Comprehensive Spending Review

HC Deb 14 July 1998 vol 316 cc187-211 3.30 pm

The Chancellor of the Exchequer (Mr. Gordon Brown)

The Government's central objectives are high and stable levels of growth and employment and sustainable public services, built from a platform of long-term stability. To achieve this, two fundamental economic reforms have been undertaken for the long term: to take monetary policy out of party politics through operational independence for the Bank of England; and to impose a new framework of financial discipline by applying fiscal rules that achieve a current budget balance and prudent levels of debt to national income.

Last May, we imposed a two-year spending limit, and we have kept to this limit. We promised to cut public borrowing, and it has been cut by £20 billion. That fiscal tightening will be locked in to next year. To meet our fiscal rules, and in line with cautious and published assumptions, audited by the independent National Audit Office, we plan current surpluses for the next three years of £7 billion, £10 billion and £13 billion. As a proportion of national income, debt will fall below 40 per cent. By the end of this Parliament, debt interest payments will be £5 billion a year lower than if we had simply left borrowing at the level inherited from the previous Government.

In the last economic cycle, under the previous Government, the current budget deficit averaged 1.5 per cent. of national income—the equivalent of £12 billion a year extra borrowing. During the 1990s, national debt doubled. Over this economic cycle, and for the first time for decades, Britain is set to have both a current budget in balance and a sustainable approach to debt—an approach that is among the most prudent of our G7 partners, and more prudent than that of our predecessors.

All the allocations that we make this afternoon are made within and subject to this overall financial discipline, which I set out in the "Economic and Fiscal Strategy Report", published last month. Through our new deal for the unemployed, we are tackling the bills of economic failure. Under the plans published today, the growth in social security spending for this Parliament will be significantly lower than in the previous Parliament.

Working within that framework, the comprehensive spending review has examined the most effective use of public money across and within each Department. I am grateful to my right hon. Friend the Chief Secretary to the Treasury, and to the Public Expenditure Committee of the Cabinet, for all their work.

By looking not just at what Government spend but at what Government do, the review has identified the essential modernisations and savings. The review's first innovation is to move from the short-termism of the annual cycle to the drawing up of public expenditure plans not on a one-year basis but on a three-year basis. The review's second conclusion is that all new resources should be conditional on the implementation of essential reforms: money, but only in return for modernisation; Government moving out of areas where they need not be; and, in areas where public service matters, Government setting clear targets for modern, efficient and effective services.

Today, we begin, not, as all spending announcements over the past 30 years have traditionally begun, with annual allocations, but by setting out the new three-year objectives and targets for each service. Therefore, the results that we are demanding, the new standards of efficiency that will have to be met to ensure that every penny is well spent, the procedures for scrutiny and audit that will be set in place, and the reforms that we have agreed, are all based on a modern and clear understanding that Government should do only what they have to do, but do what they do to the highest standard. I shall set out the essential changes.

First, each Department has reached a public service agreement with the Treasury—essentially a contract for the renewal of public services. In each service area, the contract requires reform in return for investment. The new contract sets out the departmental objectives and targets that have to be met, the stages by which they will be met, how Departments intend to allocate resources to achieve those targets and the process that will monitor results. The Prime Minister has decided that that continuous scrutiny and audit will be overseen by a Cabinet Committee, continuing the work of the Ministerial Committee on Public Expenditure. Money will be released only if Departments keep to their plans.

Secondly, the contract will stipulate new three-year efficiency targets for the delivery of services. Targets will range between 3 per cent. and 10 per cent; their terms will be made public. The purpose of the efficiency targets is to ensure that more resources go directly to front-line services: patient care in the health service, classroom teaching and fighting crime—a policy of promoting front-line services so that, by securing greater value for money, we secure more money for what we value.

Thirdly, in addition to efficiency targets, we have embarked on a programme of radical reform. To achieve our priorities, difficult decisions and choices have had to be made. We have already reformed student finance; we have begun welfare reform, matching rights with responsibilities; and, as a result of the comprehensive review, further reforms will be announced in legal aid, in procedures for asylum, in child benefit, in youth justice and with the withdrawal of unjustified subsidies. Further reforms will be announced by Ministers in forthcoming statements.

In defence and in the Foreign Office, we have achieved the changes necessary to provide us with the defence and diplomatic capability we need, while making necessary savings by, for example, reducing the number of warships and establishing a new public-private partnership for the Defence Evaluation and Research Agency.

Fourthly, for central and local government, we have agreed a programme for releasing assets we do not need, to fund £11 billion-worth of additional new investment in health, education, transport and other capital projects that we urgently need. With a number of further announcements today, our policy of promoting public-private partnerships is extended into new areas, including national science policy, urban policy and overseas development.

Fifthly, while we are raising capital investment for three years to tackle the backlog of underinvestment that was bequeathed to us, current spending will grow by no more than 2.25 per cent. We must ensure that public sector pay settlements are fair and affordable, and do not put at risk our target for public service improvements in each of the next three years, for which we have budgeted.

In line with three-year allocations, the independent pay review bodies will report not just to the Prime Minister but to the departmental Ministers who have to meet those public service improvement targets and who will respond to the recommendations.

Consistent with the three-year allocation, we are announcing a further strengthening of the pay review system. Having spoken to the chairmen, the Prime Minister has confirmed that their remits, in addition to the responsibility to recruit, reward and motivate staff—and therefore their role—will be strengthened with three responsibilities. Their recommendations will take account of affordability—in other words, the current departmental spending limits; of the Government's inflation target of 2.5 per cent.; and of the need to achieve the Government's targets for output and efficiency.

That reform offers the opportunity for the public services to manage their pay and conditions more directly, but also gives Departments the responsibility to ensure that pay settlements cannot be determined without regard to the demands of the service. In that way, as in every other organisation, pay decisions will now be made in relation to the overall objectives of the service.

Perhaps the most important advantage of conducting a comprehensive spending review is the opportunity that it allows for individual services to put in place a substantial reallocation of resources within Departments—from bureaucracy to front-line services, from dealing with the symptoms of problems to dealing with their causes—and to consider a co-ordinated approach that breaks free from the old departmental fragmentations and duplication.

As a result of interdepartmental reviews, services for asylum seekers will now be managed by one Department rather than five, and the three Departments responsible for criminal justice will work together to one set of objectives. Children's services, the urban regeneration budget and our approach to tackling fraud will all be reorganised, achieving both efficiencies and savings, and other reforms will be announced by Ministers in the next few days.

Our prudence has been for a purpose. It is because we have set tough efficiency targets and reordered departmental budgets that our top priorities of health and education will receive more new money than the other 19 Government Departments combined. To accommodate that, we have had to take a firm line with other spending programmes and rigorously to select priorities. As a result, more than half of today's allocation will be invested in health and education—so there will be additional resources, but they represent money in return for modernisation.

I now turn to the allocations to individual services. Here, the main conclusion of the spending review is that it is not only a social duty for Government to invest in good public services to improve our social fabric, and to tackle poverty and deprivation by extending opportunity, but that most people in Britain, apart from a small and extreme minority, agree that it is also in the economic interests of our country to create an infrastructure of opportunity and to invest in education, science, transport and strong communities, so that individuals can make their contributions to the economic well-being of this country.

Invest in the education of our children, and we are investing in our future. In the old economy, it was possible to survive with an education system that advanced only the ambitions of the few; the new economy demands an education system that advances the ambitions of all. However, the investments that we make will take place only in exchange for further modernisation and reform.

