Public Expenditure

HC Deb 13 February 1990 vol 167 cc162-239

[ Relevant documents: First Report from the Treasury and Civil Service Committee of Session 1989–90 on the 1989 Autumn Statement ( House of Commons Paper No. 20) and First Special Report: Government Observations on the First Report ( House of Commons Paper No. 209).]

Mr. Speaker

I have selected the amendment in the name of the Leader of the Opposition.

4.44 pm

The Chief Secretary to the Treasury (Mr. Norman Lamont)

I beg to move, That this House takes note of the White Paper on the Government's Expenditure Plans for 1990–91 to 1992–93 (Cm. 1001–1009, 1011–1018, and 1021). Three weeks ago, we debated the Autumn Statement and focused on overall economic prospects and policy. Since then, the public expenditure White Paper has been published. In a formal sense, it will be the last to be published, because 18 months ago the Government announced that they would replace the White Paper with individual departmental reports. That follows the recommendation of the Public Accounts Committee and of the Select Committee on Treasury and Civil Service, chaired by my right hon. Friend the Member for Worthing (Mr. Higgins). I should like once again to pay tribute to his skill in chairing the Committee and to the contribution that it made to the development of the format of the White Paper.

The Committee included in its report on the Autumn Statement a number of useful recommendations on public expenditure. The Government responded yesterday, and the Committee made that response available to the House. Some of the Committee's suggestions are reflected in the White Paper, and we have undertaken to consider others further.

Tight control of public expenditure is, and always has been, a central element of the Government's economic strategy. Getting inflation down is an important priority, and a tight fiscal policy plays a crucial role in that. If spending is not firmly controlled, the burden of financing it will cripple and hold back an economy. Only when the burden of tax is set at moderate and reasonable levels will enterprise and growth flourish.

That has always been our approach. Twelve years ago, we said in the document, "The Right Approach": Our intention is to allow state spending and revenue a significantly smaller percentage slice of the nation's annual output and income each year. This is not a prescription for poorer social provision … In the longer term it is only by building a healthier, more productive economy that we shall afford the improvements in services that we need. Those words have been well justified. In line with the objective that we set ourselves 12 years ago, we have reduced public spending as a percentage of gross domestic product. Public spending means total spending—central and local government spending, and that includes finance for nationalised industries and debt interest. Debt interest is, of course, expenditure which must be paid for like any other item. The Labour party tends to forget that.

The ratio of public spending to GDP reached nearly 50 per cent. in 1975–76, but is now below 40 per cent. Over the past seven years, it has fallen by a remarkable eight percentage points—a fall that is unparalleled since the war time economy was unwound.

In real terms, total public spending, including debt interest, is now broadly at the same level as five years ago, while the economy has grown by an average of 3½ per cent. a year. One would have to look hard to find another five-year period in any country where public spending has been so successfully controlled and economic growth has been so high.

Mr. Tony Banks (Newham, North-West)

There is a down side to that—that there has been insufficient investment in the social and economic infrastructure that the nation requires. That is evident from the collapse of transport and roads in London. How do the figures that the Minister has just given compare with the expenditure patterns of other European Community countries?

Mr. Lamont

I shall deal with those points. The subject about which the hon. Gentleman asked is precisely the theme of my speech, and I shall comment specifically on infrastructure, investment and comparisons with other countries.

I emphasise, in reply to the hon. Gentleman, that we have in the past five years succeeded in meeting two objectives simultaneously. There has been restraint in overall total public spending but there has also been higher spending in key areas where that has been necessary and justified.

How has that been achieved? The hon. Member for Berwick-upon-Tweed (Mr. Beith), who is not here, often in these debates contrasts the position of Treasury Ministers boasting about overall control and the position of individual departmental Ministers boasting about spending increases within their individual Departments. The answer to how that has been achieved is that it has been done not by chicanery or magic, or by mirrors. It has been done by three methods. First, we have reduced borrowing. The public sector borrowing requirement averaged nearly 7 per cent. of GDP between 1973–74 and 1978–79. Five years later it was at half that level and five years after that we were in the new and unprecedented situation of repaying debt.

That reduction in debt has brought with it lower debt interest payments. The cost of servicing debt is now 15 per cent. lower in real terms than it was five years ago. That yields savings of about £3 billion a year, to spend on priority areas. A virtuous circle is now at work and that is indeed in contrast to some other European countries, which are facing severe handicaps from uncontrolled and threatening deficits.

Compared with the rest of Europe, Britain has become a country of low taxation, low national debt and lighter regulation. That is a happy combination and it is no accident that, at the same time, we have moved from the bottom to the top of the growth league of major European countries.

Dr. Norman A. Godman (Greenock and Port Glasgow)

I was interested in the Minister's remarks about other Government Departments. Looking at table 3.1 on page 1 of chapter 3, which applies to the Ministry of Agriculture, Fisheries and Food, may I ask the right hon. Gentleman whether, under the heading "Support for the fishing industry," the figures for 1990–91 and 1991–92 will enable the Ministry of Agriculture, Fisheries and Food and the Department of Agriculture and Fisheries for Scotland to introduce a decommissioning scheme so as to reduce the size of the United Kingdom registered fishing fleet?

The Minister will be aware that the European Community has instructed Her Majesty's Government to reduce the size of the British fishing fleet by about 25, per cent. What recent discussions have taken place between his officials and those of other Government Departments on the introduction of a decommissioning scheme, which would reduce the fleet in a humane—[Interruption.]—and fair-minded way?

Madam Deputy Speaker (Miss Betty Boothroyd)

Order. I remind hon. Members that interventions should be in the form of short comments rather than speeches.

Mr. Lamont

We have not taken any new initiatives or made any announcements on a decommissioning scheme, although there have been discussions on the subject. I shall ask my hon. Friend the Financial Secretary to see whether, when he replies to the debate, he can give any further details.

I was saying that the first room for extra expenditure has been created by the reduction of debt interest. The second saving that we have achieved has occurred as a result of the dramatic turnround in the nationalised industries. As a result of improvement there and of privatisation, we are saving about £5 billion each year, a sum approaching the cost of the whole of the wage bill for nurses in England this year.

The third point is that the strength of the economy in recent years has produced substantial savings as the number of unemployed has fallen and the cost of unemployment likewise. Those savings on debt interest, the nationalised industries and on benefits to the unemployed add up to a substantial amount. Those savings have enabled us to pull off the trick—which puzzles the hon. Member for Newham, North-West (Mr. Banks)—of keeping overall spending tight but at the same time giving large increases to programmes such as health, transport and education.

The expenditure plans in the 1990 public expenditure White Paper are firmly in the same tradition of overall control, with substantial increases in the most important areas. Resources for health in this year's White Paper will be nearly £3 billion higher next year than this. By 1992–93, spending on national roads will be twice as high as last year. Spending by central Government and public corporations on fixed investment is to rise by £2 billion between this year and next.

There are a number of smaller but important increases, including over the next two years about £250 million to relieve homelessness, and an extra £75 million for the arts, which, pace Sir Roy Strong's remarks at the weekend, received a wide welcome.

Mr. John Battle (Leeds, West)

Does the Minister agree that one of the most important areas should have been housing, remembering that the Conservatives have reduced the housing budget by £7 billion in the past 10 years—a cut of 67 per cent.? Does he regard that as a wise way to reduce homelessness in Britain?

Mr. Lamont

I do not believe, as the hon. Gentleman believes, that the answer to dealing with homelessness lies in building more council houses. The solution lies in other areas, including the revival of the private rented sector; and the absence of available accommodation in the south-east has added greatly to the housing problem.

There is a tight outcome to this year's spending negotiations. The additions, substantial though they are, have been made only because they can be afforded within the overall strategy for public spending.

As has been noted, we have not automatically compensated Departments for inflation. Indeed, if a cash planning system is to be effective, it cannot be based on accommodating inflation. As a result of that tough approach, we have been able to keep the ratios of public spending to national income for 1990–91 and 1991–92 at exactly the same levels as in the previous plans—39 and 38.75 per cent. respectively. The downward trend of the ratio of public expenditure to GDP is continuing and is set to continue.

Many of the increases in this year's White Paper are in areas that should be welcomed by the Opposition. They are in some of the areas that they have highlighted. The right hon. and learned Member for Monklands, East (Mr. Smith), now that Socialism has been ditched everywhere in the world, wants to persuade us that Socialism—though he is careful never to use that word—consists only of more miles of motorway and more students at polytechnics. That is breathtakingly daring in its boldness of vision and in its radicalism.

This year the right hon. and learned Gentleman is getting plenty of miles of motorway and more students at polytechnics. We shall spend next year £1 billion more on national roads, a 50 per cent. increase in real terms. Investment by British Rail and London Transport will be £700 million higher, an increase in real terms of nearly 60 per cent. In the next three years, British Rail and London Transport will be investing about £6 billion.

There are a large number of important schemes now in the pipeline. One could mention many of them and read from a long list. But whatever else this is, it is not the neglect of infrastructure. For anyone with eyes to see, who observes the cranes at work in our cities and machines at work on our roads, it is clear that what is going on is an extensive modernisation of our infrastructure.

That modernisation could not have been afforded by the Labour party. Indeed, it would not have been necessary had Labour been in power, because the demands for better transport facilities, better roads and so on are a product of the growth and expansion of the economy in recent years.

That investment in transport is part of a huge programme of investment across the public sector. Overall, investment by central Government and public corporations in creating new capital assets for the nation will be about £2 billion higher next year than this, an increase of 7.5 per cent. in real terms.

Ms. Diane Abbott (Hackney, North and Stoke Newington)

The Minister is right. In Hackney in my constituency, in the south of the borough where it borders on the City, we can see cranes and development work. The problem is that that building work is in the private sector, because the Government are not releasing resources for the public sector to invest in the Underground, house building and the building of hospitals.

Mr. Lamont

Unlike the hon. Lady, we see nothing wrong with booming private investment. We have close to record investment, public and private, as a proportion of GDP. We do not want, as the hon. Lady seems to, public investment crowding out private investment. Private and public investment are both needed.

Within the overall settlement, and taking into account the additional funding announced for the review body pay awards, there is also another huge increase of nearly £3 billion, or over 6 per cent. in real terms, in spending on the National Health Service. It will allow continuing improvements in health care and higher capital spending. We already have under way the largest ever programme of hospital building. In England, 500 major schemes, each costing over £1 million, are in various stages of design and construction. The new plans mean that gross capital spending in the Health Service in England next year will be no less than 55 per cent. higher in real terms than in 1978–79.

Dame Elaine Kellett-Bowman (Lancaster)

May I thank my right hon. Friend for the fact that one of those schemes is phase 3 of the hospital building programme in Lancaster, for which we begged the Labour party in vain? We are delighted that it is going ahead.

Mr. Lamont

In the debate on the Autumn Statement—indeed, it was also reflected in one of the comments made from a sedentary position and no doubt not recorded in Hansard—various Opposition Members tried to minimise the scale of the increases. They tried to talk them all away because of demography, increases in the price of drugs and increases in the cost of medical equipment. No matter how much we spend, whether it is £500 million or £2 billion, as they were urging us to spend, they make out that every sum is in reality a cut. The position is different; today we are spending about 45 per cent. more in real terms on the Health Service than we did a decade ago.

Several Hon. Members

rose—

Mr. Lamont

I have given way a lot and I should like to make more progress.

The White Paper plans also include substantial extra provision for the science budget, something dear to the heart of the right hon. and learned Member for Monklands, East. The increase comes on top of the increases announced after the 1988 survey. After a 15 per cent. increase between 1988–89 and 1989–90, a further 8 per cent. growth is provided for next year. As a result, the science budget will be 25 per cent. larger in real terms than it was a decade ago.

Investment in research compares well with that of our competitors. As a percentage of GDP, Government support for research and development is as high as in West Germany and higher than in Italy and Japan; and the Government's support for civil research and development surpasses that provided by the Government of the United States of America, again as a proportion of GDP.

The White Paper again contains further additional resources for education. Provision for spending on education and science by central Government will rise from £5.75 billion in 1989–90 to £6.59 billion in 1990–91, a cash increase of 14 per cent., or over 9 per cent in real terms. In addition, local authority spending on schools in England will benefit from education standard spending of £15 billion in 1990–91, which will be 9.5 per cent. more than the comparable figure for the previous year.

With those considerable extra resources, which mirror what happened in previous years, it is no surprise that record numbers of students are choosing to stay on and study beyond the age of 16, something that Opposition Members urge on us but seem to be unaware is happening already. In 1980–81, 29 per cent. of 16 to 18-year-olds chose to stay at school or colleges of further education; in 1987–88 nearly 35 per cent. did so.

There is also in this year's plan a large increase for higher education, to provide for 27,000 more students than forecast in the previous plans. During the period since 1979 we have made substantial progress in making higher education available to increasing numbers and also to an increasing proportion of the age group that wants it. By the end of the previous Labour Government, 12.3 per cent. of young people benefited from full-time higher education. This year the figure is 16 per cent. and it is projected to rise to 19 per cent. by 1992–93.

Those increases are substantial by any standards, but I do not seek to disguise the fact that there are some areas where we have felt it proper to make cuts because, if one is to control overall spending, one must find the resources for the priority areas. We have cut the budget of the Department of Trade and Industry. We recognise that investment is important, but the offer of increasing subsidies does not lead to worthwhile, high quality investment. We do not seek to encourage the right attitude in companies by bribing or bullying them to do the things that they should be doing in their own interest. Companies do those things if they are allowed to build up profits to finance investment. That is what we have done. Since 1981, profitability has increased by 300 per cent., a staggering increase about which we do not hear much from the Labour party. That is why we have had an investment boom and why it is right to make cuts.

Mr. Robert Sheldon (Ashton-under-Lyne)

rose—

Mr. Lamont

I shall give way to the right hon. Gentleman, but then I want to make progress.

Mr. Sheldon

In detailing the cuts, the right hon. Gentleman did not mention cuts in maintenance, which cause so much decay and dilapidation. The road maintenance programme has been bitten into. In the hospital programme, £1.8 billion of maintenance has not been undertaken. There may be new schemes, but the maintenance of our estate and our national heritage is in danger.

Mr. Lamont

There is substantially increased provision for maintenance of the fabric of buildings in some of the plans, particularly for higher education and hospitals. Local authorities also have some responsibility for road maintenance.

We have made reductions in the programme for training. Those reductions follow very much the reduction in unemployment. Our training programme has been geared towards the unemployed. As unemployment has fallen dramatically and substantially, it is right to make adjustments in training, given that there are fewer young people coming on to the labour market.

Opposition Members seem to think that nothing is happening in training unless money is spent by the public sector. There is tremendous investment in training by the private sector. Employers are spending about £20 billion a year on training. By any standards, that is a substantial investment. Indeed, the latest figures published by the Eurostat labour costs survey show that the share of labour costs spent on training is broadly the same here as in Germany.

Opposition Members love to paint a picture of this country with an ill-educated, ill-equipped, untrained labour force. If that were the position, we should not attract the largest proportion of any European country of Japanese and American investment. Opposition Members may think that our work force are the ill-educated serfs of Europe, but that is not the view of Toyota, Honda or Fujitsu when they invest here. They know that we have a skilled labour force able to handle the most sophisticated processes.

Mr. Denzil Davies (Llanelli)

If everything is going so well, why do we have the highest inflation rate in western Europe and the worst balance of payments deficit? Can the right hon. Gentleman answer that?

Mr. Lamont

We do not have the highest rate of inflation in western Europe. I am happy to debate the economy on any occasion and we have had many debates on that, but we are now trying to debate the public expenditure White Paper.

One important aspect of presentation in the format of the White Paper, on which my right hon. Friend the Member for Worthing, who, as I said, is the Chairman of the Select Committee on Treasury and Civil Service, and the Committee commented, is the new definition of planning total. The new definition distinguishes more clearly between central and local responsibilities. It includes central Government's support for local authorities; it excludes what local authorities spend from their own resources. That is a change that brings us into line with practice in many other countries. It is a change that the Select Committee welcomed shortly after we first announced our proposals in summer 1988. Above all, it is a change that recognises the way in which decisions are taken in the real world. It was a point on which we commented in our reply to the Select Committee.

There is much material in the White Paper about efficiency measures and measures to increase value for money. Value for money is neither a gimmick nor, as the Opposition allege, a euphemism for cuts in spending. It simply means getting the best possible value for the taxpayers' money put into a service. Unlike the Labour party, we are serious about efficiency and we are getting results from a series of initiatives over the past 10 years.

Dr. Godman

rose—

Mr. Lamont

Those savings and value-for-money improvements are either being ploughed back into the same service or redeployed to other initiatives. Taken together, the figures are substantial. The figures are for the National Health Service cost improvement scheme, the departmental efficiency scrutinies, better Government purchasing, market testing and contracting out and local authority efficiency savings. Together, they add up to .2 billion each year and they are the result of measures that we have introduced, the vast majority of which were opposed bitterly by the Labour party and which would not be available for the Labour party should it ever assume responsibility.

The Labour party likes to portray the Government's attitude as, "public spending bad, private spending good." That is not our attitude, but we believe that public spending should be limited to what is affordable. All public services, such as health, education and transport, are ultimately dependent on the strength and growth of the economy. We all know what happened to public spending when the Labour party was in office. Public spending was on the big dipper. We had zooming, unaffordable increases up to the sky followed by crashing cuts. But what would have happened if the Labour party's policies had continued throughout the 1980s? What would be the state and size of the resources put into the Health Service if the Labour party had remained in office throughout the 1980s?

Let us suppose that Labour's straitjacket of high taxation and high spending had been kept in place for the past 10 years and that Britain had remained bottom of the European growth league, just as we were when the Labour party was in office. What would have happened? The economy would have been a good deal smaller than it is today. If Labour spent the same share of that smaller economy as it did in 1979, it would probably be spending about £3 billion less today on the NHS. What would that mean for the Health Service? It would mean that we should probably be spending about 12 per cent. less than we are now. Twelve per cent. fewer nurses would mean 60,000 fewer nurses. Twelve per cent. fewer doctors would mean 10,000 fewer doctors. Twelve per cent. fewer in-patient treatments is almost 100,000 fewer patients being treated. That is the reality and that is what would be likely to happen if we followed Labour's policies of uncontrolled spending and high taxation. Labour's irresponsible attitude would ultimately have been self-defeating and would have resulted in less provision over the medium term.

In the Autumn Statement debate, I said that we welcomed the appointment of the hon. Member for Derby, South (Mrs. Beckett) and we are certainly looking forward to her first House of Commons speech devoted exclusively to public spending. We were looking to her for some answers—[Interruption.]—to the questions that the hon. Member for Dunfermline, East (Mr. Brown), when he was shadow Chief Secretary, refused to answer. It is not only the Labour party's policy towards local government finance, but its attitude to central Government finance, which is a mystery wrapped in enigma. I was a little disappointed when I read that the hon. Member for Derby, South had been appointed not to cost Labour's programme, but to stop members of the shadow Cabinet saying anything. She may find that difficult with the hon. Member for Dagenham (Mr. Gould).

The hon. Lady went on Sky television shortly after she was appointed and told us that the Labour party would not increase taxation. That might be believable if she were about to welcome the increases in the White Paper as reasonable, affordable and generous, but we know that she will not. We know that she will describe them as inadequate and mean. How is it that the hon. Lady is unable to answer the two basic questions: how much will the Labour party's programme cost, and what will be the consequential increase in taxes? If the hon. Lady will not tell us that, perhaps she will give us the answer to a far more modest question: when will the costing of the programme be made available to the public? I am not very optimistic about receiving an answer to that limited question.

The Leader of the Opposition appeared on "The World at One" on 4 October and told us that the costing of Labour's programme might have to wait. The audience waited. Would he say six weeks, six months or nine months? He then told us that it might have to wait until after the election. Is that the responsibility and accountability that Labour Members assume? It is not an attitude that they would accept from anyone else and Labour cannot go on indefinitely dodging the question because the British public demand to know. We have spelt out our spending priorities for the British people, which are based on the same principles as those which have brought a record improvement in living standards for the British people in the past decade. They are combined with affordable and realistic improvements in vital public services, and I commend them as such to the House.

5.17 pm

Mrs. Margaret Beckett (Derby, South)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'regrets the Government's continued failure to recognise the threat to long term prosperity of inadequate levels of investment in manufacturing, in training and in infrastructure; deplores its refusal to play its own part in the manner of the governments of this country's major competitors in promotion of these objectives; and recognises that this refusal further jeopardises the United Kingdom's future in the Single European Market.' This is the first public expenditure White Paper in the 1990s. It reflects the Government's judgment of the contribution that public spending should make to the nation's needs not only in this year of grace 1990 but, at least in outline, in the two succeeding years. Frankly, it is terrifying in its complacency—at least if it is viewed without the blue filter. After a decade-of Tory rule and a decade of unprecedented wealth flowing from the North sea—£87 billion accruing to the nation's coffers under this Government, which was not available to any of their predecessors—we enter the 1990s with an equally unprecedented balance of payments deficit of potentially catastrophic proportions, with inflation higher by any measure than that faced by all our major competitors, with interest rates higher than those of our major competitors and with the most decrepit public services and the most run-down infrastructure of all our major competitors.

Although the Government no longer talk quite so much about an economic miracle, they still call this "success". The position in which we find ourselves would be alarming at any time. To find ourselves so placed two years away from the completion of the European single market is even more frightening. To find in all the circumstances that the Government have learnt nothing from the missed opportunities of the past 10 years is terrifying. We could not catch up with those whose Governments have prudently invested in their future if we started now to follow their example, but we are not starting now. According to the policies revealed by the White Paper, we are not starting at all. It is still, "Steady as she sinks".

I shall address three main points in the debate. First, I shall examine the Government's stewardship of the nation's assets. Their record is one of the pieces of evidence that enables us to judge their future commitments. I shall then look at those commitments, as revealed in the White Paper. Thirdly, I shall consider whether what the White Paper reveals shows that we are squaring up to the challenges of 1992 and beyond.

I listened with keen interest to the brave and cogent speech of the Chief Secretary to the Treasury setting out as best he could how great everything has been, is and will be in future. The trouble is that it is the speech that we heard from that Bench last year, the year before and the year before that. The scene and the cast change, but the scriptwriter goes on and on.

To be completely fair, the script shows some textual amendments that are of key interest and significance to scholars. It seems only yesterday—and it was not all that long ago—that the then Chief Secretary, now gloriously translated to the Chancellorship, was telling us that firm control of public expenditure in itself brings interest rates down. We have all noticed that, haven't we? That was before interest rates rose to their present giddy heights.

There are no longer the same mystic incantations that were once a feature of all economic debates, calling on the gods of monetary policy to bless their faithful disciples. We no longer hear the reading of the runes and the targets for M3. Whatever happened to M3? Nor do we hear respectful references to M4—rising at 18 per cent. when last sighted. Even good old MO—the only one that the Government still target—is still outside its target limits.

As if to make up for those failings, what remains of the text is chanted with ever-increasing fervour—one might almost say desperation. The Chief Secretary tells us that the Government have been wise stewards of our economy. He says that public spending has been reduced as a proportion of our income, which he claims is a desirable thing in all circumstances. He tells us that due to the Government's firmness in cutting out waste and their determination to obtain value for our money it has still been possible to meet the nation's real spending needs. Bunkum! It is bunkum on a truly grandiose scale. Whatever else the Government may lack, they possess gall and bravado in astonishing proportions.

Let us take the question of waste and value for money. During the Government's tenure of office, amazingly for a Government who rejoice in the title of Conservative, they have mounted a vast sale of the nation's assets, which was well described by the late Lord Stockton as selling the family silver. I suspect that his Lordship did not contemplate even then the extent to which the proceeds—as with the windfall revenues from the North sea—would simply be blown away on buying victory at three successive general elections.

Whatever the merits or otherwise of what was a dogmatic decision to sell, the conduct, timing and manner of the sales owed everything to the Government's political convenience and nothing to the efficient management of assets or to obtaining value for what the Prime Minister likes to call our money.

The history of privatisation abounds with cases where the Government spent our money on advice about the mechanics of the sale which they then ignored. The inevitable result was overall losses to the taxpayer on a heroic scale. They include losses from debt write-offs, special offers to make sales more attractive, advertising and marketing costs and low asset valuations. Estimates of debt write-offs alone suggest a loss to the taxpayer of about £16 billion. That money was spent on fattening industries for privatisation. In the cases of gas, electricity and water, the losses were not just to the taxpayer but disproportionately to those who are too poor to pay tax. In those industries everyone had to pay increased prices jacked up by the Government to make the industries even more attractive to buy.

The loss to the taxpayer from artificially low sale prices and badly timed or imprudent marketing decisions is estimated by Price Waterhouse at a further £31 billion. The costs of advertising and underwriters' fees come in at a mere £1,400 million. That is a grand total of net and irretrievable losses to the taxpayer of our money of approaching £50 billion.

