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Baroness Noakes: My Lords, I have enjoyed this debate. In particular, I have enjoyed the continuing exchanges between the Benches opposite and my noble friend Lord Trenchard on the tax raid on pension funds. I am persuaded by my noble friend's forensic analysis and I hope that the usual channels will ensure that my noble friend gets to speak after the noble Lord, Lord McKenzie of Luton, next time, so that he has the contemporaneous right of reply.
Here we are again debating a Maastricht Motion. My noble friend Lord Trenchard has already said that we do not think that this is a meaningful activity. One of the few things on which we agree with the Chancellor is the folly of the UK joining the economic and monetary union. Of course, the Chancellor does not publicly say that it is folly, but he has been especially skilfuland I pay tribute to himin preventing any serious moves by the UK to join the euro-zone. He knows, as we do, that the UK economy will prosper better outside the clutches of the European Central Bank and all the other trappings of euro entry, and long may that remain.
Let me be clear: I shall not be arguing that there is a crisis in our economy. My noble friend Lord Trenchard has already noted the excellent legacy left by my party and the current Government have so far continued to achieve a stable and growing economy. However, I say four things: first, that the Government have wasted taxpayers' money to an unacceptable degree; secondly,
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that they have increased taxes, largely by stealth and will continue to do so; thirdly, that they have over-regulated the business sector and thereby damaged our international competitiveness; and, lastly, that the figures presented by the Chancellor are at best optimistic and at worst misleading.
I will start with waste. The Chancellor has ramped up public expenditure without ensuring that the money was well spent. He has often claimed that he would give extra money only in return for reform in public services, but in practice he has scattered taxpayers' money regardless of the value for money return and bureaucracies have thrived. In the NHS, far more administrators have been added to the payroll than nurses. In our schools, only one quarter of the extra staff since 2000 are in frontline teaching jobs. Public sector sickness absence is on average 40 per cent worse than the private sector and in some cases twice as bad. Therefore, public sector productivity has fallen in the past five yearson any measure yet producedand we have a Civil Service the size of Sheffield.
Sir Peter Gershon's analysis is that over £20 billion of waste exists in the public sector. We believe that that is a conservative estimate. The independent analysis undertaken by David James for my party shows a higher figure. However, the crucial question is whether this Government will deliver the £20 billion. So far, the omens are not good. For example, the CBI has described the detailed plans as "confusing and vague".
The noble Lord, Lord Newby, has already referred to the smoke and mirrors of the money that has already been claimed to have been saved in 200304, but not a single job has been reported as being cut. In the July spending review, the Chancellor announced job cuts of 84,000, but they were really only 70,000 because some were re-allocations. But 70,000 would be better than nothing if they were ever realised. I invite the Minister to tell the House precisely when we can see these reductions occurring in terms of fewer civil servants overall.
Turning to the question of taxes, there is no doubt that the Chancellor has been raising taxes since he came to power. We have identified 66 stealth taxes to date and only a U-turn late last week prevented the 67th in relation to the taxation of orphan assets. I listened carefully to the critique of the noble Lord, Lord McKenzie, but my noble friend Lord Northbrook rightly cited the national insurance increases and stamp duty increase. I would add council tax increases and, of course, the pension fund raid. The plain fact is that the average household is now paying £5,000 more in taxes than in 1997.
Lord McKenzie of Luton: My Lords, would the noble Baroness still contend that each of the 66 items on the list that her party has produced are properly characterised as stealth taxes, especially given some of the points that I made earlier?
Baroness Noakes: My Lords, the noble Lord, raises an interesting question. When he raised it, I asked for the list of the 66 to be sent to me, which I have received. I have not had a chance to look at it in detail, but I do
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not recognise what the noble Lord was saying to the House in his critique earlier, and pro tem I will stick by 66 stealth tax increases.
It is not only the tax taken to date. The Pre-Budget Report shows more tax rises. Council tax receipts are shown to go up next year by 8 per cent, which is six times the rate of CPI inflation and nearly three times the rate of increase in pensions. Income tax is expected to rise next year by 8 per cent and national insurance by 6 per cent, but earnings have recently been growing at less than 4 per cent.
