Commons Sitting of 16 July 1998

Preamble
The House met at half-past Two o'clock
PRAYERS
[MADAM SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS

    LLOYDS TSB BILL [Lords] (By Order)
    Order for Third Reading read.
    To be read the Third time on Tuesday 28 July at Seven o'clock.

    ALLIANCE AND LEICESTER PLC (GROUP REORGANISATION) BILL [Lords] (By Order)
    Order for Second Reading read.
    To be read a Second time on Thursday 23 July.

Oral Answers to Questions
  TRADE AND INDUSTRY
  The President of the Board of Trade was asked—
  TRADE AND INDUSTRY

    Manufacturing Industry
    Sir Teddy Taylor: What recent reports she has obtained on the state of business confidence in manufacturing industry. [49371]
    The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett): I receive numerous reports from business about many aspects of economic performance, including the state of business confidence in manufacturing industry. I recognise that some sections of manufacturing have strong concerns at present, but that it is a more mixed picture than is sometimes suggested. For example, the Confederation of British Industry continues to forecast that manufacturing output and investment will grow both this year and next.
    Sir Teddy Taylor: Will the Secretary of State study the alarming report published this morning by the British Chambers of Commerce, which tends to be a more reliable organisation than the one she mentioned? It shows that home sales are at their lowest for six years and that export activity is falling sharply on the last quarter, which was a record low, probably because of the problems in the European Union. Will the right hon. Lady remind the Chancellor that manufacturing activity is vital to the economy and that trying to make himself popular with a spending spree is a great danger if the only result is a further increase in interest rates, which would have a devastating effect on manufacturing industry?
    Mrs. Beckett: First, while I bow to no one in my respect for the British Chambers of Commerce and I am
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    aware of the survey, I cannot share the hon. Gentleman's view that the CBI is in some way an unreliable organisation. My right hon. Friend the Chancellor is extremely well aware of the position in manufacturing industry, about which we continue to liaise closely. Far from seeking merely to make himself popular with his announcements on Tuesday, he is laying a sound basis for reform, modernisation and investment in Britain's future. Far from embarking on some sort of spending spree, he is showing considerable responsibility and prudence, but he is also making the right choices to lay the right path for Britain's future.
    Mr. Martin O'Neill: First, is not it the case that our right hon. Friend the Chancellor's announcement on Tuesday has gone some way to encourage British manufacturers because, in the public expenditure increases, the emphasis will be on manufacturing and capital matters and we will see the beginnings of a turnround in those areas? Secondly, I do not think that any of us assumes that interest rates will reduce dramatically in the short term, but can we assume that in the weeks and months ahead, as the Government plan for the next Budget, a case will be made for investment incentives so that manufacturing industry can use the space that it has to plan for the future and take advantage of what we assume will be the better trading prospects throughout the world next year?
    Mrs. Beckett: My hon. Friend is right to draw attention to the fact that trading prospects throughout the world and the impact of the Asian crisis are in part impinging on manufacturing. He is also right to say that it is important that the manufacturing sector of the economy continues to invest and plan for the future. I am confident that he shares my view and that of the whole Government that some of the announcements made this week—not merely the announcement for investment in the science and engineering base, for example, but the whole basis of the public spending settlement, with its three-year rolling programme approach and the split between capital and current spending—will help to create a climate in which everyone, including business, will feel better able to plan sustainably for the future.
    Mrs. Ann Winterton: Is the right hon. Lady aware that the north-west chamber of commerce has consulted its manufacturers, who believe that the outlook is extremely gloomy and that the country will slide further into recession, for which they blame the strong pound, six interest rate rises and an increase in business taxation? Is she concerned that they are reducing the number of people in their work forces and that that will have an adverse effect on the plans announced in the House on Tuesday?
    Mrs. Beckett: I am, of course, familiar with the some of the work of the north-west chamber of commerce, and I understand its wish to reflect the concerns and anxieties of its members, but I hope that the hon. Lady, who I know takes a great interest in these matters and wants to be accurate, will remind the House that three quarters of the increase in the rate of sterling took place before the general election and before interest rates were increased. Indeed—although I do not expect her to convey this information—the previous Chancellor should have

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    increased interest rates before the election. People are aware of the concerns of manufacturing, but they are also conscious that the difficulties that are being experienced are a result of what is happening in Asia and of pressures on sterling because of concerns about the euro. The picture is much more mixed than the Conservative party pretends.
    Mr. Michael Clapham: Does my right hon. Friend agree that the fact that there were 618 inward investment projects last year—the highest number ever—shows that foreign investors believe that the British economy has a stable future? Does she also agree that the £1.1 billion that has been made available to the university science base will help to anchor the pharmaceutical and chemical industries, for example, which rely on their collaboration with universities, and that that will lead to a strengthening of confidence in the British economy?
    Mrs. Beckett: I am grateful to my hon. Friend, who is entirely right. There is indeed an all-time record in inward investment projects. As he correctly said, 618 new projects were signed last year, which is the first time that the number has been above 500. That substantial increase is a sign of the confidence of inward investors in the future of this country; that confidence will be strengthened by the Government's announcement of long-term investment to create the basis for prosperity in manufacturing in the future.
    Mr. John Redwood: The British Chambers of Commerce survey that was published today shows meltdown in manufacturing. Meanwhile, private sector earnings are going up by more than 6 per cent. a year. Labour has created a boom-and-bust economy—bust for manufacturing, boom for most of the other businesses. Will the right hon. Lady say how much of the money the Chancellor announced this week will be swallowed up in large, inflationary pay awards as the public sector seeks to catch up with the private sector? What impact will that have on manufacturing prospects? Will she urge the Chancellor, as Conservative Members have repeatedly done, to change policy on tax, interest rates and savings to give manufacturers some relief?
    Mrs. Beckett: The right hon. Gentleman has failed to notice that commentators, who have some genuine concerns, have pointed out that recent statistics—on confidence levels and so on—are a repetition of what was shown some five or six years ago. At that time, of course, not only was the Conservative party in power, but I rather think he was in the Government and perhaps even in my Department, so I find his use of the word meltdown interesting, even though it is, of course, nonsense. There are real concerns, which is understandable, but, as I said, the picture is rather more mixed than his extravagant claims suggest.
    Output in manufacturing has been broadly flat over the past year—for the past three months it is up 0.1 per cent. on the previous three months, and the volume of exports grew in each of those three months.
    Mr. John Bercow: Do not write home about it.
    Mrs. Beckett: The hon. Gentleman may think that 0.1 per cent. is not a massive increase, but I should point
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    out that over the whole history of the previous Government manufacturing output grew, on average, by only 0.5 per cent. a year.
    Mr. Andy King: What action her Department has taken to improve the competitiveness of manufacturing industry in Europe during the British presidency of the European Union. [49372]
    The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): My Department's priority during our presidency has been to promote policies, in partnership with industry, to improve European competitiveness and I believe that we have made a real impact. Key areas in which we have made progress include the single market, research and development, telecommunications and electronic commerce and promoting entrepreneurship and trade liberalisation. Competitiveness is now firmly embedded in the language of Brussels, helped in no small part by our efforts, and I am especially pleased with the profile given to economic reform at the Cardiff summit.
    Mr. King: Does my hon. Friend agree that Britain's new relationship with our European partners is already bearing fruit and that it is in stark contrast with the miserable legacy that we inherited from the Tory Government, who succeeded only in reviling Europe and alienating Britain from the rest of the continent? We have a much better future for manufacturing in Britain under the new Labour Government.
    Mr. McCartney: I thank my hon. Friend for his kind remarks. It is absolutely correct to say that the Government have begun to turn round the appalling legacy of that rabble over there, who spent most of their time trying to close down British industry, and that we are spending our time building it up. Yesterday, it was announced that Britain is the No. 1 nation for inward investment for the first time ever, and the more than 500 new investment projects are a clear sign that we have the confidence of both the national and the international business community.
    Miss Anne McIntosh: Why was no progress made on the chocolate directive, which has damaged the competitiveness of British chocolate manufacturing?
    Was there any discussion during the British presidency of the Commission proposals for compulsory consultation of employees in all companies with 20 or more employees? Does not he expect that to damage the competitiveness of British manufacturing industry?
    Mr. McCartney: I cannot give the hon. Lady a definitive answer on the directive but, as someone who enjoys chocolate, I can assure her that nothing will be done under this regime to damage the British chocolate industry. A Mars a day keeps me at bay.
    To answer the hon. Lady's clever question, we have made it absolutely clear both in opposition and in government that we will apply subsidiarity. If a Commission proposal places requirements on companies that operate solely within a country's own boundaries, we will oppose it. We are in favour of information and

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    consultation, and the "Fairness at Work" White Paper is a step forward in that direction, guaranteeing employment rights, but if the Commission proposals are made in the form that has been suggested, the Government will oppose them.
    Mr. Barry Sheerman: We may no longer be president of the European Union, but we can still set an example. In a threatened global economy, have not we set a good example this week? I may or may not be a parliamentary poodle, but I am an unreconstructed Keynesian. Does my hon. Friend agree that we need good old Keynesian investment? The United Kingdom showed the way this week by putting nearly £50 billion into our economy. If that does not stimulate our manufacturing industry, and European industry, nothing will.
    Mr. McCartney: Our No. 1 priority both here and in Europe has been employability: co-ordinating policies to deal with the 18 million people who are unemployed in Europe, more than half of whom have been out of work for more than a year. While we have been developing those policies with our European colleagues, the Opposition have fought tooth and nail against the windfall tax and the introduction of the new deal to get young people and older workers back to work. Once again, the Government are doing effective work throughout Europe and in the United Kingdom to get down the appalling levels of unemployment left by the previous Government.

    Euro
    Mr. David Watts: What action her Department has taken to improve awareness among British companies of the introduction of the euro. [49373]
    The Minister for Competition and Consumer Affairs (Mr. Nigel Griffiths): We have set up the euro preparations unit and DTI Ministers have taken part in a wide range of events to help business prepare for the single currency. Our officials are working to assist companies.
    Mr. Watts: I thank my hon. Friend for that response. May I draw to his attention the fact that many companies in St. Helens have still taken no action to prepare for the introduction of the euro? What action will the Department take to make those companies more aware of the problems and opportunities that will exist once the euro is introduced? Does my hon. Friend share my view that it is crucial that we show world leadership on this issue and that the divisions on the Opposition Benches on it are damaging to Britain and British industry? Does he agree that it is time the Leader of the Opposition came off the fence on this issue and showed real leadership qualities?
    Mr. Griffiths: I agree with my hon. Friend. Indeed, he echoes the words of Sir Leon Brittan, who ridiculed the Opposition's view of the preparations for the euro. The euro preparations unit has been able to assist companies in my hon. Friend's constituency and all others. It has taken several measures to raise awareness among United Kingdom businesses about the practical changes that will come with the introduction of the single
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    currency on 1 January. They include a series of fact sheets, a business-friendly diagnostic pack and an internet website, all backed by a dedicated phone line.
    Mr. Ian Taylor: Given that the euro is not just another foreign currency, but the currency that will dominate 80 per cent. of the European single market and will increasingly be used as the base currency for business transactions in this country, will the Minister have a word with the various people involved in the business for sterling campaign that, much as we respect their right to express opinions and stir up debate, their companies must also prepare for the euro? Otherwise, there will be grave competitive disadvantages to the United Kingdom economy.
    Mr. Griffiths: I am keen to endorse those sentiments on behalf of the Government and, indeed, to encourage the route that the hon. Gentleman so rightly advises. That is why we have set up a euro preparations unit. We are doing all we can to ensure that British businesses, in a market where, as the hon. Gentleman said, 80 per cent. of the countries and businesses will be operating in the euro, are well geared up to ensure they are not damaged by that prospect. It is important that they take advantage of the advice that is given through the Government's agencies without delay.

    Low Pay Commission
    Mr. Russell Brown: If she will make a statement about the future of the Low Pay Commission. [49374]
    The Minister of State, Department of Trade and Industry (Mr. Ian McCartney): My right hon. Friend the President of the Board of Trade announced to the House on 18 June that the Low Pay Commission will be asked to continue its work, monitoring and evaluating the introduction and impact of the national minimum wage.
    About 2 million workers will benefit from our proposed minimum wage rates: some 1.4 million are women, over 1.3 million are part-time workers, some 200,000 are young people, around 110,000 are home workers, approximately 175,000 are lone parents who work and some 130,000 are ethnic minority workers.
    Mr. Brown: I thank my hon. Friend for that reply. More than 1,600 families in my constituency are delighted that at long last we shall see an end to poverty pay, which was the trademark of the previous Government. Will my hon. Friend explain how long he believes the Low Pay Commission will remain in operation? Does he agree that this is the real way to encourage people off benefits and into work?
    Mr. McCartney: The Low Pay Commission will continue and the best way to ensure that it does is to ensure that at the next election that lot on the Opposition Benches do not get elected again. [Laughter.] I say that in all seriousness because in our debate on Monday evening, the right hon. Member for Wokingham (Mr. Redwood) made it absolutely clear that the Conservatives would review all the new employment rights that we will provide under our fairness at work proposals, including the minimum wage. We assume that

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    they will go into the next election fighting for wage cuts for the 2 million lowest-paid workers in Britain. What a shambles. What a rabble.
    Mr. Eric Forth: If it were discovered as a result of the monitoring exercise that the Minister has mentioned that one of the results of the introduction of the minimum wage was a loss of employment opportunities, a loss of jobs and, due to a maintenance of differentials, a general increase in wage costs, what conclusions would the Minister, the Low Pay Commission and the President of the Board of Trade draw?
    Mr. McCartney: The right hon. Gentleman should opt for sackcloth and ashes. As Minister of State, Department for Education and Employment, he was one of those responsible for getting rid of wages councils—thus ensuring that 2 million low-paid workers in Britain received no protection—and putting 3 million people on the dole. What nonsense. The Low Pay Commission was established to ensure that the minimum wage is implemented in a fair and effective way. Since the announcement of the rate, no one, except the Conservative party, has made other than positive remarks about the way in which the Government have gone about the matter.
    Mr. David Chidgey: Will the Low Pay Commission be a permanent body? Will its remit include monitoring and evaluating the variable rates for those under 18 and those in training? When will the Low Pay Commission next report? Will its conclusions be introduced free from political interference or influence?
    Mr. McCartney: First, I make it absolutely clear that the Low Pay Commission will continue because it has a job to do in monitoring and evaluating the introduction of the national minimum wage. From time to time, it will report to the Government on those matters. It is an important partnership body and it is central to the effective introduction of the national minimum wage. We went out of our way to make clear the commission's independence, and that independence led the Government to agree to its 24 recommendations—and they will be implemented.

    British Industry
    Mr. Ross Cranston: If she will make a statement about her Department's policy on increasing the productivity of British industry. [49376]
    The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett): Improving productivity is at the heart of the Government's drive to improve the competitiveness of UK companies. The responsibility for that lies largely with business itself, but the Government have a key role to play, which is why I set up six business-led working parties last year to make recommendations about how the Government and business could work together in partnership to promote competitiveness.
    I am also co-hosting, with my right hon. Friend the Chancellor of the Exchequer, a series of seminars on the UK's productivity gap. That work will contribute to a
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    White Paper on competitiveness, to be published in the autumn, which, for the first time, will have been prepared in partnership with the business community.
    Mr. Cranston: I congratulate my right hon. Friend on her partnership approach and on bringing industry to the heart of government. Do not the productivity figures produced by Professor Siebert of the Kiel institute in Germany, demonstrating that labour productivity in Britain is only 70 per cent. of that in Germany, give the lie to the Tory Government's claim that they left us a golden economic legacy? Does she further agree that British industry must lift its game, for example by improving research and development to the levels that obtain in, say, the pharmaceutical industry?
    Mrs. Beckett: I am grateful to my hon. Friend. I share his view, which is shared widely throughout British business and industry. It is necessary to raise our game and for British companies to become more productive and competitive. My hon. Friend is also entirely right to point out that the legacy of the productivity gap gives the lie to the propaganda put out before the election by the Conservative party. I fear that there will be more than one stark difference between our competitiveness White Paper and those produced by the previous Government. Not only will ours have been prepared in partnership with business, it will look at the whole picture—both sides of the balance sheet—instead of being simply a leaflet that says what a wonderful job the Government are doing.
    Mr. John Wilkinson: Would not it have been more helpful in terms of increasing British industry's productivity if, instead of hitting the boards with the Chancellor, the President of the Board of Trade had persuaded him to introduce a package of expenditure measures that were appropriate to the increase in industrial productivity, rather than the contrary? Will not the spending splurge that he announced to the House, particularly the vast increase in social security spending and the likelihood that interest rates will have to go up from their present high levels as a consequence, gravely damage British industrial productivity, rather than the contrary?
    Mrs. Beckett: That is a load of rubbish. My right hon. Friend made it absolutely plain that modernisation and reform in the public services and beyond are the basis of his programme. Competitiveness and productivity are matters for companies, although the Government have a role in ensuring that the legislative framework does not impede them. The Chancellor's announcements, particularly on science and engineering investment, will help British business. The pharmaceutical industry had urged such steps before my right hon. Friend published his proposals, and it has welcomed them since.
    Mr. Bill O'Brien: I congratulate my right hon. Friend on helping to increase United Kingdom productivity. Yorkshire was devastated by pit closures caused by the previous Government, and that has left pockets of pain. When my right hon. Friend creates partnerships, will she have regard for west Yorkshire in particular and for Yorkshire in general as the region

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    requires the encouragement of partnerships with engineering and manufacturing industry to regenerate jobs?
    Mrs. Beckett: I have the highest regard for west Yorkshire and for its people. I am mindful of its glorious history and of the need for the Government to do all we can in partnership with business to ensure that it has a glorious future. A great deal of our work is focused on the need for investment, for innovation, for the spread of best practice and for British industry to be encouraged to raise its game to create greater opportunities for employment that would help to relieve the difficulties to which my hon. Friend drew attention.
    Mr. John Redwood: May I wish the President of the Board of Trade a happy holiday during the summer recess? Before she goes, however, does she agree that she needs to raise her productivity for the sake of British business? With her in tray stretching to the ceiling, British business does not know the answers to fundamental questions about Government policy, which it needs to know if it is to raise productivity and investment. Will she promise us an energy policy? Will she promise us a competition policy that can work in detail? Will she promise us a policy that will allow the Post Office to expand? Will she promise us a water competition policy that will allow new entrants to the markets? Will she promise statements on all those things before she goes away? After a year of her dithering, industry needs the answers.
    Mrs. Beckett: In the spirit of cross-party co-operation, I wish the right hon. Gentleman a happy holiday—unless he is going to waste his time giving more misleading information to the press. I shall not be taking a two-month holiday, as he alleged I did last year. I have never had a two-month holiday in my life. Perhaps I might look forward to such a thing when I retire.
    As for the litany of nonsense that the right hon. Gentleman churned out for the 55th time, I do not know where he has been for the past year. My Department has had a hand in or produced eight pieces of legislation in the past 15 months. During the previous three years, under the Conservative Government, there may have been one. Certainly there was none in the previous two years. We have made statements on energy policy. We have changed competition law. Discussions are under way with the Post Office about how it can exploit its competitiveness. We are addressing all those issues. We inherited nothing from the Conservatives—no energy policy, no Post Office policy likely to succeed and a competition policy that they had been discussing for 10 years before a Labour Government brought in a Bill. We need no lecture from the right hon. Gentleman.

    Regional Assistance
    Dr. Tony Wright: What proposals she has for the future of regional assistance. [49377]
    The Minister for Competition and Consumer Affairs (Mr. Nigel Griffiths): Regional selective assistance can play an important role in regional regeneration. We want to ensure that we use it most effectively.
    Dr. Wright: The future of regional assistance from Europe and from home is under review. Will the Minister
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    say something about the report of the coalfields task force? We owe a particular debt to coalfield areas. The Government deserve congratulations on setting up and welcoming the report, which provides a framework for regeneration for all the pit closure areas. Will my hon. Friend ensure that regeneration of the coalfield areas is central to regional policy and that it is a central objective of the new regional development agencies?
    Mr. Griffiths: The coalfields task force has brought together three Government Departments with coalfield representatives, English Partnerships and the chief executives of local authorities. The task force has recommended a wide-ranging plan of action to help coalfield communities, including continued objective 2 and RECHAR funding. The Government strongly support those objectives.
    Mr. John Bercow: Does the hon. Gentleman agree with the view of the Trade and Industry Select Committee that, as the proposals stand, the UK's share of the European Union structural funds is set to fall further? What guarantee can he offer the House that he would resist any reduction at all, and that he and his right hon. Friends would readily apologise to the House if they had to concede such a reduction?
    Mr. Griffiths: I fear that the hon. Gentleman has confused selective assistance with European structural funds. In that confusion, he undermines the case that the British Government are putting to Europe to ensure that as many jobs and as many areas as possible are protected. That is the priority of the Government.
    Mr. Gwyn Prosser: When my hon. Friend considers ways of using regional funds to support the former coalfields and the recommendations of the coalfields task force, will he take particular note of the problems of the east Kent coalfield and the closed pits of east Kent, which were closed by the Conservative Government without apology or compensation? Will he take note of the isolation of the east Kent coalfield and of the fact that, in the past, the area missed out on RECHAR and on the Conservative Government's measures of support?
    Mr. Griffiths: I have visited my hon. Friend's constituency more than once and I know of his concern, which he continues to press on behalf of his constituents. In the light of what he has said, it is important to ensure that there is an integrated approach to the matter by Government Departments, if we are to be as helpful as possible to industries that have suffered, such as those in his constituency.

    Coal Industry
    Mr. James Gray: What assessment she has made of the implications of her energy policy for employment in the coal industry over the next three years. [49378]
    The Minister for Science, Energy and Industry (Mr. John Battle): Purchasing and sourcing coal are commercial decisions for the coal-fired generators. Obviously, it is up to the coal industry itself to respond

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    to market opportunities. Our task as a Government is to ensure a level playing field and fair market conditions for competition in coal. That is exactly what we are now delivering.
    Mr. Gray: I am grateful to the Minister for that answer, but does he agree that one of the greatest threats facing the coal mining industry comes from cheap imports of coal? Will he tell us what he has done to speak to the German and the Spanish Governments in particular to stop their unfair subsidies to their coal mining industries?
    Mr. Battle: Yes. We have supported the claims of companies that have protested about unfair imports, whether from Germany or elsewhere, through the European Commission. That is rather more than the previous Administration did. The hon. Gentleman talks about threats to the coal industry; I think that the previous Government was the greatest threat to the coal industry.
    Mr. Dennis Skinner: Is my hon. Friend aware that one of the reasons for his having to deal with the remnants of the coal industry—a maximum of 24 deep-mined pits—is what happened during those past 18 years, especially since 1992, when the previous Government, for the first time ever, actually closed pits themselves? Is my hon. Friend aware that, as a result of the closures made by the previous Secretary of State—who now sits somewhere on the Back Benches, when he turns up; he must be on some sort of productivity drive—there are still pit villages with more than 30 per cent. unemployment? The only way in which we can deal with that problem is to ensure that we keep those 20-odd pits working. We must also ensure that, in the process, we do not stuff the pockets of Mr. Richard Budge, who had his pockets filled by the previous Tory Government, when they handed over the remnants of the coal industry.
    Mr. Battle: We have no intention of stuffing anybody's pockets. We inherited a deeply flawed market for power generation. We have tackled that flawed structure and proposed a programme to reform it, which is out for consultation. That reform will ensure that there is a genuinely fair market for coal. To be fair to the coalfield communities, they asked us not for favours, but for fairness. We are delivering that fairness and it will ensure that there is a place for coal in the market. Where communities have suffered as a result of policies in the past, our actions such as those in respect of the task force on regeneration, to which my hon. Friend the Minister for Competition and Consumer Affairs referred, should make some practical, positive contribution.
    Mr. Tim Boswell: We have some sympathy with the Minister and the Department for having the coal deal fixed for them by the Paymaster General. Now that the Minister has had a month to reflect on the deal, will he tell the House whether the proposals in that consultation document will affect the mining of one additional tonne of coal? If so, what will be the implications for the Government's Kyoto and domestic emissions targets?
    Mr. Battle: One week, Opposition Members are in favour of public spending; the next week, they are against it. One week, they are against the coal industry; the next
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    week, they are in favour of it. We inherited from the hon. Gentleman's Government, who privatised the coal industry and the whole of the energy sector, a deeply flawed market which was not working.
    What have this Government done? We have undertaken a review of energy sources for power generation to ensure that we shall have secure supplies in the future—which is paramount—rather than managing supplies day by day. We have asked the Director General of Electricity Supply to examine the energy-buying market for power stations. We have found that the market was rigged against coal by the previous Administration. We have also introduced a review of utility regulation because the framework that we inherited for consumer regulation was deeply flawed and rickety. In all that work, we shall ensure that there is fair competition in energy policy, that there is room for coal in the market and that it is not unfairly squeezed out as the previous Administration intended.
    Mr. Kevin Barron: I thank my hon. Friend for all the work that he has done in his ministerial position over the past 12 months to achieve a fair market for coal. We have never asked for anything other than a level playing field. Last May, our Government inherited a market that was rigged against the coal industry as a result of political decisions taken by the previous Government. Those coal miners who are left are thanking God that we have a Government who want to restore fairness. My hon. Friend should take no notice of Opposition Members who talk about coal miners' jobs, because they got rid of thousands of jobs in my constituency in a short period.
    Mr. Battle: I am grateful to my hon. Friend and other hon. Friends who made representations on this matter. The new energy markets are incredibly complex. We accept that, but we have calmly and quietly injected a dose of common sense into the debate. It is important that we consult, not the Conservative party, but industry and people working in the sector so that their views are considered. We can then make proposals for long-term sustainability to ensure that we shall have diverse, secure supplies at competitive prices well into the next century.

    Information Technology
    Dr. Vincent Cable: What steps the Government are taking to ensure that there is effective competition in the market for directories for information technology. [49379]
    The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): I believe that there are no comprehensive directories available for electronic mail and internet website addresses. They are typically obtained by means of special search engines which can be easily accessed on-line. They are numerous and independent of companies that provide the most popular web browser software packages. The market for information technology directories is emerging and barriers to entry are low, and at present we are not aware of any evidence of anti-competitive behaviour.
    Dr. Cable: Will the Minister acknowledge that there is a potential threat to the public interest from private

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    monopolies being established in information technology, as we have already seen from the software standards of Mr. Gates's companies and the decoding of satellite signals by Mr. Murdoch's companies? Will she further acknowledge that the company that first develops an effective directory system will effectively have control over access to the whole e-mail commerce system? Will she reassure the House that the Department has the capacity to anticipate and react quickly to threats to the public interest and competition in the information sector?
    Mrs. Roche: May I assure the hon. Gentleman that the Government treat competition issues in this area very seriously? He will know that, under existing United Kingdom competition law, the Director General of Fair Trading is responsible for investigating claims of anti-competitive behaviour. If the hon. Gentleman has any evidence in that regard, he should notify the director general. These are clearly the industries of the future, and we want to see more and more entrants because that must be good for consumers and for business.

    Cycle Industry
    Mr. Alan Simpson: What assessment she has made of the barriers to fair competition facing the UK cycle industry in the domestic market. [49380]
    The Minister for Science, Energy and Industry (Mr. John Battle): My Department makes every effort to ensure that fair and competitive markets are maintained for all sectors of industry in the United Kingdom, including the bicycle industry, which my hon. Friend champions.
    Mr. Simpson: I know that my hon. Friend is aware that the Raleigh Cycle Company is located in my constituency and provides some 90 per cent. of United Kingdom bicycles. Is he aware of the legacy of unfairness left to this Government as a result of the Tories' treatment of the United Kingdom cycle industry? First, they refused to tackle the abuse of the quota system, which allowed foreign competitors to dump bicycles from south-east Asia on the United Kingdom market. They refused to take action equivalent to that initiated by the French Government to end that practice. Secondly, the previous Government refused to tackle the unfairness in the tax system, which requires United Kingdom manufacturers to pay tax on imported gearing systems while competitors are not required to do so.
    Madam Speaker: Order. What is the hon. Gentleman's question to the Minister?
    Mr. Simpson: I am asking whether the Minister is willing to re-examine the legacy of unfairness in the tax and subsidy systems, which saw the Tories subsidising competitors for the provision of screwdriver assembly sites for bikes while disfavouring United Kingdom manufacturers.
    Mr. Battle: Raleigh is a world-renowned company, and we want it to remain so. The United Kingdom bicycle industry has been under pressure from far eastern imports. As a result of complaints and investigation, action was
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    taken recently against bicycle imports from China, Thailand, Indonesia and Malaysia and duties have been imposed. I understand that the European Commission is investigating the dumping of bicycles by Taiwan. That issue was discussed at a member states meeting in an advisory committee in July. Once it is proved that there is a clear case of substantial damage, measures will be taken. We shall continue to oppose unfair trading practices in an effort to ensure that Raleigh has a successful future.
    Mr. Edward Garnier: The Minister anticipated my question by referring to cheap far eastern bicycle imports. What instructions have the President of the Board of Trade and her team and Foreign Office officials given to our commercial attachés in the People's Republic of China and other far eastern countries about keeping a close look-out for the dumping of cheap far eastern bicycle imports, which skews the market for home-made bicycles in this country?
    Mr. Battle: Commercial attachés are under instruction to keep a "close look-out", as the hon. and learned Gentleman puts it. In order to prove a clear case of substantial damage and dumping, we must do our homework. We shall look out for unfair trading practices to ensure that our industry is not damaged unfairly. I cannot say more than that.

    Consumer Protection
    Fiona Mactaggart: What measures she has taken to enhance protection for consumers; and if she will make a statement. [49381]
    The Minister for Competition and Consumer Affairs (Mr. Nigel Griffiths): My right hon. Friend the President of the Board of Trade and I have taken a number of measures to put consumer interests and consumer protection at the heart of Government, from banning dangerous laser pens to tackling time-share touts and protecting British loaf weights. Among other things, we have targeted rogue directors, introduced a Competition Bill, moved to allow consumers' organisations to take representative actions in our courts and improved protection for low-income consumers seeking credit.
    Fiona Mactaggart: I know that my constituents welcome this active approach to consumer protection, especially the swift action that the Minister took last autumn to tackle unsafe fireworks, which led to the largest fall in firework injuries in 23 years. However, will he share my disappointment and anger at those Opposition Members who, by talking out the Fireworks Bill, stopped him building on that track record, and thus put their petty politics before public safety?
    Mr. Griffiths: I certainly share, as do firework safety campaigners and the Confederation of British Industry, my hon. Friend's anger at the activities of the former Conservative consumer spokesman, the hon. Member for Gainsborough (Mr. Leigh), and his Conservative friends in talking out that measure. When the hon. Gentleman was a Minister, the number of firework injuries rose by

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    46 per cent. and 335 more people ended up in hospital. Fortunately, the Government are able to use secondary legislation to outlaw bangers this year.
    Mr. Richard Allan: The Minister will be aware of the problems faced by consumers who purchase home-working packs with the promise of making large amounts of money and then find themselves ripped off as the income does not materialise. Does the Minister have any plans to tackle the problems faced by such people, including my constituents in Sheffield, who have found themselves ripped off by unscrupulous home work offerers?
    Mr. Griffiths: The Minister of State, my hon. Friend the Member for Makerfield (Mr. McCartney), and I have launched a national campaign on home working. We share the condemnation of the abuse of home workers and we believe that the national campaign will offer real protection by ensuring that people are steered towards projects of proven worth, not projects such as the hon. Gentleman refers to.
    Mr. Andrew Reed: I know that the Minister is aware of the difficulty that many of my constituents have had resulting from international lottery draws, whereby individuals are targeted from abroad for lottery winnings. Those are, of course, largely fraudulent acts. I believe that the Advertising Standards Agency has no rights in that regard. Will the Minister turn his attention to such acts originating from Australia, the far east and eastern Europe, to protect consumers in my constituency and throughout the country?
    Mr. Griffiths: I am glad to have the opportunity to warn every member of the British public against falling for these unfortunate scams. We are seeking international co-operation on advertising, and in this case the abuse of advertising, to ensure that such scam schemes are prohibited from entering Britain and are put out of business altogether.
    Mr. Christopher Chope: Why is the Minister so sickeningly self-satisfied? May I draw his attention to two examples of failure—first, his refusal to respond to the request of the Consumers Association to add consumer issues to the remit of Action 2000 and, secondly, his absolutely supine attitude in Europe? Not long ago, he boasted at a conference that he had contributed strongly in the Consumer Council towards the aim of creating a people's Europe. How is that rhetoric consistent with today's European Court of Justice ruling preventing ordinary people from having access to the designer clothes so beloved by Labour MPs?
    Mr. Griffiths: I suppose that the hon. Gentleman is entitled to two questions because both were so poor.
    To tackle the first question, given that the present Government have spent 70 times the amount that the previous Government spent on the Action 2000 campaign and on fighting the millennium bug, it is ridiculous that the hon. Gentleman should criticise us on that.
    As for today's decision of the European Court of Justice, one of my first acts as a Minister was to invite some of Britain's leading retailers, some of our most successful companies—people who had never been
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    invited under the previous Administration—to come to the Department of Trade and Industry to discuss the very issues that have come up today. We deplore any action that prevents British retailers from providing British consumers with foreign-manufactured goods at reasonable prices. Although it is important that trademarks are protected, a balance must be struck between the right of those who hold trademarks and the right of consumers. It is unfair that British consumers should have to pay inflated prices, and we have taken action to get the European Commission to investigate pricing across all the EU states, because we believe that, in too many areas, British consumers are paying far too much.
    Mr. Richard Burden: Does my hon. Friend agree that the criticisms of Opposition Front Benchers would have rather more weight if they had not sat on their hands and allowed their Back Benchers to derail the Fireworks Bill? The CBI said that the derailing of that Bill was likely to lead directly to an increase in firework-related injuries. Will my hon. Friend ask Opposition Front Benchers whether they will now co-operate in ensuring that the Bill comes back to the House and is given a "fair wind", to use their words, so that the number of firework-related injuries continues to go down, rather than going up again as a result of their irresponsible actions?
    Mr. Griffiths: This should not be a party political matter. I invite Opposition Members to reflect on it and to support any such Bill. It is noticeable that there were more Opposition Members in the House to block that Bill than the 13 or 14 Back Benchers present this afternoon to discuss that issue and other important matters, such as British manufacturing. They simply do not care.