I have a better analogy for that rip-off than that of selling the family silver. It is as if a great house had been put into the custody of the nation. When, after a period of years, the trustees return, they find that the appointed stewards have sold off all the contents cheap on the spurious ground that it was a lot of trouble to look after them. The man who got the removal fees and the new owners are all delighted with their bargains, but that does not alter the fact that the original owners have been rooked by those trusted and paid to look after their interests. Nor have the proceeds been reinvested. The former stewards do not care if the roof falls in. They have stashed their cut. If they are sacked, they will be off to pastures new and possibly even more lucrative.

I recognise that the Prime Minister's line is that we have had a jolly good deal. We paid mugs to relieve us of a burden and what a good thing it was too. What exactly is the right hon. Lady saying? Is she saying that all those purchasers have been conned and that they bought a pig in a poke? When it comes to taking people to the cleaners, my money is on that simple soul Professor Smith any day, rather than any Minister in this Government.

Of course, it ain't so. Those in a position to buy are now sharing in British Telecom profits of nearly £700 million this year. Presumably, next year or whenever it comes to light, the shareholders in the electricity industry will benefit from the £1 billion or so profit that that industry paid to the Treasury this year.

With every day that passes, more examples of the Government's poor stewardship come to light. Recently, just one of Sealink's ferries was resold for more than the total price that the taxpayer received for the whole enterprise.

Those are not the only examples of waste arid misappropriation. Spending on Government advertising has increased by about £50 million in the last five years. Government advertising included such notable examples as the media launch of the National Health Service White Paper. What a waste of our money that was. It also included adverts for the Government's employment training scheme. Particularly close to the 1987 general election—a mere coincidence of course—it was concentrated not in the parts of the country or sections of the media where the unemployed were most likely to see them but those where they might convince a doubting electorate that the Government were trying to do something about unemployment.

The Government spent £1 million of our money on unsuccessfully prosecuting the "Spycatcher" case. While the armed forces were condemned by the Public Accounts Committee for letting their stock of public housing fall into disrepair, the Prime Minister spent £1.2 million on doing up No. 10—although she will not tell us what she spent it on any more than she will tell us what it cost to put gates on Downing street. So much for the record and stewardship of the Tory party.

Mr. Tim Smith (Beaconsfield)

If the Government's record on privatisation is so appalling, why do so many other countries not only follow our example but come here for advice on how to do it?

Hon. Members

How not to do it.

Mrs. Beckett

The hon. Gentleman cannot have been listening. My point was the incompetence of the way in which the Government have marketed privatisation and the enormous losses to the taxpayer that have accrued. That point is not affected by the fact that people are coming here to consult. As my hon. Friends said, it is more than likely that they are coming to find out how not to do it.

That brings me to my second point. The Government's argument—and the Chief Secretary reiterated it again today—is that they have been able to spend not just sufficiently but generously on our public services.

Mr. Barry Porter (Wirral, South)

The hon. Lady referred to Professor Roland Smith. I assume that she was referring to British Aerospace and Rover. She implied that Professor Smith had bought Rover for a knockdown price. To whom else would Rover have been sold and for what price would a Labour Government, if they ever came to power, have sold it?

Mrs. Beckett

I imagine that if British Aerospace had not been offered the deal that it apparently was offered by the Government—I do not wish to prejudge any consideration—one of the other people who were competing to buy it might have done so. There were several alternative buyers, of which, as I recall, Ford was one. Toyota was another.

Mr. Porter

No, there were not.

Mrs. Beckett

The hon. Gentleman says that there were not alternative offers, but Ford and Toyota say that there were. Frankly, I prefer to rely on their knowledge of their bids rather than that of the hon. Gentleman.

Mr. Graham Allen (Nottingham, North)

As sedentary interventions are often not put on the record, it is worth pointing out that Professor Smith has not yet parted with a single penny for the Rover deal. I understand that he will not pay anything until 31 March. That may assist the hon. Member for Wirral, South (Mr. Porter) in his financial analysis.

Mrs. Beckett

I shall go on to the second point that I want to raise. As I have said, the Government have argued that they have been able to spend generously on our public services, whether they are local authority-provided or within the National Health Service. That squares ill with the White Paper's indication of support for local authority spending, which is predicted to remain at an effective standstill. Where does that leave the needs of the nation's school children? Where does it leave all the grand statements about community care? It leaves them with the last part of the Chief Secretary's speech—in the realm of myth and fantasy with, no doubt the Government hope, local authorities of all political shades carrying the can.

The National Health Service is the area of the greatest Government boasts—

Mr. Ian Taylor (Esher)

I congratulate the hon. Lady on her debut as an Opposition Front-Bench Treasury spokesman. She is reading extremely well so far. At some point would she care to comment on the Labour party's expenditure plans, how much they will cost, and how they will be financed? Is The Independent's assessment that Labour's tax proposals will cost anyone earning between £18,000 and £30,000 another £4,000 per year correct? Is that how the Labour party intends to finance its plans?

Mrs. Beckett

I did not hear all the hon. Gentleman's remarks, but I intend to say something later about our own approach to public spending. The article to which he referred—[Interruption.] I thank the hon. Gentleman, but I shall say this in my own way. The article to which he referred was extremely inaccurate and unworthy of comment. It was so far-fetched and so wrong that it is not worth my taking up all its details.

As the Minister repeated again today, the National Health Service has received what he described as £2,600 million "extra"—presumably on the grounds that if he keeps repeating the figure, those who say that the Government do not care will be confounded. However, anyone who looks at the figures will at least raise an eyebrow. We believe that the residual sums left for patient care may amount to only £500 million, because, although the Chief Secretary does not like it, we first have to take out the figures for inflation, and then the extra figure for inflation in the National Health Service. That is not new money, although the Government seem to imply that it is.

Then I deduct the "creative accounting" sum of £150 million or so for cost improvements, because that is not money at all. It is a wholly imaginary figure. It is unrelated to any factual information and represents what the Government have decided that health authorities could save this year by cutting out waste and inefficiency. It is not based on any survey, assessment or information. To my knowledge, the health authorities have been telling the Government for several years that they have reached the end of any such savings that they could ever have made without cutting patient care, unspecified and unplanned as those savings always were. However, although the figure is a complete fiction and is money that the health authorities never see, it still appears because it bumps up the spending total.

We then have the figure of about £300 million for implementing the Health Service White Paper. That is the money to provide for hospitals to opt-out and to introduce, at a wholly unrealistic speed, thousands of accountants, computers and billing procedures into our Health Service. Before anyone asks, I make it perfectly clear that we are not against proper, efficient accounting because there may well be an argument for saying that there was room for improvement in the record-keeping and cost-management in the Health Service. If I were asked whether I would bring in more doctors and nurses, more therapists and radiographers, more ambulance staff, or more accountants, I fear that, at least temporarily, my vote would go against the accountants.

I wonder how many people have looked at the scale and scope of the accountancy procedures that the Government have envisaged over time and for which those substantial sums are being provided. I refer, for example, to the listing of capital assets down to the last iron or electric kettle and to the details about how, when assessing depreciation, the lifts must be on a different time scale from the buildings themselves. That may be prudent, but is it really what we should be spending our money on?

Mr. James Arbuthnot (Wanstead and Woodford)

rose—

Mrs. Beckett

If I may, I shall continue for a little longer.

I refer also to the procedures that are needed to cost and bill what the document calls "every episode" of patient care. The document explains that in the long term the Government want to be able to list, cost and to send out a bill for all patient care episodes, not only for in-patient admissions, but for out-patient visits and ultimately for community care. Every district nurse visit, every home help, and every out-patient clinic will be listed and billed. Although that is the long-term perspective of the White Paper on the Health Service reforms, it is the perspective and it will be very expensive.

Mr. Arbuthnot

In view of the things that the hon. Lady is suggesting that we should look at, has she herself looked at the sheer numbers of new doctors, dentists and nurses that we have brought into the National Health Service?

Mrs. Beckett

Yes, of course, but i am well aware of how often the Government have fiddled the figures by changing, for example, the way in which hours were counted—

Mr. Arbuthnot

indicated dissent.

Mrs. Beckett

It is no good the hon. Gentleman shaking his head because, as he is well aware, that money is not being spent on doctors and nurses or on any of the other staff who work in the Health Service; it is being spent on accounting procedures which seem to be so detailed that they cannot possibly be needed for anything other than a privatised Health Service.

The final insult is the £40 million that is allocated to help to subsidise the Prime Minister's private health insurance. It is more than has been given for the special waiting list initiative for the whole National Health Service. My hon. Friend the Member for Livingston (Mr. Cook) has calculated that the outturn of the expenditure could he far higher if we examine the actual costs of private health care. Experience suggests that his warnings are justified. The Chancellor, at least, will remember—because he shared the responsibility for putting it on the statute book—the 2 per cent. bribe that was paid from the national insurance fund to persuade people to gamble their retirement income on personal pension plans. He may even remember that the then Secretary of State for Health and Social Security, his right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler), costed the expenditure at a mere £60 million. In the first year of payment, covering a period of almost two years, £900 million or so was paid in place of the predicted £60 million. This year and for the next couple of years, unless the law is changed—

The Chancellor of the Exchequer (Mr. John Major)

indicated dissent.

Mrs. Beckett

It is no good the Chancellor shaking his head—this material is from parliamentary answers. Unless the law is changed, about £500 million per year will be paid this year and for the next couple of years for the same purpose. What was that about prudent fiscal management and about avoiding extravagant and uncosted promises? Frankly, £60 million is too much for that purpose. If the scheme is to people's financial advantage, why should the state waste money giving them more? If it is not to their financial advantage, how dare the state use our money to persuade people to act against their own long-term interests?

What can we learn from the White Paper about this country's investment needs? I believe that it is now widely acknowledged—even to some degree inside the Government—that our training and education are woefully inadequate, compared with our competitors. The Chief Secretary was strong on that, saying that it was all nonsense, so it is a pity that that was exactly what his right hon. and learned Friend the Secretary of State for Employment said a few days ago.

Central Government spending on education is to be cut between this coming year, 1990–91, and 1992–93 by £85 million in real terms, while spending on city technology colleges—individual prestige schools in certain areas—will reach £135 million over the same period. Despite the present fall in pupil numbers, the all-important pupil-teacher ratio has not fallen in the past three years and even the Government admit to a teacher shortage of 3,600, affecting the education of about 60,000 children. However, the teacher unions believe that the shortfall is more like 8,000 and that the education of 250,000 children is at risk. It is true that the Government have found some money for education, although the Chief Secretary did not refer to it. They are to spend £500 million more for student loans than the cost of uprating the existing grants would require.

Spending on training programmes this year is £190 million less than the Government originally planned and, by 1992, will have fallen even further. When pressed to explain that, the Government talk vaguely about the falling number of unemployed people. The Chief Secretary did it again today.

The White Paper shows that spending per head on youth training, employment training for the adult long-term unemployed, and training for the disabled and for those in work—in many ways the most neglected group of all—will fall. All that is happening at a time when the bottlenecks and inflationary pressures of skill shortages are once more evident. The Government are washing their hands of the country's training needs.

Research and development are part of the key to our future. Government spending on civil R and D has been cut in real terms by 2 per cent. since 1984–85, when we were already behind the spending of our competitors. It appears from the figures in the White Paper that spending is set to fall another 8 per cent. between 1992 and 1993. I listened with great interest to what the Chief Secretary said about that, and I shall look again at his justification for his figures. That does not alter the fact that there are fewer research studentships now than in 1986 and spending on the science budget is set to fall in real terms from next year onwards.

Support for industry has been cut once again, by 2.5 per cent. in real terms by 1992–93. Support for the regions is also being slashed by £75 million in cash terms over the same period. By 1992–93, the year of the single market, for which our colleagues and competitors in Europe are pulling out all the stops, assistance to the regions and general industrial support will have fallen by 37 per cent. from the not overgenerous levels of last year. To complete the picture of a Government displaying total indifference to the welfare of its wealth-creating sector, spending on export promotion services will be frozen for the next three years—a fall in real terms of 16 per cent.—while the Export Credits Guarantee Department budget is to be slashed by £100 million next year.

Most hon. Members are now familiar with the anxieties expressed by, among others, the Confederation of British Industry about the costs and inefficiency caused by our neglected transport system. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) described that precisely. The White Paper shows that every class of road in Britain is in a worse state of repair than it was 10 years ago.

The helpful little diagram from last year's White Paper with its categories of "better" above the line and "worse" below the line, which my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) used to such effect in last year's debate has—surprise, surprise—disappeared. [ Laughter.] I thought that the civil servant who had drafted the White Paper had gone down the oubliette, but we shall see.

The lack of maintenance identified ties in, if not with the diagram, with the day-to-day experience of people who are, increasingly, bouncing from pothole to pothole as they drive along the nation's roads. That is apart from in the south-east where, for much of the time, there is no bouncing because the traffic is not moving at all. Only a Government who have taken complete leave of their senses would, in those circumstances, decide to abolish the subsidy to Network SouthEast. It has been said before, but bears saying again, that if there is one part of the country where the last thing people need is a financial incentive to travel by road, it is the south-east.

I can see only one possible explanation for such utter stupidity. The Government were forced, by the weight of public opinion, to say that they would meet the bill for the safety improvements recommended following the tragedy at Clapham. I do not doubt that they will. The savings from cutting the subsidy will be returned to meet the safety bill. That will give the Government lots of kudos at no extra cost. Public funds for British Rail are being cut again, so that the much-vaunted and more than welcome investment plans will be paid for by higher fares, Iand sales and British Rail borrowing. That is a neat financial trick, but a short-sighted policy.

This careful study of the White Paper reveals where, and in what context, the Government are cutting or reining back on their previous plans and commitments. Of greater importance than all those details, revealing though they are, is the question: why? Why do the Government ignore the pleas for greater investment in training, education, research and development and transport? Why do their plans show that they will still cut where they can conceal it, and give false reasons for those cuts? They did so with training, claiming that the cut was due to the fall in unemployment, when we all know that unemployment is soon likely to rise and, anyway, spending per head is falling.

There seem to be two possibilities. The first is that the Government, and they alone, still refuse to accept the proper role of public spending in oiling the wheels of the economy. The second, and even more disreputable, reason is that they are making that choice to which the Chief Secretary referred in his evidence to the Select Committee, when he said that a major reason for cutting public spending was not that it was inflationary or intrinsically undesirable, but to make room for income tax cuts. The Government are leaving themselves room for an income-tax cutting and, they hope, election-winning Budget in 1991.

The Government are making the choice that they have consistently made throughout their period in office. When it comes to a choice between the national interest, the future well-being and prosperity of our country and the electoral interest of the Conservative party, the country can whistle. The Confederation of British Industry can whistle for more investment in the infrastucture, schools can whistle for repairs or enough teachers, the employed and the unemployed alike can whistle for the training opportunities which are giving our competitors more and more of an edge over us. Where, even with the restraints on investment that such a policy imposes, choices remain, they will be dictated by the Prime Minister's dogma.

I shall lay down a number of extremely simple but pertinent parameters about public spending. First, the Opposition reject the simplistic view that there is always, and in every circumstance, merit in reducing public spending as a percentage of national income. For example, West Germany spends a higher proportion of its GDP on public spending than we do, and does so successfully. Secondly, on each occasion, the level of public spending should be judged according to a balanced assessment of the nation's current needs and what can prudently be afforded, bearing in mind the American saying that one sometimes has to spend a buck to make a buck and—[HON. MEMBERS: "Ah!"] There is nothing very exciting about that. We should also bear in mind that proper and prudent public investment may be not only non-inflationary, but counter-inflationary.

Many comments in the Select Committee report, as elsewhere, show that our long-term economic problems, for example balance of trade, cannot be resolved without investment—some of which must come from the public sector. We are determined to make only the most limited of firm spending commitments—those that we must and can afford. Beyond that, we shall set out the direction of public investment and the priorities and choices of a Labour Government, emphasing throughout that we will not spend more than the country is earning or can prudently afford. The real question for the country, as for the House, is about the way we use the fruits of growth as they become available, where they are diverted, what needs they seek to meet and what choices are made.

Our priorities are clear: immediate relief for those who have suffered most—the pensioners and families with children—and the fostering of much-needed investment in our future, not by Government alone, but by forming a partnership and giving a lead to those many groups in our society who see the gaps opening up and wring their hands in despair at the Government's indifference and inaction.

Mr. Tim Smith

On 22 January, in the debate on the Social Security Bill, I asked the hon. Member for Birmingham, Ladywood (Ms. Short) about the cost of Labour's package for the disabled. She said that the Labour party would provide detailed costings of its entire programme before the next election. When can we expect that?

Mrs. Beckett

I do not think that the hon. Gentleman was listening. What I said was clear and simple—what we are promising after the next election is—[Interruption.] Perhaps the Chief Secretary would let me finish. What we are promising is an increase for pensioners and an increase in child benefit. Everything else that is regarded as a desirable aim is also listed, quite clearly and specifically, as something that we hope to do as resources allow. There is an excellent document that I can recommend to the hon. Gentleman. It has quite a nice beige cover, costs only £2.50, and is available from the Labour party at 150 Walworth road. It is called "Meet the Challenge, Make the Change". The hon. Gentleman will find it interesting.

Mr. Norman Lamont

What is the point in the Labour party's listing things that it thinks are desirable but which it might not implement? Is it not the height of dishonesty to include in a document undertakings that there is no firm intention to carry out?

Mrs. Beckett

I am not sure that I follow the Chief Secretary's argument. I thought that he, in his speech, and other Conservative Members, in their interventions, had demanded as comprehensive a list as possible of the things that a Labour Government might want to do in the next 30 years. Clearly, they do not want to know what we are promising to spend in the immediate future and thereafter. The Chief Secretary should make up his mind.

Mr. Norman Lamont

The hon. Lady is saying—and we have heard this before—that things in a Labour manifesto might not be implemented by a Labour Government. Surely things in the Labour party's programme ought to do things that the party intends to do—not things that it might do.

Mrs. Beckett

I will not take the hon. Gentleman's advice about what ought to be in a manifesto. I presume that in 1979 he fought the general election on a manifesto that contained nothing about increasing value added tax to 15 per cent.—almost doubling it. I can assure him now that the Labour party will not play a con trick of that kind on the British electorate.

Mr. Peter Viggers (Gosport)

The hon. Lady is walking delicately round the subject of public expenditure and Labour's future expenditure plans. Is she aware that her party's transport spokesman has said that our public transport system is in need of public investment on a massive scale? Does that mean that transport is near the top of the list of priorities for a Labour Government, or is spending on a massive scale just par for the course?

Mrs. Beckett

Some public sector investment in transport is indeed one of our priorities.

Mr. Norman Lamont

Is it not one of the hon. Lady's priorities'?

Mrs. Beckett

I am sorry that it is not one of the hon. Gentleman's priorities.

As we get near an election and see what room there is for manoeuvre, we may be able to make a better assessment of what the ranking order should be. There is no question about the overall priorities of an incoming Labour Government. As I have already said, there is an immediate commitment to the very poorest, who have suffered most under this Government and have had precious little sympathy from Conservative Members. There will be an indication of the direction in which we believe that investment can prudently flow.

Our message to the electorate is quite straightforward. One clear, cold look at the stewardship of the present Government points to the need for a new set of stewards. Here is our job application, our damage assessment: "Frankly, you have been robbed. We cannot return all your property; some of it has gone for good. We cannot overnight repair all the damage and undo all the neglect; some of the scars will always show. But we can make a start. Together we have already taken the first step. We know—all of us know—the scale of the problems and the needs. We can begin to rebuild. We can begin to repair. We can begin to reinvest. Give us the tools, and we will do the job."

5.53 pm

Sir Anthony Meyer (Clwyd, North-West)

I am very grateful to you, Madam Deputy Speaker, for having called me at such an early stage in the debate. I am sorry if my contribution is one that will prove to be excessively modest in relation to the position that I have been allotted.

In my view, the Chancellor of the Exchequer has made an excellent start in the high office that he now holds. I am sure that he would be the first to admit that almost as important as having wise policies is conveying the impression that those policies are wise and that they are supported by a united Government. It was the impression of the ill-concealed differences between my right hon. Friend the Member for Blaby (Mr. Lawson) and the Prime Minister over economic policy—most notably over entry into the exchange rate mechanism—that had so damaging an effect on confidence and on sterling. It had a more damaging effect than any possible mistakes that the former Chancellor may be held, with hindsight, to have made. By and large, the present Chancellor, by keeping his mouth shut when it is not necessary to open it, has avoided any appearance of conflict between himself and the Prime Minister. This has undoubtedly calmed nerves.

The trouble is that there has to be rather more than the usual element of guesswork in assessing whether there has been any fundamental change in economic strategy. It is now accepted wisdom that pure monetarism was abandoned a good while ago, and that we are now in a twilight zone where the ostensible policy still relies almost entirely on interest rates but where, nonetheless, there is a growing feeling that the present Chancellor may be more ready to employ fiscal means than were any of his predecessors. But until the Chancellor delivers his Budget we will not know whether that is true.

I have never made any secret of my support for the judicious use of public expenditure to stimulate industrial investment, particularly in the regions. Of course, we in Wales have a Secretary of State who has been an outstandingly successful proponent of that idea. During the current financial year we have had about £3.7 billion of public expenditure—representing an increase of 9.8 per cent. over the previous year. This has undoubtedly helped in a major regeneration of industry, urban renewal and rural development throughout the Principality, and has resulted in a truly massive volume of inward investment. A quite disproportionate amount of investment, particularly from Japan, in the United Kingdom has come to Wales. The effects of my right hon. Friend's policy are very widely appreciated throughout the Principality. Magic worker though he is, it has taken the electors a little time to appreciate the merits of this policy. However, I assure him that they are widely appreciated throughout the Principality.

My right hon. Friend managed to secure an extremely generous allocation of Government support for local government expenditure throughout the Principality. Thereby it has been made possible for most local authorities in Wales to keep their community charge within bounds. It so happens that the county that I represent and part of my constituency have both, in their separate ways, been clobbered very heavily by the change in the formula used for assessing the Government contribution to the revenue support grant. The county of Clwyd is having to make a rate precept of no less than £223 per person, which is terrifyingly higher than is regarded as acceptable as an average throughout Wales. I do not think that much of this can be attributed to extravagance or mismanagement. A great deal of it is due to the reduction in the level of the revenue support grant coming through this new formula. Still worse, the district of Rhuddlan in my constituency, which has been exceptionally well managed, is having to increase its share of the poll tax from £35 to £53—a 50 per cent. increase—purely as a result of the new formula. That is clearly not within the province of my right hon. Friends on the Front Bench, but it shows that, even where the general level of Government support for local government finance is adequate, there is still a margin of error. Therefore, a reasonable settlement for most local authorities almost inevitably involves considerable unfairness for a few.

I had intended to allude to the possible effect on local government finance of the severe flooding in my constituency yesterday when the sea wall broke. However, to my delight, I find that that is entirely the responsibility of British Rail because the wall runs within a few hundred feet of its railway line. I can rejoice in that, but ultimately that may not be for the benefit of public expenditure.

We can debate endlessly the right level of public expenditure. There is no doubt that tight control of public expenditure is vital and that the Government's record throughout has been immeasurably better than that of their Labour predecessors and infinitely better than is likely to come from any Labour successor if, God forbid, there ever should be one. But some public expenditure is necessary. However far we go with privatisation, there will always be things that people cannot buy out of the money that an increasingly indulgent tax collector leaves in our pockets. There are things that cannot be provided by the play of market forces.

For Socialists, if such creatures still exist after the recent upheavals in eastern Europe, the answer is simple: public expenditure can meet pretty well all of our needs, and those needs that cannot be met by public expenditure are somehow less serious, almost frivolous. When it comes to saying how that level of public expenditure will be financed out of wealth generated by the economy, the Labour party, and in particular the hon. Member for Derby, South (Mrs. Beckett), becomes extraordinarily unconvincing. Nothing that has been said by any Labour party spokesman gives any ground for believing that a Labour Government would ever take the firm decisions that are necessary to enable the process of wealth creation to go ahead.

But somewhere between the doctrinaire excesses of what sometimes appears to be the Government's attitude that all public expenditure is somehow wasteful, that public bodies are splashing around taxpayers' hard-earned money, and the Labour party's contention that there is a bottomless pocket from which public expenditure can finance just about everything there has to be a happy medium. I believe that the Chancellor is steering such a middle path, but when the Chief Secretary says, as he said this afternoon, that we do not want to see public investment crowding out private investment it leaves me a tiny bit queasy.

