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I want a strategy for true social tariffs to come from the energy companies, Ofgem and the Government Departments that are responsible for energy issues and
assessing the costs for people, especially the elderly, as they try to decide between heating and eating. The role of energy regulators needs to be reviewed. My hon. Friend the Member for Selby made a compelling case in saying that such matters should go before the Competition Commission; I certainly support that view. It is time that we made switching suppliers meaningful and not just a slogan. Let the companies that do not participate in a real sense be named and shamed and let the needs of our people, who have done so much—particularly in constituencies such as mine—to help us build our economy towards the stability that we now enjoy, be recognised.
The right hon. and learned Member for Rushcliffe seemed to mock the word “stability”, but I find it very welcome. On Sunday morning, I saw the Leader of the Opposition being interviewed in the north-east on the Andrew Marr programme; he did not feel that the use of that word was unacceptable. What I want is meaningful stability, not just slogans. We hear grim talk about the old fabled man in the street, and platitudes about Government competence being not about how they perform when things are going well, but how well prepared they are to cope when things get tough. That opinion was bandied about almost immediately after the Chancellor sat down.
I believe that we have built up our economy and seized the opportunities in Europe and the rest of the world. Some have mentioned India and China. There has, of course, been considerable growth in both those countries, but we still must maintain the approach that I am happy to say I have witnessed from the Dispatch Box: one that means that we do not have extreme wealth on the one hand and huge poverty on the other. The proposals in the Budget to continue with an excellent record on international development and overseas aid fit comfortably with the challenge of tackling poverty—a challenge taken up by those on the Labour Benches and one of the reasons why I joined the Labour party at a youthful age and continue to support it with great pride.
I conclude on this note. Employment, inflation, interest rates, public investment, making sure that we do our utmost for equality of opportunity in education, the health service and even culture and the creative industries—such things remain a priority today. It is right that at this stage of the millennium our Government should address themselves to such issues. In presenting his Budget, the Chancellor had every reason to feel proud. Although my constituents accept that we have much more progress to make, and will remind me that that is what they want, they recognise fairness when they see it—and this Budget was, above all, a fair one.
6.18 pm
Mr. Edward Leigh (Gainsborough) (Con): It is always a pleasure to follow the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke), who always addresses the House in a measured way on behalf of the least advantaged in society. What he says is, of course, true: credit squeezes are not new. It is also true that lady luck has not smiled on this Chancellor since the previous incumbent moved next door. We all know that.
The Chancellor has now presented himself as the steadfast helmsman steering us through the global economic storm, but I contend that in some key respects the Government’s own navigation has contributed to the gathering gloom. To continue the nautical analogy, the squalls were apparent long before they hit us, as my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said, and perhaps the Government were tardy in reefing their mainsail in time.
The Chancellor said that his Budget is responsible and that it matches increased spending with vital reforms. We all share that concern for reform and I welcome the examples of change that I have seen in my role as Chairman of the Public Accounts Committee. I always try to give credit where it is due. However, I have also witnessed too many examples of waste and inefficiency to share the Chancellor’s supreme confidence in the certainty of savings that he promised us. I want to make that the gravamen of my contribution, which, I hope, will not be too long.
Spending on health has doubled and there are many more doctors and nurses, as we were reminded, but hon. Members will perhaps not be surprised to learn that the statistics in the Budget speech do not reveal the full picture. There was no acknowledgement that productivity in the health service has fallen in recent years. Hon. Members might not trust me implicitly on statistics, but, on this occasion, they can also rely on the Office for National Statistics. Its latest completed figures show an average 2 per cent. decrease in NHS productivity between 2001 and 2005, which is worrying.
Let me be clear: those who work in the NHS deserve to be paid a decent wage. We know that our lives and those of our constituents depend on them. They are not to blame for the inconsistency in outcomes. After all, the worst work on their behalf is often done with the best of intentions. For example, our Committee will shortly take evidence on the recent National Audit Office report on the new GP contract. There is the small matter that it cost £1.76 billion more than the Government expected, and that a 2.5 per cent. decrease in primary care productivity accompanied the first two years of the contract. Of course, the Government had predicated the entire reform on a productivity rise. The contract for NHS consultants was a similar story, and the predicted productivity rises have yet to happen. The cost of out-of-hours care was, again, higher than forecast, and delivery struggled to fulfil expectations. That is constantly repeated in public service delivery.