    Defence Industry
    Mr. Michael Colvin: What assessment she has made of the impact of the strategic defence review on Britain's defence industries. [49382]
    The Minister for Science, Energy and Industry (Mr. John Battle): Our Department was closely involved with the strategic defence review so that we were able to analyse carefully the implications for the UK defence industry of the emerging proposals. Industry was also closely involved, which led to widespread agreement on how to modernise our defence procurement processes and the White Paper, which has been warmly welcomed.
    Mr. Colvin: I thank the Minister for that reply. Did he see in the SDR reference to the Defence Evaluation and Research Agency? Has he had time yet to read the report on the agency by the Defence Select Committee, which concludes that, in view of the sensitive work that it undertakes and the importance of preserving its impartiality and critical mass, it is a part of the public sector that should not be privatised?
    Mr. Battle: I thank the hon. Gentleman for those comments. I have read the Defence Select Committee report and the Government have announced proposals, as was set out in our manifesto before the election, to set up a defence diversification agency within DERA to foster, in partnership with industry, a greater two-way

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    technology transfer between the military and civil sectors. Decisions on the way ahead will be announced when the results of the consultation process have been assessed. I understand that industry is involved in that consultation, and I am sure that the hon. Gentleman's comments and those of the Select Committee will have been noted.
    Mr. Denis MacShane: Is the Minister aware how much the strategic defence review has been welcomed by those in the steel industry, because of course steel is the raw material to be used in the new ships and aeroplanes discussed in the review? Has my hon. Friend seen early-day motion 1563 on the Order Paper today, in my name and the names of about three dozen other hon. Members, which draws attention to the productivity record of the British steel industry? Does my hon. Friend agree that, as the steel industry prepares for our new defence procurement programme, it is getting little help from the Conservatives, who did nothing for that industry while they were in power and do everything to talk down the steel industry and manufacturing now that they are in opposition?
    Mr. Battle: My hon. Friend champions the steel industry at every opportunity, and he is welcome to do so. He represents his constituents and the industry well in doing that. The Defence Industries Council welcomes the partnership that was offered by the strategic defence review. It stated:
    "The defence industry welcomes the Government's firm commitment to a partnership with UK industry to acquire equipment and services for the armed services more cost effectively."
    More important, there will be benefits for companies throughout the country—not only those that supply the gear, but those in the supply chains that back up that equipment.
    Rev. Martin Smyth: I welcome the modernisation of the defence procurement plans. Does the Minister agree that the Raytheon project, which is a combined project involving large parts of British industry, is important, and will he support it as it progresses?
    Mr. Battle: Contracts are out for procurement and I obviously cannot comment on them. The defence review
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    is good news for industry as a whole and has been welcomed by industry. In combination with the work of DERA and the defence diversification agency, it will contribute to manufacturing success in the UK in the future.

    Arms Sales
    Mr. David Heath: What considerations she took into account in formulating her proposals to amend procedures on arms export licences. [49383]
    Mrs. Roche: The White Paper on strategic export controls was published on 1 July. In drawing up the proposals contained in it, the main consideration has been to develop the right legislative and procedural framework for effective, clear and accountable strategic export controls. The Government have taken account of the recommendations contained in the Scott report and the views expressed by the 38 respondents to the consultation document published by the previous Government. Views on the proposals are invited by 30 September.
    Mr. Heath: Does the Minister recognise that there is deep concern about the confusion of having six Departments of State involved in arms control, that we have succeeded in selling arms to regimes that are deeply unpleasant and sometimes deeply insolvent, and that there is a lack of transparency and clarity which means that the outside world cannot tell whether a licence is issued for an armoured car or a packet of washers? Is it not time to review the arms control regime completely and produce something that is open to proper scrutiny, and particularly scrutiny by Members of this place?
    Mrs. Roche: I should be grateful if the hon. Gentleman would take the time to read the White Paper in detail. It responds to the criticisms made in the Scott report, which the Government are committed to dealing with. That is why my right hon. Friend the Foreign Secretary published the criteria that he did a year ago and why the Government are committed to much more transparency, which is why we are committed to publishing an annual report on this vital work.

Health Expenditure
3.31 pm
The Secretary of State for Health (Mr. Frank Dobson): With permission, Madam Speaker, I wish to make a statement. The Government's top priorities are to renew and modernise our country's health and education systems. On Tuesday, my right hon. Friend the Chancellor of the Exchequer was able to announce that, as a result of our comprehensive spending review, an extra £21 billion will be invested in the national health service in the United Kingdom over the next three years—approaching £18 billion in England. This is an average annual real-terms increase of 4.7 per cent. over the three years—starting off with 5.7 per cent. next year. It will kick start the Government's 10-year programme of modernisation for our national health service.
This is the biggest cash increase ever announced for the NHS. The step change in funding will be matched by the biggest programme of renewal and modernisation since the NHS was founded—investment for reform. £21 billion is a large sum of money. It was welcomed by the representatives of all the people working in the NHS and described by the National Health Service Federation as beyond their wildest dreams. However, when set against the rundown state of the NHS which we inherited, when set against the improvements which the staff and the public are seeking, and when set against the scale of our ambitions for the service, even £21 billion is a settlement which will have to be tightly managed and properly targeted.
Not all the problems that we inherited in the NHS will be solved over the next three years. They are too deeply entrenched for that. Not all the improvements that we seek can be delivered in that time. But what both staff and the public will see is demonstrable year-on-year improvements in all parts of the health and social care systems.
Staff and patients alike want to see a modern and dependable service. A modern health service requires high and stable levels of funding. In all its long history, the NHS has never before had a three-year settlement. The NHS has never been able to plan beyond the short term. Modern organisations have to plan for the longer term. The NHS can now do that for the very first time
A modern health service requires enough staff, well trained and highly motivated. With the extra money that we are making available, the NHS will be able to take on more doctors and more nurses—up to 7,000 more doctors and 15,000 more nurses over the next three years. Earmarked funds will be provided to allow staff to update their skills to keep up with rapidly changing technology. I can tell the House today that, over the next three years, there will be an extra 6,000 nurse training places, and I will shortly be announcing a large increase in the number of places in medical schools. With those extra staff, NHS hospitals will treat an extra 3 million patients.
Expanding staff numbers, in particular to deal with some of the shortages that we know exist, depends on pay rises being fair and affordable: fair, to allow us to recruit and retain motivated staff; affordable, to allow us to make the modernisations that patients demand. Fair pay and modernisation must go hand in hand, and that is why, for the first time, we are asking the pay review bodies formally to take into account the service improvements
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that we want to achieve, the resources available to the NHS and the Government's inflation target, as well as recruitment and retention.
The three-year settlement allows the NHS to take a longer-term view. Now that funds are guaranteed for three years, there should, for example, be no more systematic use of short-term contracts of employment for nurses and other staff. That will provide security that they do not have at present.
A modern health service requires modern buildings and modern equipment. Over recent years, the NHS has been starved of capital. We are putting that right. That is why, as part of the modernisation programme, £8 billion will be invested in new hospitals, clinics and GP premises. Thirty new hospitals are already planned, and work is already under way at eight: Dartford and Gravesham, Norfolk and Norwich, Carlisle, High Wycombe, Durham, Sheffield, Amersham and Greenwich. There will be more to come, and new and better buildings will not be confined to the places that are getting new hospitals. We will be increasing public sector capital by 50 per cent., and hospitals in every part of the country will benefit. Hundreds of wards, accident and emergency departments and operating theatres will be refurbished, and, every year, outdated equipment will be replaced with the newest and best that medical science can offer.
We are investing in primary care. Over the next three years, more than 1,000 GP surgeries will be improved or rebuilt. A modern health service requires earmarked cash to make change happen. I can announce today that the £18 billion settlement for England includes a £5 billion-plus modernisation fund. That money will be strictly targeted on helping NHS staff to transform the NHS into the kind of service that they and we want to see—a service that is fast and convenient, has uniformly high standards and is moulded to the needs of patients.
The modernisation fund will fund an information technology revolution in the NHS. It will go towards making sure that we meet the reductions in waiting lists to which we are committed. We will also use money from the modernisation fund to make a start this coming year on introducing booked admissions, so that when patients are told by their GPs that they need to attend an out-patient department, they will be able, there and then, to book an appointment that suits them. Similarly, if people have to have surgery as a day patient or an in-patient, they will be able to book an admission date that suits their needs, and their family and work requirements.
Besides contributing to the refurbishment of hospitals and the building of new GP premises, the fund will help to buy new equipment, support the promotion of good health, pay for better training of NHS staff and provide modern and effective mental health services. The modernisation fund will be allocated to finance well worked-out plans and proven mechanisms for improving services. It is investment for reform.
A modern health service requires modern ways of working. By getting rid of the wasteful and divisive competitive internal market, we are taking money out of the Tory-created bureaucracy and putting it into patient care. Primary care groups involving doctors, nurses and social services will replace the maze of commissioning and fundholding organisations. NHS trusts' managements will be amalgamated, and competition between hospitals is being ended; they are working together again, and they will continue to do so.

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The NHS is, proudly, already the most cost-effective health care system in the world, but there are still unacceptable variations in performance, and management effort will be targeted on hospitals where costs are above the national average. A new performance framework will help to measure progress. Our value-for-money improvements should release a further £1 billion for patient care. There will be a tough drive for genuine efficiency. That means more money for patients and staff, and better value for taxpayers.
A modern health service requires a new relationship with social services. We have made a start on breaking down the Berlin wall between the NHS and social services. To back that up, over the next three years, we are providing an extra £3 billion for social services so that they can match, complement and augment what the NHS is doing. That is an increase of 3.1 per cent. in real terms, year on year on year. For the first time, they will be able to produce joint, local, long-term plans with the national health service and then implement them.
For the first time, we will be setting tough efficiency targets for all social services authorities to help them deliver the goods for vulnerable people. It will mean better help for the elderly, and better and more help for carers. There will be new measures to allow tens of thousands of old people to live an independent life, where, at present, they end up trapped in nursing homes or hospitals. It will mean more help for people with mental health problems to match the extra NHS commitment to mental health.
Arrangements for looking after children in care have far too frequently been deplorable, with children being molested and with low levels of school attendance and educational attainment. Many of them have been turned out of care to fend for themselves when they are little more than children. We are determined to give them a new deal, and the extra social services money will provide the funds necessary to improve the quality of care received by children living away from home—and not before time.
All that effort and all that investment is intended to deal properly with people when they need treatment and care. But the Government are not satisfied with a health policy just for treating the sick. We want to stop people getting ill in the first place and stop people dying prematurely. We want to tackle the growing inequalities in health. That is a job for the whole Government, not just the Department of Health.
The comprehensive spending review settlement is not just a good settlement for our health service; it is a good settlement for our people's health. We have provided £540 million for the Sure Start children's fund, almost £4 billion to invest in decent housing and improved insulation, £3 billion for deprived communities and £1.7 billion for transport, particularly public transport. That is on top of our earlier commitment to the £3.5 billion new deal for jobs and our introduction of a national minimum wage. All that amounts to the biggest health crusade the country has seen since the NHS was born 50 years ago—a modern, Government-wide crusade.
The NHS was founded on the simple principle that care should be provided on the basis of need. That principle has served the NHS well for 50 years. While we were considering the comprehensive spending review we
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were urged by all sorts of people to abandon that principle. We were urged to do so by some Conservative Members, by the Social Market Foundation, by the Adam Smith Institute, by many of our newspapers and by various pointy-headed professors. They wanted us to charge people for going to the doctor. They wanted us to charge people for going to see their GP, for attending out-patient departments and for going into hospital. We have looked at all that very carefully. We have looked at all the pros and cons, and we have spent the best part of a year doing it. We utterly reject those ideas. We have rejected them because they would not work and they would harm the worst off. Charges would be expensive to collect and would glean little overall revenue. Most important, charges would deny treatment to those who need it most. I can announce today that there will be no new NHS charges in this Parliament.
We have not stopped there. From next April, the NHS will provide free eye tests for pensioners. That will be good for their purses and pockets, good for their sight, and good for their general health.
This is an historic financial settlement. It will enable the hard-working and dedicated staff of the national health service and social services to provide the treatment and care that people need, and to provide it to a higher standard than ever in every part of the country. It will modernise and renew the national health service. The extra money will be matched by enormous changes and improvements.
Over the past few weeks, we have been celebrating the 50th anniversary of the national health service. That was right and proper, but now we must do as the founders of the NHS did—we must look forward, find the resources, and make the changes that are necessary to relaunch the national health service so that it serves our country well for the next 50 years. Nothing less will do, and that is what the Government are doing.
Miss Ann Widdecombe: May I start by regretting that the Secretary of State for Health did not manage on this occasion to observe the usual courtesies and conventions and that I did not have sight of his statement until 3.17 pm? I am returning his discourtesy with a considerable courtesy of my own. Even at this moment, the questions that I am about to ask are being brought to him so that he will have them in front of him and I shall not have to ask him to remember all that I have asked. Therefore, he will be able to address himself to every question.
The Government figures on Tuesday claimed that £21 billion of extra money for our health service was being made available, of which some £18 billion was for England alone. Closer inspection of the make-up of those figures suggests an exercise in accountancy so creative that if it were in any other context one would be sorely tempted to call in the Yard. I have some brief questions for the Secretary of State, and I would appreciate his answering fully and frankly. The questions are in front of him now.
First, can the right hon. Gentleman confirm that the difference in overall UK health spending between 1998–99 and 2002 is £10.5 billion, of which £8.8 billion is for England? Does he accept that independent figures that have been produced by the House of Commons Library show that the extra money from the

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comprehensive spending review over the Conservative real-growth trend of 3.1 per cent. is just over £2 billion and that, although it is welcome, it is a long way from Tuesday's hype and hyperbole? Does he accept that there is an enormous difference between what can be purchased for £2 billion extra and what can be purchased for £18 billion extra?
I am happy to approach the figures either on the double-counting, triple-counting basis of the right hon. Gentleman's £21 billion or on the Opposition's straight increase basis, provided that the same method is used to calculate both his extra spending and our extra spending. Will the right hon. Gentleman confirm that, no matter which way he does it—on his basis or on mine—it results in a £2 billion difference for England, not an £18 billion difference? I shall now move to the main body of his statement. [Interruption.]
If the Secretary of State would look me in the eyes, we might believe that he was as happy as he is trying to suggest. Will he confirm that the independence has now been taken out of the independent pay review body and that its recommendations are now subverted to Treasury consideration? Is not that a betrayal of the very principle of such review bodies? What is the right hon. Gentleman's response to the comment by the British Medical Association that it objects to any unilateral attempt to undermine the even-handedness of the pay review body? Will he undertake to honour the recommendations of any such body in future?
Will the Secretary of State confirm that the announcement is not of the largest real-terms three-year increase in the history of our health service, as the Chancellor so glibly asserted on Tuesday? All he has to do is to read the editorial in The Independent today. If he does, he will find that even that paper agrees. It is below the 5.6 per cent. that we spent between 1990 and 1993. I ask again: will the right hon. Gentleman confirm that this increase is below the 5.6 per cent. increase that we spent in the first three years of this decade? Does he accept Peter Riddell's comment that the Chancellor's public spending statements are like the words of Lewis Carroll: nothing is quite as it seems and the cat's smile vanishes on closer inspection?
Certain specific items of expenditure will have to be taken from the extra money that the right hon. Gentleman has announced. Will he tell me what each one will cost? How much has he made available or set aside for the millennium bug—is he aware that his own Audit Commission said that the cost could be as high as £850 million? How much is he setting aside for the additional costs of the minimum wage to the health service? How much is he keeping for the abolition of compulsory competitive tendering? How much is he allowing for the abolition of tax relief on private medical insurance for the over-60s?
Does the right hon. Gentleman agree that, by the time that he has set against all his figures the Government's inflation targets—I will be kind and assume that they will be realised—the rate of increases that we managed over our term of office, the costs of the minimum wage, the costs of the millennium bug, the costs of abolishing private medical insurance and compulsory competitive tendering, and the costs of administering each primary care group, his extra £2 billion, welcome though it is,
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is worth little more than a few hundred million? Finally, is he aware—Will he look at me at this point? [Interruption.] He will not look at me, and I suspect that he will not face the employees of the NHS, among whom initial high hopes on Tuesday are now turning to disbelieving anger.
Mr. Dobson: At Department of Health Question Time as recently as last week, the right hon. Lady said that an increase of £9 billion would be the minimum that would be required to meet the Tory level of spending for the NHS. We have increased the sum by £18 billion, double what she asked for—and, for that matter, double what the Liberal Democrats were asking for. If they do not understand the figures, let me give some simple arithmetic, rounded for purposes of argument. Next year, there will be an extra £3 billion. The year after that, there will be an extra £6 billion. The year after that, there will be an extra £9 billion. Even in the Tory arithmetic book, 3 plus 6 plus 9 amounts to 18.
I know that the right hon. Lady claims that the £21 billion is £2.1 billion, and I know that she is not yet old enough for free eye tests, but the figures show that it is £21 billion; there is not a decimal point between the 2 and the 1.
As everyone knows, the pay review bodies have always considered all the other aspects that we have referred to, but those aspects have never been on the face of their terms of reference. All we have done is make it explicit—we think that that is right and proper—rather than trying to do it furtively, as previous Governments have done.
It is bare-faced cheek of the highest order for any Tory to ask what provision we are making for the problems of the millennium bug. When we got in, the Tories had made no provision, although, even for a collection of witless loons like them, the fact that the year 2000 was only three years ahead must have been fairly obvious.
On the national minimum wage, I can confirm that we have made provision for £21 million towards meeting its cost. Even £21 million is too much, and it is a national disgrace that, after 18 years of Tory rule, people working in the health service are getting paid less than the minimum wage.
The costs of primary care groups will cover every general practitioner in the country, and their running costs will equal those of the fundholders who used to represent half the GPs; so we have doubled the efficiency of the system in one fell swoop.
To return to my first point, whatever the right hon. Member for Maidstone and The Weald (Miss Widdecombe) may do, whatever questions she may have asked the House of Commons Library to answer—questions and, therefore, answers for which the Library staff are not responsible—and whatever answers she may have been given, people representing those who work in the health service have told me personally or have said publicly that the settlement is beyond their wildest dreams. It is a huge sum of money, which will have to be spent carefully, so that we get full value for money.
The right hon. Lady normally prides herself, or so she claims, on being straightforward. Last week, she said that if we found £9 billion she would thank us for it, but she cannot even thank us for £18 billion.
Mr. Simon Hughes: The Secretary of State knows that cash for

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health is welcome. The Liberal Democrats and others have been urging the Government to take that step since before they were elected and now they have acceded to our wishes, so we are grateful. Without getting into a debate about the billions, can the right hon. Gentleman confirm that 4.7 per cent. for the next three years, which is his figure, means 3.7 per cent. over the five years of this Parliament? Given that everyone accepted that 3 per cent. was needed in the national health service to keep up with inflation, although the additional money is additional and welcome spending money, it is hardly the lottery jackpot.
On staff, can the Secretary of State tell us whether his announcement and the figures today mean that the 8,000 nursing and 2,500 doctor vacancies in the health service will all be filled by the end of the three years? How many additional staff will there be in the service in three years' time, over and above those who are there today? When the pay review body recommends increases in future, with its tighter remit, will those always be implemented immediately and in full rather than staged, which is what the Secretary of State and his colleagues have done in the past year?
Really, it should not be a cause for celebration that a Labour Government tell the House that there will be no more charges. Surely the Secretary of State must answer why a policy that prescription charges will increase for the next three years, as they have done this year, is consistent—that is the Government's policy—when two years ago the Labour party said that increasing such charges was a tax on the sick.
On waiting lists and waiting times—the right hon. Gentleman's own target—at the general election, £100 million was to produce 100,000 off waiting lists as an early pledge. Now that we have £21 billion, will more people come off waiting lists or will it still be only one in 13 by the end of this Parliament? When will everyone know that six months will be the maximum time that they have to wait? If we are trying to keep pressure off the health service, why continue to cap social services budgets when such services can often provide cheaper care?
Does the money that the Secretary of State announced today mean that a hospital such as the Freeman cancer centre in Newcastle can know that, at the end of the three years, it will have curtains round the beds, a shower as well as a 30-year-old bath and separate toilets for men and women?
In my constituency, will the mentally ill know that support services will be available at the weekends and at night, as well as during the day? Will we have a 24-hour-a-day, seven-days-a-week health service that is equal and available to all, which is what the people of Britain expect a Government to provide?
Mr. Dobson: For a start, it is worth saying that the national health service is a 24-hour-a-day service. Countless numbers of our fellow citizens deliver that service 24 hours a day, and we should thank them for it, rather than suggest that they are not there some of the time. I say to the representative of the Liberal party what I said to the representative of the Tory party. As recently as last week, the Liberals asked us to guarantee to deliver £9 billion extra. When we deliver £18 billion extra, they have the gall to start whingeing and moaning as usual—which is, I suppose, what qualifies them as Liberals.
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Yes, we want to recruit up to 7,000 extra doctors and 15,000 extra nurses, but we obviously cannot guarantee that every shortage in every part of the country will be wiped out over the three years, as sudden acute problems arise in some places and not in others. All that I believe is that we shall be able to go a long way towards resolving those problems, and we shall recruit additional staff so that hard-working doctors, nurses, midwives and other staff are not run off their feet. I really hope that we shall be able to achieve a pay settlement that does not involve staging. That is all that I can say at the moment, but I hope that we can create a system that is fair to the staff and affordable to the country.
The hon. Gentleman referred to the social services budget. He must have prepared his question before I spoke, as I explained that there would be a £3 billion increase in the amount available to social services, so that they can match the extra money and effort from the NHS to provide an adequate mental health service for people in his area and in every other area.
We are determined to bring down waiting lists. They are coming down, and will continue to come down. Waiting times will also come down; by reducing waiting lists on the scale that we are, we shall ensure that waiting times come down, too.
We hear yet again the Liberal obsession with the extra 1p on income tax, which is spent on practically everything that one can think of. The Liberals must be the only party in history whose slogan is, "I want to spend a penny."
Mr. David Hinchliffe: May I be the first to welcome warmly my right hon. Friend's announcement, which I am sure the population as a whole will recognise as the best possible way in which to celebrate 50 years of the national health service? I have two practical questions. First, does he share my experience that a common thread of the representations and complaints that we receive on the NHS relates to immense pressures at ward level on hard-pressed doctors and nurses? What, in practical terms, will the global amount of money mean at ward level in constituencies such as mine?
Secondly, may I warmly welcome the announcement on personal social services, which I believe has been a forgotten area of the caring professions for many years? Will my right hon. Friend give practical examples of the way in which the money will impact on personal social services and, indirectly, on the NHS locally?
Mr. Dobson: I thank my hon. and hard-working Friend for welcoming my statement and that of my right hon. Friend the Chancellor on Tuesday. I agree that, in many ways, the worst aspect of the national health service—it is felt by many patients and people who visit them in hospital—is the fact that the staff are overstretched and run off their feet, and we want to reduce the impact of that by spending money on modernising wards.
That will help in some cases, because the layout of some wards—and the fact that they are clapped-out, ruinous and awful—means that the work is harder than it ought to be. We intend to recruit more nurses and doctors, which should relieve the pressure. We intend to try to extend the role of nurses, so that they can make a bigger professional contribution, which will also bring some relief.

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We hope that NHS Direct, the nurse-led 24-hour helpline, will employ nurses who have had to leave nursing, for instance because of a back injury acquired at work, to provide advice over the telephone. That will be a good way of making use of their nursing skills, and will reduce pressure.
We must try to stop people having to come into hospital when they do not want to and it is unnecessary. People in the health service, with our encouragement, have made substantial steps in that direction, especially last winter. I give again the example of Halton general hospital in Cheshire, where, when old folks who were admitted with a bad chest were discharged, a respiratory nurse team picked them up and looked after them at home. That worked so successfully that the GPs in the area started referring old folks who were having a bad chest at home to the respiratory team, so that they could be treated at home and did not have to go into hospital at all. A hospital is a dangerous place, and is the last place where frail old people should be, if it can possibly be avoided.
All those changes are intended to relieve the pressure on the hard-working people in the health service. It cannot be done overnight, but we have to recognise that those people are the health service.
Mrs. Marion Roe: I welcome any additional funding for the NHS, although it is not as much in real terms as the Secretary of State would have us believe, but how does he intend to deal with the serious GP shortages that currently exist, with approximately 1,000 vacancies, especially as evidence published in the past two weeks shows that GP list sizes, so effectively brought down by the previous Conservative Government, are rising again?
Mr. Dobson: It is a bit difficult for a Government who have been in power for only 14 months to take responsibility for the supply of doctors, when a doctor only now leaving medical school and beginning to do something useful probably started about 10 years ago—or did not start, which is one of our problems. We are dealing with the shortages, and, for the first time in ages, there has been a rise in the number of doctors becoming GP trainees, which is a step in the right direction.
Using the facilities made available by the previous Government, we are encouraging the appointment of salaried GPs in some of the areas where the shortages are worst, and we intend to continue, with other schemes that we are working out with the profession, to try to relieve the problem, but if we are to succeed, and to tackle health inequalities at the same time, our principal target must be to get better GP practice in those inner-city and other rundown areas where people are currently not getting a fair share of the resources.
Mr. Gordon Prentice: I warmly welcome the statement and the extra 7,000 doctors and 15,000 nurses, but north-east Lancashire has been described as a dental desert, and, only this week, East Lancashire health authority is advertising in Scandinavia for additional dentists. Does my right hon. Friend have indicative figures for the number of additional dentists that we could expect to have in post at the end of this three-year period?
Mr. Dobson: The straightforward answer is no, I do not have those figures at the minute, but I can tell my
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hon. Friend that, as a result of the initiatives that we have taken in our short period in office, an extra 250,000 people have been able to become NHS dentistry patients.
Mr. Nicholas Winterton: May I tell the Secretary of State that, only yesterday, as a result of an unfortunately heavy fall in Trafalgar square, I experienced the expertise and care of not only the London ambulance service, but the junior doctors, nurses and staff at St. Thomas's hospital? It was brilliant. I have no complaint. It was first class, but they were overstretched and under stress. Does the Secretary of State's announcement, particularly in respect of additional doctors and nurses, mean that that sort of stress and overstretch in an accident and emergency department at a hospital such as St. Thomas's will improve and that those who genuinely need more money for the wonderful work they do, particularly junior doctors and nurses, will get what they deserve—bigger remuneration?
Mr. Dobson: The hon. Gentleman rightly pays tribute to the people who looked after him, and I am sure that he is right in his observation that they are overstretched and under stress. With the proposals that I have outlined today I want to reduce that stress. Obviously, it will take a considerable time to bring that about in every part of the country, but that is what we want to do. I also want to see people who work in the national health service getting fair pay for the huge contribution that they make to the welfare of our people. I hope that we can manage that. We shall work hard to achieve, it. Certainly, the extra money will assist us in that.
Audrey Wise: May I congratulate my right hon. Friend on the success of his efforts to improve the national health service? In particular, may I welcome his intention to improve services for children? I was pleased that he mentioned children being looked after by local authorities. Although he will not yet have had time to study the report on this subject issued today by the Select Committee on Health, will he ensure that he and his Department give it careful attention, because our recommendations will undoubtedly help him achieve his stated objectives? Finally, will he make sure that he never forgets the need to improve choice and continuity of carer for women in pregnancy and childbirth?
Mr. Dobson: Dealing with my hon. Friend's questions in reverse order, I shall do my very best not to forget what she has said about choice and continuity of carer for women in pregnancy and childbirth. In many parts of the country children's services have been a national disgrace. Children who, in effect, have had the state as their parent—
Mr. Philip Hammond: Ealing.
Mr. Dobson: It is all very well shouting out a place name because it happens to be Labour controlled at the moment, but there are plenty of examples from all round the country. As all hon. Members know, if they are not just making stupid party-political points, there has been a group of organised child molesters getting appointments in all sorts of children's homes, some of which are run by

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charities, or Labour authorities, Tory authorities and Liberal authorities. It is a disgrace that it has not been dealt with. We are trying to deal with it now.
Before I was interrupted, I was pointing out that if the children who, in effect, have had the state as their parent had been looked after by ordinary parents, those parents would have been prosecuted and gaoled for neglect. That shows how some children have been treated in children's homes; it must end. The Utting report made a large number of recommendations. I have been chairing a working group which has been going through them. We shall find the money to implement virtually all of them, and I hope to make announcements on that shortly. We shall certainly bear in mind the additional scrutiny of the Select Committee on Health.
It is intolerable that in many parts of the country, on reaching the age of 16 some children are just turned out by the local authority to fend for themselves. No hon. Members would have wanted that to happen to them or to their children or, possibly, in view of the age of some of us, grandchildren. That would be an intolerable concept. But that has been going on in our name as recently as last month, and it cannot go on any longer.
Mr. John Wilkinson: It would be churlish not to congratulate the Secretary of State on securing from the Chancellor a financial settlement which goes at least a little of the way to matching his grandiloquent rhetoric, but may I bring him from the euphoria of the general to the specifics, because it is on the specifics that he will be judged by our electors? Will he ensure, as evidence of his good faith, that the Mount Vernon hospital at Northwood, the largest cancer hospital on a single site in the south of England, will not see its supporting burns, plastics and oral surgery, general medicine and general surgery removed, because, if they are, that cancer centre, with its outstanding research facilities, will go into a decline from which it may not be possible to recover?
Mr. Dobson: I thank the hon. Gentleman for his welcome for what I have said. Like most people, I respond rather better to encouragement than criticism. I shall bear in mind the points that he makes about the Mount Vernon hospital, because the last thing that we want to see is good and effective treatment and care being taken away from anywhere.
Ann Keen: As a nurse for more than 20 years, I warmly congratulate my right hon. Friend on his amazing achievement in giving back to the people our health service and the security that it entails. All the professions respect him so much because he always demonstrates such a wide understanding of their work. But, looking at nurse recruitment, particularly in my constituency of Brentford and Isleworth in west London, does he agree that the problems facing people who want to recruit or retain student nurses, which we must address seriously, include accommodation and the cost of accommodation? The previous Government sold off nurses' homes, and that was encouraged. We now need to revisit the question of accommodation for our student nurses.
Mr. Dobson: I thank my hon. Friend for her kind welcome. Nurse recruitment is a major issue. Pay is one
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consideration, and accommodation is another. This is one of those circumstances where it is not easy to turn back the clock. The previous Government having sold off so many nurses' homes, it takes quite a bit of time to find alternative accommodation, if that is the right way to deal with the problem.
Mr. Alan Duncan: If?
Mr. Dobson: In some areas it might be the right way, but in some areas it may not. The problem is that the previous Government pursued that policy in those areas where it might have been a sensible policy and in those areas where it was not. We are trying to address matters, such as accommodation, which either make nursing unattractive to someone who might be thinking of becoming a nurse or increasingly unattractive to people who are already nurses.
We are trying to establish more family-friendly employment policies so that nurses, whether men or women, with family responsibilities, can work the hours of the day, the days of the week, or, in some cases, because of school holidays, the weeks of the year that suit those responsibilities. Some hospitals manage to do that, and I do not understand why others cannot. They are, shall I say, being encouraged to follow the good examples.
We are also putting a great deal of effort into something else that is putting people off working in the health service: we are taking seriously assaults on and abuse of staff. We have taken steps within the health service to try to reduce that. My right hon. Friends the Lord Chancellor and the Home Secretary are also doing their bit through the judicial system and the police to ensure that if people commit offences, they are caught and prosecuted and, if they are successfully prosecuted, they get a rattling bad sentence. They should. It is quite wrong that the people working for us, trying to look after us, our friends and our neighbours, should be beaten up by anybody. There is no excuse for that, and we shall accept no excuse for it.
Miss Julie Kirkbride: The Secretary of State has made much of the Government's spending plans, and I want to encourage him rather than criticise him, by saying that I broadly go along with them. However, the people of Worcestershire have three general hospitals, but face the axing of one of them. Kidderminster general hospital, which serves my constituents and those of the hon. Member for Wyre Forest (Mr. Lock), is excellent and efficient, and it has won a chartermark, but its proposed closure is on the Secretary of State's desk. If his spending plans are accurate, can he promise my constituents and the people of Worcestershire that he will put a stop to that closure?
Mr. Dobson: I believe that we do not yet have the proposals on our desks, but I will use the excuse that they might be there, which means that it would be improper for me to make any promise one way or the other because it could be challenged in the courts. I shall carefully consider all the evidence. Unlike some of our predecessors, we are not supine when it comes to hospital closures, and we are not approving some of them.
Dr. Howard Stoate: May I tell my right hon. Friend that his statement will be warmly welcomed by general practitioners and primary care nurses

