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Mr. Hammond:
I do not think that it is the general practice in this House that hon. Members giving way in a debate can make conditions about the interventions to which they gave way. The right hon. Gentleman used
the word “austerity”. Would he characterise a freeze in real-terms public expenditure as a period of austerity? My right hon. Friend the Member for Maidenhead (Mrs. May) was describing the circumstances that the nation is facing as a result of the crisis delivered upon us by this Government.
Mr. Clarke: The hon. Gentleman is not even on message. It was his own party leader who talked about austerity. If we are going to have austerity, the hon. Gentleman will have to be much more open, as his right hon. Friends ought to be, about what exactly that austerity means.
I come back to the Budget, Madam Deputy Speaker. The decision to put up the top rate of income tax is a difficult one for the Chancellor. I understand that. However, it is not a difficult one for my constituents. Folks in my constituency find it easy, because they know that once again, it is low earners who are losing their homes and jobs. It is they who are being asked to make sacrifices, unless we have both the fairness and the strategy, which I believe is based on decency, that the Chancellor has offered in his Budget.
Mr. Clarke: No, I am not giving way any more. There are others who want to speak.
Public expenditure is important. Why should we hit people with a double whammy, by cutting the numbers of doctors, nurses, teachers and policemen in our communities, which would be the consequence of cutting public expenditure yet again? The Government are accused of not fixing the roof when the sun was shining. Let me tell the hon. Gentleman that there were indeed cases when we did not fix the roof. I remember going round the schools in my constituencies under the previous Government and seeing buckets along the corridor because rain was coming in. I remember the dampness and the kids going to outside toilets.
I will tell you what we did, Madam Deputy Speaker. In my constituency alone, there has been one new school for every year of this Government—a record of which I am immensely proud. We demolished the schools: we razed them to the ground and built brand new ones. This week I visited Coatbridge college in my constituency. When Opposition Members have time to go and see how real people live— [ Interruption. ] The hon. Gentleman is betraying the manners that he was taught at school. We are told about all the money spent on private education, but nobody in my constituency would be so rude as to interrupt a Member of Parliament, and the hon. Gentleman would be well advised not to do so either.
We took action to build our economy—action to introduce 2 million new jobs and give young people opportunities. I welcome very much the initiatives in the Budget that apply to 15 to 18-year-olds and others. I refer the hon. Gentleman to my maiden speech on 14 July 1982. I would be ashamed if we returned to a situation similar to the one about which I informed the House in that speech, in which for a job for a young person in the then Strathclyde regional council area, there were 2,500 applications. Are we going back to those days? Not if we in the Labour party have anything to do with it.
I believe that the Budget was carefully considered and that it reflected the agreements made with the other G20 countries. Those agreements were essential, because this crisis will not be solved by one country alone. I believe that we should be entitled to look the other developed countries in the eye, and to look to the developing countries and to our own people when this crisis is over and say, “Yes, we did give a lead, and it was based on fairness and justice.” It is a lead that I look forward to the British people making their decision on, just as we will make ours tonight.
6.51 pm
Mr. Edward Leigh (Gainsborough) (Con): It is always a pleasure to follow the right hon. Member for Coatbridge and various other bits of Lanarkshire that I do not remember (Mr. Clarke). I would say to him that no one denies that we are facing a worldwide recession; the debate is about why we are uniquely badly placed to meet it. The Chancellor tells us that we will get through the crisis. Of course the British people will get through it; we need to ask when we will arrive at the calmer waters that we all want to reach, given the £45 billion black hole in our budget. Even the Institute for Fiscal Studies, with all the expertise that it can bring to this subject, finds it difficult to understand where 50 per cent. of the resources to fill that black hole will come from. It refers to measures “yet to be announced”, and we would have liked to hear the Secretary of State announcing the measures to plug that black hole here today.
As Chairman of the Public Accounts Committee, I should like to give the House some of my own personal thoughts on how we should deal with this issue. Those on the Treasury Bench have made some promises that I welcome. I welcome the promised £5 billion of efficiency savings for next year, if they can be achieved. I welcome the goal of £9 billion of back-office efficiencies by 2014. That is a laudable aim. I welcome the £16 billion promised in asset sales by the Government by 2015. That is to be encouraged, but can it be achieved? The hon. Member for Twickenham (Dr. Cable) asked why, if efficiency savings were so clear and so likely to be achieved, it took so long to identify them. The National Audit Office has proved again and again that only about a quarter of the efficiency savings claimed by the Government can actually be validated.
Mr. Love: Does the hon. Gentleman welcome the increase in the rate of income tax to 50 per cent. for those earning more than £100,000 a year?
Mr. Leigh: The hon. Gentleman knows perfectly well that I was not talking about income tax at all; I was talking about efficiency gains. If he is going to intervene, he should at least intervene on a subject that I am talking about in my speech.
