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Mr. Flight: I, too, was appalled to read the headline. If the right hon. Gentleman had read the story, he would have realised that the headline was completely stupid.
 
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My right hon. Friend the shadow Chancellor made it clear that the FSA was over-burdened with the requirements of law and the Treasury, and that that was arguably leading to over-regulation, but nothing was said about abolishing the FSA—that is not our intention.

Mr. McFall: I take it from the hon. Gentleman that although there has been an absence of clarification from Tory Front Benchers over the past few days, the Conservative party is committed to a single regulator—the FSA.

Mr. Flight: I can confirm that.

Mr. McFall: It was rather unfortunate that the headlines went well beyond that, so the hon. Gentleman's clarification was useful.

The shadow Chancellor has claimed that official statistics are politicised, but he should apologise for saying that. He made a personal attack on both the head of the Office for National Statistics, Len Cook—he appears before the Treasury Committee and sometimes feels a bit traduced by us—and Tony Atkinson.

I note that the Cabinet Secretary, Sir Andrew Turnbull, wrote to the shadow Chancellor on 27 April, saying:

"there has not been any political interference with official statistics"

and

"the suggestion that the important work being done by a figure of Sir Tony Atkinson's stature is being used for political ends is untrue and deeply unhelpful."

The shadow Chancellor has been personally assured by Len Cook that the work that the ONS and Sir Tony Atkinson are carrying out to improve current measures of productivity is completely independent. He was also told by Len Cook that any changes would be subject to peer review and in line with international guidance and the national statistics code of practice.

The hon. Member for Arundel and South Downs (Mr. Flight) could do two things. He could confirm that the shadow Chancellor will apologise for those personal remarks and ensure that we have both integrity and soundness of judgment when we scrutinise the work of figures such as Len Cook, Tony Atkinson and the ONS staff.

Mr. Flight: I understand that the shadow Chancellor had a conversation and meeting with Len Cook and the misunderstandings have been sorted out.

Mr. McFall: So I take it that a private apology has been made.

The Chancellor has committed the Labour Government to devoting 0.7 per cent. of national income to international development by 2013. That is a massive move forward. We must remember that the Government have increased spending on international aid by 140 per cent. since 1997. An extra £6.5 billion will be spent by 2007–08, but there is still an awful lot of work to do.

It is important that the signal that the 0.7 per cent. gives out is loud and clear. It should be made into a manifesto commitment. That has still to be discussed by
 
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the Cabinet, but I put it strongly to the Minister that that is what is needed. When the Treasury Committee visited Washington two or three weeks ago, we spoke to Mr. Rodrigo de Rato at the International Monetary Fund and Jim Wolfensohn at the World Bank. Jim Wolfensohn said that third-world countries must see the developed countries give a commitment for the future. If the 0.7 per cent. commitment were given in the manifesto, that would be of enormous benefit. It would be symbolic and help people around the world. It would also help the Chancellor's international finance facility proposals, which are appropriate.

Hon. Members may know that the Chairman of the International Development Committee wrote to me and asked whether we could take a joint approach to our American colleagues and others to ensure that that IFF commitment is made. The United States Administration are against it, but it is important to keep lobbying and to continue the political contact between ourselves, our European colleagues and our American colleagues. The establishment of the 0.7 per cent. figure is a great step forward. Let us turn it into a manifesto commitment so that we have domestic prosperity and an international commitment for the future.

3.58 pm

Mr. Kenneth Clarke (Rushcliffe) (Con): This debate is the second part of the Budget. Indeed, before 1997, both the tax changes and the public spending changes for the coming year were announced at the same time in November. So this is the second arm of the Chancellor's explanation to the House of Commons of the fiscal policy that he is producing and how he intends to meet his fiscal rules. In my opinion, that is the most important thing that we should address. It is highly unlikely that the Chancellor will meet his fiscal rules. He is getting ever more ingenious in trying to disguise from the outside world what little margin he has and what he is likely to have to do after the election if he fails to comply with his golden rule and his other fiscal rules.

At the time of the Budget, the Chancellor tried to explain how the rapidly deteriorating public finances would not lead to his breaking his golden rule. He forecast a sudden and dramatic acceleration in the collection of revenue, but he explained that that would not require a tax rise, which the public might find uncomfortable. Instead, he would stop avoidance, and there would be a dramatic rise in tax revenues over the next few years. At the same time, he said in the Budget that there would be a remarkable deceleration in the growth of public expenditure. Policy changes or diminution of the delivery of public services would not be required, as the public might find any such announcements uncomfortable. We were therefore told that 2.5 per cent. efficiency savings would be achieved over the next few years as the result of the great work of Sir Peter Gershon and his team. We are considering those proposals today, but I still doubt whether the Chancellor's tax revenues will accelerate over the next few years as he has forecast. I shall not give the House my figures, because they are different from those given by the right hon. Member for Dumbarton (Mr. McFall). We have been told that the tax take will increase more rapidly than the growth in gross domestic product, with
 
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particularly remarkable accelerations in the collection of corporation and income taxes, but I still fail to believe that that is the case.

