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House of Lords

Wednesday, 26 May 2010.

3 pm

Prayers-read by the Lord Bishop of Salisbury.

Several noble Lords took the oath or affirmed.

Academies Bill [HL]

First Reading

3.09 pm

A Bill to make provision about academies.

The Bill was introduced by Lord Wallace of Saltaire, read a first time and ordered to be printed.

Local Government Bill [HL]

First Reading

A Bill to prevent the implementation of existing proposals made for the purposes of Part 1 of the Local Government and Public Involvement in Health Act 2007, to revoke the Exeter and Devon (Structural Changes) Order 2010 and the Norwich and Norfolk (Structural Changes) Order 2010, and to make provision consequential on that revocation.

The Bill was introduced by Baroness Hanham, read a first time and ordered to be printed.

Defamation Bill [HL]

First Reading

A Bill to amend the law of defamation; and for connected purposes.

The Bill was introduced by Lord Lester of Herne Hill, read a first time and ordered to be printed.

Dog Control Bill [HL]

First Reading

A Bill to make provision about the control of dogs; and for connected purposes.

The Bill was introduced by Lord Redesdale, read a first time and ordered to be printed.

Re-Export Controls Bill [HL]

First Reading

A Bill to make provision for the regulation of the re-export of military equipment and goods further to their original exportation from the United Kingdom.

The Bill was introduced by Lord Alton of Liverpool, read a first time and ordered to be printed

26 May 2010 : Column 26

Contaminated Blood (Support for Infected and Bereaved Persons) Bill [HL]

First Reading

A Bill to establish a committee to advise on haemophilia; to make provision in relation to blood donations; to establish a scheme for NHS compensation cards for people who have been treated with, and infected by, contaminated blood or blood products; to make provision for the financial compensation of people treated with, and infected by, contaminated blood or blood products, and of their widows, dependants and carers; to establish a review of the support available for people who have been treated with, and infected by, contaminated blood or blood products; and for connected purposes.

The Bill was introduced by Lord Morris of Manchester, read a first time and ordered to be printed.

Building Regulations (Review) Bill [HL]

First Reading

A Bill to make provision for a review of the Building Regulations 2000 with regard to the installation of automatic fire-suppression systems in new residential premises.

The Bill was introduced by Lord Harrison, read a first time and ordered to be printed.

House of Lords Reform Bill [HL]

First Reading

A Bill to make provision for the appointment of a commission to make recommendations to the Crown for the creation of life peerages; to restrict membership of the House of Lords by virtue of hereditary peerage; to make provision for permanent leave of absence from the House of Lords; to provide for the expulsion of Members of the House of Lords in specified circumstances; and for connected purposes.

Lord Steel of Aikwood: Despite debating this twice already, I now move that this Bill be read a first time.

The Bill was introduced by Lord Steel of Aikwood, read a first time and ordered to be printed.

Marine Navigation Aids Bill [HL]

First Reading

A Bill to establish a marine navigation aids commission; to establish an office of marine navigation aids regulation; to amend the Merchant Shipping Act 1995; and for connected purposes.

The Bill was introduced by Lord Berkeley, read a first time and ordered to be printed.

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Committee of Selection

Membership Motion

3.13 pm

Moved By The Chairman of Committees

Motion agreed.

Government Spending


3.15 pm

Lord De Mauley: My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend the Chief Secretary to the Treasury to an urgent Question asked in another place earlier today. The Statement is as follows.

"Mr Speaker, I am extremely grateful both to you and the shadow Chancellor for this opportunity to update the House on the urgent and decisive action which the Government have taken to tackle the economic mess which we inherited from the last Government. I refer the House to the Written Ministerial Statement that I laid in the House this morning, which sets out the details of this early action.

The last Government were borrowing an extra £3 billion each week. These huge public debts threaten financial stability and, if left unchecked, would derail the economic recovery. We need not look far across our own continent to see that action to tackle our budget deficit is both urgent and necessary. This is only the first step in a long road to restoring good management of our public finances.

I have set out in a Written Ministerial Statement this morning the details of the spending cuts that we will make for government departments in 2010-11. We have found cuts totalling £6.243 billion-£243 million more than originally targeted. However, the budgets for health, international development and defence will not be reduced, and we have been able to take the important decision to protect the budgets for schools, Sure Start and spending on 16 to19 year-olds in 2010-11.

The devolved Administrations will have the option of making their savings this year or deferring their share of the savings until the next financial year. They will also receive their share of the additional spending as agreed.

