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Mr. Oliver Letwin (West Dorset) (Con): The Chancellor seems to have noticed that the Prime Minister's friend, Commissioner Mandelson, recently warned him against "exaggerated gloating", but he does not appear to have heeded the advice. He prefers to slide over inconvenient facts. He did not take much time discussing the figures for current borrowing, and he did not take much time discussing the golden rule either—and no wonder: it has been alchemy in reverse, and the golden rule has turned to dross in his hands. The golden rule was meant to be a guarantee that the Chancellor would borrow only to invest—all talk: he is borrowing to spend. His current borrowing for the first seven months is almost twice as high as his last prediction for the year as a whole, and he has just announced borrowing of £170 billion over six years. Why do the ITEM Club and the Institute for Fiscal Studies say that he has a black hole in his finances of £10 billion? Why do the International Monetary Fund and the National Institute of Economic and Social Research say that he has a £12 billion black hole? Why do the CBI, the Organisation for Economic Co-operation and Development, the British Chambers of Commerce and the all the rest say that, on his spending plans, he will have to raise taxes? Why do 20 of the 21 economists on the Treasury's own panel say the same? Does not the Chancellor feel a little isolated?

The fact is that the tide is going out on the Chancellor's credibility. The tragedy is that the Chancellor is spending, borrowing and taxing so much because he is not getting value for taxpayers' money. He says that he has a plan to cut waste. Whose waste? It is his waste. We have paid all the taxes. Where has all the money gone?

This is the Chancellor—[Interruption.]

Mr. Speaker: Order. Let the right hon. Gentleman speak.

Mr. Letwin: This is the Chancellor who paid for £1,000 chairs for Ministry of Defence civil servants, each of which would have paid for three flak jackets for soldiers serving in Iraq. That is not the holy grail of value for money. He is not Sir Lancelot, he is Sir Wastealot. The Chancellor's plans to save money are like his promise to borrow only for investment—all talk.

Last year, the Chancellor's plan for cutting bureaucracy increased civil service numbers by 12,000. This year, he is doing even better. In just five months, in just one newspaper, his bureaucracies advertised 4,000 new jobs. That is a salary cost of more than £150 million. Talking of advertising, is the right hon. Gentleman proud of having increased the Government's advertising budget by £100 million? That is 17,000 heart bypass operations. And that is not the only thing he has increased. He has increased the number of tax collectors
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twice as fast as the number of nurses; he has increased the number of bureaucrats and support staff in education twice as fast as the number of teachers; and he has increased the bill for management consultants by £1 billion a year.

The Chancellor says that Britain is working, but it is the bureaucrats, the administrators and the management consultants who are at work. Our public services are not working. After 66 stealth tax rises, why are there 1 million people on hospital waiting lists? Taxes have gone up by £5,000 per year per family in Britain, so why are 5,000 people a year dying from infections picked up in dirty hospital wards? These are fundamental failures of public service delivery. The Chancellor cannot mask them by making grand speeches about the long-term future of the economy, particularly when he himself is jeopardising that future with his taxes and regulations.

Our friend, Commissioner Mandelson, wants to know why our productivity is not better, and the commissioner is right to ask that question, because the Chancellor has presided over an economy whose productivity growth rate has dropped by a third, an economy that has slipped from fourth to eleventh in international competitiveness, and an economy that has grown more slowly than that of any other major English-speaking country. The Chancellor cannot make up for his failures of public service delivery by parading new schemes. His pledges to pensioners and council tax payers today will not make up for 70 per cent. increases—[Interruption.]

Mr. Speaker: Order. If the hon. Member for South Shields (Mr. Miliband) wants to carry on a conversation, he should go outside the Chamber. As a Minister, he should know better.

Mr. Letwin: I am grateful, Mr. Speaker, but I fear that the irritation of those on the Government Benches may grow. Labour Members do not want to hear it, but the plans announced today will not make up for the 70 per cent. increase in council tax that have driven many pensioners to despair. The Chancellor's plans for financial exclusion cannot make up for the fact that the savings ratio has dropped by a third.

The Chancellor's grand statements about science will not make up for the fact that 100 university science departments have closed. His scheme for child care will not make up for the lack of discipline in schools. The Chancellor's plans for training will not make up for the fact that one child in three leaves primary school without being able to write properly. The Chancellor's plans for academic research will not make up for the damage he caused when he created the rules that he is now abolishing.

The country faces great challenges in the years ahead, not least from the emerging economies of the sub-continent and the far east. We have the capacity as a country to meet those challenges, but we will not succeed if we are held back by failed schemes, fat government and excessive regulation. We will not succeed if economic growth is siphoned off to pay for bloated bureaucracy that fails to give value for money.
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The long and the short of it is that the Chancellor's failure to give Britain's taxpayers value for money will be the terrible legacy of this Government.