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throughout the country, and particularly in Dartford? How will the welcome modernisation fund be channelled into improving GP premises, some of which are sorely in need of modernisation?
Mr. Dobson: The funds will be channelled into areas where people say they are needed. We want to be positive, and to improve appalling GP premises in areas such as the constituency of my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore). We have set the test of whether we would go to a GP who had premises like some of those in that constituency. The answer is no, and we should not tolerate the long-term existence of places that we would not use ourselves.
Mr. Robert Walter: Health care is expensive, and costs are ever expanding as we live longer and technology advances. I read some research this morning that suggests that costs are growing at between two and two and a half times the rate of inflation in the United States. The assumptions underlying the Secretary of State's figures are based on a Treasury GDP deflator of 2.5 per cent., which is very optimistic and higher than this year's 2.9 per cent. Can the Secretary of State tell us what assumptions he has made for increases in staff costs over the next three to five years, and which NHS costs are likely to rise well ahead of the rate of inflation?
Mr. Dobson: The hon. Gentleman should remember that his party asserts that a 3 per cent. year on year real-terms increase is satisfactory. We are proposing 4.7 per cent.
Mr. Hammond: It is 3.7 per cent.
Mr. Dobson: It is 4.7 per cent. over the next three years, and 3.7 per cent. over five years. If we take a five-year average, the Tory figure falls to 3 per cent., not 3.1 per cent. I do not want to get into that kind of nonsense. The increase is 4.7 per cent. over the three years in question, which is a massive and steady improvement on anything that happened under the Tories. We are ensuring that the money is directed into providing necessary services.
We should not challenge assumptions on UK health costs by comparing them with figures from the United States, which spends twice as much of its national wealth on health, but where neither women nor men live as long as British women and men.
Mr. Richard Burden: Judging by the questions posed by the right hon. Member for Maidstone and The Weald (Miss Widdecombe), does my right hon. Friend agree that, in comparison, pointy-headed professors might have a reasonable grasp of what is going on in the health service?
In respect of primary care, today's announcement will be widely welcomed across the country, because we have a great deal to do to put the legacy right. Is my right hon. Friend aware that, in Birmingham, between 35 and 40 per cent. of GPs in the most deprived areas will be retiring in the next 10 years? We desperately need not only to increase the number of GPs but to make the necessary
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investment in primary care to ensure both that people have the quality of health care that they deserve, and that accident and emergency departments are able to provide an A and E service, instead of becoming, as happens all too often, a substitute for inadequate primary care.
Mr. Dobson: I certainly accept my hon. Friend's points. Clearly, we have to use all human and other resources possible both to try to improve the state of primary care in the most deprived parts of the country, and to put ourselves in readiness for the retirement of some GPs.
That is certainly one reason, albeit not the only one, why extending the role of nurses and district nurses to being nurse practitioners and other, similar measures will clearly make a contribution. We have a system in which large numbers of highly trained and skilled people are not permitted, under our present arrangements, to make full use of their skills and training to the advantage of the rest of us. That certainly applies to nurses and midwives, as well as to local pharmacists. Pharmacists do a four-year course, but frequently do little more than hand over pills in the local pharmacy. We want them to play a bigger role in primary care, which would be another way of getting more out of them, making their jobs more satisfying and, at the same time, providing a better all-round service.
My hon. Friend referred to the right hon. Member for Maidstone and The Weald and I should come back to her.
Miss Widdecombe: Ah.
Mr. Dobson: I am going to apologise. I always do my level best to comply with the courtesies of the House in respect of informing the Opposition about things, so I am sorry that my office did not manage to get the statement to the right hon. Lady. I certainly cleared it before 3 o'clock, and I assumed that she would get it then.
Rev. Martin Smyth: I welcome the statement, especially the fact that we are looking three years ahead. Bearing in mind the fact that the Secretary of State, like myself and others, grew up with the old saying that half a loaf is better than no bread, may I nevertheless press the issue of the recruitment of staff? If we had new medical students going in this September or October, before they were fully qualified, that would be almost the 10 years up. At the same time, may I ask about the recruitment of nurses? Do we intend to advertise to bring nurses from overseas? What about therapists? We are putting cancer treatment high on our list, but there is a shortage of radiotherapists and radiographers.
Mr. Dobson: I thank the hon. Gentleman for his welcome for my statement. Most of what I have been saying applies to Northern Ireland, and my colleagues will be trying to apply it there. He raises the issue of the difficulty in recruiting staff and it is no good my pretending that there is no difficulty in recruiting staff, be they doctors, nursing staff or, as he says, therapists, many of whom are in extremely short supply. It is difficult, because one cannot turn on a tap and have qualified therapists come out.
However, there is a substantial number of people who used to work in the national health service, but who left for one reason or another. There are about 140,000 nurses

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and a substantial number of doctors. Dr. Ian Bogle, who has just become chairman of the British Medical Association and whom I congratulate on his election, was saying this morning that he thought that, given the right circumstances, we would be able to recruit doctors who had left the service back into it. I believe that that would apply also to nurses and to the professions allied to medicine. However, it will be a long, difficult and laborious task, which will have to be done locally in response to local circumstances.
Shona McIsaac: Will my right hon. Friend send his congratulations to the staff at Grimsby hospital who have worked phenomenally hard to reduce its waiting lists? They are on target to reduce them by about 1,400 by next year. Before the general election, that hospital was in danger of being downgraded because the health authority was severely underfunded, thanks to the previous Government. I know that Grimsby hospital and all the residents of Grimsby and Cleethorpes will be delighted with my right hon. Friend's announcement today.
Mr. Dobson: I thank my hon. Friend for her welcome for our actions. I certainly congratulate all the staff of Grimsby hospital on their work. I hope that they will receive their fair and proper share of the extra funds and that they will continue to be as efficient and productive as they are today.
Several hon. Members rose—
Madam Speaker: Order. We shall now move on to the business statement.

Business of the House
4.30 pm
The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): I should like to make a statement about the business for next week.
MONDAY 20 JULY—Second Reading of the Northern Ireland Bill.
TUESDAY 21 JULY—Opposition Day (18th allotted day). Until about 7 pm, there will be a debate on the relationship of Government to Parliament, followed by a debate on the European single currency. Both debates will arise on motions in the name of the Liberal Democrats.
WEDNESDAY 22 JULY—Until 2 pm, there will be debates on the motion for the Adjournment of the House.
Consideration of Lords amendments to the Government of Wales Bill.
Consideration in Committee of the Northern Ireland Bill.
THURSDAY AND FRIDAY 23 AND 24 JULY—Consideration in Committee of the Northern Ireland Bill.
The provisional business for the following week will be as follows:
MONDAY 27 JULY—Conclusion of consideration in Committee of the Northern Ireland Bill.
TUESDAY 28 JULY—Consideration of any Lords amendments that may be received.
The Chairman of Ways and Means has named opposed private business for consideration at 7 pm.
WEDNESDAY 29 JULY—Until 2 pm, there will be debates on the motion for the Adjournment of the House, which will include the usual three-hour pre-recess debate.
Opposition Day (19th allotted day). The subjects for debate have yet to be decided and announced.
THURSDAY 30 JULY—Progress on remaining stages of the Northern Ireland Bill.
FRIDAY 31 JULY—Conclusion of remaining stages of the Northern Ireland Bill.
The House may also be asked to consider any Lords messages which may be received.
I confirm that, subject to the progress of business, I expect the House to rise for the summer recess on Friday 31 July, and in the business statement next week I shall announce the return date in October.
Sir George Young: The House is grateful to the right hon. Lady for next week's business, and for an indication of the business for the following week.
The House expects a number of announcements in the next few days, so will the Leader of the House tell us when we can expect, first, the statement on the transport White Paper and, secondly, that on local government finance? Will the right hon. Lady tell us also what other statements the Government plan to make before the recess? Will she ensure that Members whose constituencies are affected by the transport White Paper and the roads review are told about them before the media find out?

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The right hon. Lady has made no provision to debate the Legg report into the Sandline affair, which I understand is now expected before the House rises. Does not that warrant a statement and an early debate, not least because the Foreign Secretary is reported to have told the Foreign Affairs Select Committee this morning that he was certain that the report would support his claims of non-involvement? How can he make that assertion if the independent report is not available?
Last week, I asked the right hon. Lady when we might see the new guidelines on lobbying that the Cabinet Secretary has been asked to prepare. What is the position on those guidelines? Could we debate the Select Committee's report on London Underground, and could the House help the Deputy Prime Minister to find a workable way of privatising London Underground to replace the unworkable proposals on which he has embarked?
Finally, I refer the right hon. Lady to reports in today's newspapers that the Prime Minister has ordered Ministers to come up with policy announcements in August
"in an attempt to stop the government falling apart while he is on holiday."
The reports state that Alastair Campbell has
"sent an edict to all departments telling them to save up stories for the 'silly season'."
Can the right hon. Lady confirm that there is no question of delaying announcements so that they can be made when the House is not sitting?
Mr. Dennis Skinner: A very good idea.
Mrs. Taylor: I must take issue with my hon. Friend on that point. We are not saving up announcements that should be made, or are ready to be made, in the House so that they can be delivered at another time, such as during the recess.
The right hon. Gentleman asked specifically about certain statements that may be made while the House is sitting. I expect various statements to come before the House in the next two weeks. I hope that the statement on the transport White Paper can be delivered next week. It is pencilled in for Monday, but, as I have explained before, we make provisional arrangements that must sometimes be changed. That is why we do not often announce statements in advance. If specific hon. Members are concerned about any Government decisions—whether they are announced by statement or through written parliamentary questions—I think that it is important that Ministers ensure that those hon. Members who are most affected are informed directly of the decisions that have been made.
The right hon. Gentleman also asked me about the Legg report, and whether there would be time to debate it before the House rises. He will know from my announcement that it is very unlikely that there will be time for such a debate. We do not know precisely when the Legg report will be published. It is an independent inquiry, and it is anticipated that its report will be produced in the House's final week of sitting. I hope that there will be at least a statement to the House following the publication of that report.
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The right hon. Gentleman inquired about lobbying guidelines. I do not think that I have anything to add at this stage to my comments last week. We inherited guidelines, and we are considering whether they need to be tightened and improved. The Prime Minister has made the arrangements clear, and I hope that the right hon. Gentleman is not suggesting that the process should be rushed. It is important that we get any guidelines right.
On the right hon. Gentleman's point about London Underground, I reject completely his suggestion that my right hon. Friend the Deputy Prime Minister has come up with unworkable proposals. As a member of the previous Government, who let investment in the London underground decline so badly, I think that the right hon. Gentleman has a cheek to ask that question.
As to the right hon. Gentleman's final point about policy announcements in August, although that suggestion might be welcomed by my hon. Friend the Member for Bolsover (Mr. Skinner), who thinks it is a good idea, I have received no such edict about withholding stories until August.
Mr. David Winnick: In view of reports that the BBC wants to increase licence fees, will my right hon. Friend ensure that a statement is made to the House before the Government make any final decisions about the matter? It is also important to bear in mind the feelings of a large number—indeed, a majority—of Labour Back Benchers, leaving aside Parliamentary Private Secretaries, who have signed my early-day motion 1483.
[That this House calls on the Government to give sympathetic consideration to a concessionary television licence scheme for pensioners; and hopes that such a scheme can be brought in within the lifetime of this Parliament.]
In the light of the calls for restraint in public sector pay, is it not rather alarming that the press have reported today that the Director-General of the BBC, John Birt, has received a large pay increase, bringing his salary to nearly £390,000 a year? Many matters must be considered—quite apart from the agreement reached previously—before there is any question of increasing the licence fee again.
Mrs. Taylor: I think that my hon. Friend is requesting a debate on the licence fee rather than the other issues involved with it. The level of television licence fees for the years 1997–98 to 2001–2 is determined by a five-year formula, which takes into account the BBC's spending needs over the whole period. The Government have no plans to change that formula, so I think that it would be inappropriate to give priority to a debate of that nature at this stage.
Mr. Andrew Stunell: I am sure that, especially as the Leader of the House comes to this session every week, she is well aware of the pressure from Back Benchers for increasing time for business, but may I draw her attention to the pressure from Ministers, who are becoming so frustrated by the lack of time in the House that they are absolutely forced to go to the media in default of coming to the Chamber? Will she give the House an assurance that some of the ideas that are being canvassed for improving the speed and effectiveness of

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the work of the House will see the light of day before the recess, and that, soon after the start of the autumn session, we shall have an opportunity to debate those matters and improve the accountability and effectiveness of that work?
Mrs. Taylor: Without accepting all the points that the hon. Gentleman makes, I hope that we shall be able to make further progress in modernising the workings of the House. He asked whether the next Committee report could be published before the recess. Ideally, I would like that to be the case, and I know that members of the Committee will work hard over the next few weeks, hopefully meeting whenever it is necessary, to try to make progress and agree a report. If that were to be possible, we might well be able to hold a further debate on modernisation in the spillover period, but I believe that some work remains to be done by the Committee before a report is ready.
Mr. Paul Flynn: When may we debate the recent report by Age Concern and the Alzheimer's Society on the huge problem of the over-medication of the elderly, especially the evidence that one in five hospital admissions of elderly people results from the misuse of medicinal drugs, and the evidence from Glasgow and the north of England that in one case 54 per cent., and in another case 88 per. cent. of residents of care homes were being prescribed very powerful neuroleptic drugs inappropriately? A very effective review by the school of psychiatry in Manchester reduced the number of drugs used by the elderly, thereby greatly improving the quality of their life, extending their life expectancy and saving money for the health service. When shall we replicate those studies nationally?
Mrs. Taylor: My hon. Friend will understand if I cannot promise him time in the near future for the debate he requests. I hope, however, that the reforms that the Secretary of State for Health announced only a short time ago in respect of Social Services and help for the elderly may assist with some of the problems that concern him. If my hon. Friend wants to pursue the matter further, he could apply for an Adjournment debate, but I do not think that there is a possibility of holding such a debate in Government time before the recess.
Mr. Peter Brooke: I imagine that the Leader of the House will not yet have had an opportunity to read the Wyndham report, written by Tony Travers and published yesterday, on the economic impact of London's west end theatre, one of the great successes of my constituency, but may I hope that we might hold a debate upon it while it is still fresh in everyone's mind?
Mrs. Taylor: The right hon. Gentleman is right—I have not read the entire Wyndham report. However, I understand that the report reveals a vibrant industry and a British success story as far as London's west end theatres are concerned, and I congratulate the right hon. Gentleman on having them in his constituency. They are clearly very important to the British economy as well as to the British Tourist Authority. He too will understand why we cannot have a debate in Government time before the recess.
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There is always the opportunity for an Adjournment debate. There is also the pre-recess three-hour Adjournment debate, which hon. Members find extremely useful for raising topics that they have not been able to weave into our parliamentary timetable on other occasions.
Mr. Tam Dalyell: Given the pressure on time, and parliamentary realities, would my right hon. Friend ask the Foreign Secretary, who will open tomorrow's debate on the expansion of NATO, which some of us, including ex-Senator Sam Nunn and other serious Americans, regard with foreboding and dismay, whether there could be a statement on the military position in Kosovo? May I hark back yet again and nag my right hon. Friend that the House of Commons should be consulted before there is any commitment to military action?
Mrs. Taylor: I am happy to bring my hon. Friend's comments to the Foreign Secretary's attention. I have previously said that we cannot give an absolute undertaking that an oral statement will be made before any decision to deploy troops, but I can confirm that, operational circumstances permitting, we would do so. I have said that on other occasions; I repeat it today, but I shall again remind the Foreign Secretary of my hon. Friend's concerns.
Mr. Paul Burstow: Given hon. Members' intense interest in the statement earlier today by the Secretary of State for Health, and the understandable focus on the extra expenditure within the NHS, I express a hope that the right hon. Lady will share my concern that personal social services and the extra expenditure that was being targeted on that area were not adequately covered in questions on the statement.
I therefore wonder two things. First, will a statement be made before the recess on the White Paper on social services, to enable us to explore the Government's approach to social services in the medium to long term? Secondly, will there be an opportunity for a debate in Government time on personal social services? I understand that most of the debates on that subject in recent years have been Adjournment debates. Surely there should be time in which we might test the Government's views on that subject in Government time.
Mrs. Taylor: In Government time, we had a wide-ranging debate on the Health Service last week, when some of those issues were relevant. I cannot add anything to what I said about statements. I remind the hon. Gentleman that the Liberals have an Opposition day next week; had they felt that that issue should have priority, it would have been open to them to choose that instead of the subjects that are on the Order Paper.
Mr. Nicholas Soames: The right hon. Lady is aware, as I have raised the matter with her several times, that West Sussex county council has been obliged to go to the High Court to seek redress against an over-mighty and overbearing Executive which is seeking to place upon the people of West Sussex, and especially upon my constituents in Mid-Sussex, substantial numbers of extra new houses over and above that already budgeted for. Is she aware that the judge is now considering his view of the matter, the representations having been made?

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Would the President be good enough to say whether she might be prepared, when the House returns, to grant time for a debate on the outcome of those deliberations, as they will fundamentally affect the planning law and legislation on the building of new houses throughout the country for the foreseeable future?
Mrs. Taylor: It is difficult enough at this stage to plan the next two weeks, and I cannot at the moment make any commitments such as those that the hon. Gentleman is asking me to make.
Mr. Edward Garnier: Will the Leader of the House tell us whether the regulations extending conditional fee arrangements will be debated in Committee upstairs or on the Floor of the House, and when such debate will take place? The delay in introducing these proposals, ill thought out though they may be, is causing difficulties for the insurance market. Unless the extension of CFAs, as they are called, is underpinned by insurance, it simply will not happen.
Mrs. Taylor: There are no plans at the moment to debate those regulations on the Floor of the House. I cannot be specific about timing, but I shall ensure that, once a decision is taken, the hon. and learned Gentleman is informed.

ROYAL ASSENT
Madam Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Appropriation Act 1998.

Data Protection Act 1998.

Teaching and Higher Education Act 1998.

Shrewsbury and Atcham Borough Council Act 1998.

Public Expenditure
[Relevant documents: Minutes of Evidence taken before the Treasury Committee on Wednesday 15 July (HC 960-ii).]
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pope.]
Madam Speaker: I understand that many right hon. and hon. Members wish to speak in the debate. For that reason I have announced that Back-Bench speeches will be limited to 15 minutes.
4.48 pm
The Chief Secretary to the Treasury (Mr. Alistair Darling): This is the first opportunity that the House has had to debate the Government's public expenditure plans. I shall set in context the announcement made by my right hon. Friend the Chancellor of the Exchequer on Tuesday, which represented a further step by the Government in implementing their manifesto commitments.
In his first two Budgets, the Chancellor had to deal with the structural problems that we inherited. Last month, he set out his fiscal strategy in the economic and fiscal strategy report which laid out a prudent and cautious approach to public spending that was widely welcomed. This week, he set out our spending strategy—increased investment, but money in return for modernisation. Investment is conditional on reform. Every Department will be bound by an agreement to deliver key outcomes on which it will be judged.
The Government's central objectives are high and sustainable levels of growth and employment and sustainable public services, built on a platform of long-term stability. We have put in place two fundamental long-term economic reforms to ensure that we get long-term sustainable economic growth, and to ensure that public spending is affordable.
First, we had to deal with the previous Government's failure to deal with inflation, which was left rising out of control, so we gave independence to the Bank of England, with the result that our long-term interest rates are the lowest that they have been for 33 years. Secondly, to impose a new framework of financial discipline, we have adopted fiscal rules that achieve a current budget balance and a prudent level of debt to national income.
It is interesting to note that even the most pessimistic of the 45 independent economic forecasts that we surveyed show that our strict rules will be met over the next three years. We have kept to the two-year spending limits that we promised at the election while we sorted out the mess that we inherited. We have imposed a significant fiscal tightening—£25 billion—which is some 3½per cent. of national income.
We have reduced the borrowing that we inherited. During the 1990s, national debt doubled. As a result, we were faced with a bill of £25 billion a year just to service that debt. That was the golden economic legacy to which the Opposition keep referring. We inherited a situation of boom and bust. Under the Conservatives, interest rates reached 15 per cent., and inflation doubled in two and a half years to almost 10 per cent. in 1990. We will not repeat the mistakes of the late 1980s—the Lawson boom—the economic miracle of the 1980s that became the economic nightmare of the 1990s, when the shadow Chancellor was at the heart of the Treasury.

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Over this economic cycle and for the first time in decades, Britain is set to have both a current budget in balance and a sustainable approach to debt. Over the three years 1996–97 to 1999–2000, public sector net borrowing will fall by 3½ per cent. of national income, just as set out in the Budget figures. The ratio of net public debt is projected to fall below 40 per cent. of GDP.
Although we are boosting spending on capital, which we believe is important, we plan that the debt ratio will remain below 40 per cent. Our approach is among the most prudent of our G7 partners, and far more prudent than that of the Government from whom we took over.
Mr. Nick Gibb: I am grateful to the right hon. Gentleman for giving way. Many definitions have been changed. Can he confirm that, on the basis of what was called the public sector borrowing requirement, the Government are running a PSBR of £4 billion next year, £5 billion the following year, and £6 billion in each of the two years after that?
Mr. Darling: That is the point that the hon. Gentleman put to the Chancellor yesterday at the Treasury Select Committee. My right hon. Friend made it clear that, unlike the situation under the previous Government, we are determined to reduce the amount of borrowing so that we can have sustainable public finances in the future.
In the economic and fiscal strategy report that we published last month, the hon. Gentleman will have seen that we have a far stricter and more open discipline than ever existed under the previous Government. There is a further innovation. The new regime breaks with the old-fashioned culture of short-termism and uncertainty. We believe that moving away from the annual negotiating cycle and the annual spending round, and introducing fixed three-year budgets, will give Departments, and therefore the public service, far more certainty than they ever had in the past.
The Government have set tough new long-term fiscal rules. To ensure that those are met and to ensure long-term investment in our infrastructure, we have separate current and capital budgets for each Department, which will ensure that capital investment is sustained.
The fiscal rules that we have adopted are rigorous. Over the economic cycle, they will bring the current budget into balance. To meet our fiscal rules, and in line with cautious and published assumptions, we plan current surpluses in the next three years of £7 billion, £10 billion and £13 billion.
We have adopted an approach that is cautious and prudent, in contrast to the previous Government's approach. In the last economic cycle, the average current budget deficit was more than 1½per cent. of GDP—the equivalent of £12 billion a year.
Mr. Francis Maude: If, as the Chief Secretary says, the Government intend to reduce borrowing, why does he plan to increase it?
Mr. Darling: I explained to the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) that, under the Conservative Government, over the economic cycle there was a current deficit equivalent to more than £12 billion a year. We have taken a deliberately prudent and cautious approach and budgeted for a surplus in
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each of the next three years. That demonstrates this Government's commitment to being prudent and cautious, which is in complete contrast to the position adopted by the previous Government, who even in the good times, ran up debts that were unsustainable.
Sir Michael Spicer: What is the point of the right hon. Gentleman banging on about a current surplus, when the total figures add up to a deficit? Every newspaper that the Government spin to says that we have a surplus, but the surplus is in the current spending. The total figures add up to a deficit.
Mr. Darling: We are budgeting for a current surplus because we believe it is important that current expenditure is covered by taxation. That was not happening under the previous Government. They were running up debts far greater than they could ever reduce. We believe that if we are to have sustainable public finances, current expenditure ought to be financed by taxation.
With regard to investment and capital expenditure, we believe that the Government should be prepared to borrow, because the benefit will come over a number of years. Even so, the total amount that the Government borrow will reduce. That is in contrast with what happened over much of the previous 18 years.
Mr. Maude: How on earth does the right hon. Gentleman arrive at the conclusion that he is reducing borrowing, when his own plans, based on very optimistic assumptions, show borrowing going up every year and the absolute size of the national debt increasing every year? Let him not mislead the House in this way.
Mr. Darling: As I was explaining to the hon. Member for West Worcestershire (Sir M. Spicer), the Government believe that we should be prepared to borrow when we are investing for capital, but we believe that current expenditure ought to be covered by taxation. Conservative Members are in no position to lecture us. Because of the irresponsibility of the previous Government, we were left huge levels of debt, which we have had to reduce.
As for the remarks of the right hon. Member for Horsham (Mr. Maude) about optimistic forecasts, we have taken a deliberately cautious and prudent approach to how much the Government can spend over the next few years. I know that there are some who wanted us to spend more, including, it seems, some Tory spokesmen. However, we are determined to take a prudent and affordable approach.
It is only because we are taking that approach and setting ourselves a tough framework that we can take the necessary action to reverse the chronic under-investment in our country's health, education, transport and housing infrastructure. As I said, the key difference from the past is that we are making additional investment, but we are demanding reform in return for that.
All new resources will be conditional on the implementation of essential reforms. We have set ourselves a clear target for modern, efficient and effective services. The House will see that in each chapter of the White Paper, departmental objectives are set out. It is money for modernisation. Every Minister knows that he or she is working to deliver those objectives. There are

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new targets for each area of public service, new standards of efficiency that will have to be met to ensure that every penny is well spent.
Mr. Quentin Davies: Does not the right hon. Gentleman realise that he is deceiving himself when he says that his projections for deficit and debt are based on prudent forecasts? They are not at all. If the forecasts for growth—the right hon. Gentleman knows that such projections are extremely sensitive to growth assumptions—are those set out in the Red Book of 1.75 per cent. this year, 2 per cent. next financial year and 2.25 per cent. in the following two years, they are extremely optimistic. They are desperately over-optimistic at a time when the economy is turning down and manufacturing is already in recession.
Mr. Darling: The hon. Gentleman should be aware that we have taken a more pessimistic view than the Government whom he used to support. We are not taking credit, for example, for asset sales which the previous Government assumed and never had any intention of realising. I do not know whether the hon. Gentleman was in the Chamber earlier when I made the point that there have been about 45 independent economic forecasts in the past few weeks, and that in respect of every one of them we shall meet the objectives set out in our fiscal rules. We are taking a cautious and prudent approach, which stands in stark contrast to what happened—
Mr. Gibb rose—
Mr. Darling: No, I shall not give way at the moment.
Our approach stands in stark contrast to what we had for 18 years. Something else that the hon. Member for Grantham and Stamford (Mr. Davies), who I think is now a member of the Opposition Front Bench team, should bear in mind is that although the Conservative party is criticising us and suggesting that we are spending too much, a number of Opposition spokesmen and spokeswomen—for example, the Opposition spokeswoman on health—are demanding that we should be spending more. They cannot have it both ways. However, I note that the shadow Chancellor of the Exchequer had a go at that. Yesterday, on the "Today" programme, he was asked:
"Mr. Maude, can you really have it both ways—asking for increased spending but opposing overall increased spending?"
The right hon. Member for Horsham replied, "Of course we can." The truth is that the Opposition cannot have it both ways. We are either spending too much or too little. The Opposition should work out which side they are on.
Mr. Alan W. Williams: The interest payments on the national debt are about £25 billion, and that sum is based on present interest rates. What if over the next two years interest rates fall from 7.5 per cent. to 7 per cent. and perhaps to 6 per cent? Does that mean that the £25 billion devoted to interest payments will fall to less than £20 billion? If so, does not that mean that an extra £5 billion could be released and made available again for public expenditure?
Mr. Darling: My hon. Friend should be aware that we believe that we shall be spending about £5 billion less a
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year in servicing debt as a result of the programme that we have set out than we would have been if we had just left the situation as we inherited it.
I was referring to the importance of securing reform in return for investment. I shall give a couple of examples of what I mean. First, let us take health. As my right hon. Friend the Secretary of State for Health made clear in his statement earlier this afternoon, we are increasing investment in health but in return for that we are looking to improve the value that we derive from spending on medicines. We are looking for improved efficiency. Already £1 billion of savings over the Parliament will be transferred from red tape, following the abolition of the internal market, to front-line patient care.
Mr. Tim Boswell: Will the Minister give way?
Mr. Darling: In one moment.
It is worth noting that some hospitals are 20 per cent. more efficient than others. We want to ensure that that discrepancy in the performance of national health service trusts is tackled so that we get the best possible value for the money that we are spending.
As for education, in 1996 only 57 per cent. of 11-year-olds met literacy standards while only 54 per cent. met numeracy standards. We set new and higher targets to be delivered by the year 2002. That is a clear example—
Mr. Robert Sheldon: Will my right hon. Friend give way?
Mr. Darling: I am about to give way to my right hon. Friend.
In education there is a clear example of where we are increasing investment but demanding a far higher return and higher standards in return for it.
Mr. Sheldon: My right hon. Friend is right to draw attention to the importance of making sure that we get value for money before we release further moneys. That turns on how previous investment has been progressing. I note that there will be a Cabinet committee to deal with these matters, presumably chaired by my right hon. Friend the Chancellor of the Exchequer. Will my right hon. Friend say something about this committee? It is obviously going to be a very important committee and something akin to the Star Chamber committee that we had under Willie Whitelaw. How does that leave my right hon. Friend the Chief Secretary in connection with such a powerful committee? I know that my right hon. Friend's position will not be diminished because I expect him to move to many higher things. However, will he say something about the process itself?
Mr. Darling: I am grateful to my right hon. Friend. I will not speculate on where the Chief Secretary may be left after all this. That is for somebody else. The important point that my right hon. Friend makes relates to the audit of what happens to the additional investment. During consideration of the comprehensive spending review the Public Expenditure Committee, which my right hon. Friend the Prime Minister had set up, came to the view that if we were to increase spending, especially where