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We will help local government to deliver their savings by removing the ring-fences around over £1.7 billion of grants to local authorities in 2010-11, consistent with our belief in giving more freedom to local government.

Our first priority is to cut out waste. We cannot expect difficult decisions to be taken on spending until we have eliminated waste. We expect departments to make savings which include: around £1.15 billion in cutting discretionary areas such as consultancy, advertising and travel costs; £1.7 billion from delaying and stopping contracts and projects, including immediate negotiations to achieve cost reductions from the 70 major suppliers to government; £600 million from cutting the costs of quangos; and at least £120 million from freezing Civil Service recruitment. We will drive these and other savings through a new Efficiency and Reform Group, drawing on expertise within government and funded from within existing budgets.

This action is designed to send a shock wave through government departments, to focus Ministers and civil servants on whether spending in these areas is really a priority in the difficult times we are now facing.

As well as reducing waste and the costs of government, we have started work to scale back lower-priority spending. We will pass legislation to end child trust fund payments that will save £320 million in 2010-11, rising to £520 million in 2011-12, but the House will be pleased to learn that some savings will be reinvested to provide respite breaks for disabled children.

Quangos across government will have to make major savings in their budgets. Regional development agencies will have to cut back on spending which has the lowest economic impact.

Finally, we have decided to allocate £500 million in 2010-11 to measures to invest in improving our growth potential and building a fairer society, and £150 million will be used to help to deliver up to 50,000 adult apprenticeship starts.

Following the shambles under the previous Government of the colleges capital programme, an extra £50 million will be allocated to help to fund capital investment in those FE colleges in most need. We are also allocating an additional £170 million to fund investment in social rented housing in 2010-11 to help deliver 4,000 social housing starts, and we will freeze backdated business rates payments under the eight-year schedule of payments, including businesses in ports, until April 2011. We will consider any further action in this area and bring forward any plans before the freeze ends.

These are only the first steps which we will need to take to put our public finances back in shape. The public and the House will welcome the fact that we now have a Government who have the determination to act but who will also cut with care".

My Lords, that concludes the Statement.

3.21 pm

Lord Eatwell: My Lords, I am most grateful to the noble Lord, Lord De Mauley, for repeating the Answer given by his right honourable friend in another place. I congratulate him on his new responsibilities, and express

26 May 2010 : Column 29

the hope that he will display the same forensic ability in economic affairs displayed by the noble Baroness, Lady Noakes, in the previous Parliament.

It is an axiom of sound financial management that actions have consequences. What is striking about the Statement made by Mr Laws is that the consequences of the expenditure cuts are not spelt out at all. Instead we are presented with £6 billion-plus of cuts in government expenditure, but not told what the true consequences will be. Of course I can understand the sheer delight with which the Chancellor imposed swingeing cuts on the Department for Business-or should it now be called the department for closure? That will teach Vince Cable to declare earlier this year that,

Try a cut of £836 million on for size, Vince!

The rationale for the cuts is declared to be,

The Chief Secretary cites the United States as following a similar policy. That is arrant nonsense. On the very day that Vince Cable suffered the unkindest cut of all, President Obama announced a £30 billion new initiative to support small businesses. Has the noble Lord read the speech of Professor Christina Romer, chair of President Obama's Council of Economic Advisers, delivered at the William and Mary College last week? Professor Romer said:

"I worry that policymakers may take the return of growth as license to withdraw the support that has been essential to the recovery. That is exactly what happened in 1936 and 1937. President Roosevelt, Congress and the Federal Reserve switched to fiscal and monetary contraction before the recovery from the Great Depression was complete. The result was a second recession in 1938 that pushed unemployment back up to 18 percent and delayed the return to normal for another three years".

That is the potential cost of this Government's deficit hysteria.

So will the noble Lord tell us, first, what is the Treasury's estimate of the increase in unemployment directly attributable to these spending cuts? Secondly, what is the Treasury's estimate of the number of business failures that will be directly attributable to these spending cuts?

The Government claim continuously to be protecting front-line services-a laudable objective. To enable your Lordships' House to assess the Government's achievement, will the noble Lord give the House a precise definition of what is a front-line service? A precise definition would enable your Lordships to assess whether the £1.7 billion of the contracts and projects delayed or stopped are front line. Can the noble Lord tell us exactly what the contracts and projects to be stopped might be? Can he also tell us exactly what are the £1.7 billion of local authority services that are no longer to be ring-fenced? Are they front line? Is the removal of funding to underwrite children's futures in the children's trust fund front line-they look jolly front line to me.

