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2.28 pm
Mr Andrew Tyrie (Chichester) (Con): Six minutes is not a long time in which to respond to such high-octane exchanges. I do not intend to add to the highly partisan exchanges that we have just heard, but given that the Treasury Committee is currently undertaking an inquiry into the CSR-the largest that has ever been undertaken-I want to make a few observations about what is in the document. I shall see how far I can get.
I am not sure that everyone will like my first observation. Indeed, I am not sure that anyone will like it. But the truth is that beneath all the political noise there is quite a wide range of cross-party agreement about the need for sharp action to tackle the deficit. At least two thirds of the correction to the deficit, or perhaps more, would have taken place whoever had won the election. That is clear from table 1.1 of the Red Book.
My second observation is that there is also a substantial consensus about overall economic strategy in the United Kingdom. That is in complete contrast to the position in the 1980s, when there were rival economic strategies. There is a consensus not just on deficit reduction, but on the need in principle to reform welfare, the need to sort out the banking system and to bring more competitiveness to it, and the need for some industrial support for biosciences and for some energy production, for example.
The third observation is that these cuts are not unprecedentedly large, as Lord Turnbull, who gave evidence to us this morning, said. The plans to cut public expenditure in the period ahead will keep it broadly steady in real terms for five years. Spending was kept broadly steady in real terms between 1984 and 1990.
Mr David Ruffley: I wonder whether that is right, because I have looked at the numbers and it would be appear that, over the period of the CSR, we will see the share of national income accounted for by public spending fall by about 6%, to 41%. That is exactly the same fall as was achieved during the first, and the start of the second, Thatcher Administrations.
Mr Tyrie: Yes, and public expenditure will be back broadly speaking to the level under the last Labour Government prior to the financial crisis.
My fourth observation is that the major parties were right to conclude that large cuts in public spending were going to be necessary to stabilise the public finances. One way of looking at this, which Lord Turnbull alluded to this morning, is to work out how much tax has been forgone as a result of the output lost during the recession. If one does that calculation, one sees that, broadly speaking, around £80 billion of tax has been forgone. The total GDP loss is around £200 billion, of which about 40% would have flowed into tax. That suggests that cuts in spending of about £80 billion are probably required.
My fifth observation is that the scope for cuts is probably better now than it was in the 1980s. That retrenchment took place not, as this one is going to, after the longest period of continuous growth for a very long time in British history, but after the doleful years of the 1970s, when there was no growth at all, which made spending cuts difficult. In addition, absolute levels of income are much higher now than they were then, meaning that absolute levels of pain will also be reduced if these cuts are targeted effectively.
My sixth observation is that some, but certainly not all, of these cuts are the result of careful longer-term planning. For example, quite a lot of thought seems to have gone into welfare reform and education. This has been planned for some years and it probably draws on quite a lot of work that was already done in Whitehall for whoever won the election.
However, if I look at defence, I find it difficult to believe that much long-term planning has been done. It is extraordinary. We are going to build two aircraft carriers which for a decade will not carry any aircraft. I am reminded of an episode of "Yes Minister" in which Jim Hacker discovers that a hospital does not have any patients. In fact it is worse than "Yes Minister", because Sir Humphrey pointed out in that episode, which I looked up, that some patients were about to be brought in. However, one of the carriers is even going to be mothballed. We would not start from here. I hope that the Public Accounts Committee will look vigorously at how the UK-and I see the Chairman nodding her head-came to sign those contracts for the carriers without any exit clauses. I also hope that we get to the bottom of whether there was scope for renegotiation of the contracts, which after all were taken out between a monopoly supplier and a monopoly demander. That should have created some scope for renegotiation.
My seventh observation is that some of the ring-fencing of public expenditure-we have quite a bit of ring-fencing-will be difficult to justify in the years ahead. I refer particularly to aid. To increase the aid budget by 37% in real terms while the justice budget is cut by a quarter in real terms takes quite a bit of justifying.
My final observation is very much a personal one: that the level of public expenditure matters irrespective of the deficit, and that it is too high. Even if there were no deficit, my own view is that having public expenditure as a proportion of GDP standing at 50% is not good for this country. It reduces choice and freedom for millions of individuals and it burdens enterprise with unacceptable levels of taxation. That is perhaps why for a large proportion of Labour's period in office they held it at
about 40%, and why the Government now intend to bring it back towards that level-the level at which Labour had it in 2008.
2.35 pm
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab): I am very pleased to have an opportunity to contribute to this debate, as I believe that these economic issues will be the most important issues facing this Parliament. I want to talk in particular about the effects of the spending review on London and inner-city communities-the type of community that I have lived in all my life and sought to represent over the past two decades. I also want to talk specifically about the effects of the spending review on the private sector, as they are not sufficiently debated or understood, and on the public sector, and about the particular effects on housing and housing need in London, because I think the spending review and the mix of proposals on housing benefit and cutting expenditure on public sector housing will hit London harder than any other part of the country, with consequences that I do not think the Government have calculated.
It is not sufficiently understood that more than 1 million jobs in the private sector are directly dependent on public sector contracts with private sector organisations. That is the case in construction, for example, but there are also many jobs in social care and looking after young children that are basically delivered by private sector organisations. Also, when we make these cuts and people lose their jobs, demand will be taken out of the economy, so many retail and service companies in London will suffer. These cuts will have a ripple effect in the private sector in London. The Government and their supporters in the Lib Dem party may be laughing now, but they will be laughing on the other side of their faces when the effects on the private sector become clear.
The coalition Government talk about the public sector as if it is all about men in bowler hats who can easily be switched into meaningful jobs in sectors such as banking. In Hackney and the inner city generally the majority of public sector jobs are women's jobs, however, and the majority of those women are heads of households, and far from doing peripheral or frippery jobs, they work in the heart of communities as teaching assistants or care assistants or in the voluntary sector, which will suffer because of the cuts in local government spending. These jobs are at the heart of communities. How hypocritical it is of the coalition Government to talk about the big society and then attack ordinary women working in the heart of their communities across a range of important occupations.
I have listened to what coalition Ministers have had to say, but having lived in and represented Hackney for more than 20 years, I can tell them that there are no private sector jobs for women in Hackney who will be made unemployed to step into. That is because of the structure of employment in Hackney and the inner city. Yes, we can count up the number of vacancies and the number of people who might be made unemployed, but there is a mismatch between the types of people that this coalition are going to fling into unemployment and the actual opportunities available to them, such as they are, in the City and the private sector in London generally.
We have to judge these matters on the basis not of political banter, to and fro and Punch and Judy, but of the effect on real people's-real women's-lives. The consequences for communities such as Hackney in the next financial year will be very serious indeed. The people in those communities will not have been impressed to see Ministers on the Treasury Bench laughing and congratulating themselves when the statement was read out. What were they congratulating themselves on-thousands of people losing their jobs and thousands more losing their homes?
That brings me on to housing. Members will be aware that since the 19th century one of the core activities of local government in London has been building housing-affordable, quality housing for rent. If hon. Members are not aware of that, I can take them to estates built in Hackney more than a century ago. Of course politicians then, even Tory politicians, recognised that decent housing was at the core of social stability and public health concerns. But what are we getting from this coalition? We are getting cuts in public sector housing expenditure, which, as I said, affect the traditional role of local government; cuts in people's housing benefit after a year; and, above all, a cap in housing benefit.
I put it to the Government that the majority of people claiming housing benefit are not shiftless people, but working people and those looking after disabled people. These are not people who are simply unemployed. It has been argued that we have to cut housing benefit because, horror of horror, poor people are living alongside rich people in desirable areas of the city.
Toby Perkins: My hon. Friend is reflecting on the inequities of the changes to housing benefit. Does she agree that the Government's focus on the cap is a red herring, because it is relevant to very few housing benefit recipients, and that the really important thing is the 10% cut that will hit housing benefit recipients in the second year?
Ms Abbott: I quite agree, and I am grateful to my hon. Friend for raising that issue. I have a sentence or so more to say about the cap. We have been told by the Prime Minister of the horror of poor people living alongside rich people in boroughs such as Islington and Westminster. Let me tell the Government that I can take them to the heart of the Prime Minister's Notting Hill and show them poor but entirely respectable West Indian couples living alongside merchant bankers who have bought their houses for millions of pounds. London has always been a city where rich and poor live side by side; it has never had the perfumed stockades of the upper east side of New York or the kind of social segregation seen in American cities. This type of cleansing of poor people from what are deemed to be areas that are too good for them to live in is quite unconscionable. As my hon. Friends have said, this is not just about the cap on housing benefit, although that will also have a serious effect on ordinary people in London and may well see the end of some Lib Dem MPs now sitting on the Benches opposite us; it is also about the cuts in housing benefit after a year.
What I say to the House is that we can sit here this afternoon scoring points and doing the Punch and Judy stuff, but real people in our constituencies, whose circumstances are not understood by those on the Treasury
Bench, will suffer as a result of this ill-thought-out, ill-paced and wholly ideological spending review. The credit crunch and the deficit have been the occasion of this spending review, not the reason for it.
2.43 pm
Mr John Redwood (Wokingham) (Con): At the end of the period, in 2014-15, the Government plan to spend £92 billion a year more, on current spending, on services than Labour did in its last year-that is a large 15% increase in the amount of cash. We need to ask ourselves why it is that every year public spending increases, yet the Government are proposing some extremely difficult or, in some cases, undesirable choices to be made in subsequent years to try to live within that rather big figure. I suggest to the Government that there are three areas that they could work on, and that their doing so would be in all our interests in this House, because if they could manage them better, they might not need to make so many of those difficult choices in the later years and would still be able to live within their totals and get the deficit down.
The first reason why there is a squeeze on some programmes that many Members do not want to see squeezed is the big rise in money allocated to pay for inflation; the plans assume quite a lot of public sector inflation over the five years. If the Government can do better at buying in goods and services-they are a very big purchaser and they say they are going to do so-they might reduce the average price of bought-in things. Instead of having positive inflation, they would have negative inflation on that part of the programme. If they can do a good deal with their employees, reassure them and get them to accept the kind of measures on pay that are being suggested-I believe that they are talking about a two-year pay freeze, for example-that will take a lot of extra inflation out of the system, because the biggest single item in these budgets is of course pay. Again, the more that we in the public sector can share the pain by moderate means, such as accepting pay restraint, the less we will have to take the difficult choices in later years that are built into the programme.
The next thing is staff numbers. A lot has been made so far in what passes for a debate in this House about having 490,000 fewer jobs in the public sector by the end of the period. These are not 490,000 redundancies. Given the large rate of resignations and retirements in the public sector to which the Chancellor has referred, I hope that most can be taken care of by eliminating posts after people have resigned or left.
Helen Goodman: I am most grateful to the right hon. Gentleman for giving way. Of course, in a very small-minded way, what he says is right. If those jobs are cut, where does he think that young people will get the new jobs that they need?
Mr Redwood:
In the private sector, which is already generating tens of thousands of jobs every month. That is what we need to do. I am not saying that there should be a complete staff freeze. For example, if 480,000 a year are leaving, which was the Chancellor's figure in the Budget, 250,000 people could be hired while still achieving half the reduction in the first year. I think that the Chancellor might have been a bit optimistic, but he referred to an 8% rate. If the percentage was half
as great, the reduction could still be made in the first two years. There could be reductions of 250,000 without a single redundancy.
I urge my right hon. and hon. Friends not to pursue the redundancy route wherever possible. It is expensive, unpleasant and disruptive. I do not want to see lots of people retiring early from the administrative services on big pensions, and I do not want to see redundancy payments made with people coming back into the public sector at a later date, leaving us to wonder why all the cost and disruption has been incurred.