The Secretary of State for Education and Employment has agreed not only to set numeracy and literacy targets for 11-year-olds, but to set Government targets for nursery education, for cutting truancy, for higher attainment by teenagers, for improved standards of teaching, including a qualification for head teachers, for greater efficiency in further and higher education, and for the inspection of schools. In return for investment there will also be further reforms in teacher training and in the administration of school budgets.

At every stage, we are linking new investment with reform, and it is on that basis that the Secretary of State for Education and Employment will tomorrow announce the biggest single investment in education in the history of our country. For that service, and for other services, there will be separate announcements, based on the Barnett formula, for Scotland, Wales and Northern Ireland.

In the last three years of the Conservative Government, the growth in education spending was £7 billion. I can confirm that, for the next three years, additional education expenditure will total £19 billion. In total, we shall spend £3 billion more next year, £6 billion more in 2000 and £10 billion more in 2001. That is what we mean by "Education, education, education"—honouring our manifesto commitment to the British people.

In the 18 years of the Conservative Government, spending on education rose on average by 1.4 per cent. a year. Education spending will now rise in real terms by an average of 5.1 per cent. a year until the end of the Parliament.

We said that we would devote a rising share of national income to education, and we have. Spending on education will now rise to 5 per cent. of national income. Today, about 1 million children are still being taught in classrooms built before the first world war. Some 6,000 schools are already being refurbished this year. Over the Parliament, capital investment to re-equip our schools will now double. Following our reforms in student finance, there will now be an expansion in the numbers of students in higher and further education by the end of this Parliament—more than 500,000 additional students.

We said that we would meet our class size pledge for five, six and seven-year-olds. Under the proposals that my right hon. Friend the Secretary of State for Education and Employment will announce tomorrow, our pledge will be met as we promised.

Investing in education is essential to secure both a fairer society and an efficient economy. If our country is to be equipped and prepared for the competitive challenges ahead, the Government also have an economic responsibility to invest in science and innovation, in our transport infrastructure and in building safer and stronger communities. Net public investment will be doubled as a result of the Government's new fund for investing in Britain's future, but in every area, investment is conditional on further reform. It is the development and application of ideas and inventions in science that hold the key to improved national competitiveness in the future.

As a result of a reduction in subsidies that can no longer be justified, and also as a result of £400 million in support from the Wellcome Foundation—which I thank for its generosity—the Government are able to announce the biggest ever Government-led public-private partnership for science for this country. A total of £1.1 billion will now be available to provide the modern facilities for science research and teaching at our universities and to support science teaching and research throughout the country. This innovative step change in our approach to science will lay the foundations for putting Britain at the forefront of the next generation of scientific and industrial research.

Any one who travels on our roads and railways knows that, after years of neglect and under-investment, Britain suffers from an overcrowded, under-financed, under-planned and under-maintained transport system. So for transport, also, we propose reform—a new investment strategy that will involve a network of public-private partnerships—like those for the underground, the channel tunnel rail link and air traffic control—and a commitment to more integrated planning of public transport. In return for those innovations, there will be £2 billion more investment. From a 25 per cent. decline in transport investment in the last Parliament, there will be a 25 per cent. increase in the next three years for investment in public transport and also to meet our environmental objectives. Full details will be set out by my right hon. Friend the Deputy Prime Minister in the transport White Paper next week.

Economic success and social cohesion depend on safer and stronger communities. That is why we will now invest more in the prevention of crime. That is why today we also propose a policy reform to tackle the underlying causes of poverty in the most hard-hit estates. It is because we are announcing major modernisations that will put legal aid on a fairer footing and will reform youth justice, that more resources can be made available for policing and, for the first time, substantial resources for innovative, evidence-based crime prevention work that can reduce crime. Measures to tackle drug abuse will have a new priority, with a 25 per cent. increase in funding. Further details, including targets that will have to be met, will be announced by my right hon. Friends the Home Secretary and the President of the Council.

To build stronger communities, it is clear that we need to renew housing stock. To cut out waste and to ensure the best use of resources, the Deputy Prime Minister will impose new guidelines for greater efficiency in construction and repair. Following the Egan report, a new housing inspectorate will audit housing management in every local authority.

With the help of those reforms, we will be able not just to tackle homelessness, but to renovate 1.5 million homes in our country. To do so, we will now allocate, from capital receipts, £3.6 billion. Our commitment to the environment also recognises the need for responsibility in the use of energy, so there will be a new programme of home energy efficiency.

We are committed to a comprehensive programme of welfare reform. Since coming into office, we have introduced the new deal for the unemployed, the reform in finance for students, the working families tax credit and a new approach to child benefit. The Prime Minister has set up a welfare review which led to the welfare Green Paper, and a long-term framework for the provision of future pensions and for the reform of disability benefits will be announced later this year.

Last week we announced reforms in the Child Support Agency, and yesterday we announced new measures to combat social security fraud. The social security budget—which rose faster in the last Parliament—is set to rise by far less in this Parliament. The number of single parents on income support has fallen below 1 million for the first time in years as we have cut the bills of unemployment. Some 60,000 young people have already signed up for the new deal.

Today, I can announce further changes in welfare policy. The new deal for the unemployed is based on opportunities matched by responsibilities. It is now time to extend that approach to communities by tackling the underlying causes of their poverty. For our most deprived estates, the key problems are not just poor housing, but lack of employment and economic opportunity. In exchange for long-term targets for improving skills, educational qualifications and business start-ups in those areas, a total of £800 million will be allocated to a new deal to lift up our most deprived communities. A new deal helping the unemployed to become self-employed will be launched by the Prime Minister on Friday.

A further reform will make it possible for thousands more young people to stay on in school and to go on to further and higher education. We have to raise Britain's appallingly low staying-on rates, and a new educational maintenance allowance—linked to attendance and based on parental income—will be piloted for 16 to 18-year-olds. If, as we expect, the new maintenance allowance succeeds in encouraging more young people to stay on in education, we plan to introduce it nationally, using the money currently spent on post-16 child benefit.

As the interdepartmental review of children's services has uncovered, we spend £10 billion on young children, but we do so in an unco-ordinated and piecemeal way. Thousands of the youngest children—especially those under three—are missing out. Plans for a sure-start programme for the youngest children will be announced later this month, bringing together quality services for the under-threes and their parents—nursery, child care and playgroup provision, and post-natal and other health services. One new feature will be to extend to parents the offer of counselling and help as they prepare their children for learning and for school.

That is a significant step in the development of family policy for our country—supporting family life, encouraging stable families, and building on our national child care strategy. The Home Secretary's group will bring forward new recommendations on family policy soon.

At the heart of our review has been a determination that we fulfil our duty to the oldest members of our society. First, pensioners will benefit most from a better health service, but it has always been wrong that charges are levied on pensioners for the eyesight tests that they regularly need to preserve sight and to protect against disease. From next April, eyesight test charges for pensioners will be abolished.

Secondly, elderly people who rely heavily on public transport need a fairer deal to enable them to be more mobile. In his transport White Paper, the Deputy Prime Minister will announce plans for nationwide help with transport for the elderly.

The elderly fear their winter fuel bills. As a result of the cut in VAT, our winter fuel payment and other changes, average pensioner fuel bills are up to £100 lower this year. Later this week, my right hon. Friend the Secretary of State for Social Security will announce our further plans for help with fuel bills for the rest of the Parliament. She will also announce further financial proposals to help pensioners who need help. Here, too, we are prepared to make reforms that will help alleviate poverty. From next April, every pensioner and pensioner couple will have a minimum income guarantee.

