| Previous Section | Index | Home Page |
3.45 pm
Mr. Andrew Tyrie (Chichester): I should like to pick up on a few points made earlier in the debate. I was astonished to hear from the hon. Member for Croydon, Central (Mr. Davies)--no longer in his place--that the lower the savings ratio is, the better for all of us. The hon. Gentleman suggested that it is a sign that things are going well. Of course, the savings ratio in the United States of America is negative while in Japan it is hugely positive, which must be the evidence to which the hon. Gentleman was alluding. He should realise, however, that saving is a counterpart to investment, and that high-quality investment delivers growth. He should reconsider the relationship between savings and high-quality economic performance before he repeats that remark.
Mr. Edward Davey: The hon. Gentleman is right to suggest that saving is important for investment, but the hon. Member for Croydon, Central (Mr. Davies) was trying to make the point that the savings ratio is determined by many things, not just tax policies. When net household wealth is increasing substantially, as it is in the UK with increasing house prices, it is not surprising that the savings ratio is going down.
Mr. Tyrie: We have been unable to elicit any answer from the Liberal Democrats on what tax burden they would wish to impose. Perhaps the hon. Gentleman will be able to tell us what he thinks the savings ratio should be if we are to have a prosperous economy.
I shall speak briefly about debt and public spending, then about economic management over the past couple of years. On debt, the right hon. Member for Ashton- under-Lyne (Mr. Sheldon)--a former Chairman of the Public Accounts Committee who is also no longer in his place--alluded to what he called the Government's excellent performance in reducing the debt burden and the deficit. He failed completely to grasp the fact that those issues can be considered intelligently only in the context of the business cycle. It is easy to reduce debt and the deficit during an upswing. It is difficult--indeed, usually impossible--to do so during a downswing.
The Conservative record on debt and the deficit--particularly debt--was without doubt the best achieved by any Organisation for Economic Co-operation and Development country over the lifetime of the last Conservative Government. I have the figures, should anyone wish to challenge them. Every other major country increased its debt stock during that period; the United Kingdom enjoyed a net fall. That was an astonishing achievement. The sharp rise to which Labour always alludes was a consequence of the recession in the early 1990s, by which the UK was particularly badly affected.
Dr. Palmer: Is the hon. Gentleman not missing the point? It is certainly much more difficult to reduce debt when one is plunging a country into recession, but the drawback of the previous Government's record was their propensity to plunge the country into recession. An attractive feature of the past couple of years has been that when a recession was widely predicted by the hon. Gentleman's Front-Bench colleagues, it did not happen, and we were able to reduce debt all the same.
Mr. Tyrie: The economy was more volatile in the 1980s and 1990s and the peaks and troughs were larger. Let me offer the hon. Gentleman one core fact that demonstrates the transformation in the performance of the British economy, on the trend growth line that we want to improve above all others. During the 1960s and 1970s, the British economy grew at about two thirds the average annual rate of the economies of our major European competitors. During the 1980s and 1990s, however, the British economy has grown slightly faster than those of our major European competitors. We have seen greater volatility, deeper recessions and higher peaks, but that has delivered higher overall growth rates.
Certain fundamental things have happened. One was the deregulation of the financial markets, which unleashed a reallocation of capital in this country and achieved much greater efficiency in the use of capital. That contributed enormously to economic growth. However, that same deregulation made the conduct of monetary policy difficult in the mid-1980s. Mistakes were undoubtedly made; those who participated in policy at the time freely admit it. It contributed to a subsequent deeper recession than we would otherwise have had, but the long-term benefits of the deregulation are there for all to see. We are benefiting from it today.
The hon. Member for Wellingborough (Mr. Stinchcombe), who is also not in the Chamber--he is probably having a cup of tea, too--talked extensively about the £40 billion extra spending that Labour was providing, and what a good thing that was. I certainly support increases in health spending, for example, where it is affordable in the long run; but just as important as increases in spending are increases in
performance that arise from the way in which that spending is used. There is no earthly point in putting a lot more money into one particular sector unless it can increase output and delivery as a consequence.
Ms Sally Keeble (Northampton, North): Does the hon. Gentleman agree that the Government have, if nothing else, set close performance targets throughout the public services, and that his party has been at the forefront of criticising the Government for interfering by doing just that: setting clear targets on how money should be spent and on performance improvements that the public expect?
Mr. Tyrie: Merely setting a performance target does not take one far. To achieve higher productivity in the public sector, we need to create a system of incentives that is as near as possible akin to that in the private sector, where, as we all know, capital is generally better allocated. That is partly what Labour has moved away from.
On the health service, for example, the figures are indisputable. Again, I have them with me if hon. Members want to challenge me. Output measures in the health service show clearly that the introduction of the internal market increased productivity in the service. Preliminary evidence appears to suggest that changes to the internal market since 1997 have led to some diminution in the trend improvement in productivity.
That is an example of how a change in the structure of policy can reduce the effectiveness of spending. I am as concerned to see increases in outputs in the health service as a result of improvements in the management of the system as I am to see more money put in.
Ms Keeble: Will the hon. Gentleman give way?
Mr. Tyrie: I will not give way again on that point.
It is a fact that the health service is a huge success story. It is a remarkable institution. In terms of output measures--that is, morbidity and mortality rates--it delivers health care that is comparable with that of all our major competitors, but it does it at about two thirds the average cost per capita. That is a remarkable achievement.
Let us compare the position here with that in the United States, for example. Spending there is about three times more in absolute terms per capita, but morbidity and mortality rates here are broadly comparable, so we see that the health service is a remarkable success. We have to examine carefully why that is and ensure that reforms and extra money in the health service enable what we have achieved to be maintained.
What concerns me is that there is a real risk that structural changes in the health service--for example, the decision to end fundholding--may reduce allocation efficiency and that we may find that we no longer achieve such good value for money for every pound spent.
Shona McIsaac: The hon. Gentleman mentions the United States of America. Of course, in the United States, most people pay thousands of dollars a year for private health insurance and purely publicly funded hospitals are in the minority. Is he saying that that is the model that the Tories will use for their health policy? After all, his party's health policies show that it wants to move
more towards privately funded health care. Is he suggesting that we will have a model such as the one in the United States?
Mr. Tyrie: Oh dear, oh dear. I thought that I had made things reasonably clear, but I will have another brief go. I am saying that the health service, for a variety of reasons that I will not bore the House with now, has been an extraordinary success. It has been one of the few examples of an extraordinary public sector institution doing very well and continuing to do well, while almost all other public sector institutions, or a very high proportion of them, started to do badly some time after they were set up, during or just after the war.
My remark about the United States pointed in exactly the opposite direction. I said that we should be wary of implanting the American structure of health delivery. We may have something to learn from the Americans in some areas, but they have a lot to learn from us.
Education is an example of a sector where we spend about the same as comparable countries--for example, France--but have far worse outputs. For example, levels in maths and science at the age of 13, which are measured in all OECD countries, are far worse in the UK. In fact, we are near the bottom of the performance league in maths and science at age 13, even though we spend about the same as comparable countries that do much better, such as France.
I thought that it might interest the House to know that the countries that have the highest performance in maths and science at the age of 13 spend the least. Hungary comes top; Japan does very well. The country that spends the most on secondary education comes almost bottom in the OECD maths and science league: the United States of America. That is an important point to bear in mind when considering education funding and productivity.
The Government have said how marvellous it is that so much more money is being poured into health and education. The point that I am trying to make is that that is only half the story; indeed, it is not even half the story. It is how that money is used and to what effect that count.
| Next Section
| Index | Home Page |