The next big area that puts pressure on the increased money is debt interest. I entirely agree with the Government, and with Opposition Members who knew this when they were in government, that we have to bring the deficit down before it kills the whole budget. If we allow the deficit to keep on rising, as the Opposition originally proposed, debt interest will take more and more of the increased spending and we will have to make unpleasant cuts to the things that matter. How can we reduce that debt interest burden more quickly? If we can get more cash into the public sector, starting today-we do not need to wait to start the programme next year, as is implied in the figures-we will reduce the increase in the debt day by day. If we sell more assets, we will not have to raise so much money in the debt markets, which will keep the debt down.
It is very good news that the Government's programme has restored a lot of confidence in the markets, so that the rate at which they now have to borrow is now lower. That will obviously make a contribution to getting the debt interest rate programme down.
I have to say to the Government that I do not think that we can afford to give £80 billion to foreign countries over the CSR period. If we add the overseas aid programme to the European Union programme, the total is £80 billion over the period. I do not want to take any money away from the poorest countries or from humanitarian aid. Those are good things and I fully support the Government's intention to carry on with them, but I do not think that there is any need to subsidise China, India or Russia-nuclear weapons powers with, in the case of China, $2.5 trillion in the bank. It is a bit odd to give China a grant when we then have to borrow the money from China to pay the grant to China. That cannot make any sense.
I believe that the Government are now going to remove the aid to the richer and more successful countries. Cannot we pocket that for a couple of years and then become more generous when we have the deficit under control? May we please get the European amounts down? They are the most unforgivable ones; poor people in Britain are paying tax to offer grants to rich countries in Europe, and that is not acceptable in the current conditions.
The more that these pressures-the grants abroad, debt interest, costs, inflation and staff numbers-can be abated, the more we will have money available to do better things with the growing programmes. It is good news that nine of the Departments have level or rising cash throughout the period, but it is bad news that one or two other Departments will find that the shoe pinches a lot. That is why I think that we need to make more rapid progress in controlling costs and staff numbers, particularly in administration, and in dealing with the
debt interest programmes, so that we have a bit more free to ease those areas that will be very tight in future years.
I do not for one moment believe the figures from 2013 to 2015 anyway, because I think that they will be subject to subsequent revision because of the pressure of events. As inflation changes, we will need to revise them. As the state of the economy changes, we will need to revise them one way or the other. Let us hope it will outperform and we will have a bit more scope.
As an election draws near, politicians tend to want to spend more, so we should discount the 2013-15 figures and concentrate on what is happening now. Will the Government please bring forward as many of the reductions as possible to this year, and not wait until next year? The more we save now, the less we borrow and the more the pressure is reduced on subsequent years' programmes.
2.50 pm
Malcolm Wicks (Croydon North) (Lab): I shall focus specifically on child benefit, and start by sincerely congratulating the coalition Government. In 1945 the coalition Government, which involved Liberals, Conservatives and Labour, introduced family allowances-a coalition Government who got something right. It was in the mid to late 1970s that child tax allowances were amalgamated with the family allowance scheme to form child benefit.
Unfortunately, there is now a need to restate the case for family support and for child benefit. I want to explain why it is such an important scheme to maintain as a universal scheme. First, there is the societal interest in bringing up our children. No one spoke more clearly about that than Eleanor Rathbone when in 1940 she said that
"children are not simply a private luxury. They are an asset to the community, and the community can no longer afford to leave the provision for their welfare solely to the accident of individual income."
That was Eleanor Rathbone, the heroine of family support, back in 1940.
A second reason for child benefit is what we might call horizontal equity. The welfare state is not simply about poverty. In terms of child benefit, it is about the fact that whatever people's income level, if they have children, they are taking on financial responsibilities over and above those who are childless or the single. Horizontal equity is important, as we are finding out now.
Thirdly, there is the sheer cost of bringing up a child. No longer is a child someone who becomes independent at 14, 15 or 16, when they leave school and get a job. Once upon a time children might have been an economic asset on the land. Today our children, with higher and further education, are dependent on their families for longer and longer.
People have had a go at estimating the costs of a child. The most recent estimate that I have seen is from the Liverpool Victoria Friendly Society, which said that the costs of a child could be as high as £200,000. We can add on to that other indirect costs when the mother, staying at home, loses her place on the career ladder, loses salary, loses income and loses pension rights. Our
children are very expensive, as many of us who are parents know. It may be that for these economic reasons, the birth rate in societies such as the UK is below replacement level. These are significant issues.
The fourth reason is extremely important. The family allowance-now child benefit-was essentially an income for mothers. That is what Eleanor Rathbone was arguing for. Despite modern times, and despite the rise of the dual worker family and the rise of women's rights, my guess would be that it is still mothers in most of our families who are responsible for juggling family budgets at different income levels. It is mums who make the judgment about whether the clothes and the shoes can be afforded, how to fund the school trips and the treats for children- [Interruption.] That obviously struck a chord with someone. If my hon. Friend the Member for Bishop Auckland (Helen Goodman) could also laugh at any jokes I make, that would be helpful.
The income for mothers is particularly important for mothers who, often pejoratively, are referred to as the stay-at-home mums-those who make the judgment that for the first few years, they want to look after their own children. Choice is so important. I think that in future we will see more parents wanting to spend time with their children, especially when they are young. That is why the family allowance and the child benefit have been so important, and that is why, following the modern coalition Government's announcement, we have seen so much concern from those mothers in so-called higher income families about the loss of their income. That is very important.
A fifth reason is that child benefit, alongside other benefits, is part of the universalist spine that is so crucial to a modern welfare state. Alongside free education, a free national health service, pensions and national insurance benefits, child benefit is universalism, and I believe that universalism is a major force for cohesion in our society. It is a "We're all in this together" social policy, which we start to erode with perilous implications. Child benefit is simple, easily understood and easily administered.
Mr Umunna: Will my right hon. Friend give way?
Malcolm Wicks: I am happy to give way to my constituency neighbour in Streatham.
Mr Umunna: Will my right hon. Friend also acknowledge that one of the good things about child benefit is that its take-up is so high? Take-up is one of the problems that we have with many benefits that are paid out.
Malcolm Wicks: I agree, of course, because child benefit is easily understood, simple and a universal benefit. I am very happy to agree with my parliamentary neighbour.
Child benefit is now being undermined, which is why it is so important to restate the basics in favour of family benefits. We are seeing something that will attack the very principle of women's entitlement. It will essentially punish mothers if their husbands earn above the higher tax threshold; the mums will suffer because of the father's income. As an aside, let us not assume that in the 21st century income is shared by all families; there are still families where the father keeps more than he
gives to the mother and the children. That is not just about poverty, either; it happens at other income levels, too.
The measure is also a snub to those mothers who, as I said earlier, choose to stay at home to look after their own children. We need more choices-about whether people go to work and use child care or stay at home to look after their own children. What message are we sending out to those mothers who want to care for their children in that way?
The measure also introduces, as we know, the unfairness between the dual-earner family on £80,000, who keep the child benefit, and the family with one earner above the threshold, who lose it. The measure is a recipe for complexity, and it will disincentivise those who are just below the tax threshold to earn more money in the future.
This is a measure that needs to be rethought. It undermines family support, and it undermines our children. So much for the party of the family.
2.57 pm
Stephen Williams (Bristol West) (LD): I begin by reminding the House of the background against which we debate this comprehensive spending review. We were borrowing £1 for every £4 that we spent, and that simply could not go on, whatever Government of whatever combination of parties had taken office after the general election in May.
There were more than 20 public meetings in Bristol West during the election, and at every single one I made it clear to my potential constituents that, if my party took part in a coalition after the election, as seemed likely from the polls at the time, we would have to make difficult decisions and would not shirk from doing so.
Mr Andy Slaughter (Hammersmith) (Lab): Did the hon. Gentleman make it clear at those same meetings what he was going to do on tuition fees after the election? Did he make it clear that the pledge that he was signing was not the worth the paper it was written on?
Stephen Williams: I thank the hon. Gentleman for his point. Yes, I certainly did address many student audiences during the election in Bristol West, and I made it quite clear that in an ideal world, and in ideal financial circumstances, the Liberal Democrats would have wished to abolish tuition fees from the outset. Financial circumstances did not allow us to do so, however, and that is why we had a phased plan. I spoke at the launch of the National Union of Students pledge on working with the Government for a fairer system of student finance, and I am still working with the Government and the NUS to produce such a fair system. If the Government come forward with a fair system, I will support them; if they do not, I will not.
We know that Labour planned to make billions of pounds' worth of cuts whatever happened after the election; it has been confirmed in many memoirs. But Labour Members have since been in deficit denial. They have been in denial about the need to tackle the deficit itself, and, as today's debate has shown, they have not been able to give us a single Government measure that they would support, or to put forward an alternative
themselves. The coalition Government are taking the necessary steps to restore order and stability to our public finances. That will restore confidence among British businesses and confidence among countries abroad that Britain is serious about tackling its desperate situation. Confidence and low interest rates are the bedrock for ensuring that our businesses can grow.
Mr Umunna: Will the hon. Gentleman acknowledge that there is not a difference in views on the need to deal with the deficit per se but that the issue is rather the speed and the depth with which we do that? Labour Members think that we need to go for a different time scale of deficit reduction as compared with his party-or at least his party post-May of this year. Will he at least acknowledge that there is a view on deficit reduction among Labour Members, but that it may not be the same as his party's?
Stephen Williams: The hon. Gentleman is a thoughtful man who now sits on the Treasury Committee. Perhaps he thinks that this is a serious issue that needs to be tackled, but many of his hon. Friends seem to be in deficit denial. We have not heard thus far in the debate-although there are many hours to go-a single idea from the Opposition on how they would tackle the deficit, whether it is over four years or five years, which is a point of debate.
Mary Macleod (Brentford and Isleworth) (Con): Will the hon. Gentleman give way?
Stephen Williams: I am running out of time, so I will not be able to.
The Chief Secretary announced that the comprehensive spending review was designed to achieve three things. The first of those was growth, and today's statement by the Business Secretary certainly builds on that. I welcome the £1.4 billion for the regional growth fund and the local enterprise partnerships that have been set up to replace the regional development agencies. In Bristol, the South West Regional Development Agency will not be missed, and I look forward to working with our local enterprise partnership for Bristol and the west of England. I welcome the fact that the science budget has been protected in cash terms, and the fact that £250 million extra is being put into apprenticeships-something that I spoke about repeatedly in the last Parliament, when I led for my party on these issues.
I also welcome the moves towards a low-carbon economy to ensure that we have stable and sustainable growth in future, with the green investment bank and the first investment in carbon capture and storage, which the previous Government pulled out of.
I welcome, too, the transport schemes that have been announced so far this week, but I look forward to confirmation next week, when we have the announcements on rail, that the electrification of the great western main line from Paddington to Bristol and to south Wales should go ahead in order to support growth and stability in Swindon, Bristol, the west of England and south Wales.
The second theme of the CSR is reform to the welfare system, which is absolutely essential. The need for that was recognised by the last Labour Government, but now Lord Freud is a Minister in the coalition
Government and Lord Hutton is advising the coalition Government on how to achieve what the previous Government recognised but failed to tackle. It is a key principle that work should always pay: it should be clear to everybody that if one is in work one should be better off. However, the welfare system is a social contract between all of us, and, in addition, taxpayers must think it is fair for them to pay for it.
Glenda Jackson (Hampstead and Kilburn) (Lab): Will the hon. Gentleman give way?
Stephen Williams: Once more, and then I will run out of time.
Glenda Jackson: In the light of what the hon. Gentleman just told the House, does he support the cuts in housing benefit?
Stephen Williams: The cuts in housing benefit are an example of difficult decisions that have been made. However, I have to say to the hon. Lady-we represent similar constituencies, mine in Bristol and hers in central London-that £400 a week in housing benefit is not a miserly amount for someone to fund their accommodation.
