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Mr. Michael Jack (Fylde) (Con): I have listened to the hon. Gentleman with care. If the Chancellor has such an iron grip, will he explain why he required the services of Sir Peter Gershon to rein in an accumulation of overspending in the public sector of some £20 billion?

Mr. Purchase: I have never worked for a company in which savings could not be made. Whether those savings entailed mere stock control, better and smarter working or something else, I have never worked for a company that could not make savings in its day-to-day operations. I would be amazed if a Government of whatever stripe examined what they were doing and how they were doing it and could not make savings. The Gershon savings amount to about 5 per cent. of total expenditure and will be gained over a period of years, which is not surprising. The right hon. Gentleman is right to draw attention to the fact that those savings should have been made some little time ago, but I do not regard such expenditure as wasteful. The expenditure should have been managed better, but savings are available and we will make them as we go.

Mr. Bercow: The hon. Gentleman's loyalty is valiant, but his argument in response to my right hon. Friend is implausible. Either way, he is in checkmate: if the sudden accumulation of waste is just that—sudden—it logically follows that the Chancellor has recently lost control; if, on the other hand, the waste has accumulated over a long period rather than being the result of a sudden lapse, the Chancellor is guilty of a
 
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long-standing failure. Either way, the Chancellor cannot be defended on this occasion, and the hon. Gentleman should give up the unequal struggle.

Mr. Purchase: Once again, you try to proceed from a false premise. I do not accept that what you are describing as waste is necessarily—

Mr. Deputy Speaker: Order. The hon. Gentleman is experienced enough to know that he should not be referring to me.

Mr. Purchase: I apologise, Mr. Deputy Speaker.

I do not accept the hon. Gentleman's checkmate. I think that he is wrong—he is not often right, and he is wrong again.

The competitive labour market appears to be in the best equilibrium that I can recall in my lifetime. We still have more vacancies than the number of people who are unemployed, and that would normally lead to wage inflation. However, that is not happening. That is partly due to the international situation. There is no question about that. The way in which my right hon. Friend the Chancellor has worked with all the flows of the economy has meant that we have reached a point where it is possible—the fact that there is to be an election does not escape me—to make life better for those who are at the bottom of the heap.

The hon. Member for Buckingham (Mr. Bercow) will recall that in his article of a few weeks ago, I think for The Independent, he called for tax to be lowered for the lowest paid. In large measure that call has been met today. I noticed that there was an interesting look on his face when my right hon. Friend the Chancellor was talking about joint incomes and an average of about £24,000 for people with two children, who would be virtually tax free up to that amount. I hope that the hon. Gentleman feels vindicated by writing his article in The Independent and perhaps not being entirely popular within his party. In that instance, however, I support him.

It is right to welcome the raft of improvements for people who are the worst off in our society, those who do not have the advantages that we would like to see them enjoy. I welcome what my right hon. Friend the Chancellor has had to say. It is an excellent Budget and one in which the dividing lines will be clearer as we move into the general election.

4.52 pm

Mr. Michael Jack (Fylde) (Con): It is a pleasure to follow the hon. Member for Wolverhampton, North-East (Mr. Purchase), who always makes thoughtful speeches. He engaged in a proper debate on matters connected with the Budget. I was asked by my local newspaper what I thought about the Budget. I described it as rather like standing outside the church watching the celebrations while being covered in confetti. The Budget is just like the confetti, with lots of little bits and pieces. When they are swept up at the end of the ceremony, it does not amount to very much, and should be quickly consigned to the waste paper bin.

The Government are attempting to be all things to all men and women. There is a statute here and an initiative there. There is the chopping up of a bit of red tape, most of it made by the Government. That is the sum total of the Budget.
 
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There are some points that we need to consider in detail. Much has been made of the fact that the Chancellor subcontracted to the Monetary Policy Committee the setting of the monetary framework, which is the other side of the Budget. By and large, the Budget report and financial statement deals with the fiscal dimension of the Budget while the Monetary Policy Committee deals with monetary matters. The fact that we have interest rates at about 5 per cent. raises the issue of the structural nature of our economy. If, to achieve an inflation rate, projected by the Chancellor, of about 2 per cent., we need to have effectively internationally uncompetitive interest rates of 5 per cent., that says something about the structure of the economy. That in part reflects the substantial growth in public sector employment. Without doubt, it has tightened the labour market considerably.

I would not disagree with the taking on by the public sector of more and better trained people such as doctors, nurses and teachers. However, that has not been the entire hallmark or characteristic of changes in public sector spending by the Government. Since they came into office, the Government have recruited about 583,000 extra people into the public sector. Not all of them are nurses, doctors and teachers, and others of a vital nature. The growth of the quangocracy, the new organisations and so on requires to be teased out so that we can ascertain where the money has gone.