We shall also set a tax guarantee that no pensioner will pay income tax unless their income rises above a specified level. The Government will also announce measures to ensure that more people automatically receive the income they are due. As a result of the proposals, thousands of pensioners will be relieved from poverty. A total of £2.5 billion will be set aside for this important programme.

Further reforms in other services have made possible new investments that improve the quality of community life. As a result of cutting quangos and wasteful bureaucracy, and a new targeting of resources, £290 million extra will be invested in museums, the arts and sport during the next three years—not just repairing the damage of the previous Government's cuts, but a real increase of 5½ per cent., making possible improved access to museums and galleries in Britain.

As a result of asset sales in areas where spending is no longer needed, the Foreign Office budget will not only ensure more resources for the proper representation and promotion of Britain abroad, but my right hon. Friend the Foreign Secretary is announcing today that our support for the BBC World Service will be raised by a total of £44 million during the next three years. [HON. MEMBERS: "Hear, hear."]

For 20 years, overseas aid has been falling as a proportion of national income. Under our Government, it will now start to rise again. Because of a decision to sell a majority stake in the Commonwealth Development Corporation, raising substantial funds in so doing, and because of a new decision to target overseas development assistance on health, education and anti-poverty programmes, my right hon. Friend the Secretary of State for International Development will announce today that Britain will, during this Parliament, increase overseas aid from the low of 0.25 per cent. of national income—the Budget figure that we inherited—to 0.3 per cent. of national income.

Britain will enter the millennium at the forefront in pressing for debt reduction for the poorest countries, and aid, which was falling by 2 per cent. per year under the previous Government, will now rise in each of the next three years.

I come finally to the NHS. The NHS is compassion in action—what its founder Aneurin Bevan rightly called the most civilised achievement of modern government. The final conclusion of the comprehensive spending review is that it is fair and efficient to provide the best health service we can on the basis of need, not ability to pay, and under this Government health services will never be left to the hazards of private or charitable provision.

Yet half the beds in health service hospitals are in accommodation built before the first world war, three quarters of ward blocks are hand-me-downs from the days of charity, voluntary and municipal hospitals, and investment in the health service is long overdue. We also recognise the care, responsibility and dedication of doctors, nurses and all staff to NHS patients.

My right hon. Friend the Secretary of State for Health will announce on Thursday in the House targets that tackle inefficiencies in hospitals and cost overruns, simplify management structures and give a new emphasis to long-term planning. On quality, all hospitals will be required to publish league tables measuring the success rates of their treatments. During the lifetime of this Parliament, more than £1 billion will now be saved from red tape and put into patient care, in part by scrapping the costly and time-consuming internal market.

On the 50th anniversary of the NHS, the Government will make the biggest ever investment in its future, giving the health service for the first time for decades the long-term resources that it needs. Under the previous Government, the increase for the last three years was £7 billion. For the coming three years, I am announcing an increase in health service funding of £21 billion. [HON. MEMBERS: "Hear, hear."]

Health Department spending rose by an average of 2.5 per cent. a year during the last Parliament. Next year, it will rise by 5.7 per cent.; the year after that by 4.5 per cent.; for the rest of the Parliament, we will achieve yearly real growth averaging 4.7 per cent.

We shall meet our waiting list pledge, as we promised. Every hospital will benefit from the 50 per cent. increase in investment in equipment and buildings, and the £5 billion fund for national health service modernisation will give us the largest hospital building and modernisation programme that this country has seen. As it starts its next 50 years, the national health service is safe in this Government's hands.

The Government have made the choices necessary to deliver stable and sustainable public finances. We have been steadfast in the priorities that we set down, which are the nation's priorities. Now, as a result of our prudence and a commitment to investment in return for modernisation and reform, a total of £40 billion more can be invested in health and education—the nation's priorities. We are a Government whose prudence allows us to build modern public services to renew Britain; a Government who are keeping our promises to the people of Britain; a Government who are, line by line, delivering our manifesto commitments; and a Government who are, step by step, making Britain better and stronger. I commend the statement to the House.

Mr. Francis Maude (Horsham)

rose—[Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. The House must come to order.

Mr. Maude

In the light of the press reports this morning, which include direct quotations from the Chancellor's document, can the Chancellor say whether there was a single newspaper that did not receive a prior briefing? Which lobby firm does the House of Commons have to employ to get an early sight of Government documents? Once again, the Government have shown their brazen contempt for Parliament—[Interruption.]

Mr. Deputy Speaker

Order. It is no good if I have to be on my feet all the time calling the House to order, but that is what must happen if we are to have order. We must have order.

Mr. Maude

The Chancellor has confirmed today why Labour has already raised taxes 17 times, and why families are already £1,000 a year worse off under Labour. It is because Labour cannot control public spending, and because a Government without principles cannot take hard decisions and are pushed around by every crony in every spending lobby.

Does the Chancellor recall his promise that increased spending on priority services would be paid for by cuts in welfare? Does he recall who said: as we get the welfare bills down…then we can release money into education and health"? He may recall that it was the Prime Minister, in his pre-electoral phase. That is how Labour claimed that it would square the circle. That was the basis of the myth of the iron Chancellor.

But Labour failed. Today, the Prime Minister's spokesman said about that: it was unrealistic that social security was going to be cut until other problems had been solved.

Mr. Barry Gardiner (Brent, North)

rose—

Mr. Deputy Speaker

Order. The hon. Gentleman must be seated.

Mr. Maude

Every one of Labour's welfare reforms has cost money, not saved it. That is why, despite what the Chancellor says, his figures show that social security spending, by the last year that is covered in the book, will be up by more than 20 per cent. in the course of this year. Does he recall warning the world of the myth that the solution to every problem was increased spending"? Does he recall the Prime Minister warning his European partners that we will be fierce in containing public spending"? That was the pre-election phase; what a deception it was. The Chancellor should now admit that, once the fiddled numbers are added back into state spending, it will increase over and above inflation by much more than 3 per cent. a year.

The Chancellor hopes that we will oppose his plans to spend more money on health and education, but I am going to disappoint him. Let there be no doubt that we welcome extra money for those priority services. We, after all, always increased spending on those key areas, so that is not the difference.

The difference is that, although we increased spending on key services, we kept a tight rein on spending overall, and paid for that increase honestly, because we were running a strong economy that could support increases. Under Labour, the economy is already faltering, and because the Chancellor has failed to reform welfare, he is paying for the increases in spending by raising taxes. So far, the British taxpayer has paid only the down payment. He is reordering spending all right—from the taxpayer to the state.

The Government have abandoned our programme of public service reforms, so the extra money for priority services simply will not go as far as it should. By loading extra costs on to the health service, the bottom line will be simple: there will be more money on overheads and less money on patients. Will the Chancellor tell the House how much of the extra money on health will be spent simply on pensioners who have been forced off health insurance by his vindictive attack?

How much of the extra money on education will be spent on pupils who have been forced off the assisted places scheme? Will the Chancellor admit that his spending on education at the end of four years will be only 0.1 per cent. of national income more than we delivered, and that the plans that he has published today bear little relation to those in his March Budget Red Book? Does he remember saying, only three months ago: By 2000, the Budget is forecast to be in balance"?—[Official Report, 17 March 1998; Vol. 308, c. 1099.] He now plans no Budget balance or surplus, even in a single year; no repayment of national debt—not a single penny will be repaid; no reduction in the proportion of national income—[Interruption.] Labour Members clearly do not believe the numbers in the Chancellor's own book, which show that this Budget does not even get into balance in a single year.