Glenda Jackson: Will the hon. Gentleman give way?
Stephen Williams: Not again. I do not think that the coalition Government will be making people homeless on the scale that the hyperbole coming from the Opposition Benches suggests.
The third theme of the CSR is the need for fairness. In the last Parliament, I spoke many times about the importance of achieving social mobility. We know from the studies of those born in 1958 and those born in 1970 that social mobility has stagnated. There are many complicated reasons for that, not all of which can be laid at the door of the previous Government. I am sure that their intentions were good in many circumstances, but sadly after 13 years social mobility was still stuck and Britain was still the second least socially mobile country in the world after the United States. That is why I particularly welcome the fairness premium of £7.2 billion over the comprehensive spending review period that was confirmed in the review, and the £2.5 billion pupil premium, which is from additional funding from outside schools' budgets and is being introduced to help the poorest children from around our country. I grew up being entitled to free school meals and know what it is like to make the journey from poverty to a career through work and effort. Many children need support from their schoolteachers and mentoring from other people to bring about that transformation. I am a liberal interventionist and make no apology for that. It is important that that support continues through to further and higher education, so I welcome the £150 million higher education scholarship as a basis of support for young people who access higher education for the first time.
This Government inherited a desperate situation. We have the worst deficit of all the major economies in the world, at 11% of our national income. It is not entirely the fault of the banks. The structural deficit was high
before the bank bail-out and continued to increase after it, and the Labour Government spent recklessly in their last days. The current Government are acting to reduce the deficit, introduce reform, encourage growth and, most importantly, encourage fairness in our society and achieve it through social mobility.
3.6 pm
Lilian Greenwood (Nottingham South) (Lab): I was particularly keen to speak in today's debate because, the day after the Chancellor delivered his statement in the Chamber, his draconian cuts greeted with cheering and waving from the Government Benches, the Prime Minister and Deputy Prime Minister headed off to a primary school in my constituency. I am not quite sure why they were there, and it seemed as though they did not know why either, but of course the kids at Welbeck primary greeted them with great delight. Prince Charles came up to the Meadows recently, so people are getting used to visitors from London.
Gordon Banks: Could the Prime Minister and Deputy Prime Minister possibly have been at the school in my hon. Friend's constituency getting some arithmetic lessons?
Lilian Greenwood: If only. I thank my hon. Friend.
What did I hear in the media coverage of the visit? I heard about the Prime Minister's amazement that he had found a lad who liked broccoli. I did not hear the Prime Minister or Deputy Prime Minister telling the kids about the huge gamble that the Government are taking with their future. They are performing a huge economic experiment. They have a theory that if we cut public spending, lose 490,000 public sector jobs and, as PricewaterhouseCoopers tells us, lose another 500,000 private sector jobs that depend on the public sector, the rest of the private sector will somehow fill the gap. They do not seem to hear the warnings of economists who disagree. Listening to Ministers last week, one would have thought that the PricewaterhouseCoopers figures had about the same credence as Mystic Meg. The Government do not want to hear about the effect of their cuts, because they want to make them.
Nia Griffith (Llanelli) (Lab): Has my hon. Friend found any evidence that the coalition Government have thought out how confidence will be created to stimulate the public sector, given that millions of people across the country are worrying that their household might be one of the million that will be hit by a job cut, and fearing that cuts to housing benefit will mean that they are left with very few pennies to spare after their mortgage payments or rent?
Lilian Greenwood: I thank my hon. Friend for that interjection. In fact, the latest figures for both consumer and business confidence are going through the floor.
Never mind the extra 1 million who will be out of work, the extra £700 million that we will have to spend on jobseeker's allowance or the loss of tax revenues; the Government's attitude is, "Cut deep and keep your fingers crossed." But did the Prime Minister say that when he was in Nottingham? Did he tell those children about his gamble? Of course not, just like he did not tell them that their families, many of whom are in the poorest 10%, would be hit harder than anyone else. He
did not mention that for all the talk of fairness, families with children will have to pay more than twice as much as the banks towards reducing the deficit. He did not mention that although his friend the Chancellor talked about continuing the decent homes programme, the funds have actually been cut.
Richard Graham (Gloucester) (Con): I am sure that the hon. Lady and all hon. Members present agree that future jobs are vital. Will she therefore join me in welcoming last quarter's figures, which show the greatest increase in new jobs for more than 20 years?
Lilian Greenwood: I am absolutely delighted that new jobs are being created. My concern is that when the cuts start to feed through that will no longer be the case.
Although some of the children whom the Prime Minister and Deputy Prime Minister were talking to will have had improvements to their homes-new windows and doors to make them secure, or new boilers or better insulation to make them warm-their classmates will not all get the same opportunity. The Prime Minister did not tell them what will be happening to some of the schools that they will go to when they leave Welbeck primary, or to the schools that their brothers and sisters might go to. The projects to rebuild Trinity and Fernwood secondary schools in my constituency have been scrapped altogether. As for the projects to rebuild Nethergate, Farnborough and Bluecoat, a few months ago, the Secretary of State for Education said that they were unaffected, but they are now being told that there is a cut of 40% in the funding available. I am sure that if the Prime Minister had asked the kids at Welbeck they could have told him that "unaffected" means not affected. Sadly, that is another broken promise and it is not fair.
Finally, let us nail the myth that this is all Labour's fault. When he spoke in the Chamber last week, the Chancellor did not mention the word "recession" once. We have just come through the biggest economic crisis in generations-a global recession. If he does not understand why the deficit is high how can he possibly understand how to fix it? The deficit went up because we had a huge fall in output and tax receipts plummeted. Spending went up so that we could protect people's homes and jobs, protect businesses and prevent the recession from becoming a depression. Labour took the right decisions and the Conservatives would have made the wrong choice every time. They are gambling with people's jobs and homes and they have no plan for growth.
Mel Stride (Central Devon) (Con): If the previous Government took the right decisions, why were we the first of the G7 countries into recession, the longest in it and the last out?
Lilian Greenwood: We suffered most during the recession because we had a high reliance on financial services. It was because our tax receipts were hit so badly that we needed to take action to protect people's jobs and homes. The Conservatives would have done nothing and they have no plan for growth. I am afraid that the next time the Prime Minister and the Deputy Prime Minister come to Nottingham, they might not get such a warm welcome.
3.12 pm
Bob Russell (Colchester) (LD): The reading comes from "Proverbs", chapter 31, verses 8 and 9:
"Speak up for those who cannot speak for themselves;
oppose any that go to law against them;
speak out and pronounce just sentence
and give judgement for the wretched and the poor."
I am grateful to Lexden Methodist church in my constituency for its notices for the week of Sunday 24 October and the thought for the week-political concerns. I mention that because of the deafening silence from the Church in the broader sense on issues of social concern, housing benefit and the housing crisis. There are enough bishops at the other end who could speak out on such issues, but I am still waiting for the Church-archbishops, bishops and cardinals, the whole lot-to speak. I am grateful to Lexden Methodist church for allowing me to put that on the record and I welcome the concept of fairness.
I am not one who says that all private is good and all public bad, or vice versa. It is important to keep a mixture of the two.
Mr Slaughter: I do not disagree with the hon. Gentleman, but I think he is being slightly unfair to the clergy. My local vicar has written asking me to join a campaign to get the Chancellor to pay his fair share of taxes following last week's "Dispatches" programme.
Bob Russell: I am grateful to the hon. Gentleman for that point, but I was talking about the major, national Church leaders. There are excellent clergy at local level. Indeed, St Margaret's church in my constituency, which is in a relatively prosperous part of one of the world's richest countries, has started a food parcel system for hard-up families. The fact that the Church at community level is doing such things speaks volumes, but our national Church leaders are not. I look forward to the Archbishop of Canterbury speaking up.
Nic Dakin (Scunthorpe) (Lab): Archbishop Sentamu said only the other day:
"I am not an economist, and I am not a politician, but to cut investment to vital public services, and to withdraw investment from communities, is madness."
Does the hon. Gentleman recognise that Archbishop Sentamu is sticking up for people in this country? Does he agree with those sentiments?
Bob Russell: I applaud the Archbishop of York for that sentiment and those words-and indeed many others. He and I have something in common: we have both done a freefall sky dive with the Red Devils.
Earlier this morning I met the vicar of Dibley. Actually, that is not quite true. I actually met the Rev. Paul Nicholson, who is chair of Zacchaeus 2000 Trust. Before he took that position, he was the priest in the village of Turville, where "The Vicar of Dibley" was filmed. He is very concerned, as indeed I hope we all are. He points out that contrary to the Daily Mail examples, accommodation for people on benefits is expensive because there is a shortage of affordable housing, owing to the absence of any coherent housing policy for the past 30 years.
The market has failed to provide affordable housing. Property speculators and landowners have grown wealthy, but the poorest tenants face the misery of eviction through no fault of their own. Eviction for rent arrears triggers homelessness, and councils must somehow address that. However, those of us who have a local government background will know that when eviction is brought about by rent arrears, the legal term "intentional homelessness" creeps in, which is a serious problem. Those who were present at Prime Minister's questions yesterday will know that I asked him about it, and I have spoken on the matter in Westminster Hall debates.
I am grateful to Family Action, a charity that was founded in 1869 and that is now sponsored by Barclaycard. Its analysis of the welfare reforms, which is entitled "Pushed Towards Poverty: 21 welfare cuts for low-income working families", adds to the anxiety of recent times, which can only get worse. Family Action supports vulnerable and disadvantaged families throughout England, including families in which parents experience mental health problems, learning difficulties, addiction or domestic violence. Critically, it works with families within their homes to improve the parenting, ensure that the children's development milestones are met, and to help them to access work, training and volunteering. The impact of the changes in general-not just housing benefit cuts-could make it harder for many families to lift themselves out of poverty through work and, in some cases, families such as the ones with whom Family Action works risk finding that employment is no longer sustainable.
In debates such as this, it is worth quoting local examples. The one big benefit of the cancellation of the Building Schools for the Future programme is that a secondary school in my constituency that the Labour Government would have closed will not now be closed. However, alongside that, we need funding for Colchester academy, which opened last month. It was Sir Charles Lucas Arts college. The pupils have a new uniform and the school a new name, but they are still using the same dilapidated building. I therefore look to the coalition Government to deliver a new building.
Finally, I shall draw the House's attention to the possible unintended consequences and knock-on effects of halting capital schemes. The Sure Start capital grant project at Kendall school in Colchester has already had £102,000 invested, but if the grant is not now forthcoming, all that money will have been wasted. That takes into account only the financial aspects, not the provision of places for pre-school children and so on. A local building company was all set to start work, planning permission has been granted and a chain reaction of education provision is on the verge of commencing for the benefit of the school and the local community, but it needs the Sure Start money.
I also wrote to the Secretary of State for Education on 23 September. I headed the letter "The Big Society-common-sense and avoiding an own goal". It relates to St John's church in Colchester where the erection of a new church hall is again dependent on the Sure Start money. If that project does not go ahead, £115,000- worth of preparatory work will be wasted and donations, bequests and fundraising work will all have been to no avail. I urge the Government to look at what is going on. These are capital investments that would generate jobs and provide benefits for the local community.
3.21 pm
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op): The headlines in the debate on the comprehensive spending review have concentrated mainly on justified concerns about cuts to family support, welfare and housing. However, in my contribution I wish to focus on some of the main questions about transport.
Transport is vital to most of what happens in this country. It is vital to economic development, to enabling people to get to work and to quality of life. It enables people to lead full lives and guards against social exclusion. I welcome the headlines in the settlement on transport, including the focus on some specific investments which is very welcome, but I wish to draw the House's attention to some major issues that need much fuller investigation.
