House of Commons Hansard Debates for 15 May 1991

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I welcome that. I welcome the fact that over a 10-year period there has been an increase of some 10 per cent. in the number of police officers. According to my rather limited mathematics, that means an increase of 1 per cent. each year. But in terms of output, the situation is serious. I do not want to involve the hon. member for Aldridge -Brownhills (Mr. Shepherd) in my political speech, but we went on an all- party delegation to the Home office a year ago seeking additional police officers. I remember the occasion vividly, but for the wrong reasons.

If one looks not at expenditure but at output in my area and that represented by the hon. Member for Aldridge-Brownhills, one sees that crime increased by 23 per cent. last year. Even though there has been a significant increase in expenditure, it has not, in H division of the west midlands, Walsall, been reflected in any significant increase in manpower. The way in which the police have been compelled to cope with a vast increase in crime has been grossly inadequate. I want to see more public expenditure, but it must be public expenditure properly applied. An increase in public expenditure unrelated to intelligent and sensitive decision-making is anathema to me.

I fear that the Government's hostility to the public services is partly reflected in the way in which they deal with the police. The Government have not sought to privatise the police force directly, but they are doing so indirectly by allowing the private security industry to burgeon and to assume more and more responsibilities that should be the exclusive responsibility of the official police force. Now we have two police forces, one accountable to Parliament and to Ministers and the other accountable to no one except shareholders, should they exist. The consequence is a private police force that is more numerous than the official police force, but where efficiency is low, criminality is high and accountability is zero. I fear that that is the way in which the Government approach the question of public order. More money has been spent, but, bearing in mind the enormous increase in the work load, the Government have gone about things the wrong way.

Like many hon. Members, I received a circular letter from my opponent, no doubt a wheeze of Tory central office, attacking Labour Members on education. The Government will reap the rewards of their education policy. I will not dwell on the national health service because the Government will hear quite enough about that in the obituaries after the Monmouth by- election.

I looked carefully at the departmental report of the Ministry of Defence in the Government's expenditure plans. Its figures belong to "Alice in Wonderland". The Government's problems in defence matters are enormous, far worse than the problems in other Departments, for a number of reasons. First, defence expenditure is falling and the Government do not know how to reconcile the demands for a peace dividend--and the enormous pressure upon them from the Treasury--with an uncertain international situation where there are so many imponderables such as in the middle east, the Soviet Union and eastern Europe, where we do not know how they will develop.

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Civil servants in the Ministry of Defence are being compelled to make cuts that prudence dictates they should treat more cautiously than the Treasury is allowing them to do. Decisions that might be irrevocable should not be taken at this moment. We can plan for what may well be a substantial decrease in defence expenditure, but at the moment it would be wise not to make any precipitate decisions. The Ministry of Defence has tried to go down the route of greater competition, contractorising, reorganising and setting up management surveys, but the end product has not been sufficient to match commitments and resources. Thank God that we were successful in the Gulf and that casualties were so low, but I fear that the corollary to the Government not wanting to appear to be cutting defence expenditure in the 1980s was that our forces were extended beyond the limits of their capability. Had the 100-hour war in the Gulf been more serious, I fear that some of the consequences of that policy would have been dramatically and disastrously exposed.

I am a member of the Select Committee on Defence which visited Kuwait a month ago just after the conflict ended. We all know that, in order to run 150 Challenger tanks--not the finest tanks--effectively in the desert during that war meant using virtually every single tank that we had in west Germany for spare parts.

Our guys and women in the Army, Air Force and Navy did magnificently, but they were let down, although thankfully that fact was not exposed. There has been a policy of cutting back on infrastructure and logistics and of not replacing worn-out equipment and cancelling projects. Fortunately, we were not exposed because of the failures of that policy and I rejoice in that. The Government face a dilemma ; if they are to cut expenditure we will have to cut commitments. It is a great dilemma--trying to maintain commitments and to maintain the fiction that nothing has changed, while defence expenditure has fallen under this Government from a percentage of GNP in the mid-fives, to a percentage in the mid-fours.

The pre-election period may be short, but it is more likely to be lengthy, and it is a period in which political parties will have to explain their philosophies and policies--I hope that they will do so realistically. The electorate is sophisticated and any political party that seeks to convince the electorate that it is able to resolve all our problems instantaneously will be quite rightly rejected.

In the past couple of years, the Labour party has done a great deal of work to present its policies and elaborate upon them--far more work than is often done when in opposition. When we eventually face the electorate, we will have prioritised. It will not be a case of one person announcing his or her priorities and the Government getting their civil servants to work out how much it will cost. We shall have to prioritise. The failures of the Government and the economy will not be remedied overnight and any political party that seeks to pretend that that is so will be very foolish. I am delighted that the Labour party is not likely to fall into that category.

