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I conclude by welcoming this significant boost to public expenditure. This is a significant political moment, when the balance of argument has shifted decisively in favour of public expenditure after two decades in which the assumption has been, in England at least, that high levels of public expenditure were not politically popular. Now the climate seems to have changed in England--although I must say that it has always been the case in Scotland that we support high levels of public expenditure.
This week's spending review document should have had a subtitle--"Return to Labour tax and spend". We have seen a set of propositions from the Labour Chancellor which invited us to believe several things. These were very much the kind of propositions that old Labour invited the British public to believe. "We can have high levels of spending and the tax burden does not have to go up to finance that". "We can have high levels of public spending but ordinary hard-working families will not have to pay more tax to finance that". "We can have high levels of public spending and big Labour spending figures that are credible, believable and deliverable and will automatically result in better frontline services".
Those are ridiculous propositions now and they were ridiculous 20 years ago. All Conservative Members know that there is no such thing as a free Labour spending splurge. Someone has to pay for it. Who pays for it? Let us refer to those who must pay rates of interest. In the coming financial year, we will see real terms growth in spending of about 6.7 per cent. That means that about 40 per cent. of the British economy will be growing at nearly 7 per cent.
As Goldman Sachs observed today, it is clear that that will crowd out private sector economic activity. Those who are assiduous enough will have read the minutes of the Monetary Policy Committee at its last meeting, at which it was observed that this spending splurge could lead to inflationary pressures unless the private sector slows down. If it does not slow down, the MPC has made it perfectly clear that there will be upward pressure on interest rates. If there is upward pressure on interest rates, mortgage payers and manufacturing exporters will suffer. These things are not spoken about by Labour Members because they are a cost--there is a cost attached to this spending.
In response to a question on whether there is any room for reducing tax under these fiscal projections, the National Institute for Economic and Social Research and the Institute for Fiscal Studies have observed today that there is not. There is no prospect of money being returned to the British people who have had their pockets picked for three years by the Chancellor and the Labour Government. There is no prospect in the three years of CSR2 of any return of their money through even modest tax reductions.
We do not have to talk about future tax increases from today. We only have to look at the way in which the typical hard-working family has paid more tax over the past three years. As the House of Commons Library has shown, the average family will be paying about £670 a year extra tax. That is made up of council tax, which is rising at nearly four times the rate of inflation; personal pension contributions, which will have to rise by more than £200 a year on average to pay for the £5 billion a year raid by the Chancellor in his first Budget in 1997;
I should like to say something about that canard--the £16 billion, a figure that the Labour party will try, I believe unsuccessfully, to lodge in the public mind as being a Tory "cut". Let me explain why that is a fantasy fiscal figure. It is bogus because the £43 billion extra that the Labour party suggests it will spend at the end of four years from now is obviously not going to be delivered. That is the view of many outside commentators, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) and my right hon. Friend the Member for Kensington and Chelsea (Mr. Portillo). They agree, as we all do on the Conservative Benches, that those are figures four years out. Plenty of things can happen before then.
I am always reminded on these occasions, when I look at Labour fiscal numbers and the preposterous distortions of the truth that they try to foist on the British public in relation to our policy, that a lie is halfway around the world before the truth has got its shoes on. That will not be the case with the bogus £16 billion figure. One cannot have cuts of £16 billion if one does not know what the actual spend will be. I do not believe that £43 billion is what, in practice, will be delivered.
Mr. Ruffley: It is not a document that I have seen. I understand from hon. Friends that it has been, as usual--no surprises there--completely distorted by the Labour party, but the £16 billion is a canard that is being thrown around and debated, not with much success, by the Labour party. I have explained why it is a bogus figure. Those cuts do not materialise because the money that the Government say that they will spend has not materialised. I do not know how much will be delivered, but we know one thing: it will not be spent wisely or well.
We know that because the Labour party and those on the Treasury Bench have been in a bit of a mess about the whole idea of comprehensive spending reviews. First, it said that they would have a three-year planning horizon. I am afraid that we had only two years of CSR1, announced in July 1998, because its third year has now become the first year of CSR2--that is to say, 2001-02.
It gets even worse. Last year, emergency cheques were doled out busting the limits that the Government had said that they were setting. The idea that we have a prudent Chancellor who has a three-year time horizon has been exploded. It is a myth. It is simply not true.
Then we have that work of fiction: the publication of the public service agreements. That was a bit of a laugh. The Government started out with several hundred targets and said that they would measure them over the lifetime of the Parliament, so that the public and the public services could see how that extra money was being spent. They have had to slash the number of targets, many of which were inappropriate. We do not have a basis on which to measure what was happening at the start of the
We were told that the allocations set out in the document for CSR2 were going to be informed by the results of the PSAs in CSR1. In other words, they would see how that money was spent and whether Departments hit targets--if they did not, sanctions would have to be taken and the allocations would be tied to performance. We all know that the numbers announced in the document bear no relation whatever to the PSA targets and whether they have been met in the past two years. Everyone in Whitehall knows it.
Mr. Timms: It was always the intention that the first year of the new spending review and the last year of the previous spending review would overlap. That was the intention set out at the beginning of the spending review process. The CSR targets relate to the full three years, which finish at the end of the 2002 year.
Mr. Ruffley: I am afraid that the Minister has not explained why there were so many PSA targets, which were inappropriate, ludicrous and had to be scrapped. We now have no basis on which to measure performance over the Parliament. That is something that no Minister has sought to deny. I notice that he did not seek to deny it in his intervention.