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Rob Marris: I venture to suggest that I might be able to help the right hon. Gentleman on that point. The Chancellor made it clear in his Budget that the savings from moving staff from the back office to the front office would come because of the Government's investment in information technology. That investment had not been made in 2001, and it had not been put in place by the Conservatives in 1997; that is the situation that we inherited.
Mr. Letwin: I hope desperately that the hon. Gentleman will be given a job because he certainly will not get one as a spin doctor. I assure him that the Chancellor's purported savings have nothing to do with investment.
Parts of the Chancellor's savings are meant to come from cutting the civil service by 40,000 between now and 2008. I understand that the Chancellor's spin doctors—not the hon. Member for Wolverhampton, South-West (Rob Marris), but his genuine spin doctors—have been busy explaining that it was with that very reduction in mind that he increased civil service numbers by 52,361 over the past four years. That sounds enormously clever, does it not? One increases the civil service by 50,000 precisely so that one can reduce it by 40,000. If Labour Members have difficulty identifying the logic behind the strategy, or even if there are hesitations in some quarters about the reduction in civil service numbers, let me reassure them. They do not need to worry because under a Labour Government, there may well be no net reduction whatsoever in civil service numbers.
The Chancellor intends to remove 40,000 from the civil service between now and 2008, but at the present rate of hiring the Government, if re-elected, will add 65,450 civil servants over the same period. The Chancellor's policy on the civil service is admirably clear. His aim is to hire people in order to sack them, just as long as he hires a few more than he sacks. I hope that his spin doctors will have a fine time explaining that proposition over the coming months. [Hon. Members: "Balls!"] Let us not worry about who, or what, the name may be.
The Chancellor's cleverness is not, of course, meant to reside only in the brilliance of his plans for the civil service. It is also meant to be demonstrated by his new-found attachment to 2.5 per cent. per year efficiency savings throughout the public sector. The savings certainly cannot come from reducing numbers of public sector employees, because the Gershon report states clearly that the number of people employed in the public sector as a whole is meant to rise by 300,000 during the next few years. The efficiency savings, which the Chancellor said in 1998 would not be needed and the Prime Minister said in 2001 could not be achieved, will be brought about by adding more than 300,000 new public sector workers. I have to admit that if that can be done, it is very clever indeed. I doubt that a combination of Newton and Einstein could match it for cleverness.
Mr. Watson: There is no point in the right hon. Gentleman spluttering out his speech while he is surrounded by his laughing boys. Will he confirm that
he intends to freeze in real terms the defence budget and the law and order budget for the United Kingdom? If not, where are the rest of the cuts going to come from?
Mr. Letwin: Oh dear, I do not know whether the hon. Gentleman has been in the Chamber. I thought that he was, but it may have been a shadow of him. A moment ago, I read a passage that made it perfectly clear that I have made no such commitment and have no intention of doing so.
I fear that the nation will not gain much from efficiencies that never take place, and in which neither the Prime Minister nor the Chancellor had the slightest belief or interest until the Opposition pointed out the colossal and shameful waste that is currently taking place. However, I remind my hon. Friends that there is one large advantage in the Chancellor's admission that he is wasting £20 billion a year and in his new-found belief that he can make 2.5 per cent. efficiency savings a year. If there is waste on that scale and if efficiencies of 2.5 per cent. a year are possible, a Conservative Government who believe in cutting waste could do so without affecting front-line services.
James Purnell: Will the right hon. Gentleman give way?
Mr. Letwin: No, the hon. Gentleman should listen so that he understands a bit of the logic even if his hon. Friends cannot.
A Conservative Government who plan a gross recruitment freeze to cut the civil service by 100,000 with genuine net reductions rather than fiddled figures, and who are not shackled by a commitment to increase the public sector by more than 300,000, can truly make the savings that the Chancellor just wants to talk about. By the logic of the Chancellor's own admission, a Conservative Government can do so without touching front-line services. I do not want to stretch the arithmetical capacities of Government Members, but they will surely see that if a departmental budget of £100 is possible this year, and there is inflation of 2.5 per cent. and offsetting efficiency savings of 2.5 per cent., it is possible to have a departmental budget next year of £100 without a real-terms cut in front-line services. The Treasury Bench have not yet realised that, but by allowing himself to be trapped into admitting £20 billion a year of waste and by allowing himself to admit the potential for 2.5 per cent. efficiency savings a year, the Chancellor has removed completely any slight credibility from his much loved attack on so-called Conservative cuts. If a 2.5 per cent. a year efficiency saving is possible, a cash freeze with no real-terms cuts whatsoever in front-line services is possible.
