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Mr. Graham Stuart : Does my right hon. Friend agree that at the end of that series of complex financial transactions, there is a human cost—compounding damage to those who put money aside for security in old age? There may be sniggering on the Labour Benches but there is a clear, logical link between the tax on pensions and the impact on companies and the drive on to bonds. That is why people are no longer saving for their old age and there is the horrifying prospect, about which Labour Members seem to be happy, of 70 per cent. of people in this country being dependent on means-tested benefits by 2050.
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Mr. Redwood: My hon. Friend makes an extremely good and different powerful point, with which I entirely agree. It is a great worry. The lack of a proper savings culture, which has probably been influenced by all the uncertainty and damage to pension saving, is certainly not helpful.

I hope that those on the Treasury Bench have understood that there is a serious national problem. I put it to them in that spirit; I am not making a party political point. They need to tackle the matter urgently.

John Bercow (Buckingham) (Con): Before my right hon. Friend moves on to his next topic in what is proving to be an extremely interesting disquisition on the state of the British economy, may I invite him to underline in clear terms what is now a worrying apartheid between the public sector and the private sector? He has described what many companies have faced as a result of the perverse and iniquitous taxation policy of the Chancellor. Is it not disturbing that the wealth-creating sector has been so savaged, while the Chancellor has been unduly preoccupied with the creation of new jobs in the public sector, which is the sector for which the wealth-creating sector is obliged to pay?

Mr. Redwood: I quite agree and I shall come briefly to that very issue of public sector efficiency and productivity.

In chapter 3 of the report there are measures to meet the productivity challenge. The main issues seem to be addressed in the Chancellor's mind to the private sector, but if one splits the disappointing figures for productivity growth in the past year or two, one sees immediately that productivity growth in areas such as manufacturing has been pretty good—it has had to be, because it is an extremely competitive global world out there—whereas productivity performance in the public sector has been poor to abysmal. The Government think that the figures are so bad that they have decided to call them in for re-examination and re-presentation. That is how serious it is. The figures are beginning to hit them in the headlines so they will need to be recalculated or suppressed.

On the figures that we have had so far from the Government, it appears that productivity in the health service has been falling by 1 per cent. a year against the background of a massive increase in spending, which the Government rather foolishly call investment. There is a lot of investment going into the health service—that is in capital expenditure and it ought to be increasing productivity, but it does not seem to be working. There has also been a lot of increased spending, but much of it appears to be on unnecessary jobs and activities that are not related to front-line actions. That is one of the reasons why there are not more beds, more operations and more treatments. I hope that the Government will therefore regard productivity as especially a public sector challenge and that they will understand that merely presenting Gershon as a nice idea is not sufficient. They have not only to implement Gershon—we hear of stumbling progress; I think that they are a long way from full progress—but to introduce son of Gershon very quickly.

Justine Greening: Is my right hon. Friend aware that the Department for Work and Pensions, for example, is
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to spend £500 million on voluntary and involuntary redundancy schemes over the next two to three years? Does he agree that that is clearly an ineffective way of running a Department?

Mr. Redwood: It is horrifying; what a waste of money. The rate of run-off and natural turnover in public sector employment is very high in most such departments. Surely it is possible for the Government to cut staff numbers in administration and unnecessary activities quite rapidly by ensuring that they do not replace staff and that where genuine vacancies occur for real jobs people are transferred from less important posts. It can be extremely good for morale in a department to have a staff freeze, because it creates promotion opportunities for those who remain. It is certainly better for morale in a department to try to run the change and to gain savings by a staff freeze and by transferring people to jobs that really matter than to embark on mass redundancy programmes. It clearly makes a lot more sense for the taxpayer than would spending the money on voluntary or compulsory redundancies.

The Chancellor understands that productivity also needs to be improved through working away on education. It is wonderful to share the Lobby with him in order to try to secure some reforms to our schooling system, which I hope he will want to take considerably further. It is a slight move in the right direction, but I am impatient to go a lot further and faster, and I always think that we are so much better when we are at our boldest. I would like my party to be much bolder on all those things.

