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Mr. Giles Radice (North Durham): The Treasury Committee will want to question my right hon. Friend on his statement, as he knows, but is it not the case that his announcement of significant but affordable public spending increases is a vindication of the Government's economic policies? Does it not show that the Government's restraint in the first two years in office, the new monetary framework and the steady economic growth have led to a virtuous circle of low inflation, low public debt, and now the increased public spending in vital areas such as education and health that we have heard announced this afternoon?

Mr. Brown: I am grateful to my right hon. Friend. He is the distinguished Chairman of the Treasury Committee, and he says that the economy has been put on a strong foundation. The figures show that 42 per cent. of additional expenditure under the Conservatives went on social security and debt interest, but that only 17 per cent. will go on those things under the new spending plans. That is a recognition not only that the public finances are in order, but that we are using them to best effect. I shall give the House the benefit of further information. Under the regime of the former Chief Secretary to the Treasury, who is now the shadow Chancellor, it was not 42 per cent. but 55 per cent. that went on social security and debt interest. More than half the expenditure went on social security and debt interest. Today, most expenditure goes on health, social services, education, transport, tackling crime and building a better Britain.

Mr. Matthew Taylor (Truro and St. Austell): Millions of people will have had one question in their minds as the Chancellor sat down: what about the pensioners? With £43 billion to spend, the Chancellor's Budget in March, with its 75p a week for pensioners, looked miserly; now, with a £2.5 billion surplus in the social security budget, his zero increase for pensioners looks positively mean.

As for the rest of the statement, no one will accuse the Chancellor of underspinning. The shadow Chancellor may be underperforming, but the Chancellor is not underspinning. However, the question that the Chancellor must answer is whether his statement today was effectively an admission that what has happened in the past three years was unnecessary, that Liberal Democrats were right to say that the Government were building an election war chest, and that--contrary to what the shadow Chancellor said--what we suffered from was the problem of having had a Conservative budget in the early years of this Parliament, and the costs that it imposed on

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pensioners, pupils, patients, the police and public services as a whole. This is bust-boom economics; this is exactly the treatment of public services that Liberal Democrats have predicted for the past two years, because it was there for all to read.

The irony of the shadow Chancellor's position is that this Budget will only bring Government spending, as a proportion of national wealth, back to the level they inherited from the previous Conservative Government, having cut it in the early years by following Conservative Budgets. That is not what people voted for, and it was a wasted opportunity. The statement makes that absolutely clear. We have bust-boom treatment of the public services.

The Conservatives now offer £20 billion of cuts while the Liberal Democrats welcome increased investment in public services, even if it is late. However, will the Chancellor guarantee it? In the previous comprehensive spending review, he gave figures that we now know were not true. For example, he said that there would be a 5.1 per cent. increase in spending for education. We know now that last year, schools received only a 2.5 per cent. increase. The spin is all there, but where will the delivery be? It is not there for pensioners. Will it be there for the police? Is the Chancellor able to tell us whether there will be more police on the beat at the end of this process than there were when he came into office?

Will the right hon. Gentleman get rid of tuition fees? Is he able to guarantee lower class sizes for all children, and not only for those up to the age of seven? Or will the position continue to worsen, as it has so far since Labour took office? Can the Government even guarantee that tuition fees are not set to rise to help pay for their higher education policy?

The 18 years of Conservative government were a disaster for public services. However, the early years of the Labour Government left Conservative policies in office. The bust-boom approach is not a sensible way of handling public service investment. It never was, and the Government's cynicism showed through in every sentence that the Chancellor read out. No wonder the Prime Minister's memo did not mention the Chancellor. There never was any chance that the Chancellor would underspin. He follows the same agenda of trying to win elections at the cost of public service.

We will scrutinise the figures because we know that on every previous occasion, the Chancellor has sought to mislead. We want to show pensioners that the Government had the money to give them a decent pension and have not delivered. I suggest to Labour Members that when the leave this place, they will experience the anger of pensioners because they are still left with 75p. That will be the greatest single legacy from the Chancellor's statement.

