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Mr. Vaizey:
The use of that figure in relation to nuclear new-build is extremely disingenuous. That was a historic cost; there is no doubt that the generation and disposal of waste was shockingly bad 30 or 40 years ago, but that would not be the case now. Those who oppose nuclear new-build tend to compare what we could build
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now with what we built in the past, but in fact that would be the equivalent of buying a 1970s Ford Cortina, whereas nuclear new-build now is the equivalent of buying a Toyota Prius. Does the hon. Gentleman agree?
Alan Simpson: No, I do not agree; nor does the Sustainable Development Commission or Greenpeace. Those who consider the issue say that, as soon as we start to scrutinise the cost element of what the nuclear industry wants, we are back into the same old game. I remind the House that, when we were there first time, the House and the public were promised atoms for free. We have been paying for that deception ever since, and we would do so again. My caution is that, if we go down that path, all the money that the Chancellor would have to play with for a shift towards renewables and decentralised energy would be hijacked and put into the pockets of the nuclear industry once again. That will not meet our energy security or supply needs.
My final point on energy and the carbon consequences of how we run the economy is to echo the sense of sadness that aviation duties were not mentioned in the Budget. Some colleagues say that those duties are covered by international agreements and that we are pushing forward with the plans for emissions trading, but I would add a word of caution. We need to look carefully at what emissions trading is about. With all other aspects of pollution trading, the real danger is that a market in non-goods is created. Some of the greatest enthusiasts for emissions trading schemes are in the City of London, and they see themselves as making large fortunes out of their brokerage roles in the trade in non-goods.
In aviation, it is far simpler to consider non-tradable duties. It would be very simple to calculate the current carbon miles impact of flights from all UK airports in the past year. We could set that as a quota for them, and we could say that the UK regime will be to reduce every airport's quota by 5 per cent. a year. Airports could specify that priority will be given to higher efficiency aircraft or shorter flights, with higher passenger usage or shorter cargo trips, all of which reduce the carbon content of passenger miles and food miles. We must engage in that scale of shift in the next 10 years if we are remotely likely to manage our way through the climate change that will happen. We can do that if we intervene to set those climate change duties in fiscal terms that define a different shape of aviation market.
All Budgets are really expressions of solidarity, to a greater or lesser extent. They are transfers in society. They represent the extent to which a society will take elements of the wealth generated today by those in work and redistribute it to those out of work. They are transfers from one generation to another in determining how people in work today meet the pension needs of those who are retired and the needs of our children in the future. They are transfers from one region to another and from one section of society to another.
It would be possible for the House, in solidarity, to have a Budget that wrote off the NHS deficit and scrapped prescription charges, which would cost us £1.2 billion. We could do that if, for instance, we transferred the costs of our current military occupation of Iraq and Afghanistan, which currently comes to £1.3 billion a year. It would be possible for us to have a Budget that guaranteed that we delivered the decent
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homes standard, with a bill of £7 billion, by setting defence spending to the European average. We could change the fiscal rules of the energy markets to create sustainable markets and decentralised energy networks in the way that I have described. We could restore faith in pensions and pension saving by restoring the state pension and repaying stolen pensions with a tax on dividends and executive pay for gross inefficiencies in delivery.
All that would be drawing back the nation's wealth, not from those who have created it, but from those who have been involved in a process of wealth annexation. That, for me, is what Governments of whatever hue will be asked to do if we are to meet the needs of social cohesion and environmental stability in this country in the years and decades ahead. I hope that we have a Labour Chancellor who will not lack the courage to face up to that challenge and deliver those answers, if not in this Budget, in the Budgets ahead, regardless of whether he does so as the Chancellor or whether he aspires to do so as leader of the parliamentary Labour party.
Madam Deputy Speaker (Sylvia Heal): Order. We now have little more than an hour for the debate. Hon. Members have patiently waited to deliver their speeches, so I hope that the remaining speeches will be brief so that they can all contribute to the debate.
5.40 pm
Greg Clark (Tunbridge Wells) (Con): It is a privilege to follow the thoughtful speech made by the hon. Member for Nottingham, South (Alan Simpson). Perhaps I should pay tribute to the Chancellor for his 10th Budget statement because delivering 10 Budgets in a row is not to be sneezed at. His statement seemed very familiar in some ways. Perhaps it is like an ageing rock star taking his greatest hits on tour year after year, albeit with a slightly dwindling audience, at least on the Labour Benches. I pay tribute to the Chancellor for his achievement.
