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The Financial Secretary to the Treasury (Ruth Kelly) indicated dissent.

Dr. Cable: Well, it is not clear who will decide how the target should be achieved and how Departments will be rewarded or penalised if they succeed or fail.

The immediate action—as opposed to the general commitments in Gershon—is the dismissal of 84,000 civil servants. How much will that actually save? We hear some confusion about numbers. The BBC said that it would save £5 billion. However, a little mental arithmetic suggests that the loss of 84,000 people who are paid an average of £25,000 a year—who would all be paid redundancy money—would save only £2 billion. That suggests that Digby Jones is right to suggest that the 84,000 would be only a tiny fraction of the job losses necessary to meet the Government's objectives.

Can the Government tell us a little more about the civil service cuts? Who will suffer them? Will it be the people who have been brought in over the past two years, many of them to do IT work? What will be the split between senior and junior civil servants? That will make a big difference to the cost savings, but we have no specific information at present.

Can the Government tell us something about the deeper aspects of the Gershon reforms and how they will be delivered? From the documents that I have read it
 
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appears that one of the key arguments is that we will see a big leap forward in information technology. However, the Government's record in that area is abysmal. The National Audit Office suggested in a report a couple of years ago that only a third of Government IT projects succeed. We all remember the Passport Office story, and the courts and the Post Office have suffered fiascos in that area. To their credit, the Government have introduced a much improved procedure, including the gateways, and the level of error has been reduced. However, many of the projects are still highly doubtful. People close to the industry, such as Computer Weekly, are concerned that the IT programme will unravel badly with disastrous consequences, especially for the NHS. One of my reasons for arguing that the Home Office should abandon its plans for identity cards—apart from the civil liberties aspect—was the management issue. How would a Department that has conspicuously failed to manage big IT projects in all its other operations be able to handle one that would be even more complicated and difficult?

The other element in Gershon that is very important—the hon. Member for Arundel and South Downs (Mr. Flight) highlighted it too—is the centralisation of procurement. It will be a key part of the process. In business, centralisation of procurement has gone in and out of fashion, but Gershon goes in for it in a big way. A move from 400 to four major civil service procurement centres is planned. Is that feasible? At the end of the debate, may we have an indication as to the Government's progress in centralising procurement and how it will work? My understanding is that few councils or agencies have agreed to undertake that process.

The Government and the Conservatives place great emphasis on the idea that somehow or other they can achieve great savings by getting rid of the back-office staff and concentrating on the front line—to use the jargon. However, I have never been wholly clear as to the distinction between the two; nor are the Government, because they have just reclassified £5 billion in that regard.

One of the things that most shocked me when I became an MP was visiting my local police station and seeing big, brawny, fully-trained police officers doing their own typing. We were in the wake of cuts in the Metropolitan police; at the time, the current Conservative leader was Home Secretary and we had just gone through a period of downsizing, so when I asked why those officers were typing instead of being out on the streets, I was told, "We decided we needed to get rid of our civilian support staff to concentrate resources". However, somebody had to do the clerical work—the police officers.

One of the new fashions that the Government have adopted and the Conservatives are advocating is to get rid of local education authorities—those parasitic, bureaucratic tiers of management. They claim that great savings will be made by getting rid of LEAs. In my area, I discovered that the LEA is small. I am not making a political point, by the way; the local council is a Tory one. The LEA occupies one floor of a multi-storey building and comprises fewer people than the James committee, yet it is responsible for all the borough's education administration. Which of those people would
 
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the Government get rid of? Who would do their tasks when that "unproductive" layer of management was stripped out?

Perhaps we do not need the LEA's four inspectors, although it is self-evident that schools need inspecting—they cannot wait for Ofsted every three years. A few people handle student grants and a few deal with special needs. Those people cannot be stripped out with no consequences. Other people deal with the payroll and staffing. If their posts are abolished at the LEA, they will reappear in schools, so where will we see the savings from stripping out that layer of management?

