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Mr. Edward Davey: The hon. Gentleman is suggesting that the increased tax burden as a percentage of GDP has funded increased expenditure. However, the figures suggest that that is not true. In 1997-98, general government expenditure as a percentage of GDP was 39.1; in 1999-2000, it is 39.2. Therefore, the proceeds from any increase in tax burden has been spent on deficit reduction.
Mr. Letwin: Alas, no. As I was trying to explain, the extent of current fiscal laxity is demonstrated by the fact that--although the hon. Gentleman was quite right to say that there has been a minor reduction in the deficit and some money has been put away--in the economic cycle in those three years, as the economy has come out of recession and into growth, very little of the surplus has been used where it should have been used--to reduce debt--and a great and growing part of it is being used on social security expenditure. Moreover, that spending creates a ratchet.
If the hon. Member for Kingston and Surbiton ever found himself--of course, he will not--as Chief Secretary or Chancellor or in a similar office and thought that he could enter a period in which we approach the trend growth rate with current levels of debt repayment and ballooning social security payments and come out the other end--when the cycle hits him, and we move back into recession--without those spending commitments hitting him on the head, he would find himself sorely disillusioned, as many hon. Members in the Chamber who have been in those offices will very well know.
The situation is worse than I have so far described. It is not merely that we have the oddity of a great increase in tax, very little debt repayment and a great increase in social security spending--storing up trouble for the future. We face also a severe lack of transparency in the accounts and open government. That was what my right hon. Friend the Member for Wells (Mr. Heathcoat- Amory) went on about, as did my hon. Friends the Members for Chichester and for Bury St. Edmunds.
We have the Government Resources and Accounts Bill, which misses most of the major assets and liabilities. We have a refusal by the Government to accept the establishment of a national accounts commission that would set proper definitions. We have fiddled figures on the reclassification of the working families tax credit and a series of other things. The Red Book has reached a level of incomprehensibility that transcends even the miraculous mixed metaphors of which this Government are otherwise capable.
That is the Government's method of disguising from themselves the very deficiency to which I have pointed. The accounts are not bringing out--as the Treasury must, by now, have lost sight of their own accounts--the real truth, which is that there is no proper tackling of the systemic problem in social security. Until there is, the very structural deficiencies that I have outlined will continue.
The situation is worse than that. [Hon. Members: "Oh!"] I am glad that there is an intake of breath by Labour Members. The truth is that the Government have
presided over the most astonishing recreation of a growth in Government waste. I do not have to rely on fiddled figures or speculation--I can look at the Government's own publication. That document is the only one of the Government's productions that is to be commended. For some reason, Mr. Balls and the others in the Treasury who specialise in spinning these documents have failed to attend to it. Unlike the others, it contains tables that one can understand, and no one has yet managed to manipulate them.The document shows total gross expenditure on civil departments' running costs. The remarkable thing is that, between 1993 and fiscal year 1997-98, the previous Government managed to contain those costs very well--to within about £100 million across the five years. The figures started and ended at £13 billion. The Government have so managed their own public affairs that they will increase the amount from £13.2 billion at the start to £14.7 billion, a rise of £1.5 billion across the period. What a miraculous achievement for a Government whose priorities are education, education, education, or, according to taste, trying to deal with education and health, or, according to taste, trying to reduce the public sector deficit. Not only have they spent money on social security, they have wasted it wholesale on administration.
That is why my right hon. and hon. Friends spent so long unearthing the £410 million of particular items of waste. However, that is just the beginning of the story. No one could claim that the Conservatives had eliminated all waste from public sector administration when we left government. However, this Government have added to it when it needs to be reduced dramatically.
We have a background of a relatively poorly performing economy--worse than most of our competitors--despite the inherent strengths. We have low growth in comparison with many of our competitors, against the background of a strong economic system--a golden economic legacy indeed--which the Labour party inherited. That is being corroded by high taxes and regulation to fund an explosion in social security payments which the Government are doing their best to hide from themselves and the rest of us through opaque accounting. It amounts to the Government storing up a mass of trouble for the future.
As competitiveness declines, as the IOUs mount, as the Government discover, to their horror, that all their blissful metaphor will not save them from the cycle that everyone else in the world always faces--and that they and the country, in due course, will face--they will find that the IOUs are called in.
I know why none of this worries the Chancellor. The reason is set out in a lapidary phrase that I would like Labour Front Benchers to attend to. A certain person said:
- "In every pore and sinew Labour has shown its basic instinct to tax and tax again."
