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Mr. Bercow: My hon. Friend is offering a penetrating dissection of the failures and absurdities of the Government's performance. Does he agree that the Government are guilty of the targets they have not met, the targets they will not set, and the targets that are meaningless? Does he also agree that if Government Departments have public service agreement targets simply to publish White Papers when they have obviously already decided to publish them, it is no great achievement when they do so?

Mr. Ruffley: I am grateful to my hon. Friend for making the point that I was about to make. Let me remind him of a figure that he brilliantly exposed: 43 per cent. of the 1998 PSA targets were not met in full by June 2002. I am grateful to him for disclosing such interesting facts, which were buried away in all sorts of annual reports; clearly, the Government hoped that we would not unearth them.

Were any of the funding allocation decisions in this year's spending review the result of PSA failures? In other words, did failure inform any of the allocations? Were financial penalties imposed on under-performing and offending Departments? Professor Colin Talbot, in evidence to the Select Committee last week, said no, there were not. I thought that I would go to the horse's mouth, and I put the question to the Chancellor last Thursday. He was typically evasive and would not give a straight answer. However, we know that he was unable to name one Department that had had its spending allocation adversely affected in the new spending review as a result of failure to hit any of the PSA targets. That is eloquent testimony to the futility and utter uselessness of the Chief Secretary, his predecessors and the Chancellor. So much for the tough talk of the martinet grinning on the Government Front Bench and his predecessors.

It is clear that the present regime, which has attempted to raise productivity and activity rates in the public services, has got virtually nowhere, despite the Herculean efforts of many of the dedicated public servants in our schools and hospitals, for example. I include the nurses, doctors and support staff and everyone else in the caring professions. Has the money that the Government have devolved been properly spent so far? Have funding increases for the NHS worked? I fear that the answer is a resounding no.

Between 1997–98 and 2001–02, the total health budget in England has risen by nearly one third. However, the number of patients treated in hospitals rose by an amazing 5 per cent., from 1,211,000 per quarter to 1,267,000. The failure in productivity means that waiting lists remain above 1 million. They have remained at that level since 1993 despite a public spending increase over that period, over two Governments, of two thirds.

What about the new money promised in the spending review? No one would doubt that some earnings catch-up is important if we are to recruit and retain good quality

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public sector workers. However, the evidence suggests already that the well-being of providers, and that of the unions at the forefront, is ranked ahead of increasing capacity and activity. In the year to last March, earnings grew, according to the Office for National Statistics, by more than 5 per cent. in the public sector, outstripping private sector earnings growth for the first time in nine years.

In the NHS, during 2001–02, 40 per cent. of the budget increase went on higher pay for existing staff while only 11 per cent. went to pay for new health workers. It is not immediately obvious to anyone that this is merely a one-off catch-up for past losses. Presumably, that is why the respected and independent director of health systems at the King's Fund, Mr. John Appleby, says that a similar proportion of the new NHS spending increases will also be consumed in higher salaries.

The other problem with public sector pay is that managers in the health service and elsewhere have not been given the necessary freedom by the Government to set pay according to local conditions and to chip away—indeed, abolish—national pay bargaining. Higher salaries are, of course, necessary in certain parts of London and the south-east to ensure that workers are recruited in areas where housing costs especially are very high. However, it is madness, under national pay bargaining rules, that such increases must be reflected in other parts of the country where the cost of living, especially in terms of housing costs, is much lower.

The Secretary of State for Health trumpets his new foundation hospitals. He says that these are the best performing hospitals that will be given greater autonomy. He does not tell us whether the hospital managers involved will have responsibility for staff working practices and the setting of staff remuneration levels. The answer is almost certainly not. That is why the Government have got it all wrong. We know in advance what the results will be.