The first is that of fairness in investment and regeneration-with the accompanying jobs-across the country. At the moment, transport investment in London per head is three times higher than in other regions. It is unclear whether the proposals in the settlement will change that or simply exacerbate the difference. I welcome the announcement that Crossrail will go ahead. I know how important that is in London-and it has national implications-but there is an ominous silence about the go-ahead in a proper timescale for electrification of the Liverpool-Manchester-Preston-Blackpool line. I noted the strange answer from the Secretary of State for Transport this morning, which avoided the issue completely. We have had no clarity about electrification on the Great Western line or whether the northern hub will go ahead in the way envisaged. All those projects are important for economic regeneration and have implications for the release and provision of rolling stock across the north. We need much clearer and quicker answers to those questions.
Great concern has also been expressed about the dramatic fare increases in the settlement. The increase in train fares could see the fare from Manchester to London increase from just over £65 to £88-
Kwasi Kwarteng: Will the hon. Lady give way?
Mrs Ellman: I am sorry, but I have very little time and other hon. Members wish to speak.
Bus fares often do not get sufficient attention, but many lower-income people depend on buses to get to work and local amenities. But there will be a severe cut in bus services' operators grant, which could mean higher bus fares and fewer bus services. The cut in that grant combined with cuts in revenue support to local authorities could mean that less money is available to enable buses to be provided where services are needed for social reasons rather than to make increased profits for the bus operating companies. We have had very little clarity about what that means.
Another important matter that has not been mentioned by Government Transport Ministers concerns the implications of a settlement on the critical issue of road safety. One of the unrecognised success stories of recent years has been the big reduction in the number of fatalities and serious injuries on our roads. Every single death and serious injury is a tragedy for the individuals and their families, but it is significant that, in the past year alone, there has been a 12% reduction in the number of people killed on our roads. The reason for
that reduction is that local and central Government have combined in a number of measures to make our roads safer.
It is extremely disturbing, therefore, that we now have a cut in-an elimination of, in some cases-the specific grants to local authorities that enable them to go ahead with road safety schemes, together with a change in national direction and the abolition, I understand, and the complete axing of the previous Government's effective public education campaign on road safety. That combination of Government and local action was very important in reducing the number of road casualties. Has any thought been given to how the cuts in this spending will affect the number of deaths on our roads? That is critical.
I am also extremely concerned about the difficulties facing strategic road schemes under the new arrangements. Such schemes matter because they bring jobs and economic benefits to local areas, but the projects currently decided on through the regional allocations now have nowhere to go and, from the Transport Secretary's written statement today, it seems clear that he too has no answers. Local economic partnerships are no substitute for proper regional thinking that cuts across local authorities and provides vital economic lifelines-by giving access to ports, for example.
3.27 pm
Mr Dominic Raab (Esher and Walton) (Con): I commend Ministers on the spending review, because finally we have a Government who are prepared to address the big picture.
In the last four years of the previous Government, Britain dropped from third to 13th on the international rankings for economic competitiveness, partly because of rising global competition, but also because of the excessive inflation of the public sector. As a result, British productivity lags behind our major international competitors. According to EUROSTAT data, between 2000 and 2008, European Governments who spent 42% or less of GDP created 27% extra jobs. Governments who spent more than 42% had jobs growth of just 6%. In that period-before the banking crisis-Britain jumped from the high-jobs-growth camp to the low-jobs-growth camp. The amount of GDP consumed by the UK Government rose by 11% to 48%, and sure enough jobs growth was a paltry 5%. The evidence is plain: we cannot spend our way to economic growth.
There is nothing ideological about wanting to create jobs, and there is nothing socially fair about the welfare trap. I hear the calls every week from Opposition Members to soak the rich, but today the top 5% of earners in this country pay almost half the country's income tax. If that is not a fair share, fine, but where would the Opposition raise taxes, and by how much? The real risk with their strategy is that the brightest talent will flee this country, if they believe that talent and graft are punished rather than rewarded. The brain drain does nothing for social fairness. The July Budget and this deficit plan have brought Britain back from the cusp of default.
Yesterday, we saw Standard & Poor's triple A rating restored from negative to stable, and the task now is to drive economic growth and competitiveness. However, the spending review also addresses fairness at three
levels. First, there is the snapshot of winners and losers that there will be in any budgetary process, and the matter of protecting the lowest-paid public sector employees from the pay freeze, the pupil premium and the triple lock on pensions. We must address the glaring unfairness in pay not only between the public and private sectors, but within the public sector. The best paramedic in this country can earn just one tenth of what the top NHS manager can earn. What does that say about our priorities? Some are bucking the trend. Sir Norman Bettison, the chief constable of West Yorkshire, described the idea that the public sector is competing with the private sector for talent as "costly and irresponsible nonsense". He proposes to address public sector pay restraint incrementally, starting with the highest paid 25%. His proposal merits close consideration.
The second dimension of fairness in the CSR relates to the intergenerational allocation of resources. According to the National Institute of Economic and Social Research, a failure to tackle the deficit would leave each member of the next generation having to pay £200,000 extra in taxes just to enjoy the same level of public services that we and previous generations have enjoyed. What is fair about leaving our children with a tax bill of £200,000 each?
Helen Goodman: What is fair about those of us who had a free university education not paying extra tax while our children are to be burdened with extra debt?
Mr Raab: I thank the hon. Lady for her intervention, but the problem is that the university budget as it was configured under the previous Government was simply unsustainable. That is but one of the many examples of where they ducked the problem of reform and we have addressed it.
Richard Graham: Would my hon. Friend like to ask the House which party introduced charges on university education?
Mr Raab: I will resist the temptation, but I thank my hon. Friend for his question.
Finally, the comprehensive spending review promotes the economic growth that we need-growth driven by the private sector. That is what creates jobs and pays for public services. The July Budget restored confidence, cutting corporation tax and reversing the jobs tax. Employment was up by 178,000 in the last quarter. Economic growth in the last two quarters was the highest that it had been for 10 years. We must build on that-nothing can be taken for granted-and that is why I welcome the investment in infrastructure and science. I support the plan for tax breaks in national insurance for start-up companies in their first year. However, that measure will be confined to certain regions. Will Ministers say what assessment has been made of the net effect on tax revenue of extending that important measure across the country?
I know that time is short, and I want to allow others the time to have their say. It is right that every measure in the CSR should be robustly debated and scrutinised, but without an alternative, overarching deficit plan, criticism of those measures fails the test of credibility and relevance.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Before I call the next speaker, I am going to have to reduce the time to five minutes, and even then we are really struggling, so if hon. Members can ease up on the time that they use, that would be better.
3.32 pm
Joan Ruddock (Lewisham, Deptford) (Lab): I appreciate the opportunity to make a brief contribution, which I shall limit to my constituency, and to housing benefit in particular. Lewisham is a relatively poor borough, where wages are around £26,500 per annum on average and where the mean house price in sales last year was £240,000. In common with most London boroughs, we are an area of extreme housing stress, brought about primarily by population growth and the fragmentation of households. Changes in housing benefit will have a devastating effect on people who seek to be decently housed in Lewisham.
Ministers have sought to present their cuts and their new proposals in the light of a few absolutely extortionate rents. They have spoken continuously about the cap and the fact that people should not be able to claim benefits to live in what they deem to be luxury accommodation. That is not something that affects the majority of housing benefit claimants in this country. When he sums up, will the Minister, who is not paying attention- [ Interruption ] I am glad to see that he now is paying attention. Will he tell us what proportion of all housing benefit claimants in the UK are affected by the cap? In Lewisham, fewer than one in 1,000 people will be affected. Our people are not living in luxury, but let me tell him that this change will be a tragedy for the biggest families, living in the biggest properties-often in quite squalid conditions-and they will be evicted.
The fact is that a conservative estimate made by my local authority finds that 9,050 households are affected by the generality of changes that are proposed by this Government. I further tell the Minister, to nail another myth perpetrated by this Government, that 5,000 of those are people in work.
Joan Ruddock: I am advised not to allow interventions, as it will take up other Members' time.
The loss for a one-bedroom property is about £11 a week; for a three-bedroom property, £34 a week; and for a four-bedroom property, £57 a week. People cannot make up this difference from their low wages-very low in Lewisham, as I have said-and they could not make it up if they were in receipt of benefit because of unemployment. There is no way these people can make it up, so they will be evicted. What will happen then? There are 17,000 people waiting for council housing in Lewisham; there are 50 families already in bed and breakfast; there are 1,000 households in temporary accommodation. There are no alternatives for the people I am concerned about. They will not be able to rent and they will not be able to find cheaper accommodation because of the huge pressure on housing-pressure that will come from richer boroughs that try to put people out of their own area and into areas like Lewisham.
The Government argue that rents will fall. They will not. We have so many young professionals who cannot purchase property because of the prices and because they cannot get loans-and they are taking up any slack. The Government argue that this is an incentive to work-a terrible insult to those who are unemployed. When Labour were in government, unemployment fell by 50% in my constituency. We halved unemployment and the fact is that it has risen only because of the recession. People want to work and people will work.
I am absolutely sickened when I hear the Government speak about fairness. There is nothing fair about these measures-nothing fair whatever-and they are going to hurt the most vulnerable most. They are absolutely sickening. They will not drive people into work; they will not lower the prices; there is nothing fair about the housing benefit changes and nothing more punitive. This is a catastrophe in the making-a catastrophe for my people in Lewisham, for London as a whole and for this great capital city. I remember when people slept in cardboard boxes on the South Bank. This Government are planning to bring back those conditions.
3.37 pm
Jackie Doyle-Price (Thurrock) (Con): In the brief time available, I would like to direct my remarks to some of the changes announced this week as they relate specifically to my Thurrock constituency.
In building a programme of spending to go forward, the Chancellor has rightly recognised the importance of infrastructure investment for creating the right conditions for businesses to grow and for the UK to become a more competitive economy. However, there are a couple of constituency issues that I would like to put to him, and I want to ask him to think about whether, as we go forward, we are really serving my constituents well-in particular, the businesses within the constituency.
Paragraph 2.25 of the spending review states that
"subject to consultation... charges on the Dartford Crossing"
"alongside accelerating plans to improve traffic flow."
At this stage, it is not clear what those plans are. Motorists who are regular users of the crossing will witness that it is operating way beyond capacity and has regular delays. Moreover, the congestion regularly spills out on to the road network in Thurrock, so my constituents are regularly faced with misery, caused by the congestion that is caused by users of an over-used crossing.
The local economy in Thurrock is uniquely dependent on logistics. We have a thriving port at Tilbury and we are now witnessing a massive inward investment on the part of DP World, which will generate upwards of 16,000 jobs once it is on stream. That will require a fully functioning road infrastructure network for those businesses to be the success that we want them to be in creating the jobs that we need. I urge the Chancellor, when considering where the proceeds of the tolls will be directed, to show some sympathy for making greater investment in the road infrastructure in Thurrock.
It is particularly regrettable that the Secretary of State had to announce yesterday that the proposed improvements at junction 30 had also been shelved. It is regrettable because DP World, which was investing in Thurrock, would also have made a private sector investment
contribution to the road improvements. I hope that we will soon get more clarity on the road infrastructure improvements that we are going to get to increase capacity at the crossing.
Having said that, and although the increase in charges at the crossing are regrettable, I quite understand why the Chancellor finds himself in this position. At this stage, he is not able to turn down a nice little earner for the Government, given the mess that the public finances are in, thanks to the Labour Government.
I want to make another suggestion. When we are looking to see where we can get the most bang for our buck in public spending, we must remember that Thurrock is in Essex, and Essex is known for its entrepreneurial spirit, if for nothing else. Everyone recognises that the road improvements-at junction 30 in particular-are essential for creating the investment that could unlock 36,000 jobs in the area. It is my contention that, for every £1 invested in Essex, we will get more bang for the taxpayers' buck. I hope that the Chancellor and the Secretary of State for Transport will bear this in mind when they consider their options for increasing spending in future.
