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9.44 pm
The Economic Secretary to the Treasury (Ms Patricia Hewitt): This has been an extremely interesting and well-informed debate, largely due to excellent contributions from my right hon. and hon. Friends. I am afraid that I cannot say the same for the contributions of members of the Opposition Front-Bench team. That is perhaps unkind, and I recognise that we must make allowances for the fact that it is the last day of term. It is a well-known tradition that, on the last day of term, children are allowed to bring their favourite toys to school. I think that the right hon. Member for Wells (Mr. Heathcoat-Amory) brought along his favourite speech.
As my hon. Friend the Member for Northampton, North (Ms Keeble) accurately, but perhaps also unkindly, said, the right hon. Member for Wells completely avoided mentioning the Bank of England in his opening contribution. He left that extremely important issue to the hon. Member for Bury St. Edmunds (Mr. Ruffley).
Perhaps the right hon. Gentleman did not want to be reminded--but I shall remind him--of what he said in the House on 26 October 1998, in response to an intervention from a Labour Member. He said:
Mr. Letwin:
The Economic Secretary has mentioned something that was mentioned several times by her colleagues. Would she expect interest and mortgage rates to be high at a time of significant economic downturn?
Ms Hewitt:
The excellent report published by the Select Committee on the Treasury on this subject rightly reflects the success that is being achieved by the removal of politics from interest-rate decisions. We are seeing that success in the fall in long-term interest rates, and in the narrowing of differentials between our interest rates and those of our European counterparts.
My hon. Friends the Members for Northampton, North and for Stafford (Mr. Kidney) both referred, in excellent speeches, to the benefits that are already being seen in their constituencies as a result of our additional investment in schools, hospitals and housing. What did the right hon. Member for Wells have to say about that additional investment? He said that the extra money was being spent on all the wrong things. All the wrong things? The money is being spent on hospitals, schools, elderly people and the highest-ever increase in child benefit for families with children. Are those, in the eyes of the present Conservative party, "all the wrong things"?
We know, and have known for some time, what the Conservative party is now against. It is against independence for the Bank of England, the minimum wage, the working families tax credit and the new deal. Now we want to know what the Conservatives would cut. Would they cut the extra spending on hospitals and on schools, the additional money being made available to elderly people, or the record increase in child benefit?
My right hon. Friend the Member for North Durham (Mr. Radice) made, as we would all expect, an excellent speech. Like many others who spoke today, I thank him and his colleagues on the Select Committee--members of all parties--for their excellent report on the new monetary police framework. The Committee is playing an extremely valuable role in enhancing the transparency and accountability of the framework.
Mr. Blunt:
The Economic Secretary speaks of transparency and accountability. Will she deal with the point made so eloquently by my hon. Friend the Member
Ms Hewitt:
I understand that the hon. Gentleman supports the independence of the Bank of England and the new monetary policy framework. I am surprised that he did not intervene to congratulate us on implementing a policy that is supported by him, but opposed by his Front Bench.
In an extremely constructive speech--it was perhaps a little long, but it was very constructive--the hon. Member for Kingston and Surbiton (Mr. Davey) referred to the new public service agreements, an important innovation in ensuring that we achieve the modernisation and results that we need from our public services. I remind him that, in December, we published in the White Paper, "Public services for the future--modernisation, reform, accountability" the first tranche of the public service agreements. They are there in the public domain for all to see--the targets that we have set for improvements in public services. They include reductions in hospital in-patient waiting lists, reductions in class sizes for five, six and seven-year-olds, and reductions in the time between arrest and sentence for persistent young offenders, who for years under the previous Government were allowed to get away with it.
The hon. Member for Kingston and Surbiton raised the Select Committee on Procedure report that was published yesterday on debates on expenditure plans. Of course, we will want to consider carefully that extremely thoughtful report and will respond to it in due course, but the report's recommendations are primarily addressed to how Parliament can use the opportunities that are already available to it, rather than a matter for the Government themselves.