Mark Tami (Alyn and Deeside) (Lab): What about selection?

Mr. Redwood : Yes, selection is very important, which is why I support the view of the Leader of the Opposition that we should select on ability as well as aptitude. We should select across disciplines, as specified in our policy, and we should defend our very good grammar schools, of which people are rightly proud. Many hon. Members are here only because they went to very good grammar schools or direct grant schools, as I did. We are grateful for that opportunity, so we do not wish to pull up the ladder on such proposals.

The Economic Secretary to the Treasury (Mr. Ivan Lewis): Tell us more—the hidden agenda on selection is revealed.

Mr. Redwood: The Minister is heckling me, but he clearly has not studied Conservative policy carefully enough. The Leader of the Opposition is keen to preserve all the great grammar schools in this country and in Northern Ireland, as I am. He is keen to introduce sensible selection in our comprehensive system, and effectively to create a grammar school stream at the top of every comprehensive, which is a very good way of raising quality. Indeed, it is the Minister's own policy for certain disciplines, such as modern languages, where he does believe in selection on aptitude, which is another word for ability, as we all know. When I asked the Prime Minister what the difference was between aptitude and ability in modern languages, his answer was notably deficient. I am glad that the Chancellor, in the guise of
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the Secretary of State for Education and Skills, said that more needed to be done in further education. He said that we need to take skills education much more seriously, and we may find common ground in trying to achieve such improvements.

The Government could make an important contribution to improving our productivity and efficiency if they sorted out a couple of things for which they have prime responsibility. They have been in power for nine years, but we still lack an energy policy. They play an important role in energy, as they need to send the right signals in their tax and market-influencing policies, and they issue planning permission for new power stations. The Chancellor glided over the matter in his speech and in the document, but it is high time that we had an energy policy. If we wish to develop process industry in this country we need better answers on energy availability and price. In the past few weeks, there has been too much reliance on the spot price, which has gone all over the place because of the imperfections of the continental market.

The Chancellor and the Secretary of State for Trade and Industry have both said that the Government intend to push for proper competition inquiries in Europe to try to free the market so that we can achieve access to a good supply of gas and other power at sensible prices. When will the Government persuade their partners to do so, and when are things going to be open? This is an urgent matter—it is no good saying that it may happen next year.

The Government often play a lead role in transport. We have a 21st-century economy and a very good private sector, but we have a mid-20th-century transport system that is in desperate need of more capacity and modernisation—a word that the Government usually like but which they misinterpret. I hope that they will soon come up with a way of increasing transport capacity on both the road and the rail system, and I hope that it will harness private finance. I am not putting in a bid for extra public spending, as a huge amount of money is available for sensibly worked-out road schemes to expand transport capacity. The bipartisan project for the relief road around Birmingham offers a good model, and we need more of those projects. I hope that the Chancellor accepts that if we are to improve the country's economy and productivity we must tackle those road blocks, which hinder the movement of goods and people.

Finally, I would like to raise the issue of regulation. In his Budget statement and in the supporting papers, the Chancellor talked about the need for better regulation. Indeed, at times, he even talks about the need for deregulation. In the past, I have warmly welcomed his conversion and that of the Prime Minister to the view that we are a greatly over-regulated society. I welcome their conversion to the notion that certain regulations are unnecessary—some of them achieve the opposite of what they set out to achieve and other regulations are simply too expensive, given the aims that they set themselves.

We have heard fine words and speeches, and the first of two promised Bills on deregulation has finally been introduced. It is therefore an enormous disappointment that there are two problems with the Legislative and Regulatory Reform Bill. First, it does not include any provisions on deregulation. With the agreement of all
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my Conservative colleagues, I have proposed 63 things that we would like to deregulate immediately. Personally, I could cite another 100, and I may persuade my colleagues to back them in due course.

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