Spending Review

HC Deb 11 June 1997 vol 295 cc1143-58 3.30 pm

The Chief Secretary to the Treasury (Mr. Alistair Darling)

With permission, Madam Speaker, I should like to make a short statement about our approach to public spending in the medium term and to the comprehensive spending review promised in our manifesto.

We set out our spending plans for this year and next in our manifesto. We made it clear that tough decisions would be needed, but that such an approach was essential. We shall maintain that approach. This statement looks beyond the next two years to the medium term.

We will deliver prudent and sound management of the public finances to provide a stable platform for investment and growth; and we will ensure that public spending achieves the objectives that we have set ourselves—objectives which are based on our key principles of opportunity, fairness, employment and investment. To achieve that, we must put the public finances into proper shape.

Since 1990, public sector debt has almost doubled as a proportion of national output. In 1994, we were told there would be a Budget balance in 1998–99; in 1995, we were told it had slipped a year to 1999–2000; and last year, it slipped again to 2000–01. As a result, after five years of growth, we are still borrowing to cover our current spending: the current deficit was about £20 billion last year and the last Budget forecast that we would stay in deficit for the next two years, despite making some questionable assumptions. In order to rebuild public trust in the management of the public finances, my right hon. Friend the Chancellor has asked the National Audit Office to review the forecasting assumptions he set out in the House on 20 May.

The public have a right to know not only that total spending is affordable and prudent, but that their money is being spent on their priorities, that it is being spent efficiently and that the spending is effective. The Government spend more than £300 billion, equivalent to over £5,000 a year for every man, woman and child in the country. We will reorder that £300 billion to meet our objectives, which were endorsed by the people on 1 May.

Public spending needs to be clearly focused, and we will achieve that objective. There is no better time for a root-and-branch reappraisal of public spending priorities than at the start of a new Government.

We showed the way when we were in opposition. We said that we would provide nursery places for all four-year-olds, and we will find the money by scrapping nursery vouchers. We promised to cut waiting lists in the national health service, and we will release the funds by releasing savings from red tape and bureaucracy. We promised to reduce class sizes for five, six, and seven-year-olds, and we will find the money to pay for it by abolishing the assisted places scheme.

We have already made a start in delivering those promises, within weeks of the election. We will continue this approach in government, stripping out ill-targeted programmes that benefit only the few, and redirecting spending towards the priorities of the many.

The comprehensive spending review I am announcing today will carry on that process. It will set out clear objectives for all Departments. It will examine how we can achieve our objectives of improving standards in education, modernising the welfare state and getting people into work—in short, delivering our manifesto commitments as efficiently and effectively as we can.

Every Department will scrutinise its spending plans in detail from a zero base, and ask, how does each item of spending contribute to the Government's objectives as set out in our manifesto? Why are we spending this money? Do we need to spend it? What is it achieving? How effective is it? How efficiently are we spending it?

Every objective will be costed and Departments' effectiveness in achieving them will be scrutinised. We will make sure that we know how much we are spending on each objective, and that we can demonstrate to the public what we have achieved as a result.

We will consider how best to provide services. What should be provided by the public sector, the private sector, or a combination of both in public and private partnerships? As my right hon. Friend the Prime Minister has said, what counts is what works.

As well as looking at spending in each Department separately, we will look at issues that cross departmental boundaries. Those cross-departmental reviews will ensure that we are not hidebound by the existing structure of government. The review will be co-ordinated by the ministerial committee on public expenditure, which will look at spending across Departments.

We will look in particular at Departments' efficiency in making the best use of their assets. We have asked Departments to draw up an inventory of their assets—something that no Government have ever achieved before. We need to know what the Government own, and whether they need those assets. If not, we shall reallocate the proceeds where they are needed most.

The review will be thorough and far reaching. All Departments and all Ministers will be involved. It will take 12 months to complete and its conclusions will inform a new set of public spending plans for the rest of this Parliament—a set that reflects our priorities and meets the country's needs beyond that. It will take the long-term view.

The review process is already under way. Terms of reference for the departmental reviews will be published shortly. The Government have already shown their determination to achieve their objectives. The comprehensive spending review will provide us with a clear sense of direction and the long-term view that every Government need. We will ensure that the Government spend public money wisely and fairly, so that public spending matches the people's priorities.

