Public Expenditure Reviews

HC Deb 08 February 1993 vol 218 cc683-90 3.31 pm

The Chief Secretary to the Treasury (Mr. Richard Portillo)

With permission, Madam Speaker, I would like to make a statement about public spending. The Government are committed to a rigorous approach to public spending. We set out in our manifesto for the last election our objective of reducing the share of national income taken by the public sector. As part of that, on 14 May last year, following a discussion on public spending, the Cabinet decided that, once the 1992 public spending round was completed, I should be commissioned as Chief Secretary to conduct a long-term exercise involving in-depth reviews of the public-spending programmes of each Department of State. It was anticipated that the reviews would take much of the period of this parliament to complete.

My right hon. Friend the Prime Minister mentioned the exercise in a speech last week. He noted how easy it was for the state to settle into habits of spending that outlast their purpose and outrun their budgets.

The exercise will require Secretaries of State in each Department to conduct searching studies of their programmes in co-operation with me. The process will start this year with four of the largest programmes. The Departments involved are the Home Office and the Departments of Health, Education and Social Security. The particular aim is to distinguish clearly between the essential costs of high priority spending, which we will continue to fund, and avoidable spending which we cannot afford.

Over the course of the Parliament, we shall be looking at the direction that spending on every programme is taking, and at whether its purpose remains right for the 1990s. We will be seeking to identify areas where better targetting can be achieved, or from which the public sector can withdraw altogether.

These fundamental reviews are not a substitute for the traditional process of public expenditure control; rather, they are intended to reinforce it. Their focus will be on the medium to longer term, although our aim is that their provisional findings should inform the next spending round in the summer.

Making progress towards our fiscal objectives requires us to exercise tight control over public spending. We have an absolute duty to ensure full value for money for the taxpayer from the £250 billion that we spend each year. We shall fulfil that duty.

Ms. Harriet Harman (Peckham)

Will the Chief Secretary confirm that this is no ordinary review—that it is quite different from the normal Treasury overview of spending? Although he says that the review was originally intended to last the whole Parliament, will not the provisional findings of the review start hitting spending plans as early as this summer?

On what basis has the right hon. Gentleman chosen the four Departments? What are the criteria? Given that the Departments that he has selected cover our police, our schools, our hospitals and pensions, people will want to know now what options are being contemplated. What is up for grabs in this extraordinary review?

Given that the right hon. Gentleman has stated that there are areas of spending and investment from which the public sector can withdraw altogether, will he tell us which services, which benefits and which investment plans are under consideration as those from which the public sector can withdraw altogether? Which are "high priority" and may survive; which are only "a priority" and will therefore be doomed?

Who will be consulted before these decisions are taken? What is the process? Will the right hon. Gentleman confirm that the election promises made by the Prime Minister were not only to raise child benefit in line with inflation but to maintain the levels of public services over the whole Parliament?

Is not the real reason for this extraordinary statement nothing to do with the fact that the Government want a genuine and open review of the efficiency of public spending, but rather a panic response to the Government's economic mismanagement—in particular, to the appalling levels of unemployment, costing £9,000 for every unemployed person?

Will not the right hon. Gentleman realise that it would be wholly wrong if the British people, who are already suffering in the recession, ended up paying the price in terms of worse policing, worse schools and worse health care—not to mention lost pensions and lost benefits? Should not the price of the recession and economic mismanagement be paid by the Government who caused them?

Mr. Portillo

I fear that the hon. Lady has not adopted the measured tone required by this subject. I will be happy to answer her questions, however.

Is this review quite different from what has gone before? It is a substantial review; it will cover the whole of this Parliament; it will cover every Department. It is different from what happens in every public expenditure round, but it will not be the bitter and vicious cutting exercise that the Labour Government went in for.

The hon. Lady wants to know whether there will be results as early as this summer. There may be some; I am asking for preliminary conclusions. She asked how the Departments were chosen. They are the largest Departments, with the exception of Defence, and Defence underwent a review quite recently, entitled "Options for Change".