Furthermore, the right hon. Gentleman plans no reduction in the proportion of national income spent by the state; instead, there will be an increase in every single year. We now face permanent budget deficits, the national debt increasing all the time and all over again, and the state spending ever more. In the few months since March, the three central pillars of the myth of the iron Chancellor have rusted away.

Will the Chancellor acknowledge that all his plans are based on assumptions in respect of growth, inflation and unemployment that are far more optimistic than those of most independent economists? Does he realise that those plans—which already represent a huge expansion of the public sector—are dangerously vulnerable to an economic downturn to which his own policies have contributed? Does he really think that now is the time to launch a grand plan for ever more state spending?

Will the Chancellor confirm that only half of public spending will be subject to his three-year plans, and that the remainder is demand-led? Does not his decision to abandon cash limits mean that, the faster inflation grows, the faster spending will grow? The more spending grows, the higher interest rates will have to stay, as members of the Monetary Policy Committee have said. How seriously does he expect the House to take his threats on public sector pay when The Daily Telegraph is briefed to carry the headline "Public Sector Workers Face Pay Squeeze" and The Guardian says that the Government will announce extra pay for existing doctors, nurses and teachers"? How seriously does he expect to be taken? Does he really believe that people cannot read two newspapers and compare the spin given to each? Does he accept that the so-called new obligations for the review bodies are exactly what those bodies already have?

New Labour's claim to have found a third way was based on saving money on welfare to move it into health and education. The Chancellor said so in terms last year. He said: We will ensure that our central aim of shifting resources from welfare to education is met through reform of the welfare state. On his own test, the Chancellor has failed, and failed comprehensively. Will he confirm that every single welfare reform that he has introduced has cost money, not saved it—has increased dependency, not reduced it? Will he confirm that, as his press office said last week, the £5 billion a year cost of working families tax credit is being fiddled out of the public spending figures altogether? Will he confirm that the Office of National Statistics has contradicted him, and said that it will classify WFTC as a benefit in the national accounts?

Has the Chancellor not fiddled a further £1 billion a year for welfare to work out of benefit spending to massage down his spending figures, and to enable him to say what he has said? Are these not exactly the sort of accounting dodges that we last saw from the Paymaster General's old crony Robert Maxwell? More fiddles, more fudge—all intended to hide the real impact of the Chancellor's plans.

The Chancellor boasts about his intention to tackle benefit fraud. Unlike Labour in opposition, we support genuine efforts to tackle fraud; but how is the Chancellor going to do it? Where does he get his figure of £7 billion? Does he recall that, in March, Ministers were saying that there was £4 billion of fraud? What has he done in the meantime to almost double that figure? Does he agree that such loopholes are an "Alice in Wonderland" fantasy, and that the entirety of the Government's plans now rest on them? Those were the words used by his right hon. Friend the Prime Minister 18 months ago, when the Conservative Government planned to save just £2 billion a year. What has changed in the meantime? Why is there suddenly a cornucopia?

While we welcome extra money going to the pensioners who are in the greatest need, is the Chancellor not creating a two-tier system? Those who have provided for themselves will be penalised: they will not receive a penny of the increase. Is this not the beginning of a means-tested basic state pension? Will not the new scheme discriminate against middle Britain—people who work hard and save hard all their lives, and try to be independent of the state?

The Chancellor talks about his "golden rule". Does he agree with Professor Buiter, a member of his own Monetary Policy Committee, who said that the golden rule on which he places so much importance had no merit as a guide to optimal Government borrowing"? In his desperate efforts to cover up his tax and spending rises, is not the Chancellor playing fast and loose with the public accounts? There is a new list of redefinitions: PSNB, PSNCR, CGNCR, TME, DEL, AME. New Labour, new definitions.

Is not the simple truth that new Labour has failed to get a grip on public spending, and has had to fall back on tax rises? The typical family is already paying £1,000 a year more under Labour. The reality is that further big tax rises or a huge growth in borrowing must lie ahead. Labour learned when it was last in government that we cannot spend our way out of recession; today, the Chancellor risks spending us into recession.

The economy is already heading down through easily avoidable errors. Manufacturing is already in recession, there have been six interest rate rises and 17 tax rises, and unemployment is already increasing. Now, the Chancellor's comprehensive failure in regard to public finance is being disguised through a series of accounting fiddles and deceptions. This is a fiscal strategy hatched by the Chancellor and his cronies in the Paymaster General's penthouse flat. Last year we had the Robert Maxwell memorial Budget, with its vicious raid on pension funds. This year, the Government have moved on: this year, it is Robert Maxwell accounting.

This is not a comprehensive spending review; it is a comprehensive spending failure.

Mr. Brown

I shall answer every one of the detailed questions of the right hon. Member for Horsham (Mr. Maude). It became absolutely clear during the exchanges that he does not believe in delivering public services, as we want to do. It also became absolutely clear—without him saying which services he would cut—that the Conservative party would plan a massive cut in public services.

The right hon. Gentleman says that he would exempt health and education. Given that he wants to spend more on defence, that the Opposition home affairs spokesman wants to spend more on law and order, that our rate of growth in social security spending is around half what it was under the Conservative Government, that the right hon. Gentleman has no proposals for reducing social security expenditure, and that half the extra allocation will go to health and education, he cannot escape the fact that his proposals would mean cuts in hospitals, cuts in the health service, cuts in education and cuts in schools.

The right hon. Gentleman has set his face against the public services that this country needs, so from now until the next election the Conservative party will have to explain to each constituency which hospital it would starve of funds, which school it would starve of funds and what it would do to the education and health services of this country.

Let me deal with the right hon. Gentleman's points one by one. Let us be absolutely clear about social security spending. The right hon. Gentleman talks as if he were the reformer on social security spending, but welfare spending rose by 3.8 per cent. a year under his Government, whereas it will rise by 2 per cent. a year in this Parliament, even taking into account the working families tax credit.

If the right hon. Gentleman supports reform, why does he not support our proposals on student finance, which will give half a million students places in universities and colleges? Why does he refuse to support our working families tax credit? Why does he refuse to support the new deal? Why did the Conservative party refuse to support the windfall tax that made possible the new deal?

We will not take any lectures on prudence from a shadow Minister who was at the Treasury between 1990 and 1992, when interest rates were 15 per cent., inflation was 10 per cent., borrowing was rising to £50 billion—its highest ever level—and imprudence was the policy being pursued by the Conservative Government.

As for our figures on public spending, why does not the right hon. Gentleman acknowledge that we are reducing debt as a share of national income from 45 per cent. under the previous Government to less than 40 per cent. under the present Government? Why does he not acknowledge that current spending—which under the Conservatives grew by 1.5 per cent. a year, or £12 billion—is to be in balance under the present Government? Why does not he acknowledge the fact that we have been prudent and cautious by being prepared to sell off assets that we do not need, to set efficiency standards and rigorously to select priorities—which the previous Government never did—so that we can get money for health and education?

As I was listening to the shadow Chancellor, I thought that I should like to see the deputy leader of the Conservative party back in his former position, and then I thought of the former Chancellor. The Conservative party had 18 years of failed government, and they will have 18 more years of failed opposition.