Mr. Brown: At the general election, the Liberal Democrats stood on a manifesto that stated that they would put £500 million more every year into the national health service. Under our plans, we are putting £13 billion more a year into it. The Liberal Democrat manifesto stated that they would put £1.9 billion extra into education. Under the new plans, there will be £10 billion extra a year. The Liberal Democrats said that they would raise the pension only in line with inflation. They also said in their manifesto that they supported a minimum income guarantee.

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Now we have the shopping-list approach to economics, which has been adopted, unfortunately, by the Treasury spokesman for the Liberal Democrats. He wants in one part of the country to say that he is doing this, while saying in another part that he is doing that. In other parts of the country, he wants to appease particular groups. He tries to coin a new line about bust-and-boom economics, but that sits uneasily with the fact that we have put public finances in order. The national debt has been reduced and the borrowing that we inherited has been eliminated. Debt as a proportion of national income is falling, and we are now able to have sustained and sustainable improvement in our public sector services for the years ahead. That would not have happened under the Liberal Democrats' policy.

Mr. Alun Michael (Cardiff, South and Penarth): I welcome the fact that my right hon. Friend's announcements today address Labour issues from the international to the local. In particular, his announcement on the new deal will give opportunities to young people as individuals.

My right hon. Friend will be aware that the announcement has been particularly awaited with interest in Wales. Will he confirm, not least for the right hon. Member for Caernarfon (Mr. Wigley), that his settlement enables the National Assembly for Wales to spend in full the money available to Wales under objective 1 without cutting into education and health spending? Does it also provide the necessary flexibility for the Assembly to deal with matters such as match funding?

Mr. Brown: I am grateful to my right hon. Friend. The settlement does exactly that. I am grateful to him for the work that he has done and I am grateful to all his colleagues who are Welsh Members of Parliament. The Welsh objective 1 settlement ensures that the resources are there to move ahead. The Wales Office expenditure is rising by 5.4 per cent. in real terms, something that could never have happened under Plaid Cymru policies.

Equally, my right hon. Friend is right to say that we have been spending money in Wales on the new deal and the working families tax credit in a way that gets money to the communities that need it most--an allocation of public expenditure that is most important to areas of high unemployment. In total, we are spending £231 million on the new deal and the working families tax credit. Taking into account the Barnett formula, the additional money for objective 1 spending, which my right hon. Friend has urged--as have many others over a period of time--and the £231 million expenditure on the new deal and the working families tax credit, this is not only a good settlement but one that will help Wales to invest in its future and to invest to create a Wales of full employment.

Mr. Kenneth Clarke (Rushcliffe): Will the Chancellor, who strives for a reputation as a serious policy maker, agree that no one, including himself, can predict accurately now the course of the economic cycle or the growth in the British economy during the next four years? The Chancellor is never knowingly underspun when he is surprised by changes that are favourable compared with his forecast, but will he accept that, if the forecasts go wrong, he does not know the extent to which he might have to raise tax, the extent to which public borrowing will go up, the inflationary pressures that might be caused and the extent

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to which he might squeeze out private sector investment in business by what he has announced? Is not the explanation for a statement in which I do not think Prudence was mentioned once--[Interruption.] I am told that she had four sad and parting mentions.

The reason for these U-turns and the bran tub approach of throwing money at every problem is that the right hon. Gentleman's colleagues have become panic stricken that big numbers and big promises two years ago have delivered nothing, so they now hope that big numbers and big promises beyond the next election will deliver them a return to office.

If the Chancellor wants to turn to serious policy making, does he accept that the future that we want and the strength of our public services, as well as our jobs and well being, depend on sustaining growth with low inflation and healthy public finances, which he and I have been lucky enough to enjoy at the Treasury for the best part of seven years now? If he wants to sustain that, he should run a surplus at this stage of the cycle and wait, year by year, to see the course of economic events, and release money sensibly to finance public services when he has the money in his pocket.

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