Mr. Kenneth Clarke (Rushcliffe)

Is the Chief Secretary aware that we are always glad when he comes to the House to give us information about what the Government are doing? However, the Government already have a history of not coming to the House when they have serious policy announcements to make.

We were rather surprised that the right hon. Gentleman should come here with a rather platitudinous rewrite of a speech that the Chancellor made in January when in opposition, and that he should lift a little of the language that the Conservative Treasury team used over the past four years on efficiency and the best use of public money. He told us nothing in his statement.

The right hon. Gentleman wants a reaction to the only objectives he set. He said that his purposes are opportunity, fairness, employment and investment. Is he aware that we agree with all those purposes? I can think of no one, of any political view, who would not agree.

The right hon. Gentleman also said that the aim is to spend public money wisely. I dare to speak for the other political parties when I say that every hon. Member is in favour of spending public money wisely. Does he realise how incredible his statement is, corning from a party that opposed all the Conservative Government's public spending measures and which had uncosted public spending plans in its election manifesto, which it is plainly not yet able to address?

If the right hon. Gentleman wishes to tell the House something about the framework of the review, which was announced a long time ago, will he say whether he is still committed to our objective that public spending should be kept below 40 per cent. of national income? Is he committed to an objective where gross Government expenditure each year will grow less rapidly than growth of the economy as a whole? Is he, remarkably for a Labour Chief Secretary, intending to look for all opportunities to move public sector functions into the private sector which it can perform them more effectively and efficiently?

If the right hon. Gentleman cannot answer even those questions about a framework policy, we regard it as the beginning of a whole lot of smoke and mirrors—like the National Audit Office review of the Budget assumptions, preparing the way for moving away from strict control of public expenditure and equating it with the party's objectives.

Will the right hon. Gentleman answer some specific questions? Can we take it that the present definition of general Government expenditure will stand? Can we take it that the present definitions that underlie the private finance initiative stand, so that there will be no moving off the books expenditure that the Labour party wants to hide?

Will the present systems of accounting for European expenditure—the so-called Euro-PES system—remain intact under that arrangement? Can we have a reassurance about what are known as the Scottish and Welsh formulae—the territorial formulae that underlie the divisions between parts of the United Kingdom? Are those part of the general review? If the tax-raising powers of a Scottish Parliament are to be used, will there be offsetting savings in public expenditure for the rest of the United Kingdom?

Those questions must have been approached at the start of this review of public expenditure, but the Chief Secretary has told us about none of them, nor about the specifics of his approach.

A moment ago, the Prime Minister gave the leader of the Liberal Democrats the impression that the purpose was to tighten up fiscal policy. We listened to him say yet again that every departmental total is set for two years. He went on to criticise the record, and was plainly talking about tightening up policy. Is that the case? Are public spending plans to be stuck to for two years and then reduced, or are we right strongly to suspect that, whatever else comes out of this review, the Labour Government will spend much more public money in three years' time than would have been spent had the former Conservative Government stayed in office?

Mr. Darling

It would be wrong of me not to congratulate the right hon. and learned Member for Rushcliffe (Mr. Clarke) on his showing in yesterday's leadership election. We wish him well, although we appreciate that the feeling may not be shared by all the Members on the Opposition Front Bench. I also welcome him and what is left of the former Government's Treasury team to the Opposition Front Bench, as only two of them made it through the general election.

The last time that my right hon. Friend the Chancellor made a statement, the right hon. and learned Gentleman complained bitterly that he had not had time to look at it. I understand that he received my statement at 1.30 pm, although one might not have realised that for all he had to say about it.

Let me deal with the questions that the right hon. and learned Gentleman put. When it comes to fairness, the Conservative party is in no position whatever to lecture us or anyone else. Everyone in the country remembers the poll tax, which said everything that anyone needs to know about the Conservative party's lack of fairness. Nor is the right hon. and learned Gentleman in a position to lecture us on waste. This country is paying an extremely high price for the problems that have arisen as a result of the BSE scandal to which the previous Government contributed through their short-sighted decisions.

