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Mr. Letwin: I thank the Chancellor for allowing me to intervene at last.

I shall not respond to any of that garbage, as I would be surprised if the Chancellor could really delude himself that any rational being would listen to such stuff. I shall do something else, and defend the Liberal Democrats. [Hon. Members: "Oh!"] If Government Members will contain themselves, the Liberal Democrats are my principal opponents in my constituency, and I do not believe that British politics benefits from the kind of rubbish of which the Chancellor was accusing them. The hon. Member for Twickenham (Dr. Cable) is a perfectly rational individual and made a perfectly rational proposition
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with which, however, I disagree. It is rational to disagree that we should have public spending broadly at its present level across the cycle. The Chancellor knows perfectly well that the Noddy arithmetic that he was using for the Liberal Democrat proposals is no better than the Noddy arithmetic that he was using for our proposals, and it is no way to conduct British politics.

Mr. Brown: If the shadow Chancellor had said that my figures were wrong and could prove that they were, I might have had some respect for what he has just said. However, he said on "Breakfast with Frost" on Sunday that he would find £35 billion of savings. Does he deny that? Of course, he does not. [Interruption.] He says that it is beneath contempt to point out exactly what he said on "Breakfast with Frost" on Sunday. However, he said that he wanted £35 billion of savings. He must also find another £15 billion, because other Conservative Front Benchers have made commitments worth £15 billion. If he is going to find that sum, as he keeps telling us on the radio and elsewhere, through efficiency savings, he must deal with a point made by Sir Peter Gershon, who said:

Let me tell the House what savings of £50 billion would mean. If the right hon. Gentleman froze civil service recruitment, as he plans to do, he would gain £250 million a year. In other words, he would get 0.5 per cent. of the savings that he claims that he needs. If he halved the civil service by sacking half its members tomorrow and getting rid of prison officers, probation officers, security officers, customs officers and people guarding our ports and coastguards, he would save less than £6 billion of the £50 billion that he needs to save. If he sacked every civil servant in the land—dismissed the whole domestic civil service—he would get only about £10 billion or £12 billion, so he would still be £38 billion short of the target that he is trying to reach.

The fact of the mater is that the shadow Chancellor is going round every television and radio studio saying that he will make £35 billion of cuts and that there are £15 billion of commitments by his shadow Cabinet colleagues. He says that he will find that sum without affecting the quality of services such as health and education by cutting bureaucracy and waste. However, if he sacked every civil servant in the country, including prison officers and probation officers, he would only find £10 billion of the £50 billion, which exposes the hollowness of the Conservative campaign.

Why does the right hon. Gentleman not tell the country the truth, and admit that he wants to cut services, not just bureaucracy? Why is he not honest and say that he has always believed in cutting the national health service, charging and privatisation? Why does he not say that privatisation, rather than the development of public services, is the goal of Conservative shadow Ministers? Why does he not tell the truth and say that he has always wanted to cut public expenditure to 35 per cent. of national income, which he said consistently until he became shadow Chancellor? Why does he not admit that that is the view of the Leader of the Opposition, who has also committed himself to massive cuts? Why
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do they not admit that what they really want to do is cut the number of teachers, nurses, doctors, home helps and carers? The issues that we should consider in our debate on the Queen's Speech are, first, stability under Labour against a party that cannot even be honest about its monetary policy, and, secondly, investment under the Labour Government against massive cuts under the Conservatives. I believe that, when we come to the general election, the country will deliver its verdict by supporting us.

1.35 pm

Dr. Vincent Cable (Twickenham) (LD): We support the practical measures on the Inland Revenue and Customs and Excise in the Queen's Speech. I am glad that the Government have noted the concerns that I have long expressed about consumer debt, which is to be dealt with in limited but useful legislation that we will support. I also support the sensible suggestion of the right hon. Member for West Dorset (Mr. Letwin) about introducing legislation on the independence of the statistical service. A key theme over the next few days will be the integrity of Government figures, so such legislation would be a useful building block.

