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Mr. George Foulkes (Carrick, Cumnock and Doon Valley) (Lab/Co-op): Will the right hon. Gentleman give way?

Mr. Letwin: I will give way to the right hon. Gentleman. Perhaps he can explain why more than 1,400 staff have been added to the Department of Trade and Industry payroll.

Mr. Foulkes: I am here to ask questions, not answer them. I want the right hon. Gentleman to answer the question from my hon. Friend the Member for

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Dumbarton (Mr. McFall) that he avoided answering. The shadow Chancellor wrote in the Financial Times on—I had better get the date right—17 May 2001:

Does the right hon. Gentleman still adhere to that—yes or no?

Mr. Letwin: If that was the question, I apologise for not having understood in the least what the hon. Member for Dumbarton (Mr. McFall) was trying to say. We are absolutely clear that we would like to reduce the burden of public expenditure and the level of tax compared with GDP, because we believe that a low-tax economy is a prosperous economy. We will stick with that.

Mr. Foulkes: Will the right hon. Gentleman give way?

Mr. Letwin: No. I have answered the right hon. Gentleman's question.

Why have the Government spent £882,351 renaming Government Departments and providing them with new logos? Why did the Ministry of Defence spend £8 million in 2002 on newspapers and magazines?

David Wright (Telford) (Lab): Will the right hon. Gentleman give way?

Mr. Letwin: I will in a moment.

Why did the NHS spend nearly £900,000 on the production and distribution of a magazine that was issued 10 times in a year but managed to sell only 22 copies of each edition? Why was NHS money in Wolverhampton spent on "empathy bellies", so that young men could feel what it was like to be pregnant? Why has the Department for Education and Skills spent over £650 million on truancy and unruly behaviour initiatives since 1997, yet seen truancy increase by 17 per cent?

The truth is that, as my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) so brilliantly exposed last Wednesday, the Chancellor has transformed the principle of open government into the principle of the open wallet.

Mr. Foulkes: Will the right hon. Gentleman give way?

Mr. Letwin: I will not.

I regret to say that the Chancellor has lost control over the element of public expenditure that is in principle most controllable: the cost of the Government's administration of itself.

David Wright: I thank the right hon. Gentleman for giving way. He is very generous in these matters. Dozens of people across the country will be interested in what he is saying. Does he consider the new deal for young people a bureaucratic waste of money?

Mr. Letwin: The view that Conservative Members take is that there is more to be gained by floating pensioners off the ghastly array of means-tested benefits

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that the Chancellor has proposed by raising the basic state pension in line with earnings, than by continuing with a new deal project that has been shown to be an expensive failure.

Several hon. Members rose—

Mr. Letwin: I will continue, if hon. Members will forgive me.

In many ways, the House should sympathise with the Chancellor's plight, because he is now beginning to experience the truth of the proposition put forward by his own chief economic adviser and his own permanent secretary:

In the Supply estimates of March 1997, the Conservative Government asked Parliament to approve total spending on Government running costs in the succeeding year of £14.8 billion. In his first supplementary estimates, the Chancellor raised that figure by a modest £7 million—so far, so good.

By November 1997, the Chancellor was already adding £89 million—not quite so good. In February 1998, he added a further £175 million—a total rise across the first year of the Labour Government of some £270 million—not particularly good at all. However, it was very moderate compared with what we have seen since.

In March 2001, the Chancellor raised the cost limit on central Government administrative expenditure to £16.7 billion, an increase of 19 per cent. on the previous March, and then asked Parliament to approve an additional £763 million by the end of the year that he had not thought of at the beginning of the year. By today's standards, that was still very modest. In March this year, the Supply estimates allowed for £20.6 billion of Government administrative expenses and the additions—[Interruption.] The Chief Secretary to the Treasury, who is meant to be controlling these things, is yawning because he has been utterly asleep on the job. The additions in the two rounds of supplementary estimates are now running at something like £1.4 billion each year.

Geraint Davies (Croydon, Central) (Lab): Will the right hon. Gentleman give way?

Mr. Letwin: I always welcome interventions from the hon. Gentleman. I will certainly give way. Would he like to explain why the Government added £1.4 billion to the supplementary estimates?

Geraint Davies: Is it not the case that the share of GDP spent by the Conservative Government in 1995-96—the figures are from the Library—was 42.5 per cent. and now it is only 39.7 per cent? The share of tax plus borrowing, borrowing being deferred tax, has also dropped by two points. Therefore, is it not the case that, if the right hon. Gentleman wanted to reduce public expenditure to 35 per cent. of GDP by slashing public services, he would be completely incompetent at it?

Mr. Letwin: I thought that I would be pleased to take the hon. Gentleman's intervention. I wonder whether he

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realises that if the Government had not added so much to central Government expenditure, in particular if they had not added £1.4 billion to their own costs in the middle of the year, the proportion of tax to GDP would be lower than it is at present. That is the point with which he must wrestle.

To put that in a context that the Chancellor will be familiar with, he is adding the cost of four domes to the administrative overhead of government each year on purpose, and the cost of another two domes each year by mistake.

Mr. Martin O'Neill (Ochil) (Lab): Will the right hon. Gentleman give way?

Mr. Letwin: I will not take any more interventions for the moment. If the hon. Gentleman will forgive me, I want to make progress.

I expect that, in a few minutes, the Chancellor will come to the Dispatch Box and tell the House that he has recognised the problem and now recognises the need to reduce the cost of bureaucracy, but I fear that he will find it a more difficult and a slower process than he anticipates, because he has created great engines of growth within the bureaucracy. With new regulations on business alone running at nearly 15 per working day, not to mention the array of targets, plans and initiatives, the dynamic of senior civil servants building careers out of increasing pyramids of subordinates to administer increasing pyramids of regulation is well entrenched. Once the wallet has been opened, closing it takes very considerable political will and very considerable ingenuity. I have no doubt that the Chancellor has the ingenuity. We shall see whether he has the will.

If the only effect of that open-wallet policy were to establish a bizarre combination of a culture of control and a culture of waste, it would be sad for the hard-pressed taxpayer but it might just be bearable. Unfortunately, the squandering of taxpayers' money is just a by-product of the Chancellor's largesse. The real tragedy lies in the fact that huge sums of money spent on public services, which are not being wasted, are nevertheless being systematically mis-spent.

This year, the Government are spending over £50 million of taxpayers' money every hour of every day. By 2005 under Labour, people will be working for the taxman until 9 June each year. Taxes have been increased 60 times since 1997 but, because the Chancellor has made the public services dance to the tune of bureaucracy, because the public services have huge structural deficiencies, and because the Chancellor has failed to provide real reform, the public services are failing to deliver. Since 1997, current Government spending has increased by close to 50 per cent. but public sector output has increased by only 15 per cent.

Mr. Steve Webb (Northavon) (LD): The right hon. Gentleman mentioned structural deficiencies and talked about his policy of linking the pension to earnings. He is a very intelligent man and good with numbers. He will appreciate that the main way he will pay for his earnings-link policy will be by abolishing the new deal. That costs £600 million, £600 million, £600 million and £600 million in successive years, but his earnings-link

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policy will get more and more expensive each year. How will he fund a rising spending commitment with a flat-rate cut?

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