3.41 pm
Ms Margaret Ritchie (South Down) (SDLP): When the comprehensive spending review was debated recently in the Northern Ireland Assembly, there was a general feeling that, against the budgetary framework outlined at the time when devolution was restored, we had been short-changed. Notwithstanding the protestations of the Secretary of State for Northern Ireland, we have been disappointed, to say the least. I note, however, the undertakings given today by the Chief Secretary to the Treasury that the Government will keep their commitments on track. The Members of Parliament for Northern Ireland will undoubtedly hold them to that.
During that debate in the Assembly, there was an air of financial realism. Perhaps for the first time in our recent history, it has become clear to everyone in Northern Ireland that we really are responsible for ourselves and for making the best use of the available resources. I hope that it might still be possible, however, to secure improvements around the edges of the published settlement, including guarantees on policing and security; access to end-year flexibility; latitude in how welfare reform is implemented in Northern Ireland, given its unique legacy; and more freedom to borrow. For this reason, I fully support the plans of the joint First Ministers in Northern Ireland to engage directly with the Prime Minister and the Chancellor.
The impact of the CSR settlement on Northern Ireland can be assessed in three parts. First, on current expenditure, we are facing a cut in real terms of 7% by the final year of the CSR. That is challenging, but it is not insurmountable. Secondly, in regard to capital expenditure-regardless of the smoke and mirrors put in place by the Chancellor, the Prime Minister and the Secretary of State for Northern Ireland-we have been left well short of our expectations. Thirdly, on capital investment, we faced a further downturn the other day with the suspension of the Northern Ireland aggregates levy credit scheme. I want to ask the Chancellor and his Treasury team to continue the negotiations with the European Commission to ensure that that is reinstated.
The Economic Secretary to the Treasury (Justine Greening): This is a very important issue, and I want to take this opportunity to reassure the hon. Lady that that is precisely what we are doing.
Ms Ritchie: I thank the hon. Lady for her response.
The most important thing to us in Northern Ireland is the annually managed expenditure, through which our benefits are paid. What makes this iniquitous is the fact that the money does not come out of the Northern Ireland block, but directly out of the pockets and purses of benefit recipients. In Northern Ireland, that represents up to £0.5 billion being taken from some of the poorest households. The Prime Minister claims that that is fair, but what is fair about snatching the mobility allowance that is payable to people in residential care? What about the changes to child benefit? What about the changes to housing benefit? Are they fair? On the face of it, those large-scale welfare cuts have little to do with the laudable desire to help people move from benefit dependency to the dignity and self-sufficiency of gainful employment. They represent an old-fashioned onslaught on the poor.
I am a former Minister for Social Development in Northern Ireland with responsibility for benefits. Along with my successor, I have engaged in continuing discussions with the Department for Work and Pensions about welfare reform issues and the respects in which welfare reform proposals are inappropriate for Northern Ireland. I believe that we have reached a point at which we may need to redesign the social security system in Northern Ireland to make it much fairer for all, and to give ourselves greater freedom and flexibility to do things differently. I believe that that can be done without the need for an increase in the net subsidy to Northern Ireland.
We are doing a lot of thinking about how we can secure more local control of Northern Ireland's economic levers, and we expect a robust but fruitful dialogue with the Chancellor when the promised economic paper on Northern Ireland is circulated by the Government within the next few weeks. The Chancellor indicated in last week's CSR statement that both he and the Secretary of State for Northern Ireland intended to engage with all Northern Ireland Members of Parliament. As one of those Members of Parliament, and as a Northern Ireland party leader, I look forward to that discussion. There is no doubt that we need to rebalance our economy, but one thing that we must not do is throw the baby out with the bathwater and remove people from the public sector, because that will throw asunder our whole jobs and investment scenario.
3.47 pm
Stephen Gilbert (St Austell and Newquay) (LD): Let me begin by reminding the House why the country is in its present position, and why the spending review has had to be so tough. We are in this position because the last Labour Government left the largest deficit in our peacetime history, and the largest structural deficit in Europe.
What does that mean? I will tell hon. Members what it means. This year, we will spend £43 billion on debt interest alone. That is £120 million every single day. For that money, we could build a new primary school every
hour. We could triple the number of doctors in our hospitals. We could spend twice as much on education every year. I therefore do not see how it is tenable for Opposition Members to ignore the astronomical waste of money that those interest payments are leaving with us, and the unfairness of suggesting that we pass it to future generations.
Labour Members claim that they planned £48 billion of public spending cuts when they were still in government, but they forgot to tell us where those cuts would fall. Throughout the debate, I have been enlightened no further on what they would cut and how they would address the problem. I hope that, in the hours that remain, some Labour Members may come up with some ideas of their own.
The Government's comprehensive spending review sets out £1 billion less of cuts in Government Departments. The remaining plan focuses on long overdue reform of a complex and byzantine welfare system that delivers unintended effects to people throughout the country-and, of course, tax rises. The important point, however, is that the spending review is also fair. The banking levy will raise £2.5 billion a year. The last Government did not do that, and they had 13 years in which to do it. Indeed, under the last Government bankers and lawyers often paid lower taxes than those who cleaned their offices. That is something else that was left to this Government to sort out.
Mary Macleod: Does my hon. Friend agree with the leaders of 35 of the biggest companies around, including Marks & Spencer, Microsoft, Diageo and Next? They say that they believe that
"Addressing the debt problem in a decisive way will improve business and consumer confidence"
"The cost of delay...would result in almost £100 billion of additional national debt".
Stephen Gilbert: I thank the hon. Lady for her intervention. Not only do I agree with those companies; I also agree with the CBI and the International Monetary Fund, which have commended these plans as the best way both to ensure growth and to deal with the deficit.
Let me be clear. The Opposition have every right to challenge and to resist the measures that the coalition Government are implementing. That is of course the Opposition's job, but they need to come clean with the British public and tell this House and the public at large what their alternative is. They will not be taken seriously until we hear different ideas from them. Today so far we have heard special pleading on transport, child benefits, housing and myriad other topics, but we have not heard anything about the measures that they would put in place to address the significant problems that we face.
The spending review has had to be tough, and of course we and our constituents will feel it, but there are many positive policies that will help create a fairer, freer and more responsible country over the next few years. One crucial area is the fairness premium that was announced by my right hon. Friend the Deputy Prime Minister.
The fairness premium involves extending 15 hours per week of free education and care to all disadvantaged two-year-olds, and a £2.5 billion pupil premium, with
extra money attached to the children who need it most. Like my hon. Friend the Member for Bristol West (Stephen Williams), who has left his place, when I was at school, I was eligible for free school meals, and I know what a difference extra money going to the pupils who need it most can make. The funding will not just benefit them. By driving up standards across our schools, it will benefit every child in every school. It could be used to cut class sizes, provide one-to-one tuition and catch-up classes, or used in any way the school sees fit, ensuring that every child gets the individual attention that they need and deserve.
As everyone in the House knows, performance at school is tightly linked to future outcomes. That is where fairness can start: the funding can make a difference in the early years. Giving this country's poorest children the best possible start in life is the most effective way to lift them out of poverty and to help them to achieve their full potential. The fairness premium is therefore one of the most important policies of the spending review and I hope that it will be welcomed by Members on both sides of the House.
There is no doubt that the spending review is full of difficult decisions, but these are decisions that Labour Members shirked for the 13 years that they were in government. These are decisions that two parties coming together and acting in the national interest will be taking.
3.53 pm
Margaret Hodge (Barking) (Lab): Given the shortness of time, I will focus on my observations as Chair of the Public Accounts Committee, but I cannot let the moment pass without reflecting on constituency interests, particularly in relation to housing benefit. I share the views of my right hon. Friend the Member for Lewisham, Deptford (Joan Ruddock). The housing benefit policy will simply not even meet the Government's intent. It will not cut housing rents in the private sector in London. If the Government wish to do that, I say to them: do not punish the tenants, cut the rent. The policy will not cut public spending, but it will increase homelessness in London and that will have its impact. It will not help people get into jobs. The very people who will be frozen out of London are those who come in to clean the House of Commons at 4 in the morning and who cannot come in from places such as Dover. We will have more people coming into Barking as a result of these reforms. The policy will inflame community relations in constituencies such as mine, which will simply provide more food for the extreme right, which will exploit such issues to vicious political ends.
I want to talk about issues that I have observed in the few months that I have been Chair of the Public Accounts Committee. Whatever the political intent, I am worried that the capacity of the Government machine to respond, to manage the process and to realise the intended savings is highly questionable. If the Government fail to deliver the vicious savings that they have planned, I fear that they will return for a series of further easy but highly damaging cuts to achieve the £81 billion target. Those cuts might include further slashing the benefit bill, on which the most vulnerable depend, or introducing charges into the NHS so that it ceases to be a service that is free at the point of need.
The record of the civil service in securing efficiency savings and value for money savings is poor. We recently reviewed the performance of Departments in delivering the value for money savings required in the 2007 comprehensive spending review. After two years only a third of the savings had been achieved, and of those reported only a third were sustainable value for money savings. The great tanker of Government was unable to deliver a budget imperative. I note that the Government expect to deliver a further £6 billion from savings in back-office costs, but I am sceptical about whether that will be achieved.
There is also a presumption that closures, mergers and job cuts achieve immediate savings, but in the real world these changes involve massive upfront costs. The Government's promise that in abolishing the Audit Commission they would save £50 million started to unravel before the ink was even dry on the letter to the chairman of the Audit Commission announcing its abolition. We saw in yesterday's papers that Barnet, Britain's first "Easy Council", was embarking on a programme of savings and was planning to save £3 million in the first year, yet not only is it not going to save that amount, but it is going to spend more on the programme of savings than it will save in the year itself.
Departments operate in silos and appear to have limited understanding of the extent to which cuts in one area impact on the budget of another. Let me give just one example. Her Majesty's Revenue and Customs has planned to get tougher on fraud and theft, which we all welcome, and it expects to collect a further £7 billion in taxes, but the law officers are taking a 24% cut in their budget, so the Crown Prosecution Service is far less likely to be able to prosecute complex tax cases. If the Government do not consider the effects of the cuts on a whole-system basis, I have absolutely no doubt that my Committee will see Departments passing the buck among themselves for this failure.
If the Government are driven by ideology and do not intend to pursue their policies pragmatically, we will fail to deliver value for money and we will waste public money, forcing cuts elsewhere. In this respect, I offer the example of the pathways to work programme. We demonstrated in our report that private providers perform far less well in delivering jobs and cost more, and that Jobcentre Plus is much more effective, yet the Government, driven by ideology, are determined to privatise that programme.
My Committee will keep a close eye on whether the Government meet their own objectives and do actually deliver on fairness and efficiency in the cuts they make.
3.58 pm
Mel Stride (Central Devon) (Con): I have sat through most of this debate with a sense of growing incredulity at the collective amnesia and denial of Opposition Members who, quite simply, are unprepared to face up to the reality of the fiscal disaster they have bequeathed to us to attempt to clear up. Let me just remind them of some of the figures. [Interruption.] I am pleased to see that they find this so amusing: £270,000 per minute in debt interest, £120 million a day, £43 billion per year-which is more than we spend on education. That is a disgrace.
Let me put this in historical context. In 1976, when another Labour Chancellor, Denis Healey, went cap in hand to the International Monetary Fund because this
country was busted, our deficit represented about 7% of GDP. Today, it stands at 11.4%. Our house is well and truly economically out of order. This will not only affect our children, who will have to pick up the strain in repaying the debt. It has also affected our standing in the world, because this country has the worst deficit in the G20. Our deficit is worse than that of many Latin American countries; Brazil has a nominal annual deficit, as of April 2010, of a little over 3%, compared with ours of 11.4%, so we are 300% behind Brazil. It has come to something when we have to look enviously at Latin America's fiscal position.
