Treasury Minister rules out austerity despite ‘record cost’ of public services

22 November 2020, 11:39

By Megan White

Chief Secretary to the Treasury Steve Barclay has ruled out a return to austerity despite the "record cost" of public services.

Mr Barclay told LBC's Swarbrick on Sunday "significant investment" has been made into public services but we've "got to get the balance between supporting public services and how we afford that."

The Conservative MP said there would "not be a return to austerity" but said there has been "very significant borrowing" and therefore "we have to take a balanced approach but reduce the economic scarring that we have in the interim."

His comments came as Chancellor Rishi Sunak prepared to outline a vast spending plan to help the nation's finances recover from the coronavirus crisis, but said "people will see the scale of the economic shock laid bare."

The Chancellor will unveil a £100 billion plan for long-term infrastructure investment and a £3 billion package of new spending to support the NHS in recovering from the pandemic.

Asked whether pay freezes for those on the frontline of the fight against Covid, such as nurses, were fair, Mr Barclay said: “We are not going to have a return to austerity, we are going to have big investment in our public services.

"But on the issue of pay, obviously I can’t speculate on that ahead of the spending review, the Chancellor will say more about that next Wednesday.

"But we do need to look at these things in the round in terms of what is happening with the wider economy, what is happening in the private sector, and make these decisions in a balanced way, but that's something the Chancellor will say more about next week."

Asked if what happens in the private sector will be reflected in the public sector, Mr Barclay continued: "We need to look in the round at what is happening with the wider economy and what is happening, for example as you say, in the private sector.

“We saw an increase in unemployment - furlough has helped retain the links for people with their jobs, but particularly in the hospitality and retail sector, we’ve seen many people, particularly the young, affected by the Covid measures, so we need to look at the economy in the round.

“We need to ensure that it’s not just reducing the number of people that become unemployed, but also the length of time that they’re unemployed.

“So getting the right skills package in place, which is why, for example, we’re doubling the work coaches, we’re tripling the traineeships, we’re putting in place support for apprenticeships, and pay policy must be judged alongside that wider package of economic support.”

Asked whether hitting those who had worked the hardest throughout the pandemic was fair, Mr Barclay said: “It’s about getting through the crisis, supporting businesses which is what we’re doing, so the people who have been particularly hit in those sectors which have born the brunt of the Covid measures, the restrictions that have been in place, and we’re lifting those as we come out of national lockdown on December 2.”

He added: “As I say, I’m not going to speculate on this ahead of the Spending Review, what I’m saying is one looks at these things in the round - very significant borrowing this year, further significant borrowing next year, and therefore we have to take a balanced approach but reduce the economic scarring that we have in the interim.

“The package of measures that the Chancellor has set out has reduced the level of economic scarring and therefore will enable us to recover quicker from the Covid pandemic as a result of that support, whether it’s on business loans, VAT reduction for those sectors affected, whether it’s the furlough scheme, the self-employed scheme.

“It’s been a comprehensive package which stands in comparison internationally with the best in the world.”

The Treasury said that the NHS will get £1 billion to address backlogs by catching up on checks, scans and operations that were delayed by Covid-19.

Around £1.5 billion will be used to ease existing pressures in the health service and £500 million will help support mental health services.

But Mr Sunak had a warning for the nation's finances, and said: "People will see the scale of the economic shock laid bare. We can see the data every month, and obviously the shock that our economy is facing at the moment is significant."

He hinted that some combination of spending cuts and tax rises will have to follow but said it is a "question of timing" while the economy is in difficulty.

"While that's happening, absolutely the right thing to do is to support the economy, and jobs are my number one priority, but - obviously - you can't sustain borrowing on this level indefinitely," he said.

"Once we get through that, we'll have to figure out what the best way of returning to sustainable public finances is. I'm hopeful that by the spring, with positive news on both mass testing and vaccines, we can start to look forward."

Labour shadow chancellor Anneliese Dodds urged Mr Sunak on Saturday to use his review to prevent a return to the conditions that allowed the UK to be "so badly hit by the pandemic".

She said the Chancellor "must lay the foundations for that recovery" in his set-piece financial update on Wednesday to prevent protective equipment stocks dwindling, local services returning to being "on their knees", and families being left with little savings and "struggling with the cost of living".

"And that must include working together to build a better, more secure future for our country, so that we do not go back the fragility and instability of the way things were," she told the Co-operative Party's local government conference.

Mr Sunak will also unveil the much-delayed National Infrastructure Strategy for £100 billion of long-term spending to help tackle the climate crisis and invest in transport.

He will also alter the Treasury's "green book", a set of rules to determine the value of Government schemes which is thought to favour London and the South East of England.