6.35 pm
The Financial Secretary to the Treasury (Mr. Stephen Timms): We have had an interesting debate. I enjoyed the speech made by the hon. Member for West Dorset (Mr. Letwin).
Our vision for the economy rests on the new foundation that we have built: the new platform of stability in our economy that is almost unprecedented in our history. That stability is all the more important and impressive given the state of the economy two and a half years ago and the massive deficit that was then a feature of it. The challenge now is to lock in that new stability for good so that we can build on it for the long term; and that is what we are determined to do.
That is the basis on which my right hon. Friend the Chancellor was able to set out last month, in his pre-Budget report, the Government's new ambitions for the coming decade: that we should make substantial progress in catching up on productivity with our major competitors after decades of slipping behind under the previous Government; that we should have a higher proportion of people in work than ever before--we already have the highest absolute number ever in work, which is a remarkable achievement, but our aim is for the highest proportion ever; that the number of children in poverty should be halved in the next decade, on the way to the ambition set by my right hon. Friend the Prime Minister of the abolition of child poverty within two decades; and that, for the first time, over half our school leavers should go on to study for a degree.
All those targets are achievable if we can lock in our new-found stability and build on it for the long term, as we are determined that we should. That determination underpins our programme and our goal of providing employment opportunity for all and a new hope for the future in a fair society, in which all the people have the chance to develop to their full potential and no one is left out.
That applies not only to people in Britain. Thanks to my right hon. Friend's historic announcement last week, there is new hope for people in the poorest countries in the world. I join my hon. Friend the Member for Stafford (Mr. Kidney) in commending the Churches, the charities and Jubilee 2000 for the way in which they have pursued their campaign.
The Tories made the classic error time and again over their 18 years in government of allowing short-term political considerations to dictate economic decision making, with Britain then paying the price. Borrowing in 1997 was still high, with the burden of public debt rising steeply and public investment scandalously neglected. The old familiar cycle of boom and bust reared its ugly head once again. What a contrast there is today--the public finances are back under control; public sector net borrowing has been cut by £30 billion in our first two years; and, unlike in the previous cycle, inflationary pressures have been contained and interest rates peaked lower and fell much faster after the peak. As has been said, our peak was the Tories' trough in inflation.
Last month, as well as our new ambitions, the pre-Budget report gave new projections for the economy and the public finances. Current surpluses totalling £58.5 billion are expected over the next five years, compared with a deficit over the previous economic cycle of £149 billion. Net borrowing is now estimated to be in surplus by £3.5 billion, with total net borrowing over the next five years lower than in any single year in the previous Parliament.
We are on track to meet our tough fiscal rules over the cycle, while at the same time investing an additional £40 billion in health and education over the next three years, plus the extra resources for schools, hospitals and safer communities announced in the Budget and the pre-Budget report.
We have been able to deliver all that as a result of our new macro-economic framework, with a new monetary policy framework giving the Bank of England responsibility for setting interest rates in the best long-term interests of the economy to meet the Government's symmetric inflation target, as commended by the hon. Member for Chichester (Mr. Tyrie). Giving the Bank of England responsibility for interest rates was opposed by the Conservative party, but a lot of hints were dropped in this debate. The right hon. Member for Charnwood (Mr. Dorrell) told us that the Opposition had set up a committee, which is a ruse to minimise the embarrassment caused by their change in policy. Indeed, several Conservative Members--such as the hon. Members for Chichester and for East Worthing and Shoreham (Mr. Loughton)--have already declared that they support our policy.
We need to remember what the Opposition said at the time of the change to independence, and more recently. The Leader of the Opposition said in October last year that the Government had given up control of interest rates when they should have kept hold of them. The shadow Chancellor said at the same time that the Conservatives would not have given up control of interest rates in the first place. However, the Tories may be about to have a major change of heart and support at last the Government's policy on the monetary policy framework, and we would welcome that.
I was interested in the evidence given by the right hon. and learned Member for Rushcliffe (Mr. Clarke)--the former Chancellor--to the Lords Select Committee on the Monetary Policy Committee of the Bank of England. He said that he was in favour of independence for central banks and even said:
- "I have always been in favour in principle of an independent central bank and I would have pressed it further if I thought there was the slightest chance of persuading my colleagues in the last Government . . . that we should do that."
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