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Mr. Howard: I am very happy to respond to the hon. Gentleman. When we see particular proposals for dealing with the crisis in pensions, we will of course consider them. We are prepared to look at all proposals on their merits. We are determined to provide the people of this country with public services of which they can be proud, and which they need and deserve.

Mr. McFall: That is what I call a first step towards partnership, and I welcome it.

The Chief Secretary to the Treasury mentioned the Government's four main priorities. The first is a sound economy, and we certainly must not do anything to jeopardise long-term stability. The second is good public services, and the country and our constituents deserve no less. The third is the need to recreate communities that, as our daily constituency experience shows, have been shattered. It is extremely important that we build strong communities. The final priority is the United Kingdom's place in the world in the provision of overseas aid, and I am reassured by the Government's commitment to such targets in the spending review.

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I am also pleased that such means have been provided in handsome measure, but the slogan here should be not education, education, education, but delivery, delivery, delivery. Back Benchers and Treasury Committee members will monitor these developments, and ensure that the Government are held to account for these huge—and hopefully beneficial—sums of public money.

7.18 pm

Mr. Edward Davey (Kingston and Surbiton): I agree with much of what the hon. Member for Dumbarton (Mr. McFall) said. It is clear that he has been listening to my hon. Friend the Member for Yeovil (Mr. Laws), who serves with him on the Treasury Committee. I congratulate them both, along with other members of the Committee, on their work in scrutinising the spending review. However, it is a great shame that, because of the truncated timetable that the Government have instigated, we cannot consult their report in order to enhance our debate.

It is a genuine pleasure for a Liberal Democrat to be able to say in a public expenditure debate, "At last!" [Interruption.] One of my hon. Friend's says I should say "I told you so". I was trying to be gracious at the beginning of my speech. After three successive election manifestos and more than a decade of hard campaigning, key Liberal Democrat demands for investment in education and health at last look like they have begun to be met. The Government have U-turned on public spending, at last. No one in British politics today is in any doubt that the Budget and spending review for 2002 mark historic shifts in public investment, and Liberal Democrats welcome that unreservedly.

At last, the Government have stopped copying the Conservatives—on some things, at least. The days of adopting Conservative spending plans lock, stock and barrel appear to be long gone. At last education is receiving something approaching the scale of funding for which Liberal Democrats have long campaigned.

Of course we will question individual priorities in the education budget. We have huge concerns about the approach, and no doubt my hon. Friends will identify education needs unmet over coming months. Tuition fees are one example. But at last we can begin to shift from a debate about how much to spend to a debate about how best to spend, and that is the debate in which I intend to engage.

First, however, let me make an observation about public expenditure during Labour's first five years in office. It is directly relevant to this debate. For the record, Liberal Democrats believe that Labour made a huge strategic mistake in failing to invest properly in our public services during those first five years. Much of today's extra expenditure is necessary simply to rectify major errors of the past. It would have represented much better value for money had it happened earlier. Labour's bust-boom approach to public spending has been bad for patients, bad for pupils and bad for passengers. In his first five years the Chancellor, far from being an iron Chancellor, has been a corroding Chancellor, allowing our

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public infrastructure to rust away. Whatever his party political reasons for that, it was a huge financial and social mistake.

Hugh Bayley: The hon. Gentleman reminds us of the Liberal Democrats' pledge to raise income tax, if necessary—their qualification—by one penny, thus raising some £2.5 billion a year. Would the hon. Gentleman have put that drop in the ocean towards the Labour Government's increased investment in education, in health spending, in fighting crime or in transport? It would not have gone very far if he had tried to spread it across the total of Labour's increased spending.

Mr. Davey: Some interventions take one by surprise. That was not one of them.

We have always said in our taxation plans that our spending proposals will be fully costed. Because our proposals were covered by tax increases, they were over and above what the Government were proposing at the time. The cumulative tax rises in the alternative Liberal Democrat Budget of 2002 are very similar to the rises proposed in the Government's Budget, although obviously they would apply to different things. We would therefore have had the same resources at our disposal as the Chancellor had for the purposes of his spending review. The hon. Gentleman's point, therefore, does not take us very far.

To be fair, it must be said that where we had new Labour, now, with this extra spending, we have new Gordon. The problem is that, whereas new Labour promised us that it would not spend anything, new Gordon promises us that he will not allow anyone else to spend anything. The Chancellor must micro-manage everything. New Labour had reviews; new Gordon has regulators. New Labour had taskforces; new Gordon has targets. New Labour had new ambitions; new Gordon has new auditors. New Labour created Tsars; new Gordon is the Tsar.

Some of us here are genuine admirers of the Chancellor. He has done some very good things—establishing an independent Bank, tackling third-world debt and sorting out the Conservatives' debt mountain. All those are great achievements. However accomplished this Chancellor is, however, he simply cannot run Britain's public services from Whitehall. He must learn to let go, and to trust others.

David Wright: During our debates on the Finance Bill, the hon. Gentleman made a number of additional financial commitments on behalf of his party. Does he think that he will have to put another penny on income tax to pay for them?