The hon. Lady wants to know what will be included and what excluded. She should understand that at this stage we are asking questions. There is no point in asking questions if one knows the answers. As to what will be included and what excluded, perhaps I can use the following words: We should be prepared to re-examine everything. I've not ruled anything out of court. Those were the words used by the right hon. and learned Gentleman the Leader of the Opposition, to describe the social justice commission that he has established.

It is extraordinary of the hon. Lady to ask me about manifesto pledges. Yes, they stand. We honoured them in the autumn statement. She is in an extraordinary position. Yesterday, she helped to build up a bonfire of the Labour party's manifesto pledges, which were then set alight by the right hon. and learned Member for Monklands, East (Mr. Smith). The pledge to nationalise water: gone. The pledge to renationalise electricity: gone. The tax rises in the shadow Budget: gone. Yesterday, the Labour party was urged by its leader to think the unthinkable—unfortunately, the hon. Lady was not included among the thinkers.

The party to which the hon. Lady belongs set up a Commission for Social Justice, a no-holds barred review. A party that is afraid to question is a party that is afraid to govern. A party that, in setting up the social justice commission, is willing to ask these questions, but then attacks our party for asking them, is a party that does not know its bottom from its elbow.

Mr. Nigel Forman (Carshalton and Wallington)

Is my right hon. Friend aware that this fundamental review will be welcomed not only by Conservative Members but by the financial markets, providing that it produces a sensible medium-term strategy for public expenditure that will take us to the end of the Parliament and beyond? Is he further aware that one of the structural problems of public expenditure, which must be addressed, is to improve the balance between transfer payments, which have, on the whole, been growing too fast and programmed expenditure on investment in such matters as human capital in education and training, which needs to grow faster?

Mr. Portillo

I am grateful to my hon. Friend far his well-phrased remarks. I appreciate the ready co-operation of my right hon. Friends in this exercise, some of whom are with me on the Treasury Bench. At the weekend, my right hon. Friend the Secretary of State for Health said: I welcome the Prime Minister's review of public expenditure. Of course we have to look into every corner to root out waste and make sure we use taxpayers' money as efficiently as possible. This means taking tough decisions about priorities. Priorities are exactly what my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) spoke about, and I agree with him, as I agree with my right hon. Friend the Secretary of State for Health.

Mr. Simon Hughes (Southwark and Bermondsey)

The country thinks that the Chief Secretary's main job is to keep public expenditure under review all the time. Therefore, his announcement should not be a great surprise. His review will not be welcomed, but will be looked upon with fear and suspicion by the country, unless he gives certain assurances. He must give the assurance that the review will be public and open and not private; that it will aim at rebuilding Britain's economic prosperity; and, above all, that it will have as its objective a reduction in the appalling gap that has widened between the rich and the poor in Britain, and which has been the most damning legacy of the past 14 Tory years.

Mr. Portillo

The hon. Gentleman is right to say that there is nothing surprising about a Chief Secretary indulging in a review of public spending. We have to do that, and in May we announced that it would have two legs, which are the annual rounds and this further review covering the entire Parliament and each Department in turn.

The Government have an obligation to undertake such a review, because we are responsible for the spending of taxpayers' money, and in sorting out our priorities we must carry out this internal exercise. My right hon. Friends are conducting the exercise and are, of course, free to take what advice they wish from outside. This is basically an exercise for the Government to decide their own priorities. A central point is that the review is directed towards recovery. If the Government took an increasing share of the nation's resources year by year, it would have a devastating effect on the wealth-creating sector, and we must be concerned about that.

Mr. James Couchman (Gillingham)

My right hon. Friend is right to remind the House that he would be negligent if in his important position he did not have public expenditure under review at all times. Will he note that the provision of health care free at the point of delivery is cherished by rich and poor alike, and that any erosion of that principle would be deeply resented throughout the country?