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there was to be quite a significant increase, as in health and education, it was crucial to ensure that we obtained some real benefit and real gain from it.
There have been occasions in the past—Conservatives may point to this—where expenditure was increased on health, for example, but it did not necessarily result in a better outcome in terms of improved health care. Indeed, part of the increase in spending on health under the Conservatives was to set up the internal market. We want to keep investment under review, which is why my right hon. Friend the Prime Minister has agreed that there will be a committee, chaired by my right hon. Friend the Chancellor, that will carry out a constant review of performance so that we will see that we are getting the value for money that we want and all the reforms that have been set out. That is something that Governments in the past have neglected. It is very important that we are satisfied that if we increase spending, as we are doing in health and education particularly, as well as across the board, we can see some gain from it.
Mr. Malcolm Bruce rose—
Mr. John MacGregor rose—
Mr. Darling: I hope that the hon. Gentleman and the right hon. Gentleman will not be put out if I give way first to the hon. Member for Daventry (Mr. Boswell).
Mr. Boswell: As the right hon. Gentleman sets great store by investment and as he has said, plausibly enough, that he wishes to receive greater benefit from public investment, will he tell the House what his estimate is of the increased annual rate of return that he is seeking from a marginal increase in investment?
Mr. Darling: The hon. Gentleman will be aware that each Department is responsible for delivering the improvements in standards and so on that have been set out. [Interruption.] As my right hon. Friend the Chancellor made clear, the public service agreements that have been reached between the Treasury and the Departments will be published. At that time the hon. Gentleman and the entire House will be able to see the nature of these agreements and then judge the progress that Departments make.
Mr. MacGregor: When the public service agreements are published, I hope we shall see that they are quantified in considerable detail. If that is the position, what will happen in the proposed committee's reviews if a Department fails to meet the targets? Will money actually be withdrawn from that Department?
Mr. Darling: As my right hon. Friend the Chancellor made clear, in both health and education money will be released only if the Government are satisfied that we are getting the returns that we want. One of the advantages of having a constant review of expenditure is that it should be possible at a far earlier stage than in the past to identify if we are not getting the reforms and improvements that we want to see.
Mr. Malcolm Bruce: That sounds as if the Chancellor of the Exchequer has the right to claw back money if things go wrong. I wanted to press the right hon.
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Gentleman on why the Government will not give an inflation-proofing guarantee. They are very confident in their forecasts, but if things go wrong because of inflation, that is outside departmental control. They can do nothing about inflation. The Prime Minister said that the forecasts were good, irrespective of the economic circumstances, but the Chancellor told me that these are cash limits and there will be no change even if inflation goes outside the forecast. Why will the right hon. Gentleman not give a guarantee on things that Departments cannot control?
Mr. Darling: The hon. Gentleman might have started by congratulating us on giving a significant, above-inflation increase to investment in health and education. The health service will receive a £21 billion increase while the Liberals wanted an increase of only £2½ billion. They wanted £6 billion for education, and we have increased expenditure in that area by £19 billion. The point that my right hon. Friend the Chancellor was making to the hon. Gentleman yesterday, I think, at the Select Committee on Treasury Affairs, is that Departments have been given their departmental expenditure limits and they are expected to live within them. Certainly in the cases of health and education they have a significant increase in expenditure, and that allows them to plan their provision for the next three years. They are real-terms increases.
Mr. Kenneth Clarke: Will the right hon. Gentleman clarify that he meant what he appeared to be saying to my right hon. Friend the Member for South Norfolk (Mr. MacGregor)? Put in practical terms, did he mean that the Treasury will withdraw the promise of additional funds for the health service and reduce provision to it if the Chancellor's Committee discovers that health waiting lists have gone up and the Secretary of State has not achieved the reductions that he is promising?
Mr. Darling: I was not suggesting anything of the sort, as the right hon. and learned Gentleman well knows. I said that we have made it clear that the sums that we have allocated to health and to education will be released in return for reform. The point of the Committee is to ensure that we are making steady progress in reducing waiting lists, among other things. One of the advantages of considering these matters constantly, and not waiting until the end of an annual review, as in the past, or a three-year period, is that problems, for example in reducing waiting lists, can be dealt with far earlier and more effectively.
The right hon. and learned Gentleman, who was Secretary of State for Health some years ago, knows that many things contribute to reducing waiting lists in the health service—not only money, which is clearly important, but management, because performance can vary substantially between different hospitals and trusts. Over the past few months, my right hon. Friend the Secretary of State for Health has, among other things, been using some of the additional money that we have already allocated to identify management failures and administrative problems in getting waiting lists down. The point of having a Cabinet Committee to review these things is to ensure that we can take action to achieve improvements where performance is not coming up to the mark.
My point in respect of the modernisation fund is about incentive. We can effectively encourage hospitals to improve standards if they know that they can get

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additional funds to improve their performance. We have been doing that over the past few months, and it has worked extremely well.
Mr. Andrew Tyrie: Will the right hon. Gentleman give way?
Mr. Darling: No, I want to make progress. I shall try to give way to the hon. Gentleman later, but Madam Speaker has said that many hon. Members want to contribute and Back Benchers tend to complain if Front Benchers take up most of the time. [HON. MEMBERS: "Hear, hear."] I have sensed the mood of the House quite well.
It has struck us over the past year that many Departments could be far more efficient than they have been in the past. On defence, there are savings to be gained from improved procurement measures, and the agreement on targets will enable the Ministry of Defence to do that. The Government have not only put in place firm spending disciplines, but will ensure that they deliver the results that we want to achieve.
We have considered whether resources are targeted effectively, and over half the additional resources have gone to our priorities, health and education. We are getting rid of assets that we do not need and the MOD, for example, is selling property in central London so that resources can be diverted to the front line. The Foreign Office is to sell property that it does not need to finance services elsewhere, and we are making increasing use of the national asset register which, for the first time, showed what the Government own.
Far greater emphasis has been put on prevention, because it makes sense to tackle the causes of crime and the causes of poor health rather than leaving the public purse to pick up the pieces. We are helping young children to get the best possible start, we have introduced a new crime prevention strategy and we are dealing with the problems of drug misuse.
In addition, public spending has an important role in raising the rate of sustainable growth. In the global economy, the skills and training of the work force will mark Britain out as a place to invest. As we have shown, our priority in education is absolutely clear: we have achieved a record 5.1 per cent. average increase in spending over the next three years, which contrasts extremely favourably with the previous Government's record.
To deliver a more efficient economy, we need to invest in a first-class science base. As my right hon. Friend the Chancellor made clear, the Government have increased science spending by £1.1 billion and we have set up a public-private partnership with the Wellcome Trust to create a pool of £600 million which will be available to further scientific research. That is, of course, in addition to the £50 million challenge fund announced in the Budget, which will bring science and industry closer together so that good research ideas can be converted into good business ideas. That clearly demonstrates the Government's commitment to the future.
Mr. Mike Hall: My right hon. Friend will be aware that the Daresbury laboratory is in
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my constituency. Since 1993, I have been pressing Governments to invest in the next generation of synchrotron radiation research, and £100 million of expenditure has been announced to replace the synchrotron radiation source at Daresbury. We have not yet convinced the Government that the next £100 million should be invested at Daresbury, but I press on my right hon. Friend the fact that that investment is needed. If it comes to my constituency, I shall be absolutely delighted.
Mr. Darling: My hon. Friend is right to stress the importance of scientific investment, and he will no doubt press my right hon. Friend the President of the Board of Trade on that point.
Mr. Tam Dalyell: Will all the Wellcome funds be independently refereed? Will the Treasury exercise such pressure as it can to get rid of the dreadful system of short-term, postgraduate contract research posts, which are causing such agony? People spend their lives going from year to year on such contracts, without knowing what their future will be. If pressure could be applied to do something about that, it would be a great help and vastly more efficient in terms of science.
Mr. Darling: My hon. Friend knows that I represent a city that has three universities, and I am well aware of the problems to which he refers. I hope that my right hon. Friend the President of the Board of Trade will be able to make a further announcement in due course. I cannot promise that all the problems that have been visited on us will be resolved, but most people working in the scientific field will welcome the additional investment here.
Also important is the need to invest not only in education, but in transport. My right hon. Friend the Deputy Prime Minister will publish his White Paper on transport—the first for a generation—next week. It will set out the importance that the Government attach to public and private sector partnerships, which will increase investment in public transport. We are also increasing investment in housing repairs. Each Department will draw up an investment strategy by early next year, and they will be published so that people can see the difference that the investment will make.
Dr. Lynne Jones: Will my right hon. Friend give way?
Mr. Darling: Once more, then I shall make giant strides towards the end of my speech.
Dr. Jones: On Tuesday, I said that the Government deserved to be praised through the roof for the extra money for science, but I am a little disappointed on housing. I am concerned about the amount of investment that is going into housing, and I have figures from the Library showing that we spent £4 billion on housing investment in real terms in 1985–86. In the current year, even with the capital receipts, the total is about £2 billion—half that figure. What will be the figure next year? Will it get up even to the poor showing of 1985–86?
Mr. Darling: May I acknowledge my appreciation of my hon. Friend praising the Government? It is perhaps worth a few moments of silence to savour that. It was perhaps too much to hope that my hon. Friend would sit down without going on to make a further point.

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There are two points to be made in respect of housing. First, as in all matters, the Government had to start from the point at which they took over—investment in public sector housing had reduced substantially. Secondly, we have to be consistent with the fiscal rules to which I referred, so that growth in current expenditure and in capital investment are sustainable and affordable. I believe that the increase in housing investment is affordable and will be sustainable. It will be very much welcomed, not only by local authorities and housing associations, but, more important, by those who live in local authority and housing association property. There are major renovation and improvements initiatives and increased maintenance. I appreciate that my hon. Friend the Member for Birmingham, Selly Oak (Dr. Jones), on this and other matters, might like to have seen much much more, but the Government had to take a view on how much they could afford across the whole pattern of Government spending. The £3.6 billion increase over the period will be widely welcomed.
I want to deal with welfare reform to which the Government attach a great deal of importance. We have introduced the new deal, we have reformed the Child Support Agency and student finances and we are reforming legal aid. We said two things in our manifesto. We said that we would increase the share of national income spent on education—we have done that—and we said that we would reduce the bills for economic and social failure, which we are doing. By any view, the rate of increase in the amount that the Government will be spending on social security will be half that of the previous Government. By the end of this Parliament, it will be lower as a proportion of national income than the level we inherited.
I find the Conservative party's attitude rather curious. Yesterday—no doubt it will be the same today—Conservative Members criticised us because they said that social security spending would be increasing by £27 billion. We should look at where that increase is going. Help for pensioners accounts for over half the increase, help for the disabled and the provision of sickness benefit is taking up about a quarter and the increase in child benefit accounts for the bulk of the rest.
If Conservative Members say that we are spending too much, what would they cut? Would they cut pensions, disability benefits or the extra money for child benefit? There is a distinction between spending on pensions, disability payments and on child benefit for children most in need and the money we have been spending in the past because we have had far too many people on the dole when they could have been in work. The new deal, which the Conservative party opposes, has seen 60,000 young people go into work or take up other opportunities and nearly 40,000 lone parents are now in work rather than being dependent on benefit.
Mr. Tim Loughton: Will the right hon. Gentleman give way?
Mr. Darling: Not just now.
The number of lone parents on benefit is now below 1 million for the first time in many years. We have tackled the waste that we said we would tackle. In our manifesto we promised to do more for families in need and that is why we increased child benefit by a record
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amount. At the same time, we have been able to improve the position of many pensioners, which is something else that we promised in our manifesto.
Conservative Members cannot have it both ways. If they think that we are spending too much on pensions, child benefit and on helping the disabled—all the things we said we would do—they have to say what they would cut.
That is not the only thing that Conservative Members have to explain. Conservative Members are saying that we are spending far too much money—that is the view of the shadow Chancellor—while, at the same time, some Opposition spokesmen and women are saying that they want to spend more on health, education, pensions and defence. They must explain which view is right. Do they want more or less money to be spent? I am inclined to believe the view of the shadow Chancellor because he is an extremely important person in the Opposition and because the Leader of the Opposition was saying the same yesterday.
Mr. Loughton: Will the right hon. Gentleman give way?
Mr. Darling: Not just now.
Over half the increase in spending is going on health and education. If we are spending too much, we are entitled to ask which schools and hospitals, up and down the country, the Conservative party would close. If Conservative Members believe that we are spending too much on pensions, by how much would they reduce that spending? If we are spending too much on child benefit, would they cut that? The shadow Chancellor and the shadow Chief Secretary have to explain how they can reconcile their criticism about us spending too much with the fact that during proceedings on the Finance Bill they moved amendments which would cost £6 billion to fund. How on earth can they justify that?
The Opposition are beginning to make their position clear. The shadow Chancellor, and the Leader of the Opposition yesterday, showed that the Conservative party is again lurching further to the right. Last year at the Tory party conference fringe the shadow Chancellor said:
"When a right of centre party moves to the right, it can become more popular."
I do not know whether that view is shared by the right hon. and learned Member for Rushcliffe (Mr. Clarke), but it is clearly the way that the Front Bench representatives of the Conservative party want to go. The shadow Chancellor has made it clear that public services should depend more on charity and private provision. He sees a reduced role for the Government and the state in providing a decent service in the NHS or an education service that gives every child the opportunity it deserves.
We believe in public services because education is the key to our country's future. We believe that the NHS is the mark of a civilised, decent and fair society. We believe in the value of public transport because it is good for people, good for the environment and good for the country. We believe that the Government have a role to ensure that we do everything we can to reduce crime.
The comprehensive spending review has shown how the Government have been able, against a sound and prudent fiscal background, to provide for sustainable

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public finances in the future. It has also shown how we can divert finances to our priority areas so that we can build a strong and fair society and so that we can have spending based on long-term economic stability and affordable public services. The comprehensive spending review has also shown how the Government, step by step and line by line, are delivering on all their election promises.
5.25 pm
Mr. David Heathcoat-Amory: We can always tell when the Chief Secretary has lost the plot, because he returns to completely phoney allegations about what we are alleged to have done during the Finance Bill proceedings. We make no apologies for resisting Labour party tax increases. If the right hon. Gentleman cannot distinguish taxation from expenditure, it explains a lot about the mess he got into over the comprehensive spending review.
On Tuesday, the Chancellor of the Exchequer announced the biggest increase in public expenditure ever contemplated by a peacetime Government. Spending, particularly spending other people's money, is the easy part of politics. The difficult task is to increase and improve the productive potential of the economy or, perhaps at the same time, to find offsetting savings to match areas of expenditure that need to be increased in line with changing political priorities. That was the task that the Government should have set themselves and it was the task they failed.
Instead, the comprehensive spending review is not really a review at all; it is a comprehensive spending increase. The Government have locked into the expenditure for three years hence and, at the same time, they are taking a huge and unnecessary risk with the performance of the economy.
To be fair, the Government showed considerable ingenuity in dressing up the figures.
Mr. Geraint Davies: Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory: I shall give way in a minute, but I should like the hon. Gentleman to listen to this point.
As much is concealed in these figures as is revealed by the document. Spin doctoring has given way to spin accounting. That is hardly surprising, as the Paymaster General—[HON. MEMBERS: "Oh."] Oh, yes. The Paymaster General is quite happy to publish accounts showing disbursements, but then somehow the payments never get made. That is not my view; it is the view of the Committee on Standards and Privileges. Perhaps the same thinking suffuses the documents before us. Perhaps the accountancy figures will never be paid. Perhaps the public services will never see the money supposedly allocated to them on Tuesday.
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The other big disguise was over what is perhaps the central failure, which was to find those offsetting savings in welfare reform—I shall return to that.
Mr. Mike Hall: If the right hon. Gentleman thinks that the social security bill is too high, will he tell us what parts of it he would cut?
Mr. Heathcoat-Amory: I shall come on to welfare reform specifically and come back to the point raised by the hon. Gentleman.
The Government have put up a smokescreen of changed definitions and accountancy changes which is designed to make comparisons difficult. We have had to enlist the help of the Library to find out what is really happening to the public accounts. Ingenuity in presenting the figures is not enough. The Chancellor has committed himself to a three-year programme of expenditure just as the economy is faltering. It is beyond dispute that manufacturing and exporting are going into recession. The growth projections in the Government's documents, the strategy report and others are a fantasy for those sectors.
Mr. Geraint Davies: Does the right hon. Gentleman accept that the long-term growth rate for the past four years was 2.3 per cent. and that the growth rate in the past year was 3 per cent. above the 2.25 per cent. medium-term forecast? Does he also accept that the assumed rate for 1998–99 is 1.75 per cent., which is not particularly high, and that the following year it will rise to 2 per cent. and then go to 2.25 per cent? Record inward investment last year created 46,000 new jobs and retained 100,000. That shows that we are in good shape and that the Government's assumptions are prudent and cautious. What is more, they will lead to a current account surplus of £30 billion in the three years.
Mr. Heathcoat-Amory: I suggest that the hon. Gentleman ask some manufacturing firms in his constituency whether they will grow by 2.25 or 2.5 per cent. this year. They will tell him, as they are telling us, that they are already in recession. The projected growth figure of 2.25 per cent. is for them already a fantasy, and we have not even begun the three-year period. On that matter, the Government are going wrong already.
As I have said, manufacturing and exporting are in recession. That will get worse, because there is a growing mismatch, a conflict, between the Treasury's tax and spending decisions, which by and large are inflationary, and the Bank of England's tight monetary policy, which is designed to get down to the inflation target of a Government who have raised interest rates and the value of the pound.
Mr. Andrew Miller: I cannot understand what fantasy land the right hon. Gentleman is living in. Why has Vauxhall in my constituency just taken on 1,000 new workers? In two weeks, members of the royal family will visit the latest major investment in my constituency. I cannot see where the right hon. Gentleman's logic is taking us. In the real world, there are real jobs. Why does he not get back to the real world?
Mr. Heathcoat-Amory: The hon. Gentleman has probably noticed that the claimant count for

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unemployment has started to go up. That will soon affect his constituency: it has certainly started to affect mine. If he does not believe the figures that I have quoted, perhaps he will agree with those that have been produced by the Office for National Statistics, which has reported that the manufacturing and exporting sectors of the economy are now in recession and that output has fallen for two successive quarters. Does the hon. Gentleman accept those figures, which emanate from his Government?
Mr. Oliver Letwin: Does my right hon. Friend agree that, if the hon. Member for Ellesmere Port and Neston (Mr. Miller) does not believe the statistics, he could ask the hon. Member for Bolsover (Mr. Skinner)?
Mr. Heathcoat-Amory: Yes, they should sort it out between themselves. The Opposition are entitled to rely on official statistics that have been published by the Office for National Statistics. They confirm beyond doubt that those sectors of the economy are in recession. If that has not hit the hon. Gentleman's constituency, all that I can say to him is, "Watch out," because it soon will.
It is not an opinion but a fact that the economy is distorted and manufacturing is affected by the high pound and high interest rates. Meanwhile, the extra spending that is signalled in the review will add to pressures on the Bank of England. A looser expenditure policy will cause interest rates to remain high for longer than would otherwise have been the case and it may increase them further. The increases that were signalled by the Chancellor on Tuesday could drive the economy further into recession.
Mr. Christopher Leslie: I am trying to grasp the right hon. Gentleman's meaning. The Opposition say that public expenditure is too high. Which of the public services of health, education and anti-crime policy would the right hon. Gentleman cut?
Mr. Heathcoat-Amory: Perhaps the hon. Gentleman will contain himself until I come to deal with the details in the public expenditure document. At this point in my speech, I am setting out the economic background and showing that the entire strategy rests on foundations that the Government are removing one by one.
It may be unfashionable to rely on the claimant count as a measure of unemployment, but it is an arithmetic fact that that count has risen for two months. Even if the Government dismiss that as being an accurate estimate of unemployment, the increase is already adding to expenditure from the social security budget. Under the Government, social failure bills are going up. It is remarkable that the Government's strategy report assumes no increase in unemployment. That is not just unusual; it is extremely foolish. Page 42 of that report states:
"Unemployment is assumed flat at its April level."
The Government assume that, throughout the three-year period, unemployment will remain at what might be the all-time low that was achieved in the spring or summer of this year. That is a totally unrealistic assumption, and it means that the social security projections in the documents are already unrealistically low.
Mr. Geraint Davies: Does the right hon. Gentleman accept that alternative statistics show that, in the past
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three months, the claimant count has gone down by 54,000? What is more, when the previous Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), who is in his place, carried out this analysis, instead of assuming stable unemployment he assumed that it would fall. [Interruption.] The right hon. Gentleman should ask his right hon. and learned Friend. It is true. The Conservatives say that we are imprudent. When they were in government, they were imprudent.
Mr. Heathcoat-Amory: We bequeathed to the Government a golden economic legacy of sustainable growth, steady inflation and falling unemployment. It is an arithmetic fact that the claimant count has started to rise, and that adds to the Department of Social Security bills.
Sir Michael Spicer: What conclusions would my right hon. Friend draw if unemployment went up in the way that he suggests just as the new deal came into play?
Mr. Heathcoat-Amory: Of course, the new deal is yet another burden on the social security budget. I shall come to that. All the Government's welfare reforms have cost money, and that one is no exception. Despite the promises by the Prime Minister and others before the election that all the extra expenditure on health and education would be paid for by social security reforms, those reforms have all cost money and have not saved it.
It is not just growth and unemployment that are already going wrong under the Government. Savings are a vital component in the economy if expenditure is not simply to be paid for by increased taxation. The Red Book that was published in March shows that the savings ratio is due to fall from its record level in 1997 when we lost office. It shows that it will fall in 1998 and that it will fall further in 1999 and further in 2000.
The Office for National Statistics recently published its arithmetic, which shows that the four-year fall in the savings ratio has been achieved in less than one year. That is not surprising. We warned the Government that, if savings were taxed, savings would fall. That is not a complicated matter: it is easy to understand. In their first Budget, the Government carried out a £5 billion raid on pension funds. When one adds to that the abolition of personal equity plans and tax-exempt special savings accounts, the two most successful savings vehicles of all time, it is hardly surprising that people save less. That was recorded in the Red Book. What we did not know at the time was that that four-year fall would be achieved in less than 12 months.
It is not just savings that are falling; investment is down as well. There was much hype about public sector investment in the Chancellor's statement, but, again, we have only to go back to the Red Book—which is, after all, only three months old—to find that, despite everything that the Government are trying to do, investment in the whole economy is due to fall again next year and to fall further the year after. Business investment has fallen from its peak in 1997, when we lost office, and is due to fall further this year, next year and the year after, so the Chancellor has locked into this three-year expenditure programme while knocking away the foundations on which that economic revenue depends, and it is irreversible.

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The Chief Secretary told us about some marvellous new Cabinet Committee, which will get all this money back if Departments do not perform. If class sizes fail to fall, all the money will be clawed back from the Department for Education and Employment. If waiting lists go on rising, the Department of Health will be punished by having to return the money to the Treasury, so this is a recipe not for prudence, but for ruin. What we are faced with, and what the Government should worry about, is unemployment already going up, manufacturing output coming down, savings coming down, investment coming down and debt going up.
The Chief Secretary got into a most awful muddle about debt, but I think that he did finally admit that debt is going to rise. He was perhaps somewhat confused by the fact that, in the Red Book that was published at the time of the March Budget, projected debt was due to fall over the medium term—that was promised on page 121—but, a few months later, all that was thrown away and replaced by what one might call the Blue Book, which stated on page 43 that public sector net borrowing was due to go up every year. I think that we did finally get him to understand that, but that rise contrasts sharply with the record of the previous Government, who, at a similar time in the economic cycle, repaid massive quantities of debt.
I have not even mentioned the balance of payments. The Chancellor certainly did not mention it during his statement, but it is again a fact that the balance of payments is now going into alarming deficit. The Red Book did at least have the grace to note that the balance of payments was moving from a surplus of £4.5 billion last year—when we were in office—to a deficit of £6.5 billion next year, so that is another thing that is going wrong for the Chancellor and the Chief Secretary, just at the moment when they are making these irreversible commitments for up to three years hence.
Who will pay for all this? One group is public sector workers. Their pay is already lagging behind. Average earnings in the public sector in the year to April—again, I rely on the Office for National Statistics for these figures—rose by 2.8 per cent. In the private sector, they rose by 6.2 per cent.
Mr. Leslie: Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory: I will not give way to the hon. Gentleman again because I am going to come to his point. I know that he is very excitable, but, if he will just contain himself, I will come to the point about expenditure on the health service and social expenditure generally.
In the face of that distortion, the Government have announced that their so-called independent review bodies will now tie that same group of workers to a 2.5 per cent. inflation target. The Government are missing their target, but they want the public sector to be paid as though they had met their inflation target. In each Budget, and we have had two already, the Government will go on putting up duty on tobacco, drink, road fuel and heating fuel; all those will be increased way above inflation. Then up will go the cost of borrowing and of mortgages. Up will go council tax. All those will increase by far more than 2.5 per cent. The Government are putting up the prices,
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and it is public sector workers who are expected to accept wage increases of 2.5 per cent. That is a true reflection of how this Government value the public sector.
Mr. Darling: I am sure that public service workers will be very grateful that comrade Heathcoat-Amory is riding to their rescue. If I understand his argument correctly, he is saying that public service workers should be paid more and that the Conservatives welcome the spending on health and education, yet the whole thrust of his argument is that we are spending too much. Will he now tell us how much less he would spend and what he would cut?
Mr. Heathcoat-Amory: That distortion in the economy is entirely of the Government's making. It was they who put up prices in their Budget. We had two Budgets in the space of eight months which increased indirect taxes way above inflation, and now they have the brass neck to say to public sector workers, "We missed our target and we want you to be paid at the rate of the inflation target that we missed."
Mr. Leslie rose—
Mr. Heathcoat-Amory: I am coming to the hon. Gentleman's private obsession, which is the public services, and health and education in particular.
We did find extra money for those priority services, particularly health and education, throughout our time in office, and we do welcome the fact that the Government are belatedly trying to keep their promises over class sizes and waiting lists, which they broke in their first year of office. They have a good deal of ground to make up because, last year, real expenditure fell below what our plans were: they inherited and kept to our cash totals, but higher inflation in the public services meant that real expenditure on health and education fell below what we had planned.
In addition, we know that the extra money that we are glad the Government are putting into the priority services will be soaked up by the damage and destruction that have already been caused in those services by, for example, the abolition of compulsory competitive tendering, the abolition of tax relief on private health insurance, the introduction of the minimum wage, and so on. Therefore, we know that the money that is going in will not all go towards patient care—[Interruption.]
Mr. Deputy Speaker (Mr. Michael J. Martin): Order. The hon. Member for Somerton and Frome (Mr. Heath) should not be reading a book in the Chamber.
Mr. Heathcoat-Amory rose—
Mr. Darling: Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory: I give way.
Mr. Darling: I am listening to the right hon. Gentleman's argument, even if Liberal Democrat Members are not. So far, the right hon. Gentleman has said that he welcomes our increased spending on health

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and education. He wants more pay for the workers, so what is he going to cut if we are spending too much overall?
Mr. Heathcoat-Amory: I am coming to that next.
We did increase expenditure on priority areas, but in the context of an affordable and disciplined total. We did not draw cheques on the future three years hence and just hope that something would turn up. Our spending reviews—this answers the right hon. Gentleman—were genuine, finding money from one programme to spend on another.
That is what the Prime Minister himself promised. It was he who spotted that he was going to have difficulties if he won an election, so he said:
"as we get the welfare bills down … then we can release more money into education and health".
That could hardly have been clearer. Not only did he promise to get the welfare bills down, but he made it clear that the order of things was that that had to happen before he released more money into education and health.
Not only have the Government now got that the wrong way around—they are spending money on health and education before they have touched the reform of the welfare state—but the Prime Minister is wriggling off that promise about welfare reform. In Prime Minister's Question Time yesterday, the right hon. Gentleman started to temporise and to say that he did not mean to cut anything or do anything nasty like reducing anything; he just meant that he wanted to study everything and perhaps to increase spending—by a little, or possibly a lot. That is exactly what he is doing.
The splendid glossy document which I have here—the comprehensive spending review—and which was published on Tuesday gives us a glimpse of what is really happening to welfare and social security expenditure. One has to look hard for the figures and it is odd that by far the biggest item of public expenditure—nearly one third of the total—is relegated to near the back. Sandwiched between the Department for Culture, Media and Sport and the cross-departmental review of provision for young children—both titanic items of expenditure—we find out what will happen to nearly one third of public expenditure. Just as we suspected, it will go up and up. Once all the fiddles and changed statistics are added back in, it will increase by £37.5 billion.
That was not an easy calculation for the House of Commons Library to make, but it was done by adding back the tax credit that had been reclassified. If one adds back the 80 per cent. of working families tax credit, one arrives at an increase that is almost as great as the total extra that the Government plan to spend on health and education together—the extra was disguised as an accounting adjustment.
The Chancellor and the Government more generally make great play of their commitment to transparency. A few months ago, they published a ludicrous document entitled "Your Right to Know"; they talk endlessly about accountability and openness; and they said that all the figures were to be transparent and easy to understand.
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However, buried in the accounting adjustments we find working families tax credit and the true picture emerges if that is added back.
Mr. Mike Hall: To demonstrate the transparency of the right hon. Gentleman's policies to the House, will he say which part of the benefit bill he will cut?
Mr. Heathcoat-Amory: The Prime Minister and his Ministers promised to reform the welfare state, but I have a suggestion for the hon. Gentleman: the Prime Minister should carry forward the reforms that we implemented. If the hon. Gentleman glances at the figures, he will see that, in the past three years, spending on social security increased in total—not year by year—by only 1.5 per cent. in real terms. That budget was virtually flat. If the Government are serious about welfare reform, why did they not take over the reforms and the spending profile that we bequeathed them? Because of the savings, which we were implementing and not merely talking about, we were able to spend on other priority areas, such as health and education.
The Government have failed on a central plank of their expenditure strategy. The true picture is of a colossal and continuing failure to reform the welfare state. As a result, the Government have embarked on a three-year commitment to spend money that they do not have and to pledge to the public services money that may never be earned.
The comprehensive spending review was billed as a Budget—it was that important. If so, it is the fourth that the Government have presented in a year. We have had the July Budget last year, a pre-Budget in November, the March Budget this year and now the spending review. Each time, the Government have increased their spending commitments and weakened the ability of the British economy to deliver the money on which those depend. Now they will have no chance of repaying national debt—they will not even balance the budget. They are going on a four-year spending spree with the public's money and, as usual, the public will end up paying.
5.54 pm
Mr. John Hutton: I am grateful to have the opportunity to make what I hope will be a short contribution to the debate. I must first warmly welcome the conclusions of the comprehensive spending review, which sets out a sensible direction for the Government to take in meeting their objectives of promoting social cohesion, maintaining strong public finances, investing in modern and effective public services, and ensuring real value for money for the taxpayer by new disciplines over public spending, with proper efficiency targets and effective monitoring of public service outcomes.
The prudent decisions that we have taken on spending in the first two years, together with our actions to get public borrowing under control, have helped to lay the foundations for the new three-year spending plan announced on Tuesday by my right hon. Friend the Chancellor. The Government's spending plans are based on cautious estimates for economic growth, which is right. It is good that the fundamental assumptions that underpin the comprehensive spending review have been verified by the National Audit Office, which will give them

