THE BLOG

The Chancellor's Spending Review Will Be Shaped by a Political Choice to Reduce the Deficit Through Swingeing Spending Cuts Instead of Growing the Economy

17/11/2015 17:52 GMT | Updated 17/11/2016 10:12 GMT

The Chancellor's spending review will be shaped by a political choice to reduce the deficit through swingeing spending cuts, rather than by growing the economy. Record low interest rates could allow him to fund much needed infrastructure development, but his choice means he risks not only missing borrowing targets but leaving a legacy of a smaller economy with fewer opportunities for growth in the future - amounting to an act of economic vandalism.

At the heart of Labour's argument about future growth and productivity is the Business, Innovation and Skills department - it's where the levers of future growth for our economy within government are found, but which faces being gutted with severe cuts to both staffing and resource, and which has already seen hundreds of civil servants rushing for the exits.

We're braced to expect cuts of between 25% and 40% which will have long-term consequences and could end up costing us all far more in the long-run by impacting adversely on our future prosperity.

Take the crucial area of further education, as the spending review approaches sector leaders have said they are already on a 'precipice'. The Government cannot claim they want to boost technical skills and jobs and then choke off funding for the colleges and the providers that deliver them. Skills are vital for our future competitiveness, and the government risks making false economies while denying young people the life chances and choices they deserve.

The drive to deliver more apprenticeships is welcome but the government must put greater emphasis on quality. So when the Chancellor delivers his spending review he must make sure that new apprenticeship starts are high-quality and accessible; and ensure that the new apprenticeships levy is workable, targets those who underinvest in training, and ultimately delivers for learners as well as employers.

Skills are important in the fight to retain our world-leading status in sectors like science, because our advantage in a competitive and fast changing world is not inevitable or guaranteed.

Increasing science capital investment in real terms is welcome, but investment in resource is also required to ensure that our brightest and best can use the infrastructure for research. Investment in resource has faced real terms cuts eroding the budget by over £1billion, and our public investment in research and development has not kept pace with our international competitors.

With the Business Secretary having called in consultants to help him hollow out the department, research councils and bodies like Innovate UK are in the firing line. The latter's laser-like focus on high-skill industries like advanced manufacturing and its links to universities, local enterprise, and catapult centres make it invaluable in boosting productivity and securing our future prosperity. A slash and burn approach could damage innovation in high-skill, knowledge-intensive sectors just as much as it would dent research in universities, and impact on our export potential.

On current trends the government is set to miss its own target of doubling exports to £1trillion by 2020 by more than a decade - these figures should serve as a critical call to action.

To turn our export fortunes around the government must actively help manufacturers with access to finance to train, invest, innovate, scale-up, and export. Central to the mission to build on our position as the eighth largest manufacturing nation in the world, the government must do more to level the playing field for Britain's steel industry which is of vital strategic importance to our manufacturing supply chain.

In the pursuit of an economy with more high-skilled, better-paid jobs, the government must be a partner rather than an ideological roadblock and must not let laissez-faire dogma dictate the economic terms of trade.

We could have an industrial strategy which enjoys cross-party support, helping business and industry deliver that high-value economy we all want to see, instead we have a Business Secretary who unlike his predecessors won't let the phrase industrial strategy even pass his lips. We could have a spending review which builds on all the good progress which has been achieved, instead this is all at risk because his focus seems to be on a job he may one day hold in the future, rather than the better-paid jobs of the future ordinary working families one day hope to hold.

While his backbenchers joke there may no longer be a Business, Innovation and Skills department left, it's our duty to make sure there is; because if it's firing on all cylinders with the levers of growth protected from the Chancellor's raids, it is integral for our country's future prosperity.

So the tests for the spending review are clear: will it make working people better off and deliver a much-needed focus on growth, skills, productivity and infrastructure; or is it business as usual with a short-sighted spending review, underpinned by the Chancellor's fiscal fundamentalism and delivering little beyond false economies.

Angela Eagle MP is Shadow First Secretary of State and Shadow Secretary of State for Business, Innovation and Skills