Mr. Portillo

Yes. I think that my hon. Friend well knows, as does the whole House, the real and absolute commitment of my right hon. Friend the Secretary of State for Health. She would not have endorsed in such generous terms the necessity for this review if she did not strongly believe that money can be saved in the health service and that there are ways to provide better care and more money to patients. That is very much the object of the exercise.

Mr. Robert Ainsworth (Coventry, North-East)

The Minister gave as his excuse for not including the Ministry of Defence the fact that a review of defence had already been undertaken. Have not huge changes been undertaken in the health service following review, and has there not been review after review of education to pretend that something is actually being done about the appalling standards? How on earth can the right hon. Gentleman justify leaving defence out? And is the Treasury to be part of the review, as it is the Treasury that has got us into the mess that has necessitated it?

Mr. Portillo

The hon. Gentleman must not get upset. I assure him that all Departments will be included in the review, which will take much of a Parliament to complete. We must begin somewhere, and I have begun with four large Departments, taking account of the fact that Defence has recently been reviewed. That is not to rule out the possibility of looking further at what is done within the Ministry of Defence as conditions in the world change. All Departments, including the Treasury, will be reached in due course.

Sir Giles Shaw (Pudsey)

I congratulate my right hon. Friend and his colleagues on the commitment to undertake the review and to do so thoroughly. Is it not odd that the hon. Member for Peckham (Ms. Harman) should seek to ask so many questions when she does not want to have the facts before she seeks the answers? My right hon. Friend must be able to obtain all the information that he needs. Will he make it clear that, although he wishes to see certain results available during the year, the review must be sufficiently thorough to ensure that the results are sustainable in the longer term? In other words, he must not rush it.

Mr. Portillo

My hon. Friend is right. The important thing is to get the right answers over a period, and that will take a long time. However, it is reasonable to ask for some perliminary conclusions around the early summer, so that they can inform the public expenditure survey that begins at that time. The review will go on. I can do no better than to quote the Leader of the Opposition: I've set up the Social Justice Commission in order to conduct a very wide-ranging review of the whole complex system of tax, benefits, rights of peoples'…We haven't looked at any of this, almost since Beveridge. There's been no thorough examination, that's what we're going to do. What is sauce for the goose is sauce for the gander.

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

The Chief Secretary spoke earlier about the state settling into habits of spending. Will he bear in mind the fact that the old-age pension is not a charitable dole from the state? People pay in for their pension all their lives, and most of our constituents, whether they vote Conservative or Labour believe——

Mr. Simon Hughes

Or Liberal Democrat.

Mr. Tony Banks (Newham, North-West)

Not many of them do that.

Ms. Abbott

Most of the constituents of hon. Members on both sides of the House believe strongly that, when people retire, after having worked all their lives, whether in the marketplace or in the home, they are entitled as of right to a decent pension. They should not have to beg or go asking for charity. That is the principle behind a universal pension. The Chief Secretary tampers with the principle of a universal pension at his peril.

Mr. Portillo

I have never said that I would tamper with the universal pension. The person who has said it is the Leader of the Opposition. He said: We must be prepared to examine in an open-minded way some of the fundamental features of our approach. What is the right balance between universal and selective benefits? The hon. Lady's argument is not with me but with those on her own Front Bench.

Mr. Geoffrey Dickens (Littleborough and Saddleworth)

Does my right hon. Friend agree that throwing resources at a problem is not always the answer? Sometimes the answer is good management and sometimes it is good work practice. We are not talking about the Government's money, because the Government do not have any. It is the taxpayers' money, and we are the custodians of it and have to use it wisely. There is nothing wrong with selective benefits as long as they are targeted on those in need. What is wrong with that? The Opposition will always cry, "Means testing." They mean, "Don't let's get it to those in need."

