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Mrs. Virginia Bottomley: Does my right hon. and learned Friend, who understood how important it was to delegate, appreciate the comment of Nye Bevan? He said:
- the Minister of Health will be the whipping-boy for the Health Service in Parliament. Every time a maid kicks over a bucket of slops in a ward an agonised wail will go through Whitehall.
Mr. Clarke: When I first came to the Department of Health in the early 1980s, that is the way it was.
I hear that the Secretary of State is trying to take responsibility for community hospitals here and programmes there. He will be completely mad if he does that, and he will be completely mad if he issues the money according to his judgment of their performance over the last quarter. He will not be able to manage that.
Mr. Geraint Davies:
Will the right hon. and learned Gentleman give way?
Mr. Clarke:
No, I must get on.
What does this money for the health service mean for the other Departments? My complaint about the Government's policy on the health service, until now, has been that nobody has assessed annually its needs and how it is getting on. That is how the crisis has built up. Now there is provision for the health service, and every other Department has been ignored. The Home Office and transport get peanuts, while the provision for education, which is no longer the No. 1 priority, although not bad, is not enough.
What about local government? What about defence? What about agriculture? Ministers in those Departments are presumably listening to the money being dispensed, with no idea of what it means for them except that they
have to fight for what is left within 2.5 per cent. of gross domestic product. It is spread over three years, so we do not know what the GDP is going to be. A cautious view will be taken, so any other political priority will presumably be squeezed into what is left. I presume that the health provisions are in cash terms, so that if the economy slows down, the health service will still get its share. The whale will get bigger, and the bath water will get less for all the minnows who sit around the Cabinet table. That is no way to control priorities in future.
When I was Chancellor of the Exchequer and when I was a Cabinet Minister, my highest priority, in terms of public resources, was always health. My second priority was always education. It was not difficult--that was the position of the Conservative Government during almost the entirety of our 18 years in office. So I do not complain about the health provision. However, we need annual spending rounds. We need to see how the economy is actually performing--the outturn in terms of patient delivery and quality, the outturn in defence, the pressures on Departments. This three-year grandstanding is a bizarre way of deciding political priorities that are now cast in stone. It has been done because the health service is in a mess and the public realise that it has deteriorated since Labour took over. They have to be promised jam tomorrow, so all the talk is about 2003 and 2004--the other side of the election, when the Government will make everything better. That approach has distorted public spending.
We talk about the percentage of GDP in 2003 and 2004, and whether the surplus will last. Of course, if we look clearly at this vision, it is all predicated on forecast. It is all illusion. We have to have forecasts; we always produced them. The likely development of growth, inflation and unemployment are worked out--I used to publish forecasts for unemployment by the end. The public sector borrowing requirement, or cash requirement, as it now is, and public spending are taken into account. But it never works out as expected. Anybody here who knows what the economy will be like in 2002 should make himself a very large amount of money and order the first of his yachts. The fact is that none of us has the first idea what pressures will face the Chancellor of the Exchequer in 2002.
The Prime Minister and the Chancellor are constructing castles in the air. It all depends on what happens to the global economy. Is there another south-east Asian crisis? Are there problems in Latin America? The Chancellor has had such a lucky run that he thinks that he has abolished economic cycles. He thinks that he is going ever onward and upward, running more and more of the government as he disperses the results of his control of the economy. That is illusion; it is as bad as Midas. He will come to disillusion.
We do not know when the economy will next turn down. I think that it is on course for recovery for a year or two more. However, I would like to think that next year, when we see what happens, we might have back a responsible Chancellor who presents a Budget with real figures and tells us why he is tightening or loosening policy. We want a Chancellor who brings back a genuine public spending round that addresses priorities, compares Departments and does not give us fancy, management- school descriptions of how great reforms and great money
will give us a health service of a kind that we have not seen before in three or four years' time if only we will re-elect him and give him the time to do it.
Mr. Giles Radice (North Durham):
It is always a pleasure to follow the right hon. and learned Member for Rushcliffe (Mr. Clarke). Frankly, we can see the difference between his performance and that of his Front Bench. The Conservatives really should have him on the Front Bench, but that is a matter for them.