In my constituency—this is not a particularly good example—private investment is roaring ahead in the massive provision of retirement homes for elderly people, not resident in the area already, but to be attracted into the area by that massive provision of retirement homes. One of the most hideous buildings that I have ever seen now damages the front at Colwyn bay. It is a vast block of unwanted, unused old people's flats. Planning controls have proved an extraordinarily ineffective way of preventing some of those developments. It is all very well to say that market forces should prevent such a thing happening, but they do not. They happen through market forces. At the same time that that unwanted private development is roaring ahead, many of our schools are in a physically deplorable state. I am sure that more clear-cut examples could be found in other constituencies.

In conclusion, I repeat that we in Wales have benefited to an extraordinary extent from the skill with which two successive Secretaries of State for Wales—I say this in homage also to my noble Friend Lord Crickhowell, who preceded my right hon. Friend the present Secretary of State for Wales—have achieved a skilful balance between the tight controls operated by the Government and a measure of interventionism which has brought great benefits to the Principality and to my constituency.

6.4 pm

Mr. Robert Sheldon (Ashton-under-Lyne)

It was a pleasure to hear the hon. Member for Clwyd, North-West (Sir A. Meyer) enunciating the traditional Tory view which is at present dormant in the Conservative party.

I want particularly to refer to the speech made by my hon. Friend the Member for Derby, South (Mrs. Beckett). She made two points that were of great importance. First, she pointed out the particular problems that arise from the decrepit nature of so much of our industry and the various structures of our society. She also dealt with the prudent way in which she will act as the Chief Secretary in the next Labour Government. The prudence lies in the fact that she intends not to spend until the money has been earned. That is a lesson that all of us must welcome. We look forward to her carrying it out.

In particular, I want to mention our failure to maintain our inheritance. Our public buildings, roads, estates and hospitals were set up by previous generations and those institutions grew with the passage of the years. We have seen a failure to maintain them properly, and the inability to prevent the decay of so many of our assets which previous generations have produced for us.

I want to deal first with the civil estate, the estate owned by the Government. It is the Civil Service buildings, Department of Social Security offices, the Government Departments, police stations and so on. We have 8,000 properties held on trust by the Government; 110 million sq ft of property, worth about £3 billion—a desk estimate—in 1982. It is probably worth much more now. Offices account for about two thirds of that and storage and specialised buildings, such as the courts of law, the remaining third. The need to maintain that valuable inheritance is obvious to us all.

It was obvious to the Public Accounts Committee, as was made clear in its thirtieth report of 1983–84 entitled "Building maintenance expenditure in the United Kingdom". On 21 May 1984 it took evidence from Mr. Gordon Manzie, as he then was, who had just been appointed chief executive of the Property Services Agency, and Mr. Geoffrey Chipperfield, who spoke on most of the matters because he had been in post much longer. The PSA did not seem able to distinguish between essential and desirable works. In question 3338 I said: there is some widespread inconsistency in distinguishing between the essential and the desirable work. There does not seem to be a clear distinction between what is essential and what is desirable … How do you decide which should have priority when you are unable to distinguish between essential and desirable work? Speaking on behalf of the PSA, defending the ability to maintain the structures that it holds on our behalf, Mr. Chipperfield said: We entirely accept the criticism of the report here that we have not instituted adequate guidelines from the centre in order to guide our regions and areas and districts on what things they should take into account when deciding on the categorisation of maintenance expenditure. At the moment we are working hard to produce such guidelines which we will be issuing to our offices in the course of the year. That was 1984.

The Public Accounts Committee took evidence again in 1988 and that was set out in our third report of the 1988–89 Session. Our report deals with the six years of backlog of maintenance which is priority I and priority 2. Following our earlier report the PSA did distinguish between what was essential, where there was clear decay coming into buildings held on our behalf, and what was less essential. We took evidence on 15 June 1988 and questions 4865 to 4867 say: How long will it take you to clear this backlog? Sir Gordon Manzie replied: If we maintain the kind of level of spend that we have at the present time our aim is to clear the backlog by the middle of the '90s. I went on to say: So you reckon you have somewhere between six and seven years of backlog. Sir Gordon Manzie said: That is priority 1 and 2. I said: That is a very large backlog. Sir Gordon Manzie agreed.

The backlog has been allowed to grow. We question the Treasury as to the justification for not allowing the PSA to have more resources for maintenance work. The Treasury stated that it was for the PSA to decide its priorities from within its total budget. Nevertheless, it accepted that constraints on funding had been a factor which had prevented the PSA from doing some things which would have been desirable if more funds had been made available.

Now, four years later, we are not discussing optional matters; we are talking about an attempt to prevent further decay of the value of the estate. I refer to our third report, paragraph 30: Maintenance requirements for which the PSA are responsible are categorised into four priorities. Priority I: Unavoidable services to meet statutory obligations, which cannot be deferred for health and safety reasons, or which if not undertaken will seriously affect the crime department's operations and function. Priority 2: Essential services which cannot be deferred without risk or serious penalties in terms of dilapidations and/or increased costs. We found that allocations were sufficient to cover only 80 per cent. of priority 1. That is really appalling. We are not talking about gilding any lilies; we are talking about matters which can lead to serious consequences for health or affect the operations of the Department itself.

Then there is priority 3—urgent services which it is desirable to undertake. Nothing was done about essential services that could not be deferred without risk or serious penalties; action was taken only in regard to 80 per cent. of that crucial priority, where legal action could have been taken against them. The PSA now tells us, four years later, that following recommendations made by our predecessors it has improved the procedures for identifying and recording maintenance requirements, which included inspection arrangements. Its forward maintenance registers were now up to date. We managed to get it to do that.

Despite the fact that the PSA had been spending approximately £80 million a year, the backlog on priorities I and 2 over these years had risen to £125 million. In addition, there was a backlog on priorities 3 and 4 of approximately £50 million. The position has become worse.

The terrible thing about this is, as anybody who is familiar with property knows, that it is not just a question of a stitch in time saves nine. The value of money lost through failure to take essential action is a serious matter.

That is precisely what is happening to the civil estate—the buildings which the Government own, and which they are allowing to decay. The assets that are held in trust for British people have been declining because of that.

Let us consider defence. I refer to the sixteenth report of the Public Accounts Committee entitled "Control and Management of the Defence Estate". The estate consists of approximately 500,000 acres, 3,000 sites, including barracks and houses for soldiers, and 137,000 married quarters. The replacement value of all this property was thought to be £50 billion. The market value would be very much less, especially if it is in remote parts of the country—about £7 billion. Paragraph 18 reads: We are concerned about the alarming increase in the maintenance backlog from £125 million for 1987 to an expected £269 million at 1 April 1989 and in particular the under-maintenance of many married quarters. We trust that the introduction of competition and choice in maintenance will enable the Ministry to secure the highest possible level of effective maintenance from the funds available and reduce the backlog. We repeated the earlier recommendations that this should embrace maintenance and spend-to-save schemes and allow funds to secure the optimum return.

Paragraph 20 reads: The Estate has some 137,000 married quarters, of which about a third are overseas … but the vacancy level had continued to increase from 17 per cent. (13,876) in 1986 to 19 per cent. (15,228) in March 1988. The Ministry told us that the vacancy position had worsened. It has far more vacant sites than any local authority has as a proportion of the stock. Before complaining about the local authorities' activities, the Ministry should see what it is doing itself.

In July 1988 the Ministry sought the advice of consultants, who reported that in July 1988 the service's performance in managing married quarters was poor. Anybody who knows anything about this aspect would accept the criticism of that report.

The Committee looked at this matter in its ninth report, during the Session 1986–87, and found not only that many properties were empty, but in the London area—an area where one would not expect to find difficulty in letting property—the Ministry of Defence had 2,000 vacant properties, although more than 1,900 single or unaccompanied service personnel were in receipt of lodging allowance. Any strategy for maintaining the value of that which we own ought to embrace maintenance and—as my hon. Friend the Member for Derby, South pointed out—the principle of spending to save.

There is an argument for spending to save. Money can be borrowed for the purpose. It is a far better investment to stop the decay of properties. This is the best investment of all, because it is a year later, after the rain has got in and the property is decaying, that the really expensive bills are incurred.

Mr. Sydney Bidwell (Ealing, Southall)

Surely some of the storm damage would have been less if there had not been neglect? Would my hon. Friend respond to that? It would not be all that difficult to assess how much less the damage would have been.

Mr. Sheldon

I am sure that that is right. The storm damage affected particularly those properties that have been falling into neglect. This wanton neglect, about which little is done, is the falsest of all possible economies.

Another area of neglect is the roads and motorways, to which my hon. Friend the Member for Derby, South referred. This was mentioned in the nineteenth report for 1985–86. The Committee found that the cost of maintaining roads was not only leading to excessive delays about which we all know, but to unwarranted expenditure which needed to be incurred at a later date. Those who travel on our motorways will know that my journey to Manchester, for example, takes three hours when I leave here at night after a 10 o'clock vote and up to seven hours on Friday evenings.

Paragraph 19 of the report says: The liability for maintenance is increasing yearly as new road schemes are completed and added to the network, and older roads need major repair or resurfacing as heavy traffic takes its toll. While expenditure on maintenance might therefore have been expected to take up a larger share of its programme, it had in practice remained fairly constant at around 25 per cent. of total expenditure. The report does not deal with road construction, which is a disgrace. Roman roads have lasted for years, even centuries, but after only a few years cones can be seen up and down the motorways.

Dame Elaine Kellett-Bowman

Oh!

Mr. Sheldon

The hon. Lady travels on the M6. If she has not seen cones appearing again and again in the same places, she has not been keeping her eyes open.

Dame Elaine Kellett-Bowman

It is true that I suffer as a result of the motorway, but I do not drive a Roman chariot; nor do I exceed the speed limit, as the right hon. Gentleman clearly does. My right hon. Friend the Secretary of State for Transport has already taken action to prevent ridiculously unnecessary coning, and he is eager for us all to let the regions know when it happens. The right hon. Gentleman is right: the cones are a disaster.

Mr. Sheldon

The hon. Lady is extraordinarily gullible. I shall forget what she said about my exceeding the speed limit, although I do not do so, and I feel that she ought to withdraw her remark. Four years ago I was given an assurance by the Minister for Roads and Traffic that the level of the cones would be improved. I have been told that again and again, but anyone who believes it had better think again.

Paragraph 20 of the nineteenth report states: To achieve value for money in road maintenance it is important to resurface at the optimum time, to prevent undue deterioration leading to premature reconstruction, which can be nearly three times more expensive. Surely it is desirable to save nearly 300 per cent. by investing in preventive maintenance—or, rather, in maintenance to deal with damage that has already been caused.

The report refers to a backlog of 60 miles of motorway maintenance by the end of 1984–85"— the position has become much worse since then— and possibly as many as 220 single carriageway equivalent miles. Paragraph 23 states: We consider it most unsatisfactory that maintenance of roads has been starved of funds for many years. More funds are now to be made available", we said optimistically. We consider it imperative that they should maintain roads in good repair and avoid the need for premature and extremely expensive reconstruction of either motorways or trunk roads due to lack of timely maintenance. The hon. Member for Lancaster (Dame E. Kellett-Bowman) should remember the vexed question of the M25. That was probably one of the most disgraceful examples, but it is outside my area.

Dame Elaine Kellett-Bowman

Will the right hon. Gentleman give way?

Mr. Sheldon

No; I have already given the hon. Lady her chance.

The twenty-eighth report updates information about the backlog of maintenance of motorways and trunk roads. Let me quote from paragraphs 8 and 9: In July 1988 the Department estimated that as a result of their cut back in maintenance funds— the Department actually cut the funding— they would be able to deal with less than half the equivalent miles of road which they had intended to renew. They told us that the result would be to increase the size of the backlog and therefore the amount of maintenance needed in later years. Further deterioration caused to roads by a lack of maintenance would also lead to extra costs later. After four years, the position was still worsening. We hear the same promises year after year, and we see the same results—sometimes rather worse results. In that instance, money was taken from the road renewal and maintenance schemes and was spent on one or two new roads, and the same has been done several times since then.

The potholes referred to by my hon. Friend the Member for Derby, South are almost like those to be seen in an undeveloped country. There are some not far from here, and drivers must keep their eyes peeled to avoid them. It is a scandal. The PAC does not examine the underground and overground railways—they are outside our purview, more's the pity—but I am aware of the problems.

There is also the problem of dilapidation in the National Health Service, which is referred to in the fortieth report, dated 1987–88. The NHS owns about 50,000 acres, and 2,000 hospitals, the estimated value of which is about £13 billion, and we do not even know the condition of some of those hospitals. The report states: We are concerned that surveys of the condition of NHS property are not reliable or generally kept up to date. In view of the value of the estate … we are surprised that the use of space within buildings has not generally been assessed … Overall, we are not satisfied with the assurances". The report identifies health and safety as a major problem and states: We therefore expect the three health departments to monitor compliance with standards rigorously through their review processes. Paragraph 25 states: The maintenance expenditure required to bring NHS properties in England to a level regarded as the minimum acceptable standard had last been estimated at about £2 billion". Paragraph 27 states: the proportion of the estate in adequate or better condition had increased to 68 per cent". That means that 32 per cent. was in an unacceptable or inoperable condition.

We are talking about essential repairs, not minor ones. The worst of it was, however, that we did not know the full extent of the problem. Only 113 of the 191 area hospital boards replied to the questionnaire with which they were issued, and it is at least arguable that those that did not reply could present an even worse picture. Money is best used to prevent existing problems from getting worse. If a roof tile has gone, for instance, it is essential to replace it at an early stage; once the rot has set in, much more expenditure will be involved.

I have referred to the civil estate, the defence estate, the roads and the National Health Service; our first report, in Session 1988–89, dealt with the museums. The nation's historical, cultural and artistic heritage is of enormous value to us. We gained that heritage when we were a wealthy country. We shall never be as wealthy, in comparison with other countries, as we were in the last century and the century before that. Our heritage was acquired at enormous expense to us as a nation; its value is incalculable, and much is irreplaceable.

The Victoria and Albert museum has accepted that its care of the valuable books and manuscripts was a national disaster. We found that it was highly likely that a number of the most valuable collections had not been properly catalogued, and it is even possible that some pilferage has taken place. Much of that criticism could apply to other museums and art galleries elsewhere in the country.

In all those instances, the story is one of decay—do not let us cloak it in any other language. We are failing to maintain our fabric. I have not dealt with matters that the PAC does not consider, such as roads and streets in towns, and schools—although I know that in my constituency school roofs are leaking and walls are covered with fungus. Some of our utilities are also not being looked after. We are asking future taxpayers to pick up this generation's bill, and that cannot be right.

I know that the Chancellor of the Exchequer receives many calls for investment, and it is always difficult to know the rate of return on long-term investment, however advantageous it may appear. In this instance, however., we are talking about disinvestment, and the longer that we wait to tackle it seriously, the more the British people will suffer from the consequences of our inaction.

6.29 pm

Mr. Patrick Ground (Feltham and Heston)

I welcome the fall in Government debt interest which is reflected in the White Paper. I was pleased to hear my right hon. Friend the Chief Secretary to the Treasury refer to the large reduction in the national debt in the past three years, and the resultant saving of some £3 billion a year in debt interest.

The fall in interest is all the more remarkable when one considers the extraordinary rise in Government debt and debt interest in the 12 years up to 1986. Under the last Labour Government, between 1974 and 1979, the national debt doubled from £40 billion to £80 billion and from 1973–74 to 1979–80 the cost of servicing the national debt more than trebled.

The figures in the White Paper reflect the fact that it took the present Government more than a parliament to reverse the trend of Government borrowing and to start upon modest repayment. The table on page 25, in chapter 21 of the White Paper, which is adjusted for inflation, shows how the increase in expenditure on Government debt interest started to crowd out and choke other forms of public expenditure.

By 1985–86 debt interest had grown to equal the size of the education budget, and to be almost on a par with the defence budget. Debt interest constituted a sum equal to five sixths of the expenditure on health services and social services and to some 40 per cent. of the expenditure on social security. The figures, which are adjusted far inflation, show a decline of £4 billion in the figures since 1985–86, from £20.6 billion a year to £16.6 billion, and that is a change which I welcome.

Looking back over the course of British history, arid studying the pattern of Government borrowing and debt servicing, it is clear that the period of history which immediately preceded the change was an exceptional period in the peace time performance of a British Government. I welcome the fact that that period now appears to have changed. I hope that the pattern of repayments will continue with a substantial repayment of the debt in the coming Budget. I hope that, when Ministers consider the Autumn Statement and the policy for the coming year, they will take a prudent fiscal stance.

I remind the Minister of what is said in the first report of the Treasury and Civil Service Committee concerning the effect of sales of Government and local authority assets. The Committee warns: privatisation proceeds and other asset sale receipts give an exaggerated impression of how tight the fiscal position is. Privatisation receipts contributed £4.2 billion and local authority capital receipts provided another £5.3 billion to the budget surplus. The Committee remarks: although the fact that the government's finances are in surplus is a sign of fiscal tightness, it does not necessarily mean that it is tight enough, when related to the private sector deficit and the balance of payments deficit. Therefore, when we consider the present situation, and the favourable reversal that the Government have achieved, there is a strong case this year for maintaining a substantial repayment of debt to bring down the level of interest payments for the future. I believe that such a policy is prudent, sensible and constructive for sensible decisions about public expenditure, which will permit sensible growth of public expenditure where that is needed. It is also fairer to future generations not to saddle them with an increasing burden of debt.

It is time—as we are considering the White Paper—to look back over a period of 15 years of British history, and perhaps a few years before that, and to say that we welcome the fact that a period of heavy Government borrowing is coming to, or has come to, an end. We welcome the fact that lower debt interest payments by central Government are likely and may make more room for increases in various Government expenditure programmes. I hope that that approach is not necessarily partisan to the Conservative Benches, but is a policy of prudence which can commend itself to many other hon. Members.

We have learnt from bitter experience the effects of ever-increasing public debt. It creates overcrowding in the budget and ridiculously high interest payments.

6.36 pm

Mr. Matthew Taylor (Truro)

The background to any debate on public expenditure is inevitably the general economic circumstances that the country has to face. It is not possible to debate public expenditure divorced from that. We know that considerable economic difficulties lie at the Chancellor's door at present. One of those difficulties is the considerable trade deficit—a record deficit—which a Government that came into office talking about turning round our competitiveness should not have to consider. They can hardly be pleased to have to do so.

There is also the background of the problems that the Government have encountered with inflation—problems that are not entirely caused by outside forces. They can be laid, in no inconsiderable part, at the Government's door.

Whatever the reason, it means that when we consider the figures given in the documents, and by the Minister, in regard to planned increases in expenditure, we can anticipate that inflation over the coming year is likely to bite severely into the kind of increases in expenditure of which Ministers like to boast. I do not believe that economic forecasts that interest rates and inflation will fall, which the Government are currently basing their plans on, are credible. The Government's plans also assume that inflation for the coming financial year will be 6.5 per cent., and that inflation will be down to 3 per cent. by September 1991. That is wholly unrealistic in the circumstances that the Government face.

If we consider the impact that inflation has on expenditure plans, we find that they will be rapidly eaten away by any realistic estimate of what inflation is likely to be. If inflation is higher than the estimated figures, we may hope that Ministers will respond by increasing planned public expenditure. Yet the Chief Secretary to the Treasury made it quite clear that he did not believe that budgeting for inflation was an adequate way of proceeding. What he meant was that, irrespective of inflation, these are the kinds of expenditure targets that the Government intend to implement. I do not believe—and I do not think that in their heart of hearts most hon. Members believe it either—that those inflation targets can be met, so we can assume that the real expenditure increases of which the Government boast will not be met either.

Part of the answer to all this, in my view, is that the Government must abandon the dogmatic approach to reducing public expenditure as a proportion of gross domestic product. In an economic downturn, it is extremely difficult to meet such targets. Indeed, the Government appear in part to have acknowledged this, because this year, excluding the proceeds from privatisation, they are allowing for a slight increase in the percentage of GDP going into public expenditure. It is right, in my view, for spending to increase in that way at present. Indeed, I believe that it needs to increase further, but, if they are going to allow for that—and I will come later to some of the areas in which I believe that is necessary—a tight budget in other ways is needed, given the inflation problems about which I have already talked.

The Government need to do a number of things in terms of their overall economic strategy to make possible the kind of expenditure increases that I advocate. One is that in their economic policy making they need to give far greater certainty than they have as yet to the markets. The Government attempt to do that through interest-rate strategy. They say that they will do what is necessary with interest rates to create ground rules and certainty of that kind. But I believe not only that that is an inadequate tool but that it is not using the range of tools that are and should be available to Ministers.

I believe that the kind of economic restraint and certainty that could be provided through much more rapid progress towards joining the exchange rate mechanism is one way of tackling that. A second way, in our current economic circumstances, would be to make it quite clear that further cuts in income tax are at present ruled out.

If we were to adopt that kind of strategy and, particularly, to join the ERM, we would have to make compensating fiscal changes. I believe that we can do that by tackling some of the clear anomalies within the tax system, including the higher rate relief on mortgage interest rates and abolition of the ceiling on national insurance contributions, both of which unfairly help the rich.

Once we have done that, we can start to look at how the long-term impact of Government expenditure targets and restraints is affecting the economy and the kind of changes we can make on the supply side—changes that should be in the documents that we are debating today.

One of the difficulties in debating this matter is caused by the changes which the Government have included in their papers separating central and local government expenditure, for political reasons which the House finds easy to understand—although, given poll-tax capping, I doubt that the idea that the poll tax should introduce greater accountability to local government is really effective, as I believe the Government have ultimately acknowledged. Nevertheless, we can understand why Ministers might want to do it.

The problem is that, looking at the papers, it is impossible to get an accurate idea of what the Government think will happen in terms of expenditure on many important areas of the infrastructure and public services, because this becomes obscured by the complication of the local government system of assessing what expenditure should be, what the Government think it should be and what it actually will be.

Even so, if we consider some of those areas we can expose some of the weaknesses in the Government's plans. I start with education. Whether we put people first, or perhaps believe that in order to help people the priority must be to put the economy, business and incentives first, education is fundamental to this country's future. It gives an unrepeatable opportunity to young people. By and large, they cannot go back in later years to make up for shortfalls now. So it is one of the crucial areas for any politician, who must look at the quality of what is provided.

Last week's report of Her Majesty's schools inspectorate has met political flak in the Chamber. Different interpretations of it have been spun across the Floor and it has been the subject of political argument. But there is no doubt that, whatever the proportions may be, it tells of staff shortages, buildings in a poor state of repair and inadequate provision of books and equipment. Those problems, as I know very well from the situation in my part of the country, relate especially to primary schools; and education for the youngest people is something that education scientists would say is crucial to the prospects of young people as they grow up.

The education expenditure paper shows that the increase in cash terms in central Government funding is from £5,748 million to £6,590 million, while local authorities are expected to spend £15 billion this year. This is inadequate for the task of tackling the problems. Teachers' salaries will not rise sufficiently to deal with the problems of low morale and, especially, teacher shortages. It cannot be acceptable, whatever one's political view, to continue to have historians teaching physics and English teachers trying to teach maths for lack of qualified staff.

The local authority associations, not all of them by any means Opposition dominated, say that the education spending assessments for local authorities will leave a shortfall of some £800 million—a shortfall that is reflected at present in the estimates of what will be required in poll tax. If it were not so reflected, a cut of some 3.5 per cent. in spending on education would be required. This is reflected also in the debates in council chambers, including the debate today in Cornwall county council, about how to balance the need to keep the poll tax as low as possible so that people can afford it with the need to push it as high as possible to meet the spending requirements of the education system.

The December Adjournment debate that I was privileged to initiate allowed me to point out the special needs in my own area. The hon. Member for Clwyd, North-West (Sir A. Meyer) talked about similar problems in his area. Cornwall's schools need some £100 million to be spent on them to bring them up to the minimum standards laid down by the Education Act 1981. The allowance for capital expenditure from the Government is less than £10 million a year. We are moving backwards in Cornwall in terms of the state of repair of our schools. There are still 50 schools with outside toilets and 50 schools without the necessary school halls, and we have schools that in many other respects fall short of the minimum required.

I asked the Minister of State, Department of Education and Science what we should do about it. Would the Department allow us to spend the extra money, our money, needed to bring our schools up to standard? Her reply was not that the Government would allow us the money but that they were reviewing the standards. All hon. Members should be aware that when Ministers debate the specifics they are not talking about meeting the needs of the children and providing the things that parents are demanding for their children; they are talking about cutting, changing and reviewing the standards they have themselves laid down. That is the reality behind the expenditure proposals. No matter what Ministers say, tossing about percentages and talking about cash in real terms, the reality is that in many cases our schools are going backwards in terms of facilities.