Mr. Portillo

My hon. Friend is right. Only a fool could possibly believe that, in £250 billion-worth of public spending, every penny is as well spent as it could be. As my right hon. Friend the Secretary of State for Health said the other day: we cannot tolerate a drugs bill that is rising at around 12 per cent. per year, four times the rate of inflation, especially when staff are being asked to settle for no more than 1.5 per cent. We need to examine such issues, and I cannot understand why the Opposition are opposed to such questions being put.

Mrs. Alice Mahon (Halifax)

When the Chief Secretary is looking at education, will he consider the effects that some of the so-called reforms have had? Is he aware that a two-tier system is developing in many of our constituencies? When he is considering the targeting of money, will he reflect on the £225,000 in grants that went to one opted-out school in Halifax, while the other 109 schools had to share £200,000? Is that the fair education in which he is supposed to believe?

Mr. Portillo

My right hon. Friend the Secretary of State for Education and his predecessors are warmly to be congratulated on moving the numbers of those in higher education from one in eight to one in four, and on planning over the next three years a 25 per cent. increase in those who will receive further education. The initiative that the Government have taken towards the development of grant-maintained schools has been enormously important in providing schools with pride and independence as well as ensuring value for money.

Sir Teddy Taylor (Southend, East)

Will my right hon. Friend be willing to extend this excellent review to cover agriculture, especially when we observe that last month the cereal mountains broke all established records, despite the fact that we are spending a fortune on set-aside? Will the Government be willing to consider postponing the implementation of the Maastricht treaty, bearing in mind the fact that the treaty will cost the taxpayer a huge sum on top of the £2.6 billion net that we are paying this year?

Mr. Portillo

There are no plans to postpone consideration of the Maastricht Bill. I can assure my hon. Friend that the consideration of agriculture will be reached in due course. Much of the spending on agriculture derives directly from commitments under the European Community's common agricultural policy. For that reason, it is important that we ensure that we use money to best possible value in all the areas in which we have discretion, and that we bring pressure upon our European Community partners to ensure that the CAP is reformed and improved so as to provide better value for taxpayers across Europe.

Mr. Alfred Morris (Manchester, Wythenshawe)

Is the right hon. Gentleman really saying that nothing is sacrosanct in this review? Are we to understand that even the amounts and rules of entitlement for the attendance allowance, the mobility allowance and other disability benefits will be included in the review? If so, how much consultation will the right hon. Gentleman be having with the organisations of and for disabled people?

Mr. Portillo

I quoted the right hon. and learned Gentleman the Leader of the Opposition, who said that nothing could be ruled out. That is a sensible basis on which to embark on conducting a review—otherwise we omit things and we find that we are driven down alleys, with the result that extremely important matters are excluded. I think that the right hon. and learned Gentleman had it absolutely right. It would be improper of any Opposition Member to seek to start scare stories on the back of the review, especially when the Labour party is pledged to examine things fundamentally.

Mrs. Teresa Gorman (Billericay)

I welcome my right hon. Friend's statement. Does he agree with me that, as a society, we might have moved a little too far from the old-fashioned virtues of looking after our families and observing our own responsibilities? Does he agree also that it is essential that we do not continue to tax the business community, as only it can provide the jobs that will eventually provide an improvement in incomes for all those who need it?

Mr. Portillo

My hon. Friend makes a good point. I believe that the original objectives of the social security system were to encourage people into independence—in other words, to leave dependency. That is very much in our minds. It seems from the tone that the right hon. and learned Gentleman the Leader of the Opposition took that it is very much in his mind too. My hon. Friend does well to remind us of that.

Mr. Harry Barnes (Derbyshire, North-West)

A small amount of Home Office money is spent on encouraging the basic democratic right of electoral registration. Will the Government ensure that, following the review, expenditure on electoral registration is increased, so that this democratic right is encouraged and developed? Or is it the case that the only chance that the Conservative party has at the next general election is to be gained by not spending anything on electoral registration, so that as few people as possible are on the register?