8.21 pm

Mr. Nicholas Budgen (Wolverhampton, South-West) : I should like to take up the last argument of the hon. Member for Walsall, South (Mr. George), who said that he believes that our activities in the next few months will

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increasingly be devoted to explaining the differences between the philosophies of the various parties in the House. I shall confine my remarks to two matters : first, to offer a few reflections on growth and the extent to which it can be created by Governments ; and, secondly to say a few words on interest rates and the dispute which is arising between the Governor of the Bank of England and the Chancellor.

May I start on my first point by complimenting the Chair upon the way in which those who have contributed to this debate have been called? We have had a wide-ranging debate, illustrating the inexorable pressures on public expenditure. There was a dramatic peroration to the speech by my hon. Friend the Member for Havant (Sir I. Lloyd). As I listened to him, I reflected on the fact that my right hon. Friend the Member for Shoreham (Sir R. Luce) sits for the seat which was once represented by the Whig playwright, Sheridan. On one occasion, Sheridan got over-excited in the House--he drew a dagger and began to direct it towards his heart. Fortunately, the House was not overawed by that somewhat histrionic gesture. The equivalent of my hon. Friend the Member for Northampton, North (Mr. Marlow) was sitting on the opposite Tory Benches. As Sheridan's knife fell to the ground in the dramatic last moments of the scene, the Tory opposite said to him, "Hey, you've dropped your penknife." Some of the force of the drama diminished in the face of those laconic remarks.

My hon. Friend the Member for Havant demonstrated that even Tories can from time to time add to the pressure for public expenditure. However, I thought that the pressures upon public expenditure were demonstrated most dramatically by the hon. Member for Renfrew, West and Inverclyde (Mr. Graham) and in the intervention from his hon. Friend the Member for Glasgow, Provan (Mr. Wray). Each and every member for the Opposition has demonstrated their desire for massive increases in public expenditure in this debate. I am sure that in the course of the next few months it will become plain that the grass roots of the Labour party want more and more public expenditure. They are perfectly entitled to demand that. However, it will not do for the leaders of the Labour party to say that all that expenditure will, in substance, be paid for out of growth.

The Tory party asks, quite reasonably, how will it be paid for? Is it going to be paid for by increased taxation? Are the Opposition going to borrow more, and will that lead to higher interest rates? Or will they print money? "No," says the Labour party, "in substance, we will deal with it by growth."

Growth has been the great cop-out of post-war politics. You, Madam Deputy Speaker, will remember the Wilson and George Brown dash for growth, which was brought to a dramatic halt by Mr. Roy Jenkins, one of the best and most iron of Chancellors. You will also recollect Lord Barber's dash for growth between 1972 and 1974. To some extent, that was checked by the right hon. Member for Leeds, East (Mr. Healey) in 1976. However, it would be too much to hope for that British politics should have learnt from those few mistakes. You will also recollect, Madam Deputy Speaker, that the next dash for growth was in 1978, when the predecessors of G7--I think that they called themselves G5--made a worldwide co-ordinated dash for growth with a universal reduction in interest rates. That had a major

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effect, in that it had to be corrected in the massive depression between 1979 and 1982. That was not good enough, because by 1985 the Tories had forgotten their mistakes and from 1986 to 1988 there was another dash for growth, although it was never so described. While there was the appearance of very much higher growth of between 4 and 5 per cent., my right hon. Friend the then Chancellor used to keep on saying that he had cracked it, and that there was an economic miracle--low inflation at about 3 per cent. and high rates of growth at 5 per cent. He never mentioned that he was allowing the money supply to increase by more than 20 per cent. per annum. Those high levels of growth were merely the early signs that he had over-expanded the economy by an excessive increase in the money supply.

Governments may come and Governments may go, but those of us who received part of our political education from, for example, Lord Joseph, remember how compellingy he argued that it was the duty of Government to hold the ring and, most of all, to ensure that money was sound, but it was neither their duty nor was it given to Government to create growth, that that is created by individuals, who may create growth from time to time in the most unpropitious circumstances.

Ironically, when circumstances become more propitious--for instance, after a major increase in labour productivity because of our trade union reforms, or more efficient capital because of the abolition of exchange controls-- they may decide that they do not want necessarily to go on making more money. They may come to the conclusion that they have made enough.

The evidence is clear that, year in, year out, the British economy will provide no more than 25 per cent. of real growth. If the Labour party intends to claim at the hustings that it can increase public expenditure out of growth, a 2.5 per cent. real increase in public expenditure will not be enough. When its leaders go up to Scotland, they will find the hon. Member for Renfrew, West and Inverclyde at the back of the hall, asking, "What are you going to do about my hospital? What are you going to do about my industry? What are you going to do about this, and what are you going to do about that?" That will become the cry.