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considerably more weight than previous Government attempts to predict economic trends. Labour Members certainly came to treat with extreme caution the figures of the previous Government in all those areas.
I also have no doubt that the new spending plans fully reflect the priorities of the British public, who want our national health service to be put on to a secure, long-term growth trajectory, and our schools and colleges to be modernised and brought up to date with the best technology, teachers and facilities. The British public want a better deal for Britain's pensioners and improvements in our public transport infrastructure.
My constituents, in particular, want the Government to renew and redouble their efforts to deal with the problems of economic regeneration in those areas that have suffered through major job losses in traditional industries. We also want major improvements in our housing provision, in particular social housing, which was deliberately allowed to fall into decline by the previous Administration.
Those are the public's priorities, and, at long last, they are also the priority of the British Government. It is the measure of public support for those proposals that is the root cause of the Opposition's present difficulties. Their response to date can be described only as chaotic. They have three main arguments against the proposals in the comprehensive spending review. First, they allege that spending is too high and will propel us into a recession—that was the view of the shadow Chancellor on Tuesday. Yet, secondly, the Tories want to claim that they support the extra spending on the national health service and schools. As my right hon. Friend the Chief Secretary to the Treasury said clearly from the Dispatch Box, they cannot have it both ways. Their third line of argument is that the new spending plans are all a con. I understand that the shadow Health Secretary was yesterday trying to persuade lobby correspondents that the £21 billion of additional expenditure for the NHS amounted only to four shillings and nine pence, that we were fiddling the figures and that they could not rely on our estimates.
The Opposition cannot have their cake and eat it. If they are claiming that the figures are fiddled and that we are spending less, how can they be propelling us towards recession? To add insult to injury, the Conservatives are also claiming that their spending record was better than ours and that they spent more than we are proposing on all those key areas. Those arguments simply do not add up.
The Opposition could best be described as going through some sort of collective psychotic episode about the figures, which has been marked by hallucinations and delusions. They cannot separate fact from fiction. In truth, they are in a complete mess. They do not know whether to support the additional spending or oppose it.
If my arithmetic is correct, the shadow Chief Secretary was asked on three occasions tonight to say where he would cut the expenditure that we are proposing. He simply failed to answer the question. The Conservatives cannot agree among themselves whether we are spending too little or too much, and they are attempting to deny
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any personal responsibility for the dire state of many of our key public services, despite the fact that they formed the Government for 18 years.
Mr. Loughton: Will the hon. Gentleman give way?
Mr. Hutton: No. This is a serious debate, so I have no intention of giving way to the hon. Gentleman.
The Conservative party's behaviour has been an unedifying display, providing further vivid confirmation—if any were needed—of the wisdom of the electorate's decision on 1 May last year to throw it out of office. I am sure that when the Conservatives begin their listening to Britain exercise, the public will spell out their support for the measures that the Government have announced. In that way, the Conservative party will be able to undergo the necessary therapy and counselling that it so obviously needs. Given its record in office, I cannot think of one good reason why we should listen to any of its criticisms of the comprehensive spending review.
On the detail of the review, I particularly welcome the additional spending on education, the national health service and the science base. The new money is an investment in our future as a modern, healthy and prosperous society, and I look forward with great anticipation to seeing how the new policies will bear fruit in my constituency.
The new commitments on further and higher education are also very good news, and I am glad that the cap on students entering higher education has been lifted. I particularly welcome the additional £200 million for further education. Further education colleges have a major role to play in helping to develop local economic regeneration initiatives—that has certainly been the experience in my constituency. I pay tribute to the excellent work of both Furness college and Barrow sixth-form college in helping people in my constituency to come to terms with the economic shock wave that hit us a few years ago. During that difficult period, both the colleges provided new opportunities and career options to hundreds of my constituents. They have done a fantastic job, and the new money should make the services that they provide even better.
On economic regeneration, the Government's new deal for communities initiative, under which a further £800 million will be invested in economic support to areas of high deprivation over the next three years, will be welcomed across the country, as will the proposals on the single regeneration budget. That is a hugely important area of Government responsibility, which will promote social cohesion and social inclusion—it goes right to the heart of what we should be doing in government.
My constituency suffered especially badly between 1990 and 1995 owing to the rundown in defence spending under the previous Government and the latter of the two Tory-inspired recessions. Over that period, 13,000 jobs were lost in the Furness area—in more stark terms, one in three of the work force in the area lost their jobs. Parts of my constituency remain unemployment black spots, particularly Barrow island, Hindpool and Central wards, where unemployment is almost twice the national average. That is totally unacceptable.
Barrow scores highly on the Department for the Environment, Transport and the Regions measurement of economic deprivation. The Department's figures reveal

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serious social and economic problems, which we must begin to tackle effectively. In the 1998 DETR ranking of deprivation, Barrow and Furness came 55th out of 354 local authority areas; in 1991, it had been 94th. The 1998 figures show that Barrow is the most economically deprived part of Cumbria and that it is in the 15 per cent. of most deprived areas nationally.
I believe that the new spending priorities in the comprehensive spending review will allow us to make a new beginning. I fully understand the case for tying the new resources to innovative and well-focused initiatives, and I entirely agree with the proposals on money for modernisation. I believe that local agencies in my constituency will be able to participate actively in successful regeneration programmes—we have an established track record of doing so. Like many of my hon. Friends, I look forward to hearing details of the pilot scheme for the new deal for communities; I understand that we shall hear them from my right hon. Friend the Deputy Prime Minister next week.
My constituency is directly concerned with the defence procurement budget; everything that the Government spend on defence directly affects its economic well-being. I am absolutely delighted with the conclusions of the strategic defence review. In particular, I think that the decision to proceed with a replacement for the Invincible class of aircraft carriers—two new 40,000 tonne aircraft carriers will be built—is exactly right. It will allow Britain to continue to deploy forces around the world in support of the United Nations and our NATO allies or, if the need arises, independently. It will also allow the current amphibious capability of the Royal Navy to be fully effective; I remind the House that, in my constituency, we are building the replacement amphibious landing ships for the Royal Marines. When the carriers come into service, the Royal Navy will once again have a truly effective, modern and capable amphibious force.
I also strongly welcome the decision in the strategic defence review to proceed with the procurement of two new Astute class hunter killer submarines. I appreciate that difficult decisions have had to be made about the Royal Navy—I am thinking in particular of the decision to reduce the number of strategic submarines nuclear from 12 to 10. I understand why the Government found it necessary to make that decision, but it is hugely important that the reduction is not made at the expense of a new and capable class of submarines. We should by all means consider taking out of commission the older SSNs, but the Government would have made a serious mistake if they had decided not to proceed with the procurement of the two new submarines.
Taken together with the existing order book, the decision to build the new carriers and submarines means that my constituents who work for GEC Marine at Barrow can look forward to 15 years of job security and stability. That is in stark contrast to what happened under the Conservative Government, when two thirds of the work force at GEC Marine lost their jobs, because the Government had no long-term commitment to the future of shipbuilding and had a completely ineffective strategy on procurement decisions. Many of the key procurement decisions that my constituents were waiting on were delayed and delayed, but I am now absolutely confident that my right hon. Friend the Secretary of State for Defence and his colleagues in the Ministry of Defence will take the decisions on time and in a competitive
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context, so that my constituents can look forward to the solid future that they were denied by the Conservative party.
I believe that the comprehensive spending review will provide the Government with a solid platform on which we can build a modern, fair and decent society. It has my very strong support.
Mr. Deputy Speaker: Before I call the next hon. Member to speak, I remind the House that Madam Speaker has set a 15-minute limit on all Back-Bench speeches. Of course, hon. Members do not need to take the full 15 minutes.
6.6 pm
Mr. Malcolm Bruce: I welcome the Chancellor's Tuesday statement, particularly the extra funds for the national health service and for education. I do not think that the Chief Secretary was expecting me to say that, but I said it on Tuesday and I am very glad again to put it on the record. I also said on Tuesday that I knew that the Chancellor would eventually find the war chest if only he had the will to look for it.
I believe that the Chancellor is right to leave a current budget surplus over the next few years until the outlook for economic growth is clearer, and I accept the Government's case for adopting a more cautious forecast. However, there are many uncertainties and some real clouds on the horizon, as today's chambers of commerce report confirms. The Government must take seriously the threat to British competitiveness and the possibility that investment will leave the country because of the strength of the pound. I hope that the Chancellor will avoid the boom-bust approach to financing public services, which is bad for our schools, hospitals and economic stability.
I suspect that the Chief Secretary would not expect me to concentrate on areas of agreement; constructive opposition requires me to focus on some of the statement's deficiencies and on what I believe the Government could and should do. The Government's use of cumulative cash figures and their blind eye to the effects of inflation must delude no one about what is really going on.
Overall, current Government spending will rise only 1.4 per cent. in this Parliament. That is half the 2.7 per cent. rise under the Tories in the previous Parliament, so it is no bonanza, and I have no idea what the Tories are talking about when they accuse the Government of profligacy for proposing half the increase that they delivered—which did not exactly secure re-election.
The fact that no extra money was announced for 1998–99 tends to be overlooked in the euphoria. It is no foregone conclusion that progress will be rapid on class sizes and hospital waiting lists this year. There is certainly no jam today, and perhaps not even tomorrow. The supertanker may prove extremely slow to turn round.
In the light of the extra money allocated, it is surprising that the Government have not been able to promise more solid service improvements. We are told that the extra £40 billion for health and education will allow the early pledges to be delivered. Well, I hope so, but I seem to remember that that was supposed to cost a mere £100 million for each service. We do not seem to be getting very much for our money.

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The Liberal Democrats would like a cut in class sizes for eight to 11-year-olds, in which age range 40 per cent. of children are in classes of 31 or more; a target of reducing maximum average primary school class sizes to 25 or fewer; early-years education for all three-year-olds whose parents want it—I acknowledge that the Government have made some commitments on that; a cap on hospital waiting times of six months; and the abolition of all eye and dental check charges. I am sorry that more of those substantive policies did not find their way into the Chancellor's statement or emerge from the Departments.
The Government publication, "Modern Public Services for Britain", promised
"4.7% a year, above inflation, for three years"
for the NHS, and
"an increase of 5 per cent. a year on average above inflation between 1998/99 and 2001/2002".
for education.
Mr. Geoffrey Clifton-Brown: I assume that the hon. Gentleman's wish list represented new Liberal Democrat spending commitments. Will he be kind enough to tell us what those would cost and what the overall spending target would be if his party ever got anywhere near power?
Mr. Bruce: Yes, I will, as I always do, when we produce our alternative Budget and our annual statement. Indeed, we published a statement on spending a few weeks ago, but it has clearly not yet reached Conservative central office.
Yesterday, the Prime Minister said that Labour's promises held good, whatever the economic circumstances, and even if inflation went up. That is misleading, because the Government have promised cash figures based on their 2.5 per cent. inflation forecast, which may be overshot, as it has been for the past two years. An overshoot of only 1 per cent. would wipe out £5 billion of health and education spending over the three years.
Many economists, including those who advise the Government, think that inflation will overshoot. In the economic and fiscal strategy report, the Treasury promised that extra cash would be available to compensate for inflation,
"if inflation varies substantially from forecast"—
what "substantially" means is unclear—but yesterday, in the Treasury Select Committee, the Chancellor told me that there would be no more cash, no matter how much inflation went up. With respect, that means that the Government's pledge is so much pie in the sky. It also means a potential for more black holes to open up in the Government's spending promises.
As the Government's nominal revenues are boosted from higher inflation, and given the sorry state of education and health funding, which we are now trying to remedy, I believe that the Chancellor should protect those two areas from the consequences of higher inflation during this Parliament.
Mr. Leslie: On the subject of black holes opening up in finances, the hon. Gentleman will remember that the
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Liberal spokesperson on tax, the hon. Member for Kingston and Surbiton (Mr. Davey), said that their party would increase the personal allowance for income tax to equalise it with capital gains tax, which the Library has costed at £17.5 billion, equivalent to 8p on income tax. How would he pay for all his promises?
Mr. Bruce: The hon. Gentleman is new to the House and he is a bit repetitive. I knew that it was a mistake to give way to him. My party produced a costed manifesto, acknowledged by independent people as the most honest and objective account of party intentions from any party, and his party did no such thing. We will do what we always do and produce an annual alternative Budget and a clear, costed programme.
The Government have only small reserves to accommodate any need for more cash: a mere £1.5 billion for departmental budgets next year, out of a spending total of £175 billion. I only hope that we do not have another BSE crisis, never mind an overshoot on inflation. I am registering a genuine, serious concern about the Government's ability to deliver, and I hope that they will think again.
This has been an incredibly secretive, centralised and non-consultative process. On Tuesday, the Chancellor announced the allocation of £1 trillion of public money, without so much as a sniff of consultation with the House, the public, or even the Labour party. Indeed, as far as I can tell, half the Cabinet were not consulted.
The outcome was presented in reverse. We were not told what the costed policies were; we were told how much will be allocated, and the policies will come later. Apparently, what the people think has already been quietly digested in secret. We believe that the performance contracts, which are in principle a good and interesting development, should be with Parliament, not with the Treasury, and that there should be much more public consultation on spending priorities and departmental targets. It is our money and we, the public, have a right to some say in what the priorities should be.
The Government seem to be taking a very restrictive attitude to public sector pay, but that is not the current inflationary threat, as pay rises in the public sector are at 2.5 per cent., below inflation, whereas private sector rises are at more than 6 per cent., yet the Government say that pay review bodies must take into account the need for efficiency savings; the need to hit the Government's 2.5 per cent. inflation target; and affordability against budgets. Public sector workers appear to be being used as the Government's shield against fears that there is too much loosening of policy.
The practical concern is that good education, for example, depends at least as much on attracting and retaining good teachers as on replacing dilapidated buildings. We accept that the Government must be responsible about pay, but responsibility also implies that we must encourage some of our best people into the public services and not end up, as I fear we will, in a vicious circle of lower pay and lower than desirable standards.
Let us consider some of the Government's specific boasts. The Secretary of State for Health was certainly being boastful on the radio this morning. The increase in spending on health of about 4.75 per cent. over the next three years will take the average real rise over this

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Parliament to about 3.7 per cent. a year, assuming that the Government stay within their inflation target. That compares with 4.1 per cent. in the previous Prime Minister's first five years; 3.3 per cent. over his entire premiership; and 3.1 per cent. on average over the 18 years of Tory government. It is healthy growth, but it is not unprecedented, as is being claimed. Indeed, in the three years from 1989–90 to 1992–93 average health spending rose by 5.5 per cent. per annum, yet waiting lists rose during that period, although the number of people waiting for more than a year fell. Therefore, the Secretary of State for Health is misleading us when he says in his press release that this is
"the biggest cash injection in the history of the National Health Service."
In the only meaningful terms—real money—the right hon. Member for Huntingdon (Mr. Major) did better seven or so years ago.
The budget on education will rise by 3 per cent. a year in real terms over the Parliament, with 5 per cent. rises over the next three years. During the last Prime Minister's first five years, the rise was 2.6 per cent. a year on average or 1 per cent. over the entire period in office. Therefore, this rise is much better, but it is certainly not a bonanza.
Yet again, the Government are paying the price of two years of going backwards on standards. I remind the Chief Secretary what the Secretary of State for Education and Employment said on 11 April 1994 when he was in opposition:
"It is a scandal that over a million of our children in primary schools are taught in classes of over 30."
Since then, the percentage in such classes has risen from 28 to 34.8 per cent., and to 40 per cent. in the eight to 11 age group. If inflation rises by more than the Government forecast, these real rises, impressive as they look initially, will soon melt away.
Mr. Darling: I wonder what the leader of the Liberal party meant when he 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.]
That seems to be a rather different story from the one advanced by the hon. Gentleman today.
Mr. Bruce: Absolutely not. What my right hon. Friend said then and what we said in our manifesto was that we had to start investment in health and education on day one of this Parliament. That is what we 46 Liberal Democrats have been elected to fight for, and that is what we are doing. Of course, we are in favour of ensuring value for money and agree that it is necessary to finance, not borrow, the extra expenditure. That is why we committed ourselves to putting an extra 1p on income tax, which the other parties were not prepared to do.
You, Mr. Deputy Speaker, the Chief Secretary and I all have an interest in what happens in Scotland. According to the Government's own figures, the Scottish departmental budget will be 1.5 per cent. lower in real terms in 2001 and 2002 than it was in 1994–95 when Ian Lang was Secretary of State for Scotland. He was not conspicuously popular. Over the entire Parliament, the real budget for the Scottish block will grow at an anaemic 0.6 per cent. a year in real terms. That is a fraction of the
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4.7 per cent. annual real growth rate in the first five years of the last Prime Minister or even the 2.9 per cent. real rate through his entire period in office. That is no bonanza for Scotland.
Can the Chief Secretary confirm that the health budget in Scotland will rise by only 2.8 per cent. in real terms this Parliament, compared with an average 3.1 per cent. during the 18 years under the Tories? As I said in the House on Tuesday, that is not John Major plus, but John Major minus.
On other occasions, I have raised issues relating to my constituency. I live in an area of strong population growth where, for example, we need a new secondary school—a new Garioch academy—and new primary schools in growth points such as Kintore. I hope that the Government's injection of funds will allow those projects to come to fruition. So far, we have made only limited progress. In the small town of Ellon, the health board promised more consultant clinics in the town, but it has not been able to find the resources to deliver that, let alone resources for the community hospital that the majority of people in the town think is necessary.
It is on such specific performances that the Government will be measured, not on the billions of pounds or on comparisons of who invested more and who less. It is on what will translate into real, measurable terms. Naturally, we welcome the public sector boost that was announced on Tuesday. However, we are entitled to say that there is a big difference between attractive headlines about big numbers and the real palpable transformation of Britain's public services. We will not be impressed by the former until the Government make real progress on delivering the latter, and I am sure that the British people will give the same verdict.
6.24 pm
Mr. Andrew Miller: Before I come to the substance of my remarks, I cannot help but comment on the speech of the hon. Member for Gordon (Mr. Bruce). Given that the Liberal Democrat and Conservative parties have been screaming for months about when the review was to come, if they had something of substance to say in the context of the review, it would have been helpful if they had submitted it to the Treasury.
Mr. Malcolm Bruce: We did.
Mr. Miller: If so, what is the complaint about? How can the hon. Gentleman say that he had no opportunity to comment? Obviously, he has commented, but now whinges because he has not got exactly his way. It is hardly surprising that we did not follow the Liberal Democrat party's advice, as the intervention by my hon. Friend the Member for Shipley (Mr. Leslie) made clear.
It is clear from Conservative Members' comments that there is a fundamental lack of understanding about prudent investment in the public sector. It is clear from constituencies such as mine how a lack of prudent investment in the public sector has led to social exclusion, which in turn has increased costs to the public purse. That was clear throughout the term of the previous Administration.
There was an investment programme in housing estates constructed in the pre-cast reinforced concrete—PRC—style which was designed to modernise them and bring

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them up to a decent standard, but the Conservative Government stopped it. As a result, some houses run the risk of having to be demolished. That was a crazy, short-sighted approach to public expenditure. Since my right hon. Friend the Deputy Prime Minister released some capital receipts as part of his commitment to public sector housing, that programme is back on track. As a result of the programme, we have citizens living in decent homes and the housing stock will have a longer life expectancy. That is prudent use of public money.
I do not entirely blame the previous Administration for the decline in employment because some job losses were technology driven. In my constituency, massive numbers of people who previously worked in the vehicle and petro-chemical industries found themselves unemployed and, under the Conservative Government, unemployable. No attempts were made, except for the occasional Mickey Mouse scheme, to get people back into real, permanent jobs. As a result of this Government's initiatives, starting with the new deal and including the many steps to integrate programmes across departmental boundaries, people are getting back into real jobs. That is prudent use of public money.
I am thinking, in particular, about a discussion I had with THI, which is developing a large leisure complex in my constituency adjacent to one of the poorest communities. The developer is already prepared to work with public sector partners—training and enterprise councils, schools, further education and the Employment Service—to ensure that the jobs that emerge from its investment will benefit people from the poorest part of the community. It is responding positively because it is clearly to its advantage to have people trained locally to meet its needs. It is responding to an initiative by this Government which, again, reflects prudent investment.
I intervened earlier to touch on my lack of confidence in the Conservative party's description of what is happening to the real economy. The investment that I have just spoken of will create 900 jobs next year, and enormous strides have been made in partnership with the local authority and the Department of Trade and Industry to create many other jobs in the area.
I am particularly encouraged by a photograph on the front page of my local paper, which bears a remarkable similarity to that rotten and misleading Tory party poster of 1979, "Labour isn't working". That was the lie then and that is the lie now. The photograph shows people willingly queueing up to apply for jobs available at Vauxhall Motors in my constituency—jobs that have come to Britain as a result of the Government's prudent public investment.
Had the Conservative party's analysis of what is happening to the economy been accurate, those jobs would have gone to Russelsheim in Germany, to Belgium or to Spain. That did not happen. They came to the United Kingdom as a result of the Government presenting the best case in partnership with the company, the local authority and many other private sector players. Again, that is prudent use of public money.
Mr. Oliver Heald: Tell that to Dunstable.
Mr. Miller: I remind the hon. Gentleman that, as a result of the Government's initiative, the plant at Luton
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has been saved. Under the Conservative Administration, the Dunstable van plant closed. The hon. Gentleman should get his facts right.
I come now to the substance of my remarks and, in particular, the aspect of the comprehensive spending review that gives me a great deal of pleasure—the reference on pages 77 and 78 to investment in and promotion of science and innovation.
Under the previous Administration, since about the mid-1980s, there has been a gradual and systematic decline in investment in research and development in Britain. There is no doubt about that. The House discussed that earlier this week when debating a report from the Select Committee on Science and Technology. The Chairman of that Committee, the hon. Member for Rayleigh (Dr. Clark), set out the case succinctly.
As a result of the comprehensive spending review, there is a massive commitment to British science, something for which the Labour party has been pressing for many years. We are delighted with that investment because we believe that it will be the seedcorn for future investment in Britain
My hon. Friend the Member for Weaver Vale (Mr. Hall) referred in an intervention to the Daresbury laboratory in his constituency just down the road from me. I was delighted to see £100 million being committed to synchrotron radiation in the comprehensive spending review. My hon. Friend has pressed for that investment since 1993. It did not happen under the Conservatives, but as a result of the comprehensive spending review, subject to the business case, and as we are talking about prudent investment, we shall now see that investment.
The case for that investment is solid. This is the laboratory that helped Dr. John Walker to win the Nobel prize for molecular biology last year. He worked from Cambridge, but he used the X-ray facilities of the Daresbury laboratory. That is the business case for the laboratory, and I hope that when the Department of Trade and Industry and the science councils consider that programme, the project will promote science in the north-west of England. I hope that my right hon. Friend the Chief Secretary will pass those comments on to his right hon. and hon. Friends in the DTI.
Mr. Peter Brooke: Before the hon. Gentleman goes overboard with euphoria about the injection of money into university research, will he accept that, until we see the small print, we shall not know what matching funding will be required and, therefore, what distortion may also occur in research into the humanities?
Mr. Miller: I was not referring to university research; I was referring specifically to the Daresbury project. I hope that the right hon. Gentleman understands that that project creates a three-way partnership between the research councils, the universities and the private sector, producing not only an expansion of knowledge in pure science for Britain, but massive results that are transforming themselves into innovation—just the sort of thing that the Government are seeking to promote. I hope that the right hon. Gentleman will support my comments in that respect.
All those developments—the local ones relating to investment in housing and jobs, the crossing of boundaries bringing together social services and health and new deal

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partners in the poorest parts of my community, what is happening in the manufacturing sector in my constituency and the seemingly esoteric research which is, in reality, the practical way of rebuilding Britain—are examples of the prudent use of public money. I am delighted to see commitments towards the continuation of such programmes in the comprehensive spending review. I am sure that in my constituency and in the north-west of England, we shall see substantial benefits as a result of that review.
6.36 pm
Mr. Kenneth Clarke: The Chancellor of the Exchequer and his Treasury team, including the Chief Secretary, are proving increasingly incompetent in discharging their main role, which is to provide a stable economic background against which the country can achieve a reasonable level of growth without excessive threat from inflation or other shocks. We should always judge the economic statements made by a Government to the House by the likely impact in the medium term on the ability of business men to manage the growth of their businesses, and the effect that they will have on job creation, job security and living standards in the country.
That point is always emphasised in most of the speeches by Treasury Ministers, but I become ever more doubtful about whether they will achieve it. Ministers who frequently use the word "prudence" in every speech that they make are proving ever more imprudent in practice. They talk about a stable, medium-term view of economic policy, but now we have the fourth set of figures—the fourth policy announcement—presented as if it were a Queen's Speech, with the most surprising lurch of policy and tone that we have seen so far.
The iron Chancellor has gradually moved nearer to being an open-handed man, but the transformation to Santa Claus shows that there has been a dramatic change of direction, and that is what we criticise. It is imprudent, it will be regretted before the end of the Parliament and it is time that the House addressed it, as Conservative Members are, from a serious standpoint, rather than joining in the inevitable celebrations that take place on the Government Back Benches when largesse is being handed out to every lobby in sight.
Let me make clear precisely my position about some of the welcome increases in spending. There has never been a Chancellor or Chief Secretary who did not come here with some announcements that increased spending. It is the totality of public spending that we are criticising. There has not been an adequate choice of priorities. To commit to an excessive total over three years enables all the numbers to sound like telephone numbers, but it is reckless to do so regardless of what economic circumstances may bring.
Labour Members have asked for our position. Let me deal first with the priorities. The Chief Secretary should have used the comprehensive spending review to make hard choices on the priorities about which the Prime Minister talks. The Government's first priorities are health and education. Not surprisingly, I welcome that; they have been the first priorities of Governments for as long as I can remember—they were for the previous Government. Increased spending on the national health service is welcome, and I trust that it will be delivered over the next three years. I also welcome increased spending on
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education, including higher and further education, and I and my right hon. and hon. Friends trust that that, too, will be delivered.
I listened carefully to exchanges earlier between the Secretary of State for Health and my right hon. Friend the Member for Maidstone and The Weald (Miss Widdecombe). She did not demand that less be spent on health, but she put the spending increase into proportion. As the hon. Member for Gordon (Mr. Bruce) has rightly said, the figures were grossly exaggerated by the way in which they were presented. They are, in fact, fairly normal. The Secretary of State was wrong to claim that his increase was unprecedented, unless he was simply claiming that there had never before been a three-year increase. The growth in real terms that he announced is lower than the level during my last year as Secretary of State for Health, and lower than in the following year, when my successor, William Waldegrave, was Secretary of State. There have been previous increases just as large, as there should be when health is the priority.
Nor are the education figures exceptional. The Government have just about managed to deliver their election promise—I congratulate them on that—of increasing the proportion of gross domestic product spent on education. However, they have done so by a tiny fraction. I do not go along with the hon. Member for Gordon when he takes over from the left of the Labour party by demanding more big spending, but he was right to say that by the end of the Parliament, education will creep just above the proportion of GDP spent by the previous Government. The Government have just about delivered that pledge.
No one on the Conservative Benches—unless some particularly hard-line colleague is yet to speak—is going to demand that we spend less on the NHS or education. However, the rest of the Government's spending makes the review difficult to contemplate. We, too, gave priority to education and health, and our record bears comparison with the Government's new figures. However, we examined other priorities, and we restrained the growth of other Departments so that it was affordable. That has not been done in the comprehensive spending review.
It is easy for Government Back Benchers to welcome every increase. Most propositions advanced by spending Departments are desirable. The duty of the Treasury team—particularly the Chief Secretary—is to decide which of them we can afford this year, which to postpone and where more efficiency savings can be sought. That is what happens in an annual spending review, particularly in a fundamental review. The comprehensive review is not a new idea; when Michael Portillo was Chief Secretary, he and I produced big increases for health and education from a comprehensive review, but we also produced what turned out to be the beginning of control of public expenditure. That produced a steady decline in excessive borrowing during the last years of the previous Parliament. The control established then is now being thrown away.
Scarcely a Department of State has failed to get a pretty good settlement. Only the Ministry of Agriculture, Fisheries and Food appears to have done badly, and that is mostly because of the ending of compensation payments for BSE. Total expenditure over the next three years is due to rise by 2.75 per cent. in real terms above the rate of inflation. That is a tremendous loosening of public spending, and it bears no relation to what the

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Chancellor and the Chief Secretary said when they launched the CSR. It certainly does not resemble all the prudence that we were told about before the election, when we heard that new Labour would abandon the old high-spending approach and would no longer throw money at every problem. The rejoicing on the Labour Benches is because new Labour is doing exactly that.
It is almost impossible for the Chief Secretary to defend the 2.75 per cent. figure. Only three months ago, while he was in the middle of his comprehensive spending review, the Red Book revealed that the Government planned a much lower growth in public spending than they have been able to deliver. The increases are not some great economic breakthrough, but a total relaxation of what was intended to be controlled public spending.
The Government clearly know that that is so. They are trying to present their review in such a way as to minimise the impact on the outside world of their spending. The documents that we have received have reduced the amount of information available to the House about future spending. The Government have taken over our well-advanced move to resource accounting, and have taken the opportunity to change many definitions and seek to obfuscate what is happening.
The biggest increases are in accounting adjustments. No Labour Back Bencher has yet leapt to his feet to praise the massive increase in accounting adjustments, but I do not doubt that we shall hear from one sooner or later. The reason for that is the working families tax credit, which has quite wrongly been tucked away in the accounting adjustments. That is an attempt to reduce the otherwise appalling impact of a huge increase in the welfare budget. I was extremely critical of the working families tax credit during the Budget as I believe it to be inferior to the family credit that it replaced, and which used always to count as social security. It will prove a nightmare to apply working families tax credit. In America, it has proved extremely expensive, and it is easy for people to obtain it fraudulently. When the Government first announced the credit to the House, they had not done their sums properly. Now they have discovered the real costs, and they have tucked the credit away into the books, just as they have with other matters.
I welcome private finance, having helped to develop the private finance initiative during our last three or four years in office. I am increasingly suspicious about the Government's approach to the PFI, however, as they are going in for off-the-books accounting. Risk transfer is not being given the importance that it was given previously. How can the Chief Secretary justify not including the guarantee for the channel tunnel link as public expenditure? We are talking about £3.75 billion. No previous Government have regarded a guarantee for a debt—a taxpayers' guarantee—as not counting as a liability in public expenditure.
There is also talk of finding more areas in which receipts can be netted off against expenditure, which means not counting taxation as taxation, but using it to reduce the apparent costs of providing public services. Assumptions are being made about fraud, and about asset sales, which I do not think will be realised. The books have been altered to try to reduce the impact, and to bring the increase down to 2.75 per cent. in real terms over three years.
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I was impressed by an article by David Smith in The Sunday Times on 12 July about the effect of changing definitions for apparently purposeless reasons when presenting spending. He gave more detail than I have time for, but the most important point is that the Government have given up what we used to call the control total, our principal instrument for controlling public expenditure. We left out cyclical social security expenditure because we could not control it, but we bore down on the rest of expenditure, which was within the control of Departments.
Of course the Government have abolished the control total. In this year alone, it is going up by 1.2 per cent. in real terms. Over the next three years, the control total, which we used as our principal instrument for controlling public expenditure, is set to rise by 3.4 per cent. each year over and above inflation—in other words, in real terms. That is a relaxation of total public spending at an extraordinary time.
Why are we concerned? Most politicians are happier when they are spending money, our constituents are happier when we are spending money, and it has never been part of my approach to life to wear a hair shirt too readily. However, as I said, I am concerned about job security, living standards and the state of British business and commerce, which ought to be our principal concern. They will be the Government's concern before long, because the position is deteriorating. The Government have taken the extraordinary decision to abandon their control over public spending when everybody knows that the economy is slowing down fast and when there is increasing sign of pain.
Mr. Miller indicated dissent.
Mr. Clarke: I am glad that things are fine in Ellesmere Port, but one does not have to go far from Ellesmere Port to find engineering and manufacturing firms that are having a hard time.
Mr. Miller: He is talking down Britain.
Mr. Clarke: I am not talking down Britain. I want Britain to be a successful enterprise economy, but it will not be if it is run incompetently by the Treasury team.
Our constituents will understand why we ask where the money is coming from. That is a sensible question, which has been asked of Governments in the past and which we have asked when we have been in opposition. What do we get by way of an answer? The answer now is the same as Harold Wilson used to give—it is all going to come from economic growth—but it comes when people are more worried about economic growth than they have been at any time since the Labour Government took office, and they are right to be worried. The Government are anticipating a not terribly spectacular level of growth, and I agree with all my right hon. and hon. Friends who have spoken so far in believing that the Government are counting their chickens before they are hatched. That is an extremely reckless thing to do in economic policy.
I am by no means sure that the Government's forecasts will be achieved. I have no time to go into my usual arguments about why I think monetary policy is slowing down growth too fast. I agree with Dr. DeAnne Julius that, at the very least, policy should now be going into