Both the Government and the Conservatives have created the illusion that these changes can be easily made. I have been in a big company that was McKinseyed and saw the process at work. Management consultants decide that many functions can be stripped out, but it cannot be done, and senior managers end up doing their own secretarial work. In business, that is called "managing your own function" and it is often extremely inefficient. There is much glib talk about savings from eliminating waste and stripping out management. Of course, there are things that should be done, but much of what is actually achieved is worryingly superficial.

It is my view, which I have also argued as my party's spokesman, that the Government must get out of certain activities. Although arguments about waste are important and we have to be on the ball about such matters, we have to make political choices. One of the reasons that my colleagues and I focused on the Department of Trade and Industry is that although it is not one of the biggest Departments, it raises the biggest questions about whether the Government have any basic competence in that field. It has a budget of £5 billion and it is supposed to help business and industry.

When I attended a conference recently I was struck by the comments of one of our leading Asian entrepreneurs, Ghulam Noon. He turned to the Secretary of State for Trade and Industry, who was in the audience, and said: "Will the Government please stop trying to help us? Just let us get on with our job. Make sure the infrastructure works. Keep taxes reasonable, but please stop trying to help us."

The Chancellor is passionately committed to science, innovation and research and development schemes, but many of those things are unproductive. The OECD did some good research recently, which showed that support for R and D distorts and completely displaces private sector R and D. It adds no value in the economic sense. I would not go quite that far; there is a residual role for the DTI, but much could be taken out.

We really need money for pensions, which are a big priority; they must be lifted out of means-testing. We have to find the money from somewhere. That is the kind of choice we have to make.

5.5 pm

Alan Howarth (Newport, East) (Lab): The hon. Member for Twickenham (Dr. Cable) calls for perfect forecasting and perpetual stability. All Governments would like to achieve that but, of course, government is very difficult. This Administration are decent and outstandingly capable, and the spending review demonstrates their intellectual and moral energy. The
 
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review is based on seven years of experience, during which a matured and successful strategy for government has been developed.

The fiscal stance seems to be sound and that is confirmed by a rather better judge—the markets, which are unperturbed by the spending review. The right hon. and learned Member for Rushcliffe (Mr. Clarke), my former right hon. and learned Friend, has the ability, amiable indeed, to make apocalypse sound very jolly, but I think that he will be disappointed. There is every reason to suppose that my right hon. Friend the Chancellor will successfully adhere to his fiscal rules and he has proved a better forecaster than most of his critics in recent times.

An independent umpire, the Institute for Fiscal Studies—all hon. Members could accept its objectivity and competence—tells us that, as total public expenditure rises to a planned £580 billion by 2007–08, it will represent 42.3 per cent. of national income. That figure is below the average of 44 per cent. of national income that prevailed in the years of the Conservative Administration. It is in line with OECD standards and lower than the figure found in many European countries.

The sustainable investment rule should be met. Public sector debt is expected to rise to no more than 36.5 per cent. of GDP—well within the 40 per cent. limit that my right hon. Friend the Chancellor sets himself—and public sector net investment is planned to rise from 2 to 2.25 per cent. I note that that is well outwith the rules of the stability and growth pact. The borrowing requirement will clearly exceed the requirement of the stability and growth pact that a balance or surplus should be achieved over the cycle, taking into account public investment. Thank goodness, we are outside those constraints, and my right hon. Friend the Chancellor has kept us out of that financial morass. Given the dismal history of deflation and wasted potential in the eurozone, surely we cannot now wish that we were part of that system. It is interesting to note that the flat-earthers in the Commission were upheld yesterday by the European Court of Justice. Will they then proceed to impose penalties on France and Germany, compounding the deflation for which they have been responsible through their policies in past years? The answer is no. They would have had a go at that a couple of years ago; they will not do so now, thanks to the pressure for reform created by my right hon. Friend the Chancellor.

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