Will this 2.5 per cent. per annum be enough for all that? It will not bring in the new Jerusalem, or make it possible to transform Britain into a fairer or more equal and prosperous place. If the Labour party wants to increase public expenditure, which it is perfectly entitled to do, it must campaign on the basis that it will be done either by higher taxes or else by higher borrowing, since 2.5 per cent. growth per annum will not do the trick.

Mr. Nicholas Brown : I am grateful to the hon. Gentleman for allowing me to intervene. He has a cult following on our side of the House, and I freely confess to being a member of it. I enjoy his contributions to our debates. I was with him right up to his last point. The Labour party does not intend to make a dash for growth. We intend to make slow, steady and orderly progress and to use the fruits of that progress for public expenditure. Our tax policies have already been clearly and carefully set out. There is no hidden or further agenda, as the hon. Gentleman tries to imply.

Mr. Budgen : I hope that I have dealt with that point. I fear that, under the pressure of the demands from, in

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particular, a very large caucus in Scotland, promises will be made that more can be delivered than a growth of 2.5 per cent. per annum can supply. If such a promise is made, that is the way to disaster. May I say a few words about what the popular papers describe as a dispute between the Governor of the Bank of England and the Chancellor of the Exchequer about reducing interest rates? I am one of those who would wish greater independence to be exercised by the Governor of the Bank of England, but not because I want this country to go into any form of Euro- bank.

I want this country to return to a freely floating exchange rate. When we return to it, I can see that there will be a question as to where the discipline in our economy resides. I believe that a more independent bank will be the answer to that problem. We read tonight about the Governor's speech yesterday. It seems to me, having obtained a copy of the speech, that it has been somewhat hyped up by the press. None the less, the Governor suggests that he is sceptical about further reductions in interest rates.

I think that on this issue the balance of argument is in favour of the Government further reducing interest rates as quickly as possible. The Government have got themselves into a most appalling jam by having joined the exchange rate mechanism. We are at the whim of foreign speculators in currencies. We are forced to have as the principal determinant of the level of our interest rates the position that our currency has in the exchange rate mechanism. We have also advanced fallacious arguments about the circumstances in which we can reduce interest rates.

The Chancellor keeps saying, "We'll be able to reduce interest rates when the retail price index comes down," but that has nothing whatever to do with current economic conditions. If the RPI is falling--I believe that it will fall substantially in the near future--that has nothing to do with current economic conditions : it is a reflection of the squeeze that was imposed some 18 months ago. Therefore, in deciding what should be the current level of interest rates, we ought to look at the most up-to-date statistics. We ought to see what is the state of credit in the economy now, not what the state of credit in the economy was 18 months ago. I believe that the three most important indicators point to the necessity of a further reduction in interest rates.

The first is broad money. You, Madam Deputy Speaker, will recollect that that used to be the complete bible for the Conservative Government. Between 1979 and 1982, it used to be the standard to which every economic decision was referred. We have torn up that bible, but I have retained a copy for my own use.

It is plain that broad money, which was once increasing by 21 per cent., is now increasing only by just over 7 per cent. That suggests a considerable credit crunch. Secondly, the Government's narrow money indicator is M0. They believe that narrow money ought to be increasing by between 0 per cent. and 4 per cent. per annum. It is now increasing by over 2 per cent. per annum. When one recollects that at the height of the boom in 1988 narrow money was increasing by 8 per cent., one can see the extent to which there has been a real reduction in credit.

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My third point relies on the most recent figures for bank lending. At the height of the boom, bank lending was increasing by between £5 billion and £6 billion per month. It was a massive boost to house prices and asset prices. In the last recorded month, bank lending increased by only £700 million--a massive reduction. Those three factors--together, I agree, with anecdotal evidence- -show that there is a credit crunch.

The Government are entitled to say, "We want to reduce inflation." Theoretically, it is possible to reduce inflation so fast and so fiercely that money appreciates in value against other assets, but if people are to adjust to a reduction in inflation, what is surely required is to allow it to be done gradually, as was envisaged in 1979 by the medium-term financial strategy.