Mr. Malcolm Bruce (Gordon)

I welcome the Chancellor's statement. Like him, to some extent I welcome the shadow Chancellor's remarks, because they clearly showed that the Conservative party is wedded to third-rate public services. The right hon. Member for Horsham (Mr. Maude) had apparently not read the statement, because spending over the whole Parliament adds up to less than spending in the last Parliament, so it is hardly profligate.

I also welcome the fact that the Chancellor has now acknowledged that he has a war chest, and that he is putting some of it to good use, especially in health and education. I welcome the action on top-up on pensions, and on health checks. I hope that he will acknowledge that those are two good Liberal Democrat policies, and we are happy to share them with him.

Why have we had to wait so long for this crucial investment in education and health, given that class sizes and waiting lists have continued to rocket? Little is so comprehensive in this review that it could not have been announced a considerable time ago. Does the Chancellor accept that he runs the danger of creating boom-bust in the public services just as he squeezes it out of the economy?

More money for public services—which we have been calling for—over the next three years is welcome.

Does the Chancellor agree that, viewed over the whole Parliament rather than the next three years—he conspicuously missed two years in all his comparisons—the figures are not quite so impressive? Compared with the first five years that the right hon. Member for Huntingdon (Mr. Major) was Prime Minister, health spending in the life of this Parliament will rise in real terms by about 3.7 per cent. a year compared with 4.1 per cent. in the previous Parliament.

Does the Chancellor further agree that, in Scotland, the comparison is much worse, at 0.6 per cent. a year during this Parliament compared with 4.7 per cent. during the first five years under the previous Prime Minister? That means that, by 2001, the Scottish Office budget will be lower in real terms than it was in 1994–95.

Today's settlement has been advertised as a bonanza, but comparing the Prime Minister's record against the dismal record of the previous Prime Minister suggests that, overall, in health and in many other areas, the settlement is not Major-plus but Major-minus. What happens if inflation is higher than expected, as many commentators say it will be? What overshoot in inflation would have to occur before the Chancellor provided compensation for those budgets? A 1 per cent. overshoot in inflation would wipe £5 billion from health and education funding. In view of that risk, why is the departmental reserve a mere £1.4 billion?

What happened to consultation? Why has there been no consultation on £900 billion of public spending? Why has the House not had a chance to debate in advance the priorities that should be considered, and why is the system so centralised by the Chancellor, with capital spending controlled by the Treasury and performance contracts with the Treasury? Surely Ministers should be accountable to Parliament.

The problem for many people is that, by waiting two years, the Government have acted too late. Those people have suffered the squeeze. Instead of getting the better public services they were promised, they have got worse services during the first two years of Labour, and they will now have to wait to see whether things get better.

I congratulate the Chancellor on putting the emphasis on health and education. I welcome that unreservedly. We and the British people will judge the Government over the whole Parliament, not on big numbers in one day's headlines. We shall judge them on whether they deliver a genuine, palpable and significant improvement in the quality of public services. I hope that the Chancellor will accept that that is the basis on which the Government should be judged.

Mr. Brown

I suppose I should say that I am grateful to the hon. Member for Gordon (Mr. Bruce) for his limited congratulations. As it is the first time that he has managed to do that in this Parliament, I should thank him for it.

The hon. Gentleman asked why we waited before taking today's action. We did that for the very reason he mentioned, that we must get stop-go out of the system and create stability in the management of both public finances and the national economy. The person who reminded us of that was the hon. Gentleman's leader, the right hon. Member for Yeovil (Mr. Ashdown), who said in the debate on the Queen's speech: If we tighten our belts now, we have a real opportunity to get to grips with the huge hangover of debt left behind by the Conservatives."—[Official Report, 14 May 1997; Vol. 294, c. 74.] It is strange that, since the right hon. Gentleman said that a year ago, he has been demanding more and more instead of facing up to the need to deal with debt.

The hon. Member for Gordon asked about spending. I would simply have thanked him for his congratulations had he not said that it was not enough. The Conservatives say that it is far too much, and the Liberal Democrats say that it is not enough. In the general election the hon. Gentleman asked for £1.9 billion extra a year to be spent on education. That is just slightly less than £6 billion over the next three years. We are spending not £6 billion but £19 billion. Why did the hon. Gentleman not start by welcoming that? He said that we should spend £500 million a year extra on the health service and engage in some capital spending. That is £2.5 billion over a Parliament. We are spending £21 billion in three years.

Is it not about time that the Liberal Democrats, instead of finding every excuse for more and more spending and more and more taxes, welcomed the Government's progress in the development of public services? The figures for Scotland, England and Wales show that health spending is rising by 4.7 per cent. and education spending is rising by 5.1 per cent. a year. That is far more than any Liberal Democrat candidate ever asked for, and it is about time that the party recognised that the Government can combine the prudence that it has never shown with the ability to deliver proper public services.

Mr. Kenneth Clarke (Rushcliffe)

Is the right hon. Gentleman content for me to regard today's statement as his transformation from the iron Chancellor, with two years of control of public spending, to the big-handed Chancellor, with three years of uncontrolled spending on health, education and just about every other Department in Whitehall, with no significant savings in any part? Can he persuade me that this transformation to a new, happy Chancellor is planned and prudent, rather than forced upon him?

Does the right hon. Gentleman accept that the figures for growth of total public spending at 2.75 per cent. real in each of the next three years are far above the figures that he planned as recently as his last Budget? Has he not noticed that this U-turn takes place at a time when interest rates are too high, the economy is slowing down too fast, unemployment is about to go up again, and his tax revenue forecasts will fall short? Will he not end this Parliament short of taxation and short of economic growth? Will he tell the cheering ranks of old Labour behind him that they may ring the bells today, but they will wring their hands hereafter?

Mr. Brown

From the Chancellor who gave us the 17 tax rises, from the Chancellor who refused to take the action necessary to raise interest rates before the general election in order to tackle inflation—[Interruption.] As for the right hon. and learned Gentleman's predictions today, let him recall what he said in January 1997, when we said that we would keep within a two-year spending ceiling. He said: Hell will freeze over before Gordon Brown could control the spending. We took the action—[Interruption.]

Mr. Deputy Speaker

Order. We must have good order.

Mr. Brown

We took the action necessary, controlling spending. We reduced borrowing by £20 billion. We have current account surpluses for the next three years. We are meeting a golden rule that means that taxation must pay for current spending. We have a sustainable investment rule that gets debt down below 40 per cent. of GDP. We have achieved more in our planning in a year than the right hon. and learned Member for Rushcliffe (Mr. Clarke) did in all the time that he was Chancellor.

The Conservatives should now face the fact that they were responsible for the inflation that has entered the system, and that we have had to deal with it. They had better tell us whether they support the independence of the Bank of England. Do they support the action that was taken on interest rates? Do they want interest rates higher or lower? Do they want public spending to be higher, the same, or lower? The Conservative party seems to be setting its face against the good modern public services that this country needs.

Mr. Giles Radice (North Durham)

As the Chancellor knows, the Treasury Select Committee will question him on the statement tomorrow. Does my right hon. Friend accept that the plans that he announced today combine fiscal prudence with a much welcome long-term commitment to spending, especially on health and education? Does he agree that the achievement of the objectives that he has announced today depends in part on the performance of Government Departments, as he said, but also on the performance of the economy?

Mr. Brown

I am grateful to my hon. Friend. This is indeed a tough settlement, because it combines investment with the need for reform. I am grateful to him for drawing attention to the fact that each Department now has targets for the services that it must deliver, and stages by which those targets must be met, and that there is a process of scrutiny and audit that will have to be followed.