As for the right hon. and learned Gentleman's question about whether we would keep the share of public spending below 40 per cent., every year the Conservative party announced a total, and every year they failed to meet that total. It is therefore in no position to lecture us on keeping to promises. [Interruption.]

The right hon. and learned Gentleman asked a number of specific questions—[Interruption.] If Conservative Members would stop bawling and shouting, they might hear the answers. I shall deal with the questions in turn. First, on provision by the public and private sector, we have always made it clear that our approach is pragmatic. What counts is what works. The Conservative party was hidebound by a dogmatic approach that was both inefficient and wasteful.

The right hon. and learned Gentleman also said that our approach to the National Audit Office was about smoke and mirrors. On the contrary—it is to shine some light on public finances. Because of the position we inherited, we asked the National Audit Office to look at some of the assumptions that had been made. I should have thought that, in the interests of open government, the right hon. and learned Gentleman might have welcomed that. He also asked about the PFI definitions. We are determined to make the PFI work, unlike the last Government, who spoke a lot about it but had precious little to show for it, whether in health or any other area.

I agree that the Euro-PES system is a useful discipline, not just in this country but to keep a check on European spending. The Barnett formula has been in place for some 20 years, and the Conservative Government did nothing about it. The right hon. and learned Gentleman's comments were therefore a bit rich. After all, he used to be one of the most passionate supporters of devolution, with, I believe, tax-raising powers.

Mr. Robert Sheldon (Ashton-under-Lyne)

I welcome the statement, especially in the light of the important intervention that the Government have made in public expenditure. We should also welcome the most fundamental review that we have seen in recent years and look forward to seeing its effect. It will bring fresh light into the annual public expenditure debate, and I hope that the next one we have will take that into account.

Will my right hon. Friend inform us whether the House of Commons will be involved in such a debate? We do not want to wait for a whole year to pass before we see some of the possibilities that will now be open to us.

Mr. Darling

I am grateful to my right hon. Friend, and congratulate him on all the work he did as Chairman of the Public Accounts Committee over the past few years. He conducted the Committee in an entirely non-partisan way, which will be a good example to his successor.

My right hon. Friend asked about the involvement of the House. The terms of reference of the reviews will be published shortly. My right hon. Friends the heads of Departments will welcome input from wherever it comes—inside or outside the House. As the reviews proceed, the House will become aware of the results. It is expected that the fruits of the reviews will be announced in different ways and at different times, as and when the work is completed, but there will be ample opportunity for the House to pass judgment on them.

The object of the exercise is to introduce as much transparency as possible, so that people can see what the Government's objectives are and judge us on whether they are achieved. At the same time, they will have an opportunity to make contributions to policy development as the process continues.

Mr. Malcolm Bruce (Gordon)

The Liberal Democrats welcome the Government's announcement of a full review. A new Government with a new set of priorities must clearly examine all departmental spending and determine how it should be changed in the light of new Government priorities.

During the period of consultation, will there be open sharing of the discussions that are going on, so that the House will have some opportunity to influence the outcome?

The Chief Secretary's review will concentrate on how spending might change in two years' time—it is very much for the medium term. That reminds me and the House of Keynes's dictum that, in the long term, we are all dead. Is it not strange—the Prime Minister's answer was inadequate—that if, in the course of the review, serious savings can be found, the Government are not prepared to transfer a single penny out of any departmental spending to meet a cash shortfall that occurs anywhere else? Is that not unrealistic and unnecessary?

In spite of the very small commitments that the Government have made, will not the crisis in education and health continue for the next two years, with rising class sizes, more teachers being dispatched and increasing NHS waiting lists? How on earth will the Government tackle that? What will they do about it?

Mr. Darling

I appreciate the support from the hon. Gentleman and his party for the review generally. He is right to say that it looks to the medium and the long term. I can assure him that the Government intend to be around in both the medium and the long term, so he need have no worry on that score. It is important that the Government look to the long term, and do not conduct their affairs simply to react to crises and problems that arise year on year. The Government must have a long-term view, as I think the hon. Gentleman would accept.

With regard to the next two years, we set out our position in the manifesto. It was made entirely clear, as it was by the Prime Minister a few moments ago. Before any question of raising additional money arises, surely it makes sense to ask ourselves, in each and every Government Department—the same applies to local government—where the money is being spent at present. Is it being spent in the most appropriate way? Local authorities should be asking themselves that all the time.