There have been cuts in training and the privatisation of training provision was announced today. Again, public expenditure falls short of the real needs that are often presented to us in our surgeries and when we visit businesses, particularly small businesses. Such businesses suffer most from high interest rates as they are unable to negotiate the best discounts and are always on the edge of their borrowing limits. At the same time, they are being hit by the uniform business rate and revaluation, which hammer particularly small, local high street traders. They cannot distribute the costs around a large plc or make up for loss of profit in the high street by higher profit in manufacturing. The Minister has the ability to tackle those problems.

Small businesses suffer most from the lack of Government training initiatives. Of course, bigger businesses can and should be encouraged to take on some of the burden. One of the most distressing things to happen in the past 10 years has been the disappearance of many apprenticeship programmes which have been replaced by Government-funded and less-adequate YTS programmes. Cuts in Government expenditure hit smaller businesses which are in no position to train people or to do anything to tackle the skills shortages. Surely it should be a priority for Conservative Members who claim an interest in the needs of businesses to tackle the skills gap that is being addressed far more adequately in our nearest competitor nations in Europe and elsewhere.

I do not agree with the Minister that public investment crowds out the private sector. The lack of a basic infrastructure and a skilled work force crowds out private sector investment because businesses do not have the public sector background against which they can make that investment work.

We are told that spending on the National Health Service will increase by £2.4 billion, or 3.4 per cent. in real terms. Yet the White Paper assumes that Health Service pay and prices will increase by only 5 per cent. It is predicted that if inflation runs at 7 per cent. in the next financial year and wages in the Health Service reflect that, as I suspect they will, the health authorities could have a £37 million shortfall. That brings us back to the old argument between the reality of cuts and Government claims about increased expenditure. Of course both are true, but that will not solve the problems of overcrowded hospitals and morale in the Health Service.

We also lack the price information on inflation in the Health Service that would allow us to make a judgment about what is happening. We do not have information about demographic and other changes that are affecting our Health Service. It would not be difficult or expensive to tackle some of the problems that our constituents face. There are still long waiting lists for operations, despite the Government having announced programme after programme. I do not need to elaborate because hon. Members on both sides of the House are only too well aware of the problems that their constituents face in getting operations and medical care within a reasonable time. All too often Ministers know the cost of something but not its value.

The Financial Secretary to the Treasury (Mr. Peter Lilley)

Will the hon. Gentleman give way?

Mr. Taylor

I shall give one example before giving way to the Minister.

I do not apologise for using the opportunity to raise a local example. Cornwall's first air ambulance, in my constituency, is not funded by the health authority or by the Government; it is funded entirely by public subscription. It costs about £30,000 a month and an enormous effort has been put into paying for it. We were proud of the fact that it was the first air ambulance. People came from other parts of the country to look at it. Some of those people were from the Daily Express. They went back to London and announced in the Daily Express that they were launching the first air ambulance in the country. That was a surprise to us as we thought we had already done that and they had had a look at it. They had splash coverage in the Daily Express, but what really got our goat was that through a series of parliamentary questions we discovered that the Government were not only supporting it but were putting £50,000 a month—more than the total cost of Cornwall's air ambulance—into the Daily Express programme.

No matter how much we asked and how hard we tried to find out why that difference should occur, the reeking suspicion remains that Ministers do not treat public services as a priority; they do not recognise the value of what the public have done in Cornwall, but consider only the politics and the publicity content. Therefore, the Daily Express came out far ahead of the people of Cornwall.

Mr. Lilley

When I tried to intervene earlier, the hon. Gentleman had just said that Ministers know the cost of everything. Unfortunately, that is not so; we do not know the cost of the Labour programme or of the Liberal programme, although we know the value of both. Does the hon. Gentleman propose to cost the pledges that he has implicitly made today and his party has made repeatedly or, as with the Labour party, is there a line of small print saying, "You will never get it ever"?

Mr. Taylor

I am sympathetic to the Minister's criticisms of the Labour party, but he knows that in previous elections the Liberal Democrats undertook some difficult work in costing our programmes and we shall do precisely that in future. The Minister should accept that that is harder to do in opposition than in government, but nevertheless we intend to produce answers in subsequent elections, as we did in the last election.

Mr. William O'Brien (Normanton)

Returning to local support and local initiatives to help people who need treatment and assistance from the Health Service, will the hon. Gentleman bear in mind that local organisations have to raise funds to maintain local hospices? In my constituency people are working hard to raise funds and have approached the Department of Health for assistance, suggesting that perhaps the Secretary of State for Health should match pound for pound the voluntary subscriptions to help fund the hospice service, but we are miles from achieving that principle. The assistance that local organisations receive from the Government is miserable. Will the hon. Gentleman comment on the hospice service?

Mr. Taylor

I support what the hon. Gentleman has said about hospices. They work on the same principle as the parent-teacher associations, which put in enormous efforts. What bites them is not that they have had to put in such great efforts but when the money they raise gradually stops being a top-up and becomes part of the essential service. That really hurts people.

Mr. Allan Stewart (Eastwood)

Will the hon. Gentleman give way?

Mr. Taylor

No. I have been speaking for some time and wish to conclude my speech.

Despite the Government's talk about percentages, real terms and the rest, the reality is more than apparent. More often than not it is reflected when hon. Members talk about individual cases. The White Paper represents missed opportunities. We need a change of tack, and that is motivating many people throughout the country to believe that the Government are coming to the end of their natural life.

6.59 pm

Mr. Alistair Burt (Bury, North)

I always find that these debates take place in a somewhat unreal atmosphere. Opposition Members furiously conceal Government expenditure in order to produce some imagined sleight because they would like more money spent elsewhere. Increasingly, they furiously conceal their future public expenditure plans, either because they have none or, more likely, because they dare not reveal them. Quite naturally, they conceal their past record, rather like the offender who believes that time has lapsed on his conviction under the Rehabilitation of Offenders Act 1974 and that it is rather naughty to mention it.

I congratulate the hon. Member for Derby, South (Mrs. Beckett), who is my neighbour in Norman Shaw, on making a good speech. It was beautifully enunciated, but weak on policy. Should Glenda Jackson become an hon. Member, she will find that no one speaks from the Dispatch Box with clearer diction and more properly than the hon. Member for Derby, South.

The hon. Member for Derby, South used the analogy of a house when considering the Government's economic policy. Had she used the analogy of a house during the period of the Labour Government between 1974 and 1979, she would have given the picture of a house falling down, with severe subsidence, a "For sale" notice on the front, a foreign buyer giving the caretaker a list of demands to carry out and subversives busy underneath continuing to undermine its foundations. If she had produced the analogy of a Labour house in the future, she would have given not the picture of a house but, like foreign holiday brochures of a few years ago, an artist's impression. The British public, like the tourist of a few years ago, would find only a chap saying, "Sorry, we are too busy. Come back when the house is built." To add to the air of unreality, Conservative Members have sometimes concealed public expenditure for quite different reasons, but we no longer do so.

There is something touchingly biblical about the Government's modesty—of the left hand not knowing what the right is doing—but that can be alarmingly counterproductive. Although all too often it is not recognised by the general public, our public expenditure record is very good. The prospects that were all outlined by my right hon. Friend the Chief Secretary to the Treasury make the opportunities better still.

No one seriously believes in the blank cheque argument any more, except perhaps the hon. Member for Derby, South and her hon. Friends. Priorities, rightly, must be preferred, and the Government's honest determination to put those facts before the people is to be commended.

Our perceived attitude to the public sector has cost us dear in the mind of many people. I think that we should be unequivocal. Some services are well provided by the public sector, and will continue to be so. Those who work in public service are to be commended for the difficult jobs that they often must do and, in many cases, for the excellence with which they do them. It is a genuine outrage to suggest that Conservative Members believe differently.

The Government's overall stance is correct. They are right to prioritise, which is why I welcome the further emphasis that has been placed on the National Health Service, with spending rising from this year to next by £2.4 billion, or 5.5 per cent. in real terms.

However, mere recitation of those figures becomes tedious and unreal to constituents, so let me briefly mention what the Government's record over the past few years has meant in tangible and practical form to my constituency and health authority. Consultant medical staffing has increased by about 35 per cent. over the past five or six years. Money has been earmarked to support those doctors, and the new posts will lead to reduced waiting lists and to the introduction of services that previously were not available in Bury. Nursing staff has increased from 875 in 1979 to over 1,100 now. Capital spending since 1979 has run at about £19 million. That is not just a figure, because it has produced at Fairfield general hospital a new children's ward, a new children's out-patient department, a new ante-natal clinic, a new catering department, a new sterilising department and a new ear, nose and throat out-patient department.

Developments from April 1989 onwards show a new ENT theatre costing almost £500,000, a major upgrading of an orthopaedic theatre and the provision of additional wards for the elderly at Bury general hospital. Those are not just figures; they are tangible services that are now available in my health authority. That is what public expenditure on the Health Service has meant in Bury.

Curiously, over the past 12 months a new group has formed in my constituency, called the Bury Health Services defence campaign. I am at a loss to work out quite from whom it is defending the National Health Service. It cannot be from me or from Ministers, who have provided more nurses, doctors, buildings and services over the past decade. I believe that it is working to defend us from a severe attack of a Labour Government, because a previous attack was serious indeed. They cut nurses' salary, capital expenditure and total spending on the Health Service in my constituency by 2 per cent. between 1974 and 1979, compared with the growth of 19 per cent. over the past decade under this Government.

I therefore look forward with confidence to future expenditure on Health Service provision in Bury, secure in the knowledge that the Government properly dispense care through efficiency and competence, whereas care under Labour Governments, mouthed uselessly all too often, is not provided and is threatened by mismanagement and over-heavy union control.

I am in a position to reveal a great truth to the House. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) made passing reference to traffic problems and to cones on our motorways. There is much mystery about from where those cones come. Do they multiply among themselves in the dead of night? Do they appear, like Santa Claus and Labour party policies, from fairyland? No, I can reveal that the world's best cones are made in my constituency by a firm called Swintex, under the guidance of a chap called Harry Houghton. They are the best cones in the world. They are beautifully made and have improved substantially over recent years. They are more fluorescent and more stable, and, if properly used in traffic management control, they can make a significant contribution to road safety. The next time that hon. Members pass those traffic cones, they should curse them not; they should think only that they are yet another good product from Bury and rejoice in the safety that they bring to the roads as necessary road repairs are carried out.

I welcome the projected increase in overseas development aid from £1,430 million in 1990 to £1,750 million by 1993. The aid budget is planned to increase by about 22 per cent. in cash terms and, we hope, by about 9 per cent. in relation to domestic inflation. I make a particular plea to Ministers for an increase in the share of that aid for southern Africa, particularly for South Africa.

It is not sufficiently widely known how much Britain has achieved for black South Africans over the past few years. South Africa is much more a mixture of first and third world than people realise. Rural poverty is extensive, and apart from the obvious inequalities between blacks and whites, which must be addressed by the future South Africa, much work will ultimately need to be done in rural areas to improve health, education and economic standards. Anyone who has visited rural Africa will have been touched by the scenes at the sides of roads in the early morning or in the afternoon of children from poor homes managing to struggle to appear in some form of school uniform. Such is the value of education that great effort is made.

I have visited South Africa twice in recent years on a Christian basis and have seen some of the work that the Government have done for the black community of South Africa and for Mozambiquan refugees in the area of South Africa known as Kangwane, under the fine leadership of chief Minister Enos Mobusa.

Many people in South Africa believe that the changes currently taking place there have much to do with internal changes of attitude as a result of years of patient work for peace and reconciliation by Christians and others across, all races. Put in that context, the equally patient work undertaken by Britain, either directly or via voluntary agencies, deserves some credit. Together with our uncompromising message of hostility to apartheid, which has been personally delivered by our excellent ambassador, Sir Robin Renwick, who is highly regarded in all South African circles, that work has been helpful in changing attitudes for the best.

What sort of work do we do among black South Africans that is so valuable? Between 1987 and 1992 this country will have provided over £30 million in support of the black people of South Africa. We provide help and assistance for students, the seed corn of the future of South Africa.

This year we are providing for 90 undergraduate awards in Great Britain, 60 undergraduate awards in South Africa and 250 postgraduate awards in Britain. In total, including those who continue their studies from earlier years, Britain will be financing about 1,000 black South African students from 1991.

Rural schools and squatter camps have also been assisted. There is a project in Johannesburg called Women for Peace, a non-racial organisation with branches across South Africa. It aims to break down barriers between races. The Women for Peace building in Alexandria, the black township nearest the centre of Johannesburg, was opened in 1988. Britain contributed 30,000 rand, the majority of the construction costs and a number of sewing machines. The building is used for typing and sewing lessons, craft lessons for the handicapped, and supplementary lessons for school pupils, and is available for general community use. The building has proved so successful that Women for Peace is in the process of extending it. That is an example of what Britain is doing in South Africa through public money.

The further development of South Africa is the key to the future of the continent. It could be an engine of change for the countries around it, with immense benefits accruing to all. That is why it is important for our programme for black South Africans to be continued and intensified.

I have given two examples, one at home and one abroad, of the good that can come from public expenditure. There are other examples of the good that has been done under Conservative rule in Britain. Public expenditure must not become so large as to distort the economy. We have had examples of that in the past and, frighteningly, we have had a foretaste of what might happen in the future. The Labour party cannot get away with what it has said about its public expenditure policy. We will not accept a blank cheque. But if public expenditure is not to grow and distort, neither should judicious public expenditure wither on the vine. We have much of which to be proud in our public expenditure policy. We should proclaim that loudly, correct what is wrong and protect this country from the financial disaster that would befall us all if the Labour party was ever to take office.

7.12 pm

Mr. Denzil Davies (Llanelli)

Earlier in the debate the hon. Member for Clwyd, North-West (Sir A. Meyer)—who is not now in his place, and I make no criticism of that—referred extensively to the economy of Wales, to the Secretary of State for Wales and to his own constituency. He waxed lyrical about the economic situation in Wales, and it might be wise if, at the outset of my remarks, I were to put the record straight.

Income per head in real terms in Wales has fallen over the past 10 years. It is lower now than it was in 1979. It is also lower in Northern Ireland. The other regions of Britain have just about maintained their income per capita. The gap between Wales and Northern Ireland is now narrower than it was in 1979. We have low incomes, high unemployment, much part-time employment, a run-down social infrastructure and run-down social services. That puts the record straight.

The Chief Secretary, as always, did his best this afternoon. He tried to pretend at the outset that he did not like public expenditure, but went on to say that it was a good thing. We are again debating an expenditure White Paper produced by a Government who do not really believe in public expenditure. In the last 10 years the Conservatives have hacked, cut, sliced and nagged away at public expenditure with the exception of expenditure on the armed forces and the police.

When the Conservatives came to power, they were imbued with the ideological belief that public expenditure was bad, and they took the same view of the trade unions, the dreaded public sector borrowing requirement and high taxation. They claimed that public expenditure was at the root of all our problems, especially inflation and economic decline.

Mr. Tim Smith

The right hon. Gentleman cannot be allowed to get away with the suggestion that we have cut public expenditure. The Autumn Statement shows that in 1978–79, real-terms expenditure was £164.8 billion. I believe that the right hon. Gentleman was at that time a Minister at the Treasury. Next year, the year that we are debating, it will be £191.7 billion, so it has increased substantially in real terms.

Mr. Davies

If the hon. Gentleman believes that, he will believe anything. He should talk to hospital management board members and others.

Mr. Tim Smith

Has public expenditure not increased?

Mr. Davies

Yes, a great deal has been going into unemployment and social security payments, due to the problems that the Government have caused. But on matters that are crucial to our infrastructure, such as education, training, research and development and trade and industry, there have been cuts in public expenditure.

When the Chief Secretary discussed research and development, he said that we spent a higher percentage than Germany and Japan. But that is so only because the right hon. Gentleman included the figures for military research and development. He went on to say that we spent more than the Americans on civil research and development. Of course we do, because they spend more than us on military research and development. The fact remains that all areas vital to our economic infrastructure have suffered cuts time and again under Conservative rule.

A Government who did not have such ideological hang ups about public expenditure would have used the marvellous opportunities of the 1980s—low international inflation and massive surpluses, approaching £85 billion, from oil revenues—judiciously and prudently to build up our economic infrastructure to enable us to compete in the more difficult years of the 1990s and the turn of the century. Instead, spending on almost every item—education, training, support for industry and civil research and development—has been cut over the years.

Education expenditure has fallen from 5.5 per cent. of gross domestic product in 1978–79 to 4.8 per cent. in 1988–89. Only 35 per cent. of people in Britain between the ages of 16 and 18 stay on in full-time education and full-time training. The figure for France is 66 per cent. In other words, during 10 years of Conservative rule, with the most favourable economic climate that any Government have had since the war, that is all that our Government have been able to achieve.

Consider the figures for trainees qualifying in craft, engineering and technical subjects in Britain compared with France. Last year, 27,000 youngsters qualified in Britain, whereas 80,000 qualified in France, three times as many. How on earth is Britain to compete with the French and the Germans—even with the Italians—in the 1990s when the amount we spend on training is so meagre?

Instead of planning for the future and using correctly the £85 billion or £87 billion of oil revenues, the Conservatives threw the lot into an unfettered marketplace and allowed the money to be redistributed in that way, instead of using it to improve the economy. One need not be a financial wizard to appreciate what the market did with those billions of oil surpluses. They went, as always in the British economy, to those areas of the marketplace that have dominated the economy since the war and have caused so many of our problems. They did not go into manufacturing. Indeed, manufacturing investment has been slow in growing since 1979. Service sector investment has grown in the past 10 years while about one third of our industry has been destroyed.

In the first instance, the money went into residential and commercial property. The Prime Minister preaches financial rectitude. She has encouraged enormous borrowing to enable people to acquire residential property. At the height of the boom it was possible to borrow three and a half times one's income from banks and many building societies to buy a house or flat. It was also possible to borrow 100 per cent. of the valuation. That did not happen 10 or 20 years ago. In France, Germany and other European countries Governments would never have behaved with such profligacy as the British Government have behaved in encouraging such borrowing.

The shadow Chief Secretary, my hon. Friend the Member for Derby, South (Mrs. Beckett), mentioned M4, one of the monetary indicators which I do not think the Government have adopted. They have adopted all other monetary indicators and then abandoned them. M4 includes building society activity. Over the last 10 years, M4 has increased by at least 15 per cent. every year. The increase has been far greater than any other productive potential or power of the economy. As a result of the boom, asset values, house prices and the value of residential property increased, and people started to borrow on the basis of their value. They borrowed and they bought more goods which had to come from abroad because British industry, having been decimated by the Government to a considerable extent, could not produce the goods. The supply side was not there to produce the goods that people wanted because they had the money to buy them.

Then money poured into commercial property. Insurance companies and pension funds are still collecting people's contractual savings. It must be said that over the last 10 years people in employment have had a substantial increase in their real incomes and wages. The Government cannot take credit for that. I accept that some of the increase resulted from increased productivity in manufacturing industry, but most did not. In fact, most of the economy is now a service economy which does not know the meaning of productivity and which is not subjected to the same competition as manufacturing industry.

The increased earnings and increased contractual savings went into the pension funds and insurance companies. With their incestuous and sometimes unhealthy relationship with developers and with the bureaucrats in some of the larger town halls, they poured money into the shopping malls, marinas, B and Qs and Great Mills. Money poured into places that were selling goods from abroad. After 10 years of the Tory Government, the economy could not produce the goods that people could buy with the money they borrowed or earned.

I think that it was Napoleon who said that the English were a nation of shopkeepers. They are. Perhaps the Welsh are, too. At least in Napoleon's time the English and perhaps the British had the wit, the art and the skill to produce the goods that they sold in their shops. We are still a nation of shopkeepers but unfortunately we cannot produce the goods that our people want. We have to go abroad for them; hence the massive balance of payments deficit.

The other area to which the money went—surprise, surprise—was the good old City of London. Ten years ago the City of London was the most open financial economy, if that is the right description, in the world. Any bank could come in; anyone could set up in the City. It was far freer than Frankfurt. The Germans do not seem to need a large stock exchange, yet they have a massive balance of payments surplus; they can keep inflation down and they have high public expenditure. Compared to the City of London, Frankfurt is a small stock market. So is Paris, and the French have done much better than we have.

Ten years ago we had an open financial market but the Government have opened it up even more; they have made it even freer and competition is even more unfettered. They did it in many ways. They removed the reserve asset ratios established by the banks. There was freer borrowing from banks, with no problems from the old Bank of England asset ratios. Then the Government relaxed, and released almost immediately, exchange controls; the former Chancellor did that when he was Financial Secretary. Of course, exchange controls had to go in the end because of the rules of the treaty of Rome. But why did the Government do it suddenly? Why did they not do it gradually, as the French did? The French lifted one control after the other. They kept an eye on the economy to make sure that when they lifted controls they did not damage the real economy. The Germans did the same, as did other countries. Why did we overnight completely abandon exchange control? We did it, causing a boom and the inflation from which we are suffering.

Mr. Norman Lamont

If the right hon. Gentleman has read the autobiography of his boss, the former Chancellor of the Exchequer, he will recall that in that book the right hon. Member for Leeds, East (Mr. Healey) described how he considered abolishing exchange controls and explained clearly why he thought it necessary. That was when the right hon. Gentleman was a Treasury Minister.

Mr. Davies

I concede that exchange controls had to be abolished. I also appreciate that the treaty of Rome made us abolish exchange controls, whether we agreed or disagreed with them. But exchange controls did not have to go overnight.

Mr. Norman Lamont

The right hon. Member for Leeds, East wanted them to.

Mr. Davies

Whatever my boss wanted, my view is that they did not have to go overnight. We could have followed the experience of the French and the Germans and relaxed them gradually, but that was another instance of opening up the financial community completely.

Mr. Robert Sheldon

If my right hon. Friend the Member for Leeds, East (Mr. Healey) had abolished exchange controls overnight, I can tell everyone in the House that he would have had a resignation on his hands.

Mr. Davies

The reserve asset ratios had gone; exchange control had gone. Then we had the big bang which broke down many of the traditional barriers, financial and ethical, in the City. Again, nobody cared. Those barriers had to go. Over the last few years we have had takeover after takeover, merger after merger. Nobody cared about the company. The only question was, who owned it? No economic analysis was made of the consequences of the takeover.

The irony is that, despite all this, the Chancellor is not getting much money out of foreign investment. Money went abroad. The Central Statistical Office is scrabbling around trying to find £100 million to help reduce the massive balance of payments deficit. I have not looked up the figures, but I would not be surprised if the amount of money remitted to Britain in income and dividends is not that much greater than the amount remitted when we had exchange controls. I may be wrong. Despite all that has happened, the money remitted is going down every month. Perhaps that is an indication of the confidence that the financial community has in the Government.

The flow of money into property, wages and earnings, and the City has created the position with which we are faced. A prudent Government—the word "prudent" is used all the time by Chief Secretaries—would have used some of the £85 million to build our economic infrastructure, and to improve training, education, and civil research and development so that we could compete with the French and the Germans in 1992.

A future Government will pay a heavy price for this Government's profligacy. The Government like to talk about financial rectitude. Future Governments and the public will pay a heavy price. Of one thing we can be certain: the Tory party will pay a heavy price at the next election.

7.27 pm

Mr. Allan Stewart (Eastwood)

I am accustomed to hearing some fairly neanderthal speeches from Scottish Labour Members, but some parts of the speech of the right hon. Member for Llanelli (Mr. Davies) made them sound like models of progressive realism. We heard a great deal of Welsh rhetoric about cuts. When it comes down to it, my understanding of the right hon. Gentleman's definition of a cut is when a spending programme is reduced as a percentage of gross domestic product. I point out to the right hon. Gentleman that gross domestic product has gone up from £173.4 billion in 1978–79 to £517 billion in the current year. That is why the Government could increase expenditure in real terms on key programmes.

It is a pity that none of the Opposition Members who have spoken recognised the force of the arguments of my hon. and learned Friend the Member for Feltham and Heston (Mr. Ground), who pointed to the crucial importance of public sector debt repayment and the fact that that enables the Government to increase expenditure on priority areas without risk to their overall policy.

Like other hon. Members, I congratulate the hon. Member for Derby, South (Mrs. Beckett) on making her first speech in her present Front-Bench position. I do not criticise her for not giving way to me earlier as she had very fairly given way to a number of my hon. Friends. I now have the opportunity to ask the hon. Member for Newcastle upon Tyne, East (Mr. Brown) whether he will answer the simple question that I would have asked his hon. Friend. Apart from defence, is there any expenditure programme that the next Labour Government would reduce? [HON. MEMBERS: "Come on Nick!"] I shall be happy for the hon. Gentleman to answer.