Tony Baldry: Is not the lack of accountability a genuine concern? By the time problems come to light, as with the chaos about the Bicester asylum centre, Ministers and permanent secretaries have moved on, so that when people appear before the Public Accounts Committee they can claim, “Not me, guv, it was the previous lot”, and no one is accountable for the wastage.
Mr. Leigh:
I agree and I want to suggest a modest reform in our procedures that might tackle the problem that my hon. Friend identifies. We have the best system in the world of post facto audit but one of the least
effective Budget scrutiny systems. I shall deal with that in a little more detail before I sit down.
I do not take issue with the rosy portrait of reform that the Budget statement presented for the sake of blind opposition. There is no point in that. We all believe in reform and I welcome, for example, the proposal that long-term recipients of incapacity benefit should attend assessments of their fitness to work. That is good, but hon. Members listening to the Chancellor would be forgiven for thinking that his £30 billion of savings a year are already in the bank. They are not. We have prepared numerous reports on the existing efficiency programme. The record on reform to date shows that savings are easy to predict but harder to achieve in practice. My hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond), the shadow Chief Secretary, knows that well as he prepares for government.
There are many wise men and women in the House today, but another, John Locke, wrote that
“an unerring mark of the love of truth is not entertaining any proposition with greater assurance than the proofs it is built upon will warrant”.
To put it another way, experience tells us that the Budget is counting on chickens with a poor record of hatching. As a giver of candid advice, I therefore say to those on the Treasury Bench, as many of us have many times, that public faith in public services will not withstand public failures to deliver genuine reform, which is what we need and want.
The price of failure to deliver productivity gains and efficiency savings will be paid in higher taxes and higher borrowing. That price is paid by us all, but, as I said in last year’s debate, the burden is felt most by those who can least afford to bear it—the poorest and most vulnerable members of society.
As hon. Members know, I believe that there is a strong moral case for lower taxation, especially for those least able to pay. Some hon. Members agree and others have yet to see the light. However, I believe that few hon. Members would dissent from the equally strong moral case for removing inefficiency and waste from public services. That is the case that we fought to further in our Committee.
To give them credit, those on the Treasury Bench accept more than 90 per cent. of our recommendations, and hundreds of millions of pounds are consequently saved. That is an example of what parliamentarians can achieve when we work together, especially when we are supported by the National Audit Office. However, our scrutiny of public spending happens only after the event, to revert to the point that my hon. Friend the Member for Banbury (Tony Baldry) made. We can encourage those who come next to imitate the good and avoid the bad, but we cannot head the problem off at the pass. That is true of many issues.
Today, the non-doms issue was mentioned. Evidence on that is mixed. I have heard anecdotal evidence to suggest that many middle-income earners are leaving the country. I welcome the concessions in the Budget statement, but, in a sense, I disagree with my right hon. and learned Friend the Member for Rushcliffe, who speaks with all the authority of a former Chancellor, because I believe that pre-Budget scrutiny would help resolve such issues.
We have debated the taxation of family cars. The public are only just waking up to the fact that their small family cars, not the large gas guzzlers, will be taxed. There was insufficient debate about the cost of the Iraq war and the Afghanistan operation. There is nothing more boring than listening to people saying, “I told you so”, and my right hon. and learned Friend and I voted against the war. However, it has cost the Government £5 billion and it has cost the US Government $3 trillion. Another £2 billion is set aside for what will happen in Afghanistan and Iraq. All such issues need to be debated more often and in more detail in the House as the Budget goes through.
Let us consider what happens in Congress in the US. I believe that opportunities to unleash the collective wisdom of the House are far too limited compared with what happens in Congress, where the President proposes, but Congress disposes. There are literally hundreds of hours of line-by-line debate on the Budget. What emerges from Congress is different from the President’s proposals. Our powers in the House are far too limited. It is true that we have the Budget debate and three days of debate on the Supply estimates. However, the Budget confirms spending plans that are set out in the comprehensive spending review, of which there is almost no systematic scrutiny. The estimates are debated only after the beginning of the year in which the spending takes place. There is therefore little opportunity to influence the Government, even if they are listening.
