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Public Borrowing

3. Mr. Desmond Swayne (New Forest, West) (Con): If he will make a statement about his proposals to change the level of public borrowing. [184072]

The Chancellor of the Exchequer (Mr. Gordon Brown): The 2004 Budget set out the detailed Government forecast for the public finances up until 2008–09. These showed that the Government are on track with our borrowing figures to meet both our strict fiscal rules over the economic cycle.

Mr. Swayne: Does the Chancellor accept the rather subtly worded warning from the Governor of the Bank of England that the Chancellor's current levels of spending and borrowing are in danger of causing the economy to overheat?

Mr. Brown: The Governor said that the automatic stabilisers had worked during a period of a world downturn, so when tax revenues were lower and social security needs were higher, borrowing was higher. That is, after all, what has happened in every country around the world. The only difference is that our levels of borrowing are lower than those in most other countries. The Governor of the Bank of England said that he supports the fiscal discipline that we have shown over the past seven years.

Mrs. Anne Campbell (Cambridge) (Lab): My constituents are delighted that we are enjoying the longest period of sustained economic growth on record and the longest sustained investment in public services for a generation. In the light of that fantastic economic success, how do debt levels under this Government compare with those under the last Conservative Government?

Mr. Brown: My hon. Friend has been powerful in her advocacy of both international aid to be raised and the scientific community to be given the money that is necessary to invest in this country's future. I cannot think of anything on which there is greater consensus than the issues of investment in science, infrastructure and transport. Only one group is outside the consensus—the modern Conservative party.

As for debt levels, the Conservative party talks as if there were some golden years a few years ago, but borrowing went up to the equivalent of £80 billion and debt was at 44 per cent. of gross domestic product. We have reduced that to 34 per cent. of GDP, one of the lowest rates in the industrialised world.

Ann Winterton (Congleton) (Con): Will the Treasury make up the difference that will result from the loss of European Union structural funding to the United Kingdom regions post-2006? If so, will that add to borrowing requirements?

Mr. Brown: We are committed to no loss for the regions as a result of any changes, although they have not yet been decided in the structural funds. It is interesting, however, to hear a Conservative Member advocate more public spending by the Government.
 
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How does the hon. Lady square that policy with that of the shadow Chancellor, who wishes to cut spending on trade and industry and regional development, while also cutting spending on defence, law and order and international development? Perhaps the shadow Chancellor can tell us how he will add up his figures?

Mr. Nigel Beard (Bexleyheath and Crayford) (Lab): Does my right hon. Friend agree that public borrowing, within the fiscal rules, is essential to sustain a programme of investment that is needed to overcome the gross neglect of public investment during 18 years of Conservative government?

Mr. Brown: I am grateful to my hon. Friend, who is a distinguished member of the Treasury Committee, for that question. The neglect of investment under the Conservative Government was such that there had to be, and still has to be, a major programme of investment in health, education and transport. Members of the Conservative party know perfectly well from their constituencies about the need for new investment. Entering a general election with a pledge card of "Cut defence, cut law and order and policing, cut international development, cut science and transport spending, and put all the money from the NHS into private health care" is not a winning formula for the Conservative party.

Mr. Howard Flight (Arundel and South Downs) (Con): With no slack in the economy and the structural deficit that the Chancellor has created, by how much does he plan to raise taxes after the general election, beyond the 8 per cent. rise already planned?

Mr. Brown: Our public spending programmes are properly funded. In fact, because of our economic success, the choice that we had in the Budget was whether to cut taxes or to put money into public services. We decided—rightly, in my view—to put the money into the public services that desperately need it. The shadow Chief Secretary talks about the difficulties that the economy faces. Will he confirm that his view is still the one that he expressed just a year and a half ago when he said that we were facing an economic crisis, analogous to the 1930s?

Mr. Kelvin Hopkins (Luton, North) (Lab): I am pleased that my right hon. Friend has placed great emphasis on the need for public investment in the future of our country, to make up for the damage caused by the Tories. Given that we now have an historically low, and internationally low, level of public borrowing, is there not scope for my right hon. Friend to relax his constraints on public borrowing for investment purposes and for him to replace some private investment with public investment, to the benefit of the Treasury?