The difference between the Labour party and the Liberals—apart from the fact that we knew that there was every chance that we might win the election and therefore did not make promises unless we were prepared to keep them—is that we are also prepared to conduct a root-and-branch examination of where the public money is spent, so that we can influence and underpin the future decisions that we will take.

Ms Joan Walley (Stoke-on-Trent, North)

I welcome the review, because it is important for us to make best use of what we have. With regard to its terms of reference, may I bring to my right hon. Friend's attention my concern about education, and about the fact that local authorities such as my own in Stoke-on-Trent and Staffordshire have been underfunded year on year on year, without any level playing field? Will my right hon. Friend consult local authorities closely to make sure that the urgent and long-term educational needs of our children are addressed in the review?

Mr. Darling

I am grateful to my hon. Friend for her kind comments. She will know that, as we made clear during the election campaign, we have pledged in our manifesto to increase the amount of national income that is spent on education over a five-year Parliament. She is correct when she says that the Departments of Education and the Environment must keep in touch with local authorities. All hon. Members have schools in their constituencies and are well aware of the difficulties that they face.

I repeat that, if we are to build for a successful future and to ensure that expenditure on education is spent well and that standards are raised, we must be satisfied that existing expenditure is allocated appropriately.

Sir Nicholas Lyell (North-East Bedfordshire)

Is the right hon. Gentleman aware that, every time he drives north through Bedfordshire on the A 1, he negotiates one of the most dangerous stretches of road in Europe? It is imperative that several small road safety schemes be carried out in that area. Must they wait two years before anything is done, while the warm words congeal on the plate?

Mr. Darling

I assume that the right hon. and learned Gentleman had no luck in the past 18 years in persuading his colleagues of the merits of those schemes when they had responsibility for the Al and for every other road in the country.

I do not often drive up the A1—it is some years since I have done so—but I think I know the stretch of road to which the right hon. and learned Gentleman refers. My right hon. Friend the Secretary of State for the Environment, Transport and the Regions is reviewing the roads programme, and I am sure that the right hon. and learned Gentleman will want to make representations to him, in the hope that my right hon. Friend will listen to him with more consideration than his right hon. Friends did.

Mr. Giles Radice (North Durham)

Does my right hon. Friend accept that it is entirely sensible for a newly elected Government to implement their manifesto pledge to conduct a root-and-branch examination of public spending, particularly when it amounts to £300 billion? I am amazed that the Conservative party does not welcome such a review—I suppose it is because it is in the throes of a chaotic leadership election.

Mr. Darling

Nothing surprises me about the Conservatives" who appear to be descending to some extremely oppositionist tactics. I am grateful for my hon. Friend's support. He has done valuable work in the past while serving on the Treasury Select Committee. Opposition Members might have grounds for complaint—because it would be quite irresponsible—if we did not embark on reviews such as this. This review is absolutely essential. We promised to conduct it, and it is another Labour promise that we are implementing.

Madam Speaker

Mr. Heathcoat-Amory.

Mr. Edward Davey (Kingston and Surbiton)

Does the right hon. Gentleman realise that there is an inconsistency—[Interruption.]

Madam Speaker

Order. I called Mr. HeathcoatAmory—my pronunciation must be very bad this afternoon. We shall hear from the hon. Member for Kingston and Surbiton (Mr. Davey).

Mr. Davey

I apologise, Madam Speaker: I thought that you had called me.

Does the right hon. Gentleman realise that there is an inconsistency in his statement? He began by pillorying the previous Administration and their fiscal figures, claiming that they were always changing and were incorrect. However, he is then prepared to accept their spending pledges and to embrace them as somehow sensible and practical. That approach is not consistent. May I suggest a way out for him and for his right hon. Friend the Chancellor: they could review capping and local government finance immediately, thereby enabling local authorities to raise council tax and spend the proceeds on education.

Mr. Darling

The hon. Gentleman will know, if he has read our manifesto, that we are committed to examining the current crude capping system as part of the review process. As for his other points, either he has not listened to the debate or he wrote his question beforehand, because I have answered his queries when replying to other speakers.