Hon. Members who serve on departmental Select Committees will also recognise the difficulties because they have so much more to do on policy issues. They have difficulty in consistently devoting sufficient time to spending proposals—indeed, they hardly consider them. Parliament was created hundreds of years ago primarily as a financial watchdog on the Government. It sat mainly during the whole Budget process. That power has atrophied and there is a huge scrutiny gap.
Let me suggest a modest solution. I believe that the House should establish a Select Committee on the Budget, with the normal powers of Select Committees—I ask for no more—but with the specific purpose of considering the Government’s spending plans. To allow the good sense and good faith of Members to have the greatest influence, hearings should be held well before plans take on the formal force of estimates. After all, voting against the supply of funds is tantamount to bringing down the Government. I do not suggest that; there is no nuclear option here. We need far less than that. My proposal would not shake the foundations of the constitution, nor would it significantly inconvenience the Executive. The Government would need to produce spending reviews by the summer recess—a feat achieved in 2002 and 2004, and missed last year only because of the then Prime Minister’s extended goodbye. Annual updates would not be difficult to provide. The NAO would be willing—I know, because I have asked—to assist the House by analysing the information and providing a commentary for the Committee to consider at hearings each autumn.
I hope that the Liaison Committee will shortly have the opportunity to consider my proposal. I hope that the Government’s attitude will be welcoming. Two years ago, in the regular debate on the work of the Public Accounts Committee, which assimilates events that, sadly, too few hon. Members turn up for—I
encourage them to do so—the then Financial Secretary to the Treasury, the hon. Member for Wentworth (John Healey), recognised that the scrutiny of public spending is fundamental to our democracy. He also said that
“we need to introduce a more systematic and challenging parliamentary scrutiny of spending plans.”— [ Official Report, 18 July 2006; Vol. 449, c. 289. ]
I hope that the commitment given by the Treasury then to work with Parliament holds good today. Indeed, I know that it does, because the Treasury is doing a lot of useful work.
Establishing a Budget Select Committee would reinforce the rights and privileges of this elected House. It would also reflect the truth in the words of Benjamin Disraeli, that
“all power is a trust; that we are accountable for its exercise; that from the people, and for the people, all springs”.
Establishing such a Committee might even help the Chancellor in his quest for those savings from the public purse on which the success of the Budget so obviously depends.
6.31 pm
Frank Dobson (Holborn and St. Pancras) (Lab): I can safely say that I have considerable sympathy for the points that the hon. Member for Gainsborough (Mr. Leigh) made about the need for the House to reassert control over the raising and spending of tax. However, his was a somewhat unique contribution from the Conservative Benches. To listen to the criticisms that have been made of the Budget one would not realise that under this Government, with the stability that they have managed to achieve, we are close to almost any definition of full employment, and that we have the highest levels of employment ever, the highest ever living standards and record numbers of pensioners and children raised out of poverty, partly through the national minimum wage, which both opposition parties opposed, and tax credits.
I am always a bit reluctant to accept homilies from those on the Tory Benches about putting money by for a rainy day. After all, the previous Tory Government took in £70 billion in capital takings from privatisation over 18 years, treating that money as revenue, which would be regarded as dodgy by even the slackest accountants in the private sector.
I was struck by some of the earlier references to wealth creation. The definition of “wealth creators” that a lot of people use is a little narrow. A report was published yesterday outlining the cost to business in this country of sickness, which was estimated at about £100 billion a year. The people who reduce that level of sickness contribute hugely to wealth creation. Were those in the national health service not doing their job, a lot of the wealth being created could not be created.
Let me give just one example. Sir Harold Ridley, who died just after the millennium, having received what might be described as a belated knighthood in the millennium honours list, invented the artificial lens that has made cataract operations possible. I do not think that anybody in the City of London has ever made as big a contribution to wealth creation in this country as Sir Harold Ridley did.