There is every evidence that the Government, simply because of having been caught in the ridiculous ERM, are, if anything, reducing credit too fast. Therefore, the balance of argument is in favour of a further reduction in interest rates at this time. That does not mean, of course, that we will not have to have an increase in interest rates later perhaps. All I am saying is that the best and most up-to-date evidence of what is happening at present and not what happened 18 months ago shows that there is a credit crunch which should be relieved by further reductions in interest rates. 8.40 pm

Mr. Peter L. Pike (Burnley) : I was spurred to take part in the debate by the opening speeches. The Chief Secretary seemed to indicate that the Government have run out of steam and are fast running out of time. As the speech of my hon. Friend the Member for Derby, South (Mrs. Beckett) progressed, there was a determined attempt by Conservative Members to disrupt it and to distort the proposals of the Labour party on growth, taxation and spending. I want to comment on a few of the many issues covered in the debate. When he is replying, I want the Financial Secretary to tell us what will happen to the funding of local government expenditure next year and how poll tax bills will be kept down. He will say that the Chancellor indicated in his Budget that the percentage of local government funding to be met nationally was being changed, but one has to recognise that there will be massive increases in local government expenditure, arising from community care and other things to be introduced next year, as well as inflation and other factors. It is already clear that, if poll tax bills are to be kept anywhere near this year's level, we are talking of substantial additional government funding.

When the Government introduced the poll tax, they claimed that it was to help the pensioner living alone, as opposed to the family next door where, there might be three or four wage earners. The Government now have to answer why, in constituencies like mine, the single pensioner will be paying double the amount paid under the rates whereas, because of low rateable values, three or four people living next door will pay much less. Hundreds of my constituents are very angry about what the Government have done.

Growth is important in relation to what a Labour Government would do. The Government's motion talks of reducing expenditure in relation to the gross national product. We want to see public expenditure and value for

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money, but we recognise that growth will play an important part in our plans. We have grave regrets because the Government have failed to recognise the importance to the nation of manufacturing industries that have suffered so considerably in recent years. In the latest recession, there are severe attacks on the service sector, but again the recession is affecting manufacturing industries very badly. Lancashire is very dependent on manufacturing jobs, with aerospace providing major employment. British Aerospace at Preston has announced 3,000 redundancies. The same group has also announced some 400 redundancies at the royal ordnance factory at Blackburn. Yet that company has probably benefited more than almost any other from the policies of the Government. It has benefited from three privatisations--its own, the privatisation of the Rover Group and the privatisation of the royal ordnance factories which are under the British Aerospace umbrella. It has had assistance with launch aid for the airbus and it is heavily dependent on Government contracts for defence. Yet, while it is announcing massive redundancies, large parts of its work are being contracted overseas.

When I raised the matter with the Minister for Industry he said that it is not a matter for him but that it is up to market forces and is purely a matter for the company ; he said that he did not intend to intervene. In another letter on another issue, he told me that aerospace was not an industry of great national importance. If the Government regard aerospace, which is high-technology, modern industry as of little national importance, that shows why we have suffered so much industrial decline under the 12 years of Conservative Government since 1979. The Government must take a much more positive approach to industry in their final period in office. Certainly it is something that our policy will recognise. In our amendment we recognise the importance of training and investment in people. When one talks of training, one has to link with it the importance to the nation of education. Investment in people through education and training is the biggest single investment that the country can make. One sad fact is that our record in education and training is abysmal and appalling compared with the performance of other countries with which we are competing. It is no wonder that we are doing so badly.

In regard to the national health service, hospitals in my constituency are in the process of trying to opt out. There will be strong resistance. When the matter was before the council, a unanimous resolution by all parties, including the Conservatives, condemned the opt-out proposals for the Burnley, Pendle and Rossendale health authority.

Dame Elaine Kellett-Bowman (Lancaster) : The hon. Gentleman should be more accurate. There is no question of any hospital opting out of the national health service. Hospitals may become hospital trusts. Does not the hon. Gentleman agree that the mess that the London hospitals have got into is on their own heads? Hospitals in the north-west, particularly those in Lancaster, are extremely well run. Although we may apply for trust status, we have no intention of laying off staff. Will not the hon. Gentleman join me in saying that it is high time London put its house in order and that we in the north-west got the money that London has had too much of in the past?

Mr. Pike : The hon. Lady fails to recognise the funding shortages that exist in the north-west region. I made a sad

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mistake in giving way to her. When I agree with something that the hon. Lady says, that day will go down in history. I went to Lancaster community health council earlier this year because the hon. Lady and the other Conservative Members from that area refused to go. I wanted to make a point about Christie hospital, which has opted out--I will use that phrase although Conservative Members object. Christie hospital, the major cancer hospital in the north-west and a hospital of international reputation, has made it clear that it will give priority for treatment to patients living in district health authority areas that can give the hospital financial support. If an authority can pay towards the opening of another ward, the hospital will give the people of that area preferential treatment. That is appalling.

My health authority, which has had to consider the closure of the third hospital in Burnley within three years, cannot afford to give money to Christie for another ward. That is appalling discrimination. It means that patients will not be treated on the basis of need, a point that the Prime Minister was trying to make and that was hotly disputed only last week, but will be treated only on the basis of the area in which they live and whether that health authority can assist the hospital.