Mr. Dennis Skinner (Bolsover)

While sitting in this place every day, I have heard Liberal Members asking questions about this, that and the other at every question time. I get the impression that they have already spent the 1 p on income tax six times over during this Parliament.

On a more serious note, will my right hon. Friend bear in mind the fact that any spending review and any resulting savings could mean a net loss of jobs? Another part of the Labour manifesto promised that we would protect jobs. Therefore, will he ensure that this comprehensive review will not result in a net loss of jobs, and that any savings made will be used to ring-fence prescription charges?

Mr. Darling

I am grateful to my hon. Friend for his comments. I agree whole-heartedly with what he said about the Liberals. During the election campaign, the Liberals must have spent the 1p several times over. We had only to listen to successive Liberal spokesmen at different studios throughout the country to find that the money was spent over and over again.

We have made it clear that all aspects of Government spending must be examined. It would be wrong, for example, to exclude prescription charge problems where there are anomalies, where one illness is recognised for free prescriptions while others are not. My right hon. and hon. Friends at the Department of Health will be examining that.

My hon. Friend will be aware, first, that we are committed to introducing the welfare to work programme, which is an important part of our promise to the country. The programme will put many people who are now unemployed back into work or into educational opportunities. Secondly, it is essential—this underpins my statement—that we have a stable economic background that will enable us to achieve long-term sustainable growth, which is the one way that we shall be able to guarantee to increase jobs across the board.

Mr. David Heathcoat-Amory (Wells)

May I save the Minister the trouble and expense of this review by telling him that the public expenditure targets that he has signed up to are indeed tough, as they should be, but perfectly attainable given enough political determination? They will not be achieved, however, if he continues to take on extra unnecessary expenditure such as shutting down the entirely legitimate sport of. 22 pistol shooting and having to compensate those affected. Will the right hon. Gentleman take responsibility for the expenditure target that he has taken on rather than continue to govern by review?

Mr. Darling

I am grateful to the right hon. Gentleman. He seems to have more confidence in the former Government's spending totals than the shadow Chancellor does.

As for the Government's compensation scheme, it is one of those issues where Members have to reach a judgment on whether the banning of the guns concerned is justified, as many right hon. and hon. Members believe. If it is justified, consequences flow for compensation. There is a wider issue at stake, which the House is about to debate, rather than the sum that might he spent on compensation.

Ms Kali Mountford (Colne Valley)

May I take this opportunity of welcoming my right hon. Friend's statement? Does he agree that we need long-term spending plans for public spending priorities, and that it was right to make those plans? Does my right hon. Friend agree also that it is time now to break out of the boom-and-bust policies that so dogged the Conservative party?

Mr. Darling

I absolutely agree on both points. The legacy of boom and bust, which the previous Government left us, and which they inflicted on the country, has been highly damaging. It is one reason why industry and business have not taken the long-term view that has been taken in other countries. Sound public finances are an integral part of ensuring that we have a stable platform on which to build.

I agree with my hon. Friend about the need for long-term spending plans. Members on both sides of the House have referred to the difficulties that local authorities face. Difficulties arise where spending programmes are suddenly changed because the Government lose control of their economic objectives. We are determined not to allow that to happen to us.

Mr. William Ross (East Londonderry)

At the beginning of his statement, the right hon. Gentleman expressed his righteous horror at the tremendous growth in public sector debt over the past few years. Is part of the intention behind the review to move towards a balanced budget? If so, what is the right hon. Gentleman's time scale for that? If assets are identified during the review that are not needed, and they are to be disposed of, how will the right hon. Gentleman use the moneys that result? Will they be used for current expenditure or for the reduction of public sector debt?

Mr. Darling

The hon. Gentleman has raised two points. First, we are committed to the golden rule of public expenditure. My right hon. Friend the Chancellor of the Exchequer will have more to say about that in his Budget statement shortly.

So far as assets are concerned, there are two points. The compilation of a national register of all the assets that the state owns is long overdue. The Ministry of Defence, for example, owns some 90,000 buildings, and the public and the House would expect any Government to take a rational view as to whether those assets are needed.

With respect, before deciding how the money should be spent, it is important to find out whether it can be raised in the first place. As I said in my statement, if we do not need assets—wherever they may be—there is no point in holding on to them. It would be far better to sell them and use the proceeds so that they benefit public finances and public services.