I want to turn to the aspirations of the operational efficiency programme, which I welcome. It is a laudable proposal, but will it actually be achieved? The right hon. Member for Neath (Mr. Hain) tried to paint a picture of an incoming Conservative Government cutting vital services. Let me give the House some suggestions of savings that we might make that would not impact on ordinary people. For instance, why is the civil service pay bill running at 1.4 per cent. ahead of that of the
private sector? Can we not cut out unnecessary machinery of government changes? The divorce of the Home Office and the Justice Department was very costly, like all divorces. Was it really necessary?
What about the army of consultants? There are five times more consultants per employee in the public sector than there are in the private sector. That is £10,000 for each civil servant who has a consultant. Do we need them all? Do we need the vast variation in the cost of office accommodation? I have asked before why the Treasury is the most expensive Department in terms of office accommodation. Why can we redeploy only 24,000 civil servants from central London? Could we not get rid of more assets? It is true that the Government got rid of £1.5 billion of assets last year, but they acquired many more. Funnily enough, among those few things that I have been talking about for the past minute or so, I have identified £5 billion-worth of savings, none of which would have any impact whatever on front-line services.
I want to put some serious questions to the Ministers about the detailed and important announcements that have been made. Will the value for money review group have the authority to make really tough choices? Will the Ministers’ champions for money be able to say no to spending beyond their immediate control? Will the non-executive directors that we have been hearing about be able to stop wasteful spending when they see it? Will the public value programme have real targets, expressed in pound signs, and will it go far enough and fast enough? Those are a few questions for Ministers. If those detailed questions on efficiency savings and other matters cannot be answered in clear terms, we might be talking about a sticking plaster to deal with the black hole, rather than a real attempt to fill it.
I say to my hon. Friends on the Front Bench that if and, I hope, when we come to power next spring, they will be faced by the “Yes, Minster” syndrome. We all know that the mandarins will say, “Minister, what you are proposing is administratively impossible, legally inadmissible, financially unjustifiable and politically unacceptable.” Anyone in the Chamber who has been a Minister will know that those are precisely the answers that the civil servants will give. We shall have to slay those shibboleths; we shall need to be very tough indeed.
The crisis is upon us. The hon. Member for Twickenham made that point very well, as did my right hon. Friend the Member for Maidenhead (Mrs. May). In the five short months since the pre-Budget report, the public sector borrowing requirement has increased by a staggering £280 billion—more than half as much again as the Chancellor’s November forecast. As my right hon. Friend said, that is £22,000 for every baby now being born. My sister-in-law came in when we were having a family lunch last weekend and said, “Great news! We’re going to have a baby.” That new baby will have £22,000 of debt when he or she arrives in the world.
This is a real crisis. It is much more serious than party political banter. The fact is that the era of imperial spending is over, as is the era of sofa government, of back-of-the-envelope, of Tony Blair committing himself to a new national computer or whatever. That is all finished; it is over. There are such difficult decisions that we now have to make, not only about the NHS computer. Yesterday, the PAC was looking at the third sector, which has not been debated in the House this week.
There has been a complete lack of accountability, with £500 million perhaps wasted. We are also considering the Chinook helicopter, GP and consultant contracts, the Olympics, the farce of the Rural Payments Agency and the farce of the Department for Transport’s shared services. There has been so much wasteful spending.
Describing the Budget, the London Evening Standard put it well:
“It will surely be nowhere near enough to rescue the public finances. It is hard to see how further cuts are now unavoidable. Some cuts seem obvious: scrapping ID cards, for instance, and freezing plans for colossally expensive government IT upgrades. And there are far more cuts that could be made: a succession of reports from the Commons Public Accounts Committee has identified enormous waste in the public sector. Even then, further tax rises seem likely too.”
This matter is just too important for the kind of intervention made by the hon. Member for Edmonton (Mr. Love). We are talking about a real crisis, real cuts in services and, probably, real tax rises.
Mr. Hayes: My hon. Friend is, as ever, making a persuasive, well-informed and well-structured contribution to our debate. The hon. Member for Twickenham (Dr. Cable) suggested that there might be different ways for Governments to approach these matters. How good have the Government been at taking notice of Public Accounts Committee reports? How responsive have they been to the work that my hon. Friend and his colleagues across the Chamber have done over the years, and how might that be changed?
Mr. Leigh: Members of the PAC are very proud of the fact that it is not partisan and that 90 per cent. of our recommendations are accepted by the Government, but the hit rate on delivery is not so great. As the whole Budget process has been mentioned, may I say that it is fantastically weak? When the President of the United States proposes a budget, Congress disposes. Our Budget process is one of the weakest in the world, so last year I proposed having a proper Budget committee. As the hon. Member for Twickenham was saying, we have to address these problems seriously. The Finance Bill will now go into Committee, where hundreds of amendments will be tabled but not one passed, where there will be no proper debate and where an average of a few seconds’ consideration will be given to each amendment. That is not good enough for this democratic Chamber. When we are talking about a crisis on this scale, can we not have a proper Budget process whereby we debate these things properly?