I shall deal with two other issues, the first of which is rural housing. The documents state that there will be additional provision for housing associations in rural areas, but they fail to recognise the major need for affordable housing which local authorities in rural areas must be able to tackle. Housing in rural areas is a great problem and the Government must give more assistance to tackle it. Secondly, I shall deal with overseas aid. I do so because Conservative Members have attacked that issue several times in this debate. We have talked about the 0.7 per cent. of gross national product which is the target figure at which we should aim. During the Government's period in office, the figure has dropped from above 0.5 per cent. by about 0.2 per cent. to just more than 0.35 per cent. That is an appalling record. If they do nothing else, the current problems in Bangladesh and the problems with the Kurdish people should bring home to us that we have a responsibility to tackle problems not only in this country, but elsewhere in the world where there is poverty, starvation and other problems that could be solved if nations such as ours did a little more to tackle them. It is right for us to strive towards the 0.7 per cent. target. We should not wash our hands of these problems and a Labour Government would try to solve them as rapidly as possible.

8.51 pm

Mr. Ian Taylor (Esher) : My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) made a speech in classic style, the excellent first half of which I endorse. I am saddened that he continued to speak when I thought that he had sat down. Once again he seemed not to have read my contributions to the debates about the benefits of joining the exchange rate mechanism, but I shall ensure that he gets copies of Hansard containing the relevant sections. My hon. Friend will then understand that many of his worries about monetary policy and the lack of discipline would have been solved if we had joined the ERM in 1985.

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The first part of my hon. Friend's speech was extremely good and pertinent and I am sad that the hon. Member for Derby, South (Mrs. Beckett) was not present to hear it. However, I am delighted that the hon. Member who will reply for the Opposition--the hon. Member for Newcastle upon Tyne, East (Mr. Brown)--enjoyed it and took note. We are not saying that there will not be extra revenues from growth--of course there will. The hon. Member for Derby, South was wrong to accuse us of saying otherwise. However, we are saying that that level of growth will be insufficient to meet the expenditure plans--all of them priorities--that the Labour party has already announced. The revenues from growth alone will be insufficient, no matter what the level of growth. There will always be more top priorities for the Labour party.

The question is, to which priorities will the Labour party be truly attached, or, if to them all, by how much will taxes increase under a Labour Government? That is a reasonable request to put to Labour Front- Bench spokesmen and we should be told what will happen. The reality is--the electorate should listen carefully, and Labour Front-Bench spokesmen might also benefit from listening--that if the Labour party is incapable of generating from growth the money required for its priority plans, it will have to play on the fiscal level. Regardless of the uncertain buoyancy of tax revenues and the other issues about which I could argue if I had the time, the public should be aware that the Labour party will be forced to increase taxes.

It might have been possible for Labour to say that it would merely remove the upper limit on national insurance, but it has already said that and it has already precommitted the revenues from that to two of its top, top priorities. The other issues that are part of the national debate can be funded only by an increase in the basic rate of taxation. The Labour party should forget the top rate of taxation--that yield will not solve its problems. But let the top rate taxpayer be warned that top rates will increase. The hon. Member for Derby, South made that clear today. That is a warning, but basic rate taxpayers should take particular notice because they will be the ones chiefly to be hit, and they will be hit twice : by the national insurance upper limit being removed and by the increase in the basic rate. There are 2.1 million basic rate taxpayers, but 3.8 million people will be affected by the increase in the national insurance limit. Therefore, a significant proportion of the population should be careful about the prospect of the return of a Labour Government. The hon. Member for Derby, South did not seem too concerned. She concentrated on the average of various categories of people such as teachers. They may be the average, but that implies that a considerable number of people earning above the average in professions that we regard highly will be hit-- doctors, teachers and many others whom the Labour party like to think are high on its list of priorities, but who are certainly high in our esteem. Under Labour's new tax plans, those people will lose at least several hundred pounds more than they would have paid under the community charge. I hope that they will take careful note of that fact. Another reason why taxes will have to rise under Labour is that Labour will voluntarily forgo the proceeds of privatisation which, under Government plans, are

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expected to bring in about £5.5 billion in each of the next three years. The Labour leader thought that the growth rate under a Labour Government would generate £20 billion over five years, but he is prepared to forgo three times £5.5 billion.

Labour's sums start not to add up if they are considered carefully, but there is worse--specific pledges within the lifetime of a Labour Government to renationalise. The cost of renationalising the national grid, for example, is difficult to estimate, but it could be half a billion pounds or much more. There are many other estimates of what Labour Back-Benchers-- although Labour Front--Bench spokesmen are rather coy about it--would like to renationalise and those costs would soak up the growth balance. On top of that, there are spending pledges or social commitments which will pre- empt any growth. The minimum wage would be introduced up front before growth had any impact on the generation of further revenues. In the health service alone, that could cost£175 million in the first year and that will come out of patient care. Labour's alternative is to leave the expenditure unfunded.

