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Mr. David Hunt: I recall that the right hon. Gentleman served in the last Labour Government with Joel Barnett, now Lord Barnett. Has he had an opportunity to read the speech that Lord Barnett made yesterday in the other place, in which he praised the Government's handling of the economy, and said that Labour would do no better and that it would need more tax?
Mr. Sheldon: My noble Friend did not say that--the right hon. Gentleman is misquoting him. Lord Barnett is my dear friend of long standing; I have a great attachment to him, so I always listen to what he says with great interest. What he said was that, at the moment, the economy is doing well--but what is to come? How can we be sure that that will continue?
My noble Friend speaks as one who, when he was Chief Secretary to the Treasury, wanted to increase expenditure on health and education, and he still hopes for improvement. As he rightly points out, improvements are possible without increasing expenditure, but they will be much smaller than he would wish--we must all agree with that. If we want very big improvements, it is obvious that we must increase expenditure; only smaller improvements can be achieved out of the modest increases in expenditure that come from savings elsewhere in Government programmes, but that method nevertheless offers some opportunities.
To return to the subject of the debate, the PAC issues about 45 reports a year, most of which are highly critical of the way in which the Government have spent taxpayers' money. For example, it is an astonishing fact that vehicle excise duty evasion is increasing. It increased by 18 per cent. during the period of the PAC's most recent report, and is now estimated at about £163 million a year.
That is a substantial sum of money, but the problem is made even worse by the operation of the Driver and Vehicle Licensing Agency, which admits that there are some 23 million unlicensed vehicles on the register. The agency does not know whether those vehicles exist or whether they have been scrapped--it does not know what has happened to them. That makes it difficult to run a licensing organisation of that sort.
There are many other examples that I could quote. During my period as Chairman of the PAC, it has produced about 550 reports, and I shall pick out one or two recent subjects. First, there is the question of organised fraud in social security. That involves not the individual who claims a little more than he or she is entitled to, but bands of criminals going around manufacturing books, whose activities cost about £1 billion a year. We must do something about that. Then there is bovine spongiform encephalopathy, which is costing about £3.5 billion. Some of those difficulties might have been anticipated and some of the expenditure saved.
The Financial Secretary to the Treasury (Mr. Michael Jack):
I have been listening with care to the right hon. Gentleman's speech. Does he not agree that action is being taken through the Benefits Agency and Post Office Counters Ltd. arrangement to deal with many of the fraud matters to which he referred? Would he also agree that not all the reports from the Public Accounts Committee and the National Audit Office are bad? Some have praised Government expenditure--for example, a recent report praised value for money in respect of privatisation receipts.
Mr. Sheldon:
No doubt there have been several in which criticism has been muted or even absent. However, the right hon. Gentleman will be aware of the constant criticism of the privatisations. The PAC does not look at policies--we take the policy for granted, and ask whether we got value for money. Again and again, in respect of nearly all the privatisations, we have pointed out that there were ways of getting better value for the taxpayer--for example, by selling the asset in tranches.
One should not sell off the whole of asset at one go; one should take one's time and see what the market will bear, in the same way as one sells one's gilt-edged stocks--the right hon. Gentleman will understand that one does not sell them all on 1 January, but feels out the market and sells according to the state of the market. That method was never used in the privatisations, although it was employed to a certain extent when British Telecom was privatised. So many privatisation issues were made without the full value of the asset being obtained.
In passing, I make the point that the suggestion of selling in tranches came from a Conservative Member, the right hon. Member for Horsham (Sir P. Hordern). We made use of his valuable suggestion; it is a pity that the Government did not use it more fully.
To return to other examples of Government mistakes, there were the expenditures on the poll tax and on the Child Support Agency. There was the scandal of the works of art at the Ministry of Defence, when 200 out of 900 valuable works were missing. I understand that other Governments might have a similar record to the one held by the Conservative Government, but for a Government to hold a debate on the subject when such a debate is not essential suggests that they have something of which to be proud. They have nothing of which to be proud.
The record on the spending of taxpayers' money is not good. If the Government felt that the debate was necessary, they might have kept it a little quieter.
The purpose was to expose the plans of my right hon. Friends, but instead the Government have exposed their own record.
Mr. Alex Salmond (Banff and Buchan):
On a point of order, Madam Deputy Speaker. This afternoon, Ministers heard the Minister of Agriculture give the House the impression that the slaughterhouse document that was the subject of the statement this afternoon had been passed to the Scottish Office. That seemed remarkable, given that the Scottish Office had established an inquiry by Professor Hugh Pennington and that the professor had not had sight of that document. It now appears that Scottish Office officials are briefing the press to the effect that the Scottish Office did not have that document.