One of the interesting points that the Chancellor has made great virtue of in his golden rules is borrowing for investment. I want to spend a moment looking at the term "investment". Within a few years of the Chancellor's taking office, the term "public spending" had been transmuted into "investment" as a way of clothing with respectability what was actually old-fashioned public spending. In the health sector, most of the bricks and mortar activity that I would regard as investment is now being carried out under the terms of the private finance initiative. Likewise, in the transport sector one can see that road building, what little of it goes on, is done by the private sector. In the railway sector, the entire expenditure of Network Rail has been taken off the public balance sheet. I am led to the inexorable conclusion that most of the "investment" has been in borrowing to deal with the variable costs of employing additional labour, not bricks and mortar in the public sector.

David Taylor (North-West Leicestershire) (Lab/Co-op): The right hon. Gentleman, who is Chairman of my Select Committee—the Environment, Food and Rural Affairs Committee—seems to be heading down a road that would lead him to criticise the private finance initiative in the sense that it is prohibitive in cost, flawed in concept and intolerable in consequence for taxpayers, patients and NHS staff. Can he confirm that that is what he is doing, because if so, I agree with him?

Mr. Jack: No, I am not going to criticise the private finance initiative. I had responsibility for it when I was in the Treasury, and I do not for one moment resile from it as an effective vehicle for the proper transfer of risk and the creation of public sector projects without the cost overruns that used to typify old-fashioned public procurement. My point is that when one takes out of the public sector expenditure equation projects that are
 
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being paid for by the private finance initiative, one is led to the inexorable conclusion that the extra so-called investment is people-driven, not what I would term investment-driven.

Much has been made of the long run of growth in the economy. I take this opportunity to salute all the hard-working people in the United Kingdom and the excellence of British management and our companies and enterprises, which by and large have enabled that growth to take place. Following the difficulties of the mid-1990s, industry has got its act together and is working extremely hard. We have become innovative. We have changed the nature of manufacturing and of what we do in the so-called ideas economy. Much of that has happened without the intervention of the Chancellor of the Exchequer. However, let me cite some figures for the record, using data supplied by the Office for National Statistics. Average growth during the period 1992–97, when growth resumed, was 3.1 per cent.; between 1997 and 2004, under the present Administration, it was 2.7 per cent. In 1992–97, manufacturing output volume increased by an average of 2.1 per cent. year on year; under this Government it has been 0.7 per cent. Business investment was 5.5 per cent. under the Conservatives; it has been 4.5 per cent. under this regime. As my hon. Friend the Member for Grantham and Stamford (Mr. Davies), who has left the Chamber for a moment, pointed out, household saving went down by 3.9 per cent. under the Conservative Administration, but there has been a massive decline of 7.5 per cent. under this Chancellor.

The foundation laid by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) formed a valuable basis for what has taken place. Why do Conservative Members worry, despite the attractive numbers put before us by the Chancellor on the growth of the economy and relative borrowing ratios? Why do we have the temerity to criticise? It is because when my right hon. and learned Friend was Chancellor, he recognised that tight and tough control on public expenditure at a level of 38 per cent. of gross domestic product, a tough approach on inflation and a proper approach on fiscal policy were the necessary foundations for a stable economy with the prospect of long-term growth. In fairness to the present Chancellor, he has entirely agreed with that Conservative approach and has maintained, in his own way, the policy foundations that we put in place. I sometimes wish that Members on the Treasury Bench would stop airbrushing out of history the fact that growth in this country started in 1992.

Going back to my first point about inflation and interest rates, one of the problems that the Chancellor has not been able to affect is productivity. Under the Government of my former colleague, John Major, annual productivity growth averaged 2 per cent., but the average now is 1.5 per cent. If productivity is such a struggle, I conclude that many of the macro-economic activities that the Chancellor has introduced, supposedly to modernise and improve the economy, have not had a measurable effect on what has happened in the United Kingdom.
 
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I turn to some of the numbers in the "Financial Statement and Budget Report", because they raise an important issue and if the Chairman of the Treasury Committee had been here, I would have put this point to him. The Chancellor has an uncanny knack of getting his growth statistics and forecasts right, but when it comes to borrowing his track record is poor. In the "Financial Statement and Budget Report" for 2002 the prediction for borrowing this year was £17 billion and the figure for the next financial year was some £18 billion. Those figures have been changed to £32 billion and £29 billion respectively. It is absolutely clear that the forecasts on borrowing are significantly out, and it would be useful if the Treasury Committee could inquire into why it is possible to get the growth figure spot on—that is the central figure for the economy—when the borrowing figure is so far out. Unless there is greater accuracy in the projections, management of the economy is very difficult.

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