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9 pm
Mr. Steve Webb (Northavon): Apart from those from Liberal Democrat Members, there has been only one thoughtful contribution to the debate, and it was made from the Conservative Front Bench. Shortly, I shall comment on the measured defence of the Conservative strategy on tax and public spending and identify the flaw in the reasoning.
I shall speak mainly about pensions, but it is important to respond to some of the implausible remarks that the hon. Member for Harlow (Mr. Rammell) made. He talked about irresponsibility and referred to the Liberal Democrat alternative budget. That document is produced every year
and is publicly available. If the hon. Gentleman had contacted my hon. Friend the Member for Truro and St. Austell (Mr. Taylor), who is the Liberal Democrat Treasury spokesman--a reasonable first person to approach for a Liberal Democrat Treasury document--he would have obtained it. However, the hon. Gentleman preferred to pretend that the document was not available. If he had asked the right person, he would have got a copy.
An alternative budget is the hallmark of a responsible Opposition party. We sit down and prepare such a budget every year. The Labour party did that only once when it presented John Smith's famous budget before the 1992 general election. It got its fingers burned because when the sums were spelt out, they were not popular with the electorate. The Labour party never produced a budget in opposition after that.
That shows the difference between the two parties. The Liberal Democrats cost and prioritise their policies each year. Our general election manifesto includes a volume of costings so that the price of every pledge is provided.
Mr. Rammell:
Will the hon. Gentleman deposit the alternative budget in the House of Commons Library? We can then examine it line by line and add to it the other spending pledges that Liberal Democrat Members made in the Chamber, in Standing Committee and elsewhere but that are not costed in the alternative budget.
Mr. Webb:
We would be delighted to place a copy in the Library. The document is published, and we hand it out to the press. It can hardly be regarded as a secret document. We are more than happy to make it available this year.
The hon. Member for Harlow outlined the Government's progress so far in fulfilling their pledges for public services. He kept mentioning three years: this year, next year and the subsequent year. However, the Government have been in office for nearly three years, of which the hon. Gentleman refers to only one. We are more than halfway through the Parliament--we are possibly almost three quarters of the way through--and it is legitimate to consider the Government's achievements. As my hon. Friend the Member for Truro and St. Austell said, the record shows that the Government have spent pretty much what the Tories would have spent. Real-terms increases in spending on health and education are analogous to the Tories' achievements when they were in office.
When the Labour party took office, the mood was "Things can only get better; this is the dawn of a bright new era." However, the Government have more or less stuck to Tory spending plans. The electorate did not expect that from new Labour. People expected genuine improvements in public services; they are clearly not getting them.
The hon. Member for West Dorset (Mr. Letwin), in a characteristically thoughtful contribution, explained the way in which he reconciled Conservatives' pledges on health and education spending with the so-called tax guarantee. He reasoned that if the economy grows at the rate of 2.5 per cent. in real terms, and one prioritises a fifth of public spending, one can provide more than 2.5 per cent, for that fifth, if one provides less than 2.5 per cent. for the rest. That is an arithmetic truth. The
hon. Gentleman prioritised health and education; he mentioned defence and perhaps the police in parenthesis. However, he did not mention social security, describing it in his characteristic fashion as not a priority public service.
The hon. Gentleman knows that the state pension accounts for approximately half the entire social security budget. To make his sums add up, it would be necessary to freeze the state pension in real terms, and simply provide for inflation-linked increases. The hon. Gentleman rightly said that occupational pensions are increasing, but that does not save the Government a penny on the basic state pension, which is not affected by such increases. The basic state pension depends only on the number of pensioners and, to a limited extent, on contributions records, which are improving systematically every year as more women retire on larger pensions. There is therefore a real-terms, upward pressure on the state pension over and above inflation. There are more pensioners and higher average state pension receipts. A state second pension is proposed as well as SERPS. There will be pressure on the state pension.
If the hon. Member for West Dorset believes that the only way he can justify decent increases in health and education spending is through squeezing social security but he is not prepared to squeeze the state pension, what else will he squeeze? That is the unanswered question when Conservative Members claim that they will pay for their goals out of savings on welfare. Other items of public spending could be squeezed, but the hon. Gentleman said that the money would come from squeezing the social security budget. Is he willing to cut the state pension?
The hon. Gentleman mentioned funding the state pension, but surely that is a matter not for the people who will be 60, 70 or 80 in the next few years, but for people years down the line. The circle will not be squared for many decades to come because the Conservative party would have to cut the state pension or not deliver on either health and education or its tax guarantee.
Mr. Letwin:
Let us return to the figures. Does the hon. Gentleman agree that they stack up perfectly well if the social security budget is rising broadly by 1, 1.5 or 2 per cent. in real terms--that is, below the trend rate of growth of gross domestic product?
Mr. Webb:
That will not happen if the biggest single social security item, which represents about half the budget, is rising substantially faster than that because of demographic pressures and the increased average retirement pension.
Mr. Letwin:
The hon. Gentleman is one of the acknowledged experts in the House. Does he not agree that the trend in pension growth through demographic factors has been roughly 0.5 per cent. in real terms?
Mr. Webb:
One of the key differences in the coming decades will be the shift in the age structure of the pensioner population from the young elderly to the old elderly, who place a particular financial burden on the pension regime through the minimum income guarantee--the means-tested top-up--and social and health services.
Mr. Webb:
Will the hon. Gentleman bear with me for a moment? The pressures caused by the increase in the
Mr. Letwin:
The hon. Gentleman's argument has shifted to a point at which it becomes true, but it is different from mine. If he is arguing that health and education increases--not only those in real terms, but ones that are much greater than the GDP trend rate--cannot be achieved without either raising tax or bringing in money from outside, he is right. He takes one view of the right way to solve the problem and we take another. Now we agree on the empirical fact and simply disagree about the policy choice.
Mr. Webb:
To paraphrase that intervention, the hon. Gentleman is saying that delivering what the public want and expect from a health service in a growing economy requires beyond what the Conservatives are prepared to find in tax and that that has to come from the individuals themselves. The interesting distinction is that the Liberal Democrats say that health has to be paid for according to ability to pay, whereas the Conservatives say that private money has to come in through private insurance. Insurance, of necessity, is related to the risk of someone needing the service. Typically, older people would have to buy insurance. The non-urgent surgery to which the hon. Member for Woodspring (Dr. Fox) refers is older people's surgery and they would have to fork out because of their medical need. However, we think that people should pay for health care through general taxation according to ability to pay.
Mr. Webb:
I have probably taken enough interventions from the hon. Gentleman.
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