In 1975, I co-wrote for the Bow Group a pamphlet entitled "Under some Delusion". Incidentally, I co-wrote it with the person who is now the prospective Conservative candidate for Berwick-upon-Tweed. I am rather sorry that the hon. Member for Berwick-upon-Tweed (Mr. Beith) is not in his place to hear one of the last public expenditure debates before the election. He may not be here after the election to appreciate such debates- -if, as I expect to happen, my friend wins and becomes the admirable representative of that constituency. The title of the pamphlet derives from a quotation from Edmund Burke to the effect that people give up their liberty only under some delusion. The delusion is that money taken from people into the hands of Government suddenly becomes virtuous as a result of that very process--that a financial transmogrification occurs. The Labour party fundamentally believes that £1 taken from an individual and spent by the Government is not only capable of doing more but is somehow morally better. The Conservative party has long known that that is simply not the case. If we did not know it, we are called to order from time to time by the Audit Commission and Select Committees, and told that money spent by the Government is not even necessarily spent efficiently.

The job of Governments is to concentrate on those things that have to be done by Governments and not on things that Governments are likely not to do as well as business or private individuals--certainly not as well as private individuals who take a personal interest in the way in which they spend their money, either generally or on charities.

The danger is that Labour would take us back to the bad old days. When Labour left power in 1979, our public sector borrowing requirement was £12 billion--6 per cent. of gross domestic product. Our public sector borrowing requirement is now 1.75 per cent. of GDP. That level is tolerable and leaves sufficient flexibility in the economy. A high public sector borrowing requirement, on the other hand, has significant adverse ramifications for private sector funding and interest rates.

The Government have shown that they are managing the economy properly and do not require increases in income tax. I see that the hon. Member for Derby, South is now in her place and I remind her that, under Labour,

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such increases would be inevitable. The proper management of the economy does not require increases in income tax. Such increases are not required to increase tax receipts. Tax receipts have risen from £43.8 billion in 1988-89 to £55.5 billion in 1990-91. What is important is not increasing taxation rates but increasing the amount of enterprise and incentive in the economy, thereby creating wealth such as that which has enabled the present Government to increase public expenditure substantially while at the same time reducing the percentage of GDP that it represents. That is a remarkable achievement and one whose merits the Labour party has, sadly, still to learn.

Let me make one or two final points--

Mr. Keith Vaz (Leicester, East) : One.

Mr. Taylor : I shall make two final points.

First, it is important not to be dogmatic about the percentage of GDP taken by public expenditure--provided, that is, that the general target is a secular decline over a number of years. I endorse the comments made by my hon. Friends about the use of automatic stabilisers during a period of recession, which seems to me to be extremely relevant. I know that there will be criticisms in the media about the use of the reserve in this year's Budget--and, indeed, other criticisms. We should not be deterred, however, because it is already clear that the Government's long-term target is a balanced Budget and because, during this recession, it does not matter whether the percentage hovers above 41 per cent.

Secondly, we must continue to prioritise within public expenditure. I know a little about health and I am happy to note that the percentage of GDP spent by this Government on health is higher than that spent by Labour. That underlines the fact that not only do we run the economy better ; we actually deliver the goods to the people. As we can spend more, as a percentage of GDP, on health, Labour will soon find that it does not have such a winner as it thinks in the public debate on health issues.

Whatever the level of public expenditure, it is important to spend the money efficiently. I therefore welcome the work of the Audit Commission and pay tribute to my hon. Friend the Member for Gedling (Mr. Mitchell) and others who have highlighted that aspect in several speeches.

In the next Parliament--when we continue to be in government--we must ensure not only the proper management of the economy but the efficient management of public expenditure so that, in several of our high priority areas, such as health and education, we can ensure that there is better and more effective expenditure for the benefit of patients and school children. We must ensure that that is so for any given overall level of public expenditure. That is the task that we are setting ourselves and the task that we will achieve. I look forward to the Conservative Government continuing the implementation of their policies.

Several Hon. Members rose --

Madam Deputy Speaker : Mr. Keith Vaz.

Dr. Godman : Did you say Godman, Madam Deputy Speaker?

Madam Deputy Speaker : No, my enunciation was very clear.

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9.3 pm

Mr. Keith Vaz (Leicester, East) : I sat through several hours of debate on the Football Spectators Bill. One of the problems that we faced was to find a definition of "hooligan". Those of us who sat through the speech of my hon. Friend the Member for Derby, South (Mrs. Beckett) today were given a prime example of hooligan behaviour. The words and actions of Conservative Members were the words and actions of hooligans. The reason for such behaviour is simply that the Conservative Government are coming to the end of their time. These are the last few months of an Administration who have run into a great crisis and have run out of ideas. The Conservative party changed its leader and, therefore, the Prime Minister, but it retained all its policies--policies that have destroyed the lives of many thousands of my constituents in Leicester.