Much has been said about how quickly the Government have determined to reduce the structural deficit over the lifetime of this Parliament, but many are on our side, including the OECD, the Bank of England and the Office for Budget Responsibility. Let us not forget that Labour's plan and proposal, as far as there is one, is to halve our structural deficit over the period of the review. That would leave us with £100 billion in additional debt and an additional £5 billion in interest to pay on it. I see Labour Members sighing, but perhaps they could tell us what they are going to cut to find that extra £5 billion or what extra taxes they are going to raise to meet that requirement.
Rehman Chishti (Gillingham and Rainham) (Con): Does my hon. Friend agree that the International Monetary Fund's statement was clear about the fact that what the Government are doing is right and proper, and will lead to growth in the long term?
Mel Stride: My hon. Friend is entirely correct, and there is no doubt that if the Government had not taken prompt action as we did in the emergency Budget in June, we would have been that close to a Greek-style economic meltdown.
Alison McGovern (Wirral South) (Lab): Will the hon. Gentleman explain to the House how our debt was similar to that of Greece, given that the Debt Management Office in this country has been far better and we have far better terms? The question of whether the debt is sustainable is what leads to crises, not the amount of deficit, given the size of our economy.
Mel Stride: The answer to that is that we came that close because the credit rating agencies, such as Standard & Poor's, came that close to downgrading our triple A status. The consequence would have been that the Government, in funding their debt through their bonds and gilts, would have had trouble getting those debt requirements away, interest rates would have risen, mortgages would have gone up through the roof and the businesses on which we are counting to pull us out of the malaise that we are in would have been crippled by higher interest rates. That is the basic economics that Labour Members fail to understand-
Mr David Hanson (Delyn) (Lab) rose-
Mel Stride:
I will not give way because I have limited time available. [Interruption.] In the great tradition of not giving way, I will not give way after taking two interventions. One very important point is that we must look to the private sector to create the jobs. It is true that the OBR has said that 490,000 jobs will be lost in
the public sector, and there is no getting away from it. It is also true that PricewaterhouseCoopers has suggested that 500,000 jobs in the private sector might go as a consequence of the slimming down of the public sector. So we must look to growth from the private sector.
I am therefore very pleased that this Government have had such a firm and positive focus on private sector growth. We have removed national insurance for new business start-ups outside London and the south-east; we will bring corporation tax down, in steps, over the next four years from 28 to 24%; and we have cut red tape. We have also created the regional growth fund, which we heard about in the Business Secretary's statement earlier today. It involves some £1.4 billion, much of which is to be channelled into the very areas of the country where the private sector is weakest and the public sector has been strongest, and I welcome that as positive action.
I also welcome the fact that the Government are listening to business in a way that their predecessors never did. The Conservative party is a party that understands business; we understand how difficult it is to create the wealth that is needed to supply the public services that all in this House want.
Chris Williamson (Derby North) (Lab): Will the hon. Gentleman give way?
Mel Stride: I will not give way now, because I have very little time left.
I am also pleased that the OBR, an independent body, has stated that employment will grow in every year across this plan. I know that one swallow does not make a summer, but it is encouraging that in the last quarter-the one up to the end of September-growth was double that anticipated, at 0.8% as opposed to 0.4%. That is an encouraging sign. The Opposition should cheer at that. They should stand up for our country. They should feel good about the fact that we are improving where we are going and that we are beginning to make a difference-a difference that they never achieved.
I want to talk briefly about fairness, which is at the heart of the CSR. I want to challenge the IFS's point that somehow the CSR is regressive. It is to an extent, if one considers taxation and benefits, but if one includes the use of public services, it is not regressive. It is a progressive move.
I welcome the fact that we are going to keep 50% as the higher rate of tax, with 800,000 people coming out of taxation altogether, and child benefit being means-tested. The £2.5 billion that will be saved is exactly the amount that will go into the pupil premium to help the poorest children in our land. Those are all aspects of fairness, and we cannot build a society based on social justice on a mountain of debt. I commend the review to the House.
4.5 pm
Stewart Hosie (Dundee East) (SNP):
The one thing that I would say about the CSR is that-no matter how many times the Chancellor said it during his statement, no matter how many times the Chief Secretary said it today and no matter how loudly the hon. Member for
Central Devon (Mel Stride) said it a moment ago-it was not fair. The cuts-£81 billion a year by 2014-15-and the tax rises were not unavoidable.
Every decision taken by the coalition was a political one, but it was the failure to understand the consequences of the decisions that astonished me. Nowhere was that more so than in the defence elements of the CSR and the strategic defence and security review that went along with it. The decision to cancel the Nimrod programme puts a huge threat over RAF Kinloss and a huge question mark over RAF Lossiemouth,
Greg Hands (Chelsea and Fulham) (Con): What would happen under Scottish independence?
Stewart Hosie: The Parliamentary Private Secretary is chuntering away about Scottish independence. It is interesting, is it not? He normally wants to deprecate countries such as Ireland and Iceland, but they still sit above the UK in the world prosperity league. I shall give him a copy of The Scotsman to look at later, before he decides on another ill-judged sedentary intervention.
The bottom line is that those defence cuts threaten to add to the 10,000 military job losses under Labour and to the £5.6 billion military underspend in Scotland under Labour. Far more importantly, they would represent a 25% reduction in the entire military footprint in Scotland. If the cuts go ahead, they will represent a 25% hollowing out of the entire economy of Moray. When Conservative Ministers say that we are all in it together, it strikes me that that is not absolutely true and that it is not absolutely fair.
The CSR was not just about the Scottish block but about other UK spending decisions, yet somehow Scotland was portrayed as doing better than most UK Departments. That is nothing but spin. The House of Commons Library makes it clear that the Department of Health, the Department for International Development, the Department of Energy and Climate Change, the Department for Work and Pensions, the Ministry of Defence, the Cabinet Office, the Treasury, the Law Officers, the Northern Ireland Office, the Department for Culture, Media and Sport, the Foreign and Commonwealth Office, Her Majesty's Revenue and Customs and the Wales Office all did better. A little more substance and a little less spin would not go amiss.
That is important because the cuts represent £1.3 billion in cash terms next year and, above all expectations, there will be an £800 million cut in capital expenditure. That directly threatens 12,000 Scottish jobs. It is dreadfully disappointing-the cuts were announced on the same day as the Scottish quarter 2 GDP figures, which showed Scottish growth up at 1.3%, above the 1.2% for the UK, and confirmed the decision to have direct capital investment to protect jobs during the recession. That makes it all the more ludicrous that the Government would seek cuts of such magnitude before recovery is secure.
Rehman Chishti: Did the hon. Gentleman respond to the Government's spending challenge with his own ideas about where the savings should be made, with £44 billion as a starting point?
Stewart Hosie:
What I did, possibly before the hon. Gentleman was a Member of the House, was to table amendments to previous legislation to set out a much
more sensible framework for a proper programme of fiscal consolidation, based on the successful New Zealand model, rather than the flawed Canadian model that his party and the Liberal party are now following.
One of the things that I find extraordinary, which the Chief Secretary could not explain earlier, was the lack of detail in the Government's plans. The Department for Transport is expected, among other things, to reduce its administrative costs by one third-£100 million a year. The Department for Business, Innovation and Skills is expected, among other things, to reduce its administrative costs by £400 million. In the Home Office, the UK Border Agency is expected to cut its support function costs by £500 million.
I am not necessarily saying that that cannot be done: what I am asking is how. Which offices will close, how many jobs will be lost, how many staff will be sacked, and where are they located? Of the 42,000 job losses in the military-the 25,000 civilian and the 17,000 uniformed -which ones are those, in which units, where are they currently based, and when will they go? Why would not or could not the Chief Secretary give us that information today? It gives the impression that the Government are making it up as they go along.
I am aware that time is short and I know that many other Members want to speak, so I have a specific question for Treasury Ministers. Page 50 of the comprehensive spending review makes it clear that
"interest rates on Public Works Loan Board (PWLB) loans have been increased to 1 per cent above UK government gilts."
It goes on to add, unsurprisingly:
"The amount of self-financed capital expenditure is forecast to fall by 17 per cent over the four years."
This will bring in to the Government, according to the table on page 12, £1.3 billion. That will be about £120 million from Scotland.
Will the Minister please confirm that there will be a requirement in Scotland for another £120 million of cuts, and £1.3 billion of cuts throughout the whole of the UK, in order to find the money to pay the extra £1.3 billion in interest charges because of the increase on Public Works Loan Board loans? I would be grateful for confirmation of that today.
4.12 pm
Richard Harrington (Watford) (Con): Like many hon. Members, I have listened all afternoon to the debate. If everyone examined the matter, they would know that the comprehensive spending review was necessary. The cuts amount to taking us back to 2007 expenditure levels. I will not repeat the arguments that we have heard this afternoon denying or not denying the effects.
Richard Harrington: Not at the moment.
I shall concentrate on two points that I do not believe have been mentioned. The first is the importance of how the cuts are implemented. My fear is that, for political reasons, some public bodies and some councils have every incentive to make the cuts go right to the bottom line. I remember how, in the years of the Conservative Government from 1979 onwards, Mrs Thatcher's cuts, job reductions and so on were used politically by opposing parties.
Kwasi Kwarteng: I forget-how many general elections did Baroness Thatcher win? Will my hon. Friend remind the House?
Richard Harrington: Not enough.
The most important thing is that the cuts are made sensibly, and that the bloated management hierarchies of local government look at themselves and realise that this is a chance for much of the reduction in their field to come through management. Let me explain. In Hertfordshire county council- [Interruption.] Yes, Conservative, and proud to be Conservative.
In Hertfordshire county council the expected cuts, which have yet to be implemented, will be enhanced by the fact that £150 million of taxpayers' money has been saved by sensible management changes that hardly affect the front line-£150 million-yet in my local council, Watford, a council with a turnover of £18 million, we have a chief executive who is paid roughly the same as the Prime Minister, a mayor who is paid exactly the same as Members of the House, and an entourage of management levels that defy belief compared to anything in private business life.
I was very pleased to hear what the Prime Minister said yesterday about growth being so important, but I remind Opposition Members that growth is achieved not by spending money that the Government do not have and never wonder how to repay, but by businesses, ranging from the smallest to the largest, having the confidence in the economy to decide to expand, to raise money through friends and family or the stock market, to borrow money from banks that are able to lend it to them and to use every resource that they have to employ extra people. I have every confidence in this Government, and it is most important that we reward people who create jobs. Those are the people who are at a premium, and those are the people who have been stifled in the past.
There has been lots of talk about the Government making banks lend more money, and I commend the new funds that have been discussed. The new equity scheme, which the banks are putting together to provide £1.5 billion of equity for business, is a very good idea, and some of the schemes that the previous Government started and this Government are reforming and expanding are of course commendable. However, the real point is that, unless the deficit is dealt with not just in this country but elsewhere, banks will have to keep on lending money to Governments. Government debt has stifled banks here and all over the world. In the US the argument used to be, "The deficit does not matter", but it does, because banks start lending money to business in quantity when they have confidence in the future and do not have to lend to Governments. We should not forget that.
The greatest thing about the comprehensive spending review is that it deals with the problem on a one-off basis. It is not being shoved under the carpet, put off or held over until after a general election, and for that reason, above all others, the CSR is the most fundamental and best thing that the Government could have done. The problems need grasping. The world of delusion that we have lived in for the past few years-the world of expanding public expenditure, with managers appearing all over the place at a cost to the public purse that taxpayers cannot afford-is coming to an end, and I for one am delighted about that.
4.17 pm
Grahame M. Morris (Easington) (Lab): In the short time that is available to me, I shall deal with a couple of aspects of the CSR, particularly its impact on my own region, the north-east, and look at some of the issues of fairness, which Members on both sides have raised this afternoon.