When I started my career in business, I worked for the Boston Consulting Group. A few days after joining the company I was sent to south America to investigate the market for breathing apparatus among fire brigades in the Argentinean pampas—it was a fairly exotic mission. Owing to long flights and delays, I had little time after getting back before I was required to present my report to our client. Just before we were about to do that, the senior partner called me into his office and looked at my report. He jabbed an accusing finger at a number in the document that he chose at random and said, "Greg, how did you come by that figure?" I was required to explain how I derived the calculation and, fortunately, I passed the test because I was able to explain exactly where it had come from. The senior partner was making an important point because if I had not been able to give an explanation, no other figure in my report would have been of any worth whatsoever. If I could not explain every figure, there was no point presenting the report to the client at all.
When I came to the House, I assumed that there was a similar process when the Chancellor of the Exchequer presented figures in his annual Budget to Parliament. I
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assumed that there was an equivalent of the senior partner who went through the Budget figures. It might have been that the Chancellor himself asked his officials who are in the Box today how the figures were derived. If not, perhaps the Prime Minister had the papers laid out on the Cabinet table and, pointing to a figure, said, "Gordon, how did you get to that number?" Whatever the process, I assumed that if a report on breathing apparatus in Argentina could merit such scrutiny, anything presented to the House by the Chancellor of the Exchequer in the annual Budget should merit exactly the same treatment.
I was thus interested when the Chancellor said earlier this afternoon that savings of £6 billion had been secured from the Gershon efficiency review. That is extremely important because any Government have two duties: first, to advance new policies that will reform and change the country in which we live; and, secondly, to manage effectively the public services and administrative activities that are in the remit of the Government. Both duties are equally important, and the Gershon review goes to the heart of the second one. It is absolutely crucial that public services are run effectively and efficiently at the minimum cost to the public, not least because any savings that are made can be reinvested in services, can promote the greater quality of those services, or can be returned to the public through tax cuts. It is thus important that the numbers are right, and the work of the Public Accounts Committee, on which I serve, is very much geared to that end.
However, when the Chancellor announced his £6 billion figure, it called to mind an earlier claim that he had made about Gershon savings. The Committee examined that. The right hon. Gentleman made the same claim in his Budget speech last year when he said:
"I can report—ahead of target—the first £2 billion value-for-money Gershon savings".—[Official Report, 16 March 2005; Vol. 432, c. 260.]
The trouble is that having looked into the basis of those savings, the National Audit Office found that they collapsed under scrutiny. The report published in February of this year said:
in other words, by the Chancellor in the Budget—
"were not based on clear audit trails and, from our understanding of the process through which the gains were collated, were not subject to adequate challenge by the Office of Government Commerce."
That concerned me, and I was interested to find out what the exact process was that resulted in the savings.
The inquiries that I made shocked me. So disbelieving was I that they could be true that when the Public Accounts Committee examined the Office of Government Commerce and the NAO on its report, I put to John Oughton, who heads the OGC, what I understood the process to be.I said at the Committee's hearing:
"As I understand it, the process of collating this information involved the Treasury ringing round departments asking what savings they could offer up in time to be mentioned in the Budget with no checks at all."
I may have been naive in my illusions about the process, and perhaps I expected the equivalent of my senior partner to be there, jabbing his accusing finger at the numbers, but for the NAO to discover that only half the savings stood up to scrutiny, and for the head of the Office of Government Commerce to be forced to admit that, is shocking.
That is not the only basis for concern about the numbers presented in the Chancellor's speech. Just as my presentation on breathing apparatus in the Argentinean pampas collapsed if one figure was found to be wrong, how can we have confidence in any of the many figures that he presented if the history of their scrutiny shows that they fall away beneath our gaze?
The hearing also raised worrying questions about the substance of the Gershon review. I do not want to make political points about the review as an appropriate subject on which the Government should take a view. I genuinely think that it is extremely important, but the NAO advised us that commercial organisations might expect in an efficiency drive to identify about 10 per cent. of the relevant administrative costs as savings. The Gershon review proposed savings of only 2.5 per cent. I do not quibble with that; I merely compare it with practice in commercial organisations. However, it is important to achieve even that modest level.