There seems at the very least to be substantial confusion between these two Departments as they pass the poisoned chalice to one another. May I expect that on Monday, if not sooner, we might have a statement from the Secretary of State for Scotland or the Minister of Agriculture, clarifying the matter and saying who was responsible for not giving the copy of that vital document to Professor Hugh Pennington to assist in his inquiry into E. coli 0157?
Madam Deputy Speaker:
As the House will know, the Chair is not responsible for the accuracy or otherwise of the words of any Member of the House--indeed, were they to be responsible, I doubt that anyone would be found to occupy the Chair--but I have no doubt that those sitting on the Treasury Bench will have heard the hon. Gentleman's words, and perhaps this matter can be pursued another way.
Sir Archibald Hamilton (Epsom and Ewell):
I start by apologising to my right hon. Friend the Chief Secretary for the fact that I shall not be here for his winding-up speech tonight, as I have a long-term engagement that I cannot avoid.
Public expenditure has always been notoriously difficult to control, and it is sad that we still have not got away from the ethos that causes people to believe that a "good" Secretary of State is one who obtains a generous settlement from the Treasury in the public expenditure survey round. The Treasury is always painted as the enemy, and the press does not much help by criticising Ministers who have been seen to lose out in battles with the Treasury.
It is a small regret of mine that during my long and very enjoyable time in the Government, I was never a Treasury Minister, but as a taxpayer I know where my interests lie in this battle, because it must be in the interests of all taxpayers to have a Government who control public expenditure, provide good services and, where possible, lower taxes.
I am always amazed by the attitude of the right hon. Member for Kingston upon Hull, East (Mr. Prescott). In some remark about the provision of personal pensions, he said that that was an area which had cost the Government money. That is not true. What happened is that people who were prepared to pay money to provide their own pensions received tax relief and kept a little bit of their
money, which otherwise the Government would have taken. Opposition Members' attitude seems to be that all our money belongs to the Government, and they are extremely generous to allow us to keep some of it. That is a major difference in the attitude of the two sides of the House to people's money.
We all know that Britain has an impressive record on inward investment. The total inward investment stock stood at £150 billion last year, and it is a credit to British industry that our investment abroad stood at an even higher figure--£214 billion.
There are many reasons for our great record on inward investment, not least the trade union reforms, which have transformed industrial relations, and a very well-educated work force. There has been deregulation and privatisation. A very important factor has been our relatively low public expenditure and taxation--relative, that is, to western Europe. It must be a matter of congratulation to my right hon. and learned Friend the Chancellor and my right hon. Friend the Chief Secretary that our public expenditure is 8 per cent. below the European Union average.
However, we are in danger of being complacent. It has been said many times tonight that we live in a world marketplace. We do trade, and must trade, with countries outside Europe. Public expenditure of 41.5 per cent. of gross national product, although it is reducing to 40 per cent., is not especially good if comparisons are made with many of the other countries with which we trade.
The fact that our western European partners are even worse should be no reassurance. Federal and state taxes as a percentage of GNP are 33.3 per cent. in the United States and 36.2 per cent. in Japan. In many of the young economies in the far east that are becoming extremely assertive, the figure is probably about 30 per cent. I know that they have young populations and do not have the problems of aging people that we have in western Europe, but those are the countries with which we must compete, and it is important that we start to bring our public expenditure down to their levels. I hope that we shall set ourselves new targets. I hope that, having hit 40 per cent., we shall start bringing our public expenditure down to 35 per cent., to enable us to compete with the world at large.
The right hon. Member for Kingston upon Hull, East made noises about the social model not working very well in western Europe at the moment. That must be one of the understatements that we have heard tonight--an understatement to beat all understatements. France and Germany are suffering from appallingly high wage costs, very high social costs heaped on top and very high public expenditure. As has been proven in this country, those countries want proper Conservative Governments, because it is crucial to liberate their markets, to denationalise their industries--it is amazing how much industry in France remains in state hands--to regulate their trade unions and to improve industrial relations. It is also crucial that they move much of the burden of social provision from the public to the private sector.
Germany's problems are very great. It is already exporting many of its manufacturing jobs to eastern European countries such as Poland, Hungary and the Czech Republic, and those problems can only get worse when those countries eventually join the European Union.
I congratulate my right hon. Friend the Secretary of State for Social Security on the plans that he has unveiled to reform pension provision. Such reform will have a
significant impact on public expenditure, albeit far in the future. Once again, where Britain leads, Europe should follow, because the pension liabilities of some of our European partners, which will start to come to the fore in about 2015 or 2020, are horrific. Some of them will have to find moneys equivalent to 50 per cent. of gross national product then. They cannot sit and do nothing; they must start taking action now. In Chile, where the pension provision system was changed by General Pinochet 20 years ago, the effects are starting to come through only today. It takes a very long time indeed for such changes to work their way through.