The Opposition have three approaches to public expenditure. First, there is the approach of the hon. Member for Brent, East (Mr. Livingstone). In The Guardian on 2 October he said: We have to say now what we are going to spend and where the money is going to come from. That is a proper and honest approach. Secondly, there is the approach that might be described as the "nudge, nudge, wink, wink to the pressure groups" approach. The hon. Member for Kingston upon Hull, East (Mr. Prescott) said that transport needed public money on a grand scale". Every Opposition Member who speaks on the Health Service says that expenditure must be increased on whichever aspect of the Health Service is being discussed. The education spokesmen say that student grants must be increased and social services spokesmen say to the pressure groups that social services expenditure must be increased.

The third approach might be described as the "Monklands amendment". The right hon. and learned Member for Monklands, East (Mr. Smith) goes around quoting as a pillar of fiscal rectitude—

Mr. Norman Lamont

My hon. Friend is making an interesting speech. Does he agree that the answer to what he said was given by the hon. Member for Derby, South (Mrs. Beckett) when she told us that a future Labour Government would be committed only to two things—an increase in pensions and an increase in child benefit? Everything else might happen or might not happen, but would none the less be listed. Is not that a thoroughly dishonest approach?

Mr. Stewart

My right hon. Friend goes to the heart of the matter. The speech of the hon. Member for Derby, South will be read carefully by my hon. Friends and will, no doubt, often be quoted objectively in future.

The right hon. and learned Member for Monklands, East goes round like the famous Dutch boy with his finger in the dike. As the floods of promises and pledges increase, he rushes round saying, "Remember lads, say 'as resources allow'. Don't put any figures on it." He is not succeeding in that approach and he will not do so.

I shall give two examples relating to education in different parts of the country. A document called "London Pride", published by the Labour party in January 1990, said: Labour will make repair and modernisation of school buildings a top priority. How many top priorities are there? In Scotland, the approach has been rather different. Last week, the Labour party there announced its plans for Scotland to journalists. One of them asked mildly how much they would cost. He was told: We have had 10 years of not affording education and look what it has cost us. That approach to public expenditure reminds me of a Scottish friend who, when he came to London, discovered a doubles bar with a happy hour. After about his fifth cheap double, my friend was generally admonished by others there about the merit of continued expenditure. He said. "Have another. Think of the money I'm saving." Such is the approach to much of public expenditure which is adopted by Opposition Members.

Mr. Burt

Does my hon. Friend agree that a fourth principle has been enunciated this evening? It was mentioned clearly by the hon. Member for Nottingham, North (Mr. Allen) and was not contradicted by his Front Bench. He said that the spending policies of the next Labour Government would be revealed the day after the election. There was no contradiction from his Front Bench. Is not that a further extraordinary example of how to lay policy honestly before the British electorate?

Mr. Stewart

My hon. Friend the Member for Bury, North (Mr. Burt) is right. All that that pledge to the British electorate means is that if there were, by any mischance, to be a Labour Government, they would issue a public expenditure White Paper at some point.

The right hon. Member for Llanelli and my hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) spoke about Wales. They would not expect me to talk about Wales, but it is interesting to examine identifiable general Government public expenditure per head in different parts of the United Kingdom. For 1988–89, the figure for England was £2,161. For Wales, the figure was higher at £2,489. The figure for Scotland was £2,805. It is interesting that no Scottish Labour Members are here now, although I do not criticise them for that.

Mr. Tony Favell (Stockport)

They are spending all the money.

Mr. Stewart

My hon. Friend says that he believes that they are out there spending all the money. It is impossible to argue that Scotland is somehow disadvantaged in public expenditure.

I want to refer to local authority expenditure and to table 21.4.11. Will my hon. Friend the Economic Secretary to the Treasury and the hon. Member for Newcastle upon Tyne, East say a word about the implications for those figures of the implementation of the local government finance policies currently being advocated by the Labour party? If one removes the index linking of non-domestic rate income—which is a Labour party pledge—inevitably, that constraint on local authority expenditure is removed. My hon. Friend may, on this occasion or in the future, want to talk about the implications for public expenditure of the roof tax, which is clearly proposed by the hon. Member for Glasgow, Garscadden (Mr. Dewar) and his colleagues and far less clearly proposed by hon. Members south of the border. Perhaps the hon. Member for Newcastle upon Tyne, East will do the entire United Kingdom a service tonight and confirm that the Labour party generally agrees wholly with the concept of a iroof tax as spelt out by its Scottish spokesman and that it will apply in precisely the same way north and south of the border. If the hon. Gentleman wants me to give way to him, I shall be happy to do so. Does the hon. Gentleman want to get the wording right for his winding-up speech?

The introduction of such a tax, among its many other disadvantages, would have major implications for public expenditure. The tax base would be so much smaller than either the base of community chargepayers or the old base of ratepayers. The burden would fall on a small, selected part of the electorate. There is a recipe for massive increases in local authority expenditure when local authorities can go ahead with such increases without any real political cost. Those may be questions for the future, but I hope that we shall be given some answers tonight by the hon. Member for Newcastle upon Tyne, East.

7.38 pm

Mr. Graham Allen (Nottingham, North)

In our previous economic debate, I began my remarks by quoting the line from "Jaws": Just when you thought it was safe to go back in the water in respect of Ministers. I feel like quoting the same line tonight, given that my hon. Friend the Member for Dunfermline, East (Mr. Brown) has now moved on to greener pastures. His place has been taken by my hon. Friend the Member for Derby, South (Mrs. Beckett) who showed real merit and steel in her opening speech. Conservative Members may yet grow to wish that my hon. Friend the Member for Dunfermline, East was back in his place as shadow Chief Secretary to the Treasury, given the performance of his successor today.

Before I speak about the public expenditure plans, I should say that I am grateful to the Government for the changes that they have made to the layout and format of the Government expenditure plans in the White Paper. I was sorry that the Chief Secretary did not pay tribute to the Chairman of the Public Accounts Committee along with his warm tribute to the Chairman of the Treasury Select Committee. The documents have advanced so far that they are almost comprehensible to an ordinary human being. That is quite some progress, given the way that the documents looked some years ago. I thank the Chief Secretary in particular for his efforts in moving the papers on a wee bit.

I hope that hon. Members will begin to look at these documents seriously. Each Select Committee has an opportunity to examine them, in conjunction, one hopes, with annual reports from Departments, and to give some teeth to the parliamentary financial accountability of the public expenditure plans that the Government lay before the House. It would be no bad thing if each Select Committee reviewed the relevant documents and brought before the House a report on Government expenditure.

All that was by way of an aside. It worries me that Conservative Members do not know which tag to adopt when defending Government expenditure plans. Sometimes they say that we must control public expenditure. That is a totem to show how fiercely they are prepared to guard the financial integrity of the Government. At other times they talk about how much more the Government are spending. There is always an irreconcilable contradiction in Conservative Members' remarks. They cannot reconcile the desire to promote the image of the Government as a high-spending authority at national level with the idea that the Government have a tight fiscal policy, as the Chief Secretary would have it called. That is called having your cake and eating it. I am sure that my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Brown) will refer to that when he sums up, as my hon. Friend the Member for Derby, South did in her opening remarks.

There is a basic fallacy and misunderstanding in the remarks of Front-Bench Conservative Members, too. They equate on a one-to-one ratio the financial health of public sector spending with that of the economy as a whole. That is to mistake Great Britain Ltd.—the enterprise of the Government, who have balanced their books—for the health of the economy as a whole, which is in a deplorable state.

The stewardship of the Government does not merely involve Government expenditure. It sounds fine to say that we are repaying a certain amount of our debt, but the responsibility and the role of Government in the financial sphere is not only to manage their finances properly. The essential priority is to use that finance to ensure that the wider economy works properly. To express joy merely because one part of the economy is under control—as the Government would have us believe—is not enough.

We see the poor condition of the wider economy in the various indicators of economic success. Our trade deficit is the highest percentage of GDP in any industrialised country in the West. Inflation is running at an average of 7.7 per cent. over the year. We have the highest inflation of the Group of Seven countries. Interest rates are going through the roof and one in 10 people who have a mortgage are falling behind with their repayments. Every hon. Member knows that industry is screaming out because it cannot obtain the finance that is essential for long-term investment. That is the measure of the Government's economic success. The Government may take pride—perhaps misplaced pride—in the state of the minor section of the finance for which they are executively responsible, but the fact that they are repaying the public debt is not enough.

The Government have had tremendous advantages. It is commendable to repay the public sector debt, but, with North sea oil revenues over a 10-year period of some £87 billion and the massive consumer boom—with money sloshing around throughout the economy—the Government do not have a great deal to show for 10 years of tremendous advantages. Yet at the end of that period they talk so glibly and gladly about the one area in which the Government seem to have balanced their books.

To make my point, I can do no better than to quote as a point of reference for the missed opportunities the following extract: without higher investment—in skills, innovation and the infrastructure as well as new production capacity—we stand little chance of overcoming either our balance of payments deficit or inflationary pressures without a recession. But I regret to report that we enter the new decade with an unfavourable economic background against which companies will be formulating their investment plans". That quotation is not from the shadow Chancellor or Financial Secretary but the Director General of the Confederation of British Industry, that renowned Socialist Labour supporter, John Banham.

In this month's CBI News both Conservative and Opposition Members will read that the CBI will soon hold its annual dinner. It is on Thursday 17 May, in case Conservative Members have not put it in their diaries. It is to be a relaxed and cheerful gathering of members and their guests to enjoy a convivial evening of good food and conversation. It will be of interest to both Conservative and Opposition Members that the guest speaker will be none other than the Chancellor of the Exchequer. I hope that he will have on his left John Banham, who may even read him that quotation from his article in CBI News. On the Chancellor's right perhaps he will have Sir Trevor Holdsworth, the outgoing president of the CBI. He, too, has made several pungent comments on how the Government are failing to meet the needs of commercial and industrial development. He could do no better when the Government talk of their large public sector surplus than to quote from the CBI report to members. Under the heading "Economic Priorities for 1990" it urges that: The large public sector surplus be used for increases in public spending on the transport infrastructure and for cuts in business taxes:". I hope that at that dinner the Chancellor of the Exchequer will be sandwiched between those two chairmen and that that sandwich will be the most savoury item on the menu. I hope that the Chancellor will listen, if not to the Opposition or rational economic argument, at least to the views of people who in the past were supportive of his party.

Public expenditure as a percentage of GDP has fallen. That is clear from the documentation. That fall in public expenditure in real terms is evident in the lack of investment in industry and transport. The fall in expenditure simply represents cuts—good old-fashioned cuts. For example, there has been a massive reduction in the rate support grant to local authorities. The hon. Member for Clwyd, North-West (Sir A. Meyer) said that his local authority was suffering. It is no reduction in the tax burden or in requests for moneys from individuals if the Government say, "We are not giving you more or even the same rate support grant. That money will have to be found from other sources." Ultimately, the individual, the family, the taxpayer and the poll tax payer has to meet the bill.

It is a sleight of hand to imagine that local government expenditure can somehow magically be reduced merely because central Government reduce their contribution to local government. We all know—all hon Members know this from constituency experience—the pressure under which local government has been put by that sleight of hand. It does not reduce public expenditure; it simply makes the national books look a little healthier.

There are also cuts right across the range of housing provision. I know that my hon. Friend the Member for Leeds, West (Mr. Battle) will refer later to council housing and to the allowances for home improvements and the reductions in the money for housing associations. The Chairman of the Public Accounts Committee, my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), has eloquently outlined the cuts in maintenance. All those things come back to roost. If I can put it in Granthamite terms, if people do not put a lick of paint on their window sills or elsewhere on their house, they will soon have to buy new windows, guttering or whatever. The same Granthamite arguments apply to the national estate, to Government buildings, to roads, sewers and railways. The Government cannot cut maintenance by £1.8 billion on hospital maintenance, for example, as we heard recently in the Public Accounts Committee, without the ghost coming back to haunt us in a big way. Yet again it will be a Labour Government who will have to pick up the bill in the future.

Cuts in training and a reduced public sector obviously influence the way in which Government debts at national level are viewed. If the Goverment sell off the family silver, there is less of a public sector. Again, as we heard in the Public Accounts Committee, we have had a parade of privatisations, brought about by sweeteners, and by money spent on marketing, advertising and all sorts of devices, including bribes in one sense or another, extremely low sale prices or dowries. Whatever the term used, the Government have been selling Britain's assets short. That has been the way in which the major public assets—the family silver—have been disposed of, but it is a one-off and can never happen again. Once again, massive amounts of money have gone into subsidising the Government's obsession with balancing the Government's national books instead of being used to develop the wider economy, which is what I and many of my colleagues feel is the Government's real economic responsibility. According to my hon. Friend the Member for Derby, South, there has been a grand total of £50 billion-worth of wasted expenditure in that respect.

Another thing that the Chancellor could have a chat about with Sir Trevor Holdsworth and John Banham at their lunch—that is assuming that the Chancellor is still in post—[HON. MEMBERS: "Dinner."] Well, it could be a long conversation that runs from lunch to dinner. I note the obvious experience of the hon. Member for Staffordshire, South-East (Mr. Lightbown), which appears to be far more profound than that of any other hon. Member.

I refer now to a concept that lost "fashionability" about 10 years ago but which is nonetheless paraded by Ministers occasionally—it is called "crowding out". Let us look again at that famous Labour party journal, CBI News. My hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara) tried to draw the Prime Minister's attention to the front page of CBI News at Prime Minister's Question Time last week because it showed a tremendous drop in the investment intentions of CBI members. Unfortunately, the Prime Minister had a problem with her myopia and could not see the diagram. No doubt it can be sent to her if she has not yet got her own copy. It looks very much as though the intentions of CBI members to invest in plant and machinery over the next 12 months are themselves being crowded out. The concept has now lost all credibility.

The only crowding out that is taking place is in areas such as research and development. Once again, that is an area in which Sir Trevor Holdsworth has great expertise, especially in respect of the defence percentage of research and development. I believe that we have the highest percentage of R and D on defence—as opposed to civil R and D—of any country in western Europe, which will be made worse by the Government's expenditure plans in which we can see that the civil element in R and D is to be reduced by a further 2 per cent.

Mr. Christopher Gill (Ludlow)

Is it part of Labour party policy to reduce corporation tax and to allow companies to retain more of their own profits so that they can invest in research and development and in training?

Mr. Allen

I hope that the hon. Gentleman will forgive me for not being able to speak on behalf of the party. but I shall, of course, give him my personal opinion. I believe that corporation taxes should be reviewed. They are too high and could be reduced. That is a possibility, along with an examination of depreciation allowances, all of which could be paid for in time by an increase in growth when the Government's own expenditure acts as the pump-priming mechanism for a growing industry. I do not know whether that is the view of my Front Bench.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

Yes, absolutely.

Mr. Allen

Well, I should be happy to talk to my right hon. and hon. Friends about it. We should not forget which party is in government, but it is unfortunate that the Government are not taking any notice of the CBI's request for that sort of review and examination. I believe that it bears examination and I very much hope that when the time is right we can look at bringing this country's corporation tax levels more into line with the levels on the continent.

The continent does not have the theory of crowding out. If we consider the expenditure of the Governments of France, West Germany and elsewhere, especially on transport and on infrastructure developments, we see that they take no notice of the ancient Bacon and Eltis nostrum of crowding out. That is old hat. They realise that where there is a good transport infrastructure and investment, there are benefits for the private sector and the public sector equally and for those who work in them.

To me, that is common sense and it is common sense to the French, the Italians, the West Germans and to everyone else in Europe. However, once again our isolationist Prime Minister has failed to catch up, which has meant that we are falling further and further behind. That is why our trade deficit is getting higher and higher and why our imports are increasing. As my right hon. Friend the Member for Llanelli (Mr. Davies) so eloquently said, we may be a nation of shopkeepers, but the stuff that we are now selling in our shops comes from Japan and Europe and less and less of it is being made in this country.

As hon. Members are looking for suggestions for future policies under a new Government, I put forward my suggestion on the exchange rate mechanism. While all parties appear to have a host of pre-conditions for joining the ERM, my only pre-condition would be that in a new climate, with a new Government, it would be quite easy to negotiate the condition early on that our levels of public expenditure investment in industry and commerce should match those of our continental competitors. That could be achieved and there would be the will to achieve it under a Labour Government which, sadly, there is not under this Government.

If we look through the public expenditure documentation we do not see the rhetoric that we have heard tonight from Government Back Benchers who seem confused about whether the Government are holding down public expenditure or are the greatest thing since sliced bread for a host of sectors in which there is public expenditure. We see cuts in real terms in the provision for industry, the regions, research and development, housing, education and training. There is a desperate need for expenditure on education and training, but spending has been cut back by £85 million this year, despite the fact that the city technology colleges, a pet project, have a provision of £135 million. Ironically, some of the few increases in the public expenditure White Paper are to pay the extra high interest rate repayments generated by the Government's incompetence in other sectors. They have to set aside greater provision to pay back interest rate charges than they did a year ago.

I am not in a position to give Labour's priorities. I am certainly one of those referred to earlier as the Monklands, East tendency who believe in the philosophy, "We shall let you know in good time." I know that my hon. Friends on the Front Bench are more liberal and want to talk about matters more freely. If there is a kitty of £190 billion there is immense scope for reordering public expenditure provision on the lines of the social priorities that we would seek.

My hon. Friend the Member for Derby, South has already outlined what she would like in terms of pensions and child benefit. There is great scope for reorienting current programmes, even without growth. Once growth provides additional expenditure for other programmes, be assured that Conservative Members will be the second to know the sectors of greatest expansion and the matters of first priority.

I have one final worry about what we shall face as a party coming into government. It has always been our lot to inherit what has been left after the locust years of a Tory regime, be it the years after 1964 or the boom and bust of Barber in 1974. No doubt, when the Thatcher era ends, be it in 1991 or 1992, we shall inherit that position again. Massive investment will be necessary throughout industry, commerce, the transport infrastructure, sewers, water and electricity industries, right across the board to education and training. It will take a new Labour Government to make that investment. The Government have steadfastly refused to put aside the amount of money made available through North sea oil and the credit boom of the 1980s. Once again it will fall on the Labour Government to dig the country out of the hole in which the locusts have placed us. I regret that that should be so. I particularly regret that it takes a number of years before the fruits of investment are seen.

I remember having a conversation with a senior member of British Rail management who said that the organisation could not use money if it was given it on a plate within a matter of months or even one or two years. Gearing up was necessary to ensure that plans were ready and schemes were put into operation. It may well fall to a Labour Government to put those schemes into operation. I hope that the electorate will have patience with an incoming Labour Government and realise that it will be a long time before those investments bear fruit. Be that as it may, it will be the duty of the next Labour Government to undertake that task.

8.4 pm

Mr. Roger Knapman (Stroud)

Thank you, Mr. Deputy Speaker, for calling me to speak.

Like the hon. Member for Nottingham, North (Mr. Allen), I followed the speech of the hon. Member for Derby, South (Mrs. Beckett) with considerable interest, particularly towards the end when she said that the Opposition knew the scale of the problems and the scale of the needs. Unfortunately, that did not enable her to state the scale of the costs. Finally, she said in grand Churchillian crescendo, "Give us the tools and we will finish the job." Some of us feel that Labour nearly finished the job in 1979, but not in the way that the hon. Lady meant.

I congratulate my right hon. and hon. Friends in the Treasury on the presentation of the estimates. I was particularly pleased that there will be a 9 per cent. increase in Overseas Development Administration spending in the next few years. Surely it is right that, as our economy becomes strong and the country wealthier, we should spend more on Third-world countries.

Increasing spending is one thing, but actually getting it to the sharp end—the patient or pupil—can be quite another. Over the past few weeks, it struck me that one or two of the schools that are opting out are absolutely delighted with Government funding because they have suddenly found that the local education authorities were keeping up to 40 per cent. of the money. If that is so, there is no doubt that they are much better off. If that happens between local education authorities and schools, I wonder whether it also happens between regional and district health authorities. I wonder how much the regions are keeping back from the district health authorities. It would interest some of us to know.

I intend to speak about small businesses. The growth of the economy over the past few years has enabled increased public expenditure and, over the decade, a reduced proportion of GDP to be used. It is that ratio that is vital because Government income depends on the health of, and growth in, the economy. In particular, we must continue with a business environment in which small businesses can thrive. We have done a great deal towards that during the past decade, but there is one aspect where we can do a little more.

It is wonderful that such a large proportion of people have taken the plunge over the past decade, risked all and started their own businesses. The vast majority of people with energy would sooner put up with a few blips in capitalism than have the dull, drab certainties of Socialism. Labour could never even afford to acknowledge the value of small businesses or their contribution to the economy because that is absolutely incompatible with state planning. If some people prove that they can manage without such benefits, it may be catching.

The nadir of state planning for many of us with longer memories was the Meriden motor cycle co-operative. That was on the shortlist without doubt. But for me the nadir of state planning was the sale of the 24 ships to Poland. That business was conducted to prop up the shipbuilding industry—or did we think that we needed zlotys at the time? The effect was that in a short time the sale undermined the Merchant Navy.

In 1979, British industry and small businesses were hopelessly uncompetitive, overmanned and dictated to by the trade unions. That was not entirely surprising because, at that time, the right hon. Member for Islwyn (Mr. Kinnock) said: It is inconceivable that we could transform this society without a major extension of public ownership and control. The hon. Member for Nottingham, North was not saying anything very different. By 1988, the same right hon. Member for Islwyn said: faced with a market economy … we have got to run it better than the Tories. I do not know what to make of a right hon. Gentleman who makes such a sharp U-turn, except that it is possible that he does not believe in very much.

Of course, in 1979 it was obvious that new large-scale, labour-intensive undertakings were not forthcoming to replace those that were closing, and, even if they had been, it was unlikely at that time that they would have chosen to set up in this country. So we had to rely on new small industries and businesses. At that time it was absolutely essential to release the energies of business men, and we did so. It cannot be stated too often that in 1978 the number of business closures exceeded the number of start-ups by 100 every week, whereas now the number of start-ups exceeds the number of stops by 1,200 every week. No wonder the number of people in self-employment has risen from under 2 million to over 3 million in the course of just over a decade. That is an increase of about 60 per cent.

Mr. Gill

Does my hon. Friend agree that it is remarkable that, although, during the past decade, literally hundreds of thousands of men lost their jobs in the old-fashioned heavy industries, there are now more people in employment than ever before?

Mr. Knapman

My hon. Friend is absolutely right, and it is only capitalism that could have brought that change at a reasonable social cost. That contrasts with the results of the planned Socialist economies of eastern Europe that we have seen over the past few months.

I hope, in due course, to draw the attention of my hon. Friend and other hon. Members to the situation in my constituency, which is a striking example of the change that has taken place. Not only was there an increase in self-employment, but the right climate for small businesses was created by the promotion of investment, enterprise and, indeed, competition. We have reduced the levels of inflation and of taxation, although inflation is still far too high, at least by the standards of a Conservative Government. I am sure that we shall all put up with the short-term pain of high interest rates for a while, to cure inflation once and for all. Not least, the Government have reformed employment law and are continuing to do so. In fact, a member of the Committee on the Employment Bill told me that he and his colleagues started off thinking that reform of the closed shop would be a very contentious issue. Now some Labour members of the Committee are actually supporting the proposed change.

I have said that my constituency of Stroud is a perfect example of this business transition. My constituency was early into the first industrial revolution, essentially with textiles—the mills in the valleys and the sheep on the hills—but also with engineering, which usually needed to be located by streams or rivers. For many decades, the valley industries prospered, particularly in what is known as the Golden valley. Many firms ended up with 200 to 1,000 employees, and one engineering firm at Dursley employed 4,000 people. On top of the hills, overlooking the valleys, there were the large and imposing employers' houses, and woe betide any mill foreman who sounded the "leave work" hooter a minute early. The local economy there shadowed the national economy. The engineering and textile industries are still important—in the case of textiles, billiard cloths, tunics and suit materials in particular—but not as important as they used to be.

Indeed, both locally and nationally, most labour-intensive firms had to shed labour to stay competitive, both nationally and internationally. The firm that employed 4,000 people now employs 1,200, and high rates demands have not been helpful. But, with 1,200 employees, it is more competitive and has a better product range than for many years. Fortunately, unlike parts of the north or, perhaps, Corby, Stroud did not have lay-offs all in one go. They were gradual. Then the transition occurred—hundreds of new small businesses springing up, often on the sites of former textile mills and outbuildings. Business parks with planning permission for five, 10 or 20 units were soon fully let, and sometimes had a waiting list. Of course, some of those businesses will grow, and some will perish, but the capitalist cycle will go on.

In one of the valleys there is a modern factory employing 400 to 500 people, producing all sorts of high-tech materials for the North sea oil industry. A very prosperous factory it is. Adjoining it is a five-storey, Cotswold stone, mullion-windowed mill with all its windows broken. In my eyes the transition has been from one to the other. Only capitalism could have brought about that transition at an acceptable social cost. The constituency of Stroud, and for that matter the nation as a whole, owes its prosperity solely to capitalism, and not in any way to Socialism.

