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Mr Osborne: The devolved Administrations have to be part of the wider spending review. With the best will in the world, we cannot let the three devolved
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Administrations simply determine what they will spend, particularly when most of them do not have significant tax-raising powers, but I give the hon. Gentleman the commitment that we will engage in an open and frank way and that we will listen to the concerns from Northern Ireland. I am well aware that one of the big challenges in Northern Ireland is how we can stimulate the private sector in Ulster, and we want to work with him on that. As I am sure he knows, the Secretary of State for Northern Ireland has some ideas in that area. We will engage not just with the Administration in Northern Ireland but with the Scottish Government and the Welsh Assembly and its Administration. For us, this is genuinely about trying to bind as many people as possible into a collective discussion which I hope other Opposition parties will be part of, even if the main Opposition party does not want to be.

Let me explain to the House how the review will work. First, we will build on the in-year savings that we have already made in order to drive for efficiency and value for money. We are creating a new efficiency and reform group at the heart of Government, which brings together a variety of bodies that are separate across Departments in order to try to bring to one place expertise on renegotiating contracts, maximising collective buying power and the like. We will ask for administrative spending in central Whitehall and quangos to be reduced by at least a third. Each Secretary of State will appoint a Minister with specific responsibilities in their Department over the next three months for driving that value-for-money agenda across their Department, and we will place a new obligation on public servants to manage taxpayers' money more wisely by strengthening the role of the departmental finance director.

Mr Tom Watson (West Bromwich East) (Lab): I strongly support the Chancellor in his drive to have more transparent budgeting, in particular the obligation on Departments to announce every item of expenditure over £25,000. Will he be legislating to make that a statutory obligation? Will he explain the slight incongruity between the obligation on local government to publish items of expenditure over £500 and civil servants getting away with a little bit more at £25,000? Does he think that merits him reducing that bar?

Mr Osborne: We chose £25,000 because, quite frankly, the US model suggested that that was an appropriate sum. I am very willing to consider moving to a lower level of disclosure in central Government, once we get the system up and running and working, but I did not want to make the sum so small that it stopped the thing working in the first place. Local councils have much smaller budgets, of course, relative to central Government, and that is why we chose a lower threshold. However, the £25,000 threshold is perhaps just the first step. The big IT challenge is to make the system work, but in the United States they have done so, and they call it "Googling your tax dollars". Barack Obama, when he was a senator, helped to sponsor the Bill that introduced it, and we are absolutely committed to introducing such a measure here in the United Kingdom.

Secondly, the spending review will challenge Departments, local government and others to consider fundamental changes to the way they provide public services. As part of that process, every part of government and every
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spending programme will have to answer a series of probing questions. Is the activity essential to meet Government priorities? Do the Government need to fund that activity? Does the activity provide substantial economic value? Can the activity be targeted on those most in need? How can the activity be provided at a lower cost? How can the activity be provided more effectively? Can the activity be provided by a non-state provider or by citizens, wholly or in partnership? Can non-state providers be paid to carry out the activity according to the results that they achieve? And can local bodies, as opposed to central Government, provide the activity? The answers to those questions will inform a fundamental reassessment of the way in which government works.

Dr John Pugh (Southport) (LD): Where will the Public Accounts Committee and, indeed, other Select Committees play a part in the process? How will they play their part?

Mr Osborne: The Public Accounts Committee will, I hope, be very involved in the process, and I want to involve the expertise not only of its current membership, but of my hon. Friend the Member for Gainsborough (Mr Leigh), who chaired the Committee with such distinction during the previous Parliament. I served on the Public Accounts Committee when I first entered the House, and it is perhaps our most effective parliamentary tool for dealing with some of the big issues of public expenditure and value for money. One has only to read its reports on, for example, the big Ministry of Defence procurement contracts over recent years to realise that it has identified a very serious problem and, with the National Audit Office, brings a considerable expertise to solving those problems.

Chris Leslie (Nottingham East) (Lab/Co-op): Will the right hon. Gentleman give way?

Mr Osborne: I shall give way, but then I must bring my speech to a close.

Chris Leslie: At Treasury questions some time ago, I was concerned about items of expenditure that might have met the tests that the Chancellor has set out in the spending review. On some of those tests, will the Chancellor now go where the Chief Secretary to the Treasury could not and say whether he has any plans to means-test child benefit? Many people are quite worried about that.

Mr Osborne: I welcome the hon. Gentleman back to the House, but I shall not be drawn down the path whereby new, eager and young-or no longer so young-Members jump up with every cherished item of Government expenditure and pose such questions. The hon. Gentleman will have to wait for the spending review and Budget for a discussion of the whole Government programme, but he should not assume anything from that answer.