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neutral. I think that the economy will slow down more than the Bank suggests and more than the Government suggest. Once the impact of the Asian crisis has arrived, it will slow down extremely rapidly. The result will be that the Government cannot pay for what they are promising today unless they tax more and borrow more. It is no good talking about the golden rule—borrowing, which is planned to rise now, will go up to a level that will cause the Government great political difficulties.
6.51 pm
Mr. Paddy Tipping: I am extremely pleased to follow my neighbour, the right hon. and learned Member for Rushcliffe (Mr. Clarke). I join him in recognising and praising the importance of a Government who are going to deliver on their election promises. The right hon. and learned Gentleman might not be sitting on the Opposition Back Benches now if he had been a member of a Government who could persuade people that they meant what they said and delivered what they promised. The comprehensive spending review and the document "Modern Public Services for Britain—Investing in Reform" give the Labour party an opportunity to forge a new contract with the people—a Government who deliver on their promises.
I start by praising my right hon. Friend the Chief Secretary for one promise that has had no publicity at all: in opposition, we made the promise that we would stop the large-scale sale of Forestry Commission woodland. Under the Conservative Government, a third of a million acres of woodland was sold; that environment declined, and public access opportunities were lost all over the country. When we came to power, we imposed a moratorium, and the Government have now made it clear that large-scale sales of Forestry Commission land will cease. That will enhance the environment and improve the landscape.
That decision has been generally welcomed, but the review goes further. I am pleased that a middle way has been found for the Forestry Commission. The lodges where people stay on holiday are to be refurbished and brought up to modern standards by using private sector finance. We are enhancing the environment and giving people more and better recreation and leisure facilities.
Much of the debate on the spending review has concentrated on the extra spending—the inputs on education, health, crime and disorder measures and transport. The shadow Financial Secretary acknowledged that this was the biggest spending bonanza since the war, but he did not seem clear about where he stood; he was not sure whether he was for it or against it. I liked the tack he took—talk about the cavalry charging down the hill to protect and enhance the pay of public sector workers. Cleaners and dustbin men will remember the 18 years under the Tories, and will never see them as saviours.
Unlike my colleagues, I want to focus on the processes in the comprehensive spending review, because it is apparent that it contains several measures that are good public and economic policies. When the glitz and presentation has been cut away, what is left is a spending plan over three years that brings consistent and steady growth to public services, especially education and the health service, of about 4 per cent. a year in real terms.
That does not sound like a lot, but head teachers, hospital managers and people who work in the public services acknowledge that there is light at the end of the
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tunnel. What they cannot live with is uncertainty, so having a planning framework of steady, cumulative growth over three years is important to them. Of even greater importance would be to try to ensure that the three-year spending plans were constantly rolled forward, so that there is always a third indicative year. People would then have the opportunity to plan to take on new staff, to take decisions about capital expenditure, and to engage in long-term planning, rather than 12-month planning.
I also welcome the set of cross-departmental reviews, on the under-fives, asylum and immigration, crime prevention and the justice system. Those are important, because they show that the Government engage in joined-up thinking and joined-up government. We shall do more of that, and continue to pull Departments together, so that, in crude terms, by adding value to each Department, we get better bangs for our buck.
I am delighted that the comprehensive spending review speaks of a regeneration budget, new deals for communities and a revamp of the single regeneration budget that will bring extra resources to our most deprived areas. I say to the Minister: look closely at coalfield communities and at the coalfields task force, which has made 80 recommendations for Departments across Government. Let us use that as a vehicle to bring real change, new investment, new jobs and a new future to coalfield communities.
As well as inputs and extra spending, outputs and outcomes are important. I look forward to seeing the detail of the spending agreements and to there being some, shall we say, creative tension among the centre, the Treasury, and the spending Departments. I hope that we will look to spending Departments to make savings, and give them the opportunity to keep some of those savings, because the language of government is the language of priorities. We need to acknowledge that not all public spending is good public spending; we need to ensure that public spending is modern, and goes to the areas of most need.
That is why I am keen that we set targets not only for Departments, but for public spending all the way down the scale. I hope that we shall have local contracts between divisional police commanders and their communities, and between head teachers and the community that uses the school, so that people know who is accountable for the services. Targets and timetables should be set, and questions should be asked if they are not delivered.
The citizens charter made a good start on that, but the measures were not very sophisticated. They included the number of rings of a telephone and how quickly a report could be produced. We should get out and talk to people about the public services they demand and aspire to—and, what is more, pay for. We have an obligation and a responsibility to provide better services than people are receiving at the moment.
I hope that we shall ask hard questions, for example, of police authorities. How many of us, in the Chamber or outside, can name the members of the police authority that shapes our community? Very few of us can do so. We must identify stakeholders and the providers of public services, and set them hard targets.
We must also examine mistakes. I have mentioned the police. A great deal needs to be done to make our police force modern. I am ashamed at the amount of sickness in

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many police forces in this country. It cannot be right that, on any one working day, 1,500 police officers in the Metropolitan police are on sick leave. It cannot be right that there is so much early retirement, not only in the police but in the education service. We need to examine that problem, and manage it much more forcefully than we have done in the past.
I sometimes think that public servants are good at managing problems. The issue is our lack of social and public service entrepreneurs—charismatic figures who can find solutions. We must strive to identify the people and organisations that can implement good practice. We need to praise good public services and contrast them with the worst. The problem in recent years is that we have picked on the worst services—we have named and shamed—but we all respond better to praise and reward. I want us to examine public services, reward and support the best, and make them beacons for change. Public services in this country would then be transformed.
That leads to implications for the inspectorate—the people who monitor our public services, such as the Audit Commission and the Office for Standards in Education. I have great praise for the Audit Commission, and it does not need to hire a lobbyist to find that out. It is very good at identifying problems, putting forward solutions and suggesting outputs, but it is not good at delivering outcomes. We must set up organisations that support people, love public servants and give people who can achieve the opportunities to do so, such as seminars, extra training and extra resources for their organisation. By praising the best, we can enhance the rest.
Ofsted has a great deal to achieve. I note that one of the documents accompanying the comprehensive spending review sets out aims and objectives that Ofsted has set itself, including the objective of getting Investors in People status. I hope that it can move from a negative, Lone Ranger, destructive approach to school inspection towards one that considers and enhances the good aspects and acts as an agent for change.
I believe that public services are important, and the public agree, but they must be persuaded that those services are theirs, that they meet their needs and that they are stakeholders in the services. I praise the comprehensive spending review, because it is investment for reform and an opportunity to achieve modern public services. It is a challenge for change. I hope that we shall meet that challenge and make that change.
7.4 pm
Mr. John MacGregor: Before I come to my main theme, I want to address an issue of great interest to me as a former Chief Secretary. It is dealt with in section 4 of the comprehensive spending review, which is all about efficiency and modern public services. The Chancellor spent a good deal of time talking about that in the early part of his statement on Tuesday. The document says that new public service agreements for Departments
"will include their new objectives and measurable efficiency and effectiveness targets."
I had a great sense of deja vu when I heard the Chancellor's speech and read the document, because when I was Chief Secretary we had documents saying
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exactly the same things—we were measuring not by inputs but by outputs. We were having annual reports and checks.
Throughout our period of government, we took huge strides forward in efficiency measures and cost savings in the civil service and the delivery of services. There is absolutely nothing new about that, although the document tries to claim that there is. It is a huge travesty in its treatment of the 18 years of our Government. There was substantial capital investment, not least—indeed, particularly—in transport.
The Chancellor referred on Tuesday to
"an education system that advanced only the ambitions of the few".—[official report, 14 July 1998; Vol. 316, c. 190.]
He gave the impression that that is what we had done. Our period in government was one in which the numbers of people going into higher education were greater than ever before and there was a huge extension in the opportunities for higher education. When we took office, one in eight people went into higher education; when we left office, the figure was one in three.
The health and education measurements that are so heavily emphasised in the document are precisely those that our Government introduced, which were frequently criticised by the Labour Opposition. Labour now relies very heavily on the reforms that we put in place. I do not object to those reforms—they are good Tory measures, so I welcome them. However, the Government should not suggest that they are new, or that they will revolutionise public expenditure programmes.
That brings me to my point about public service agreements. I want to understand their significance, and I hope that the Financial Secretary will deal with this point in great detail when she replies. The emphasis is on measurable objectives. I do not know what the new public service agreements will be. I certainly hope that they will not use the objectives set out in this document—very often in the light blue passages at the beginning—because most of them are too unclear to measure, and many are pious hopes. They are certainly not quantified. I hope that the objectives will be quantified.
That brings us to the key question: what will the Government do if the targets are missed? We are told that the services will be regularly monitored, not annually but much more often. Are the Government saying that they will not give more money over the three-year programme to various Departments if they miss a particular target—we understand that the targets will be not only quantified but timetabled—and if so, do they really believe that that is realistic?
As my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) pointed out in an intervention following a question that I asked, if the health service targets for waiting lists are not met, will that mean that the money for the health service will be reduced? If class sizes are not met, does that mean that the education budget will be reduced? That is not realistic, so I wonder what the reform amounts to.
There is a likelihood of increased expenditure in other parts of the Government's programme and of unexpected further expenditure requirements, so, if the Government are relying on such an approach to make compensating savings when Departments do not meet their targets, all I can say is that I do not believe they will deliver their pledges.

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The early auguries are not good. One of the delivery measurements listed is
"requiring outstanding reviews to deliver against tight timetables".
A number of reviews have missed tight timetables by a mile, so there has not been a good start. On efficiency, I notice that one of the biggest increases—in cash terms—in all the programmes is the social security running costs administration programme. That is not a sign of tight control, either. I want to know how it will work, and whether it will lead to major reform.
I come now to my main theme. Like other Conservative Members, I believe that the Chancellor has thrown caution to the winds, and is taking a huge gamble. His departure from caution is the increase in average annual spending to 2.75 per cent. in real terms. However, I believe that it is more than that. If one takes into account the private finance initiative and accounting changes to which my right hon. and learned Friend the Member for Rushcliffe referred, the figure is more than 3 per cent. in real terms, measured like for like with the past. That figure is way beyond the Chancellor's earlier prudent statements.
The gamble is that economic growth in the next three years will be able to sustain that figure, which is above the long-term growth rate of the economy, and is unlikely, in the view of most in the worlds of industry and commerce, to be achieved in the next year or two. Like my right hon. and learned Friend, I always get suspicious when the word "prudence" appears so often in a statement—I think that it was used 14 times in the Chancellor's statement in June. I become even more suspicious when he starts to drop the word and it appears only rarely. That is the gamble, and I shall concentrate tonight on what I see as the traps facing the Treasury in this area.
The first trap—which I shall deal with briefly, as others have referred to it—is the relationship with growth in the economy. Table A6 on page 113 of the comprehensive spending review reveals the record of past expenditure. It shows that public spending as a proportion of gross domestic product came down fastest and moved to its lowest level on the chart during my period in office as Chief Secretary and shortly after I had left. That rate was achieved because, although it was a time of economic buoyancy, we kept strict control over public expenditure increases, because we did not want to anticipate future growth.
The public sector borrowing requirement and public expenditure as a proportion of GDP have decreased sharply because of the strong economy—a legacy from our period in government—because of revenue buoyancy, and because of Labour's adherence to our strict public expenditure limits. However, history has shown that that situation could change quickly. The swing-around on the current account surplus and the PSBR could be very substantial if some of those factors change. The Chancellor has let go a key element by agreeing to very substantial increases in total public expenditure over the next three years, irrespective of the development of the economy. That is trap No. 1.
Trap No. 2 follows from that: the fact that the programme will span three years instead of one. If one compares tables in the comprehensive spending review with previous public expenditure tables, one will see that they look very similar. The Conservative Government also had three-year programmes, but there were two crucial differences.
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Under our programmes, only the first year was absolutely key. Years two and three were indicative, and spending did not increase as substantially as we see in this document. We also had a substantial reserve in years two and three. We see here a substantial increase in years two and three in order to boost the size of the total programmes on health and education. Those figures have been lumped together in order to give what appears to be a much larger figure. However, I notice that the reserve in years two and three is also very slim and small. That is one of the particular dangers facing the Government.
Every Chief Secretary knows that there are always large, unpredictable demands during the year. In this case, they will occur over three years. If the limits are to be kept, where will the money come from? The reserves are not big enough, so it seems inevitable that there will be a clawback from elsewhere, or the figures for years two and three will rise unless savings are made in the existing three-year programmes. I have a feeling that this is a reform—like giving independence on interest rates to the Bank of England—that the Government may regret in due course. I warn that I think that the reserves are too small.
Trap No. 3 is the social security budget, which is outside the three-year programme. As some of my right hon. Friends have pointed out, on a basis of like for like and taking the working families tax credit and other factors into account, the increase in the social security programme is actually £37 billion. That is the big increase in the programme—it is much larger than education and health combined.
The Prime Minister's comments before the election—to which my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) referred—bear repeating. The Prime Minister said:
"We have said as we get welfare bills down, then we can release more money into education and health services."
It is no good the Government's indicating where they would make cuts; the point is that, in order to demonstrate their prudence, the Government planned to increase education and health spending when the welfare bills were reduced. We all know that the reverse has happened: the welfare bills will increase substantially. That was the Government's policy, but it has been abandoned.
The situation is even worse than that. I believe that, if unemployment rises, that £37 billion will rise considerably—and it is still part of the overall total. I note that the Chancellor confirmed to the Treasury Select Committee yesterday that his forecasts were based on stable levels of unemployment. When those levels rise, the social security bill will also rise considerably.
Trap No. 4 is public sector pay. I was amused to hear the Chancellor say on Tuesday that there would be new developments in public sector pay. He cited three new responsibilities: affordability, inflation and efficiency. As I am sure my right hon. and learned Friend will confirm, in giving the Treasury or Government view to various pay review bodies, the previous Conservative Government always emphasised precisely those points; so the Government's developments are nothing new.
The Chancellor said on Tuesday that the Prime Minister had spoken to the chairmen of the pay review bodies, and he was satisfied that they would take those issues into account. As Chief Secretary, I remember talking to the chairmen of pay review bodies and emphasising precisely the same points. They then advanced what they regarded

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as powerful arguments for ignoring my views entirely. I believe that the Government will find a similar outcome.
We all know that there are serious recruitment and retention problems in relation to nurses and, increasingly, general practitioners and teachers. Recent surveys that I have seen show an alarming drop in the number of students entering teacher training, particularly in areas such as physics. Therefore, I am quite sure that, over the next three years, pay review bodies will believe that they should put greater emphasis on recruitment and retention. That will blow another hole in the three-year programme.
Trap No. 5 is asset sales. Quite a large part of the public sector net investment—or what I would regard as capital expenditure—which is quite low at 1.4 per cent. of the total, is dependent on asset sales. Those asset sales are highly unpredictable. The Conservative Government knew that we could deliver with the many asset sales and privatisations that we undertook. I am very much in favour of privatising National Air Traffic Services, but I doubt whether it will be achieved easily. That dependence on asset sales is another danger.
When the Chancellor abolished advance corporation tax, he expected that it would encourage the private sector to invest substantially. That was part of the rationale behind his move. A survey produced by the Confederation of British Industry and the Association of Consulting Actuaries revealed that only 2 per cent. of companies thought that ACT changes would increase the amount of capital available for investment. Look at the damage that that measure has caused to pension funds and pensioners, and it has not produced the desired result. The same could happen with asset sales.
Trap No. 6 involves how the Government will pay for the programme if they cannot hold to their figures, or if they find that revenue buoyancy disappears. The Government have probably exhausted all the tax squeezes—such as the ACT measure—in order to bring in big extra revenue, so which tax pledges will they have to reverse? Will the strain be taken by higher borrowing and higher interest rates?
I believe that old Labour is back. It was old Labour that applauded the Chancellor on Tuesday. Perhaps that is why the Prime Minister appeared so strained and tense during that session, and why this review will be short-term gain for long-term pain.
7.19 pm
Mr. Jim Cunningham: In this debate we have heard the old Tory tales of woe—it was tales of woe when they were in government, and it is tales of woe now that they are in opposition. Phrases such as "incompetence", "people are not in charge", "people are too much in charge" and "we have always done better in government" have punctuated Tory speeches tonight, but we all know that their stewardship of the British economy during the past 18 years does not bear comparison with our stewardship of the economy. I should have thought that the last thing that those gentlemen over there would want to do was to talk about their stewardship and to compare their stewardship with ours.
Let us remind ourselves of some of the things that those people across from us got involved in during the past 18 years. Let us examine their record. Who remembers
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the negative equity under those people over there? Do you remember how the previous Chancellor had to try to devise a scheme to help those in negative equity? There is no talk about that tonight. Do you remember the record of unemployment, at 4.5 million? No one knew the accurate figure.
We also remember, in the area that I come from, Coventry and the west midlands, how the industrial base was eroded. There is no talk about that tonight. Do you also remember the record number of bankruptcies? That was the economic record that the Tories foisted on the British people. Do you remember the speedy withdrawal that they had to make from the exchange rate mechanism, and the devaluation of the pound? Do you remember when interest rates reached 22 per cent.? Again that was their record.
Mr. Deputy Speaker: Order. Some of these things I remember, some I do not, but it is best not to ask me what I do or do not remember.
Mr. Cunningham: I am actually asking the House, not you, Mr. Deputy Speaker. I am sure that my honourable colleagues will remember some of these things.
I am sure that colleagues will remember a generation of young people who never had a job, who were probably unemployable. We must now start to pick up the tab for that and try to train them and get them employment.
Do you remember record crime levels? I am sorry, Mr. Deputy Speaker; I hope that the House remembers the record levels of crime under the Tories.
We also remember the fact that the Tories created a situation in which people were being paid poverty pay. We also had the 22 tax increases. What did people get out of that? The Tories squandered North sea oil revenues. They do not want to talk about their economic record.
The Tories talk about public sector workers. I seem to remember that, in one Budget, the previous Chancellor talked about zero increases, but said that if there were to be any increases, they had to be allied to increases in efficiency. Does the House remember? Perhaps I am wrong. I shall give way to the right hon. and learned Member for Rushcliffe (Mr. Clarke) if he wants to put me right.
I welcome the comprehensive spending review because it frees the British people from recession and stagnation. In other words, it offers them hope after they have had 18 years of no hope. Among the things that I welcome is the £21 billion over the next three years for the national health service. That will help us to honour our commitments, not only to start shortening waiting lists, but to start to deal with the capital investment that the national health service needs.
We shall spend £19 billion on education over the next three years. Remember the overcrowding in classrooms? In addition, more than a million kids still have to be educated in schools that were built before the first world war, in the conditions that that implies.
I especially welcome the Government's commitment to pensioners. Obviously, one of the commitments is to provide a better health service but, more important, we are removing for pensioners the iniquitous eye test charges that the previous Government introduced. Some Conservative Members opposed the introduction of those charges; I remember talking to some of them at the time.

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I welcome the transport White Paper. I hope that it is published very soon indeed, because one of the most contentious items for us in the west midlands and for people throughout the country has been the fact that some authorities pay for free transport for pensioners and some do not. One often finds that Tory areas do not.
I welcome the cut that was previously made in VAT to help, not only pensioners, but some of the most needy families in Britain, on the poverty line, to pay their fuel bills. Equally, I welcome the further announcement made by the Secretary of State for Social Security that further funds will be provided to help pensioners with their fuel bills. About 1.7 million pensioners are on the poverty line in this country.
The Secretary of State for Social Security will also announce that, by next April, every pensioner will have a minimum pension guarantee. That is very important because many pensioners feel that they do not get an adequate pension.
The £2.5 billion set aside for tax guarantees means that pensioners will be allowed to retain up to a certain level of any income. We are still waiting for an announcement of what the taxation might be beyond that level, but at the moment many pensioners feel aggrieved by virtue of the fact that, if they take a part-time job to supplement their pension, they very often find that it is taxed away.
I welcome the commitment to do something for third-world debt. Colleagues will remember that, in our election manifesto, we committed ourselves to an objective of devoting 0.7 per cent. of gross national product to alleviating third-world debt. The Chancellor's announcement shows that we are halfway there. I believe that very many people will welcome that. We also committed ourselves to consider the whole issue of third-world debt and third-world poverty. There certainly will be some negotiations, but under the previous Government, the amount devoted to alleviating third-world debt actually fell by 2 per cent. a year.
The £21 billion funding for the national health service will certainly start to shorten waiting lists. There will be a 50 per cent. increase in capital investment in buildings and equipment, and £5 billion will be made available for national health service modernisation, which will give us the largest building programme of the past 50 years.
Other hon. Members, like myself, will know of drug abuse problems in parts of their constituencies. In my constituency, we have major problems with drug abuse. Allied to that, in certain instances, we get crime, but more important, we get murder associated with crime. We also get intimidation, if not murder, and that creates major problems for our young people. Unlike the previous Government, we shall increase by about 25 per cent. the budget for the unit that deals with drugs and crime.
I welcome the fact that we shall spend about £3.6 billion to renovate 1.5 million homes and, equally, to help the homeless. Some hon. Members probably spend at least one night a year sleeping out, to draw the nation's attention to the fact that hundreds—probably thousands—of people are homeless, destitute and without hope.
This is a Budget of hope. It shows fairness, but equally strength. I believe that it is a Budget that sets us on the road to enhance our reputation in the world
7.26 pm
Sir Michael Spicer: Later in my speech, I shall ask the hon. Member for Coventry, South (Mr. Cunningham) whether he remembers the run on the pound and the Government going with a begging bowl to the International Monetary Fund.
First, I shall turn my attention to the word "prudent". It is a rather recycled word, because it has been bandied around the Treasury for some time. My friend, Norman Lamont—we shall very soon call him Lord Lamont—often used the word "prudent". The question is, what does it mean?
The present Chancellor has defined the word strangely. He has defined it in terms of the golden rule, by which one is prudent on the capital account but can be imprudent on the current account. That is a strange concept. Professor Buiter of the Monetary Policy Committee has rubbished the idea of the golden rule in that context—certainly in the context of trying to define prudence. He has pointed out the relationship, which has existed since time immemorial, between capital expenditure and current expenditure. In the public sector it is difficult, in many cases, to define what is capital expenditure and what is current expenditure. Is road maintenance capital or current? It happens to be defined as capital expenditure, but it might just as easily be defined as current expenditure. Everyone knows that, the more capital expenditure one has, the more current expenditure one has, so it is a nonsensical distinction.
As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) said yesterday in the Treasury Select Committee, it is doubly nonsense in the context that we are discussing at the moment. I noticed on the front page of The Times today that old canard, the effect of spin, in the sense that the front-page article spoke of surpluses ahead, defining the surplus merely in terms of the current account. I do not know whether the author of the article realised that.
The actual position is very different. If we are considering prudence, we need to consider affordability. That is partly a political perspective. I have a view about the affordability of public spending in terms of the need for limited public expenditure which allows the private sector to flourish and generate the products that allow the public sector to spend. That is a political view.
Another aspect of affordability that interests both sides of the House is the management of the macro-economy. Affordability is directly related to fiscal policy, which must be seen in terms of its relationship with monetary policy. Given the Bank of England's independence on monetary policy, if public spending rises out of control, as may well happen, and if inflation is the outcome of the expenditure release, interest rates will go up. That will result in a conflict of policy for the Government, with inevitable implications for affordability.
The Government's programme and their claim of prudence must be judged against the facts. Total public expenditure will rise by 2.75 per cent. Under the Government's own projection for the next three years, gross domestic product will go up by 2.5 per cent.—that is, less than the projected level of public expenditure. Public spending as a percentage of GDP will therefore rise. There are no ifs and buts about that: it is a fact.
As my right hon. and hon. Friends have pointed out, the Government's assumptions are extremely optimistic. The growth rate figures are substantially different from

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the growth rate figures produced in the Budget just four months ago. The projections in the Budget ranged from 0.75 per cent. to 2.25 per cent. The central projection of the Government's latest programme assumes a rate of 2.5 per cent. I asked the Chancellor yesterday what enormous changes had occurred in the economy over the past four months to produce such a substantive change in the Government's assumptions about GDP for the future.
The Government's forecast is optimistic in other respects as well. Unemployment figures appear to be almost static. If that turns out not to be the case, the effect on public expenditure in terms of unemployment benefit and so on would be much greater than is implied. That is why the Government's figures show public expenditure as a percentage of GDP rising from 1999 onwards.
When I asked the Chancellor about that in the Select Committee yesterday, he spent a long time talking about the fact that next year the figure would go down. He failed to mention a pretty fundamental point—that next year is the last year in which the Conservative expenditure totals will apply. After that we will see Labour's true colours and the Government's real programme, in which public expenditure as a percentage of GDP increases.
We are getting back to business as usual on the political scene. The old-fashioned Labour-inspired vicious circle is emerging in the management of the economy. As my right hon. Friend the Member for South Norfolk (Mr. MacGregor) mentioned, high expenditure must be followed by higher taxing, unless there is to be the printing of money and higher borrowing. Higher taxes will mean higher interest rates than are good for the economy, which will lead to inflation or higher taxation to pay for the higher expenditure, which will then have to be paid for out of higher taxation.
We are leaving the good old days of sensible Conservative budgeting and moving, after 1999, into the classic Labour territory of high tax and high spend. Those of us who were Members of Parliament when a Labour Government had to suffer the humiliation of going cap in hand to the IMF know that it was those policies that led to that result. If we are going down memory lane, let us go back to the last Labour Government, who had the same economic policies as the present Government. The prospect of a run on the pound and of the Government eventually having to seek help from the IMF are not fantasies. That is the logical outcome of what always happens under a Labour Government.
The Government are leaving behind the anchor of Conservative policies, which they accepted. The controls will apply next year, but we know from the Government's own figures that after that, public spending as a percentage of GDP, and therefore taxation, will rise. They have boxed themselves in by making the Monetary Policy Committee independent, no doubt because they did not trust themselves on the matter. The concomitant interest rate rises will make matters more difficult for the Government and the country.
The electorate was warned at the last election, but was not in a mood to accept those warnings. It was as clear as day that, despite all the froth and the spinning that went on at the beginning, as long as the Labour Government kept to Conservative policies, we were in fairly safe territory. They promised the country at the time that
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Conservative expenditure controls would be maintained for a year or so. We foresaw what would happen, but the country was not in a mood to accept it.
I expect that it will not be long before the mood in the country changes, as people recognise what they will get from a Labour Government. It is a great irony that just as the Government's new deal—a typical Labour programme for spending money on trying to overcome the unemployment problem—comes into effect, unemployment will begin to rise inexorably. No doubt there will be all the interventions that we get from a Labour Government, and certainly higher taxes. There is misery ahead for the country under this Administration. The quicker they are changed, the better.
7.37 pm
Mr. Neil Gerrard: I shall begin with some general comments about the comprehensive spending review and the Government's approach. It is not always easy to question where money is spent and whether it was spent on the correct priorities in the past. The review has tried to do that and has come up with some different answers. We should all welcome that.
I shall not dwell on specific outcomes. Everyone is aware of the extra money for health, international development, science and so on. I am particularly happy about the extra money to be spent on education, much of it on capital programmes in schools. The condition of buildings is not the only aspect that matters, but it is important. After years of cuts, the increase in spending will do much for teachers' morale. If my right hon. Friends at the Treasury want to finish the job of improving teachers' morale, perhaps they will suggest to my right hon. Friend the Secretary of State for Education and Employment that he rapidly terminate the contract of Her Majesty's chief inspector of schools.
Further education will have an extra 8 per cent. funding. I used to work in further education area and I very much welcome the increased funding. That sector has been grossly undervalued. There is low morale among those who work within it and a need for recovery. If we are to deliver on our training objectives, we must improve on what is happening in FE.
I very much welcome one of the smaller items in the comprehensive spending review which relates to further education—the piloting of an education maintenance grant for 16 to 18-year-olds, with the purpose of improving the staying-on rate among students from poorer families. I am sure that the pilot will work and that we shall thereafter extend the grant nationwide. I gently suggest to the Government that the principle of maintenance grants to help poorer students go into education is one that they might consider for higher education as well as further education.
Housing is another part of public spending where many important decisions still need to be made. That links with the welfare benefits review. A housing inspectorate is being set up to oversee management in local authorities. Clearly there is nothing wrong with improving standards of management; tenants deserve good management. However, I question whether we should focus only on management in local authorities. My experience of increasing contact with housing associations is that some are very good, but the management practices of others leave quite a lot to be desired. I do not believe that the

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Housing Corporation provides effective oversight of associations' management practices. There is a gap in public accountability, especially as increasing amounts of money are going in that direction.
Housing is not only about good management. Clearly we cannot provide a good-quality physical housing environment without money, without investment. We know—it has been mentioned earlier—the appalling record of housing investment over the past 10 to 15 years. Investment is now far lower than it was 20 years ago. There is an appalling problem of supply in the social housing rented sector, especially in large cities. The situation in London is probably the worst of all. The problem of supply cannot be met by better management. It cannot be met without money, without investment.
Of course I welcome the £3.6 billion that will be put into the social housing rented sector, but I have the impression that it will be very much targeted at refurbishment. There is obviously a job to be done in refurbishment—there are extremely serious problems of disrepair—but that approach will not fundamentally affect the supply side of the equation. Oddly, it could make things worse in the short term. My experience of large-scale local authority and housing association refurbishment schemes is that often they require a decant—tenants being moved. Often these schemes take away part of the supply which might be used for other purposes.
There is nothing wrong with refurbishment, but there is still the question of what public expenditure is directed to the supply side. We know that it is not just a matter of throwing money at these projects. All the evidence suggests that we cannot engage successfully in refurbishment and redevelopment without proper tenant involvement and support. That was mentioned specifically in the statement made by my right hon. Friend the Chancellor of the Exchequer on Tuesday. If tenants feel ownership of an improvement scheme, the scheme is much more likely to be successful.
There are clear limits on spending in the new deal. It has been announced that £800 million will be spent on regeneration. That can be a good way of creating employment and training opportunities if it is tied in with housing regeneration. There is real scope, with imagination, for having housing regeneration linked to training and employment.
Other unresolved housing cost issues relate to public expenditure on housing benefit—about £11 billion—and rent levels. There is much evidence that rents are a major consideration in people's minds when they are considering whether they can get off benefits and move into work. I recall what was said in my right hon. Friend's statement on Tuesday about the minimum guaranteed income for pensioners. That implies a close look at the links between, for example, pensions, the tax system and the benefits system. It seems to me that the same approach is necessary when looking at people's housing costs and whether public money is spent in the best or the right way, whether we are getting the best value for that money and whether it fits in with other Government objectives. We need the comprehensive spending review and the benefits review, when it comes along, positively to interact with housing costs. That relates to social housing rents and subsidies.
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The working families tax credit improves matters. There is no doubt that a taper of 55 per cent. compared with one of 70 per cent. for family credit is a big improvement; it means that the poverty trap will not be so deep. Such reforms will substantially reduce the numbers of households that pay high rates of marginal tax at the stage when they are getting into work. However, the improved incentives for tenants on the current proposals will depend critically on their rent levels. Tenants at the lower end of the rent scale will be taken out of housing benefit and council tax benefit. The higher the rents, the more extensive the overlap will be, as things stand, between tax credit and existing housing benefit tapers. That is because the tax credit scheme is more generous than existing schemes, extending further up the earnings scale.
We could end up with—we end up with this under present housing benefit systems—a wider overlap that extends much further up the income range, where significant marginal deductions occur. When we come to the benefits review, that needs to be addressed in relation to what is done under the comprehensive spending review.
Rents relate to public expenditure on subsidies. We know what the previous Government did. Their policy was quite simple: cut subsidies and force up rents in social housing. That was a clear policy. As a result, we have seen some developments, especially housing association developments in big cities such as London, become virtual ghettos. Tenants cannot afford to continue living in them unless they receive housing benefit. They are virtually dependent on that benefit.
In the private rented sector, where cuts were made in housing benefit by the previous Government, there was the ridiculous philosophy that tenants would somehow be able to bargain with landlords about their rents. Certainly in the big cities, tenants in the private sector, such as elderly people and people from minorities, are often the most deprived and the least likely to be able to bargain. They live in awful conditions. We need to examine how some of the £3.6 billion that will be spent on housing improvement will reach some of the people who live in terrible private rented conditions as well as the people on major estates.
That is another challenge for the use of social exclusion money. It may be true that larger estates have major concentrations of youth unemployment and deprivation, but many other deprived people are living, scattered, in the private rented sector.
I return to the issue of rents. It could be argued—I am sure that there is some truth in the argument—that merely lowering rents is not a panacea; in other words, lowering social housing rents does not solve all the problems. Of course it does not, because that does not do anything to address the condition or supply of housing. Increased rents, however, would conflict with other Government intentions, and we need to consider that carefully within the context of the comprehensive spending review. We do not want welfare to work or policies to combat exclusion to be affected adversely by what is happening to people's housing costs.
Housing costs matter because they are up-front costs and people do not always appreciate the impact of in-work benefits such as housing benefit. Housing costs are at the forefront of people's minds when they consider whether they can afford to get off benefits and into work or to take a particular job.