It was clear from his speech that the Chancellor has not listened to the advice from the Chancellor of the Duchy of Lancaster and our man in Brussels to stop boasting about the Government's economic record. However, I am rather on the side of the Chancellor of the Exchequer, because the Government have very little to boast about, and almost all that there is of positive note is on the economic side, so his points about economic stability were fair, as I have always acknowledged.

As for basic economic growth over the past seven years, the British economy has averaged about 2.8 per cent. a year, a little above the average for the Organisation for Economic Co-operation and Development. Some European countries such as Sweden and Spain are doing better, as is the United States, but we have a perfectly commendable growth rate which—there is no point denying the underlying facts—is the product of a combination of fortunate external circumstances and a favourable international economic environment. The Chancellor has also enjoyed a helpful inheritance, including liberalised labour and financial markets, which have contributed to low inflation. Another helpful factor is sensible economic management—notably monetary policy, the independence of which, we all now accept, was a good move.

The Chancellor began by focusing on fiscal policy, and I am happy to respond to the challenge that he threw down. He obviously finds it psychologically difficult to adjust to an environment in which the Liberal Democrats are more disciplined about public spending than he is, but we shall continue to argue the case for making tough choices in public spending. The Chancellor asked me to account for our spending proposals, but it would be useful if he could elaborate on the progress of the Gershon savings exercise. How will he report on that progress? It has never been clear how we would know whether the Gershon savings had been realised and there are some opaque memorandums flying around Whitehall on implementing the recommendations. Will the Chancellor therefore undertake to set out concretely how much
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money is being saved under the Gershon programme year by year? What progress, for example, is he making in reducing the number of procurement agencies? We need to evaluate those concrete steps to be sure that the Government are serious about making savings. Whatever their motivation, we need a proper monitoring mechanism.

On fiscal policy, the Chancellor will have to acknowledge over the next few days that there is a growing consensus that he has a problem in meeting his fiscal objectives. It is not a political point. The International Monetary Fund, the OECD, the Institute for Fiscal Studies and the National Institute of Economic and Social Research are not politically driven bodies, but they are all arguing that he faces that problem. It may not be a big problem quantitatively—£7 billion, £8 billion or £10 billion is a very large sum to most individuals, but in terms of the economy it is not a very large sum. That is the standard consensus projection of the extent to which the Chancellor will be adrift in respect of his fiscal policy objectives.

My concern is not the sum of money. Economically, it is not large and could easily be absorbed in the Government's overall borrowing requirements, since the debt position is comfortable. The issue is credibility—fundamental economic credibility. If the Government set tests, they should be able to meet them. The Government clearly understood from the outset that economic credibility was important. Indeed, this year the Nobel prize went to a couple of economists who spoke about the importance of economic credibility. Credibility was what lay behind the decision to establish the Monetary Policy Committee, and it has enhanced the credibility of interest rate setting enormously.

There is a problem, however, with the way the Government have approached fiscal policy. They set fiscal rules, which are broadly sensible, and more or less followed them, but there is a question about who decides whether those fiscal rules have been met. Will that be determined independently or by the Government? The golden rule is a highly technical area. Even for anoraks, it is a recondite subject. There are a couple of specific issues. First, who evaluates the assumptions that the Government make in their forward projections? At present, the Government invite the National Audit Office, on a restricted basis, to examine those assumptions and pass judgment on them. That is sensible, but the NAO does not have unrestricted access to evaluate the Government's assumptions, and it should.

The second aspect that is defective is who decides what the golden rule is and whether it has been met. That is a technical point but it is extremely important. Who decides when the cycle started and when it ends? That is a difficult question. In my private sector days, I was once set the problem by my company. If the company had known the answer, it would have saved a lot of money in investing in refineries and chemical plants.

Somebody must answer the question, and it should not be the Chancellor, but a genuinely independent body. That is why we argue that the National Audit Office should have an enhanced role—economically and technically, it has competent staff—to evaluate the full range of fiscal policy and give an independent judgment on which the Government can then base a credible fiscal
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policy. There is no party political advantage in arguing for such a structure. It would be in the Government's interest to have a fully credible fiscal policy, which they do not have at present.

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