Again, when the NAO looked closely at the Gershon review, it discovered that most of the savings accounted for in the £21.5 billion ultimate total from Gershon came from projects that had started before the review was conceived. It is stretching credulity to regard them as being Gershon savings; that is what the NAO found. When I questioned the Comptroller and Auditor General in the PAC on his assessment of the quantity of new money—the real savings that were being made under Gershon—I discovered something even more shocking.
The NAO established a sum of 20 projects under the Gershon review that it looked at in detail. That sample was designed—I asked Sir John Bourn about it directly—to be representative of the whole, as is any sample. Any auditor would choose a sample on that basis, and Sir John confirmed that. Of that sample, the NAO was able to say that, of the ongoing efficiency savings, only between one and three were in any sense new and engaged in subsequent to the commissioning of the Gershon review. On the basis of that sample, 85 per cent. of the funding improvements that the Chancellor presented last year and, indeed, this year as possible do not merit the flourish that he gave them. They were the normal, embedded efficiency savings that Departments were already engaging in. That again gave me great cause for concern.
The final point that I wanted to raise in this Budget debate, since the Chancellor chose to talk about having achieved £6 billion-worth of Gershon efficiency savings, is their reliability and robustness. The Office of Government Commerce helpfully makes an assessment of the deliverability of each of the savings by Department, and ranks them in four categories. Red means that there are grave concerns about deliverability, and green that there are good prospects that the savings will be delivered.
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The NAO had access to that information and helpfully reproduced in a series of pie charts in its report how many projects fell into each of the four categories of deliverability. It was drawn to my attention that there seemed to be a misprint in the charts, because there were only three segments to the pie. It was only on looking at the small print to the key to the table that it became apparent that that was so because, as at December 2005, there were no projects in any Department that were rated green as having good prospects of being delivered. Therefore, far from the Chancellor's being able to bank on, boast about and flourish the £21.5 billion-worth of savings in his Budget statements, the truth is that there is extreme risk that they will be delivered. The evidence for that is reported by the Office of Government Commerce itself.
In reviewing the question, the NAO said:
"We have significant concerns over whether the adopted measurement methodologies can be relied upon to substantiate efficiency gains effectively . . . Only a few departments recognise the potential risks from double-counting, cost-shifting and additional operational costs."
Far from being numbers that can be relied on, that are cast iron and that have the imprimatur of the Chancellor, as I assumed if reported in a Budget, they are deeply suspect and so should be treated with the greatest of suspicion.
What is to be done about this? I would have hoped that the Chancellor might exercise the senior partner role and interrogate the figures. He could have taken them to the Prime Minister, who could have asked some searching questions—although the Chancellor might have asked some searching questions of the Prime Minister, so perhaps that conversation was not going to happen. In the presence of such difficulties, who better to certify that the numbers are above board and accurate than the Comptroller and Auditor General—the head of the National Audit Office, Sir John Bourn?
All Members would recognise that Sir John is an unimpeachable figure of great expertise and familiarity with Government figures. Indeed, he has published today an audit of assumptions on the forecasts in the Budget. The Red Book lists at great length the assurances that he has been able to give on factors such as the dating of the cycle, privatisation proceeds, the trend rate of GDP growth, UK claimant unemployment, interest rates, equity prices, VAT receipts and so on. Sir John Bourn rightly signed off those variables as above board and put them into the public domain. What more reasonable request could there be than to ask that he look at and validate Gershon efficiency savings before they are deployed by the Chancellor? I urged the Chancellor to do so at the last Treasury questions, suggesting that there was plenty of time before the Budget to ask Sir John to look at the savings. I raised the matter at a hearing of the Public Accounts Committee, and Sir John told me that he was ready, willing and able to conduct such an audit before the Budget. He said, too, that it would be a good idea to provide that assurance to the House.
The Chancellor cited £6 billion of Gershon savings today. I rang Sir John Bourn this morning to see whether the Chancellor had availed himself of his kind offer. I am afraid that Sir John is probably still waiting by the phone, as his invitation has not been taken up. Once again, the numbers that the Chancellor presented
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as definitive Gershon savings have not been signed off by the National Audit Office. On previous form, the House must regard them as provisional and treat them with grave suspicion.
5.56 pm
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