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Those are areas of unfinished business surrounding the comprehensive spending review and forthcoming announcements. There has been a great deal of good in this week's announcements, but I hope that the Government will consider those other issues and, as further announcements come, take great care to ensure that they fit in with the good intentions in the comprehensive spending review proposals.
7.50 pm
Mr. Tony Baldry: A number of hon. Members want to participate in the debate, so I shall try to be as brief as possible.
In 15 years as a Member of the House, this is the first time that I have felt compelled to take part in an economic debate. As my hon. Friend the Member for West Worcestershire (Sir M. Spicer) said, the debate is an occasion of some importance, because it marks the end of the Labour party at least paying lip service to some sort of financial rectitude and responsibility and the start of a classic Labour binge.
My constituency in north Oxfordshire is classic middle England, and I am concerned that middle England is simultaneously conned and ripped off—conned, because people are led to believe that far more money will be spent on health and education than will actually be spent; ripped off, because, as a consequence of the Government's obvious failure to control public spending overall, taxes will inevitably rise. I shall make a number of predictions, and will be happy to be tested on them at the next general election: as a consequence of this failure of a spending review, taxes and interest rates will be higher than they need be and higher overall. Mortgage interest rates will also be higher, as a result of higher interest rates.
We can test the Labour Government by their own words. What is clear beyond peradventure is that they have already failed to control social and welfare spending. Before the general election, we heard a lot from the Labour party about its intention to cut welfare bills by getting people off social security and into work. It also said that it would reduce the proportion spent on the welfare bills of social failure. In a comprehensive spending review at this stage in the Parliament, one would have expected an attempt to be made to show some kind of control over welfare spending. After all, each and every person in work spends £15 a day on taxes for welfare spending. That has not happened; indeed, every single item of welfare spending in the review increases social security spending.
In 1992, in the depths of the previous recession, when unemployment was 50 per cent. higher than now and thousands of home owners were receiving help with mortgage repayments, the social security bill was £60 billion. After six years of economic growth and increasing economic prosperity, the bill is £100 billion. In two years, it will be £120 billion. Health and education will supposedly receive an extra £40 billion over three years from the increase in public spending. Social security spending alone will take an extra £20 billion in only two years, and those figures would increase if unemployment returned on any scale.
The Labour Government have already completely failed to tackle welfare spending and the social security bill, and they have clearly acknowledged that. When the
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Prime Minister was challenged on that yesterday, and when other Ministers have been challenged, they have simply said to us, "What would you reduce?" The Government were elected on a manifesto that said that they would reduce spending on social security, but the review will substantially increase such spending, and that new Labour would be wise spenders, not big spenders, but the review totally fails to control spending.
The image that the Government present is that we can achieve the improvements that we want in health, education and every other area without having to dig deeper into our pockets for taxation, but history shows that that just does not happen. If the Government are to spend more money, it will inevitably come from higher taxes and higher interest rates—binge now and bill later.
As every commentator has pointed out, the public spending review is based on the assumption that there will be continuing high rates of growth. I do not know where Ministers have been recently, but, as a member of the Trade and Industry Committee, I have been out visiting businesses up and down the country and talking to business men. Ministers may not have noticed, but I should have thought that the hon. Member for Coventry, South (Mr. Cunningham) would tell the House that there is already recession in large parts of the United Kingdom—for example, in manufacturing industry in the west midlands.
The high level of sterling has made life extremely difficult for exporters and for other sectors of the economy. The idea that we shall have high economic growth on the most optimistic figures that will continue year on year is a pipe-dream, but we do not have to look far for Labour party pipe-dreams. Before the general election, we were told of two early pledges. We now learn that the word "early" means not that they will be delivered early, but that they were made before other pledges. How much can one trust a party that plays that sort of word game?
Two impressions were given to my constituents and to people up and down the country. The first was that class sizes in primary schools could be reduced to 30 or below by abolishing the assisted places scheme. That has clearly been shown to be nonsense, hence the rush to give the impression that extra money is being given to education. The second was that national health service waiting lists could be reduced by 100,000 by removing general practitioner fundholders and some of the administration that goes with that. That has been shown to be bunkum, as waiting lists have increased substantially.
My constituents are being conned, because the impression is being given that health and education are receiving a bonanza in new spending, but the rise in NHS spending is only little more than is needed to maintain existing standards of provision. There has been quite a lot of triple counting and taking no account of inflation. As this Parliament proceeds, there will be increasing pressures in health and education as people begin to appreciate that the amount of money put into those two services is not as great as the Government spin to us and would have us believe.
What is especially significant is that those two areas are dependent on the people who work in them. Nowhere in this spending review has any proper account been given to how to deal with public sector pay, except to say that public sector pay review bodies will have to have regard

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to spending targets. I will make another prediction that, between now and the next general election, as their growth targets are not met, we will see the Government seeking to meet the shortfall in health and education spending, by putting the squeeze on those who work in health and education. That will be dispiriting for them.
When all the froth of the public spending review is settled and people have really had a chance to look carefully at the figures, they will see that many people are in danger of simultaneously being conned and ripped off. Conservative Members are determined to ensure over the coming months and years that people appreciate the extent to which they are in danger of being conned and just how much they are ripped off. We will ensure that, at the next general election, people really appreciate that the Government have sold out on the economic management of this country in a way that is greatly to the detriment of every citizen in our land.
8.1 pm
Ms Rosie Winterton: I am glad to have an opportunity to speak because I want to reflect the widespread support felt in my constituency for the Chancellor's statement on Tuesday. That support comes because of the clear commitment to invest in public services. My constituency is in the heart of South Yorkshire and has suffered from years of decline in the coal, steel and railway industries and from years of undermining of public services by the previous Government.
As we all know, massive industrial decline leads to poverty and social exclusion. Providing a decent education for young people is vital if we are to give them any hope of overcoming the problems that go along with industrial decline. That is why the extra resources announced in the last Budget were so welcome. It meant that £5 million went to schools in the Doncaster area. That put into reverse years of cuts and years of reductions in teacher places. Schools were able to pull themselves out of the crisis that had been created by the nursery voucher scheme. When we put the money available then together with the money announced on Tuesday, it will make a real difference to so many young people in my constituency.
The regeneration of an area such as Doncaster depends on good public transport. Put simply, many of my constituents cannot afford a car and depend on public transport to get to work. About 40 per cent. of them do not have access to a car and investment in public transport Is vital for them. The Government have already given the go-ahead for a new transport interchange in Doncaster, but the announcement of a further £1.7 billion to invest in public transport will improve the employability of many people in my area and will provide much-needed jobs.
My hon. Friend the Member for Walthamstow (Mr. Gerrard) talked about the need for accountability in housing associations. We also need to ensure that we have accountability in the provision of bus services, which are important in my area if people are to get to work. Services need to be planned and dependable, and there needs to be accountability. At the moment, companies often withdraw services without any consultation with local people and that can put jobs in danger because people cannot always get to their workplace.
I know that many hon. Members have talked about housing, and I want to touch on that. The announcement of a further investment of £3.6 billion to improve council
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housing stock has been greatly appreciated in my area. Nothing better illustrates the Chancellor's principle of money in return for modernisation than housing. The release of capital receipts that has already taken place has meant that we have been able to rewire 503 properties in the Doncaster area. A total of 834 properties will have central heating installed, and 571 will have double glazing put in. That means that more than 2,000 properties will be modernised, and 2,000 families will have their lives directly improved by the actions of this Government. Also, as those properties are handed on to others, the effect will become more widespread.
There is more to be done. We have a housing stock of 29,000 of which more than 7,000 still have no central heating, more than 500 still have outside lavatories, nearly 18,500 need rewiring and nearly 25,000 do not have double glazing. We must give emphasis to modernising housing because we all know that poor housing leads to poor health. Rundown estates suffer high levels of crime and drug problems, as was mentioned by my hon. Friend the Member for Coventry, South (Mr. Cunningham). People give up hope and opt out of society. Whole estates can become isolated and those who live on them have no hope.
Investing in housing not only improves people's lives directly, but improves their health and provides jobs and skills training. That is why the Government's move, which will be carried out in partnership with local government, is so welcome. We are looking at how we can regenerate those areas.
My hon. Friend the Member for Sherwood (Mr. Tipping) talked about the report of the coalfield communities task force. The task force was set up by my right hon. Friend the Deputy Prime Minister. Its report shows how important it is to co-ordinate departmental initiatives if we are properly to regenerate areas of industrial decline. Improving the housing stock leads to better health, reduced crime and more jobs. Raising educational standards and developing skills means that young people are more employable and that breaks the cycle of despair that has been only too prevalent in my constituency over the past 18 years.
The Chancellor's statement on Tuesday was important because it recognised the importance of integrating all the different areas of Government responsibility and how we can bring about regeneration through Government action. It was not a piecemeal approach. It put the pieces of the jigsaw together and the picture it presented was one of a much brighter future for many people in my area who have suffered for too long. That is why I welcome the statement and why it has been so welcome in my constituency.
8.9 pm
Dr. Vincent Cable: There has been much discussion of the comprehensive spending review's arithmetic. I should like to return to some of the issues that were raised helpfully and lucidly by the right hon. Member for South Norfolk (Mr. MacGregor). They are what could be called the chapter 4 issues relating to public sector management.
In many respects, the Government's contribution in that area has been positive in the paper and more generally. In some areas, we strongly endorse their actions; the first of those endorsements is for the adoption of fiscal

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responsibility targets. The Government have committed themselves to fiscal objectives that may ultimately prove embarrassing for them, but the fact that they have openly accepted them is credible and sensible.
There are good examples in the document of inter-departmentalism. Chapter 21, which has not so far been mentioned, deals with the way in which children's concerns will be meshed across Departments. That is exemplary. At this stage, it is rhetoric rather than delivery, but the principles are good. Such positive thinking is taking place on the problem of domestic violence. The third and most positive aspect is that the Government have adopted medium-term financial planning in the public sector.
I used to prepare comprehensive spending plans for the private sector, and it was often difficult to persuade colleagues that it was desirable to escape from the constraints of the short term. People said that, as the future could not predicted, we should not make plans. The result was living from hand to mouth with spurts of expenditure at the end of each financial year and massive inefficiency. It is good practice in the private and public sector to have the kind of medium-term planning that the Government have introduced.
In some ways, success is likely to be marred by two failures. The first of those is excessive secrecy and the other, which is more important and has not been discussed, is over-centralisation. My hon. Friend the Member for Gordon (Mr. Bruce) spoke about secrecy in the context of the democratic principle. There have been good examples of consultation, one of which was the Independent Schools Information Service paper, where public consultation led to response and improved policy. In this debate, we are dealing with an issue on a vastly greater scale that has simply sprung out of the Government machine and been presented as a final product. That is not a good way to conduct public business.
As a result of such introverted decision making, the Government have created for themselves more problems than are necessary. For example, the credibility of the comprehensive spending review depends on a single-line Government forecast of the future. There was no reason for the Government to box themselves in like that. If inflation or output are worse than expected, the Government's programme will be difficult to sustain. One way of dealing with the public would be to discuss, in a spirit of open government, the logic of some of the future scenarios and possibilities. That happens in good public and private sector organisations. The Government could rehearse some of the problems that may arise if there is higher inflation or lower output. They could state how they would deal with it, whether through taxation, borrowing or by reduced expenditure.
We have been pressing the Government to make it clear that the spending targets are inflation-proof and recession-proof. Of course we want them to be, but it is right to be clear about whether that is implied in the review. It is essential that those who will work with the public expenditure figures should be clear about the assumptions on which they are based. Secrecy does not help the process, and it is unnecessary and damaging.
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In terms of centralisation, the Government have drawn many of their ideas about public sector contracts from New Zealand. We welcome that and, indeed, advocated it because New Zealand is a good model. There are many useful lessons, but New Zealand is a different country. It not only has more open government but is small. It is smaller than Scotland or London and in a country such as Britain it is important for public sector management to be much more decentralised.
Most of us who deal with councils are aware of the problems that will arise because of the relationship between a centralised system of public sector contracts and a highly constrained, capped local council. I have a vision of how the system will be driven. Bright, young people, probably technocrats, in the Treasury will set broad targets rather like those that are set by inspecteurs de finance in France. They will be set at the top with little participation from the grass roots. I shall give a few examples of how that top-down system of public sector planning goes wrong.
I am sure that hon. Members have experience, as I have, of a council that takes education seriously and tries to raise its game and meet or exceed the Government's objectives. The council hits capping limits and tries to draw resources from other parts of its budget such as social services. Because that budget has been drawn down, the problems of bed blocking in the local hospital are increased. The Government's answer is to point to the section in the review that says that social services and the health service will pool and co-ordinate resources. However, while councils are constrained by tough capping limits, it will be impossible to build in such flexibility.
The other problem with over-centralisation is that all the output targets, which sound plausible in conceptual terms, become crude when applied locally. We favour moving away from the idea of a public sector that is driven by inputs of money to one that thinks about service output. However, that must be considered locally in a way that responds to the market and the local environment. I shall give one or two local examples of what goes wrong when centralised targets are used as the basis for public sector planning.
To improve their standard assessment test ratings, many schools are increasing school exclusions. School performance is improved because people are driven by targets, and the troublemakers are put out on the streets. That is understandable, but kids on the streets get into petty crime and that fouls up the local police performance targets. The police make arrests, clear up the problem and the kids go into a young offenders institution. The school and the police are happy, but the kids may be learning a life of crime. In my area, an institution that was doing valuable preventive work was closed. It worked with families and tried to stop the problems that lead to social exclusion in the first place. Because the output of such institutions cannot be measured and because they are not high priority bits of the bureaucracy they are being cut.
Exactly the same is happening in the health service as a result of top-down, centralised directives. We all support the objective of cutting waiting lists. Sometimes, there are directives from the regions or from the Secretary of State to hospital trust managers to cut waiting lists. The careers of those people will be impaired if they do not succeed, so they shuffle the pack and acute cases are pushed further

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down the line. The funding for local family planning clinics, which have a low priority and no measurable output, may be cut instead.
The underlying problem in public sector management is over-centralisation and targets driven from the top. Such problems were extreme in the Soviet Union, but they have been produced even in this democratic, market society. The Government must think more clearly about how the management of the public sector—many of their ideas are admirable—is to be decentralised.
The right hon. Member for South Norfolk hit on a valuable point when he spoke about the growing difficulties of the public sector labour force. There is particular experience of that in London. I think that the hon. Member for Dagenham (Ms Church), who is Chairman of the Select Committee on Education and Employment, produced some devastating figures on the shortage of teachers in London. There are growing problems over the shortage of nursing staff because nurses are being attracted to much more lucrative occupations.
Over the past few days, I have discovered that there is an acute, chronic recruitment crisis in the police force. That can be met only by recognising that the labour market in the public sector operates in different ways throughout the country. There has to be flexibility. The system must be decentralised. Different occupations and different regions have to be able to offer different returns. As long as public sector pay, as well as other sectors of public sector management, are driven from the top and are over-centralised, the system is simply not going to work.
8.19 pm
Mr. Keith Darvill: I congratulate my right hon. and hon. Friends and the Government on the comprehensive spending review, and on the emphasis on raising standards in schools, rebuilding the NHS, improving public transport and tackling crime. I am tempted to say that those are the people's priorities. They are certainly my constituents' priorities, and were the priorities on which I campaigned in the general election.
I believe that the priorities are right and are what the electorate voted for in May 1997. They have been planned and introduced in the review soundly and, yes, prudently. By announcing three-year spending plans, agencies that are involved in delivering public services can plan to improve those services—a more sensible approach than hitherto—and aim to deliver the modernisation that is required.
There have, of course, been many notable achievements by the Government in the first 15 months. Notwithstanding those achievements, one of the outstanding aspects of the Government and their policies is that they are laying down firm foundations for the future. Their policies are for the medium and long term, in stark contrast with the Conservative party, which was almost entirely short-termist when in government, to the detriment of us all. In fact, the only long-term aspect about it was its 18 years in power—18 wasted years.
How good it is to have a Government who will deliver improved public services and are delivering on their manifesto pledges, providing much-needed resources and addressing infrastructure requirements. However, while heaping praise on the Government, I should like to express a concern that derives from my experience as a new Member and from the close observation of the
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circumstances of a sizeable minority of my constituents. The one concern that I have is in relation to social housing; it is shared by my hon. Friends the Members for Walthamstow (Mr. Gerrard) and for Doncaster, Central (Ms Winterton).
What I am about to say is not a special constituency plea, although I will not object, of course, to any particular help being given to my constituents. I raise the issue because I believe that it is important throughout the nation. It has got out of hand largely because of policies that were pursued by the Opposition when they were in government. We must start to address it urgently.
I recognise that the Government will provide extra investment of £3.6 billion to begin to tackle the backlog of investment in council housing inherited from the previous Government. More than 1.5 million council houses will, I read, benefit from that additional investment. I welcome those additional resources as well as the housing inspectorate, and the obligations on local councils to account for their investment decisions, and to give tenants more say in how their homes are managed and maintained. However, my concern is that those welcome measures may not go far enough. If the problems that undoubtedly exist are not dealt with, other public expenditure may be required which could, if the right decisions are made now, be avoided.
Upminster has more than 6,300 local authority houses. More than 90 per cent. of them were built immediately after the second world war, largely in Harold Hill, a London overspill estate that was planned and built cheaply by London county council. Many of the houses are now privately owned—about 60 per cent. of the original stock has been sold under the right-to-buy scheme, leaving the council with a depleted stock with which to address social needs. There is only minimal provision from housing associations.
More than 2,000 people are on the London borough of Havering housing waiting list for transfers and accommodation, usually because of growing families. About half of those on the waiting list are my constituents, and the others are shared between my hon. Friends the Members for Hornchurch (Mr. Cryer) and for Romford (Mrs. Gordon). Of the issues that are referred to me in my advice surgeries, approximately 60 per cent. are housing related. Most of the issues of social exclusion, crime and poor health have at their root inadequate housing. I have no doubt about the need to improve social housing stock.
For far too long, the links between poor housing and poor health have not been not officially recognised. As my right hon. Friend the Secretary of State for Health said last year in a speech to the London Housing Federation:
"anyone with a shred of common sense knows that housing affects people's health".
Housing conditions affect both mental and physical health. Dampness, condensation, cold housing, mineral fibres, carbon monoxide from gas appliances, infestation and poor layout and design all contribute to poor health. In the UK, an estimated 1.6 million homes—one in 14—are officially unfit for human habitation.
Recent research referred to in the July edition of London Age, the magazine of Age Concern in London, and undertaken in the London borough of Hackney provides very good evidence of that. It showed that improvements in a particular housing estate in that borough resulted in residents making 30 per cent. Fewer

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visits to general practitioner surgeries and in more than 20 per cent. fewer attendances at hospital out-patient departments. On a Stepney estate, more than 60 per cent. of residents considered their illness to be housing related.
It is estimated that 169,000 households in London are overcrowded. Much of the housing stock is also old, with 65 per cent. of houses built before 1945. London has the highest figures for homelessness, continually escalating social housing waiting lists and an increasing number of old people living alone. There is also proportionately less residential care than elsewhere in the UK, yet investment in the capital's social housing is rapidly decreasing. The London housing survey suggests that there are more than 99,000 households in which older or disabled persons require some form of adaptation to their property.
Apart from health and social exclusion, the consequences of inadequate housing go further. It is obvious from crime statistics that poor housing often leads to increasing crime rates and, obviously, an adverse knock-on effect on public expenditure. The launch of the new regeneration package to tackle the multiple problems of the most deprived areas will help, but I am unsure whether the new focused single regeneration budget will reach areas such as Harold Hill where it is needed most. If areas such as those that I have described do not benefit from the SRB and do not receive a sufficient share of housing investment, I foresee difficulties and, indeed, an adverse effect on public expenditure.
I warmly welcome the comprehensive spending review, but I felt it right to flag up, with my hon. Friends, the concerns that I genuinely hold, in the hope that further consideration will be given to those issues. If long-term investment is made in housing, it will have positive benefits for other sectors of public expenditure. Therefore, I am sure that it will be worth while not only for those who directly benefit, but, in the long term, for all taxpayers.
8.27 pm
Mr. John Swinney: In many ways, I welcome the direction of the Chancellor's statement on Tuesday. I should like to concentrate on the impact of his announcements on Scotland, and to raise several issues consequent on the announcements by the Secretary of State for Scotland on the impact of the comprehensive spending review on Scotland.
May I begin with some compliments for the Government. I am sure that the Economic Secretary to the Treasury will be horrified to hear that, but I assure her that it will not last for the entirety of my speech. First, I compliment the Government on the three-year spending plans. They will give some stability to planning and allow an eye to the medium term in programme development for a variety of Government Departments. Local authorities will be able to see over the medium term the impact of the Government's financial settlement, which has a substantial bearing on the income of local authorities. However, issues are raised by three-year spending plans and commitments. Many indicators need to remain on track for Departments and local authorities to gain the full value of those three-year spending commitments.
There is a need for some protection against unexpected or higher than expected inflation. Some guarantees should be given to protect the hopes that have been raised by
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this spending settlement, a point that was raised by the hon. Member for Gordon (Mr. Bruce) in his contribution. Perhaps it should lead to an increasing emphasis on building a reserve to ensure some protection against the benefits of the spending plans being undermined if inflation were higher than expected.
Obviously, a heavy caveat to the settlement is the controlling of public sector pay. Investment in health and education is welcome, but for it to be effective, the nurses and teachers who are the backbone of our health and education systems must share the benefits. I am concerned that the programme may be based on an element of pay constraint, which will further undermine the confidence of public sector employees.
The final point that must be borne in mind about the three-year plan is the basic condition of the economy. Failure to deliver the economic growth implicit in the assumptions behind the comprehensive spending review will undoubtedly lead to pressure on the package of proposals. Higher interest rates, a more severe impact on our economy as a result of the Asian financial crisis and the impact of the strong pound could all undermine economic conditions. A fall in tax revenues and an increase in the benefits bill will put pressure on those welcome public expenditure statements.
My second compliment to the Government is on the direction of the additional public expenditure that has been made available. On education, the Scottish National party supported the commitment to provide a nursery place for all three-year-olds in Scotland during the 1997 general election. We welcome the appointment of up to 5,000 classroom assistants to assist in developing standards in our schools. However, much of the explanation of the announcements given by the Scottish Office depends on the application of a better adult-to-child ratio in our schools, which is somewhat different from the pupil-to-teacher ratio that we had tended to consider. However, if the proposal can succeed in raising standards in our schools, it is to be welcomed.
The commitments on health expenditure to reduce waiting lists guarantee that the pressure will be on to ensure that the Government's pre-election commitments are honoured during their term of office. Like other hon. Members, including the hon. Member for Upminster (Mr. Darvill), I think that the commitments on housing expenditure are important because of the desperate amount of work required in that sector. In many Scottish authorities, it is predicated on the volume of housing debt carried, from which it is difficult to escape.
Undoubtedly, the new spending is welcome, but it must be put in the context of what has happened to public expenditure in Scotland in recent years. We have had four consecutive years of real-terms cuts—two under the Conservatives and two under new Labour. Clearly, the public voted for a renaissance of public services in the general election last year. It has taken some time for that to be forthcoming from the Government. It will start in April 1999, at the beginning of the next financial year, when all the commitments will come into effect. Of course, the Scottish Parliament will be elected in May 1999, so we shall have to await the impact of the proposals on the electoral fortunes of our various parties in those elections. The key is that public services have declined in the past four years in Scotland as well as in other parts of the United

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Kingdom. The Chancellor has recognised the need to invest in those public services—and the fact that investment was unavoidable.
I have a couple of concerns about the Government's announcement within the context of the past four years of real-terms cuts in public expenditure in Scotland. Page 109 of the White Paper on the spending review, which was issued on Tuesday, gives comparative data on departmental expenditure limits in real terms from 1993–94 to 2001–02. In that period, Scottish public expenditure reached a high point of £13.8 billion in 1994–95 and a low point in the present financial year of £12.7 billion. In the next three financial years of the comprehensive spending review, it will climb to £13.1 billion, £13.4 billion and £13.6 billion. Even by the end of the period covered by the review, 2001–02, Scottish public expenditure will still be £200 million lower than it was in 1994–95 in real terms, when Ian Lang was Secretary of State for Scotland.
When I checked through the parliamentary record of the announcement of the 1994–95 public expenditure settlement in Scotland, I was amused to find that the opening words of the right hon. Member for Hamilton, South (Mr. Robertson), who is now Secretary of State for Defence, but who was at the Dispatch Box opposite Ian Lang then, were:
"When we look behind the figures, expose the creative accountancy and blow away the blizzard of hype, the truth is a whole lot different and much nastier."—[Official Report, 8 December 1993; Vol. 234, c. 313.]
We have heard many such sentiments from the Conservatives about the creative accountancy of this settlement, which shows that that can be said by both sides of the House.
I must also compare the Scottish Office departmental expenditure limit with the total limits for the United Kingdom. The Scottish Office level in the table was 7.97 per cent. of the UK total in 1994–95. In the following year, it rose to 8.04 per cent., but in every year since, it has fallen. At present, it stands at 7.74 per cent., next year it will fall to 7.71 per cent., and in following years to 7.63 per cent. and then to 7.53 per cent. in 2001–02. Year by year, Scottish Office public expenditure is steadily eroded in comparison with the total for the United Kingdom. I assume that that is due to the impact of the rigorous application of the Barnett formula, which is often misrepresented in the House. As we all know, rather than being beneficial, it is an expenditure-reducing formula in Scotland and it is population driven, but the Economic Secretary may want to say something about that in her reply.
I can offer the new spending a straightforward welcome because it is welcome in our public services, but we must acknowledge that the Government, in making difficult decisions, have come to conclusions about public services in Scotland that may not all be beneficial. First, the budget available in the Scottish Office to support industry and enterprise will be cut in real terms next year by £56 million or 9 per cent. At a time of rising unemployment, when business confidence is uncertain, I am far from sure that such a cut in enterprise support is appropriate.
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An article in The Scotsman on Monday by Jeremy Peat, the chief economist of the Royal Bank of Scotland, assessed where the manufacturing sector, which is fundamental to the Scottish economy, is. He writes:
"The total economic picture is the sum of disparate parts. For the 20 per cent. plus of the economy that is represented by manufacturing, the picture is clear. After many moons of expecting major problems, as a result of strong sterling, Asian chaos and the like, these are now with us. Whether you take historic official data or forward looking survey data from the CBI or chambers of commerce; whether you look at the domestic scene or exports, output or orders, the trends are stagnant at best and downwards overall."
If that is the assessment of one of the foremost economists in Scotland of the economy there, I wonder about the wisdom of cutting the budget for industry and enterprise.
When a 15 per cent. cut in that budget was rumoured in 1995–96, under the Conservatives—it transpired to be 7.5 per cent.—the hon. Member for Dumbarton (Mr. McFall), who was a Labour spokesman at the time, asked:
"how can we deliver economic prosperity, jobs, and training with such a savage cut? It can't be done."
I was reminded of those sentiments today.
My second concern is the impact on the agriculture budget of a 10 per cent. cut in real terms. I suspect that the cut is due to the BSE factor. We will need to look into other concerns in detail, such as hill livestock compensatory allowances. I see a member of the Select Committee on Agriculture, the hon. Member for South Derbyshire (Mr. Todd), on the Labour Benches. As we all appreciate, the rural economy, which is integral to my constituency, has suffered immensely in recent years.
I welcome the investment in public services, but we must recognise that we need to invest in people as well as in services. The introduction of independent review bodies to regulate public sector pay was welcomed by all parties; the Labour party used to attack any restraint on their recommendations.
In Scotland, one in 10 employees operate in the public sector. In the past year, pay increases have, on average, been 2.6 per cent. in the public sector, whereas they have been 5.6 per cent. in the private sector. However, the Prime Minister's comments on the obligations of the pay review bodies—that they must operate on a basis that is fair, affordable and within Government spending limits—mean, I suspect, that the bodies' independence will be constrained; that is also what I infer from the Chancellor's statement on Tuesday. I fear that the bodies will be limited in their ability to reward public sector workers for the important tasks that they do.
I reiterate that the new money that is being invested in public services is welcome. In the past few days, commentators and journalists have done the public a great service by probing the Government's largesse and dismantling the cumulative expenditure totals to try to explain the phenomenally large telephone-number increases that the Government have suggested. I believe that we are, especially in this debate, getting to the nub of the real impact of the spending. However, there is a real-terms increase, which is welcome in some key areas.
As I said, I am concerned that Scottish departmental expenditure will not reach its level under the Conservative Government. The settlement has been made possible by cuts in public services, and I fear that those cuts will undermine our economic base. Time will tell whether the statement represents a success.
8.41 pm
Mrs. Helen Brinton: Most hon. Members—certainly all Labour Members—and many more people in the country will have welcomed the Chancellor's spending announcements on Tuesday, which contained generous resources for health and education. That is excellent news for my constituents. I particularly welcome the allocation of £3.6 billion to renovate 1.5 million homes, and the new programme for home energy efficiency.
However—this is a gentle nudge to the Front Bench—I look forward to hearing more from the Chancellor about what we are assured is the Government's commitment to the environment. I am sure that the House is aware that both the first and second reports of the Environmental Audit Committee, of which I am a member, praised current excellent progress, but urged greater speed in fulfilling the Government's pledge to put the environment at the heart of policy making. Yes, a large boost for transport has set us on the right road. Moreover, home energy efficiency will play an important role in achieving sustainable development, not only in environment protection and improvement.
Two other strands of sustainable development will also be promoted by home energy efficiency: the economic strand and the social strand. On the economic strand, jobs will be created and household budgets will be eased, which is especially important for people on very low incomes—such as those in parts of my constituency—and for those who are more confined to their homes, such as disabled people and elderly people. The social dimension will also be enhanced, as homes become warmer, healthier and more pleasurable places in which to live, rather than merely to exist.
Energy efficiency is only part of the story, however. To achieve the development we want, we must not only reduce the use of non-sustainable forms of energy, but promote the development and use of renewable forms. Financial measures are necessary to encourage not only efficiency, but renewables. Last autumn, as hon. Members may recall, I asked the Prime Minister to make a statement on Government policy on solar energy.
I welcomed the announcement of the United Kingdom target that 10 per cent. of our electricity needs would be met from renewables by 2010. According to the most recent figures that I have seen, however, only 0.7 per cent. of our needs are met by renewables, which is the lowest percentage in Europe. Friends of the Earth has estimated that 18 per cent. is a realistic target.
I look forward to the Green Paper on renewable energy, which is due to be published shortly. I understand from a recent parliamentary answer by my hon. Friend the Minister for Science, Energy and Industry that the Department of Trade and Industry is considering what support the Government could give to encourage the development of all forms of renewable energy, including solar power. Believe it or not, the United Kingdom has a significant solar energy resource.
Like hon. Members from, I am sure, both sides of the House, my concern is that we may do too little, too late. In Britain, we have not only enough sun—given the weather during the past couple of weeks, that may be difficult to believe—but the expertise, and industry now has major opportunities. We lead the world in combined heat and power; we could lead in solar power
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Business in solar energy is booming worldwide but, while other countries—including the United States, Japan and Germany—are busy priming the pump, we are in danger of missing out, not least in jobs and exports. Solar energy will be particularly important in currently underdeveloped regions where there is no access to a national grid.
Moreover, consumers are paying more than they need for energy; as I read recently, it is already cheaper to heat a house with solar power than with gas—if householders generate excess solar power, they can sell it back to the grid. Local grid systems are an attractive option, which would increase local accountability. By failing sufficiently to exploit solar power, we are losing out on a major way in which to meet our renewable energy targets—up to a third of our needs could be provided by solar energy.
The Government could adopt a variety of measures to encourage the development of renewables, especially solar energy. However, investment will be essential, and time is not infinite. We all sign up to wanting a healthy environment. In the comprehensive spending review, the Government have made an excellent start in creating one, with resources for transport and home energy efficiency. I look forward to—indeed, I expect—further progress along the lines that I have suggested. If the Government—any Government—invest in the environment, they not only protect the present, but safeguard the future, which is what I believe we all want.
8.47 pm
Mr. Andrew Tyrie: I welcome some of the spending increases, especially those on the health service, which was, after all, a Conservative priority for 18 years—spending increased steadily throughout our period in office. I have strong doubts about the affordability of the Chancellor's announcement, but I shall not dwell too much on that; I want instead to talk about the economic credibility of the economic numbers that lie behind the spending forecast.
That credibility depends on two things: first, whether the economy performs as the Chancellor hopes it will; and, secondly, the plausibility of the arithmetic that the Treasury has used to derive the detailed tax and spending numbers. The forecast is optimistic to say the least. It predicts growth falling to 1.75 per cent. and then going back to trend and running at 2.25 per cent. in subsequent years; steady unemployment, when all the indications are that it will rise, with added costs; and inflation steady at 2.5 per cent. The forecast suggests a very soft landing. The Government have made very little provision for the eventuality of a downturn. They are spending money before they have it.
The contingency reserve, at just over 1.4 per cent. of general Government expenditure, is far smaller than the reserve set for the outer years by any of the previous six Chancellors; in fact, it is less than half the average that they provided. I have asked the Library to check whether it is the lowest reserve for the outer years since Denis Healey's first Budget, and I think that the answer will be yes.
The forecast ignores the business cycle: the Government talk as though they have abolished it, with their references to an end to boom and bust, but of course they have not. The cycle certainly continues to exist, and may well come back to bite Labour. When I asked the

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Chief Secretary a few weeks ago whether Britain was in an upswing or a downswing or at a turning point, he had no idea. Far too little consideration is being given to the effects of the cycle. We need to examine the cyclically adjusted level of spending to determine whether the plans are affordable.
To give the forecast an air of respectability, the Government have asked the National Audit Office to comment on some of the assumptions. That sounds like a good idea, and some people, including myself, have argued for it for several years, but we should not be deceived: the NAO is merely being asked to look at a few assumptions behind the forecast, and has no remit to look at the forecast itself. For example, it does not analyse what a change of, say, 0.5 per cent. in nominal gross domestic product might do for spending and unemployment, or whether the Government have calculated roughly the right figure for it.
At present, the NAO is not even remotely equipped to try to take on such work. It is not an economic forecasting service, and it is not experienced in the field. No wonder it has come up with little more than vague phrases in its reports. It says that the assumptions are
"broadly consistent with past relationships"
or
"reconcilable with the available evidence",
and no more. That does not lend any credibility to the forecast.
If anyone is in any doubt that the NAO is merely scratching the surface of the job of vetting the forecast, it is worth looking at what resources it is employing to do the job. I asked the Comptroller and Auditor General that question in a Select Committee recently, and he told me that it was spending between £20,000 and £30,000. A fortnight ago, I asked him what resources he would need to do a proper job of vetting the forecast and examining the Treasury's arithmetic behind the assumptions. He will write to me with the answer, but he made it clear that it would be many times the resources that he employs now.
Doing a proper job means doing some of the work that the Treasury undertakes at present, so a fortnight ago I asked the Economic Secretary how much the Treasury spends on that. The answer is nearly £500,000. I have been in touch with the Bundesbank, which vets the German Government's fiscal forecast, and gives its views internally, with the president of the bank sitting in on German Cabinet meetings. The bank spends between DM1.5 million and DM2 million—a little bit more than the Treasury spends—on the task. I asked a consultancy firm, London Economics, what resources it would want to employ to do a proper job of vetting the forecast, and it said that it would take many hundreds of thousands of pounds.
If the NAO is to be prayed in aid to make the Treasury figures look respectable, it needs to be given a much wider remit, and the resources to do the job well. In the meantime, I sincerely hope that we can have an end to all the nonsense that we have been hearing from the Government about the forecast being somehow beyond reproach because the NAO examines it.
Only yesterday, the Prime Minister, in what I consider a disgraceful fashion, went as far as saying that the economic forecasts "have been agreed" by the NAO. That is complete nonsense. The NAO has been asked to
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examine not the forecast itself but only the assumptions that lie behind it, and it has never alleged otherwise. It has also never said that the forecasts were "careful and cautious", as the Prime Minister said. That is shameful nonsense from the Prime Minister.
If the NAO got to work on the detailed numbers, it might uncover quite a lot. For example, it might challenge the credibility of the golden rule, which, as my hon. Friend the Member for West Worcestershire (Sir M. Spicer) said, has been comprehensively rubbished by Willem Buiter, the Government's own appointee to the Monetary Policy Committee.
The House may be interested to learn that the definition of the golden rule has been the subject of a Supreme Court case in Germany, which forced the Government to make more effort to define what it meant. Apparently, the court concluded that the concept was too vague for the Government ever to be accused of breaking it. That tells us something about its credibility. The German Government have now come up with a more detailed definition, but still very few commentators in Germany take it seriously. A senior member of the Bundesbank recently described it to me as completely meaningless.
I would not mind all this hogwash from the Chancellor and the Prime Minister about auditing the accounts, if they described it as making a start, and if they were making a real bid to bring more transparency to the Government's accounts; but that is not what was in the statement.
When it comes to transparency, the spending review document is inexcusable. The Government have hidden the true treatment of the increases in social security spending in an annexe, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) pointed out.
Several definitions have been altered without proper explanation. A most basic definition, general Government expenditure—it sits in importance alongside the control total, which my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) was talking about earlier—has lain at the heart of Government accounts for a long time, but now we have to grapple with a new concept: total managed expenditure.
Does anyone—the Economic Secretary, perhaps—know the difference between the two numbers? Can she tell me now? Can someone from the Box tell her? I cannot find the answer in the Government's publication; it may be hidden there somewhere, but I have not been able to find it in the past 48 hours. I note that no one is rising to answer my questions. Far from enjoying increased transparency on these crucial numbers, we now have to peer through a fog of changed definitions.
We might be at a defining moment in this Parliament. In the past few weeks, the air of moral superiority has been dealt quite a blow by allegations of cronyism. In the past few days, a big divide has opened up between the parties on tax and spend. We on this side of the House believe in affordable spending and lower taxation. On the other side, they believe in higher and higher spending.
Labour has now rolled the dice. A recession may come before the election or after it, but there will be no going back to what amounts to the beginnings of a spending binge. Quite the opposite: spending Ministers will want more before long. The puny reserve that I described earlier will shortly be exhausted, and, with cash limits also swept away, Departments will not even try to absorb inflation. They will just bid for more if inflation rises.