What about failing schools? In his statement, the Chancellor seems to believe that local authorities or nearby more successful schools will be able to take over failing state schools. He seems to think that that is the way to improve productivity. We have heard that for five years now, but what is really required is the threat—the stick—of private sector providers being allowed to take over the management of a failed school. However, under the review last week, private providers will have no such freedom to come in, sack, put in their own management and remove failing teachers, without the unions invoking employment law. That is a bar to innovation and to increasing productivity, but the Chancellor did absolutely zero about it in his spending review last week.

An alternative to Gordon's Gosplan form of government could begin with reforming Whitehall. I worked in Whitehall for five years before 1997, with a very distinguished Secretary of State—my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). In those years, I saw that career civil servants could do things a lot better. They need to change, and they need to change fast.

I suggest that we as a country urgently consider the lessons that can be learned from the fantastically successful public sector reforms in New Zealand, where Ministers are chiefly responsible for the strategic direction of policy, but they have contracts with new-style chief

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executives, who are responsible for achieving the outputs and for the financial performance of the Departments. That involves removing the financial control from the Treasury and giving it to those chief executives.

The chief executive has control over departmental inputs. He can employ whom he likes. He can hire and fire. He can determine the procurement policy. He can even buy and sell departmental assets, provided that that is within the capital limits as described by the departmental balance sheet. Better chief executives are employed. There are fixed-term contracts, good bonuses and remuneration.

All those things are supplemented by the complete abolition of any requirement—implicit, or otherwise—that Departments have to procure services from central, monopoly providers. That is where we should start. That is what I believe the Opposition should, and will, be considering. We need a route map of the New Zealand kind to begin a long march through the public sector culture, which so desperately needs revolutionary change.

I conclude by saying that the Chancellor's brazen tossing of taxpayers' money into what too often seems like a bottomless pit, or even a leaky bucket, is behaviour that in the private sector would put him in breach of fiduciary duty at best, or put up on a charge with a court appearance next week at worst. He has tried to bamboozle the country in saying that money will be tied to reform when it patently has not been—not this year, not the year before and not the year before that.

The Chancellor has no concrete proposals for raising productivity in the public sector, and that is why many of those services will remain in relative crisis. He is reheating failed Labour polices from yesteryear, with some new Labour topspin added for good measure, as a substitute for the serious debate about the practical solutions that this country's public services are crying out for. Someone obviously told the Chancellor that he could be the new Nye Bevan. Unfortunately, he has believed it.

8.58 pm

Paul Goggins (Wythenshawe and Sale, East): May I begin, as other hon. Members have done, by acknowledging the importance and timeliness of this debate? Five years ago, we had an election dominated by tax pledges, which resulted in a new Government committed to keeping within inherited spending limits. I would be the last to hide from the fact that that involved very tough discipline during the first two years, but, unlike the hon. Member for Kingston and Surbiton (Mr. Davey), I can identify the benefits that that policy created.

In particular, the policy helped to bring about financial stability, together with the reductions in debt interest, to which the Chief Secretary referred in his speech, that are now worth £20 billion a year and an economy in which 1.5 million more people are now working and dole queues are shorter than they have been for 25 years.

During that Parliament and, indeed, in the first year of this Parliament, it has become clear that, after years of underinvestment in education, health and transport, many of our public services are failing to keep pace with the capacity demands and the expectations of quality that are placed on them. People, rightly, want better services and—this is every bit as important—there is increasing evidence that people are prepared to pay for them. It is

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this shift in public attitudes that has assisted the Chancellor in allocating the £61 billion extra for spending on our hospitals, schools and public transport by 2006. This is not funny money, or double counted; it is real and people do not want it back in tax cuts. But both the public and the Chancellor demand that the money is accompanied by real reform and change.

Over a fifth of the new money is to be allocated to education. I was reminded by my hon. Friend the Member for Workington (Tony Cunningham) of a visit I made 10 years ago to a school in Germany, where I looked enviously at the state-of-the-art classrooms, computers and other modern equipment in the school. With this new money, and the money allocated by the Government in previous Budgets, classrooms like that are becoming a reality in my constituency and in those of all hon. Members. That is happening not only in the leafy suburbs, but in some of the least advantaged communities in the country.