Mr. Tam Dalyell (Linlithgow)

Can we assume from the Chief Secretary's response to the former Chancellor that the Barnett formula is sacrosanct in all circumstances?

Mr. Darling

As I said, the Barnett formula has been in existence for some 20 years—it was not disturbed by the previous Government. As my hon. Friend will see when the White Papers on devolution are published, we believe that the Barnett formula, based as it is on the needs of the populations of the different countries, plays a very important part in deciding how public expenditure is to be divided up. He will see the position clearly stated in the White Papers, which are to be published shortly.

Mr. Eric Pickles (Brentwood and Ongar)

The Chief Secretary to the Treasury said that he is keen to have transparency. In the interests of transparency, will he tell the House whether, in this extensive review, he anticipates any changes in the definition of what is and what is not public expenditure? In particular, does he intend to look at the definition of public expenditure as performed by local authorities?

Did the right hon. Gentleman really mean to suggest—as he did in reply to an earlier question—that the current criteria for capping will have to wait until the review is completed and, therefore, will not be effective for the next two years?

Mr. Darling

I had not realised that the hon. Gentleman was such a fierce opponent of capping, but I am sure that my right hon. Friend the Deputy Prime Minister, who is reviewing these matters, will listen with great care to what he has said.

So far as changing definitions is concerned, the House will be aware that there are no shortcuts. Fiddling definitions to achieve an end is not justified and we do not intend to do it.

Mr. Peter L. Pike (Burnley)

When the Prime Minister referred at Question Time to the interest rates on the national debt, did he not underline the need for this review if the Government are to deliver their strategic priorities for welfare, education and the national health service, and deliver them with efficiency and fairness?

Mr. Darling

My hon. Friend is quite right. The public would expect public funds to be used wherever possible to deliver front-line services such as education rather than on repaying debt. As the Prime Minister has said, the national debt doubled under the Conservatives between 1990 and the election.

Mr. Ian Taylor (Esher and Walton)

The Chief Secretary is obviously right to conduct a review, but, given that the stated objectives in the review he has announced today are motherhood and apple pie, I think that we have a right to probe a bit further.

Is it the right hon. Gentleman's purpose to try to set the trend for changing priorities between Government Departments or is it a set of priorities within one Government Department that cannot have a virement to another Government Department? Is he attempting to try to inject more private capital into the public system? Is he attempting to change the Euro-PES system, under which I, as a former DTI Minister, suffered considerably, or is this whole thing a smokescreen to try to keep his own Back Benchers happy for the next two years while he struggles with the existing spending plans?

Mr. Darling

I know what the hon. Gentleman is saying about Euro-PES, but it is important to keep discipline, not just in UK public spending, and to maintain pressure on European spending.

On private capital, the hon. Gentleman will know that the Labour party has been committed to public and private partnerships for many years. Indeed, my right hon. Friend the Deputy Prime Minister first raised that before the 1992 election. Where it is appropriate, the introduction of private capital in the provision of public services is something we support. My hon. Friend the Minister of State, Department of Health made an announcement about that yesterday.

So far as the hon. Gentleman's general welcome is concerned, he will appreciate that he would have been on far stronger ground if the Government had declined to examine what they spend their money on. Indeed, I should have thought that the hon. Gentleman, as a member of the previous Government, might have urged his colleagues to do the same thing when they were in power.

The hon. Gentleman also asked about the money within Departments, as opposed to across Government as a whole. We have told heads of Departments that, if they want to reallocate resources, they must consider that; but any Government, and the Chancellor in particular, must review the allocation of spending between Departments overall. Of course, ultimately, the Cabinet has responsibility for all public spending to ensure that its programme and objectives are delivered right across the board, and we will do that.

Dr. Lynne Jones (Birmingham, Selly Oak)

Will my right hon. Friend assure the House that no area of spending will be exempt from the review? For example, will the review include spending on Trident and Eurofighter? Will he also be looking at the long-term revenue consequences of using private funding to finance capital projects, as against the revenue consequences of public borrowing?