Mr. Brown: Why did not the shadow Chancellor tell us the truth? He said on the radio this morning that his plans involve £35 billion of cuts in public spending. Why does he not tell us that the dividing line between his party and ours is that even if he sacked every civil servant in the land he would still have to find £20 billion in public spending cuts before there was even a hint of a tax cut for Opposition Members? Why does he not admit that his policies involve a £1.8 billion cut in transport, a £4.8 billion cut in local government, a £1.6 billion cut in the Home Office and an £800 million cut in international development?

Sooner or later, Opposition Members will have to face up to the statements being made by the shadow Chancellor, who, while he speaks in the House about waste, bureaucracy and administration, is committing his party in every constituency to sack nurses, teachers, child care workers and home helps.

We will not take lectures on bureaucracy and waste from the shadow Chancellor, the architect of the poll tax. That was the biggest single administrative cost to the country—£7 billion for poll tax registration officers, poll tax collection officers, poll tax repayment officers and poll tax compliance officers. The shadow Chancellor is still proud of the poll tax, which was an administrative nightmare.

As for the economy, does not the right hon. Gentleman accept that productivity is rising, not falling, and that we have closed the gap with Japan, and are closing the gap with Germany and France? Even his shadow Minister for deregulation, in a statement made to private businesses, praises this country and says:

So why should we take lectures on the economy from a shadow Chancellor who was an adviser to a Government who had 15 per cent. interest rates, 10 per cent. inflation, 1.25 million people in negative equity, and who caused two of the worst recessions to hit our country?

When the shadow Chancellor speaks about nurses and doctors in the national health service and compares them with tax inspectors, does he not know that 70,000 people in total were employed in the Inland Revenue, and the increased number of nurses alone under this Government is 79,000, and that there are 20,000 more doctors in the NHS? Again, we will take no lectures from the shadow Chancellor about front-line public services and their improvement. He ought to tell us the truth—that the cuts that he proposes are not in administration, but go right to the heart of public services, and that he has always believed in privatising health and education. Conservative Members should go back to their constituencies and think again.

Dr. Vincent Cable (Twickenham) (LD): Last week, the Prime Minister gave us the politics of fear, and this week the Chancellor has given us the economics of complacency. I have always been happy to acknowledge the contribution that the Chancellor has made to economic stability and steady growth, although an
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awful lot of people who have been caught up in the boom-and-bust cycle in the housing market or in unrepayable debt and collapsing pension funds would be less charitable than I am. It is now clear, however, that there is an additional problem in relation to the Budget. All the independent forecasters say that there is a deficit; it might be a small deficit, but there is a consensus. The Chancellor says that there is not, so who are we to believe?

There is an issue of credibility and trust, and we cannot have a continuation of a situation in which the Chancellor sets his own tests and then marks them. What we need is the equivalent of a thorough Ofsted inspection of the Government's accounts. The Chancellor already agrees that the National Audit Office should examine some of his Budget assumptions. Why does he not agree to let all of them be examined and to see whether the golden rule has been met, and thereby re-establish some credibility? What has he got to hide?

It is clear that there are some serious loose ends in Government public spending. The Chancellor has confirmed that he is providing an extra £500 million for the war in Iraq. The total cost to the British taxpayer of the successful first Gulf war was £500 million—the same sum—and 80 per cent. of the costs were fully paid by grateful European and Arab allies. The current war has cost seven times as much—£3.5 billion—and is growing at £125 million a month, with no end in sight. If the forces are to stay in Iraq until the beginning of 2006, as the Prime Minister said, will the Chancellor confirm that that will cost an additional £1 billion, which he will have to find?

What about the identity card? Its cost was originally put at £3 billion. On Tuesday, the Home Office said that the card was going to cost £5.5 billion. Yesterday, the Prime Minister did not know. Can the Chancellor tell us how much it will cost and who will pay the cost overrun?

It is because the budget is tight that we simply cannot afford a reckless George Bush-style tax-cutting spree of the kind that the Conservatives have trailed in the Daily Express. I am told that the proposals were considered so implausible that more cerebral and moderate newspapers such as The Sun and the Daily Mail would not even publish them, but since the proposals are essentially about titillation rather than satisfaction, it is perhaps appropriate that they have found a home in Mr. Desmond's publications.

On taxation, what is required is simpler and fairer taxation. The Chancellor has endlessly tinkered, and has created a complete mess as a result. There is a very revealing table in the Adair Turner report on pensions showing that 40 per cent. of all pensioners are now paying a marginal tax rate of more than 50 per cent. Some 1.5 million hard-working families are now paying a marginal tax rate of more than 60 per cent. The Government criticise the Liberal Democrats because we propose that very rich people should pay a marginal tax rate of only 50 per cent. So why does the Chancellor think that this situation is tolerable for millions of pensioners and hard-working families?

While I am on the issue of unfair tax, let me conclude with this question. The Chancellor said today that he has found £500 million to cut the growth of council tax rates. Has he dropped his proposal from last year to compensate pensioners with a £100 payment towards
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their council tax? Will he also say where he got the £500 million from? Is it true, as is reported, that cuts are now having to be made in the education and health budget in order to fund that increase? Would it not be much more sensible to deal with this grossly unfair and regressive tax by getting rid of it altogether and replacing it with a tax based on ability to pay?

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