Mr. Brown: No, we are going to keep to our fiscal rules. I believe that the country will support a Government who not only set fiscal rules that make sense of what should happen in an economy over the cycle but meet those fiscal rules. Of course we will get the balance right between private and public investment. Net public investment was 0.8 per cent. of gross
 
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domestic product when we came into power and it is now above 2 per cent. of GDP, so we are investing more in the future. I am really surprised that the shadow Chancellor, who has now put forward all his proposals on public expenditure, cannot even come to the Dispatch Box to answer questions about them.

Government Staffing Levels

5. Angela Watkinson (Upminster) (Con): If he will make a statement on the staffing levels of central Government Departments. [184074]

The Chief Secretary to the Treasury (Mr. Paul Boateng): The 2004 spending review has set out wide-ranging changes to central Government Departments. This means a gross reduction of 84,150 posts by April 2008; 13,550 posts are to be redeployed to front-line areas.

Angela Watkinson: In his statement on Monday, the Chancellor announced a gross reduction of 84,150 civil service posts to release resources from administration to be invested in the front line. However, the devil was in the detail, and we learned that 13,000 of those posts would not be cut but transferred to front-line services. Will the Minister explain what those 13,000 re-allocations to front-line roles are?

Mr. Boateng: There is no secret about this. I think that the hon. Lady has misunderstood the situation. We announced in the Budget our intention to redeploy to the front line. What does it mean? It means that in the Department for Work and Pensions, for example, where some 10,000 people are to be redeployed to the front line, additional help will be available to get people into work. It means looking at the people involved in back-office functions and seeing how they can be either retrained or redeployed to provide front-line services. That has made a difference already, as the new deal has demonstrated. That is why this Government have been able to create 2 million new jobs since 1997, and why it would be such a disaster if the Conservatives ever had their way and scrapped the new deal, cutting the valuable work of the Department for Work and Pensions.

Mr. Barry Sheerman (Huddersfield) (Lab/Co-op): My right hon. Friend will know that, while Labour Members support cuts to make a more efficient civil service, the Department for Education and Skills, which is quite small, has been given heavy new responsibilities under "Every Child Matters" and the Children Bill at the same time as the cuts have been announced across the board. Will there be room for negotiation so that the Department for Education and Skills can deliver the expanding educational role in which the Government are investing?

Mr. Boateng: The figures produced by the Department for Education and Skills take into account the work that it has taken on board as a result of the children's Green Paper. They also take into account the efficiencies that the Department believes it will be able to
 
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find in order to increase the support available to the front line, whether in relation to schools, the Learning and Skills Council or the work of further education colleges. In all those areas, the Department is at the forefront of recognising that we really can unlock efficiencies and resources, apply them to the front line, and continue the improvement in results in schools and FE colleges, all of which would be put in grave peril if the Conservatives were ever to implement their cuts in that Department's budget.

Dr. Vincent Cable (Twickenham) (LD): How much money will the Government save by cutting 84,000 public servants? A rough estimate of the saving is £3 billion to £4 billion, which is only a fraction of the £20 billion that must be saved under Gershon. Is Digby Jones right to assert that the Government need to cut some 300,000 jobs in the public sector in order to meet their efficiency targets?

Mr. Boateng: Digby Jones welcomed the Government's proposals because he recognised that the savings involve not only a reduction in posts, but procurement and the better use of IT. The savings include cash and other resources, which will be redeployed to the front line, and Digby Jones recognised that that added benefit is part of the proposal introduced by my right hon. Friend the Secretary of State for Trade and Industry to remove 1,000 jobs and increase the resources available to the regional development agencies. That is good news for the DTI and for business, which is why Digby Jones welcomed it.

Mr. David Chaytor (Bury, North) (Lab): I welcome the Government's intention to decentralise a considerable number of central Government jobs to the regions. Does my right hon. Friend agree that if the previous Government had done that 25 years ago, the current regional disparities would not exist? Although my constituents are extremely fortunate to enjoy virtually full employment, other parts of Greater Manchester and south-east Lancashire would welcome decentralised jobs from London. Will my right hon. Friend carefully examine Greater Manchester's claim on some of those jobs?

