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Mr. McCabe: The hon. Gentleman said that the Liberal Democrats proposed a 50 per cent. top rate of tax. He may know that his party leader said 51 per cent. the other day. I do not know whether that is mission creep. When we combine their top rate of tax of 50 per cent. or 51 per cent. and local income tax, what will be the tax burden on the average hard-working family?

Mr. Laws: The hon. Gentleman will be delighted to know that, under our proposals to abolish council tax and replace it with local income tax, 70 per cent. of households will be better off or no worse off. He should talk to those of his constituents who are retired or on a low income and who often pay 10 per cent. of their income in council tax—a grossly unfair tax that his party should be ashamed not only to retain but to have increased by 80 per cent. since 1997.

I should like to consider some of the public expenditure issues that have been raised in the context of the James debate because they are important. The Conservative party should be congratulated on stimulating debate by publicising all its policies on its website. The Chief Secretary was ungenerous in not giving the Conservative party some credit for the huge bulk of papers that he can have printed off if he is not good with technology. I had a chance to read through them this morning. I also welcome the fact that the Conservative party has undertaken a review of public expenditure. In any organisation, it is always possible to find some efficiency savings and to reprioritise some expenditure. However, it is also tempting for politicians who are desperate for easy and painless solutions to claim that they can find huge amounts of something called waste that can square the circle between public expenditure and tax priorities. We need to consider whether the Conservative party has successfully squared that circle.
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Let us begin by examining the total savings—the £35 billion—that the James report claims to have found. It sounds immensely impressive and a large amount of money. The small print acknowledges that the Government have already said that they will make two thirds of those savings—£22 billion—and use them internally to improve public services. There is a question about whether the Government will deliver them, but the additional savings that the Conservative party says that it can make are not £35 billion but the much lower figure of £13 billion.

Mr. Borrow: The hon. Gentleman mentioned parties looking for painless ways of making savings. His party proposes abolishing the Department of Trade and Industry. Which of the Department's functions would be retained and where would they be placed in the Government structure?

Mr. Laws: I am delighted to give the hon. Gentleman more information about our plans for the Department of Trade and Industry. He may know that, since the Government came to power, there has been a huge increase in the Department's budget. He will also know about reports by the Public Accounts Committee and others about the way in which money has been spent and the fact that many of the industrial subsidies that the Department pays are wasteful and have low economic returns. We would especially target that. Of course, some of the Department's expenditure would remain as part of total Government expenditure, especially some parts of the longer-term science budget, which is important.

Let me deal with other parts of the James report. It includes a list of 168 public bodies that will be abolished. That is clearly set out, and I do not want to be unfair to the hon. Member for Tatton about his list. However, I note some double and triple counting, a practice for which the Conservative party criticises the Labour party. First, there is the double counting of the Gershon savings as both the Government's proposals and those of the Conservative party. Of the 168 bodies, 16—one tenth—are regional agricultural wages committees, 28 are individual health authorities, nine are Sport England regional bodies, and seven are regional industrial development boards. So, four entities account for 60 of the public bodies in question—more than a third of the total.

The Conservatives have also been very clear about their proposed reductions in jobs. They would apparently make a reduction of 235,000 public sector jobs, or "bureaucratic posts", as the James report describes them. That is quite a large reduction. Apparently, however, not one of those posts would be eliminated through compulsory redundancy. I find that difficult to believe, and I wonder whether Mr. James thought that that was a credible proposal.

I assume that most of the bureaucratic public sector jobs are going to come out of civil service staffing figures, rather than individual public services themselves. If that is the case, we are talking about a reduction of about 550,000 public sector jobs, as a base figure. It is true that, under the Conservative Government between 1992 and 1997, the head count in that category was reduced by
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about 90,000. It is also true that that category has increased since Labour came to power. If I am right, the implication of the Conservatives' figures is that the permanent staff head count would fall to about 410,000 from a peak 10 years ago of about 580,000. That would be almost 100,000 lower even than the head count at the end of the last Conservative period in office. That is an incredible, and potentially questionable, set of figures. It is as questionable as the idea that all those reductions could be achieved through voluntary redundancy. I notice that the Conservatives' largest spending commitment in any one year is a £5.9 billion commitment to fund voluntary redundancies. That says something about the views of the party.

Geraint Davies: Will the Liberal spokesperson make clear what the Liberal position is on the Gershon report? Would the Liberals cut that total number of jobs, or just some of them? What would be the head count under the Liberal Democrats? Secondly, can he confirm that the introduction of a local income tax would increase the aggregate amount of tax being paid in Britain?

Mr. Laws: The answer to the hon. Gentleman's second question is no. The abolition of council tax and its replacement with a local income tax is an entirely neutral exercise. It would not increase the total tax burden. On the Gershon report, my hon. Friend the Member for Twickenham (Dr. Cable) has already made it clear that we are committed to delivering those savings.