Mr. Darling

On the latter point, my hon. Friend will no doubt be aware that the Government, like, I think, the previous Government, are committed to introducing resource accounting, which will enable us to make better comparisons between public and private provision. The present system of public accounting leaves much to be desired and, in the view of some, is rather old-fashioned and inappropriate for today's practices. That will enable us to obtain a better comparison between the two, which is clearly important, because we must be satisfied that, whichever way we procure public services—whether publicly, privately or a combination of both—we are obtaining value for money.

My hon. Friend will also be aware that, some two weeks ago, my right hon. Friends the Secretary of State for Defence and the Foreign Secretary announced a defence review. But I can assure her that, right across the board, the comprehensive review means exactly what she might think—it will be looking at all aspects of public expenditure.

Mr. Cynog Dafis (Ceredigion)

Does the Chief Secretary accept that there will be a suspicion that what he is about is kicking the whole issue of public expenditure into touch at a time when there is a crying need for additional public expenditure in so many areas? Does the right hon. Gentleman subscribe to the view that public expenditure should be no more than 40 per cent. of GNP, and on what basis of rationality does he approve of that target? Finally, does the right hon. Gentleman see lottery money as part of public expenditure?

Mr. Darling

My right hon. Friend the Chancellor will clearly have more to say on public spending as a percentage of GNP in his Budget statement. However, I disagree with the hon. Gentleman that this is somehow an attempt to kick public spending decisions into touch—far from it. If we did not start thinking now about the problems that we may face during this Parliament and beyond, he might have been on strong ground for criticising us.

The Government are taking a long-term view of public spending; because it sometimes takes a long time to change the pattern of spending to make provision for three or four years' time, it is only right that we should start the review immediately on entering office.

Mr. Gareth Thomas (Clwyd, West)

Does my right hon. Friend agree that the spending review must ensure that efficiency becomes the watchword of the Government? Does he agree that the Opposition's record is one of waste and inefficiency, as exemplified by the BSE and poll tax fiascos?

Mr. Darling

My hon. Friend is absolutely right. As I said, the Government spend some £5,000 for every man, woman and child in Britain, and the public expect that all public expenditure, whether by the Government, local government, quangos or whatever, should be efficient. My hon. Friend is right that the previous Government's record in that regard left much to be desired.

Mr. Quentin Davies (Grantham and Stamford)

I sincerely congratulate the right hon. Gentleman on his appointment. I wish that it was possible to say equally sincerely that he has made a good start. However, he has spectacularly evaded all the key questions asked by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke)—including, for example, the question whether if additional spending is voted by a Scottish Parliament, that will be compensated for by public expenditure reductions elsewhere or whether that would simply be a way of driving a coach and horses through the Government's public expenditure totals with impunity.

If the right hon. Gentleman insists on running away from that question, let me ask another. He said that he will have an asset review and that public expenditure will depend on the result. Does that mean that if he identifies additional possibilities for privatisation, the proceeds of those privatisation sales will finance additional public expenditure rather than be used to reduce indebtedness; and that, therefore, the undertaking by the Chancellor of the Exchequer that, for the next two years, the existing public expenditure departmental totals will be respected, is now—how shall I delicately put it?—inoperative?

Mr. Darling

The hon. Gentleman is just wrong on his final point. We made our position clear on departmental spending, not only in the manifesto but subsequently. I am sorry if the hon. Gentleman could not welcome what I said. I fear that he will be on Finance Bill Committees for many years to come, so we shall cross swords there, if not on the Floor of the House, in the future.

Ms Beverley Hughes (Stretford and Urmston)

I warmly welcome my right hon. Friend's statement and the clear direction that it gives. He referred to exploring the potential for further public-private sector partnerships. As a former leader of a metropolitan authority, may I ask him whether the Government will build on the outstanding record of Labour local authorities in initiating, sustaining and developing partnerships between the public and private sectors?

Mr. Darling

My hon. Friend is quite right: many local authorities, particularly Labour-controlled authorities, have a good record on public and private finance initiatives, and we want to encourage that. It makes sense to harness the experience of both sectors and to bring them together. That can be wholly beneficial for the communities they serve. At the end of the day, people living in a community want the best possible services. The means of providing those services are usually of less concern to them than the end result of producing what they want at a price that they can afford.

