Gordon Brown quietly slashed by a third this year’s hospital building and equipment budget in one of his last acts as chancellor.
Prompted by the tightness of the public finances, the new prime minister, who has placed the NHS as his “immediate priority”, cut the capital budget of the English NHS for 2007-08 from £6.2bn to £4.2bn. The move could delay the government’s hospital building and reconfiguration programme in England.
However, Mr Brown avoided equivalent cuts to the Scottish and Welsh NHS budgets even though the funding formula for the UK nations suggests they should have shared the pain. That decision leaves him open to criticism that he favoured patients in his home country.
An influential forecast group is worried about the risks individuals, firms and ministers are taking with amounts borrowed.
Ernst & Young’s Item Club spring forecast said people are “overly relaxed about risk” and are “spending as if it was going out of fashion”.
Club chief economic adviser Peter Spencer said: “The bottom line is that we are all living beyond our means.”
The Treasury said the UK’s performance and household finances remained strong.
The report highlights the current deficit in the public sector and expresses surprise that it built up at a time of economic strength and buoyant tax revenues.
“If the Chancellor is forced to borrow so much when the economy’s so sweet, what will happen when it turns sour?” Mr Spencer asked.
The decision to raid pension funds was the brainchild of a close-knit group of advisers known as “the hotel group”.
Before Gordon Brown became Chancellor, and for 18 months afterwards, all the key decisions were taken in the Park Lane apartment of Geoffrey Robinson, the multi-millionaire Labour MP and treasury minister, rather than in Whitehall.
Mr Brown, Ed Balls, his political adviser, and Charlie Whelan, his voluble and abrasive press spokesman, would gather to plan their policies.
They were a gang of chums, who drank beer and watched football matches on television, as they planned to seize control of the Treasury and introduce sweeping tax changes to fund Mr Brown’s ambitious plans for social engineering.Mr Brown, who had no ministerial experience before taking the second most powerful job in government, distrusted the Treasury mandarins, particularly the then permanent secretary, Sir Terry Burns.
Sir Terry and other key officials were kept out of the loop. So it is little wonder that Mr Brown brushed aside uncomfortable advice from civil servants on the problems in the pension tax changes – he no doubt saw them as part of the establishment seeking to frustrate his ambitious reform programme.
Labour came to power in 1997 claiming it had no need to raise taxes – and even promised not to increase the basic or top rate of income tax.
So Mr Brown needed to find ways of raising extra money in ways that were not immediately noticeable to middle income voters who had switched from the Tories to New Labour
The key figure was Mr Robinson, who had helped fund Mr Brown’s office in opposition. He knew his way around the corporate tax system. He provided more than £200,000 to pay for the specialist advice Mr Brown needed for formulating his tax policies.
Chancellor Gordon Brown is unrepentant about his decision to ditch a tax break despite warnings it could wipe billions of pounds from pension funds.
In his first public comment on the row surrounding the controversial 1997 measure, the Chancellor argued that it had been “the right decision for the future of the economy”.
Documents released on Friday under the Freedom of Information Act, after a two-year battle, showed the policy was pursued despite official advice it would hit pension funds.
They indicated that he was advised the abolition could leave a “big hole” in pension funds, wiping out up to £75 billion of assets and reducing pension benefits for future generations.
Critics hold the decision at least partly to blame for the closure of many final salary pension schemes in recent years which have left retiring workers severely out of pocket.
Unions have reacted with anger to below-inflation pay rises for health and other public sector workers.
Chancellor Gordon Brown told MPs he had accepted recommendations from the pay review body that awards be kept within the government’s 2% inflation target.
Nurses will get a 1.9% rise, while GPs will get no increase. The armed forces will get 3.3% and consultants 1.3%.
The CPI inflation measure targeted by the government is 2.7%. The old Retail Price Index currently stands at 4.2%.
Gordon Brown’s claim to have made £13.3bn a year efficiency savings across Whitehall as part of a drive to cut waste is called into doubt today in a detailed investigation by the National Audit Office.
The auditors found that nearly £10bn claimed to have been saved by the Treasury was open to question because it could not be properly measured or was substantially incorrect. Only £3.1bn of the £13.3bn gets a green light.
The Chancellor Gordon Brown has been given a “could do better” in a report on cutting national debt.
The Institute for Fiscal studies says other countries are reducing their debts faster.
Research showed 17 of 22 leading industrialised countries have improved their budget balances by more than Britain since 1996.
The think-tank said: “After a decade of Mr Brown’s stewardship, the UK still has a relatively big structural budget deficit by international standards and remains mid-table when comparing the size of government debt.”