I wish to make one point about how we are going to deal with the national health service and education. I firmly believe that spending on the NHS has to run above inflation to a certain extent, because of an ageing population and the ever-increasing cost of providing reasonable health care, but we must have firm cash limits and we have to trust professionals—the days of targets and of not trusting doctors must be over. This debate will not be reported; all of tomorrow’s papers will be talking about swine flu. If that takes off, will anybody want to ask our opinion about it? Will they want to ask the opinion of NHS managers? No, they will want to ask the opinion of doctors; we have to trust professionals in the NHS and in education to deliver
those essential services. We politicians constantly say how much we trust and admire professionals, but we constantly take decisions away from them in our schools and our hospitals—that is a debate for another place and another time.
I am reaching the conclusion of what I wish to say. What we now need is political courage. We must face down fantasy and face up to the real fact of the crisis before us. We must restore Prudence to her proper place and marry her to true efficiency. We must have lean government and we must be more disciplined. Some programmes will not pass muster—some will have to be cut. We should echo President Obama, who said:
“Where the answer is yes, we intend to move forward. Where the answer is no, programmes will end.”
So courage will count. Some services will have to be withdrawn and we should have the courage to admit it; a lean government will offer less to some, but it will offer more to those genuinely in need.
Only the resolute, obsessive pursuit of lean government, line by line, programme by programme, will do. Out must go complexity and the farce of the tax credit errors. Out must go waste and Government computers delivering commands in German, as we saw in respect of transport shared services. Out must go the outright failure that has occurred in many programmes, such as the national offender management information system.
Making government lean, on its own, is not enough. We must ask the following of any programme: does it matter? The Civil Service Year Book lists 526 central Government bodies—26 bodies are involved in tackling childhood obesity alone. Yesterday, in the Public Accounts Committee, we learned that in respect of the third sector alone 60 civil servants are employed in the Cabinet Office—this organisation that delivers fantastically bad value for money. Although it may not be fashionable, we have to return to stern Gladstonian politics. We need a properly accountable Budget process and we must balance the Budget.
7.4 pm
Mr. Michael Meacher (Oldham, West and Royton) (Lab): The hon. Member for Gainsborough (Mr. Leigh) is entirely right to say that given the extreme danger that we face from the size of the deficit, this Chamber desperately needs a new and much more rigorous democratic procedure for examining a Budget. That is part of the wider democratisation of this Chamber that is greatly needed. We need a much more thorough and comprehensive analysis of the entire range of options, bringing in experts who can give Members in Committee the full range of their expertise.
I wish to make a rather different point. The unrivalled imperturbability and the hallmark coolness of my right hon. Friend the Chancellor meant that he probably made the best fist of the Budget that he could, given all the circumstances, but I wish to set out why it is the wrong Budget and why it could and should be a very different Budget. The reason why the national debt has ballooned out of all historical proportions and why the cost of servicing it this year is thus so enormous is that the Government’s response to the credit meltdown has been misconceived. They have been right to pursue the Keynesian strategy of increasing state expenditure to generate demand in order to head off a slump—my
right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) spoke powerfully to that end. The Tories have been wrong to advocate letting a brutal self-corrective capitalism play itself out, while keeping a very tight lid on any increase in the national debt incurred by remedial Government action. Having said that, the manner in which the Government have chosen to develop their strategy has been ill-advised.
As we all know, the Government’s approach has been geared to splurging eye-watering sums on bailing out the banks—a staggering £1.2 trillion has been committed so far—in the hope that the banks would correspondingly expand their lending to businesses and home owners. In fact, the banks have been doing the opposite, by continuing to contract their lending. The relevant money supply measure of this lending—M4—fell from 16 per cent. in September 2007, when the crisis began, to the latest figure of just 3.5 per cent. in February.
One is forced to ask why the Government chose this particular route in order to stimulate the economy. I can assume only that it was because the whole power structure of neo-liberal finance capitalism is built precisely on this close nexus between the banks and the state. The trouble is that the concentration on preserving the current power structure as the first priority has led to the whole of the rest of the economy and society being exposed by the failure of this policy. What the Government should have done—and should still do now—is focus their fiscal stimulus, which I strongly support, directly on businesses and home owners, and not through the intermediation of the banks. A much more stable, less costly and more rewarding Budget would thus become possible.
Mr. Meacher: I shall advance this argument considerably, but I am happy to give way at this point.
Mr. Hayes: The right hon. Gentleman is making a very good point about the paucity of economic modelling that assumes a very traditional relationship between low interest rates and a resultant level of credit and borrowing. What he perhaps might take on board is that that modelling no longer applies, because it is clear that although the stimulus that he described was designed to encourage greater lending, because of the perversity of some of the lenders its effect has been much less than predicted.
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