Once people begin to accept the force of that argument they will stop thinking that the Chancellor's Budget was so very clever, but will not stop thinking it was political. It was very political in every sense. It was political because it was aimed solely at scoring a short-term political point; it contained no measures whatsoever to deal with the massive and growing economic imbalances to which the Chancellor's misguided policies have given rise.
I want to do something unusual and pay tribute to our friends on the Liberal Benches, who rightly alluded to those economic imbalances—[Interruption.] My right hon. and learned Friend the Leader of the Opposition says, "Steady", but I pay tribute where it is due. I wish that I could pay tribute to the Chancellor's measures to address those imbalances in the Budget, but I cannot. There was nothing to tackle the problem of household indebtedness, which now stands at almost £1 trillion. There was nothing to tackle the problem of the decline in savings—the savings ratio has halved, and the Chancellor proposes to do nothing whatsoever about it. There was nothing to tackle the problem of productivity—the productivity growth rate has halved, and the Chancellor proposes to do nothing whatsoever about it. Most of all, however, the Budget was political because it aimed to hide the Chancellor's rising taxes from the British public.
The Budget provides for the nation's tax bill to rise by almost 8 per cent. next year, and again by almost 8 per cent. the year after. That is what the Chancellor, in a resort to the definitions of the economists, called "fiscal neutrality", but I doubt that the families and businesses who are paying that 8 per cent. increase in tax will regard it as neutral. The Budget locks in huge increases in the burden of tax under Labour. Taxes have increased by £5,000 per household per year since 1997. The Red Book now projects a tax burden in 2008—I hope that my hon. Friends will go to the country and tell people this—that will be the highest for a quarter of a century. Almost no one except the Chancellor himself doubts that tax rates need to rise to fill the Treasury's coffers in the way that his plans demand.
Mr. Wayne David (Caerphilly) (Lab): I have been listening carefully to the right hon. Gentleman. Is he aware that the director general of the CBI said that he commends the Chancellor on producing a Budget that protects economic stability and curbs waste?
Mr. Letwin: The director general of the CBI correctly points out that the Chancellor did no damage in a Budget that did nothing at all about business. It is the first time in many years that that can be said. Unfortunately, however, the tax rises that the Budget augurs will be tax rises for businesses as much as for everybody else. They have been to date and they will be again.
James Purnell: Will the right hon. Gentleman give way?
Mr. Letwin: No, I will not give way again.
Almost no one except the Chancellor doubts that there will be tax rises if Labour is re-elected. It took just 24 hours for the Institute for Fiscal Studies to calculate that the Budget sets us on course for Labour's third-term tax rises, and that only Conservative plans would avoid those tax rises. It took just 72 hours for the Ernst and Young ITEM Club to confirm that this is a borrow now, tax later Budget.
The Chancellor, who prides himself on his forecasts with huge self-confidence, has miscalculated his own borrowing on six successive occasions over three years. He is now predicting borrowing of more than £140 billion over the next five years, despite the fact that he is predicting economic growth at or above trend in each of those years. He knows as well as the rest of us, as well as the Institute for Fiscal Studies and as well as the ITEM Club, that if he borrows that much on the nation's credit card, he will have to raise taxes.
The Chancellor's plan is clear. Up to the election he proceeds entirely by stealth. There are, in fact, six extra stealth taxes in the Budget—the new small business tax, the new company vans tax, the new tax on trusts, the new tax on red diesel and the new tax on other road fuels. That brings the number of stealth taxes to 66. We have before us the clickety-click Chancellor. After the election, if Labour wins, it will all be different. The layers of stealth technology will be swept away in one glorious efficiency saving. The new taxes will be there for all of us to see—£10 billion or £15 billion a year of them, to judge by the independent forecasts, gleaming new taxes that families and businesses will be called upon to pay as a tribute to the Chancellor's great cleverness. Perhaps if the people of this country see that happening to them, they will indeed think it clever, but I suspect it is more likely that they will think it too clever by half.
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