Mr. Davey: If the hon. Gentleman were being fair, he would also say that I opposed some of the Government's tax reductions because they were very unwise. An example is the reduction in the starting rate of corporation tax to 0p, which the Institute for Fiscal Studies says may lose the Exchequer as much as £2.9 billion. According to the hon. Gentleman's logic, we could pocket that money for our purposes.

The Chancellor talks of a new localism, but it is a new localism that his Whitehall controls. Outside Scotland and Wales, there is precious little new democracy in Labour's

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new localism. The Chancellor effectively said that himself in his statement. Poor-performing local education authorities would be subject to takeover; poor-performing councils would be subject to new managers, or to takeover.

What happened to local democracy? Does the Chancellor not trust the voters? Does he not see how sensible were the voters of Hull when confronted with the waste of Hull Labour party and the scandal of the failed Gypsyville project? They kicked out the Labour council after 50 years.

The Chancellor should talk to the Deputy Prime Minister. Has he not seen how Islington is being transformed now that the Liberal Democrats are running it? He should also talk to the Prime Minister. Instead of being the man in Whitehall ordering takeovers, he should be empowering voters; but instead of democracy we have a new battery of centralised targets, the new public service agreements.

Mr. Tom Harris: The hon. Gentleman's personal tirade against the Chancellor is all very interesting, but do the Liberal Democrats now support failing schools?

Mr. Davey: I thought that the hon. Gentleman would do rather better than that. What the Liberal Democrats do in power, having been voted into power by the electors, is tackle such problems with proper investment, making education a priority.

What our party supports is local democracy. We oppose the idea that the man in Whitehall knows best, because so often he does not.

The new public service agreements now contain 130 targets—admittedly fewer than the 300 in 1998 and the 160 in 2000, but there are still plenty of centrally imposed targets. And what a reassuring set of targets this is. The No. 1 PSA of the Office of the Deputy Prime Minister is "Promote better policy integration". I am not sure how "better policy integration" will be measured, and when we will know that we have reached that nirvana. Perhaps it will be like the "better transport policy integration" provided previously by the Deputy Prime Minister; let us hope not.

The Home Office has a particularly good public service agreement:

We all look forward to seeing the Chancellor Tsar measure community activity and community participation up and down the country. Perhaps the Chief Secretary to the Treasury can tell us how it will be measured. I have an image of bowler-hatted man with clipboards touring village fetes. Presumably their first question will be "Has the number of stalls gone up this year, vicar?" As for increasing community participation, perhaps the Government have plans to slow hand-clap volunteers into joining the Women's Institute.

I would be fascinated to learn from Treasury Ministers how they plan to increase community sector activity by central diktat. We all agree with the aim—I am sure that scout and guide groups throughout the country are crying with joy at the prospect of having adult volunteers to help them—but the idea that a central Whitehall Department should target an increase in community and voluntary activity across Britain is a sign of the unbelievable hubris of this Government.

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It does not end there. I discussed this earlier with the Chief Secretary to the Treasury. Part of objective 1 of the Foreign Office simply does not make sense. It states:

That may be an excellent idea. Indeed, we can all agree that it is a worthy aim. But can Treasury Ministers tell us how they will obtain the data? Is the source, perhaps, the Afghan Ministry of Agriculture? It is an entirely innocent question.

I presume that some of the extra cash given to the Foreign Secretary has been earmarked for the purpose of destroying Afghan poppy fields; but the National Audit Office will want to audit the data that the Government use to calculate their success in approaching that ambitious target. We need to know the answers to such questions.

The key point is that the Treasury wants us to take PSAs of that kind seriously. Page 11 of the spending review White Paper states:

We as parliamentarians, therefore, are right to ask questions. The problem is that when we do the Treasury does not answer them. Liberal Democrats have asked the Treasury to publish a list of the PSA targets from the 1998 and 2000 spending reviews to show which targets were passed, which were failed, which were revoked and which were amended. The Treasury has refused to answer. How can we hold Ministers to account in regard to PSAs when they do not answer parliamentary questions about them? The Chancellor, when asked about them by the Select Committee on the Treasury, also refused to give a straight answer.

We have therefore conducted our own analysis, which the shadow Chancellor used in his speech. We have consulted departmental annual reports to try to establish what progress has been made on PSAs. Unfortunately, the annual reports are not terribly helpful, but we have managed to make some progress. The record is not very good. The Foreign Office has missed 47 per cent. of its targets, the Department for Transport has missed 57 per cent., the Department for Environment, Food and Rural Affairs has missed 83 per cent., and the Home Office has missed a staggering 89 per cent. of its PSA targets. It met only four of the original 37 targets: all the others have been missed, dropped or revised.

We do not know, now, what happens when Departments miss their targets. The Chief Secretary said today that they will not be penalised, but will Ministers be sacked, or—as the Chancellor implied to the Select Committee—will the pay of permanent secretaries be docked? We just do not know.

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