My hon. Friend rightly says that we have put money into the vital public services. Education was growing by 1.4 per cent. a year for the past 18 years, and 1.4 per cent. a year in the last Parliament. It will now grow by 5 per cent. a year, on average. Health service spending was growing by 2.5 per cent. a year in the last Parliament. It will now grow by twice that much—4.7 per cent. a year. We have managed to invest in the vital public services in which the country takes pride, while getting debt below 40 per cent., as we will do, getting a current surplus over the next three years, as we plan to do, and at the same time reducing borrowing from £27 billion to £8 billion over the last year. The ability to combine prudence with public services of a high standard is something that the previous Government could never achieve. It is the mark of a new Labour Government.

Sir Peter Tapsell (Louth and Horncastle)

Those who remember the other Mr. Brown, George Brown, who introduced the previous Labour national plan with a similar degree of naive bombast, will also recall that it all ended in tears, heavily laced with whisky. The Chancellor has no idea what the main economic indicators will be showing in three years' time, but he is offering jam to everybody in the run-up to the next general election three years ahead of it. Whatever we do not know about the future for Britain, we can be certain of one thing about the future experience of the Chancellor, and it can be summed up in three words—education, education, education.

Mr. Brown

Exactly—education, education, education. We are giving £19 billion to education, and the Conservatives should be welcoming that today. On the economy, we have taken the most prudent and cautious forecast. We are running current surpluses over the next three years. We can spend on health and education in the way that the country wants us to and in the way that the economy and society needs us to, because we have been prepared to make the tough choices which reallocate money from less high priorities to our priority services.

I should have thought that the old Conservative party would welcome that. The Conservative party will be fighting the next election on cuts in expenditure on health and education. There has been a lurch to the right in the Conservative party, and it will pay a further penalty at the next election.

Mr. Dennis Skinner (Bolsover)

Is my right hon. Friend aware that, when I was listening to the responses to his statement, it became pretty clear that those on the Tory Front Bench were concerned about the briefing for this momentous statement, the Liberal Democrat spokesman was concerned because it came a little too late, and the ex-Chancellor of the Exchequer gave me the impression that he had created the situation anyway? All in all, it seems that they are all engaging in what is called belly-warming talk.

May I ask my right hon. Friend something that matters to the people in the coalfields and in the areas where manufacturing industry suffered massive losses during the 18 years of Tory Government? Is there anything that he can say in respect of the 80 recommendations of the coalfield communities task force? It has made recommendations about repairing the social fabric in areas that have suffered mass unemployment and where unemployment is still running at over 20 per cent. Will there be any money allocated for those specific proposals that we dealt with yesterday?

Mr. Brown

I am grateful to my hon. Friend. It is precisely because of the problems in established communities that are facing unemployment and big transformations that we are introducing the new deal for communities. In the past, regeneration and other programmes have been based on the idea that, although the problems could not be solved, the consequences would be tackled, and not the causes.

We are trying to get new industry and business into the difficult and hard-hit areas. We are trying to raise the level of education and skills and trying to give adults new opportunities for jobs that they have not had for years. That is what lies behind the new deal for the communities.

It will be of particular interest in the coalfield communities about which, as my hon. Friend knows, my right hon. Friend the Deputy Prime Minister made a statement yesterday. He welcomed the 80 recommendations of the coalfield communities task force, and said that he would be acting on many of them as time proceeds. The new deal for communities means investing £800 million in rebuilding the social and economic infrastructure of those areas, and getting jobs and opportunities to people let down by the previous Government.

Mr. John D. Taylor (Strangford)

The Chancellor of the Exchequer is to be congratulated on his statement, particularly the concentration on education, health and transport. I hope that, at the end of the day, there are funds to cover all the proposed public expenditure. At a quick glance, one notices that the increase in spending in Scotland and Wales over the next three years will be 16 per cent., whereas for Northern Ireland it will be 11 per cent. One will have to look at the details to establish the reasons for that disparity.

May I ask the Chancellor one simple question? In preparation of the public spending review, what consultations—either informal or formal—were there with the central European bank?

Mr. Brown

I am grateful to the right hon. Gentleman. I was pleased to be able to visit Northern Ireland before the referendum and to say that the Government will introduce a number of proposals for improving Northern Ireland's economy and transport infrastructure. I think that he will welcome the fact that we have reduced corporation tax, given reliefs to a number of small businesses, and taken major decisions on improving the Province's airport, railway, bus and other transport services. We are also spending far more in Northern Ireland than in other parts of the country on the new deal for young people, to get young people back to work.

Spending is based on the Barnett formula, which has been accepted for many years by hon. Members on both sides of the House. Allocations have been made on that basis, and it is for the Secretary of State for Wales, the Secretary of State for Northern Ireland and the Secretary of State for Scotland to decide allocations within their Budget. Today or in future days, they too will make an announcement on their Budget priorities. We have given a fair settlement to all parts of the United Kingdom. I thought that that should be welcomed on both sides of the House.

Mr. Andrew F. Bennett (Denton and Reddish)

Will the Chancellor tell us exactly what will happen to social housing? It seemed to be very good in the statement that there would be extra money for renovation and modernisation of housing stock. However, does he accept that poor housing can lead to poor health, and that poor housing makes it extremely difficult for young people to learn? Is it not very important that, if there is not—as I think—any extra money for social housing in the next three years, we should find new and imaginative ways of getting that type of social housing built?

Mr. Brown

And it is exactly what we are doing. I am grateful to my hon. Friend for allowing me to amplify on my earlier comments. The fact is that £3.6 billion from capital receipts will be invested in building and repairing existing council housing—allowing 1.5 million homes to be refurbished, and reducing the repair backlog by at least 250,000. There will also be a new housing inspectorate, as part of the best value regime, that will have real power to tackle poor management in any part of the country.

My hon. Friend also asked for new and imaginative programmes. The new deal for the communities is exactly that. It will combine action on housing with action on employment, which is what is desperately needed in most areas.

There will be over £100 million to reduce rough sleeping. Our commitment to the homeless people of this country will be met. I visited one foyer, in Slough, which had just been opened. There are now 70 foyers round the country. We want to help young people to have both the housing and the employment opportunities that will give them the future they need. Today's announcement is about a programme for new investment—with reform—in housing, particularly for those who are in the greatest difficulty.

Sir Michael Spicer (West Worcestershire)

How can it possibly be prudent to raise public expenditure totals above the Chancellor's own forecasts for GDP rates over the next few years without saying whether it will be paid for out of higher taxes or higher public borrowing?

Mr. Brown

The hon. Gentleman should have been in the House a few weeks ago, when I explained exactly how our proposals would be financed. We have created—by the two new fiscal rules that we have adopted—a public spending control regime and financial discipline that gives us both a current Budget balance over the economic cycle and a reduced level of debt to GDP. As I said earlier today, other Governments have tried in past years to achieve a balance in the current Budget and a sustainable debt level, but have failed to do so. The previous Government had a 1.5 per cent. deficit on current spending—equivalent to a £12 billion deficit every year—but we will have a balance.

Sir Michael Spicer

Answer the question.

Mr. Brown

I am answering the question.