Mr. Portillo

The hon. Gentleman sounds as if he is writing a bidding letter at the beginning of a public expenditure survey. I do not think that there is much prospect of him being in government and in a position to do that. I do not think either that this is the time for totting up a list of the things on which we would like to spend more. The review that I am announcing is designed carefully to examine the effectiveness of the way in which we spend the money to which we are already committed over the public expenditure survey period of the next three years and beyond.

Mr. Barry Porter (Wirral, South)

I welcome this statement, but observe that it is about time, too. Will my right hon. Friend confirm that there will be no sacred cows in this review? The main objection to the community charge was that a duke paid as much as a dustman. It always struck me as illogical that the converse was not equally open to objection—that the duke receives as much as the dustman: no sacred cows, if you please.

Mr. Portillo

I think that all my hon. Friends are joining me in wishing to ensure that the money that is allocated is spent effectively. As the Government are spending billions, one must conduct a pretty thorough review and get clown to the nitty-gritty of the way in which money is spent, in order to ensure that it is spent as effectively as possible. My hon. Friend is right to think that nothing should be ruled out from the scrutiny of value for money and the effectiveness of delivery.

Mr. Jim Cunningham (Coventry, South-East)

Is the Minister aware that the budget of the local authority in Coventry has been cut by about £180 million in the past 10 years? Is it not time that he stopped rolling back the welfare state and conducted a proper review to bolster the welfare state and local government in particular?

Mr. Portillo

My memory from my time as Minister for Local Government and Inner Cities is that local government was getting not less from year to year but more. Local government is facing challenges about how it will meet the targets and budgets that are laid down in the standard spending assessments and capping limits. Both central and local government should be willing to organise their priorities and take tough decisions, because at present we have limited resources and the economy has not been growing. We have to be sensible and responsible about how we spend taxpayers' money.

Sir Anthony Grant (Cambridgeshire, South-West)

I welcome tight control of public expenditure, but will my right hon. Friend disregard what the Leader of the Opposition said about pensions—he does not know what he is talking about anyway—and please bear in mind the fact that an increasing number of elderly people have based their declining years, the last few years of their lives, on the present figures? They are not in a position to make drastic changes at this stage of their lives, and they do not expect to be let down. Will he please bear that in mind in the review?

Mr. Portillo

My hon. Friend does well to caution me about quoting the Leader of the Opposition too much. I was stimulated to do so by the responses of those on the Labour Benches. We must adhere to our important manifesto commitments to pensioners. People make provision years in advance for their retirement—I do not wish to be deprived of any contribution that I have made to my pension—so these are important issues. I stress that we are looking at medium and longer-term reviews. At some time, however, somebody must consider the way in which public spending is developing, and be willing to take serious decisions about that.

Mr. Paul Flynn (Newport, West)

Does the Minister recall that 5 million people were bribed by the Government to desert the certainty of the state pension scheme for the lottery of personal pensions? Many of those people—probably 1 million will lose unless somebody tells them they should go back into the state scheme. The Government are not telling them, and certainly the pensions industry is not doing so. Millions of people see national insurance as a future that offers certainty and safety, but the Government are now offering them a future that holds nothing but fear and insecurity.

Mr. Portillo

The previous Labour Government were involved in an extreme important and helpful pensions reform—the establishment of supplementary pensions. That has been carried forward by the Government to offer people choice. People will have a supplementary pension whether they are contracted into the state scheme or contracted out into personal or occupational schemes. It is extremely important that people make provision for their retirement over and above the state pension. We are obliged by our manifesto to make attractive to all ages the contracting-out route, but people can remain part of SERPS if they so choose.

Several hon. Members

rose——

Madam Speaker

We must now move on. [Interruption.] Order. I am not bound to give my reasons for moving on, but let me make two comments. First, the House must know that we are bound to return to these issues at a later date. Secondly, we have before us an important debate on the Principality.