I warmly welcome the Budget. I welcome the development of welfare to work, which has provided considerable help for my constituency. I welcome the increase in the working families tax credit, the increase in child benefit--which was of course announced in the previous Budget--and the useful help for pensioners, especially the raising of the savings exemption and the increase in the winter allowance. The new regional fund of £1 billion for economic development is very helpful and will certainly be welcomed in the north-east. I welcome the £1 billion for education, on top of the £3 billion that had already been planned. It is good that that money is going direct to schools. Then there is the £2 billion extra for health, on top of the £2.9 billion that was already announced in the previous comprehensive spending review.
The Government have made a commitment to very large increases in health spending over a number of years. Those increases will be ring-fenced because the Government say that this is a major priority. I have to tell the right hon. and learned Gentleman that if we believe two areas to be particularly important, it is not so strange to ring-fence them in this way. We have not done it in the past; we have not given priority to the areas that we think important in public spending. As a result, when things have gone wrong, budgets in those areas have been cut. There is a case for doing what the Government are doing. This is a very large increase, and the Government are right to want value for money. I am pleased that the Chancellor of the Exchequer and the Secretary of State for Health are putting in place mechanisms for ensuring that the money goes where it should and is properly spent.
As for whether these spending increases can be afforded, the Chancellor is noted for his caution. I think that that is a virtue in Chancellors--those who are not cautious usually come to a sticky end. My right hon. Friend has approached the matter with his natural caution, but there is of course a history. We have only to look at 1987 and 1988 and the horrid example of what happened to Nigel Lawson's strategy: spending increases, tax cuts, overheated economy, increased inflation, and then raised interest rates which plunged the economy into recession. That example is in front of every potential Chancellor, and is certainly in front of this Chancellor. Nobody wants that to happen again.
We had a golden scenario and we threw it away. We do not want to do that again. That is why the Chancellor has locked in his fiscal tightening--paying off £12 billion
of the national debt. The right hon. and learned Member for Rushcliffe knows better than anyone how quickly the figure can go from a large surplus to a large debt, so it is right for the Chancellor to be cautious. Of course, by paying off debt and reducing it, my right hon. Friend will release extra resources for public spending. An extra £4 billion will be released this year because we shall pay less in debt.
Table 2.7 on page 32 shows that the overall fiscal impact of the Budget is either a minus figure or only 0.6--that is the only plus figure, which appears for 2003-04. If that table is correct, the Budget is cautious. The Monetary Policy Committee considered the Budget. Today, its minutes stated:
In our report on last year's Budget, the Select Committee on the Treasury explained the tax burden for the benefit of the House. As the right hon. and learned Gentleman, the former Chancellor pointed out, it is true that the figures can be considered in different ways, for example by including the working families tax credit. Incidentally, it is not strange to do that; we used to count in tax credits until 1995 or 1996 when the conventions were changed. The figures show that the tax burden rises and then begins to fall. As the former Chancellor said, it is true that if we remove the WFTC, the tax burden rises. If we include the receipts figure that he cited, the tax burden is rising. However, he is not really in a position to criticise the Government on that matter.
I thought that the right hon. and learned Gentleman might attend today's debate, so I looked at his last Red Book--his projection was that the tax burden would rise. The plan was that it would rise in every year between 1997 and 2002. Of course, he might not have stuck to those figures--just as he would not have kept to the figures on public spending. However, I hope that he would have done so. It is true that, under the former Chancellor, the public debt--the public sector deficit--began to be reduced. I applaud him for taking the tough actions that were required, but the job was not completed.
The problem is that while there is a large public sector deficit, there will always be a problem with interest rates. That is a constant danger. If one can reduce the public sector deficit, it is almost certain that interest rates will go down, too. The Government were right to take action to bring down the debt.
Overall, the broad fiscal picture looks somewhat tighter than had seemed probable a month ago. The impact on future activity and inflation seemed to be fairly small, although that would, in part, depend on whether the Budget had any lasting effect on sterling's exchange rate. More analysis would be needed once the full details of the Budget were known.
The Budget has not received a thumbs down from the MPC. That is important, because if we want to get interest rates down, the fiscal stance must not be over- expansionary, otherwise the MPC will compensate by putting up interest rates, so the Chancellor did something useful in that regard.
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