The hon. Gentleman's idea that that is somehow not prudent is answered by the two rules that we are applying, and by our ability to get debt below 40 per cent. and to run a current Budget balance. That is how we are being prudent. We have been able to get so much money to health and education by reallocating resources within the moneys that are available to us. We kept to our promises, and we kept within the tight ceilings we set for our first two years. We reduced borrowing by £20 billion. I should have thought that the hon. Gentleman would give us credit for that.

The fiscal tightening that we have achieved this year will be achieved next year as well. This is a prudent settlement, but one based on good public services. It is only the Conservative party that believes that prudence means having to cut public services and public investment. We have shown that one can have both prudence and investment in the priority public services.

Mrs. Anne Campbell (Cambridge)

Does my right hon. Friend accept that, for most parents, education is an absolutely top priority, and that his statement will be met with great delight by many of our constituents? Does he agree that classes of approaching 40 pupils are simply unacceptable? Will he ensure that the money is spent in such a way that the less well funded authorities are brought much closer to the better-funded authorities, and that county councils, especially those that are Conservative-controlled, are persuaded to use the money as it is intended—for education?

Mr. Brown

I entirely agree with my hon. Friend. The money has been allocated for education, and Conservative-controlled local authorities should honour what the people of this country want and invest the money in education. I also agree that we must get class sizes for five, six and seven-year-olds down, and the money that we have invested will enable us to do so.

My hon. Friend will be interested to know that my right hon. Friend the Secretary of State for Education and Employment will be making a statement to the House tomorrow. He will outline targets and the stages by which they will be met. Representing the constituency she does, my hon. Friend will be delighted to know that the investment in science laboratories in our universities and colleges—more investment in education—is at a level that has never before been seen in this country, as a result of the new public-private partnerships that we are announcing. We are investing in education, schools and universities and in research. That is an important commitment to the future of this country.

Mr. Dafydd Wigley (Caernarfon)

When the froth and hype have settled, is not the truth to be found on page 109 of the White Paper? It shows a standstill expenditure budget through to April 2000, that in real terms the expenditure for 1999–2000 is lower than the average for 1994–96, and that the Welsh Office budget for 1999–2000, at £6.7 billion, will in real terms be the same as it was back in 1994–95? In a week that the Government published a paper for Wales showing that 250,000 people are looking for jobs, surely we need economic stimulation now, not jam tomorrow, in three years' time.

Mr. Brown

If the right hon. Gentleman is concerned, as I know he is, about unemployment, he should not only support the new deal for young people and the long-term unemployed but welcome the fact that we are today announcing a new deal for communities. Far from the facts about expenditure in Wales being as he is trying to present them to the House, the average annual real spending increase will be 2.6 per cent.—£2.2 billion extra over the next three years. That meets our commitment to Wales on education and health, which is one reason that the Labour Government are so popular with the people of Wales.

Mr. Dale Campbell-Savours (Workington)

This evening, many people in further and higher education across the country will be very happy with the £1.1 billion extra that is to go into the science budget, and with the extra 500,000—half a million—new places to be found in further and higher education. Do not the new commitments from the Labour Government require a new impetus from Cumbria county council to bring forward the project for the university of the lakes, a project that is greatly required in the county of Cumbria? In Cumbria, we must be at the forefront in taking our share of the vast amount of new money being brought on stream.

Mr. Brown

I am grateful to my hon. Friend, who has always been greatly interested in education, especially in the future of higher and further education. My right hon. Friend the Secretary of State for Education and Employment will listen with interest to his comments about the university of the lakes.

It is because we have taken the difficult decisions about student finance that we are able to say that there will be at least half a million more students in higher and further education by the end of this Parliament. That means that half a million people who were denied the opportunity to develop their talents and fulfil their potential because of the cap that the Conservatives put on entry into higher education will now have that opportunity.

As for science, under the Conservative Government, public-private partnerships were replacing public funds with private funds. We have shown today that it is possible to add to public investment with substantial private investment. Instead of £700 million being spent on science, £1.1 billion will be spent as a result of investment by the Wellcome Foundation.

These public-private partnerships, which enhance public investment in science, also make for the renewal of our science infrastructure and building for the future, in terms of the jobs that will be created and the strengthening of the economy. I hope that all hon. Members welcome what we are doing for science.

Mr. Howard Flight (Arundel and South Downs)

With creative accounting, anyone can paint a picture that appears to meet all objectives. The Chancellor constantly chants the mantra of prudence, but what does he have to say about what is going on in Japan and Asia? I have been a Member of Parliament for a little over a year, and in that time I have been amazed never to hear anything from the Chancellor about the impact on our economy of the major contracting problems in other parts of the world.

I come now to the crucial point in what the Chancellor said today. If, as I fear, British economic growth and tax revenues are substantially lower than he assumes in his forecast, will his three-year spending plan hold? Will it be financed from higher borrowing or higher taxation, or will this wonderful three-year plan be revised dramatically in 18 months' time?

Mr. Brown

I am grateful to the hon. Gentleman, but I have to tell him that I am making a public spending announcement for Britain, not the rest of the world. As for Japan, we have always said that there had to be reform of the financial system as well as reform of taxation. That remains as true today as it was a few months ago.

On public spending, I have already said that we have taken the most cautious estimate of the state of the economy. We have also been able to announce surpluses over the next three years, which is, of course, very important. However, when the hon. Gentleman examines the figures, he will notice that the main reason that we can spend on and invest in health and education is that we are committed to the health and education services, and have been prepared to make the choices necessary to reallocate resources to them. It is about time that the Conservative party acknowledged that the previous Government failed in those respects, but that we are being successful.

Mr. Barry Jones (Alyn and Deeside)

With regard to the massive sums that he is pumping into housing, school and hospital services, will my right hon. Friend say what ruthless and determined action he is going to take to make sure that every pound of those billions goes to front-line services, and is not wasted by careless health, local education and housing authorities?

Mr. Brown

Before the Conservatives came to power, the national health service used to be the most cheaply and efficiently administered system, with only 7 per cent. of health service expenditure being spent on administration. Under the Conservatives, that rose to 12 per cent. of expenditure because of the bureaucracy. That is why my right hon. Friend the Secretary of State for Health will announce on Thursday that he is going to save £1 billion on bureaucracy, which will go to front-line patient care.

As for the record of the Conservative party on the health service, there were increases of 2.5 per cent. in the last Parliament, whereas we are proposing increases of 4.7 per cent. for the next three years. On Thursday, my right hon. Friend the Secretary of State for Health will announce the targets that will have to be met, the standards that will have to be achieved, and the inefficiencies in some hospitals that will have to be rectified.

It is because we are committed to the NHS, and because we believe that every pound of public money should be well spent, that we are capable, in a way that the previous Government were not, of securing value for money for every patient in the health service.

Mr. John Swinney (North Tayside)

Will the Chancellor confirm that the base that he is assuming for this afternoon's announcement is the dreadful base that he inherited from the Conservatives, which he has prolonged for two years, and that any increase in public expenditure would be welcome alongside that starting point? Will he also confirm that, even with the increase in resources announced today, the Scottish Parliament will still have fewer resources at its disposal in 2000 when it opens than it had when one of the many discredited Conservatives was Secretary of State for Scotland in 1994? Finally, does he think it prudent that, at a time of high interest rates in the United Kingdom economy, the Secretary of State for Scotland will announce this afternoon cutting support to enterprise by £50 million in real terms?