The CSR has no credible strategy for growing our economy in order to pay down the debt. Indeed, it will make the poorest pay for the damage that those at the very top of the financial ladder inflicted on our economy. As we know, from the statements and Members' contributions that we have heard, children and families will be asked to bear a greater burden than the cavalier bankers who caused the crash in the first place.
Research by IPPR North has shown that the economy in the north grew substantially during the period of the previous Labour Government. However, the impact of the global credit crisis and economic recession has, sadly, had a disproportionately greater effect in those same areas, including my own. Caterpillar, one of our flagship private sector companies, reduced its labour force during that period by almost 50%. I am pleased to say that there are signs of recovery in that regard, however, and I am doing everything I can to assist.
The view of the IPPR in considering the decisions on jobs, welfare, capital investment and public services made by the Government in the comprehensive spending review, and how they will impact on the north-south divide, is that
"things look set to become significantly worse".
On the general outlook of the CSR strategy, it says that
"it lacks an equally rigorous and challenging strategy for economic growth".
That is the truth of the coalition's plan.
The acid test of whether the CSR works is, first, whether it is fair and, secondly, whether it will deliver economic growth. Labour Members, myself included, believe that the CSR does not provide a credible growth strategy-certainly not for my region, the north-east. The impact is compounded by a series of announcements, including the disbanding of our regional development agency, One North East, and the axing of the regional Minister; in my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown), we had an excellent advocate. For the life of me, I cannot see that much money is saved by doing away with a regional Minister-it seems to be a symbolic gesture not to have such a person arguing the case for my region from the Government Benches. We have also seen the axing of the Government office for the north-east-GONE has gone.
The north-east is more reliant on the public sector than other regions, and about 46% of working women work in public sector occupations-one of the highest percentages in any region of the UK. In fact, the proportion in my constituency is even higher. The job losses arising as a direct result of the CSR will unfairly target these women.
In the very short time that I have left, I want to focus on the effects of the CSR on social housing. The National Housing Federation has recognised that it is likely that some of the poorest and most vulnerable in society will be worst affected by the CSR, and those who access services from housing associations are likely
to see their personal financial situation worsen considerably. Its figures show a 60% cut-or, in real terms, a 63% cut -in cash terms in comparison with the 2008-11 national affordable housing programme. Where will the Government find the money to plug the gap created by these cuts? They will raise the rents on the poorest in society to 80% of market value, and this will end up displacing thousands of families from our cities. The Chancellor uses the word "fairness", but it is a concept that he does not seem to grasp.
The Chancellor has criticised Labour for not being straight with the public, and he often accused us of hiding the details of Budgets, but he will not be straight with the British people. His spending review will leave more people out of work, it will stop in its track the recovery of regions such as ours in the north, it will decimate key local services for the most vulnerable, and it will force those on low incomes out of our cities.
4.23 pm
Ian Swales (Redcar) (LD): I am a member of the Public Accounts Committee. Sadly, the Chair left the Chamber a few minutes ago, but we still have some other members here. It is the Committee's task, usually twice a week, to listen to a saga of Government mismanagement and overspending: some of the cases that we hear about are quite breathtaking, running into billions of pounds. I could give lots of examples, but those who are interested should take a look at the National Audit Office reports. It is absolutely clear from those reports that there is massive potential to save money in the operation of government.
I would like specifically to talk about the report on the previous comprehensive spending review in 2007, which required sustainable value-for-money savings of £35 billion over three years, a period which ends next April. That illustrates the phoniness of saying that everything was fine before the credit crunch. The previous Government clearly knew that spending was getting out of hand, and a year before the credit crunch they looked for £35 billion of savings. It is interesting that that is nearly half of what is proposed in the current CSR.
So how is it going, judged against the 2007 review? Some £15 billion of savings have so far been identified, but when the National Audit Office examined the matter it said that 18% of that did not represent improvements in value for money, and it rejected 44% on the basis that the Departments did not have the cost and performance information to underwrite their claims, so only 38%-£6 billion-has actually been saved. It is clear that the current spending review has to be tougher because of the failure to deliver the previous spending review. As the report that we agreed just yesterday in the Public Accounts Committee states, if Departments had been successful in making real savings of 3%, fewer painful cuts would be necessary now.
Mrs Jenny Chapman (Darlington) (Lab): I thank my colleague from the north-east for giving way. Does he have any idea how much it will cost the taxpayer to clear up the social consequences of the Government's decisions in the north-east?
Ian Swales:
Clearly the north-east has already suffered, and no doubt there will be more cuts there. The decisions about how much it will cost will come out in the overall
review, and I do not have a specific figure, but I do know that the 2007 comprehensive spending review showed a litany of management failure. There were no baselines against which to measure, so we did not even know whether savings were being made. There was no radical thinking, with few of the savings representing major departures from current thinking. That was because the Labour Government did not allow input from civil servants, so it was a top-down exercise. They did not listen to the people who were actually doing the work, and I am sure the current Government will do better than that. There was no proper reporting framework to review progress and there were no milestones-things that would be taken as read in the private sector. There was no personal accountability. We ask questions about that time after time in the PAC-did anybody lose their job as a result of some fiasco? The answer is almost always no.
In the NAO's July report, the Treasury admitted that it did not have the capability to deliver value-for-money programmes in full, and that needs to be addressed urgently. I hope that my hon. Friends on the Front Bench will learn the lessons of that report and ensure that the comprehensive spending review is driven effectively in the new environment. We need a better framework, clear personal accountability, proper baselines, clear milestones of progress and detailed monitoring. As the NAO stated, the Treasury cannot just reduce budgets and then walk away. I hope that there will be a hands-on approach and that we will deliver the savings that have been set out.
I deplore the fact that the manufacturing industry went from representing 22% of the economy to 11% under the previous Government, and that a recent BBC Experian study showed that my area was 319th of 324 in the country economically; that Hartlepool, across the river, was 314th, and Middlesbrough, next to mine, 324th. I see my fellow local MP, the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), in his place. We need take no lessons from the previous Government about economic development in the north-east.
I welcome today's announcements on the Tees valley local enterprise partnership, the regional growth fund and the green investment bank, and I look forward to a revival of the local economy under this Government.
4.28 pm
Gordon Banks (Ochil and South Perthshire) (Lab): We have heard a lot today about the impact that the CSR will have on some of the most vulnerable people in society. I support the view that it cannot be acceptable that families are expected to pay more than the banks, and that the public and private sector workers who did not cause the crisis will pay more and lose their jobs, while the banks are treated lightly.
Among the doom and gloom of last week's statement, there was a real prospect that the Chancellor would lay out a strategy for growth that would support our small businesses, which are the real drivers of the UK economy. He failed to grasp that opportunity, and I am not the only one who thinks so. Even this week, the Prime Minister and the Business Secretary have both failed to deliver a credible growth plan not just for the UK but for its small businesses.
The Federation of Small Businesses, of which I am a member, believes that a missing link in the Government's deficit programme is the need to create growth by widening the tax base, creating more businesses and incentivising small firms to grow and innovate. I agree. As the shadow Chancellor said last week:
"Without growth, the job of getting the deficit down becomes impossible."-[ Official Report, 20 October 2010; Vol. 516, c. 968.]
Even after today's statement, we are still waiting to hear a growth strategy that has any new thinking in it.
It has been well documented that the Government's approach will throw 1 million people out of work, but I want to take the Chancellor to task about part of his speech last week. He said:
"Of course, there is a very understandable concern about the reduction in the total public sector head count that will result from the measures in the spending review."-[ Official Report, 20 October 2010; Vol. 516, c. 951.]
He used the phrase "head count", but he was talking about people's lives, jobs and futures. He should have the decency not to talk about people's futures in such an insensitive way-off-hand, impersonal and using the phrase "head count".
We make a fundamental mistake by trying to separate the public and private sectors because, as we have heard, they are intrinsically linked and mutually reliant. The construction industry is significantly of the private sector but it survives with a reliance on a large state commitment to improving our infrastructure, as under the previous Labour Government, with investment in hospitals and the Building Schools for the Future programme. PricewaterhouseCoopers suggests that more than 100,000 construction workers will lose their jobs as a result of this Government's actions-that is more than 5% of the total employment in this sector and five times the loss expected in the financial services.
There are many ways to support businesses such as those in the construction industry, one of the best of which is having a well-trained and efficient work force. As my right hon. Friend the Leader of the Opposition has suggested, that could be done by offering tax cuts to employers who pay a living wage as an incentive to develop the skills of the people who work for them. Preventing our brightest students from following their chosen career path is not the best way of achieving those goals, and the cuts that will lead to reduced in-job training such as Train to Gain, which has supported more than 1 million workers in the UK, will make the job market stagnate.
My right hon. Friend the Leader of the Opposition said recently:
"There have been...too few in British politics who speak up for small business."
Well, the genie is out of the bottle now, because my right hon. Friend saw fit to give me the business brief for the Opposition. I want to take this opportunity to stress that, given my small business background, this is one voice that will support the ambitions of small businesses, support the contribution they can make to the economy and skills of the UK and support my right hon. Friend in his endeavour to stand up for small businesses in the UK.
The comprehensive spending review did nothing to stimulate funding for small businesses, nothing to provide an opportunity for small businesses to grow and nothing
to allow small businesses to grow their skills base. Quite the opposite, in fact: it takes money away from small businesses. Why? Because it puts 1 million people on the dole. It prevents small businesses from growing. Why? Because it puts 1 million people on the dole. And it shrinks the skills base of small businesses. Why? Because it puts 1 million people on the dole. It is clear from the CSR that the Government do not value small businesses in the UK, but in this House in the future there will be a voice that engages with them, and it will be on the Opposition side.
4.33 pm
Mark Pawsey (Rugby) (Con): Eight days have passed since the Chancellor stood at the Dispatch Box and made it clear why it was necessary to take decisions that many on both sides of the Chamber find difficult. We have heard more today from the Chief Secretary to the Treasury about the scale of the problem and why reducing our massive Budget deficit should be the country's primary concern. We simply cannot go on borrowing £1 in every £4 spent-paying £120 million every day in debt interest alone. We know that failure to take action would lead to our paying £4 billion more in debt interest alone by the next election. That money would go to foreign creditors and would help to pay for their schools and hospitals rather than being spent on ours.
We know that had Labour remained in government it would have cut spending, so the debate is about the pace of the cuts that are about to be made, not whether they should be made. That became clear to me in discussions that I held on Friday in my constituency with an organisation that gives a clue to its aims and objectives in its name-Rugby Against the Cuts. Its representatives came to see me on the premise that the Government should take no action to deal with the Budget deficit. After our discussions, however, I believe they accepted that some form of action might be necessary. The group issued a press release, which stated:
"Mark Pawsey listened as we outlined our fears, and said he would be happy to meet us again to monitor developments...at least our MP was prepared to listen...Although we did not seem to change his views, overall, the lobby was worth organizing".
Opposition Members will be unsurprised at that last sentence.
I will maintain that dialogue because it is important. We have offered an honest opinion to the electorate, which is why in the past eight days my hon. Friends have not had massive postbags criticising the measures in the spending review- [ Interruption. ] Well, many of the proposals were contained in the Conservative party manifesto, so it is no surprise that we are taking the action that we are taking. We are bringing forward the date at which the state pension will begin to rise, stopping the most well-off children receiving child tax credits and cutting spending on trust funds.
Last week, in addition to meeting that protest group I took a survey on to the streets of my constituency. In a poll, 87% of the people to whom we spoke said they thought it right and fair that the Government cut their expenditure at this time. It is clear that from the outset our objectives should be to ensure that people are better off in work. A poll in The Sunday Times on 24 October showed that 57% supported cutting welfare benefits. I
believe that the proposals on welfare spending show a new sense of realism. Despite Opposition Members' claims that they are ideological, they are clearly right.