The Government have presented a policy without consequences, because they are unwilling to spell out the true consequences. It is a pretty poor start to open, transparent government. What is transparent is the evident relish with which Mr Laws wields the budgetary axe. He revels in the policy of shock and awe. Mr Laws

26 May 2010 : Column 30

is the Donald Rumsfeld of economic policy, and we can expect his activities to achieve equally constructive consequences. Lloyd George would be ashamed of him.

3.26 pm

Lord De Mauley: My Lords, I thank the noble Lord, Lord Eatwell, for his Question, and indeed for his kind words when he opened his speech. I congratulate him on his new role and welcome him to the Dispatch Box. He says that the consequences of the cuts are not spelt out. I respond by saying that I understand that it is a subject about which he and his noble colleagues feel strongly. I point to the advice from the Governor of the Bank of England, who has said that he does not think that £6 billion of cuts will dramatically change the outlook for growth this year and that indeed they reduce some of the downside risk. That is backed up by advice from the Treasury. The Governor of the Bank of England has also said that the bigger risk at present, given the experience of the past two weeks, would be for the new Government not to put in place clear and credible measures to deal with the deficit.

The noble Lord asked specifically about cuts to the business department. In that regard, I simply say that cuts in specific departmental budgets have been agreed with the respective Secretaries of State. All of them are committed to ensuring that those cuts are made in a way that does not jeopardise front-line services. The noble Lord and his noble friends will have ample opportunity in the debate on the Queen's Speech to ask the respective Ministers about their position on these cuts.

The noble Lord also asked about the projected increase in unemployment and the likely effect on future business failures. He is quite right to say that these matters are extremely important. The Government's response is along the lines that the Governor of the Bank of England suggested: if the cuts were not pursued, higher interest rates would inevitably follow, which would lead to a worse situation for business and for employment.

As regards local government, we on these Benches believe that giving freedom to local authorities will enable them to meet the real priorities that they see locally. As the noble Lord will know, the LGA has said in its response to these spending cuts that it knows that they are necessary. It has identified substantial savings and welcomes radical decentralisation and the removal of ring fencing.

The noble Lord asked about child trust funds. Given the country's unprecedented budget deficit, we must make tough choices. In that context, the Government believe that it is not affordable to spend more than half a billion pounds each year on the child trust fund, when that money is not even accessible to people for up to 18 years. We believe that it is right to focus resources on spending, support and services to people now. However, the money that was allocated for extra payments into the child trust funds of children entitled to disability living allowance in future years will be recycled into other forms of support for disabled children. The noble Lord suggests that my right honourable friend revels in shock and awe. I respectfully

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remind him of the words with which the Statement closed: that the cuts will be made with care. They will be made with sensitivity.

3.40 pm

Lord Newby: My Lords-

Noble Lords: Order!

A noble Lord: It is your Government!

Lord Anderson of Swansea: My Lords-

Lord Lea of Crondall: My Lords-

Lord Strathclyde: My Lords, there are 20 minutes for Back-Benchers to speak, so we have plenty of time. I invite the noble Lord to speak first, and then we will hear from one of my noble colleagues.

Lord Lea of Crondall: My Lords, I thank the noble Lord. I think that is the protocol. I have two further questions for the Minister. First, is he aware that, as an annualised rate, the deficit-all this is premised on the huge increase in the deficit-was 2.5 per cent 18 months ago and is now 11.1 per cent? That has created a hole in the economic output against trend of about £50 million. Does he not find it totally incredible to say that that is the fault of public sector workers? Is it more likely to be the fault of the top 0.1 per cent of the population whose average wage is over £2 million? The benefit is going to those people, but the cost is because public expenditure has got to go up to pay for unemployment benefit and tax revenues will go down because of lower income tax and lower corporation tax.

Lord De Mauley: My Lords, I thank the noble Lord, Lord Lea of Crondall, for his question. He quite rightly points to the huge size of the deficit. He suggests that the Government somehow imply that it is the fault of public sector workers. There is no question that that is the suggestion. We are all in this together. I take his point, but there is no suggestion that public sector workers should bear more than their fair share of the burden.

Lord Newby: My Lords, it might be the logical thing this afternoon for me simply to stand up, say "I agree with David Laws" and sit down again. However, although loyal members of this coalition, we do not intend to play quite such a supine role.

Noble Lords: Hear, hear!

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