Mr. Brown

The first to be worried about the policies of the hon. Gentleman's party are every business in Scotland for whom those policies would mean tax rises of about £1,500 a year. As for public spending in Scotland, the hon. Gentleman should welcome the fact that this afternoon my right hon. Friend the Secretary of State for Scotland will announce that, by 2002, all three-year-olds in Scotland will have the right to a nursery place. That achievement by a Labour Government could never be achieved by the Scottish National party.

The hon. Gentleman should congratulate us on the fact that, by 2002, there will be 5,000 new classroom assistants in Scottish primary schools. Once again we are improving the standard of education in our schools. We do not base our decisions on the economics of the SNP. We base them on the economics of the real world, and that is why we get money into health and education.

Mr. Jeremy Corbyn (Islington, North)

May I take my right hon. Friend back to the subject of public sector housing and his response to my hon. Friend the Member for Stockport (Ms Coffey)? In his statement, he outlines welcome money for the improvement of existing stock and dealing with the huge backlog of repairs that was bequeathed to us by the outgoing Tory Government. However, he must recognise that, in inner-urban Britain, unless young people and poor people can be provided with council or housing association properties, they have no choice but to live in very expensive private rented accommodation that is paid for by housing benefit.

Does my. right hon. Friend recognise that we now need to invest massively in a house building programme that will improve the lot of the poorest people in inner-urban Britain and save money on health and education? Children are under-achieving, and people are occupying hospital beds because they live in such filthy accommodation.

Mr. Brown

First, my hon. Friend should welcome the new deal for young people, as it gives the people he mentioned the chance to get jobs. It provides responsibility matched by opportunity, but it is the way forward. I am pleased that 60,000 young people are now part of the new deal and participating in the programme. That is why we are extending the new deal to the long-term unemployed. We are making it possible for single parents to get jobs if they want them, and many disabled men and women who want to work will also have opportunities to do so.

Secondly, my hon. Friend should welcome the fact that we are investing in innovative housing reforms that will enable young people, particularly those living in the difficult conditions he mentioned, to match the jobs and the training that they are getting with the housing that is available. Thirdly, he should welcome the fact that 1.5 million houses will be improved as a result of the £1 billion plus investment from council tax receipts in new housing.

It is a programme for employment opportunity, rebuilding communities that have been hard hit, and improving the housing stock. In particular, we are determined to help the young homeless who were left behind under the previous Government.

Mr. Edward Leigh (Gainsborough)

Page 87 of the White Paper on social security tells us that benefit expenditure is to increase from £95 billion in this financial year to £108 billion in the financial year of the next general election. In the light of those figures, will the Chancellor confirm that, when the Prime Minister said before the general election, "I vow that we will have reduced the proportion we spend on the welfare bills of social failure," he meant to say, "I vow that, with a little bit of luck, and with massaging the figures, we might stop welfare bills increasing quite as fast as they used to"?

Mr. Brown

The hon. Gentleman should look in detail at what the Government are doing. First, we are cutting the bills of failure by getting young people into work—60,000 are participating in the new deal. The number of lone parents claiming income support has fallen below 1 million. In the past year, about 40,000 have come off benefit and into work, compared with 50,000 who were joining benefit under the previous Government. So the hon. Gentleman should applaud the fact that we are reducing the bills of unemployment and getting people back into work.

The hon. Gentleman should also be aware of the saving to the taxpayer of about £40 a week by people moving even from income support into family credit. The working families tax credit mean that the people concerned are about £40 a week better off. So we are making the transition, and he should applaud us for that. Despite everything that he and most of his party think, social security expenditure rose by 3.8 per cent. under the previous Conservative Administration in the last Parliament. Even taking account of the working families tax credit, it is rising by 2 per cent. in this Parliament.

The hon. Gentleman should applaud us for reducing the rate of growth of social security spending and putting in money that will enable people to get back to work and contribute to the community. We are meeting the election promise that he read out.

Mr. Tam Dalyell (Linlithgow)

On the question of debt relief for the poorest countries in chapter 16.8, what can my right hon. Friend say about the heavily indebted poor countries initiative? What certainties can we give those countries over the next three years?

Mr. Brown

I am grateful to my hon. Friend. In addition to what we are doing on overseas aid in respect of direct Government assistance to the poorest countries in the world rising as a proportion of national income and the development aid budget rising every year when it used to fall, which I know my hon. Friend will welcome, we are contributing to debt relief.

When we took office, very few countries were part of the heavily indebted poor countries initiative. Since the G7 meeting, the Commonwealth Finance Ministers' conference and the Mauritius mandate that we launched, several countries have moved into the debt reduction process. The latest is Mozambique, which was paying an astonishing 9 per cent. of its national income in debt repayments, while investing only 4 per cent. in education and health. Along with other countries, through a grant as well as through getting debt relief off the ground in the Paris club, we have made it possible for the heavily indebted poor countries initiative to extend to Mozambique.

Our new task is to move on to other countries that we can help. I am particularly interested in post-conflict countries such as Rwanda and Liberia that do not have the wherewithal to rebuild their economies and are burdened by unsustainable debt. It is now time for new initiatives to be launched, and I know that my hon. Friend will want to help and support us in those efforts.

Mr. Quentin Davies (Grantham and Stamford)

Neither the House nor the public will have missed the fact that, although the Chancellor undertook to answer "in detail", to use his words, the questions he was asked by my right hon. Friend the shadow Chancellor, he did not answer or address a single one of them. He just went off on his usual rant, and then sat down.

Will the right hon. Gentleman give a straightforward answer to the straightforward question from my hon. Friend the Member for Gainsborough (Mr. Leigh)? Is it not a fact that he has now definitively abandoned his commitment to reduce social security spending as a share of national income? It is quite obvious from his own figures that that is the case. Why does he not have the courage and straightforwardness just to admit it?

Mr. Brown

I actually have the figures. Social security spending as a proportion of national income, which we inherited at around 12 per cent., is falling to 11 per cent. However, under the previous Government, in the last Parliament it rose by 3.8 per cent., and it is rising by only 2 per cent. under us.

The hon. Gentleman must distinguish between the costs of failure that we are definitely reducing with the new deal and other measures, and what is entirely right support for poor pensioners as part of the social security budget and child benefit. He should support us in easing poverty among pensioners. I for one am not prepared to continue with the situation that existed under the previous Government, when thousands of poor pensioners were left without hope of getting anything more to take them out of poverty. We shall take the necessary action, and he should support us in that. As for cutting the bills of failure, that is exactly what we are doing.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

My right hon. Friend's statement has more than lived up to its trailers. When we consider future investment incentives, how to share out the money to rebuild smashed city neighbourhoods after so many years of neglect, how to meet health needs and raise educational standards, can he assure me that the needs of my own north-east region will be met in precisely the same way as the needs of Scotland and Wales—need for need, head for head and pound for pound, with fairness and without favours?

Mr. Brown

It is because of what my hon. Friend says that we are giving young people in every part of the United Kingdom the right to training or work after six months of unemployment. Every person in every part of the country who has been unemployed for more than two years will receive help worth £75 a week to get a job. The Government agree with my hon. Friend that there should be a needs-based approach. That is why the measures for single parents and for the disabled apply to the whole United Kingdom.

I hope that my hon. Friend will involve himself in shaping the new deal for communities in Newcastle. We wish that we had had the chance years ago to tackle not just the consequences of poverty, but the real causes. We must do that together.

Several hon. Members

rose—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. We must now move on. There is much else to be done, and I have to protect the remaining business of the House. I point out to hon. Members that, as the Chancellor has said, there will be several statements in the next few days, when there will be opportunities for further questions.