The Government are committed to a stimulus for business. As someone who ran a business for 25 years, I have every confidence that the private sector will rise to the challenge. We are taking steps to reduce the regulatory burden on business and to provide a stimulus, never more so than through the announcement today of the new local enterprise partnership in Coventry and Warwickshire, whose size will be manageable in contrast with the cumbersome Advantage West Midlands. I believe that the LEP will set out economic priorities for the area that I represent.
The Government are acting responsibly and are in touch. The attitude across the country was for me summed up by a gentleman called George Smith, whose daughter intends to go to university next year. He was talking about the additional costs that his family would have to bear to send their daughter to university, but he could have been talking about many aspects of our public services. In The Sunday Times of 17 October, he said:
"I'm philosophical about it. Everybody and his brother is going to have to start paying more for all sorts of things. Much as we may think it's unjust and unfair, it's really a long overdue day of reckoning."
4.38 pm
Liz Kendall (Leicester West) (Lab): I shall address two issues: first, whether the Government have kept their commitment to protect the NHS budget, and secondly, how their proposed reforms will affect the NHS's ability to live within its budget in the next four years.
Before the election, the Government promised that the NHS budget would increase in real terms over the spending review period, and last week the Chancellor announced the headline figure that the NHS will receive 0.1% more than inflation in each of the next four years. That is the lowest four-year increase for the NHS since 1951 to 1956.
The Chancellor also announced that £1 billion from the NHS budget will be transferred to local councils to spend on social care. Social care services play a vital role in improving health and reducing NHS costs, for example by helping older people to stay mobile and independent in their own homes. However, the £1 billion going to local councils is not ring-fenced, so there is no guarantee that it will be spent on social care, especially when councils face a 28% cut in their budgets over the next four years. The spending review removed a further £5.5 billion from the NHS by taking its underspend. The NHS has accumulated £1.8 billion of capital underspend and £3.7 billion of revenue underspend-money that it would normally be allowed to keep to reinvest in patient care or to help deal with future overspends. But the spending review abolished the year-end flexibility for the first time.
Far from the Government protecting the NHS budget, the fine print of the Green Book shows that they will reduce the NHS's budget by 0.5% during the spending review period. These cuts come after a period of significant increases in NHS funding, from some 6.6% of GDP in 1997 to 8.7% in 2009-10. While those increases are substantial, NHS spending as a proportion of GDP
remains below the OECD average, and pressures on the NHS budget will increase because of our ageing population, new technologies and rising expectations. Meeting those challenges while continuing to provide universal health care free at the point of use means that the NHS will need to make big improvements in productivity over the next four years. The chief executive of the NHS has said that that will be the equivalent of £20 billion of savings or some 5% of the NHS's budget in each of the next four years. The NHS has never achieved that, under any Government.
The question for coalition Members is whether the proposed reforms to the NHS will help or hinder in making those substantial productivity and efficiency savings. The Government are about to embark on major structural change to the NHS, despite promising before the election that there would be no more top-down reorganisations in the NHS. GPs will be given responsibility for commissioning £80 billion of NHS services, and PCTs and strategic health authorities will be abolished. Even when major reorganisations are well organised, they usually mean that health services stand still for a period, rather than progress. If structural change is poorly managed, patient care and finances suffer.
I fully support involving clinicians more in decisions about how services are shaped, but changes such as GP fundholding took time and significant management support to develop. The scale and pace of change that the Government are pressing ahead with pose significant risks. Major structural reforms are not cost-free, and the King's Fund estimates that these reforms will cost £3 billion over the next four years. Many patient groups and professional organisations are rightly worried that having yet another major structural reorganisation, when the NHS faces the biggest financial challenge of its life, will not be good for patient care or for finances. I ask the Government to think again.
4.43 pm
David Rutley (Macclesfield) (Con): This is a vital debate, and the comprehensive spending review and its delivery will define this Parliament. The spending review charts a course that tackles the record budget deficit that we have inherited, it rebalances the shape of the economy and it sets out a path that will lead to lasting, sustainable economic growth.
To achieve sustainable growth, we need to rebalance the economy. That will mean less reliance on the public sector. It is unsustainable for public spending to account for nearly 48% of GDP, which clearly crowds out investment from the private sector. That is why the Government are right to bring public spending down to nearer 40% of GDP by the end of this Parliament.
The rebalanced economy must also be less dependent on financial services. In the last decade, the banking sector was allowed to become far too dominant. We need to ensure that future economic growth is more broadly based and not as closely linked to the performance of the City. Instead, we need to encourage the growth of high value-added manufacturing and high-tech industries. AstraZeneca and its skilled work force is vital to Macclesfield's local economy, and it shows that we can still successfully make things in this country and compete in global marketplaces such as pharmaceuticals. It is good to see that the Government are creating the right
economic conditions for the next generation of global competitors and providing support for the all-important small and medium-sized enterprise sector.
Rebalancing the economy also means that there will need to be a greater focus on the regions outside London and the south-east. There has been much talk about that in the Chamber today. There is no question that the north-west will benefit from the strong resurgence predicted in the private sector. Over the past decade in the north-west, the number of jobs in the public sector has grown much faster than in the private sector, and since 1999, the number of people employed in the public sector has grown by 100,000-a massive 17% growth. In contrast, over the same period, job creation in the private sector has broadly flatlined, only increasing by 24,000-just 1%.
Recent announcements in Macclesfield will sadly lead to job losses. The Cheshire building society is closing down its back-office operations, and more recently it has been announced that nearby BAE Woodford is to close. However, we are working hard to strengthen the local economy. It will clearly benefit from much stronger growth in the wider economy, which is why it is encouraging to see private sector job creation improving, with a 308,000 increase in the UK over the past three months. The increase in the north-west was 28,000, and for the last year, that figure comes to 40,000. That is encouraging news.
I am delighted that the Government are looking to build on those positive developments. I fully support the decision to scrap Labour's tax on jobs, because it will help businesses to save £340 million in the north-west. The Government have gone further by giving new businesses new national insurance holidays outside the south-east worth £5,000 over the next three years, which could help up to 69,000 businesses in the north-west. The regional growth fund will also help to stimulate growth and provide sustainable private sector jobs in the north-west, and the new local enterprise partnerships, such as the Cheshire and Warrington LEP in my area, will put in place private sector-led recovery plans to stimulate economic growth, not just in major metropolitan areas such as Manchester and Liverpool, but in Macclesfield, east Cheshire and right across the north-west.
Labour's opposition to the CSR shows how out of touch it is with reality. The only path it seems to offer is to ignore the deficit, to continue to borrow, to spend and to rack up yet more debt. That is a risk that we on the Government Benches are not prepared to take. We are taking the right approach to dealing with the deficit, but clearly there is more work ahead, and I think that we can draw inspiration from one of the great entrepreneurs in Macclesfield's history-Charles Roe, from the 18th century-whose memorial in Christ church reads:
"Difficulties to others were incitements to action in him".
We would do well to adopt that same spirit in responding to these challenging times, rather than the bleating we hear from the Labour Benches.
4.48 pm
Mr Andy Slaughter (Hammersmith) (Lab): At the beginning of this debate, my hon. Friend the Member for Wallasey (Ms Eagle) quoted an article in The Wall Street Journal today that reported
"panic stations in the Treasury"
at finding out that the reduction in child benefit for higher earners was "unenforceable". It continued:
"At root is a problem that should have been apparent to those designing the policy, if detailed advice had been sought from civil servants before it was announced at Conservative party conference."
My hon. Friend the Member for Streatham (Mr Umunna) referred to himself-in all humility, I am sure-asking Sir Andrew Turnbull from the Treasury Committee this morning:
"Do you think it's accurate to describe the UK as being on the brink of bankruptcy?"
The response was: "No I don't." Both those bits of hot-off-the-press news-
Kwasi Kwarteng: Will the hon. Gentleman give way?
Mr Slaughter: No, I have not got time-actually I will, because it gives me more time.
Kwasi Kwarteng: I thought I was attending one of those rallies in North Korea, so reluctant are Labour Members to engage in debate. However, I thank the hon. Gentleman for giving way. My question is very straightforward: does he acknowledge that the deficit was a problem that had to be dealt with?
Mr Slaughter: What a stupid question, although I thank the hon. Gentleman very much for the extra time that he has given me. Anybody else? No? Okay, let us move on.
What I have described shows that it is politics rather than economics that has driven the CSR. Far from fairness driving the CSR, it is a particular type of Tory ideology that has driven it. Nowhere is that more true than in housing, to which I shall confine my remarks and which some of my hon. Friends have also addressed.
The Under-Secretary of State for Communities and Local Government, the hon. Member for Hazel Grove (Andrew Stunell) apologised to the House earlier today-and rightly so-for inappropriate remarks that he made in the debate in Westminster Hall on the CSR and housing yesterday, when he said that Opposition Members had spread "lies and deceit". I am glad that he apologised-it was good of him to do that-but the irony is that he made those comments in the context of the most selective quoting from the National Housing Federation's brief. He managed to find two sentences in an excoriating brief that he thought supported the Government's case. Let me read the bits either side of the bit that he quoted:
"This is a 60% cut in cash terms in comparison with the 2008-11 programme and in real terms a 63% cut. We are extremely disappointed that the Government has chosen to impose such significant cuts in capital funding...In an attempt to fill the gap caused by these significant capital cuts the Government is proposing to allow housing associations...to set rents on new lettings at levels between the current social rent up to a maximum of 80% of market rent."
"However, we understand that any funds generated under this new 'intermediate rent'...will only be allowed to be used to build more homes at this new intermediate rent and...across the four year spending period no homes will be built for social rent using these funds...there will be no further construction of social homes until at least 2015."
That is the housing situation that we face, and for hon. Members who want to know what "intermediate rent" means, I looked at my Conservative council's planning policies, which were announced last month. I found that the term excludes anybody on under £20,000 a year, which is 40% of my constituents and most of the people in housing need, but includes those on earnings of up to £79,400 a year-people in the top 2% of earnings. It is the Government's policy that only intermediate housing will be built over the next 10 years.
Where does that leave my constituents? Where does it leave constituents such as the one whose case I was dealing with in my office this morning? That constituent is living with three teenage children in a highly damp one-bedroom flat, but has received the usual response from the local authority, which says:
"The average expected waiting time for a three bedroomed accommodation...is projected between 8-10 years. This is however only a projection but reflects the reality of...Social Housing waiting time as dictated by demand against availability."
What tenants such as my constituent are being told is, "Give up your secured or assured tenancy, and take an insecure tenancy in the private sector. Then you may get some more space." Up until now, people have not been told-they are being told now-that such accommodation is likely to be outside the borough, because of the restrictions on housing benefit. The situation now is that my constituents are being told that if they want decent accommodation, they should go into the private sector and be re-housed a significant distant outside the borough.
That is the reality of housing policy under the CSR. It is the reality for a constituent who came to see me this week, a teaching assistant taking £900 a week net and living in a shared room in a flat in Shepherd's Bush, for which she pays £650 a month. She gets some housing benefit, but she can hardly make ends meet. Next year, she will not be able to, because of the cuts in housing benefit, and she will have to leave her job and move out of the area. That is the reality for people in my constituency.
While we are talking about apologies, perhaps someone else ought to apologise. The first interview that the Prime Minister gave after the election was to The Daily Telegraph. The article says:
"He was still angry over 'appalling' Labour lies that he blamed for preventing celebrated candidates such as Shaun Bailey winning in marginal seats",
and quotes the Prime Minister as saying:
"'They were telling people in Hammersmith they were going to have their council house taken away by the Tories.'"
Well, they are, and I will tell the House why. That candidate is at least honest, because he said at the Tory party conference:
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