I want to speak very briefly about a number of aspects of the Government's public expenditure programme. I make no apology for saying that public expenditure should be increased in certain areas of Government policy. One such area is policing. Leicestershire has the worst crime record in the country. That is not because of lack of activity by the police. Indeed, I pay tribute to the work of the chief constable, Michael Hirst, and his officers. The reason for the lack of person power to police Leicestershire properly is that, despite the pleas from both sides of the House--pleas to Ministers during debates, and at meetings with Ministers, the most recent of which was with Lord Ferrers--the Government still refuse to provide the county with the police officers that it needs so desperately. As a result, the crime rate has escalated.

Only two weeks ago we asked that the Government make provision for the construction of the new police station on the Hamilton estate. We pointed out the dire need for a new divisional headquarters in the eastern part of the city.

The Government's response was that there is not enough money. They would not even look at the scheme until 1994-95. Residents of the outer estates of Leicester--places like Thurnby Lodge, Nether Hall and Northfields-- complain about the high level of vandalism. This cannot be curbed without greater public expenditure, and that means greater expenditure by the Government.

Only this week we received the welcome news that Leicester City football club has remained in the second division. Yet the manager and chairman of the club say that they do not know how much longer they can remain solvent while they have to meet the huge cost of policing their matches. There is a need for increased Government expenditure to help clubs like Leicester and others that are not fortunate enough to have big gates.

As hon. Members know, Leicester is the centre of the footwear and textile industries. In 1979 those vital industries employed 440,000 people ; by 1990, according to the Government's own figures, the number was down to 233,000--a loss of more than 207,000. That has had a tremendous effect locally. It has affected not only the people who have lost their jobs but the families of those people. The Government's plans contain no proposals to help those two industries. There is no incentive to invest. Every week we hear about another textile or footwear firm that is suffering because of the Government's policy of high interest rates.

Later tonight we shall have a debate about education. Recently I did a survey of schools in my constituency. If

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one adds together the number of years those schools have been waiting for repairs, one gets a total of 200. Schools, such as Abbey school--whether in the inner city or on the outer estates-- need resources to get rid of some of the 60 mobile classrooms currently in use.

The same applies to the crisis in housing. Over the past 10 years Leicester city council has been robbed of £20 million of Government support for its housing programme. It cannot build any more houses. It is not allowed to spend for that purpose the money that it raises from the sale of council houses. As a result, I and other local Members of Parliament, at our surgeries every week, meet young couples in a state of great anxiety because they are unable to secure the housing that they need so desperately. That is not the fault of the city council, which works hard to ensure that transfers are effected as quickly as possible, and there is no question of a vast number of properties remaining empty. The reason why additional housing cannot be provided, and why so many people in the outer areas cannot obtain transfers, is that not enough money is spent by central Government.

There is so much more that I should like to say. There needs to be greater expenditure on the health service, and I want to know when the Government will impose surcharges on those Ministers who initiated the poll tax. If that had been done by local government, legislation would have been rushed through the House to surcharge the councillors responsible.

In the few moments left to me, I make a special plea on behalf of nuclear test veterans. As the House knows, a constituent of mine, John Hall, is dying of leukaemia--which he contracted while serving on Christmas Island. I have met the Prime Minister and other Ministers, and recently launched an appeal in Leicestershire to support John Hall and other nuclear veterans. I believe that some money could be found in the Government's programme to pay compensation to people such as John Hall.

By this time tomorrow, the Monmouth by-election will have been decided. I predict that Labour will take Monmouth, and it will do so because the people of Monmouth are fed up with the Government. My plea today is that the people of Leicester and the rest of the country should be given the same chance to pass their verdict on this, the most disastrous of Governments.

9.11 pm

Mr. Tony Marlow (Northampton, North) : As is quite often said these days, public expenditurre is good in many respects. Obviously one has to be careful how one spends the money. There are two purposes to public expenditure. The first is to care for and to help those who are unable temporarily or, sadly, permanently, to care for themselves. That area of public expenditure is one that this Government have built up. We have managed to refresh the parts that previous Governments have not reached.

The second is to ensure the provision of effective and adequate public services. That is not done by public expenditure alone. Today, I visited the channel tunnel. That service, facility and infrastructure will be made available, but it has not been paid for by the public. That is a totally refreshing change from previous Governments, who felt that everything of that kind should come out of the taxpayers' pocket.

