Harman breaks ranks to oppose cutbacks

Published on Monday 20 April 2009 22:08

HARRIET Harman yesterday exposed confusion in the Cabinet ahead of the Budget when she opposed the multi-billion-pound cuts Chancellor Alistair Darling is determined to drive through every government department.

Amid reports that Mr Darling would usher in 15 billion of efficiency savings in his Budget tomorrow, the deputy Labour leader used her address to the Scottish Trades Union Congress (STUC) to give her clear backing to a campaign against those cutbacks.

Ms Harman told STUC delegates in Perth she "strongly agreed" with their demands that Mr Darling drops 500 million of proposed annual cuts from the Scottish budget, and said Labour had learned the lessons of the 1970s and 1980s.

She said: "You cannot cut your way out of recession – you can only grow your way out of recession."

Union leaders immediately latched on to her speech and demanded Mr Darling "pays heed" to her words.

The Chancellor is expected to announce 15 billion of savings over three years across the UK. This would equate to 500 million a year – 1.5 billion over the same period – in Scotland.

The STUC submission on the Budget included a section arguing the expected efficiency savings, beginning in April 2010, were damaging for Scotland.

But there were concerns among union officials yesterday that, far from supporting their argument, Mr Darling might actually increase the cuts.

So there was warm applause for Ms Harman, who was accused by some in the Labour Party last month of making a pitch for the leadership, for taking such a definite and controversial line.

Her intervention at such a sensitive time will potentially embarrass both the Chancellor and Prime Minister Gordon Brown, both of whom have insisted on the need for UK-wide efficiency savings over the next two years to repay some of the huge debts run up in an attempt to offset the worst effects of recession.

Opponents have claimed Ms Harman's intervention proves Mr Brown's authority is slipping further and that the Cabinet has not reached an agreement on the best way out of the recession.

Conservative shadow Scottish secretary David Mundell suggested that she was "playing to a left-wing audience" again in the hope of becoming the next leader.

"This is all about her ambition to become the next leader of the Labour Party, not about doing the right thing to get Britain out of the recession Labour has dragged it into," he said.

"Essentially, there is now an admission at the heart of government that they have lost the next election and lost the argument with the public. They are split because they are only thinking about their own careers."

Mr Mundell yesterday echoed calls by the Confederation of British Industry (CBI) that there needed to be savings and no new fiscal stimulus because "Britain needs to live within its means".

But Scottish union leaders, who are also demanding a US-style fiscal stimulus to haul Britain out of recession, lined up to hail Ms Harman as the champion of their cause in the Cabinet.

Matt Smith, Scottish secretary of Unison, said: "I'm delighted she supported our submission. It was clear to us that she opposed spending cuts."

Mark Serwotka, general secretary of the Public and Commercial Services Union Scotland, added: "I suggest that Alistair Darling takes the advice of the Leader of the House of Commons (Ms Harman]."

The STUC general secretary, Grahame Smith, later told delegates he was "pleased" with Ms Harman's comments, and added: "I hope the Chancellor takes heed."

The SNP has also been demanding that the proposed cuts are shelved and welcomed Ms Harman's apparent support, which followed that of a former senior Scottish Labour adviser – John McLaren, now a leading economist – who over the weekend warned Scotland was facing real-terms spending cuts for the first time since the Conservative government of the early 1990s.

Finance secretary John Swinney said: "As the STUC has said, cutting public spending into the teeth of a recession would be disastrous for Scotland. The Prime Minister and the Chancellor need to take the opportunity provided by this week's Budget to think again and stop the cuts."

A close aide to Mr Swinney said: "If Harriet Harman now recognises the need to stop these cuts to Scotland's budget, then that is a welcome development. The thing that matters, however, is that it is also reflected in the actions of the Chancellor."

However, after her speech Ms Harman was far more guarded on the question of spending cuts in Scotland. She told reporters: "Last time I looked there was more money in the Scottish budget. It all depends on how well money is spent."

And she lavished praise on the Prime Minister for his handling of the so-called "smeargate e-mails", drawing derision from political opponents by claiming that Mr Brown had acted "decisively" on the issue, even though it took him six days to apologise.

She added that Mr Brown had been "quite outstanding" in reassuring the public about the future of the economy and their jobs.

A Downing Street spokeswoman last night insisted there was no confusion.

"From our perspective, the Prime Minister has said we have to grow our way out of the economy," she said. "He has also repeatedly emphasised that the government is committed to sustainable public finances."

And late last night, following contact with Downing Street, a spokeswoman for Ms Harman's office insisted the deputy Labour leader fully supported efficiency savings.

The spokeswoman said: "In no way did the minister say she was opposed to efficiency savings. It is untrue to say she did. She did say she is not going to comment on the Budget before Wednesday, and we need to make sure every penny is well spent."

However, the intervention was seized upon by the Tories. A spokesman for the party in Scotland said: "This is just more evidence of a government in disarray, at war and peace within the space of a few hours."

Iain Gray, the Scottish Labour leader, drew applause from STUC delegates for his call for its Council of Economic Advisers to include a trades union representative. In a compliment to the SNP, Mr Gray said the council was "a good idea" and one Labour should have come up with.

But he claimed recent evidence to Holyrood's finance committee revealed the council, chaired by the former banker Sir George Mathewson, had an agenda to undermine workers' rights in efforts to cut back on red tape.

"I don't think a Council of Economic Advisers with a voice for the trade unions would ever advise that rowing back on workers' rights is the way forward in 21st-century Scotland," he said.

BANKING MAD

VINCE Cable, the Liberal Democrats' Treasury spokesman, yesterday said any changes proposed in the Budget would amount to a "sideshow" in comparison to the amount of public money spent bailing-out the banks and kick-starting the economy.

He said the Bank of England's 75 billion "quantitative easing" scheme to increase the flow of cash available to financial institutions "completely swamps" what is likely to be announced tomorrow.

The Lib Dems yesterday proposed tax cuts of 705 a year for basic-rate taxpayers by raising the personal tax-free allowance to 10,000, as part of a "tax switch" of 17 billion of revenues.

This would be paid for by cutting the tax relief on pensions, forcing workers to pay National Insurance on company cars and introducing a new levy on "non-lifeline" domestic plane flights, which would add 35 per ticket to travel between Edinburgh or Glasgow and London.

Mr Cable said the major issue Mr Darling was unlikely to address was the cost of effectively nationalising banks including RBS, HBOS – now part of the Lloyds Banking Group – and Northern Rock.

There have been reports the Chancellor will include a 60 billion figure in his calculations to cover potential losses once the government sells its shareholding in the banks.

Mr Cable produced figures showing RBS's total liabilities, at around 1,800 billion, vastly outweighed the annual output of the UK economy, around 1,500 billion. Lloyds' balance sheet liabilities also exceeded 1,000 billion, while the Treasury's asset protection scheme for both banks – underwriting their debts in a bid to get them to resume lending – was around 500 billion.