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Lord McIntosh of Haringey: My Lords, I am grateful to my noble friend Lord Jones for what he says about the Statement in general. I acknowledge the difficulty through which manufacturing industry has been going, and in particular the industries to which he refers. He will have been as encouraged as I was to learn that after a difficult period we are returning to growth in manufacturing industry. After a period of virtually no growth since the year 2000 there are signs of an upturn in manufacturing industry.

My noble friend will also appreciate—he will have a chance to read this in more detail—that the spending review encourages manufacturing industry at its base rather than at the front line. It is the increase in the science budget, the reforms in science teaching and the credits for research and development which are surely the way that a manufacturing industry in the future—which may not be the same as a manufacturing industry in the past—will flourish. That is what the Chancellor is determined to achieve.

Lord Boardman: My Lords, does the Minister recall that the Chancellor in his speech claimed credit for his prudence and good management in reducing the public debt to a level below that achieved by many governments in the past? What he failed to do was to explain on any of these occasions how he managed to do it. Of course the reduction in public debt was largely due to the,

"unanticipated Spectrum receipts",

to which he did not refer, which as one can glean from the Red Book with care, amounted to a reduction of £22 billion—£22,000 million. The Government achieved that windfall by the sale of licences for the use of telephones. The Chancellor has never given any credit to that sum in his financial statements, which he frequently makes about the reduction of government debt.

Does the Minister feel that if the Chancellor were more frank about that windfall profit—and came clean instead of claiming prudence and good management—there would be more belief and more trust in the figures that he has quoted today?

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Lord McIntosh of Haringey: My Lords, I start by expressing surprise that such a distinguished capitalist as the noble Lord, Lord Boardman, who ran a major bank with great distinction for a number years, should object to the Government getting £22 billion by selling Spectrum. I should have thought that he would be rather pleased about it.

The Government have always recognised that a significant part of the improvement in the public finances came from the sale of Spectrum. But by no means mostly, as the noble Lord would have us believe. It was a one off. If it can be achieved again for a fourth generation, I hope that we shall have his support.

The improvement in the public finances is much greater than the result of Spectrum's sales. The improvement in them by the reduction in payments for unemployment is much greater. The social as well as the financial effects are of enormous importance.

Lord Walker of Worcester: My Lords, in his Statement the Chancellor stressed the importance of encouraging voluntary movements. There is perhaps no greater example of voluntary effort in this country than the hospice movement. Is the Minister aware that when the Government came to power 40 per cent of capital and current expenditure of the hospice movement was funded from public expenditure? It has been reduced every year and is now down to below 28 per cent. Is there any chance that as a result of this Statement the hospice movement will start to receive the assistance that it used to receive?

Lord McIntosh of Haringey: My Lords, I am as strong a supporter of the hospice movement as is the noble Lord, Lord Walker. I think that the noble Lord may be a patron of the North London Hospice, as I am and as is the noble Baroness, Lady Thatcher. I cannot remember: it is a long list. I agree with the noble Lord that public expenditure is of enormous importance. It is difficult for the hospice movement because so much of it is labour-intensive. Clearly, it is as important for the hospice movement as it is for home care for the elderly and the disabled.

I hope that the noble Lord, Lord Walker, will have noticed that in the spending review Statement reference was made to the £125 million extra which is to be made available to the voluntary and charitable sector for the public services it performs. I can assure him that hospices come under the definition of public services performed by the voluntary and charitable sector.

Baroness Sharp of Guildford: My Lords, perhaps I may say how unequivocally pleased we are that extra money is going to education. That is long overdue and the extra £15 billion is vital if we are to maintain our competitiveness worldwide. How much of that money will go directly to schools and how much will go through local education authorities?

Lord McIntosh of Haringey: My Lords, my right honourable friend the Chancellor gave the

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detailed figures for how much will go to each school. I suppose that I could add them all up and multiply by 3,500 secondary schools to give the noble Baroness a figure, but that would be unfair. My right honourable friend the Secretary of State for Education and Skills will make a Statement tomorrow and it is better if that comes authoritatively from her rather than from me.

Baroness Dean of Thornton-le-Fylde: My Lords, I welcome the Statement. It was a broad Statement which by any objective assessment could have been made only by a Chancellor who was successful in his position, as the present Chancellor surely is and has been in running the economy since 1997.

My noble friend said that schools and hospitals come first, as they surely must. I certainly welcome that, but I also welcome the fact that the third leg of the stool, as it were, in the Statement was housing. Without decent housing, the first two services are difficult to deliver for children. As chairman of the Housing Corporation, I welcome the confidence that the Statement gives us about delivery in the difficult circumstances of increased housing needs and deprivation. I look forward to the Statement promised on Thursday by my right honourable friend the Deputy Prime Minister on planning and the whole area of housing.

Baroness Carnegy of Lour: My Lords—

Lord McIntosh of Haringey: My Lords, it is my turn, I think. I am of course grateful to my noble friend, who has been a distinguished chairman of the Housing Corporation for several years. With his characteristic modesty, my right honourable friend the Chancellor did not spell out what the increased housing expenditure will actually mean. I understand that it will mean virtually a doubling of the Housing Corporation's budget by 2005–06, which is an extraordinary change in the level of support for public housing.

I am sure that my noble friend and the corporation will use that money wisely to deal with the long overdue problems of repair to existing housing and to secure affordable housing for people, especially in the South East of the country, for whom it is short. The lack of such housing is affecting our productivity. That is now up to the Housing Corporation.

Baroness Carnegy of Lour: My Lords, I am an innocent in these matters and I listened to the Statement with wonderment. I wondered whether the heading at its top was not, "All this and heaven too". It seems important to an ordinary person such as me to know what the Government will have borrowed by 2006.

Lord McIntosh of Haringey: My Lords, the noble Baroness does herself an injustice, but the answer is that borrowing will still be in within the limits that we have always set. We have always said that there will be no net borrowing for revenue purposes over the course of the economic cycle. At the same time, we have said

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that borrowing for investment—in other words, for capital—which is now properly distinguished from revenue under the resource accounting being introduced this year, will be increased. I hope that the noble Baroness agrees that that is necessary.

Baroness Harris of Richmond: My Lords, did the Minister detect the Chancellor's characteristic modesty when he did not allow himself to spell out whether the extra money that he will provide for policing takes account of the deepening crisis in police pensions?

Lord McIntosh of Haringey: My Lords, once again, the extra money being provided for policing will be much better dealt with in detail in the Home Secretary's Statement on Wednesday, but it provides for an increase in live policing, so to speak, rather than pensions funding, up to 130,000 police. Clearly, the proportion of money going to policing that goes on police pensions is a matter of continuing concern.

Lord Barnett: My Lords, first, I apologise to my noble friend because I have been upstairs in a Select Committee and was unable to be present earlier. Given that, as I understand it, there is to be major reform along with the welcome increase in expenditure, does that reform include the abolition of the Barnett formula?

Lord McIntosh of Haringey: No, my Lords, there is no suggestion of the abolition of the Barnett formula. If there were to be such a change, it would not take place in the context of a spending review.

Lord Roberts of Conwy: My Lords, can the Minister tell us a little more about the inspection arrangements, which I believe are to be introduced in health and education to ensure that the Government's targets are met? Will those inspectorates be statutory bodies or will they be related to the auditing services?

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