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Another area of public services is the water authorities. They are now in the private sector. The public--the people of this country--paid to buy them. So the taxpayer has had the money for those services, and now that those services are generating profits, they are providing the taxpayer with money yet again.

The Opposition go on about public expenditure--about spending more money, and about more plans for spending public money. They are going to buy the water authorities back. They are going to find more taxpayers' money to pay for that, and then they will lose the taxation on the profits in the future. So it is not what you do--it is how you do it.

One of the most important areas of public expenditure, recognised by both sides of the House--it is just the philosophy with which we approach it that is different--is the health service. Our approach is that we want to get more care for the cash. However much money we can make available--and we on this side of the House have made more money available than Labour did in the past or could in future--we want to make sure that it generates as much care as possible.

That is the reason we are going for hospital management trusts. A trust hospital will have control over its own destiny. It will run itself. It will manage itself, which will give it an incentive to be more effective and efficient. Not only that, but it will have a far greater awareness of the costs of what it does. By having that awareness of the costs, trust hospitals will be able to do more treatment for any given amount of money. They will want to have more people to come to them. They will want more business--more work, more care, more patients, more treatments and more effective use of our money. They will give more care for the cash.

The Opposition have talked ad infinitum about cuts and closures, but they do not tell us about the wards and the new hospitals that we open or about the additional treatments. Since the Government took office, they have increased the resources to the health service by more than a half. Is that a cut? Since the Government took office, the number of doctors and nurses has increased--8,000 more doctors and 53,000 more nurses. Is that a cut? Since the Government took office, treatments, operations and in-patient treatments have increased by a third. Is that a cut?

We have plans to increase the effectiveness and efficiency of the health service. The Opposition tell scare stories and take matters out of context. They tell us that they will not proceed with our reforms, so they will not achieve improvements in efficiency. Where will they get the resources from? We have been told that they will not increase taxation, apart from the 10 per cent. and 9 per cent. increases, and that they will obtain the money from growth. The money that will come from growth is already committed to old-age pensions and child benefit. Therefore, there will be no extra money for the health service and no improvement in that service.

We would return to the days of the previous Labour Government, when the International Monetary Fund was involved. Then there were cuts in the health service and in the amount of money spent. It was a question not of priorities and decisions about who should be treated, or of doctors and hospital management, but of the National Union of Public Employees and the Confederation of Health Service Employees, who were the Opposition's paymasters. The career of the Leader of the Opposition

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depends on the unions. He is more concerned about receiving the approval of NUPE or COHSE than about providing an effective and efficient health service. They decide his destiny and his position as Leader of the Opposition.

The Government have rightly given more resources to the health service and the public sector. We have rightly encouraged the private sector to provide facilities that would not otherwise be provided. We have rightly managed to boost the amount of money to the taxpayer rather than reduce it.

By contrast, if the Opposition took office they would do what they did before : they would try to improve services, but they would not have the systems to do so. They would not make the reforms that we have made. They would either borrow money, as my hon. Friends have said, or, once again, mug every taxpayer and take money out of their wallets and handbags. We must avoid that.

9.17 pm

Dr. Norman A. Godman (Greenock and Port Glasgow) : I have been told by those who must be obeyed that I should be brief.

Amid the electioneering that is taking place here and elsewhere, the ordinary, decent people we represent have to continue to meet the challenges and deal with the problems they face in their everyday lives. I should like to consider whether the public expenditure plans come anywhere near matching the needs, interests and expectations of my constituents. I should like the Minister to ensure that my remarks are passed on to his ministerial colleagues. I have made similar requests before, and he has courteously done precisely that. The unemployment rate in my constituency is 12.9 per cent. Thousands of people are unemployed, some of whom are categorised as long-term unemployed. Among its objectives, the Department of Employment's glossy brochure states :

"To help people to get jobs To provide particular help to people who are long term unemployed to make sure that unemployed people in receipt of benefits are available for and actively seeking work". The unemployed people I represent are anxious to find work. In Scotland, the age-old Scottish solution is being applied to unemployment. It is the solution of migration and emigration. I want the Government to establish the restart programme. I must tell the Government that, in Greenock and Port Glasgow, those programmes are being handled with appalling sensitivity by Department of Employment and Department of Social Security staff. People who have been unemployed for many months are extremely sensitive to any "instructions" that they receive from the local benefit office, the local job centre or the DSS. They should be treated much more compassionately and sensitively.

Mrs Susan Coyle in Port Glasgow told me the other day that several of her friends have been treated in a disgraceful--she said "squalid"--way by officials as a result of the legislation which has introduced among other things the restart programme.

The Department of Social Security brochure claims among other things that the DSS claims to

"Provide a good service to customers--one which is professional, efficient, responsive and fair"

and to

"Ensure correct payments are made i.e. that benefit recipients are paid their correct entitlement".

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