The next thing that we will do is bring together, from within the Government and outside, the best people in their fields. We want the best civil servants helping us in that collective effort, not defending their Whitehall Departments. We want the inspirational head teachers, the chief inspectors in the police service and the nurses
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with new ideas to have their opportunity to put their ideas to us. The remit will be to innovate, to challenge entrenched ways of doing things and to identify the best ideas from throughout the world; and, in order to ensure that the resulting reform programme is achieved, we will establish robust mechanisms to ensure accountability to the public.

Thirdly, the spending review will cover the large, cross-cutting areas of Government spending. We will set out our plans to reform the welfare system and restrain the cost of public sector pay and pensions, and for capital spending we will undertake a fundamental review of spending plans to identify the areas of spending that will achieve the greatest economic returns. Opposition Members should know that we have inherited a capital budget that is set to halve.

Mr Douglas Carswell (Clacton) (Con): My right hon. Friend has been quoted talking about having a Star Chamber to oversee public spending. For years, have we not had an elite clique of Treasury officials doing precisely that? Somehow, no Executive quite manage to rein in the executive as planned. Why not in addition try a radical solution and give the newly liberated Select Committees powers to curb departmental spending? As well as fixing our finances, that might give Parliament some purpose.

Mr Osborne: I am probably going to regret this, but I am quite attracted to the idea that my hon. Friend has proposed, not just in the Chamber today but to me privately; I think he has also written about it. The key thing that he proposes is that Select Committees should be able to recommend reductions, rather than increases, in Government Department budgets. I would certainly welcome that if we were ever to proceed in that direction.

I honestly mean it when I say to my hon. Friend that I am attracted to his idea. I will come back to him and see whether we can take it forward. Obviously, it would be the collective decision of the Government, rather than mine alone. My hon. Friend is right to say that we are trying to get away from it simply being the Treasury that conducts the spending review, imposing its decisions on everyone else.

I believe that when Tony Blair was Prime Minister, he and the right hon. Member for Kirkcaldy and Cowdenbeath would simply agree a total. Every Secretary of State would then receive the number in an envelope, before it was announced to the press about 20 minutes later. We are going to have a more collegiate approach and we are genuinely seeking to engage as many people as possible-the brightest civil servants across all the Government Departments and the best people from the devolved Administrations, pressure groups, independent think-tanks and front-line public services. There will be a Cabinet committee to chair and oversee the process and its membership will be restricted to those Cabinet Ministers with very small budgets of their own. Other Cabinet Ministers will be eligible to be members of the committee once they have settled their departmental allocations. That will create an incentive structure within the Cabinet.

Finally, over the summer we are going to conduct a wide public engagement exercise so that the whole country has a chance to get involved. We have already
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begun to implement the most radical transparency agenda that the country has ever seen. The hon. Member for West Bromwich East (Mr Watson) and I were talking earlier about the £25,000 disclosure limit for central Government expenditure. The previous Chancellor refused my freedom of information request to publish the Treasury's combined online information system, or COINS, database of public spending. But the current Chancellor of the Exchequer has accepted that request and the raw data in the COINS database are now available online.

Mr Bailey rose-

Mr Osborne: I will give way on this point, if the hon. Gentleman likes, but just let me say this. We have published the database as quickly as we have been able to. By August, we will be able to publish a more user-friendly version of the data; the current version is quite difficult to operate. We need a couple of months to get the computer software to enable people to search the database.

Mr Bailey: In his list of those who would be consulted on the budget cuts, the Chancellor omitted to mention manufacturing industry. Will he undertake to talk to representatives of manufacturing industry about his proposals on investment allowances, as portrayed in the run-up to the general election?

Mr Osborne: My team and I are in regular discussions with manufacturing industry, representatives of which were vocal supporters of our proposals during the general election to avoid the jobs tax.

Let me conclude by saying that all parts of government and society-and all parts of this Parliament, if they want to take the opportunity-will have a chance to make their voices heard. This is the great national challenge of our generation. After years of waste, debt and irresponsibility, we have to get Britain to live within its means. It is time to rethink how the Government spend our money. We did not choose the terrible economic situation that we inherited; the Labour party chose that for us. But we can work to put it right-deal with our debts, set our country on a brighter economic course and show that we are all in this together. I commend the Gracious Speech to the House.

Several hon. Members rose -

Mr Deputy Speaker (Sir Alan Haselhurst): Order. I must at this point remind the House that Mr Speaker has placed a seven-minute limit on Back-Bench speeches, which operates from now on. Obviously, anyone who can speak within that limit and spare us an extra minute will earn the gratitude of nervous hon. Members who are waiting to make their maiden speeches.

4.54 pm

Mr David Blunkett (Sheffield, Brightside and Hillsborough) (Lab): I shall endeavour to adhere to what you have requested, Mr Deputy Speaker.