Mr. John Swinney (North Tayside)

Does the Chief Secretary understand the public's bewilderment that, despite the change of government, some things remain the same, such as the departmental spending totals? The answer that was given during Prime Minister's questions to the right hon. Member for Yeovil (Mr. Ashdown) suggested that, despite the fact that economies in departmental spending may be identified, there will be no change in the way in which spending is allocated.

Does the statement not disguise the Government's attempt to create a smokescreen to hide the fact that public services need more resources? They would do more for honesty if they confronted that reality. Will the Chief Secretary give a definitive and clear answer, which he certainly did not give to the hon. Member for Linlithgow (Mr. Dalyell), to questions about the sanctity of the Barnett formula and its status in the review?

Mr. Darling

I am surprised that the hon. Member goes on about the sanctity of the Barnett formula, given that his party is committed to ending it once and for all. He is in no position to lecture us on that. I have made our position clear. The Government will shortly publish a White Paper on the referendums on devolution, so he will be able to see for himself what our position is.

The hon. Gentleman asserted that the public will be bewildered about our public spending proposals. They will not be bewildered, because we stood on a manifesto commitment on public spending and we are now delivering it. The public are seeing a Government who deliver on their promises—although I appreciate that that may bewilder Conservative Members.

Finally, I shall make a parochial point for those of us who represent Scottish constituencies. We stood on a manifesto, as did the hon. Gentleman, and our party did rather better than his, so there is no cause for bewilderment.

Mr. Mark Todd (South Derbyshire)

May I make three points? First, I welcome the publication of the review's terms of reference and I hope that the document will be widely available so that hon. Members can examine them with some intent. Secondly, it would be useful if that document set out the review's strategic objectives in more detail than my right hon. Friend has been able to give us.

Thirdly, I should like a clearer statement of the methodology that will be used in the review. As I understand it, my right hon. Friend intends to drive the review through a departmental process rather than engage external resources. Will he clarify that?

Mr. Darling

Perhaps I could explain to my hon. Friend, and to the House in general, that it was tempting to delay making the statement until all the terms of reference were agreed and the work was under way. However, no doubt the first person to complain about that would have been the shadow Chancellor, as he has complained about delays in the past. We took the view that it was appropriate to tell the House at this stage what we intended to do. As I have said, we shall publish the terms of reference. So that is the answer on timing.

As for the Departments, the review will engage effort and support right across the Government. All Ministers will be involved. It is appropriate for Departments to carry out their examinations not with the assistance of the Treasury and the efficiency unit alone, but in addition, where appropriate, by engaging the services of people outside.

One of the purposes of making an announcement today is to tell the public, through the House, what we are doing. Many members of the public have clear ideas about how the Government deliver services and how those services might be improved, and they will have the opportunity to contribute.

Lastly, of course, the work has been co-ordinated by the public expenditure committee, a small Cabinet committee, which will ensure that we look right across the board to drive the process forward and achieve the results we want.

Mr. John Wilkinson (Ruislip-Northwood)

May I remind the Chief Secretary that, during the general election campaign, Labour spokesmen were assiduous in assuring the voters that there would be no question of Eurofighter's coming under an expenditure review conducted by the Ministry of Defence? Why does he now say that the review will extend to Eurofighter?

How does that square with the supposed efforts of the Secretary of State for Defence to persuade the federal German Government, and his German counterpart, Volker Riihe, to make a production investment on a par with that already earmarked by the United Kingdom Treasury for its share in the production of that most important aeroplane?

Mr. Darling

On Eurofighter, I refer the hon. Gentleman to the statement made by my right hon. Friend the Prime Minister at last week's Question Time. He made the British Government's position on Eurofighter absolutely clear. My point was that the Secretary of State for Defence and the Foreign Secretary are conducting a review of this country's strategic defence needs for the future, and at the same time, clearly, we are examining the way in which the MOD spends its money.

Any strategic review must be influenced not only by what we would like to do but by what we can afford. The hon. Gentleman, who has long taken an interest in defence, may have some sympathy with that proposition. The Prime Minister made our position on Eurofighter clear and if the hon. Gentleman cares to read last Wednesday's Hansard, he will see it clearly set out.

Several hon. Members

rose—

Madam Speaker

Thank you. We shall now move on.