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Mr. Tyrie: A few facts are needed. When the idea of independence for the Bank of England first came to public notice in 1989, after Nigel Lawson's resignation, the Labour Opposition vigorously opposed it and continued to do so up to the last general election. Even during the election, the Labour party said that some time would need to elapse before it would introduce the policy. The Government then had their own Damascene conversion. Why?
Mr. Timms: I think that the hon. Gentleman is supporting what the Government have done, albeit in a roundabout way. We made it clear that we would take the steps necessary to achieve stability in the economy. We have done so with spectacular success. I welcome the belated support of Opposition Members and we hope that it will be formalised before too long.
The second element is a new public spending framework that will allow for long-term planning, remove the old Tory bias against investment, and focus on efficiency and
outputs. We have heard much in this debate about the problems with investment in public services from which we suffered so much in the 18 years of Tory Government. The third element is a new fiscal policy framework with the five principles of transparency, efficiency, stability, responsibility and fairness, underpinned by the golden rule and the sustainable investment rule. Those rules will ensure that borrowing stays under firm control and require current taxpayers to pay for current spending. A stable and prudent debt ratio will ensure that fiscal policy is run responsibly and does not threaten the stability of the economy or impose an undue burden on future generations.
Mr. Letwin: The Financial Secretary mentioned the golden rule, but the Chief Secretary was unable to answer questions about what exactly it is, how long the cycle is, where we are in the cycle and when it will end.
Mr. Timms: The golden rule has been repeatedly published and I shall read it to the hon. Gentleman when I find it. It is widely supported as a big step forward. The hon. Member for Chichester said that no one attached any benefit to it, but that is wrong. As the pre-Budget report makes clear, the golden rule states--word for word--that
- "over the economic cycle, the Government will borrow only to invest and not to fund current spending".
We are determined to go on making decisions for the long term. Tory short-termism brought instability to companies and caused uncertainty for taxpayers. Instead, this Government are creating a platform for economic stability that is the precondition for long-term economic success.
However, there is no room for the complacency of which we were accused earlier by a couple of Conservative Members. We remain alive to the risks involved in public finance. For that reason, we will not repeat the mistakes of the late 1980s and relax our grip in the way that I thought that the hon. Member for Kingston and Surbiton (Mr. Davey) was suggesting. We want to lock in economic stability and ensure that it endures for the long term.
The fiscal policy framework is being strengthened by our new way of planning and controlling public expenditure, which started with the comprehensive spending review last year. Departments now have firm, multi-year spending limits to prioritise resources and plan ahead. In that way, a stable foundation is provided for public services that they have never enjoyed in the past.
The new control regime allows underspends to be carried forward and spent on Government priorities, rather than forcing Departments to waste public money on the pointless end-of-year spending binges that characterised the Tory years. The clear distinction between capital spending and current spending ensures that worthwhile capital investment is not squeezed out by short-term pressures, as has happened in the past.
Our first spending review last year committed an additional £40 billion for improvements in health and education provision over three years--and it is supported, in an important U-turn, by the Tory amendment under
consideration today. I welcome that change of heart, although the hon. Member for Chichester spoke against the increase in spending. Perhaps he had not had the chance to read the amendment.It is also important to recall what Conservative Members said when the spending increases were announced. The Leader of the Opposition said that the Government had been "reckless" with spending when they should have been prudent, and the shadow Chancellor called the commitments "extremely irresponsible" and "reckless". I am therefore delighted that the Tory amendment supports the increases in health and education spending. That is an investment for the future, and it reflects our priorities--to build a modern Britain and a decent society, characterised by fairness and opportunity for all.
The spending review also announced a doubling of net investment in the public sector. That is especially welcome to a number of Labour Members, including my hon. Friends the Members for Stafford, for Luton, South (Ms Moran), and for Bexleyheath and Crayford (Mr. Beard). In their excellent contributions, they set out how they wanted more public investment in public services. The rise in net investment over this Parliament of 0.5 per cent. of gross domestic product compares with the fall of 1.5 per cent. over the previous Parliament that caused so many of the problems that we heard about in the debate. Gross investment will total nearly £30 billion a year by 2001-02.
Mr. Letwin: Does the Financial Secretary accept that much of the investment that he describes will be achieved through the private finance initiative, which the Chief Secretary lauded earlier? Does he also accept that the Government are sorely deficient in not accounting for the liabilities piling up under the private finance initiative?
Mr. Timms: Unlike the previous Government, this Government are making private finance work. I hope that the hon. Gentleman will welcome the fact that so many deals are now being done, and I shall set out the scale of those deals in a moment. I support the basis on which that initiative is being taken forward.
There is no doubt that the Government have solved the problems inherent in the application of private finance to public investment in a way that the previous Government conspicuously failed to achieve. We are providing the money to go with our commitments; that is putting in much-needed new resources for the fabric of our country. An extra £5 billion has come from private finance initiative deals since the election, and there will be £11 billion worth of deals over the next three years.
Prudence with a purpose is replacing the past imprudence without a purpose. It is spending with attitude. Our ambition is nothing less than for our services to be the envy of the world. To help our drive to improve performance, we have a range of new levers--league tables, inspections, targets, sanctions and rewards--to ensure that spending is investment in exchange for modernised services.
I want to respond to a number of the detailed points made in the debate. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) welcomed the way in which the real-terms increases in tobacco duty have been linked to health service spending. He made some
interesting points about the way in which the health service should be funded in the future. I think that he, along with many others who have spoken in the debate, will welcome the substantial additional allocations for health authorities around the country announced today by my right hon. Friend the Secretary of State for Health.My hon. Friend the Member for Wellingborough (Mr. Stinchcombe) pointed out the stark contrast between the economic failure of the past and the dramatic improvements of the past two and a half years. He illustrated that by referring to the changes in schools in his constituency--the better buildings, the repairs, the fact that there were more computers, smaller classes and new classrooms. All those improvements have been widely welcomed.
The hon. Member for Kingston and Surbiton had an interesting debate with the right hon. Member for Charnwood about tax competition. He was right to attack the Tory tax guarantee. It is surprising that in a debate when much was said about the burden of tax, Conservative Members said strikingly little about the Tory tax guarantee. Many of us would like to know rather more about that, or whether they share the views now expressed by my hon. Friend the Member for Witney (Mr. Woodward) about that guarantee. [Hon. Members: "Who?"]
The hon. Member for Kingston and Surbiton was touchingly naive about his party's influence on Government policy, although he made some interesting observations. We are not going to spend money before we have it--that is exactly the mistake that was made by the previous Government. They came up with optimistic views about future growth, as the hon. Gentleman invited us to do, and the result was boom and bust. We are not going down that road again.
Mr. Howard Flight (Arundel and South Downs): Could the Minister kindly tell us what is the cycle to which the golden rule applies? Where do the Government assess our present position to be in the economic cycle? Surely they do not believe that the economic cycle has disappeared.
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