Rachel Reeves has cut up to £1.4bn in spending for modernising schools and hospitals to pay for her pay deal with trade unions, it can be revealed.
According to Treasury documents seen by The i Paper, money earmarked for “capital expenditure” used to improve medical and education facilities is being used to help fund the multi-billion-pound pay deals Reeves made shortly after Labour took office.
Although it is not known precisely what the money was earmarked for apart from building work, cuts could relate to MRI machines, CT scanners, and other expensive diagnostic equipment.
In July, Reeves agreed a 5.5 per cent pay rise for teachers and an average 4.05 per cent pay rise for doctors.
The disclosure comes as Reeves battles to balance the books and grow the economy, amid demands for increase in defence expenditure ahead of her spending review later this month.
Shadow education minister Neil O’Brien criticised the Government for cutting critical building programmes to prioritise pay deals.
He said: “Rather than investment, the Government has chosen to prioritise short-termist savings to fund the pay deal with unions….. Rather than being up front about it they have snuck it out in the hope no one would notice”.
According to the spending documents, £575m worth of cuts were made to capital budgets for academies and local authority grants to schools.
In addition, part of an £880m fund for hospital buildings and medical equipment was “reprioritised to cover NHS pay”.
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Sally Gainsbury, of health think tank Nuffield Trust, said Reeves’s decision to use hospital infrastructure money to meet pay demands raised was “robbing Peter to pay Paul.”
She added: “Moving up to £1.4bn away from capital spending to fund the public-sector pay deals raises questions about Rachel Reeves’s dedication to her new fiscal rules – which forbids the Government from borrowing for day-to-Cday spending – if the result is money being moved away from infrastructure spending.”
Saffron Cordery, interim chief executive of NHS Providers said the cuts would have an impact on care for patients and on NHS productivity.
NHS Providers represents the trusts and other organisations that are responsible for providing care.
Cordery said: “If we want to improve patient care and boost productivity, we need significantly more capital investment in the NHS alongside wider reforms including a shift to providing more care closer to home.
“Old, crumbling buildings, facilities, and equipment well past their sell-by date hamper care for patients. Much of the NHS estate is in a bad way. We need modern, safe places where staff can give patients first-class care in hospitals, mental health, community and ambulance services.”
Luke Sibieta, of the Institute for Fiscal Studies, said shifting money from capital budgets to day-to-day spend “can often be attractive in the short run, but can make it harder to deliver long-run plans to rebuild”.
In September, Education Secretary Bridget Phillipson criticised the Conservative record on school infrastructure, describing “schools literally crumbling round the next generation, children cowering under steel props, to stop the roof falling in on their heads.”.
The cash was moved despite repeated pledges by Labour during the general election campaign to prioritise infrastructure. However, since then, severe budget constraints have grown tighter because of expensive pay deals designed to avoid continued public-sector strikes.
A Department for Education spokesperson admitted that some projects would be delayed but denied new school building has been affected.
They said: “School building programmes have not been cut as a result of the teacher pay deal, and our investment ambition for the school estate remains unchanged.
“Recruiting and keeping great teachers in our classrooms is a priority as we know they are the key to ensuring all children achieve and thrive.
“Despite the challenging economic context, in July we confirmed a 5.5 per cent pay award for teachers and provided almost £1.1bn in additional funding for schools.”
A Department of Health and Social Care spokesperson said: “The Government has inherited unprecedented challenges, with crumbling public services and a £22bn black hole in the public finances, but our Plan for Change will deliver a decade of national renewal and get the NHS back on its feet.
“We have already delivered pay rises for over 1.5 million NHS staff and ended devastating strike action by resident doctors that carried immense costs to patients, staff, and the taxpayer.”
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