Mr. Boateng: Individual Departments will determine how they relocate their functions and the jobs that come with them. My hon. Friend knows that the Lyons review utilised a formula that identified Manchester in the upper quartile of places to which Departments are likely to plan to relocate, which is good news for Manchester. When Conservative Members had stewardship of the economy, they singularly failed to take advantage of the benefits of relocation, as they singularly failed to implement efficiencies, which we are introducing. The civil service is smaller now than it was in all but one of the years in which Conservative Members had stewardship of the economy.

Mr. Mark Field (Cities of London and Westminster) (Con): In implementing the staffing level reviews, will the Chief Secretary urgently meet the Foreign Secretary and the Secretary of State for Trade and Industry? I understand that British Trade International is likely to be subject to considerable cuts, which will undermine
 
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our export drive, especially in key regions such as the Caribbean and Latin America, where we have long-standing links.

Mr. Boateng: On the contrary, British Trade International is likely to benefit from the efficiency savings identified by my right hon. Friends and from extra money provided in the course of the spending review. That will better equip it for the challenge of securing inward investment, which benefits every nation and every region of our country. The hon. Gentleman should warmly welcome the efficiency savings, which are good news for the Department of Trade and Industry and for the Foreign and Commonwealth Office.

Lawrie Quinn (Scarborough and Whitby) (Lab): I welcome the transfer of more than 20,000 jobs to the regions following the Lyons review. Is there further scope to explore the possibility of moving even more civil service jobs to the regions to maximise efficiency and ensure that the whole country is involved in delivering a service to the nation?

Mr. Boateng: Sir Michael Lyons himself saw the review as the beginning of a process in which Departments would look to the regions as likely places to locate functions and jobs. The aim is to create a culture in which London and the south-east are not seen as the automatic beneficiaries of changes and developments in policy.

Mr. Oliver Letwin (West Dorset) (Con): What the Chief Secretary's answer to my hon. Friend actually means is that the cuts in central Departments that the Chancellor announced are 71,000, not 84,000. [Laughter.] Well, they are. There is nothing that Ministers can do to deny their own figures, and 71,000, not 84,000, is the number shown for actual cuts in central Government departmental staff. Does not page   8 of the leaked interim Gershon report, which I have in my hand, tell us that the Chancellor is planning to add 360,000 extra public sector workers, and is it not true that on current trends half of those will be back-office staff?

Mr. Boateng: I do not comment on leaked documents. However, I can refer the right hon. Gentleman to the announcements that my right hon. Friend the Chancellor made to the House, which identified gross reductions in posts of 84,150 and net reductions in posts of 70,600. That is as plain as pikestaff. It is equally plain that the right hon. Gentleman has committed his party to a two-year freeze in departmental spending. That would mean cuts in transport of £1.8 billion, cuts in local government of £4.8 billion, cuts in the Home Office of £1.6 billion, cuts in defence of £2.6 billion, and cuts in international development of £800 million. That is the reality of the right hon. Gentleman's proposals. It is time that he either admitted those figures or got to the Dispatch Box to deny them. Let us wait and see what he does.

Mr. Letwin: I very well understand that the Chief Secretary does not want to engage in defending the Chancellor's arithmetic, but the Government's own figures show that of the 496,000 extra public sector
 
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workers that he and the Chancellor have added in the past seven years, half have been in back offices. Why, then, should we believe that the back-office proportion of the next 360,000 will be any different, particularly given that I heard the Chancellor telling the Select Committee this morning that he did not know the figure? How can the Chief Secretary expect the Treasury to retain credibility if the Chancellor tells us, and the world, that he is reducing back-office staff by tens of thousands, when he is planning, according to his own reports, to increase back-office staff by more than 100,000?

Mr. Boateng: We have already begun the process of redeployment to the front line. The right hon. Gentleman need only look at the Department for Work and Pensions, where the merger of the Employment Service and the Benefits Agency has already resulted in a reduction of more than 6,000 posts. That is the reality.

The question that the right hon. Gentleman fails to answer, and the reality that he fails to comprehend, is that we believe that the state has a role. We believe that it is right, in this spending review, to ensure that we create 143,000 more front-line health workers, 33,000 more criminal justice workers and approximately 55,000 more early years and child care workers. We make no apology for that. We want the right hon. Gentleman and his hon. Friends to tell us just how many front-line jobs they would cut and how they will make their sums add up, because in the past they have singularly failed to convince either the House or the country in that respect.

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