I also welcome the £1.5 billion invested in the complete roll-out of Jobcentre Plus, not least its introduction in my constituency from next April. At the moment, the Benefits Agency deals with benefits in an office that is close to the town centre, but the Employment Service runs the jobcentre two miles away from the town centre on the periphery of our community—frankly, in the place where the Tories put it in the 1980s when their policy was to get jobcentres off the high street and out of the town centre.

From next year, Jobcentre Plus will operate in the town centre. It will provide an integrated service and will use the best of new technology to transform not just the way in which the job is done, but the life chances and opportunities of those in my constituency who are still looking for work. That is a real example of investment accompanied by reform and change in the way in which we deliver services.

I welcome also the extra money for housing, an area that has been neglected too often over the past 20 years. I welcome the money for transport and for law and order, which will deliver more police officers and speed up the criminal justice system. There can hardly be a more important issue for our constituents.

One aspect of public expenditure announced last week by my right hon. Friend the Chancellor that has been welcomed on both sides of the House—it was referred to by my hon. Friend the Member for Dumbarton (Mr. McFall)—was the increase in development assistance. In the early 1970s, the UK and others signed up to the UN pledge that 0.7 per cent. of gross national product would be spent on development aid. The original idea was that that target should be reached by the end of the decade. By 1979, we had not fulfilled that pledge, but we had at least got spending up to 0.52 per cent. Since then, countries such as Sweden, Norway and Denmark have met the target and, in some cases, exceeded it.

By 1997, our contribution had fallen to a miserable 0.26 per cent. This subject has been a priority, I am proud to say, for Labour in government. The proportion is now 0.34 per cent and the announcement made by the Chancellor last Monday was of a figure of 0.4 per cent. by 2006. That will be just above the European average, which was promised at Monterrey. In real terms, that means a doubling of the amount that we spend in this country on development assistance since 1997.

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Again, it is investment accompanied by reform. Untying of aid, which began in April last year, is critical in getting better value for money out of what we spend on development assistance. Of course the stronger focus on poverty is moving us closer to the millennium development goals to which the Government are committed. Of course, 0.4 per cent is still not the 0.7 per cent. level that we need and there are still many problems in the world to overcome—the conflicts in Africa, the problem of HIV/AIDS and the continuing difficulties faced by heavily indebted poor countries as a result of the collapse in commodity prices.

If the rate of increase announced by my right hon. Friend last Monday can be sustained, however, it would bring us to 0.7 per cent. by 2012. That would fulfil the hopes of the 240 Members who have signed early-day motion 386, and it should evoke support and welcome on both sides of the House. I say in all sincerity that, despite the neglect in the 1980s and 1990s, this ought to be an area of policy on which there is no division across the House.

There is a great deal to be optimistic about, but we also face three significant challenges. The first, to which other hon. Members have referred, is the need for an open and honest debate about the balance of benefits to be gained from the extra money going in. How much will go in extra pay for existing staff? How much will go in higher charges to private sector suppliers and contractors? And how much will go in extra and improved services for our constituents?

I do not hide from the fact that those questions are complex, or that they overlap. Nor, indeed, should we hide from the tough questions raised by my right hon. Friend the Member for Llanelli (Denzil Davies), when he spoke of the global economic pressures that are building up. I am very clear, however, that the biggest winners must be our constituents, who, of course, fund public services through their taxes. I am not against public sector workers having a decent living wage. I am in favour of a campaign to try to eradicate low pay from our public services and elsewhere. Frankly, however, we need to ensure that a disproportionate amount of cash does not go to middle and higher earners in our public services who already benefit from the low-interest mortgages on offer and have the prospect of decent pensions in retirement. They cannot have the first call on the extra money.

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