I am grateful for all that the Government have done over the past decade to improve the situation of small firms. I want, however, to end with a small criticism. We have promised to reduce bureaucracy, to reduce red tape. Indeed, we have done so, but not to a great enough extent. We must reduce the burden on small businesses, of their unpaid tax-gathering functions. I want to quote from "Your Guide to Government Help for Small Firms".

Under the heading, "Cutting Red Tape", it says: Most Government departments now have Deregulation Units whose job is to cut red tape wherever possible, see whether existing laws can be simplified and assess proposed new laws for their impact on business, especially costs. I believe that if some civil servants were to spend time with the average small business, they would find a fairly consistent and common complaint. It would be about the red tape that those businesses still have to suffer, in the payment of wages and the collection of taxes.

It happens that my background is in small business, so I hope that I understand that one has to be a man or woman of many parts. One arrives on Monday morning somewhat ahead of the staff, to make widgets or whatever. Before long, one gets production going, but suddenly the first customer comes along and one has to sell something. The business has to be kept going. One is dealing with the sale when a lorry arrives and has to be unloaded. Otherwise production would stop. No sooner has one started doing that than a machine break down, and one has to become chief engineer. In small businesses, any time that is taken away from the essential processes of buying, selling or manufacturing is, relatively speaking, wasted. Yet we expect the owners of small businesses to be unpaid tax gatherers. They have to collect national insurance and VAT. That process takes up a lot of time for a person running a small business that employs up to 10 people. Above all—hideously complicated for small business—is the system of pay-as-you-earn. Here I am not criticising. I realise that much has been done to simplify the tax system. We now have one higher rate of tax, rather than four or five, as previously. However, we can do more, and I think that we should.

I should like to suggest a further move from taxes on income to taxes on expenditure, which would benefit most the small business man. It would do more for him than all the other advice put together. When I became parliamentary candidate for the constituency of Stroud about four years ago, the main problem in that area was unemployment. It is most certainly not the area's main problem now. I am pleased that the United Kingdom has an unemployment rate of 5 per cent. to 6 per cent., compared to a rate of about 9 per cent. in the rest of Europe. That is an immense achievement. For several years we have created more new jobs than the rest of Europe put together. If we encourage small firms, particularly by further simplification of the tax-gathering system, they will give more money, through taxes, to the Government, and we shall be able to continue to spend more on the Health Service and on education. We have a record of which we should be proud.

8.18 pm

Mr. Ron Leighton (Newham, North-East)

Like perhaps other hon. Members, I scanned the Government's new public expenditure plans to see what the Department of Employment was proposing to spend on training. Everybody now surely knows how abysmally we lag behind our competitors in vocational training. Unfortunately, we have the worst trained work force in the industrialised world, falling behind not only Europe and north America, but now also many Asian countries.

Only last month yet another paper, this time from the National Institute of Economic and Social Research, reported that in the West German kitchen furniture industry nine tenths of all German employees had vocational qualifications based on a three-year, externally examined apprenticeship-type course. In Britain only one tenth came anywhere near to being in that category. Is it any wonder that the German industry has a huge productivity advantage and dominates the high value added sector of the market? In clothing manufacture, the institute found that 80 per cent. of German machinists had completed the relevant two or three-year examined course, whereas in British plants it did not come across one machinist with such a qualification. So the comparison goes on for industry after industry.

Recently, the previous Secretary of State for Employment, the right hon. Member for Sutton Coldfield (Sir N. Fowler), described a study by the Department into training as mind boggling—mind bogglingly bad, not mind bogglingly good. As countries can buy in state-of-the-art technology, it is by the skills of their work forces that they compete. Training our people is the vital strategic investment.

This matter has been analysed to death. Everybody knows the facts. The question is: what are we going to do? After 10 years of a Conservative Government we are falling further behind. We are getting into a sort of low skills equilibrium with poor management and badly trained workers producing low-quality, low value added goods, and the orders for sophisticated goods are going overseas. As a result, our trade deficit now threatens to overwhelm us.

But what do we get from Ministers at the Department of Employment? We get lots of speeches and empty, windy rhetoric, lots of continuous chatter and lip service about training. But where is the action? Where are the resources? We have to turn to chapter 6 of the Government's expenditure plans. What are they going to do? They are going to make cuts. Are they going to put their money where their mouths are? No, they will do the opposite.

In the Government's expenditure plans 1990–91 to 1992–93, the training programmes are grouped under the heading "Skill and competence for work", and the figures are given in table 6.3, "Expenditure on training". If we take an index figure of 100 for the estimated outturn for this year, 1989–90, in real terms 1987–88 was 122. Two years ago we were spending 22 per cent. more. In 1992–93 it is planned to be only 73. The cash for training has been falling and it is planned to fall further. In real terms, expenditure this year is almost one fifth lower than it was two years ago, and in three years' time it is planned to be only three quarters of what it is now.

Since last year's White Paper the cash for 1990–91 and for 1991–92 has been cut in real terms by 18 per cent. and 21 per cent. That is the measure of the cuts in planned expenditure on training which the Treasury has obtained from Ministers in the autumn public spending round—a major victory for the Treasury, but a defeat for the nation's training needs.

Nor can it be claimed that the fall in numbers justifies the fall in expenditure. During the next three years, funds for YTS are to be cut in real terms by nearly a half, but the numbers are planned to fall by only one quarter. Real expenditure per trainee will fall by one third. It is right that employers should contribute more, but it is wrong for the Government to spend less and thereby send the wrong signals.

It looks as though the Treasury is saying that while there was mass youth unemployment it was willing to spend money as a cosmetic, to massage the unemployment figures, but now that there is to be a demographic change, the pretence of training can go hang while the Treasury saves money. We now have fewer young people, so more will go into jobs, but we must see that they are trained. The Government should look carefully at the plans being recommended by the CBI and the TUC to give substantial training credits to every young person.

Now let us look at the other major programme—employment training. The Government made a big splash about that when it was launched, but we do not seem to hear so much about it now. A fall in numbers cannot be argued here. The employment training programme is not hitting its numbers target, and, even it it did, it would reach only a fraction of what the Training Agency calls the client group. Despite that, there have been two cuts so far of £200 million in that programme and the cash stays the same this year while its real value is planned to fall by about one tenth. That is the opposite of what we should be doing.

Employment training, which has the germ of a good idea, is badly flawed. It is grossly underfunded and because of that it is often inadequate and unattractive. As a result, it reaches ony two thirds of the Government's published target for which it allocated the money. In those terms, it is not a success. The participants who were expected partly to work receive just £10 above the level of benefit. That is not very much of an incentive. Many are financially worse off.

The training agents receive £38 in London and £31.50 outside London to work out a personalised action plan for each participant, and £15 for each placement with a training manager. Those are shoestring budgets. Training managers receive £15 for each person who starts training and £18 a week basic grant for each person in training. In some cases there can be supplementary grants averaging perhaps another £20. That makes perhaps £38 a week to pay for training. What quality training can be obtained for that? What private training organisation would offer training for such derisory sums? The CBI refused to become involved in the scheme on those derisory figures. Hardly any large firms have lent themselves to the scheme and the construction industry refused to be involved with the scheme. It has a different and much better one where the courses cost between £150 and £180 a week.

Because of the underfunded, unsatisfactory, inadequate and unattractive nature of the programme most people drop out. When the Select Committee on Employment went to Dundee in March last year to inspect the programme we found that 33 per cent. of those referred by the employment service dropped out before reaching the training agent. We found that a further 47 per cent. dropped out before reaching the training manager, leaving only 20 per cent. who stayed with the training manager for at least one week.

Mr. Roger Dawe of the Training Agency gave evidence to the Select Committee in December 1989 when he said that, nationally, 45 per cent. drop out before reaching the training agent and then there is a further drop out before reaching the training manager. So it seems that there is a drop-out rate of about 80 per cent. Of the 20 per cent. or so who enter training, 70 per cent. leave before completing their original action plan and 42 per cent. of those who complete their training do not get jobs at the end. The House might well conclude that the employment training programme is completely shambolic. No one can pretend that it matches up to Britain's training needs or that it matches the efforts of our competitors. So unattractive is the programme and such is the number of the drop outs, it does not even spend the money that has been allocated to it. There are continual underspends. There was an underspend this year, last year and the year before that.

The last time I spoke on employment training I said it was half a loaf; now I do not think it is even that. These cheapskate schemes fail the unemployed and betray the needs of the country. Rather than making these cuts, the Government should make the essential investment that is needed in training. If they do not, it will be for a new Government to do so.

8.30 pm

Mr. James Hill (Southampton, Test)

I have had a rather chequered evening. I had a meeting in the House with some of the officers of Hampshire county council at which one of the items that we discussed was, of course, the community charge. Hampshire county council is about to submit a budget for ratification of £770,510,000. That is an increase in one year of £140 million. In cash terms, it is 22 per cent. and in real terms 12 per cent. It would seem that local government expenditure is beginning to roar ahead. According to the people I have been talking to this evening, there seems to be no way of dampening it down. If these are the sort of figures that we will be confronted with, obviously the Government must examine some of the services for which local government has to pay.

I have said for some years that the police, the fire brigade and perhaps even education should be the responsibility of central Government. I am not sure that all local authorities are as ham-fisted as some, but nevertheless they do not seem to be able to keep a check on their expenditure. I am particularly concerned because only this evening the figure for Portsmouth was announced at £308. I have a nasty feeling that the Southampton community charge may be in that region. This was not the intent of the community charge; the purpose was to keep down local government expenditure. It does not seem in this first year to be able to do it. I am only saying this for the benefit of the Treasury Bench because it may be necessary in future to review some parts of local government expenditure and perhaps add a tranche to the community charge.

Mrs. Edwina Currie (Derbyshire, South)

Is my hon. Friend aware that there are in other parts of the country many people who think his constituency jolly lucky? My constituents in Derbyshire are facing community charges likely to be well over £400 and at least £100 more than neighbouring county councils with similar geography and social needs patterns.

Mr. Hill

I am sure that that is true. There is always someone who can leap-frog a little higher, but the position of my constituents is my first priority, and Derbyshire is not on the same plane.

One good happening of the last few months has been the abolition of the dock labour scheme. The Department of Transport says that over 40 per cent. of dock workers were made redundant. I point out to everyone, including the Transport and General Workers Union, that the cost to the Government of the abolition of the scheme was £90 million, and the cost to the port employers was some £60 million. Already there are signs of rejuvenation in the port of Southampton, which may even challenge Felixstowe. I congratulate not only the Department of Transport but the Treasury on making the money available.

Law and order is, naturally, the mainstay of Conservative policy. We are indeed the party of law and order. The Opposition would take a different view, but real spending—this may quieten some Opposition Members—on law and order will rise to £422 million in 1990–91. Spending to keep the bobby on the beat is said to have increased by 70 per cent. since 1978–79. As a result of these increases, for which we are all grateful, whether we are Socialist, Liberal or Conservative, there are 14,500 more police, and over 8,500 more civilians working in the police service, which naturally releases trained policemen for duty in the street. These figures are to be commended. Once in a while it would be nice if the Opposition were to compliment the Treasury team on making the money available.

We have heard a lot about housing. In fact, a long time ago I was chairman of the housing committee. It was always a battle to meet one's targets. There was always an incredibly long waiting list. I remember Enoch Powell saying in a housing debate that he likened it to two stalls in the market selling tomatoes; on one stall they were 3p a pound and on the other they were 6p a pound. We do not need any imagination to know which stall will have the longest queue.

Under the Government, as a result of pressure from the Treasury, rents are becoming more realistic. Over the years they have helped owner-occupation. Whatever one says about Europe, we have the highest percentage—68 per cent—of home owners in the whole of Europe. No one else can touch us. We have built 1.4 million public sector houses since 1979. This is a tremendous achievement.

Mr. Kenneth Hind (Lancashire, West)

My hon. Friend will also be aware that because of the changes in the local government legislation last year Labour-controlled councils have now got their housing account ring-fixed so no longer can they, through the use of the public purse, supported by rate support grants, subsidise housing tenants who should be paying a market rate, with all due respect to the Treasury and the rest of the ratepayers.

Mr. Hill

I should like now to speak about transportation. The great problem is that, no matter how much money we put up front, as the expression goes, we will always have the long delay caused by public consultation. This has happened in southern Hampshire. We have now got the M27 finished, but the M3 is still not finished.

I agree completely that in the development of a motorway adequate compensation must be offered to those who are threatened by plans for the motorway. This is an old Mussolini idea. The autostradas would not have been built had it not been for the fact that he provided for the most generous compensation. But unfortunately here we are only just beginning to get round to dealing with the problem of Socialism perhaps devaluing people's property that they had fought for and paid for and is then offered to them on a take-it or-leave it basis by the Inland Revenue valuation officer or, indeed, in conjunction with the valuation officer of the local council. I am extremely pleased that that item has been approved.

I am astounded at the amount that can be devoted to central Government expenditure. This must be a very prosperous country. The business man must be paying his taxes, and VAT must be an extremely good revenue provider. In 1992–93, £234 billion is to be spent in cash terms.

The Opposition, of course, want to return to power, and they imagine that once they have done so it will be easy enough to pull the levers one after another to achieve the desired results. They think that everything will run like clockwork. But, as they know, they have not the necessary expertise on their Front Bench, and they have not enough entrepreneurs at their disposal to show them the way when they go wrong. They denigrate the CBI and the Institute of Directors; they will clearly drive every entrepreneur out of the country and then say, "We cannot understand it: we have not the money to pay for all our grandiose schemes."

Once in a while Labour policy comes out, usually in remarks shouted across the Chamber. Earlier we heard that corporation tax would be reviewed—probably abolished altogether, indeed: after all, what does a promise matter when it does not have to be honoured until after the election? The hon. Member for Newcastle upon Tyne, East (Mr. Brown) nods. "Goulditis" has got everywhere. The symbolism of Labour policy is, "Do not ask us to explain the percentages or the ideas; just take it on faith, and we will show you after we get in."

I realise that many hon. Members wish to speak. I have found the debate very useful—it has enabled me to bring up my little constituency points—but I think that before long we shall have to take another look at the community charge and the arrangements with local government.

8.42 pm

Mr. John Battle (Leeds, West)

Introducing the debate, the Chief Secretary was at pains to argue both that the Government were operating a policy of tight spending controls on public expenditure, and that public expenditure was increasing. He gave some examples of savings and spending in what he considered the most important areas, but used his figures selectively, presenting a contradictory image of public spending at once rising and falling.

Significantly, the Chief Secretary forgot, or rather neglected, to mention what the White Paper makes clear—that a massive £7 billion has been taken out of the housing budget in the past 10 years. Both public and private housing has suffered from the removal of grant, assistance from housing associations, improvement areas and so forth. Investment in Britain's entire housing fabric—not just council house building—has been undercut. There is no real reason for the Government's action apart from their blind opposition to council housing, illustrated in the Chief Secretary's response to an intervention from me.

Britain's housing has borne the brunt of the cuts, as the White Paper demonstrates. Between 1979 and 1989–90, it has been slashed by 67 per cent.—£7 billion. Nevertheless, the Chief Secretary had the nerve to refer to Government measures to tackle the scandalous increase in homelessness. The money that they are providing is a pittance compared with what they have taken out of the budget for building and improving housing which is desperately needed for homeless people.

Paragraph 11 of the chapter of the White Paper on the environment tells us that even the £250 million that the Government claim to be spending on emergency measures to tackle homelessness over the next two years includes the cash payments that will be used to bribe remaining tenants into owner-occupation. While paragraph 2 claims: The Government's overhall aim in its housing policy is that a decent home should be within reach of every family, the allocations in the housing budgets fall somewhat short of that.

The housing cut reveals the Janus-face of Conservative public expenditure philosophy: it faces both ways at the same time, immobilising development in provision. The Government are trying to cover up a lack of investment in housing and other forms of infrastructure, and the consequent poverty of development. That is the price that must be paid for the squandering of our oil revenue and public assets, the bulk of which ended up in the pockets of the wealthiest 5 per cent. in the form of Budget tax cuts.

It is plain to everyone but the Government that, ideologically blind as they are, they have based their policies on the crude antithetical view that private is good and public must be bad. They have attempted to deride and undermine the public sector to such an extent that everyone is now paying the price of that dichotomy. I do not believe that opposing public provision is a new philosophy; I do not even believe that it is a great Conservative insight thought up in the past 10 years. In fact, it was tried in the United States.

I seem to remember the passing of the great Proposition 99 in California under Governor Reagan, who suggested that there should be no public fire service, but that everyone should arrange fire cover through private insurers. The public fire service was duly abolished. When two houses were burnt to the ground in Beverley Hills, the owners thought that they could easily replace them by claiming on their insurance. They were shocked to learn that the insurance companies would not pay out because there was no sufficient fire cover at the time. It was not long before California reinstituted its public fire service.

It seems stupid to embark on such circular processes—abolishing public provision, discovering that it is needed and reintroducing it. The way in which the private sector has been set against the public sector is a consequence of the Government's total commitment to—their blind faith in—the idea of a free-market economy. Despite the frequent use of the phrase, in practice markets are not really free. The Chief Secretary has often referred to the need for a level playing field, and Conservative Members demand fair trade. There are many other contradictions. Water is sold off at well below its market value, and British Aerospace is offered sweeteners. It is clear that the market does not operate freely; it is fixed, and there is intervention.

Mr. Eric S. Hefter (Liverpool, Walton)

Does my hon. Friend agree that the Government are actually opposing the ideas of early Conservative Governments and local authorities? In the past, Conservative authorities created the water services for huge cities, built the parks and got the first housing schemes off the ground. If I were a Conservative, I would be rather proud of those early Conservative authorities.

The present Government, however, are a crowd of nutcases. They even turn against their own basic philosophy. I find that incredible until I look at the Government Front Bench and at the right hon. Lady who usually sits there. Then I am not so surprised; they are all mad.

Mr. Battle

I cannot comment on the state of mental health of Conservative Members. However, in my own city it was not Labour councils which built housing, took away back-to-back houses or instituted a common sewerage and drainage system. Those things were done because if there had remained only private provision for them the whole of the city would have been polluted. There was a need for public provision, and that was recognised and implemented. It seems that for the past 10 years the Government have decided that the market is all and that there should be no planning whatsoever. But the tide is turning. Conservative Members have learnt to recognise that there is a need for intervention to protect the environment.

I was once surprised to meet a small demonstration outside the House. A gentleman had a placard saying, "Justice in Berkshire". I asked him why he stood there with that placard, and he said, "Well, it's like this, there is a builder about to build." He owned a property, a house with a large garden, with poplars at the end of it, but the market said that the land at the end of his garden could be sold for a price. He said that he wanted the Government to give the local authority the power to stop the building to protect his view. It seems that all are coming round to the view that there should be intervention in planning. There is a move away from the market towards public planning co-ordination. The free-market model is being left behind as a theoretical myth, and it is universally being seen as such.

Mr. Hind

The hon. Gentleman's thesis is that there is no role for the public sector, as far as the Government are concerned. He will notice that at present 37¾ per cent. of gross domestic product is spent on public sector provision. That is a much larger percentage of GDP than the 43 per cent. spent by the last Labour Government in 1978–79. What we recognise, and what he fails to realise, is that many things have been done by the public sector in the past that can be done better by the private sector. However, the public sector still has a major role to play, hence the 37 per cent. of GDP, otherwise it would probably have been much lower.

Mr. Battle

I would be interested to find out the number of times that Conservative Members have used the word "public" as a derogatory term in the House. What is interesting and welcome is the shift towards the view that the public sector has a role. But most people's experience of housing, infrastructure, roads and hospitals shows them that there is still a desperate need for public investment in those facilities.

The reality of a policy that claims to idolise the free-market model has been high interest rates, high inflation, a huge trade deficit, the rundown of the manufacturing industrial base in constituencies such as mine, and millions of people in Britain paying the price for the Government's economic experiment.

The public expenditure White Paper reveals that the cost of mortgage interest to the Exchequer—never mind to those people who have to pay higher mortgages—has increased from £5.5 billion to £7 billion between 1988–89 and 1989–90.

Expenditure on the Export Credits Guarantee Department was £347 million and, as it says in the White Paper, in chapter 4, paragraph 106, it was due to the increase in short term sterling interest rates. In other words, high interest rates and high inflation are the stark question marks over the failure of the free-market economic system. It is worth hon. Members remembering that Monday in October 1987, when the stock markets around the world lost a quarter of their value in less than 48 hours, and the foreign exchange rates became highly unstable. The effect of the recent rumour that President Gorbachev was to resign also underlines the volatility of the market and brings into question the validity of the expression the "efficient market hypothesis" according to which current prices reflect all publicly available information.

We are entitled to ask what has been Government policy in the face of the extreme volatility of the market. In 1981 the Government said that they were leaving the exchange rate to the free working of the markets. By early 1987 it was clear that the Treasury was responding to the weakness of the foreign exchange rates by altering domestic interest rates. In practice, domestic monetary policy had been abandoned to external considerations, and the operation of an unannounced exchange rate target.

In 1988 there was yet another change of tack. Concern about overheating in the economy meant that interest rates were once again directed towards meeting domestic objectives. There is another glaring contradiction at the heart of Government economic policy—the long-running tension between the internal and external calls on monetary policy—which still remains to be resolved.

Today in The Times the right hon. Member for Blaby (Mr. Lawson)—the former Chancellor of the Exchequer—spells out: since I ceased being Chancellor no new measures have been taken. That means that the stalemate that we discussed throughout the whole of last year still remains. I suspect that the current Chancellor is waiting with his head down for something to turn up, or for the dark clouds to blow over. The former Chancellor puts it in a nutshell when he says that in practice the Government have abandoned all their former policy objectives. He said: In politics, the unexpected always happens and you just have to see how events unfold. The Government's economic policy is characterised by sitting out the market, and that is in line with their short-term investment strategies. That short-termism characterises the stock market and money markets. All we now get is short-term, day-to-day management and the abandonment of longer term objectives. In practice future investment is sold short.

The Government's policies are absolutely clear to those people who are paying the price in higher mortgage rates or who are forced into part-time, temporary, low-paid jobs. As the former Chancellor said in his article this morning: The capitalist system is seen as something rather grubby. If you say nobility is associated with low pay, then it is a very easy transition to say … that those who do what they are doing for the money are ignoble. I suspect that it is usually the other way round. Those people on low pay are usually denigrated, marginalised and expected to survive, without proper protection or adequate supplementary benefits under this Government. Some 9 million people are in low-paid jobs. The wages councils have been abolished and the unemployed are forced to take jobs regardless of how low the wage is. The result is that in some sectors wage rates are falling, particularly in part-time, temporary work. And the guru ghosts of the new right, such as Professor Roger Scruton, are now advocating that the Government reintroduce the Victorian value of child labour. He wrote recently: Many a 14-year-old, set to work as a builder's apprentice, an electrician's mate or a stable hand will learn far more than he could ever at school … If the pay were sufficiently low—and children are willing to work for quite paltry sums—there would be no lack of employers ready to offer it. It is significant that there was no reference in that article to the great Victorian campaigns against the exploitation of children or the appalling health and safety conditions in which people had to work. I wonder how many Government Members would consent to that and put their own children out to work in such circumstances.

The point lays bare the model of the free market as being intrinsically and inevitably exploitive. It generates, in practice, a two-tier economic model and on the lower tier people are low-paid, unprotected part-time workers.

Government economic policies as they now stand certainly seem to us to be theoretically threadbare. The Government seem to be drifting aimlessly and waiting without any clear sense of direction or comprehensive and consistent strategy. Even a former Member of the House, the Right Hon. Enoch Powell, referred to earlier, in an article in British Rail's InterCity journal, spelt out that it is the Government who have caused inflation, not credit cards or wages. And all the key objectives set by the Conservatives some 12 years ago remain unachieved.

In an article published in the Salisbury Review last September, entitled "One cheer for Mrs. Thatcher's economic achievement", E. J. Mishan writes: The Conservative Government's economic achievement is impressive enough when judged by its own declared priorities; somewhat less impressive when judged by reference to familiar economic criteria; least impressive when viewed in a broader social context which encompasses the quality of life. I submit that the practical daily experience of millions in Britain under this Government's economic policies is that the real quality of their lives, private and public, has been eroded as a result of those policies. So, while the Chief Secretary invites us, as he did when moving the motion on this public expenditure White Paper, to support it, I urge the House not to give its approval. In the interest of those who experience Britain under these policies and feel that the quality of their lives has been eroded as a result, I urge hon. Members to vote against it.