My right hon. Friend the Secretary of State is responsible for regulatory reform, which I want to address. When people talk about regulatory reform,
they normally want to reduce regulation, but I believe that we need massive regulatory reform of the banking system, which includes introducing tougher and more effective regulation, both nationally and internationally. The Government are trying to hang on to the stability that has made the improvements over the past decade possible, but that is being severely undermined by the current earthquake in international banking.
It is no good the Tories trying to blame the Government for the current earthquake in international banking. The international banking crisis has been created almost entirely—certainly 99 per cent.—by the people who operate the international banking system. The trouble with the bankers, and their useless auditors and even more useless risk assessors, is that the mess that they have created will affect everybody. In all probability it will affect people’s mortgages, and it may affect their pensions, savings and jobs. I know that Conservative Members smile whenever I attack the banking industry, but I believe that most people in this country are disgusted by what has happened. All the achievements of the stability that the Government seek are at risk because of the banking crisis—a crisis brought on by the practice of the banks.
It was not long ago that bankers had an image of being a rather careful lot of people. They were careful with their own money and with our money—“prudent” or “conservative” were not the words for it. however, that has not been the case in recent times. A substantial number of people now involved in international banking have behaved more like a collection of wide boys, trying to con the others, who were idiots, but they have not been playing with their own money; they have been playing with other people’s money and jobs. Those bankers have not been wealth creators; they have been wealth manipulators. As they were not risking their own money, their main objective was to maximise their bonuses and then leg it as quickly as possible, with little regard for anyone else.
That does not apply to everybody in international banking or everybody in the City. However, virtually all of them have become dedicated followers of fashion. They say, “Well, we’ve heard that A, B and C are on to a good thing, so we can’t possibly not get on to that good thing ourselves.” That is how so much of the British banking system joined the United States in being exposed to the famous sub-prime mortgage market, although the situation is not so bad here. It is usually said that the amount of money made available for mortgages in this country has increased to meet the increased cost of houses. However, I believe that the process has generally been the reverse—that prices have risen to meet the amount of money that the financial system has been willing to lend.
Again, it was not so long ago that building societies would lend people only 2.7 to three times their annual salaries. Lo and behold, most house prices were set at around 2.7 to three times people’s annual salaries. However, then the fashionable lot took over in the financial services industries and offered people mortgages that were four, five and, extraordinarily, even six times their annual salary, with no deposit—and, knowingly, mortgages that were higher than the
value of the property to be purchased. What has been the result? Prices have risen in line with the availability of the mortgages.
Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): While all those events were happening, the present Prime Minister—the former Chancellor—sat idly by. Does the right hon. Gentleman agree that he should take some responsibility?
Frank Dobson: I certainly think that the regulatory authorities have some responsibility. Above all, however, it has to be the responsibility of the practitioners—or, in this case, what might be described as the malpractitioners. They were seeking to maximise the amount of money that flowed across their desks because they always got a percentage of that money. If the price of a house went up, say, from £100,000 to £150,000, they would get at least a 50 per cent. increase in their rake-off. I believe that we need further constraints and a much more powerful Financial Services Authority in order to constrain such practices.
Mr. Jeremy Browne: Will the right hon. Gentleman give way?
Frank Dobson: No, let me go on.
It is not only in the housing sphere that the financial services industry has developed a greater influence. For example, when people buy a washing machine or deal with a water company, it is a novel experience if their letterbox is not overwhelmed with brochures for insurance for their washing machine or insurance policies against the possibility of leaks developing. It gradually becomes clear to anyone with a grain of sense that these companies make more money out of the insurance than out of the washing machine, and that they make more money by insuring people against a risk that is unlikely to happen than by selling people water. Everything seems to be shifting towards financial services in that way.
Then we come to the dreaded US sub-prime mortgages and collateralised debt obligations, which were offering something for nothing. I understand that the Financial Services Authority said recently that the public needed financial education and that schools should be doing more to provide such education for young people. Above all, it said that we needed to get across the message that we cannot get something for nothing. Well, all I can say to the Financial Services Authority is, “Why don’t you go and tell that to the bankers who got involved in the sub-prime mortgage scandal?” We have a worldwide system based on people trying to get something for nothing, promoting extravagant borrowing by hedge funds and private equity, and promoting a system of general speculation.
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