Any Government of this country must limit the totals of public expenditure, and that means that there must be constant pressure to contract out services, with all the political significance that that has. It means that, in many cases where sections of the public sector have been moved into the private sector, there are redundancies, and sometimes people are paid lower wages, but I am afraid that those are some of the consequences of the competitive pressures of the marketplace being brought to bear.
We must continue with the privatisation programme, and I sincerely hope that we shall consider privatising the Post Office, because unless it is privatised, it will go nowhere. It is already falling drastically behind in the world communications market and it needs to invest in a mass of new technology. The money for that investment cannot possibly be found from the public purse. As we have seen, there are vast pressures on public expenditure. The investment that the Post Office needs is so large that it could never be afforded by the public sector. I do not believe that there is some squirmy way of getting out of the problem by creating a hybrid, halfway between the public and the private sector.
The Post Office must be denationalised and opened up. It must be given all the opportunities that were given to British Telecom when it was privatised, to invest in all the latest technology, to expand, to compete abroad and to become a serious international company. If we do not denationalise the Post Office, it will simply die on its feet. There is no alternative.
I am delighted to hear that we are to denationalise London Underground. Once again, there is an organisation in desperate need of investment. There is no way that that investment will come from the public purse. The sooner we get it into the private sector, the better, so that it can receive the investment that it needs.
There is clearly more to be done with prisons and hospitals.
Against that background, it is incredible to suggest that a Labour Government, if there ever were one, could come anywhere near matching the Conservative record on reducing taxes and controlling spending. Labour surprised me by suggesting that it could keep within the control totals set out by my right hon. and learned Friend the Chancellor for the next two years. As has been pointed out already, included in those figures are privatisation receipts of £1.5 billion. Where will the money come from, if Labour is not prepared to entertain privatisation?
It is fallacious to suggest that if £2.5 billion-worth of council house sales receipts are spent, somehow that is new money that does not count against the public expenditure totals. That is not the case. The fact is that if the money is drawn down, it will have to be replaced,
because it represents loans to councils. All local authority spending, on council houses or anything else, goes towards the public expenditure totals. If the money is spent, it will still count and will be extra public expenditure, so it would not be possible to keep within the totals for the first two years.
The minimum wage will have a devastating effect on the public sector. It is usually suggested that the minimum wage should be brought in at £4.26 per hour. That is what everyone seems to think would be a significant minimum wage, if it were to happen. It would be a significant cost to the public sector--£3.7 billion. Once again, that would increase the pressures on public expenditure upwards.
The impact of a minimum wage would be much greater than its effect on the public sector wage roll. It would victimise those in our society who are least well educated and least skilled, and older people who are incapable of learning new skills. I have never understood how it can be argued that a labour market is different from any other market. If one shoves up the price of labour, one employs fewer people, because businesses cannot afford to employ them, or because they use automation and machinery instead. The effect is to push up the cost to the public sector by putting many people who were in employment on to the dole, where they claim income support and become a burden on the taxpayer.
It is incredible to suggest that socialists, whether old or new Labour, have changed their attitude to spending other people's money. Labour councils are some of the highest-spending councils in the country, and have been restrained only by the fact that their expenditure has been capped. Even that restraint would go, if we had a Labour Government. Immense extra sums would be spent by councils, if the capping restrictions were removed.
To anyone who has observed the political debate over the past few years, it is remarkable to hear any Labour party spokesman speak of restraining public expenditure, when all the attacks on my right hon. and hon. Friends on the Front Bench have focused on the fact that they have been cutting it. We hear nothing but the constant refrain of cuts on this, that and the next thing.
Public expenditure is extremely high in Britain. It is quite wrong for the Government to be accused of cuts, especially as most areas of public expenditure have grown. Moreover, it indicates a mindset. If Labour spokesmen are so concerned about cuts, can they be serious about restraining public expenditure, if they ever had the chance to do so?
What about taxation? What realistic chance is there that a Labour Government would cut tax? We inherited a standard rate of 33 per cent., with 83 per cent. being the top rate, and on top of that an unearned income surcharge of 15 per cent. It is almost unbelievable that some people were paying 98 per cent. of their income in tax, but that is what we inherited in 1979. Conservative Governments brought down taxes by stages. What did Labour do? It voted against every one. When my noble Friend Lord Lawson, in his Budget in 1988, reduced the top rate to 40 per cent., there was an outcry from the Opposition, as if an iniquitous crime was being committed, by bringing our rates down to an internationally competitive level.
7.10 pm
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