commitment to tackling the deficit, but fair in the way we go about it.
When we entered Government in May 2010, we inherited from Labour an economy that was on the brink. We set out a plan to get our economy on the road to recovery by dealing with the largest deficit of our peacetime history. Three years on and the deficit is down by a third, 1.3m private sector jobs have been created, and by keeping interest rates low we have helped businesses and homeowners across the country. Over those past three years it is the Liberal Democrats who have worked in Government to deliver a stronger economy and a fairer society. Whether it’s Vince Cable delivering one million more apprenticeships, or Nick Clegg’s relentless focus on creating jobs outside of London through the regional growth fund, or my own role in the Treasury where next April we will have delivered a £700 tax cut to over 24m people, the Liberal Democrats have demonstrated that we are a party that can be trusted to manage the economy. But continuing to do the right thing means taking tough decisions about the future.
Our current spending plans only cover the period up to April 2015 – one month before the General Election. It doesn’t matter whether it is one month or one day, the Liberal Democrats will not allow this country to slip back into economic uncertainty. That is why we are setting out plans today for the amount of money we will give to departments in 2015/16. Unlike previous Spending Rounds, we are only setting out plans for one year. That means that at the General Election we can campaign on our priorities without being tied into decisions about departmental spending for a whole Parliament.
Our economy is starting to recover, but we still have a long way to go. The Liberal Democrats are committed to finishing the task, creating jobs and making Britain’s economy strong again. As part of the Spending Round, we are reducing the amount departments will have to spend in 2015/16 by £11.5bn. Getting to that point has involved making some tough choices about how we spend taxpayers’ money. But by spending less money on Whitehall admin and taking difficult decisions on things like public sector pay, we can spend more money in areas to provide growth and protect key services like the NHS and schools.
We will deliver £5bn of further efficiency savings through stopping wasteful spending, transforming services such as HR administration and IT support. And by ensuring that the Government acts effectively as a single customer when it buys goods and services, we will be able to save £1bn a year. Liberal Democrats have long argued for the long term benefits of investment in infrastructure. So we will reinvest £3bn of the money saved from departments to increase capital spending plans by £3bn per year from 2015-16 – that’s a total of £18bn over the next Parliament. This will boost investment in infrastructure to support economic growth at the same time as ensuring a sustained reduction in the deficit. You’ll hear more on that from me tomorrow when I will set out in Parliament the detail of the long term capital plans for each department and how we will prioritise investment in infrastructure to deliver a stronger economy in a fairer society.
The Liberal Democrats have been clear that we will not balance the books on the backs of the most vulnerable. That is why this Spending Round includes proposals to keep our promises to protect health and schools spending in real terms, continuing with the Liberal Democrat pupil premium to provide extra funding for deprived pupils, delivering on Nick Clegg’s proposal to provide 40% of disadvantaged two year olds with 15 hours of free childcare, and sticking to our promise to spend 0.7% of our GNI on international aid. As I announced on Monday, we will be investing an additional £200m as part of a massive expansion of the Coalition’s groundbreaking Troubled Families programme to provide intensive help to 400,000 families to get to grips with their problems and change their lives for better. And we are also investing an extra £2bn from the NHS for local health and social care systems to meet the needs of older and disabled people, including a £1bn incentive to improve the way services are delivered. This extra money will help health and social care to work more closely together in local areas to deliver better services to older and disabled people, keeping them out of hospital and in their homes for longer.
Cutting public spending is never easy. And yes, we have to make tough choices. But the worst thing to do would be to burden future generations by not tackling the debts that Labour left us. If we want to protect our party’s economic credibility, that is just not an option. That’s my message for today. Tomorrow’s message will be about delivering on Liberal Democrat priorities for investment when I’ll be setting out the decisions we have taken on infrastructure to make Britain’s economy strong again.