I am standing to defend the record of my Government, not to traduce it. I am proud of those 13 years-proud of the new schools, the jobs that did not previously exist, the environment that has been improved, the houses that have been completely refurbished, and the complete transformation of Sheffield, Brightside and
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Hillsborough. I say that because I am little worried about people who are now looking over their shoulder, some of whom are competing for the leadership of my party, and who are in a 1930s denial situation whereby they have to pretend that they had nothing to do with the decisions that were taken. I did, and I am proud of the decisions that we made, some of which were about investing in communities that had been neglected for years.

When I hear Conservative Members saying, as has the Chancellor of the Exchequer in the media and this afternoon in this House, that we are all in this together, it makes me want to be sick, because those Members across the aisle know, and we know, that we are not all in this together. It will be the people we on the Labour Benches represent, and some Liberal Democrats represent, who face the greatest difficulty, because they cannot buy their way out of deteriorating public services, and they do not have the alternatives that those with resources, including capital assets, have.

That is why the decision to do away with the child trust fund is one of the most heinous things in this £6 billion package of cuts. It takes away the future assets of young people who would be able to stand on their own feet, and it reduces the propensity to save, which the Secretary of State for Work and Pensions has extolled over the past fortnight. He is right to do so. In the next breath, however, his Government are cutting at a time when the subsidy from the public purse for tax relief on individual savings accounts is twice as much as the amount that it would cost to maintain the child trust fund, which has a 100% take-up, involving 5 million children, compared with a 30% take-up for ISAs among the adult population.

In the end, we have to ask ourselves three questions. First, who got us into this mess? Was it politicians and politics, or was it the international financiers and bankers, and international capital, that created the situation that the Chancellor of the Exchequer wants to place on the shoulders of the outgoing Government? Of course, it was not the Labour Government's doing but a result of the problems that we have had to deal with over the past three years in terms of saving ourselves from the banks and avoiding the collapse of our economy.

That brings me to my second point. If we should be doing more, more quickly-cutting faster and more deeply-is it because we need to mirror what is taking place in the rest of Europe and the world, as the Chancellor of the Exchequer has enunciated? If that is true, how is it that all these other countries that we should be emulating came to be in the mire in the first place? I presume that it is the Labour Government in Britain who have brought Spain, Italy, Greece and the Republic of Ireland to their knees. That is why public sector workers are having their pay cut; that is why the Chancellor in Germany is cutting £65 billion; and that is why, across the world, we are seeing this retrenchment: it is all down to my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) and my right hon. Friend the shadow Chancellor. Everybody in this country who has a brain knows that that is nonsense.

Thirdly, if we are not careful, we will exacerbate an existing problem. Of course we know that there are going to be public expenditure reductions. We do not need to be told that-we had agreed it before the general election-but we wanted growth, an increased
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tax yield and a reduction in outgoings on benefits and unemployment to help us to bridge that gap. If we are not careful, then Sir Alan Budd, with the difficult job that he has been given in the Office for Budget Responsibility, will predict lower growth to the point where the Chancellor then tells us that because lower growth is projected, we will need to cut services and investment still further to take account of that. If we do that, we reduce the likelihood of growth and of tax yield and redemption without having to cut the essential services of the people we represent. Fourthly, we need to think imaginatively about how we can combine services nationally and locally, so that we do not have to make draconian cuts. We can genuinely reduce the cost of providing the same services.

Under the current shadow Chief Secretary to the Treasury, the Cabinet Office produced an excellent document that I recommend to the new Government. That document showed what is being done around the world and I wish we had given it greater publicity and made more of it at the time. We can use what is now called the Total Place initiative and engage local people. However, we cannot do that if massive draconian decisions to cut centrally are made and local government and local people are blamed for the cuts being made and the pain being inflicted. I shall give one example: aggregate external funding for local government. In the Prime Minister's Oxfordshire constituency, there is 1.7% of unrestricted expenditure, but that figure is 18.5% in my city. We know perfectly well that the cuts will fall on those who are least able to bear them, and that is why we should oppose them.

5.1 pm

Lorely Burt (Solihull) (LD): It is a strange feeling to be standing here today-not only am I on this side of the Chamber, but I am speaking on Government proposals that incorporate the vast majority of policies that we, the Liberal Democrat business, innovation and skills team, produced as part of our general election manifesto. I know that many of those policies were in the Conservative manifesto as well, but it would be churlish to quibble about who thought of them first.

Both the Conservatives and the Liberal Democrats see themselves as being the party of business, so it is unsurprising that many of our policies chime together. I want to speak briefly about my hopes for the implementation of some of those policies, but first I want to mention two policies that did not make it into the agreement. Access to capital has been a great problem for business for some time, and with the banks taking a more cautious-ultra-cautious some might say-approach to lending, we thought up a couple of creative ideas to use equity as opposed to capital as a mechanism to fund growth. For start-ups, we devised a policy of local enterprise funds, which would be a tax-efficient way for local companies or individuals to plough capital back into their area in return for equity. They could also have offered added value by offering advice if appropriate.

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