9 pm

Mr. Tim Smith (Beaconsfield)

Although the immediate prospects of the United Kingdom economy are not, in my view, encouraging, I think that there is every reason to be optimistic about the prospects for Britain in the 1990s. There are three specific factors which I want to draw to the attention of the House and which I believe constitute substantial evidence to support my proposition.

The first—and it was referred to in an article in The Independent on 31 January headed "Workshop of the world again"—is the very good prospects indeed for British exports. It is pointed out that in the fourth quarter of last year exports were 23 per cent. up in value on the same period in 1988 and, Hamish McRae said: That is an absolutely astonishing performance". He went on: The good news about exports is that it shows that, despite the fact that we have vacated large areas of the manufacture of internationally traded goods, we are still able to increase vastly what we sell abroad. I believe that there is every reason to be optimistic about our export performance, and Hamish McRae suggested that, whereas the 1980s were the decade of oil and services, the 1990s will be a decade of manufacture.

The CBI has been much quoted, and I think it was probably the same copy of the CBI News as was quoted by the hon. Member for Nottingham, North (Mr. Allen) that contained an article by its director of economic affairs, Dr. Sentance, in which he said about exports: In 1988 and 1989 export growth averaged 7 per cent. a year—double the average growth from 1971–1987. He went on: non-oil exports have been growing more rapidly than imports—in the three months to November, they were 14 per cent. up in volume terms on a year ago. He added: With oil production recovering, as long as the world economy remains fairly buoyant, and continues to help export growth, there could be a very significant improvement in the current account deficit during 1990.

Mr. John Smith (Monklands, East)

It is still substantial.

Mr. Tim Smith

The deficit is still a very substantial one; the right hon. and learned Gentleman is absolutely right. But I believe that we now have the right conditions for a substantial improvement. This is the difficult part; the easy part, in a sense, is damping down imports. The difficult part has always been improving Britain's export performance. I believe that we are now seeing a major improvement in Britain's export performance.

The second factor—and this addresses one of the points made by the hon. Member for Leeds, West (Mr. Battle)—is the way in which the quality of investment has improved during the 1980s. One of the reasons, perhaps the main reason, for this is that such a high proportion is now investment made by the private sector. Indeed, in an article in The Times, Tim Congdon estimated that in a couple of years' time private sector investment would account for 90 per cent. of total investment in the United Kingdom; so we can say once again that we are a genuinely capitalist economy. I am sure that Opposition Members think that we are concerned about that because of some blind ideological reason, but there is a much better reason: private sector investment is much more likely to be well directed. We have only to look at eastern Europe and the recent history of European economies to see the truth of that observation. The state is not very good at making investments, and much investment has been wasted in eastern European economies. Under the last Labour Government the National Enterprise Board demonstrated that private sector investment is of much better quality. That bodes well for the 1990s.

The third factor that has been much discussed in today's debate is public expenditure as a proportion of gross domestic product. Again, there is a good reason why it is important to reduce that. At least some Labour Members seem incapable of taking that on board, but it is possible to increase public spending in real terms and at the same time to reduce it as a proportion of GDP. That is exactly what has happened in the past 10 years and the figures speak for themselves.

Mr. Heffer

The hon. Gentleman referred to the National Enterprise Board under the last Labour Government. Is he not aware that the real problem was that the National Enterprise Board constantly had to save capitalist private enterprise firms from collapsing? That was not its original role. We had to save British Leyland and many other private enterprise companies from collapsing. Rolls-Royce was brought under public ownership by a Conservative Government. That was not the role envisaged for the National Enterprise Board. Some of us were critical of the fact that it was not carrying out its proper role. It should have been creating new public enterprise companies to compete in the market. The hon. Gentleman should realise that we had collapse after collapse. Shipbuilding and many other industries would have collapsed totally if public enterprise had not stepped in and taken them over.

Mr. Smith

That illustrates my point very well. The National Enterprise Board devoted a great deal of time to saving companies, many of which almost certainly should not have been saved because the investment would have been better directed to new enterprises. It is not the job of the state to pick winners. Private investors make better investment decisions and produce a better-quality investment. The hon. Gentleman has proved my point beyond any doubt.

We have had much discussion about what the next Labour Government will do about public spending. One way of assessing what the next Labour Government will do is to look at the performance of the last Labour Government. In their first year of office the last Labour Government increased public spending from £150 billion to £169 billion, and in the next five years they gradually cut it back so that at the end of that period the figure was £164 billion. That was the performance of the last Labour Government; a huge increase in the first year followed by a series of cuts in every successive year. That is exactly what will happen next year if we have the misfortune to have a Labour Government. We shall have a huge unsustainable increase in public spending in the first year and after that we shall have the IMF at our door exactly as we did last time.

It is important to reduce public spending as a proportion of GDP because if we leave a larger proportion of resources for the private sector to invest that will produce a better rate of economic growth. There was a very good article in The Spectator the other day, headed, We're doing better than Europe by Tim Congdon in which he shows how the reduction of Government spending is placing Britain in "a virtuous circle" of prosperity. He turned the argument about a twin-track Europe on its head. He concluded that as a result of the Government's achievement in reducing public spending as a proportion of GDP, if Mrs. Thatcher's policies continue, the 1990s will see a two-speed Europe. A lowly taxed, lightly regulated and debt-free Britain will outpace the highly taxed, heavily regulated and debt-burdened nations of the inner core. I think that he is right. For those three reasons, the economic prospects of the United Kingdom economy are good.

The acid test of that is not what I say but what investors do. Overseas investors are moving into this country at a rate that we have not experienced for many years. They are putting their money where their mouth is. I am talking about not only the Japanese but the Americans and Germans.

We can have endless debates on how much we should spend. Spending money is easy, and Labour Governments have been good at it, but the difficulty is creating the wealth in the first place, and Conservative Governments are very good at that.

9.9 pm

Dr. Norman A. Godman (Greenock and Port Glasgow)

In what I promise will be a brief intervention, I wish to make a somewhat unfashionable plea for the continuation of certain financial subsidies to two maritime industries—shipbuilding and fishing.

What is the Government's position on the continuation of the European Community shipbuilding intervention fund? We are reaching the end of the period of the sixth directive, and I should like to know where the Government stand on the continuation of that important subsidy.

The aim of the shipbuilding intervention fund is to narrow the gap between the price that a European Community shipyard can offer a would-be customer and the cost of a ship built in south-east Asia.

If we are to retain our shipbuilding industry, it is essential that the European Community retains the shipbuilding intervention fund. The next directive should increase the subsidy. The industry will require that essential form of assistance if we are to retain anything of what was once, especially in the north-east of England and Scotland, a magnificent industry. All that is left is a remnant of it, but it is still an important employer of highly skilled labour in areas of the United Kingdom that have high unemployment.

My constituency is a classic example of that. Unemployment in Greenock and Port Glasgow is twice the national average, yet it would reduce substantially if the Government allowed Scott Lithgow designated status vis-a-vis the intervention fund. I hope that I receive an answer to that from the Minister.

Parts of the catching sector of the United Kingdom fishing industry are in a terrible state. I am seeking from the Government and the European Community a maritime counterpart of the agricultural set-aside scheme. Paragraph 67 of Cm. Paper 1003 shows that the set-aside scheme will cost £22 million in 1990–91, £33 million in 1991–92 and £44 million in the following financial year, making a total of about £99 million. The Government—and I asked the Chief Secretary to the Treasury a question about this earlier—should be introducing a decommissioning scheme, which would allow our fleet to be restructured fairly and humanely.

Paragraph 80 on page 23 of Cm. 1003 entitled "Structure of the fishing fleet" is misleading in what it says about the European Community's instruction to reduce the size of the fleet. In reality, the United Kingdom registered fleet will have to be reduced by about 23 per cent. between now and the end of 1991. I estimate that that reduction, as a result of the European Community's multiple annual guidance programme, will involve the loss to the fleet of between 500 and 800 vessels. What is to happen to those vessels, their owners and crews?

Many of the vessels in Scotland are owned on a share basis, under which the fishermen who crew them are not simply company employees; they are parts of small businesses. If the EEC and the Government can, rightly, assist farmers, particularly the more disadvantaged farmers, why can they not assist fishermen? Many middle-aged fishermen would happily tie up their elderly vessels and come ashore for good if there was in existence a decent decommissioning scheme of the kind introduced some years ago by the Danish Government.

The need to introduce such a scheme for our fishermen has been dodged by the Ministry of Agriculture, Fisheries and Food and ducked by the Scottish Office. It is nothing short of a scandal. Because of the savage reductions in quotas, particularly of North sea haddock—quotas are necessary if we are to conserve the stocks of valuable fish—many of our fishermen will be ruined.

I know of one fisherman whose vessel has been taken over by the Sea Fish Authority, as a result of which he and his family have had to leave the home in the north-east of Scotland in which they have lived for many years. Had a reasonable decommissioning scheme been in operation, he might have retained his home.

The calamitous situation facing fishermen in the north-east of Scotland applies equally to fishermen in the south-west and north-east of England and elsewhere. I hope that there will be discussions between Treasury Ministers and their counterparts at the Ministry of Agriculture, Fisheries and Food and the Scottish Office with the aim of introducing a decommissioning scheme that is as fair-minded as some of the schemes of compensation offered to hill and other farmers in less-favoured areas.

Such a scheme would assist fishermen and vessels, for not only are there elderly vessels but some of our fishermen are reaching an age when they are too old to be fishing in bad weather. Fishing is a young man's occupation. Many fishermen would happily come ashore if they received financial assistance from Brussels and the Government. The British Government owe it to our fishermen to introduce such a scheme in the near future.

9.19 pm

Mr. Christopher Gill (Ludlow)

I wish to speak to appendix F of Cm. 1021 and draw the attention of the House to the reliefs and allowances against the six main Inland Revenue taxes. Those six taxes raise a total of £76.3 billion against which there are no fewer than 88 reliefs and allowances, which cost the Revenue £80.3 billion. I instance particularly capital gains tax, where the yield is £2.1 billion but the reliefs against it are no less than £7.8 billion.

What conclusions are we to draw? Apart from the conclusion that we still have too many taxes, that those taxes are too complicated and that too many of the nation's best brains are engaged on tax matters at a time when industry is crying out for professional people in accountancy and legal services, not to mention the problems the Revenue itself has in recruitment, my real concern is about the complicated network of reliefs through which the Government effectively bribe taxpayers with their own money—because taxpayers' money is effectively the only money that the Government have—to do the politicians' bidding. There is nothing new in that; it has been going on for centuries. The question is whether that is consistent with consumer choice and the free market economy of Tory philosophy.

If politicians decree that there will be mortgage interest relief, which costs £7 billion, and that there will be exemption from capital gains tax for those investing in property, which costs £7 billion, we must not be surprised at the result. Money will inevitably be sucked out of savings into bricks and mortar. The proof of that is in the eating. We see inflated property values and a massive increase in personal borrowing.

Money spent is indisputably more inflationary than money saved. There is a widely held view that savings are too low. In fact, they are at a record low level. My real fear is that we will not resist the temptation on 20 March to introduce yet another relief for savers. That would be wrong on every count. It would deal with the effect, not with the cause. It would further complicate the tax system and repeat many of the mistakes of the past. The answer for the future must surely be not more reliefs but fewer reliefs on fewer and lower taxes to bring about a position where to buy a house, to invest in stocks and shares, to purchase a pension or simply to put one's earnings into old-fashioned savings is an equal bet.

No one can doubt the beneficial effect of savings upon any economy and particularly upon inflation. To my right hon. Friend the Chancellor I simply say, now is the time for courage. We must not abandon the winning formula. My right hon. Friend should continue the drive for fewer, lower and less complicated taxes, particularly for those on lower incomes. Above all, he should encourage individual citizens to back their own judgment by progressively dismantling the multiplicity of reliefs and allowances that distort individual choice.

9.23 pm

Mr. Nicholas Brown (Newcastle upon Tyne, East)

I congratulate the hon. Member for Ludlow (Mr. Gill) on his critique of the Government's private medical insurance tax relief. I am sure that when he had an opportunity he at least contemplated voting against the Government.

The debate has been good. When the Chancellor of the Exchequer opened the debate on the Autumn Statement, he said: This is probably the last occasion that the House will have to debate the economy before the Budget, which I can now inform the House will be on Tuesday 20 March. As Treasury forecasts go, his remarks were at least broadly in line with other Treasury forecasts. I am sure that he did not intend to tell the House that the details of the Government's expenditure plans had no bearing on the management of the rest of the economy, but that was the impression that he gave. Clearly he did not mean to say that because he went on to say: Proper control of public spending—tight control—remains central to the Government's economic strategy."—[Official Report, 23 January 1990; Vol. 165, c. 749.] In winding up the debate, the Chief Secretary made a similar point. He said: It is because our finances are in order that we have been able to do three things simultaneously"—[HON. MEMBERS: "Oh!"]— comma— control spending, reduce taxes, and give much needed funds to priority sectors."—[Official Report, 23 January 1990; Vol. 165, c. 831–32.] This debate is an opportunity to test whether the Government have controlled spending, reduced taxes and given much-needed funds to priority sectors. When the Chief Secretary says that he will give much-needed funds to priority sectors, it is an implicit criticism of the previous Chief Secretary, who deprived those priority sectors of the funds that the present Chief Secretary says are "much needed".

Let us examine the Government's claim to have reduced taxation as a total share of gross domestic product. As the Opposition have often said, the tax burden—direct and indirect—has risen from 34.25 per cent. in 1978–79 to 37.5 per cent. in 1989–90. Perhaps the Chief Secretary was referring to direct taxation alone, but, if so, it is still the case that, under the present Government, a family—with two children—earning 50 per cent. of the average national income is paying more tax and national insurance now than it did in 1978–79. It must now be evident that the Conservative party's tax cutting has been highly selective. It has been designed to restore or redistribute wealth to where the Conservatives believe that it belongs—with the wealthy.

The Conservative Government are not truthfully committed to an anti-poverty strategy. They are supported by people who believe that it is an anti-poverty strategy to round up their poorer constituents and take them to Scotland's poll tax warrant sales to look for bargains. The Government do not realise just how unacceptable the social divisiveness of their tax and public expenditure policies are to most decent people.

The personal conduct of one or two former members of the Government does not help very much. Matters are not made easier for an ambulance worker whose annual pay rise is being resisted by the Government when he realises that the amount that he is claiming for the entire year is the equivalent of the wages of the previous Conservative Chancellor of the Exchequer for three and a half hours. Such a situation does not make for social unity. I accept, of course, that I may be understating the position as I have allowed the former Chancellor only half an hour for lunch.

The Government's second claim is that they are giving much-needed assistance to priority areas. The Government claimed as priorities the Health Service and transport, and homelessness and museums were also mentioned. My hon. Friend the Member for Derby, South (Mrs. Beckett), in an excellent speech, made it absolutely clear that the total sum that may be available for patient care is only £500 million, in spite of all the Government's claims to be giving substantially more money, and she set out why that was the case. It is possible to say that that meets the description of providing extra resources, but one can hardly say that it is targeting much-needed resources to priority areas. Surely the public's grievance about the funding of the NHS is that patient care is not being funded adequately—not that reviews are not being funded adequately.

The same is true of transport, another target of much-needed resources. The Government funding for British Rail—one assumes that that is still part of the transport infrastructure—is being cut by £22 million next year and by £124 million by 1992–93. Much-needed resources will have to come from asset sales, borrowing or fare increases.

In 1986, Britain invested 0.09 per cent. of our GDP in the national railway infrastructure, compared to Germany's 0.36 per cent. No doubt the Government will claim, as they did in the previous debate on the economy, that the Germans envy that. If the Germans could cut investment in their railways to the level that the British Conservative party has done, no doubt they would feel happier than they do now.

Our roads are so congested that the Confederation of British Industry estimates that in the south-east alone the cost to British industry is some £15 billion per year. Every class of road in Britain is in a worse state now than it was 10 years ago.

I pay tribute to the Public Accounts Committee, even if the Chief Secretary found it difficult to do so, and to my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). My right hon. Friend pointed out that the long-term cost to the Exchequer of the way in which the Department of Transport has handled the split between road maintenance and new roads is considerable. The contribution that the PAC has made to the debate is considerable. I, at least, pay tribute to it.

Some cynics say that the road network was bound to be given extra resources because it was in such a dire condition. Other cynics say that the reason why it was given extra resources was that the previous Chief Secretary to the Treasury thought that he might be moved to the Department of Transport. When he found out that that was not the case, it was too late to claw the money back. I do not accept that. I have known that the present Chancellor of the Exchequer was destined for greater things ever since we served together in the Committee stage of the Rates Bill in 1984. As Government Whip he sought to curtail the length of my speeches with offers of bars of chocolate. That gritty pragmatism, in his own surfing metaphor, led him to ride the waves, peaks and troughs of economic decision-making. The only problem with that image is that there is no such colour for the Chancellor's shorts as dayglo grey.

I have discussed the Government's priorities. It is only right to consider what is not a priority. Education is not a priority. An editorial in The Independent said on the topic of public expenditure plans for education: In real terms, that means cutting expenditure on education for the next three years. That is incredible. The Government's attitude to education seems dictated by atavistic prejudices of the business culture—prejudices which have directly contributed to the country's long-term economic performance. There is a contempt for teachers, seen as an unproductive class of persons, corrupted by socialism. That is The Independent's view of the Government's approach.

I know that the Conservatives take education seriously. That is why they have their children educated at private schools. For the Government to allow expenditure on education, as a percentage of GDP, to fall from 5.5 per cent. in 1987–89 to 4.8 per cent. in 1988–89 is a national outrage, as my right hon. Friend the Member for Llanelli (Mr. Davies) said. It serves only to accentuate the already widening economic and social divisions in our country.

The same is true of higher education. It takes a peculiar form of narrow sectarian meanness and utter incompetence to devise a scheme for student loans that will cost the Treasury more money this year than paying out the grant increases. The Government's student loans scheme does not make any sort of financial sense until the next century, if at all. The only thing that it will achieve is to dissuade working class youngsters from going into higher education.

If that was the only example of the Government's lack of control over sensible public spending, one would let it go as an aberration. But it is not an aberration. My hon. Friend the Member for Derby, South referred to the total cost of advertising, underwriting and debt write-offs associated with the privatisation programme and to the £1.5 billion bill for installing National Health Service computers. That money was spent, not on improving patient care, but on tracing various mathematical calculations through the NHS.

The deadweight cost of introducing the poll tax is £443 million, with recurring costs of £235 million. In anybody's language, that is just a waste of money. My right hon. Friend the Member for Ashton-under-Lyne will be aware of the scandal surrounding the sale of the royal ordnance factories and the subsequent sale of the Rover group, which cost the taxpayer about £100 million. We await the eventual report on that. Even more outrageously, the undervaluing of assets in privatisation sales is accompanied by about £16 billion of debt write-offs.

A fortnight ago we debated the Government's plans for tax relief on private medical insurance schemes for pensioners. About 90 per cent. of the £40 million that the scheme is supposed to cost is deadweight costs. In other words, that is money that the taxpayer is giving to people who already have such schemes and who do not need persuading into them.

When we challenge the Government on their management of the economy, they come back to us with two things. First, we get cod versions of Labour history from people who think that "The Ragged Trousered Philatelist" is about an impoverished stamp collector. Secondly, we have new and imaginative facts from the Chief Secretary. My hon. Friends know the sort of thing—that we have a trade surplus with the Cook islands and more telephones per household than Algeria. The Chief Secretary's most recent list includes boasting about a 40 per cent. increase in business investment in the past three years. If the same fact is put the other way round, it means that business investment as a share of national output is at an all-time high. However, as my hon. Friend the Member for Nottingham, North (Mr. Allen) pointed out, that presentation of the Government's case looks a bit grim in view of what is said in CBI News and the Bank of England Quarterly Bulletin which have set out a more pessimistic view of the future.

Company profitability and VAT registrations are all relevant facts in their own way, but if one is boasting about one's skill in managing the economy, I should have thought that one would stoop to mention things like the balance of payments, inflation or interest rates. When Sir Winston Churchill said, Never … was so much owed by so many to so few", he was not talking about mortgage interest repayments, although if he were serving on the Government's Front Bench now he could have been.

The previous Chancellor wanted inflation to be his judge and jury. Two things can be said in defence of the previous Chancellor—and because the Chief Secretary did not come to the aid of his former boss, I shall. The first thing is that, although he may well have said that inflation would be his judge and jury, he never said he would hang around for the sentencing. The second thing that can be said in his defence is that with interest rates being so high and with inflation not yet under control, it is only right that a Chancellor who always commended prudence should make sensible provision for himself in an uncertain world. What can be wrong with that? Understandably, his successor has told the House: There should be no doubt in anyone's mind. We will bring the economy back on track, as a preparation for prosperity in a decade of promise."—[Official Report, 23 January 1990; Vol. 165, c. 758.] What happened to the last decade? What does the Chancellor mean by "back on track"? Back on track from where?

In keeping with his stealthy devaluation, the new Chancellor replaces the bombastic complacency of his predecessor with a quiet, dull grey, low cunning that is all his own and, although it is bad news for Britain—

Mr. Tony Blair (Sedgefield)

It is a compliment to the right hon. Gentleman.

Mr. Brown

Yes, it is a compliment. Let there be no misunderstanding about it, I am very fond of the Chancellor. However, although it is bad news for Britain, I predict that as we enter the Chancellor's "decade of promise", low cunning and shabby pragmatism will be characteristic of the Government's approach in the early years of that decade in the run-up to the next general election.

9.39 pm

The Financial Secretary to the Treasury (Mr. Peter Lilley)

I begin by congratulating the hon. Member for Newcastle upon Tyne, East (Mr. Brown) on the knighthood that he was awarded on the Order Paper at the beginning of this week. The speech that he gave today shows that that was clearly well merited because it surpassed in its wit even the speeches of his right hon. and learned Friend the Member for Monklands, East (Mr. Smith). Unfortunately, he has also learnt from the right hon. and learned Gentleman how to make a speech that is entirely devoid of substantive content. I congratulate the hon. Member for Derby, South (Mrs. Becket) on her first outing—like me—as a Front Bencher speaking in a public expenditure White Paper debate. Her speech was admirable, particularly in its content. It was meaty and I intend to get my teeth into it later.

My right hon. and hon. Friends will want to join me in congratulating my right hon. Friend the Chief Secretary to the Treasury on his success in the public expenditure round, which culminated in the White Paper. By chance I stumbled across the Lamont clan motto which, I discovered, translates, "Neither spurn nor spare". The Chief Secretary has certainly neither spurned the chance to spend more on priority services nor spared waste, inefficiency and bids that exceed the country's ability to pay.

The speech of the hon. Member for Derby, South suggested that, as shadow Chief Secretary, she has adopted as her motto, "Neither cost nor control". She gave no hint of having costed her colleagues' proposals, let alone having brought them under control.

The White Paper represents an achievement in three respects. First, public spending as a proportion of gross domestic product is back at the lowest level it has been since the mid-1960s and is one of the lowest in Europe. As my hon. Friend the Member for Beaconsfield (Mr. Smith) said in a powerful speech, that gives us a great competitive advantage as we enter the Europe of the single market.

Secondly, my right hon. Friend has kept spending, as a percentage of GDP, within the plans laid down by his predecessor last year. Thirdly, despite that, he has been able to increase resources allocated to priority sectors. There is now nearly £3 billion more for the NHS, one of the biggest increases ever. There is an extra £1.8 billion for transport over the next two years. Capital investment by central Government and public corporations is set to rise by 7.5 per cent. in real terms.

Opposition Members, including the hon. Member for Nottingham, North (Mr. Allen), are genuinely baffled by how we repeatedly succeed in finding more money for priority areas, while still keeping within our overall planning targets. The answer is straightforward enough. First, we have a growing economy. Secondly—linked with that—we have falling unemployment and declining losses in the remaining nationalised industries. Thirdly, we have sound public finances resulting in the repayment of debt.

The repayment of the surplus this year, last year and the year before accounts for a reduction in the interest burden of about £3 billion a year for ever. The extra £3 billion that we have been able to make available to the NHS can be said to come from that source. Certainly it would not have been available to a Labour Chancellor because Labour is in the business of piling up debt, not unloading it.

The great majority of Opposition speakers mentioned transport and the infrastructure. However, there is a sharp contrast between the rhetoric that we heard today from the Opposition and the actions of the Labour party when it was in government. I looked up what the last Labour Government public expenditure White Paper had to say on the subject. We all know that in the previous years they had cut public expenditure on transport by 40 per cent., but were they then planning for the ever-expanding needs that hon. Members now take for granted? The White Paper is succinct. It says: A broadly constant level of expenditure, below that of earlier years, is planned for roads and transport. It is equally bleak for the infrastructure as a whole. It says: The share of capital expenditure in public expenditure as a whole is now lower than in the early 1970s … The amount of investment needed in roads and water is now less than in the early 1970s. It is a different tune now. By contrast, this Government have reversed the cuts that the Labour Government introduced and are planning a massive but balanced increase in spending on transport over the next three years. On national roads, in England alone, we shall be spending £5.7 billion, in addition to territorial budgets. On rail and other forms of mass transport we are planning to spend no less than £5.9 billion.