Looking further forward, the rate of tax as a percentage of GDP is set to rise steadily, from 35.6 per cent last year to 38.4 per cent in 200910. Slowly but surely, the Chancellor plans to turn ours into a high-tax economy. There is absolutely no doubt that there will be tax rises in a Labour third turn; that is something that no Treasury Minister has yet denied. The only question is about the magnitude of tax rises. We believe that the PBR, through the use of optimistic assumptions, understates the amount of the tax raid that the Chancellor really plans.
We believe in lower taxes, not only for their own sake but because we believe that a lightly taxed economy is a healthy economy. We do not have an opportunity to examine that issue in detail today, but I am glad that my noble friend Lord Blackwell has secured a debate on the virtues of a low-tax economy early in the new year. I look forward to that.
I shall not dwell overlong on the over-regulation of British business, as my noble friend Lord Stevens of Ludgate has already dealt with that matter. He referred, for example, to the average of 15 new regulations for every working day since 1997. Normally when Members of these Benches say that, noble Lords opposite jump up and say that some of those regulations are not real burdens on business, so the ones that do affect business are all right. But it would be interesting to see what noble Lords opposite say to the fact that the daily rate of regulation shows an increase of 53 per cent over the whole period 1979 to 1997. Regulation is increasing. It is no wonder, therefore, that we have been slipping down the international competitiveness league tables, that our productivity figures lag behind those in the United States or that inward investment has slumped.
Before leaving the subject of business, I refer also to the damage that the Government have done to the manufacturing industry. Between 1993 and 1997, 179,000 manufacturing jobs were created. Since 1997, 865,000 manufacturing jobs have been destroyed. I searched the PBR for something among the plethora of views and initiatives that might address the future of our manufacturing sector. I found nothing, so I conclude that the Chancellor is indifferent to the fate of the manufacturing industry. Perhaps the Minister would like to say something about that matter.
Lastly, we come to the figures themselves. As many noble Lords have already pointed out, there are no commentators who believe that the Chancellor's figures stack up. They all believe that the "golden rule"
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will be broken unless there are tax rises, and that that may well occur before the end of the current economic cycle. My noble friend Lord Northbrook dealt comprehensively with that issue.
The PBR is littered with claims that the Chancellor is using NAO audited assumptions. The noble Lord, Lord Newby, referred to that area. If I were the Comptroller and Auditor-General I would be pretty angry about that. On the basis of the work that the NAO has done, no commercial auditor would allow its name to be associated as it is in this PBR. The truth is that the so-called audit of assumptions is a highly selective exercise, examining only what the Chancellor wants examined. It is carried out over a three-year cycle, and no work whatever was done by the NAO on the figures actually used in the PBR. For example, it is true that for the 2002 Budget the NAO examined the trend of GDP growth figures. But that work can in no way be taken to endorse the actual and critical GDP growth projections used in this PBR. The fact that the NAO examined something a couple of years or even six months ago is simply not relevant to figures prepared this month.
It is damaging to the standing of the UK if the Chancellor stands accused of using numbers that suit his own ends. That is why we believe that it is time for public finances to be independently forecast. My right honourable friend Mr Oliver Letwin, the shadow Chancellor, announced last week our proposals to create a fiscal policy committee within the NAO, which would take responsibility for economic forecasts and projections. Those policies, which are similar to but not the same as those of the Liberal Democrats, would put an end to the possibility that the books could be cooked and would enhance the credibility of economic analysis. It might also shed some light on issues such as exchange rates.
Earlier this week, the Minister refused to answer my question to him on what exchange rate assumptions were used in the PBR. He said that we could debate the matter todayso I would like him to tell me today what exchange rate assumptions were either input as an assumption to the Treasury model or produced as the output to the model. The figures for the dollar and euro exchange rates for the next fiscal year will be fine for today, if the Minister does not have all the data with him.
The Government might be proud of this PBR, but we are not. It tells the story of an economy which has rising but inefficient public expenditure being financed by rising taxes. It is based on some questionable figures and fails to address some wrongs already inflicted on our economy. I hope that members of the commission, when reading the PBR, will have alongside them the edition of Hansard containing today's debate, so that they can see the real story.
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