That brings me to my next point. There is triple counting and a lot of smoke and mirrors in the other parts of the James report, and similarly, when we look at the small print relating to the 235,000 reduction in jobs, we find that it includes the 80,000 reduction that the Government are already implementing, and that 91,000 of the 235,000 jobs would simply be reclassified from the public sector to the private sector. They would therefore not be cuts at all. The figure for the Conservatives' proposed job cuts on top of those implemented under Gershon would be 64,000, not 235,000.

We need to consider in a little more detail the savings that the Conservatives are proposing. There are some with which we have no problem. The Conservatives have identified cuts to be made in some of the industrial subsidies, and cuts in some parts of the Department for Environment, Food and Rural Affairs and the Office of the Deputy Prime Minister. We think that those would be entirely sensible. The Conservatives have also proposed a set of quite small changes with which we may not agree but which are defensible in their own right in terms of costing. We may not agree with their plans to scrap the regional assemblies and the supreme court, for example, but they are perfectly entitled to those policies and to put them into their costings.

The Conservatives' remaining savings proposals seem to fall into two categories. First, there are savings that are credible but frankly unattractive. Then there are savings that sound attractive but are, in reality, incredible. I shall give the House an example. The extent of the Conservatives' proposed cuts to the new deal, to the social housing budget and to Jobcentre Plus would harm some of the most vulnerable people in Britain. My hon. Friend the Member for Twickenham had an
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interesting exchange with the hon. Member for Havant (Mr. Willetts) on the BBC yesterday, in which he pressed the Conservative spokesman on the implications of privatising the whole of Jobcentre Plus and significantly reducing expenditure in that area. My hon. Friend asked his Conservative counterpart how the Jobcentre Plus function of giving advice on work and benefits would be continued, following privatisation and given the scale of the proposed cuts. He was told that those functions would have to be outsourced to voluntary bodies. It is extraordinary to suggest that we should simply sweep away the employment and benefit advice service for some of the poorest people in society and let the voluntary sector take care of it.

I am worried not only about the proposed cuts that would hit those on lower incomes, but about those that I doubt would deliver value for money. There is a good deal of over-regulation in much of society today, and the Government have worsened a lot of that. However, I question whether it would be sensible to abolish the whole local government inspection service and to rely on council auditors and customer satisfaction reports from people who live in a particular area as a means of finding out what is going on in a council. I find it extremely surprising that that proposal should come from the Conservatives, as they were determined to introduce more inspection and accountability in the public sector. An example of that would be their proposals relating to Ofsted, which were bitterly opposed for a while.

We are very doubtful about those Conservative proposals. The costings are perfectly legitimate but the effects would be undesirable. There is, however, a bigger hole in the James report, which we look forward to exploring further in the next few weeks. It relates to the credibility of the savings that appear attractive because they do not involve cuts in key services. I have looked at the figures for reductions in Ofsted, which are already being implemented by the Government. I have also examined the proposed reductions in the advertising and consultancy budget, and I believe that the figures used in the James report are wrong. Claims are also being made in relation to the 30-month scheme and absenteeism, and £3.2 billion of completely unspecified savings are proposed by taking out the Gershon savings from Departments that could otherwise recycle them. The proposals also claim that extraordinary savings could be made by the Treasury in the processing of Inland Revenue payments, on the basis of figures in the James report that look like a back-of-the-envelope calculation. In my view, all those proposed savings are bogus and flaky. Looking at the total of the real savings that are being claimed in the James report—£13.3 billion, not £35 billion—a crude analysis would suggest that half those savings relating to waste were bogus and undeliverable.

Of course, we do not have to rely only on the Liberal Democrats' analysis to draw that conclusion. The hon. Member for Wantage (Mr. Jackson) spoke about the sceptical majority of the British public this weekend. He said:

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those on Conservative Front Bench—

The hon. Member for Wantage may no longer speak for the Conservatives, but I suspect that on this issue he speaks for the vast majority of sceptical individuals in this country who have become used to having been told by Governments and Oppositions for 100 years or more that all their problems could be solved by cutting out waste. That sceptical majority will not be convinced by the claims being made by the Conservatives.

The Conservatives claim that they will cut taxes, but when we probe further, we discover that under the next Conservative Administration—however unlikely that prospect may be—the tax burden would rise by almost 2 per cent. of gross domestic product. The Conservatives say that they will cut waste, yet most of their proposals involve double counting and incredible claims. On public spending, where Conservative proposals are attractive, they are incredible, and where they are credible, they are, to us, deeply unattractive.

Mr. James, the company doctor, was supposed to deliver a cure for Conservative electoral ills. Instead, I fear that he has turned out to be a retailer of what Mr. Gladstone would surely have referred to as quack remedies. Mr. James is supposed to have a reputation for saving beleaguered enterprises, but he appears to have failed to save the Conservative party not only from intellectual bankruptcy but from electoral defeat.

2.30 pm

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