The hon. Member for Boston and Skegness(Sir R. Body) raised the question of Kosovo and whether the costs of both the war and reconstruction in Kosovo and the western Balkans will threaten public finances. I assure him, as my right hon. Friend the Chief Secretary to the Treasury has assured the House on other occasions, that, because of the healthy state of public finances, there is no threat to the public finances from the demands that will be made, rightly, by reconstruction in the region.
The hon. Gentleman also raised the wider issue of the state of the public finances. He rightly criticised the record of the Conservative Administration, who, in 1993-94, raised public sector borrowing to £50 billion, the highest level that it has reached since the war. I hope that he and other Conservative Members will congratulate the Government on the fact that, in the first two years alone, they cut borrowing by £32 billion; that total net borrowing over the next five years will be lower than in any one single year in the previous Parliament; and that we are forecasting, and will deliver, current budget surpluses totalling £34 billion over the next five years, compared with a deficit under the previous Government over the previous cycle of a staggering £149 billion.
The hon. Gentleman raised in particular his fears about what would happen to the national debt. As I have said, the national debt doubled in the early 1990s under the Conservative party, but, if he looks at the projections in the financial statement and Budget report in table B6, he will find that the national debt is set to fall from a peak of over 44 per cent. of GDP in 1996-97 to under 40 per cent. this year and to under 35 per cent. in 2003-04.
Sir Richard Body:
In the Budget statement, that is not the forecast. Perhaps the Minister will good enough to remind herself. The figure will go up again. It is true that there has been a small surplus in the past two years, but, as I pointed out, that was the result of a time lag following decisions by the previous Government.
Ms Hewitt:
As I have already said, current budget surpluses will total £34 billion over the next five years and the national debt will fall substantially as a proportion of GDP, compared with the peak that was reached.
Mr. Gibb:
The hon. Lady has trotted out the £34 billion figure that I referred to, which is the so-called current surplus over the next five years--1999 to 2003-04. Why has she chosen five years? Why not six years? Why not four years? What is the reason for the five-year period?
Ms Hewitt:
It is the lifetime of this Parliament, and a perfectly reasonable period to choose.
Mr. Gibb:
Will the hon. Lady give way?
Ms Hewitt:
No, I shall not give way again. I am sorry, but this has been a lengthy debate, and I should like to do justice to the many speeches that we have heard.
My hon. Friend the Member for Harlow(Mr. Rammell), in a thoughtful speech, stressed again the improvement in public finances, the investment in public services, the achievement of economic stability and--underlining the point made by the Select Committee on the Treasury--the success of our new monetary policy framework in avoiding recession despite the world financial crisis.
The hon. Member for Reigate (Mr. Blunt) raised the issue of health spending. I should remind the House of the facts on health spending: over the comprehensive spending review period of 1998-99 to 2001-02, there will be real annual average growth of 4.7 per cent. in national health service spending; and, over the entire Parliament, there will be a real annual increase of 3.7 per cent. We should compare those percentages with an annual increase of 2.5 per cent. in the previous Parliament, and with an increase of a mere 3 per cent. in the 18 years of the previous, Conservative Government. On both measures, therefore, the Government are providing a significantly higher annual real increase in funding for our hospitals and the national health service.
My hon. Friend the Member for Stafford, in a typically well-informed and excellent speech, raised the extremely important issue of separating capital and revenue accounting, and stressed the importance of doing so to ensure that we achieve the levels of long-term investment that the economy needs. He was absolutely right on those points. I simply draw his attention to the Government's plans to introduce resource accounting and budgeting, which will ensure that, in the public sector, we do indeed have proper accounting for both capital and revenue.
"The hon. Gentleman has obviously already forgotten that we voted against the Bank of England Bill on Second and Third Reading. We also argued against its provisions in Standing Committee."--[Official Report, 26 October 1998; Vol. 318, c. 39.]
Well, we do not forget, the City has not forgotten and the country has not forgotten. The fact is that, as several hon. Members pointed out this evening, the Conservative party has persistently opposed the independence that we granted to the Bank of England, and the creation of a successful monetary policy framework that is delivering the lowest long-term interest rates and the lowest mortgage rates for more than 30 years. The Conservatives are opposed to that successful policy, and their spokesman has nothing whatever to say on the subject.
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