Sadly, I doubt very much whether the proposed reduction in the growth of public spending will not have any effect on Government activity. I do not accept that that slow-down can be achieved by improvements in efficiency without affecting delivery rates. Politics is not like that—policy changes are needed.

The golden rule, which I have criticised in the past, is extremely lax and elastic. I prefer, as do the International Monetary Fund and the Organisation for Economic Co-operation and Development, to seek to balance the public budget over the cycle. However, we have a golden rule that we should borrow only to cover capital investment and never for current investment. Even if the Chancellor's figures turn out to be right, he has left himself a tiny margin for error. No one can ever get their forecasts exactly right. I remember the Labour party being amused by my remark, when I was Chancellor, that forecasts of deficits and surpluses involved such enormous figures that one had to give or take £10 billion either side. That is still true, so the Chancellor's tiny margin for error is almost incredible.

I fear that we will carry on with the pretence of an explosion of tax revenues and a surge of public sector efficiency until the election. Afterwards, a Chancellor who has consistently denied that he will have to raise taxes will do so if he returns to office. Let us face it—that is what he did in 1997 and 2001. The public cannot say that they have not been warned if they vote Labour next year and find that the same thing happens after 2005. However, substantial reductions in the growth of public expenditure are required, but the Chancellor has not done well enough. I shall not invoke the name of the Governor of the Bank of England, save to say that I agree with my hon. Friend the Member for Arundel and South Downs (Mr. Flight). Mervyn King is, of course, independent of the Government and the Opposition—he is his own man, and I admire that. He talks in the delphic tones of governors of central banks, but his recent remarks are the closest that he has come to a warning and reproof that if we are to get mounting inflationary pressures in the economy under control and, more importantly, to maintain economic stability and consistent growth, the central bank, which is in charge of monetary policy, and the Chancellor of the Exchequer, who is in charge of fiscal policy, must pull in the same direction while they make their contribution. The Chancellor's contribution is not good enough.

When the Chancellor made his statement on Monday, I made disparaging remarks about the consistency of his policies. He has been quite successful, I do not deny, as the British economy has performed moderately well over the past 10 years or so. He has been extremely lucky, but he has also shown the most remarkable ability to change the entire basis of his approach to policy. When he first came into office, prudence was the guiding watchword of everything he did. He applied, in a rather mechanical way, which had not been anticipated, the strict fiscal controls that he inherited, and we saw a substantial and rapid tightening of public expenditure limits.

In 2000, or thereabouts, the Chancellor went in for a complete reversal. That came in the run-up to the 2001 election and in response to the political pressures of the
 
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Prime Minister in particular, and quite a few of his political colleagues. From 2000, the iron Chancellor was gone and prudence deserted, and since 2000 or thereabouts, we have had four years of spend, spend, spend, on a quite extraordinary scale.

We are now about to enter the third phase. There has been a sudden, sharp reduction in the growth of public expenditure, and a new Chancellor of the Exchequer has emerged—a man committed to efficiency, cost control, the quality of performance, cuts in bloated payrolls and so on. I find this third phase very unconvincing and, like the first two, not adequately described.

The key to understanding the Chancellor, which is true to a certain extent of all Chancellors of the Exchequer, is in recognising that he is, above all, an intensely political man. Here we are, with the Chairman of the Select Committee and several members of the Committee that is about to start the serious business of parliamentary scrutiny of the public accounts, and we are debating a statement about public expenditure that made some references to the public accounts, gave some indications of what was to happen and set departmental limits, but was actually political pantomime. It was entirely aimed at creating a whole new basis for debate and seemed largely aimed, and still is, at trying to have a go at the Conservative party on the basis of a slightly deluded representation of what the Conservative party is supposed to be saying instead. That does not really help us to get to what the Government are doing.

In my opinion—again, I mentioned this on Monday so I will not labour the point—the Chancellor would dearly have loved to go in for another pre-election spending spree. The classic thing, particularly for Labour Chancellors and, alas, occasionally for Conservative ones, is suddenly, when the election is coming up, to start spending a lot more public money to bribe the electorate out of their own pockets, get their party re-elected and deal with the consequences afterwards.

The Chancellor cannot do that now because he did it last time, and he is dealing with the consequences. So this time, as a pre-election stand, we have Gordon the champion against waste, the new drive for efficiency, better government, more into the front line and so on, all of which is a worthwhile sentiment, but is political sloganising. It is all based on the assessment that the public feel strongly, and quite rightly, in my opinion, that they have not been getting value for money from the increased taxation that they have been paying.

Of course, the public services are getting modestly better. The Government cannot keep increasing spending on the health service at 7 per cent. in real terms each year without getting something for it, but most members of the public realise that they are not getting value. Gordon feels vulnerable on the subject of waste. He decides to address that, and suddenly the most extraordinary targets are set for improving performance and shifting money to front-line services.