The other subject that came up repeatedly in the speeches of the Opposition Members, as one would expect, was the National Health Service. A year ago the Leader of the Opposition declared that the National Health Service needed another £1 billion a year to solve its problems. My right hon. Friend the then Chief Secretary managed to secure about £2 billion in extra resources, so this year the Leader of the Opposition declared that the service needed £3 billion more than was planned. Once again he has been capped, and the additional funding for the pay review awards, plus the £2.5 billion already announced, means that the National Health Service will have nearly £3 billion of extra resources in 1990–91. If the Leader of the Opposition declares yet again that a larger sum is needed, he will make himself even more foolish than usual, but it is a racing certainty that he will.

Those huge increases have posed the Opposition a serious problem: how can they describe as cuts increases that match their most extreme demands? But they have risen to the occasion, and they now argue that the increase, if one excludes all its components, is not an increase at all. The hon. Member for Derby, South was at it today. She dismissed what is called the extra inflation in NHS costs. But that is largely the result of pay awards rising faster than prices. It is true that Labour did not succeed in getting nurses' pay to rise faster than prices, but there is no reason why Labour should dismiss the achievement when we secure it. The hon. Lady dismissed expenditure on the Health Service review. I am advised by my hon. Friend:; that on this subject the hon. Lady has little to offer. The fact is that expenditure on the Health Service review is financing 100 extra consultant posts. Do the Opposition not want those posts? It is financing an improved medical audit. Are the Opposition uninterested in the quality of health care?

Mrs. Beckett

I hope that the Minister will try to be accurate. It is not 100 posts this year. The money to which I referred is the money for this year. This year only one third of those posts—30 to 35—will be provided.

Mr. Lilley

And this year only a fraction of the money will be going on that.

The hon. Lady talked about the spending attributable to what she dismissively called demographic factors. Nothing could be more spurious. "Demographic factors", in commonsense language, means people living longer, fitter lives. That is happening partly because of the very expenditure that we have committed to the Health Service. People live longer because they receive medical care, not vice versa. The hon. Lady tried to pretend that there had not been an increase and that the statistics could be dismissed. She at least ought to know better because in her own city we have seen completed in recent years at the Derby city hospital an obstetric, gynaecology and maternity unit costing £18.3 million. Secondly, Derbyshire royal infirmary stage 2 cost £12 million. Thirdly, Ilkeston community hospital cost £6.3 million. What gratitude from the hon. Lady.

We have heard a great deal about the Opposition's concern about training. I welcome the agreement that is beginning to emerge about the antiquity of the training problem and the importance of training for our future.

Mr. Joseph Ashton (Bassetlaw)

If the future is so rosy, and if everything is so good, why did the right hon. Member for Blaby (Mr. Lawson) quit?

Mr. Lilley

I knew that I should not have given way to an hon. Member who had not even had the courtesy to attend the debate. Now he makes a point that is wholly irrelevant to it.

It is increasingly accepted that, on training, this country has suffered, not just for years, not just for decades, but probably for a century, from three problems. There has been too little vocational training for school leavers who do not go on to higher education, too few of them entering higher education and too few of those who enter higher education qualifying in science or engineering.

What the Opposition do not like is that the Government have a track record of addressing those problems with vigour and increasing success. By contrast, when Opposition Members were in power they failed to do anything. Since they have been in opposition, they have denigrated and opposed every step taken and they have backed the unions when they have tried to prevent us from introducing constructive proposals for education and training.

The hon. Member for Derby, South was a junior Minister, although she probably prefers to forget it, in the Department of Education and Science in the previous Labour Government.

Mr. John Smith

That is insulting.

Mr. Lilley

I am in no way insulting the hon. Lady, only casting aspersions on the record of the previous Labour Government of which the right hon. and learned Gentleman and the hon. Lady were members. She may be able to confirm that the Labour Government considered a proposal to deal with the lack of vocational training for school leavers similar to the youth training scheme, and turned it down because their priorities were the ideological ones of forcing through the rest of the comprehensivisation programme, in no way improving training for our school leavers. I note that she does not deny that. She cannot, because Labour did nothing to solve that problem. But we have done so. We have achieved a vast increase in the proportion of people going into higher education and we have increased the proportion who achieve qualifications in science and engineering. The proportion of British graduates in science and engineering combined exceeds that of all other major countries, not excluding Japan.

In one sense, this has not been a proper debate, although we have had some admirable contributions.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

I confess. Take me to the Tower.

Mr. Speaker

Order. This has not been a very good day for the House of Commons. If we could have fewer comments of that kind from Front-Bench Members, it would be helpful.

Mr. Lilley

It has not been a good debate because real debate requires an alternative, and the Labour party has failed to give us an alternative to our public expenditure White Paper. It has refused to respond to two questions posed by my right hon. Friend the Chief Secretary: how much would the Labour programme cost and how much—

Dr. Godman

Will the Minister give way?

Mr. Lilley

I shall give way briefly.

Dr. Godman

The Minister will recall that the Chief Secretary promised to answer my question on negotiations with the Department of Agriculture and Fisheries for Scotland and the Ministry of Agriculture, Fisheries and Food on the funding of the decommissioning scheme.

Mr. Lilley

I shall write to the hon. Gentleman giving him the answer to the detailed point that he put.

Members of the Opposition Front Bench will be grateful for that intervention. They have once again failed to respond to the two questions: how much would Labour's programme cost and how much extra tax would it require? Labour Front-Bench Members are in a peculiarly embarrassing position. Their initial aim after the election was to steer clear of any spending commitments if possible, but they have failed. The rest of the party forced them to take on board a welter of commitments when they agreed the policy review. Recently I wasted a shining hour or two reading it and encountered no fewer than 170 potential spending pledges, and that is only a start.

Despite the best efforts of the hon. Member for Derby, South in her role as shadow Chief Secretary, each new party document that issues from the Opposition Front Bench contains more promises. Even in this debate we have had plenty more calls from every Opposition Member, Front Bencher or Back Bencher, for more expenditure on everything: training, education, research and development, science, health, and so on. The hon. Lady herself gave every impression, unless my ears deceived me, of demanding more spending on health, training, research and development, investment and transport.

I could not help thinking how bizarre the public spending round would be if ever the hon. Lady were to become Chief Secretary to the Treasury. It would be a case of her going round to the spending Departments' Ministers and knocking on the door demanding that they spend a little more money but I happily give way to the hon. Lady.

Mrs. Beckett

I am not sure that "happily" is quite the right word. The hon. Gentleman has been too clever by half. If he looks at the commitments that I said the Government should not have cut, and at the choices that the Government should not have made in spending terms, he will find that they balance almost exactly.

Mr. Lilley

That is absolute nonsense. The only number of any size that the hon. Lady specified was the alleged costs which she asserted had resulted from the privatisation programme. Without the privatisation programme, the Labour party would be deprived of revenues far in excess of any costs she referred to and it would have a black hole that it would be incapable of filling.

During the debate the hon. Lady, in response to excellent questions from my hon. Friend the Member for Beaconsfield, dropped a bombshell. She declared that not only would those promises not be costed before the election, but they would not neceessarily be implemented afterwards. She revealed a core manifesto. It consists of just two pledges: higher pensions and better benefits for families with children. Everything else—every other item—would depend on circumstances, happenstances and maybes.

I do not want to misrepresent the hon. Lady, but will she confirm that there is no firm Opposition commitment to spend on any other items apart from those two? Is there no firm commitment for extra spending on health, no firm commitment for extra spending on training, no firm commitment for extra spending on transport, and no firm commitment for extra spending on infrastructure? I look at the worried faces among Opposition Back-Bench Members and I realise that the pledges that they forced the party to accept, to "Meet the challenge, make the change", have now been disowned.

Now I know what the right hon. and learned Member for Monklands, East meant when he told The Times that there might be room only for what he calls "symbolic commitments". Labour's calls for more spending on health are, after all, purely symbolic and if ever a Labour Government were elected, patients could look forward to being treated in symbolic hospitals, we should be defended by symbolic tanks, and the ambulance men could, no doubt, look forward to a symbolic pay rise from the Labour Government. I shall happily give way to the right hon. and learned Gentleman if he wishes to disown his remarks. He does not.

The other extraodinary remark made by the hon. Lady was that not one of Labour's pledges and promises would be costed until after the next general election. That is extraordinary, not only in terms of democracy and common sense; it flatly contradicts the commitment of her own leader, and it was a commitment not lightly given. In the preface to Labour's document, on page 8 the right hon. Member for Islwyn (Mr. Kinnock) wrote: At the time of the next General Election, we will set out the accurate costs of our manifesto proposals in the light of the economic situation we are likely to inherit and the priorities which we consider most urgent. That promise has now been rendered purely symbolic, I gather. There is to be no costing exercise, no attempt to explain to the people the issues on which they will be voting. The fact is that we shall not let the Opposition get away with it, and it is not only us, but some Back-Bench Opposition Members who will not let them get away with it. I remember the hon. Member for Brent, East (Mr. Livingstone) saying: You can be miles ahead in the polls, but when you get to the last three weeks people think, 'Could I afford a Labour Government? He added: If you can't tell people where the money is coming from, they won't vote for you". Absolutely.

At the heart of the debate lies the question: does control of public expenditure matter? Conservative Members believe that it is crucial. Opposition Members appear to be willing to accede to any remotely plausible demands for more money. We have seen where that leads. We saw where it led in 1976, when the brokers' men from the IMF were called in.

There is a positive face to public expenditure controls: they make for a more dynamic economy. Ultimately it is everyone's right to spend his own money as he wishes, but the Opposition would take away that right. They have seen Socialism destroyed, but they are not prepared to admit it as they face the electorate in the next general election.

Question put, That the amendment be made:—

The House divided: Ayes 209, Noes 274.

Division No. 73]	[10.00 pm
AYES
Abbott, Ms Diane	Cartwright, John
Allen, Graham	Clarke, Tom (Monklands W)
Alton, David	Clay, Bob
Anderson, Donald	Clelland, David
Archer, Rt Hon Peter	Cohen, Harry
Ashdown, Rt Hon Paddy	Coleman, Donald
Ashley, Rt Hon Jack	Cook, Robin (Livingston)
Ashton, Joe	Corbett, Robin
Banks, Tony (Newham NW)	Corbyn, Jeremy
Barnes, Harry (Derbyshire NE)	Cousins, Jim
Barnes, Mrs Rosie (Greenwich)	Crowther, Stan
Barron, Kevin	Cryer, Bob
Battle, John	Cunliffe, Lawrence
Beckett, Margaret	Cunningham, Dr John
Bell, Stuart	Dalyell, Tam
Benn, Rt Hon Tony	Darling, Alistair
Bennett, A. F. (D'nt'n & R'dish)	Davies, Rt Hon Denzil (Llanelli)
Bermingham, Gerald	Davies, Ron (Caerphilly)
Bidwell, Sydney	Davis, Terry (B'ham Hodge H'l)
Blair, Tony	Dewar, Donald
Blunkett, David	Dixon, Don
Boateng, Paul	Dobson, Frank
Boyes, Roland	Doran, Frank
Bradley, Keith	Douglas, Dick
Bray, Dr Jeremy	Duffy, A. E. P.
Brown, Nicholas (Newcastle E)	Dunnachie, Jimmy
Bruce, Malcolm (Gordon)	Dunwoody, Hon Mrs Gwyneth
Buchan, Norman	Eadie, Alexander
Buckley, George J.	Eastham, Ken
Caborn, Richard	Evans, John (St Helens N)
Callaghan, Jim	Fatchett, Derek
Campbell-Savours, D. N.	Fearn, Ronald
Canavan, Dennis	Field, Frank (Birkenhead)
Carlile, Alex (Mont'g)	Fields, Terry (L'pool B G'n)

Flannery, Martin	Michie, Mrs Ray (Arg'l & Bute)
Flynn, Paul	Mitchell, Austin (G't Grimsby)
Foot, Rt Hon Michael	Moonie, Dr Lewis
Foster, Derek	Morgan, Rhodri
Foulkes, George	Morley, Elliot
Fraser, John	Morris, Rt Hon A. (W'shawe)
Fyfe, Maria	Morris, Rt Hon J. (Aberavon)
Galloway, George	Mullin, Chris
Garrett, John (Norwich South)	Murphy, Paul
Garrett, Ted (Wallsend)	Nellist, Dave
George, Bruce	Oakes, Rt Hon Gordon
Godman, Dr Norman A.	O'Brien, William
Gordon, Mildred	O'Neill, Martin
Gould, Bryan	Orme, Rt Hon Stanley
Griffiths, Win (Bridgend)	Patchett, Terry
Grocott, Bruce	Pendry, Tom
Hardy, Peter	Pike, Peter L.
Harman, Ms Harriet	Powell, Ray (Ogmore)
Hattersley, Rt Hon Roy	Prescott, John
Haynes, Frank	Primarolo, Dawn
Healey, Rt Hon Denis	Radice, Giles
Heffer, Eric S.	Randall, Stuart
Henderson, Doug	Redmond, Martin
Hinchliffe, David	Rees, Rt Hon Merlyn
Hoey, Ms Kate (Vauxhall)	Richardson, Jo
Hogg, N. (C'nauld & Kilsyth)	Robinson, Geoffrey
Home Robertson, John	Rooker, Jeff
Hood, Jimmy	Ross, Ernie (Dundee W)
Howarth, George (Knowsley N)	Rowlands, Ted
Howells, Dr. Kim (Pontypridd)	Ruddock, Joan
Hoyle, Doug	Salmond, Alex
Hughes, John (Coventry NE)	Sedgemore, Brian
Hughes, Robert (Aberdeen N)	Sheerman, Barry
Illsley, Eric	Sheldon, Rt Hon Robert
Ingram, Adam	Short, Clare
Janner, Greville	Sillars, Jim
Johnston, Sir Russell	Skinner, Dennis
Jones, Barry (Alyn & Deeside)	Smith, Andrew (Oxford E)
Jones, Ieuan (Ynys Môn)	Smith, C. (Isl'ton & F'bury)
Kaufman, Rt Hon Gerald	Smith, Rt Hon J. (Monk'ds E)
Kennedy, Charles	Smith, J. P. (Vale of Glam)
Kirkwood, Archy	Snape, Peter
Lambie, David	Soley, Clive
Leadbitter, Ted	Spearing, Nigel
Leighton, Ron	Steinberg, Gerry
Lestor, Joan (Eccles)	Strang, Gavin
Lewis, Terry	Straw, Jack
Litherland, Robert	Taylor, Mrs Ann (Dewsbury)
Livsey, Richard	Taylor, Matthew (Truro)
Lloyd, Tony (Stretford)	Thomas, Dr Dafydd Elis
Lofthouse, Geoffrey	Turner, Dennis
Loyden, Eddie	Vaz, Keith
McAllion, John	Wall, Pat
McAvoy, Thomas	Wallace, James
Macdonald, Calum A.	Walley, Joan
McFall, John	Warden, Gareth (Gower)
McKay, Allen (Barnsley West)	Wareing, Robert N.
McKelvey, William	Watson, Mike (Glasgow, C)
McLeish, Henry	Welsh, Andrew (Angus E)
Maclennan, Robert	Welsh, Michael (Doncaster N)
McWilliam, John	Williams, Rt Hon Alan
Madden, Max	Williams, Alan W. (Carm'then)
Mahon, Mrs Alice	Wilson, Brian
Marek, Dr John	Winnick, David
Marshall, David (Shettleston)	Wise, Mrs Audrey
Marshall, Jim (Leicester S)	Worthington, Tony
Martin, Michael J. (Springburn)	Wray, Jimmy
Martlew, Eric	Young, David (Bolton SE)
Maxton, John
Meacher, Michael	Tellers for the Ayes:
Meale, Alan	Mrs. Llin Golding and Mr. Martyn Jones.
Michael, Alun
Michie, Bill (Sheffield Heeley)

NOES
Adley, Robert	Arnold, Tom (Hazel Grove)
Alison, Rt Hon Michael	Ashby, David
Amess, David	Aspinwall, Jack
Amos, Alan	Atkins, Robert
Arbuthnot, James	Atkinson, David

Baker, Nicholas (Dorset N)	French, Douglas
Batiste, Spencer	Fry, Peter
Beaumont-Dark, Anthony	Gale, Roger
Bellingham, Henry	Gardiner, George
Bendall, Vivian	Garel-Jones, Tristan
Bennett, Nicholas (Pembroke)	Gill, Christopher
Benyon, W.	Gilmour, Rt Hon Sir Ian
Bevan, David Gilroy	Glyn, Dr Sir Alan
Biffen, Rt Hon John	Goodhart, Sir Philip
Blackburn, Dr John G.	Goodlad, Alastair
Body, Sir Richard	Goodson-Wickes, Dr Charles
Boscawen, Hon Robert	Gorman, Mrs Teresa
Boswell, Tim	Gorst, John
Bottomley, Mrs Virginia	Gow, Ian
Bowden, A (Brighton K'pto'n)	Grant, Sir Anthony (CambsSW)
Bowden, Gerald (Dulwich)	Greenway, Harry (Ealing N)
Bowis, John	Griffiths, Sir Eldon (Bury St E')
Boyson, Rt Hon Dr Sir Rhodes	Griffiths, Peter (Portsmouth N)
Brandon-Bravo, Martin	Grist, Ian
Brazier, Julian	Ground, Patrick
Bright, Graham	Grylls, Michael
Brooke, Rt Hon Peter	Hague, William
Brown, Michael (Brigg & Cl't's)	Hamilton, Hon Archie (Epsom)
Browne, John (Winchester)	Hamilton, Neil (Tatton)
Bruce, Ian (Dorset South)	Hampson, Dr Keith
Buchanan-Smith, Rt Hon Alick	Hannam, John
Buck, Sir Antony	Hargreaves, A. (B'ham H'll Gr')
Budgen, Nicholas	Hargreaves, Ken (Hyndburn)
Burns, Simon	Harris, David
Burt, Alistair	Haselhurst, Alan
Butcher, John	Hawkins, Christopher
Butler, Chris	Hayes, Jerry
Butterfill, John	Hayhoe, Rt Hon Sir Barney
Carlisle, John, (Luton N)	Hayward, Robert
Carlisle, Kenneth (Lincoln)	Heathcoat-Amory, David
Carrington, Matthew	Hicks, Mrs Maureen (Wolv' NE)
Carttiss, Michael	Hicks, Robert (Cornwall SE)
Cash, William	Higgins, Rt Hon Terence L.
Channon, Rt Hon Paul	Hill, James
Chapman, Sydney	Hind, Kenneth
Chope, Christopher	Hogg, Hon Douglas (Gr'th'm)
Churchill, Mr	Hordern, Sir Peter
Clark, Hon Alan (Plym'th S'n)	Howard, Rt Hon Michael
Clark, Sir W. (Croydon S)	Howarth, Alan (Strat'd-on-A)
Clarke, Rt Hon K. (Rushcliffe)	Howarth, G. (Cannock & B'wd)
Colvin, Michael	Howell, Rt Hon David (G'dford)
Conway, Derek	Hughes, Robert G. (Harrow W)
Coombs, Anthony (Wyre F'rest)	Hunt, Sir John (Ravensbourne)
Coombs, Simon (Swindon)	Hunter, Andrew
Couchman, James	Irvine, Michael
Cran, James	Irving, Sir Charles
Critchley, Julian	Jack, Michael
Currie, Mrs Edwina	Janman, Tim
Davies, Q. (Stamf'd & Spald'g)	Jessel, Toby
Davis, David (Boothferry)	Johnson Smith, Sir Geoffrey
Day, Stephen	Jones, Robert B (Herts W)
Devlin, Tim	Jopling, Rt Hon Michael
Dicks, Terry	Kellett-Bowman, Dame Elaine
Dorrell, Stephen	Key, Robert
Douglas-Hamilton, Lord James	Kilfedder, James
Dover, Den	King, Roger (B'ham N'thfield)
Dunn, Bob	Kirkhope, Timothy
Durant, Tony	Knapman, Roger
Dykes, Hugh	Knight, Greg (Derby North)
Eggar, Tim	Knight, Dame Jill (Edgbaston)
Evans, David (Welwyn Hatf'd)	Knowles, Michael
Evennett, David	Knox, David
Fairbairn, Sir Nicholas	Lamont, Rt Hon Norman
Fallon, Michael	Lang, Ian
Favell, Tony	Latham, Michael
Fenner, Dame Peggy	Lee, John (Pendle)
Field, Barry (Isle of Wight)	Leigh, Edward (Gainsbor'gh)
Finsberg, Sir Geoffrey	Lennox-Boyd, Hon Mark
Fookes, Dame Janet	Lester, Jim (Broxtowe)
Forman, Nigel	Lightbown, David
Forsyth, Michael (Stirling)	Lilley, Peter
Forth, Eric	Lloyd, Sir Ian (Havant)
Fowler, Rt Hon Sir Norman	Lloyd, Peter (Fareham)
Fox, Sir Marcus	Lord, Michael
Freeman, Roger	Macfarlane, Sir Neil

MacGregor, Rt Hon John	Rowe, Andrew
MacKay, Andrew (E Berkshire)	Rumbold, Mrs Angela
Maclean, David	Ryder, Richard
McLoughlin, Patrick	Sackville, Hon Tom
McNair-Wilson, Sir Michael	Sayeed, Jonathan
McNair-Wilson, Sir Patrick	Shaw, David (Dover)
Madel, David	Shaw, Sir Giles (Pudsey)
Major, Rt Hon John	Shaw, Sir Michael (Scarb')
Malins, Humfrey	Shelton, Sir William
Mans, Keith	Shephard, Mrs G. (Norfolk SW)
Marland, Paul	Shepherd, Richard (Aldridge)
Marlow, Tony	Shersby, Michael
Marshall, John (Hendon S)	Sims, Roger
Martin, David (Portsmouth S)	Skeet, Sir Trevor
Maude, Hon Francis	Smith, Tim (Beaconsfield)
Maxwell-Hyslop, Robin	Soames, Hon Nicholas
Mayhew, Rt Hon Sir Patrick	Speller, Tony
Mellor, David	Spicer, Sir Jim (Dorset W)
Meyer, Sir Anthony	Spicer, Michael (S Worcs)
Miller, Sir Hal	Squire, Robin
Mills, Iain	Stanbrook, Ivor
Miscampbell, Norman	Stanley, Rt Hon Sir John
Mitchell, Andrew (Gedling)	Stern, Michael
Mitchell, Sir David	Stevens, Lewis
Monro, Sir Hector	Stewart, Allan (Eastwood)
Morris, M (N'hampton S)	Stewart, Andy (Sherwood)
Morrison, Sir Charles	Stewart, Rt Hon Ian (Herts N)
Moss, Malcolm	Stradling Thomas, Sir John
Moynihan, Hon Colin	Sumberg, David
Mudd, David	Summerson, Hugo
Nelson, Anthony	Taylor, Ian (Esher)
Newton, Rt Hon Tony	Thompson, D. (Calder Valley)
Nicholls, Patrick	Thornton, Malcolm
Nicholson, David (Taunton)	Townsend, Cyril D. (B'heath)
Nicholson, Emma (Devon West)	Tredinnick, David
Norris, Steve	Trippier, David
Onslow, Rt Hon Cranley	Twinn, Dr Ian
Oppenheim, Phillip	Viggers, Peter
Page, Richard	Wakeham, Rt Hon John
Patten, Rt Hon Chris (Bath)	Walker, Bill (T'side North)
Patten, Rt Hon John	Warren, Kenneth
Peacock, Mrs Elizabeth	Wells, Bowen
Porter, Barry (Wirral S)	Widdecombe, Ann
Porter, David (Waveney)	Wilkinson, John
Powell, William (Corby)	Wilshire, David
Price, Sir David	Winterton, Mrs Ann
Raison, Rt Hon Timothy	Winterton, Nicholas
Rathbone, Tim	Wood, Timothy
Renton, Rt Hon Tim	Yeo, Tim
Rhodes James, Robert	Young, Sir George (Acton)
Roberts, Wyn (Conwy)
Roe, Mrs Marion	Tellers for the Noes:
Rossi, Sir Hugh	Mr. John M. Taylor and Mr. Irvine Patnick.
Rost, Peter

Question accordingly negatived.

Main Question put and agreed to.

Resolved, That this House takes note of the White Paper on the Government's Expenditure Plans for 1990–91 to 1992–93 (Cm. 1001–1009,1011–1018, and 1021).