The Chief Secretary today and the Chancellor on Monday almost passed over the fact that the key decision was the slow-down in the growth of public spending. We have two new years being brought into the public expenditure survey. We have been told that in those two years the rate of growth of public spending will almost be halved. Departments such as the Ministry
 
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of Defence will unarguably see their spending as a proportion of GDP reduced as a result of the announcement. New Labour has never seen anything like it. If they get themselves re-elected, some of the more veteran Members may be reminded of the first two or three years, when the figures began to dawn on them. They are entering a new world of a marked slow-down of public expenditure. I seriously doubt whether anything of that kind, although desirable in principle, can be achieved so dramatically and so quickly without policy changes to improve efficiency. With the greatest respect, anyone who has been in this House for any length of time has heard hon. Members from all political parties try to square the circle on how they will constrain the cost of their policy proposals by saving on waste and increasing efficiency. I can see hon. Members on both sides of the House who have held the responsibility of office, some at national level and some at local level, and none of us believes it. We should learn from experience and realise that more must be done.

That is not to disparage Sir Peter Gershon's work. I have praised him and, although I do not know him well, I am sure that he is an admirable man, and he and his team of keen, young accountants have been doing their best to deliver the remit presented to them by the Chancellor of the Exchequer. I have the Gershon report here, and it and the Butler report are two documents that will embarrass the Government in the longer term. As observers outside the machine, it is difficult to believe that Sir Peter and his team can transform delivery in every Department, and most of local government too, in anything like the terms described. Most of Sir Peter's proposals are sensible, and he goes for obvious areas such as backroom services and procurement. The sentiments are perfectly worthy, and the comments on management are good.

On Monday, we were encouraged to believe that from now on every Department of State from the Treasury to the Scotland Office, local authorities, every branch of the NHS, the Ministry of Defence and all will embrace the principles of the Gershon report and—most importantly, given the Government's publications and public expenditure review—hit spot on the figures that we were given. Some of those figures were slightly alarming, such as the number of jobs that will be lost, and some of them are important to the Chancellor, such as the billions of pounds of efficiency savings. To believe those figures is to believe in magic, and events will not occur in that way.

I am happy to concede that the report will prove to be a worthwhile influence on those parts of the public sector where officials genuinely wish to improve efficiency, to take on board experience from the management of other large outside organisations and to argue with the Treasury about how they have applied some of the Gershon principles. We will never know whether the Gershon report is delivered. It emphasises that delivery should be measurable and that an audit trail should be left, so that we can turn back in 2008 and see that it has been delivered, but I do not believe it.

We have been promised that technical guidance will be given by each Department to enable us to audit and measure what the Gershon report delivers. I do not believe it, and I shall give some examples why. We have been given gross figures on staff savings, which must be alarming to Labour Members who are particularly close
 
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to the white-collar trade unions. Never fear, we do not know the net figure, and many of those jobs will be saved, although the people will work somewhere else, and some administrative posts have already been redefined as front-line posts.

On Monday, one of my hon. Friends asked a sensible question about how many of those jobs will be outsourced, which, particularly if one goes in for information and communications technology, is obviously the way for large organisations to go. Outsourcing often means that the same man or woman continues to do the same job in the same building, but they no longer work for their first employer and are transferred to a new employer.

The targets include giant organisations that are not within the Government's direct control. Some local authorities strive to improve their efficiency, and a few have succeeded. I look forward to the process by which different authorities are persuaded to pool their backroom functions. The transformation of procurement across local government will not be delivered: in my opinion, much of local government was untouched by the Thatcherite managerial revolution of the 1980s, let alone by the Gershon report of 2004. Their reaction has not been to welcome with joy the idea that they should make these efficiency savings. This morning, the Local Government Association is reported to have commented that the total is at least £1 billion less than it requires to hold council tax increases below 7 per cent. a year. I continue to believe, and say so to all my colleagues, that unless and until someone comes up with a proposition that will credibly restrain local government expenditure and increases in local government taxation to anything like the rate of inflation, rate-capping is the only way to improve efficiency and to limit the cost to many of my constituents of the ever-rising demands of local government.

As for the national health service—the largest employer in western Europe and a giant oil tanker of an organisation—the delivering of all these targets in relation to various NHS trusts is not under the direct control of Government. I find an extraordinary contrast between the highly desirable talk on all sides of localising more responsibility and the production of central documents mandating parts of such a huge organisation to produce particular efficiency improvements in particular ways. The principle of managing any giant organisation is that one devolves responsibility locally as much as possible, so long as local bodies remain accountable to the centre and one can give them clear objectives regarding the standards and quality that they are meant to deliver. One cannot give a bottom line in the public services as one can in a private company, but one can set quality standards such as waiting time targets, pupil achievement targets or rates of detection targets for those who deliver the service.

Localism has now been taken to an extreme degree, with hon. Members on both sides of the House advocating that all central responsibility should be passed on to locally elected groups or locally appointed
 
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people who are to be allowed to go their own way. It is very unlikely that they would all be able to deliver Gershon efficiency improvements.

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