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This week may also be a defining moment in a political sense. The Chancellor of the Exchequer is staking a claim to lead old Labour. Perhaps his announcements on eye testing and his references to Nye Bevan had something to do with that. His was a rallying call to all those on the Government Benches who find the crony-ridden behaviour of the modernisers somewhat distasteful. It was a call to those who have never been wholly comfortable with the apparatchiks who surround Tony Blair. If the statement was partly the Chancellor's bid for the soul of his party, it was also a gamble on the economy and with our public services—a gamble he need not and should not have taken. I think that he will probably regret it.
8.59 pm
Mr. Mark Todd: I want to confine my remarks to a dry subject—the methodology of reviewing and controlling public expenditure, rather than the outcome itself. That is partly because, like the hon. Member for Twickenham (Dr. Cable), I made my way in the private sector, in a smaller way than he, doing that task.
I spent some time in the early stages of the comprehensive spending review attempting to establish a framework for how that review would operate, at least in my own mind, and seeking—and being courteously treated by Ministers—to get those messages across to the Government. I want to share some of those thoughts with the House this evening.
First, it is critical in a review of this kind to establish clear, demanding targets for the review process. I fear that in this particular case that has been lacking and I commented on it right at the start. Secondly, it is important to define the assumptions and forecasts on which the review will be based. This debate has shown how some of the issues around those assumptions and forecasts might be questioned. Thirdly, it is necessary to decide on the criteria for the process: what is in, what is out and what the fundamental guiding philosophies are of the process itself. The Government ran into difficulty with this at an early stage and fortunately corrected it, for example, on issues relating to charging for visits to doctors and speculation along those lines.
It is necessary to establish clear leadership and decision-making processes for the review. The Government succeeded in that in the end. The Prime Minister and the Chancellor of the Exchequer clearly owned the task of ensuring that the outcome was delivered and that was critical. There needs to be a clear division of the activities of Departments into programmes and processes—the things that are spent and the ways in which that spending is supported. It is necessary to analyse those processes into shared processes that run across more than one Department and common processes which are individual to each Department but identical in each place. It is necessary to look at the customer and client base—the people who are to be served through the services and programmes defined—and to decide whether some are impacted in several different ways by different programmes and different processes, and whether there is a need for coherence. Again, the Government's initiative to identify a range of programmes that clearly fit the bill precisely is to be welcomed. They include attention to asylum seekers and dealing with children in care.
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It is necessary to establish joint teams on the shared processes between Departments. I met with considerable resistance there on the understandable grounds of the need to protect departmental independence in the review of spending decisions. I shall briefly return to that later. It is necessary to establish joint teams on the programmes serving the same customers and that has been done. There are several initiatives of that kind—I should have liked to see more—which are welcome and look as if they will deliver substantial gains.
It is necessary to use the people who are closest to the customers and taxpayers who are being served. I have always believed it fatal to delegate a task of this kind to a senior management team who are remote from the end result. They are often keenest to protect the hierarchies that lie between. That may have happened in some instances. It is difficult to identify people lower down the chain who can provide the expertise in serving the individuals we want to reach with the programmes.
Those people need to be empowered. It is a hard job to do that because they are remote from the hierarchy above them who are often concerned about the kind of things that they will propose in terms of spending reviews.
Finally, one needs to establish clear ways to monitor the outcomes and criteria for deciding on the success of those outcomes. Again, the Government have made good progress there, certainly greater progress than I have seen in the evidence of other spending reviews, to try to define how to test whether what one says will happen has happened and what one does about failure.
There is much to applaud, but further work needs to be done to review public spending, in the ways that I have outlined, to achieve more rigorous control of the spending process.
Deferring to Departments to manage their own reviews will fail to identify all the key shared points of process and programmes. Expertise and commitment is unevenly spread between Departments, and it is particularly critical that non-core bureaucracy identifies opportunities for savings. It is easy to dismiss bureaucrats as being unhelpful and a waste of resources, but they are critical to the process, and how to motivate those individuals to deliver what is needed is an important task in establishing a review.
Respect for departmental primacy seems curious when we are so free with the mergers and demergers of Departments. After all, the processes that serve our citizens last a lot longer than the departmental structures that we chose to impose upon them.
Information technology has been used as a mantra in this review, as it has elsewhere. IT plays a critical role, but one that must be based on rigorous and harsh adherence to basic rules. First, we have to modernise processes and review programmes based on them before buying new systems. Secondly, we need core common processes which should use core common IT systems. It is criminal to invest in new information systems when an existing package will do the job just fine with amended human processes in the Department concerned.
I have found examples of investment in new payroll systems in Departments. Payroll is a commodity process and a commodity system in IT terms and to invest in new systems, in some cases developed by an IT department within the Department itself, would be prima facie evidence to me of poor management judgment.

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We establish common methodologies for managing IT projects and we operate within a clear strategy on data, software and technology. How often in the House do we hear Ministers blame incompatible systems and data for delays in delivering programmes? I have heard that two or three times already in my brief period as a Member of the House, and I am sure that many others have heard it far more often than that.
I have concentrated purely on how reviews might work and how spending should be managed. Other hon. Members have rightly paid tribute to the achievements in terms of delivery of resources to key policy objectives. That is the goal that we all seek, but I hope that my suggestions will help us to build on what has been done.
9.7 pm
Mr. Geoffrey Clifton-Brown: This evening we have seen the new Labour iron Chancellor ravaged into the old Labour poodle of his party. Every Labour Member who has spoken this evening has called for higher expenditure or welcomed these expenditure announcements. One even called it craven; they were craving for higher expenditure. Here we have it. We will hold the Government to account.
We will see whether the higher expenditure achieves its results. Will it result in lower class sizes and shorter hospital waiting lists? So far, under the Government, the number of those on hospital waiting lists for more than 12 months has doubled and, as for class sizes over 30, the number of five, six and seven-year-olds has risen by some 450,000. So far, the results are not encouraging.
We thought that new Labour was taking on some of our philosophy, and that wealth creation, small and medium enterprises, low inflation and low taxation were among their new ideas. However, the comprehensive spending review is, in truth, a comprehensive spending increase. Time after time, Labour challenges us on the level of public spending. Well, prudent economics demands that the national economy should be able to afford what we spend. We shall increasingly see that Labour's announcements are unsustainable. Interest rates will rise, borrowing will rise, inflation will rise. The economy will begin to run down.
Not everything was wonderful in the 18 years of Conservative Government. Fundamental problems remain to be addressed, such as productivity, which is 20 per cent. below that of the United States, and 30 per cent. lower than that of Germany. I expected the CSR to deal with such matters, but it did not. Every economic decision that Labour has taken since coming to power has been wrong. The Government gave monetary policy to the Bank of England, but asked it to control inflation with only one economic lever. The Bank has not been given an overall economic remit.
Had we been in control of monetary policy, we would have raised interest rates sharply after the election instead of doing it in dribs and drabs. Our two Budgets would have raised taxes. Monetary policy and fiscal policy would have been tightened a year ago, and we would not have the inflationary pressures that are affecting our economy, or pressure to raise interest rates at a time when manufacturing industry is going into recession, and when world demand is slowing down. Labour's policy will lead us into deeper recession.
Anyone who speaks to those who run manufacturing businesses will know what the Government's economic policy has done to them. Many of them have told me
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during the past couple of weeks that the last quarter has brought a sharp downturn. Interest rates are too high, resulting in a pound that is too high. Exports have dried up, and our balance of payments is rising. The picture is not good.
We cannot ignore the world macro-economic situation. The world's second largest economy, Japan, has run into general recession, and that is bound to affect our economy. First, it will weaken demand for our goods, which are difficult to export at the best of times. Secondly, as the far east recovers, huge currency devaluations of up to 40 per cent. will give a big competitive advantage to export goods coming into our markets. In reaching their assumptions, the Government have not taken into account the recession in manufacturing industry and the world economic position.
Labour has challenged us on how we would reorder spending. Total managed expenditure will rise from about £330 billion to roughly £389 billion. However, the social security budget will increase by a staggering £37 billion, to rocket through the ceiling of £100 billion for the first time. I calculate that to be £20,000 for every man and woman next year. If the Government's assumptions on unemployment or inflation are wrong, the amount will be even larger. Many benefits are linked to the retail prices index, so any increase in RPI will increase social security costs. If the assumption that unemployment will not rise is incorrect—I fear, sadly, that unemployment will rise—unemployment benefits will also go up. Here we have a comprehensive spending review that is said to be based on prudent economic assumptions, but I am not at all sure that it is.
We have watched a golden legacy inherited by the Government slowly being squandered. I want the economy to continue to perform and our country to continue being one of the world's leading manufacturing and industrial nations. I do not want us to be shackled by the bureaucracy coming out of Europe, because I want us to have a real enterprise economy. However, I am afraid that, because of the monetary and fiscal policy adopted by the Government, that will not happen.
Today, consumer demand is still very high and inflationary pressures are strong. The Government could have choked off that demand by proper and prudent fiscal and monetary policy, as I have described, but they have failed to do so. They have failed to encourage saving and the savings ratio is falling alarmingly. In the last Budget, measures were introduced to abolish PEPs and TESSAs and to replace them with the bureaucratic ISA regime. For the long term, that was not a good Budget, and this is not a good comprehensive spending review.
The Government recognise that their assumptions are not robust. At page 48 of "The Economic and Fiscal Strategy Report 1998"—the new blue book, as I call it—paragraph 4.3.7 states:
"the demand for public spending can vary unpredictably due to evolving needs and opportunities."
That is an admission that the Government are not sure that their assumptions are right. At the end of that paragraph, they add:
"However, unexpected shocks due to other influences, such as developments in the world economy, will continue to impact on the British economy."
The Government are not certain that their assumptions are robust. If growth rates are not maintained at the extremely modest levels assumed, if inflation targets are not met and

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if unemployment starts to rise, the economy will suffer a serious slow down. As has always happened with every single Labour Government of the past, the economy will be in a mess and the new incoming Conservative Government will have to sort it out and recreate the enterprise culture of the world.
9.16 pm
Mr. Tony McNulty: I congratulate the hon. Member for Cotswold (Mr. Clifton-Brown) on having brought some passion to our proceedings. For much of the evening, and certainly during the contributions from Opposition Members, I thought that I had stumbled into an accountancy seminar at KPMG, or something just as boring. Sadly, most of what the hon. Gentleman said was arrant, albeit golden, nonsense, but at least it was delivered with a degree of passion.
It struck me as interesting that, when the right hon. Member for Wells (Mr. Heathcoat-Amory) opened the debate—it feels like that was three days ago—he spent about half an hour ranting on, but never, unless I missed it, mentioned schools, pensions, hospitals or health; his speech was just a miserable little rant. Let me ask the right hon. Gentleman and the hon. Member for Cotswold this question: what should we cut? Do not come here with jargon about dampening this or that down—let us put it in front of the people who matter, the electorate in our constituencies, and ask them, "What, of all that my right hon. Friend the Chancellor announced on Tuesday, would you not do?" Would they halve the billions spent on education, or the billions spent on health? When it comes to the detail and what matters to real people, the Opposition suddenly fall quiet.
I do not want to be overly unkind. It might appear that I castigate Opposition Members, but I do this more in sorrow than in anger. What we have seen over the past couple of days is an attempt by the Conservative party to understand where we are coming from, but they do not understand the language, because they have never been here before, and it is alien to them, so it is not entirely their fault. Perhaps, as my hon. Friend the Member for Barrow and Furness (Mr. Hutton) said, we should suggest a degree of therapy for them and castigate them gently, rather than in detail.
The Conservatives are not used to the language of priorities, the language of prudence, not profligacy, or the language of reform and modernisation. To be fair to them, they have not missed the plot; they never knew what the plot was in the first place.
The Conservatives do not understand the plot because it is not about stop-go, the quick fix, short-term vandalism for political expediency, splurging—as an hon. Member said earlier at Question Time—or making the poor pay, which is their usual trick. It is about the long term and more resources for modernisation throughout government, which is crucial, with reform at every stage.
There are—I do not say this glibly—59 billion solid reasons why people should be happy about all areas of public spending. Interestingly, the right hon. Member for Wells chose not to mention any of them. They include health, pensions, services for children, social services and education. We have had no substantive response and no answers from the Conservatives—just, God bless 'em,
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utter confusion. It is not spend, spend, spend; the Conservative response, rooted in that confusion, is whinge, whinge, whinge.
The Opposition's response is chaotic. We listen to one Conservative Member and the response is that the comprehensive spending review is, "An irresponsible electoral binge, and the country cannot afford it." We listen to another, and the response is, "It is not real. It is all smoke and mirrors. It is all hype." One group is saying that we are spending far too much money and the other that we are not spending money at all because there is no money. Even the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), who bores the world with a column in Accountancy Age every month, has no idea.
Some Conservatives Members say that too much money will cause major economic difficulties, but their hon. Friends say that there is no money, so how can too much money cause economic difficulties? Some Conservatives Members say that there is not enough money and we should spend more. Depending on which radio interviews one listened to, they have probably spent another couple of hundred billion pounds in their responses since my right hon. Friend the Chancellor sat down on Tuesday. So there is no money at all, just smoke and mirrors, but the smoke and mirrors are being spent and causing inflation. How does one spend smoke and mirrors?
Opposition Members say that we are spending too much on welfare, but they never tell us which aspect of welfare spending they would cut—child benefit, pensions or disability benefits. We get no answers.
Mr. Clifton-Brown: Will the hon. Gentleman give way?
Mr. McNulty: No, time is short, so I shall not. If the hon. Gentleman wants to tell me later what he was going to say, I will have a cup of tea with him.
At Prime Minister's Question Time, the right hon. Member for Richmond, Yorks (Mr. Hague) could not answer—which is not unusual—when asked what cuts he would make in welfare spending.
I know that the people of Harrow, East will be listening carefully to Opposition Members. The 21 per cent. of my constituents who are on income support will be listening, but they will hear no answers. The 16 per cent. who are over retirement age will have heard nothing from the Conservatives about pensions today, yesterday or the day before. The 23 per cent. of households in my constituency that are pensioner only—a very high figure—will not have heard the Conservatives welcome a single aspect of the review.
The 21,000 people in my constituency who have a limiting long-term illness—also a significantly high figure—will benefit from our spending on health, social services and pensions, but Opposition Members have offered them nothing. What does the Conservatives' response to the comprehensive spending review offer the 22,000 carers, the 4,000 refugees and asylum seekers and the 37 per cent. ethnic minority population in my constituency? Their only response was to raise vacuity and fatuousness to an art form, not only in stereo but in triplicate or quadruple—
Mr. Leslie: It was quadrophonic.
Mr. McNulty: I thank my hon. Friend. "Quadrophenia"—I should have remembered that.

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The people of my constituency will welcome the comprehensive spending review and how it fits in with earlier pronouncements. The people of London will welcome the statement. The streets of London are not paved with gold and it is not all milk and honey. Members on both sides of the House have implied that London has had it far too good and been cosseted recently. According to the 1998 index of social deprivation, 14 of London's boroughs are in the 20 most poverty-stricken local authorities. They will benefit considerably from the comprehensive spending review. London contains some of the richest and poorest areas of the country, but far too often Members forget about the poorest. Even Harrow, which is supposedly an affluent suburban borough, has its pockets of serious relative deprivation.
Mr. Edward Davey: Will the hon. Gentleman give way?
Mr. McNulty: No, I am afraid not. I have been wound up all night and now I am winding down.
I am convinced that London will receive its fair share from the comprehensive spending review and we shall see the spending and investment that both this great city and the country need. The comprehensive spending review will be a success precisely because it is rooted in modernisation and the reform of public services. It is grounded in caution, prudence and efficiency and underpinned by a sharp reality and a vision and strategy that Opposition Members cannot comprehend because they do not understand where we started from. Perhaps they will disavow that notion later.
Mr. Davey: I thank the hon. Gentleman for giving way. I agree that many people believe that London has been feather-bedded in the past, and he is correct in saying that they are wrong. Will he comment on reports that, following the comprehensive spending review, the Government are examining the additional educational needs index and standard spending assessments? The reports suggest that London will lose £200 million from school spending. Will the hon. Gentleman join me in condemning those reports and agreeing—
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. The hon. Gentleman is making a mini-speech. That is quite sufficient.
Mr. McNulty: I was about to ask the hon. Gentleman to give way, but then I remembered where we were. That is another issue to discuss over a cup of tea afterwards, but I urge the hon. Gentleman not to believe all that he reads in the Evening Standard. I am afraid that I cannot take any more interventions, as I must wind down my remarks.
The Opposition simply do not understand our starting point. They do not understand what we are trying to do and they do not understand the desperate need for this comprehensive spending review. They do not understand those things because this is not about their spiv economy, with candyfloss short-term plans before each election, followed by singing in the bath with no regrets afterwards and hoping to struggle through to the next one.
The Opposition can listen for ever—they started to do that this week. They can be Billy Whizz on tour, but they will find that no one wants to speak to them. Happily, not least because of the comprehensive spending review, for Conservative Members yesterday beckons.
9.26 pm
Mr. Peter Brooke: The hon. Member for Harrow, East (Mr. McNulty) was as colourful, vehement and Harrovian as ever. I am sorry that he was disappointed by the speeches of Conservative Members, but I think that they will stand the test of time better even than his own.
My late noble father was the first Chief Secretary to the Treasury. When Harold Macmillan offered him the job, he made it clear that he wished to offer it to someone who had run a great spending Department before. John Boyd-Carpenter, who died in the past week, was the second Chief Secretary. That tradition was not maintained for the next 30 years until my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) had the great intelligence to suggest that Mr. William Waldegrave should become Chief Secretary to the Treasury in the closing period of the last Government.
I do not hold it against the incoming Government in 1964 or the incoming Government in 1997 that they did not follow the same procedure, because it was obviously not within their power to do so, but the tradition of control of public expenditure is continuous and has some eternal verities. In reverse alphabetical order, there was continuity between Plowden and Pliatsky. In the far-off days, when Charles James Fox was the Member of Parliament for my constituency, the poet William Blake—who was not of a Conservative disposition—was his constituent. Among the latter's literary works was the "Proverbs of Hell" and, among those proverbs, is the line:
"Prudence is a rich, ugly, old maid courted by Incapacity."
I am not wholly surprised that the Chancellor of the Exchequer has retired her from his retinue. I noted another line that is not far away in the same "Proverbs of Hell". It states:
"The road of excess leads to the palace of wisdom."
The sad thing about this Government is that they never needed to leave the palace of wisdom. They borrowed our policies, but they should have borrowed too from our philosophy: the past can inform and illuminate the present and the future.
In that context, I shall quote briefly from Lord Barnett's book about his time as Chief Secretary in the last Labour Government. Referring to 1974, he writes:
"We did not know at that time how often the forecasts would prove to be inaccurate. On this first occasion, the figures that proved to be disastrously wrong were company liquidity, which was vastly overstated, and the PSBR, where the margin of error turned out to be a colossal £4bn short of the real figure."
I remark parenthetically that that figure was in 1974 sterling.
"In both cases there can be little doubt that different decisions would have been reached had the forecasts been less wide of the mark."
When I entered the House, in March 1977, those on the Government Benches were still reeling from the effect of the cuts that the Chancellor had had to impose in 1976. I have a strong suspicion that, as a result of the announcements that have just been made, we shall in due course see the same reaction on the Government Benches this time.
Because the Chief Secretary again quoted the mantra about national debt in the 1990s, I conclude with a comparison between general Government net debt as a

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percentage of gross domestic product in 1978–80 and 1995 in the following countries: Austria, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, the United Kingdom and the United States. In only two of those countries was the debt ratio down between those years. One of those countries was the United Kingdom; the other was Japan, which is a special case because of the real assets in the Japanese social security arrangements. Those figures give the lie to the frequent quotations that the Chief Secretary gives us.
9.30 pm
Mr. Michael Fallon: I declare the interests recorded in the Register of Members' Interests.
The debate has been lop-sided. From the Labour Benches, a succession of speakers either ignored the condition of the economy or were complacent about it. The hon. Member for Ellesmere Port and Neston (Mr. Miller) had not even heard of the manufacturing recession. A series of speakers asked for more public spending than they were given on Tuesday. The hon. Members for Upminster (Mr. Darvill), for Doncaster, Central (Ms Winterton) and for Peterborough (Mrs. Brinton) each demanded yet more public expenditure than was allocated on Tuesday. Not one Labour Member showed any understanding of how that spending will be funded.
By contrast, in forming its judgment on the balance of the spending review, the House had the benefit of the advice and experience of three former Treasury Ministers from the Conservative Benches.
My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) condemned the spending total as "reckless", exposed the various fiddles on which it was constructed and asked the key question, "Who pays up if growth falters?" My right hon. Friend the Member for South Norfolk (Mr. MacGregor), with the additional authority of having served as Chief Secretary to the Treasury, pointed out that there was nothing new about the search for efficiency savings. He, too, asked an important question about public service agreements and the sanctions that would be available if they were broken. Finally, my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) gave us, from a filial stance, an historical perspective on the importance of that office.
During the past two days, it has become even clearer that the comprehensive spending review was not a serious review. It was not a root-and-branch examination of public spending. It was not the reordering of spending priorities that one would expect from a new Government, switching spending from one Department to another. In fact, the review was called off. This was an old-fashioned spending splurge—fiddles, fudges and a great deal of hope, the spraying around of extra billions, every Department turning out to be a winner.
Several of my hon. Friends mentioned one casualty of the spending review. We heard a little less of poor old Prudence. She had been paraded in public and pushed forward in every photo-opportunity. She had been sent out to escort the Chancellor on every trip down to the square mile. Now it is all over. These days, we read of high-profile romances being ended by fax. Well, poor old
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Prudence was dumped by press notice on Tuesday. Now she is just another ex. With her goes all the rest: the reserve, as my right hon. Friend the Member for South Norfolk pointed out, is shrunken away in years 2 and 3; cash limits are now flexible again, as we see from page 116; repayment of debt, promised in March, is already forgotten by July; and there is no balanced Budget. The Government stated:
"By 2000, the Budget is forecast to be in balance."—[Official Report, 17 March 1998; Vol. 308, c. 1099.]
Just three months later, that promise, too, is abandoned.
Even on the Government's own figures, not in the spending review but in the earlier economic and fiscal strategy report, as my hon. Friend the Member for West Worcestershire (Sir M. Spicer) well illustrated, the public sector net cash requirement is shown at upwards of £4 billion for every year after 2000. We are back to extra spending and old-fashioned borrowing, all held together by the fiddles, fudges and heroic assumptions that underline the document presented to us.
I begin with the fiddles. A number of my hon. Friends have pointed out the absurdity of classifying working families tax credit as tax forgone, rather than the benefit that it replaces. That is not a view endorsed by the Office for National Statistics; on the contrary, the ONS has contradicted the Government. It will allocate working families tax credit as a benefit in the national accounts.
The fiddled figures are all tucked away. At the back of the document, on page 107, we read:
"Accounting and other adjustments"
rising from £13.4 billion this year to £20 billion in 2001. "Accounting and other adjustments" is now the fourth-biggest spending line, higher even than the Department for Education and Employment, whose budget received such attention yesterday, and higher than the budget allocated to the Scottish Office. Perhaps it is to be a Department of State, all on its own. There is certainly a candidate to run it—the Paymaster General himself. If he can magic away £200,000 in remuneration, who knows?—with a little extra tuition, he may be able to magic away £20 billion of accounting adjustments.
All that comes from a Government who promised us openness and transparency. A rather excited press release on Budget day stated:
"For too long, economic policy-making has been conducted behind closed doors".
A few weeks after that, the permanent secretary resigned, allegedly because policy making was indeed being conducted behind closed doors—behind the closed doors of the Grosvenor House hotel by the Chancellor and his spin doctors.
So much for the fiddles. I shall deal with the assumptions on which so much of the spending review depends. It depends on efficiency gains, which are not yet delivered. The Government have made it all the more difficult to realise those gains, by abolishing the compulsory competitive tendering that we set in place across the public service.
The spending totals also depend on savings from fraud busting. We were much mocked by the Prime Minister for claims that there was £2 billion worth of fraud. We were told that that was an Alice in Wonderland figure. In March, the Government gave the figure of £4 billion. On Monday, by a happy coincidence, the day

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before the spending review, the Minister for Welfare Reform totted up £7 billion of fraud, and none of it busted yet.
As my right hon. Friend the Member for South Norfolk said, a large part of the Government's assumptions depends on asset sales not yet realised, with all the uncertainty of the commercial property market lying ahead. My right hon. Friend told us from his experience that asset sales usually take years.
Above all, the delivery of all the Government's extra spending depends on the savings from welfare reform to which they were originally committed. They said that they would cut the bills of social failure. Instead of cutting welfare spending, they have increased it. They have funked the radical reform that they promised. They have fudged the firm controls on its growth. They have postponed the reviews that they have in hand of housing benefit, the state pension and disability benefit. Above all, they are now gambling with all our futures. Every external commentator has now pointed out—this was done by the Chairman of the Treasury Select Committee in his question to the Chancellor of the Exchequer—that everything depends on the level of growth that the Treasury assumes. I shall quote just one external commentator, the leader writer of The Independent:
"How often before have we heard spurious claims that spending is to be financed out of growth? By tying the public finances to a three-year plan he is banking on today's economic prosperity lasting for at least another 36 months. Many sober judges argue that this is at best unlikely."
That is the verdict of The Independent.
When the Chancellor appeared before the Treasury Select Committee yesterday, he, too, had to admit that his figures do not take account of the recession. They do not take account of rising unemployment, and they will not take account of falling tax revenue.
We are faced with a huge gamble. For all the cheap applause now for the triple-counted figures bundled together into three-year totals to give us this billion pound bonanza, it is becoming clearer that sooner or later the Chancellor will have to borrow or he will have to tax.
The spending review has been a failure. It takes us back to old-fashioned Labour public spending. I shall answer the question that was put earlier. Of course we welcome any new money for schools and hospitals. If there is still confusion about this, let me put it even more explicitly. Genuine extra spending for schools: good. Genuine extra spending for hospitals: good. A three-year locked-in overall spending total: extremely reckless. There it is, clear as a bell.
By locking us in to three-year fixed totals without the savings or the reforms to finance them, the Government are putting at risk the future of the public services, by which they set so much store, and the future of the economy as a whole, on whose success those public services depend.
Mr. Miller: Let us just be clear. The hon. Gentleman is in favour of what I think is about £40 billion of expenditure, but he is not in favour of all the rest. What would he cut? Be straight, what would the hon. Gentleman cut?
Mr. Fallon: The hon. Gentleman's Government came into office pledged to cut welfare spending. We have
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pointed out tonight that any genuinely additional spending for schools and hospitals is thoroughly welcome. It is the overall spending total, locked in for three years without the savings and the reforms to fund it, that we think is endangering not only the economy but the future of those very public services that we support.
Mr. Leslie: Will the hon. Gentleman give way?
Mr. Fallon: I have sat down.
9.42 pm
The Economic Secretary to the Treasury (Mrs. Helen Liddell): It is quite easy to understand now why the hon. Member for Sevenoaks (Mr. Fallon) was sent by the electorate previously to spend more time with his family. We began with a declaration of interest by the hon. Gentleman, which tempted us to all to check his interests, one of which is a directorship of Just Learning Ltd. I think that it has been proved this evening that the only things that he is learning to read are the diary columns. The hon. Gentleman has not managed to get round to any independent economic analysis.
My hon. Friend the Member for Harrow, East (Mr. McNulty) summed up what we have seen from the Opposition Benches this evening—vacuity. Opposition Members do not know whether they are coming or going. Even the right hon. and learned Member for Rushcliffe (Mr. Clarke), who I admit is a gentleman I admire because he is in the round in his activities in the House—and I am not talking about his avoirdupois; he is a true renaissance man of independent mind—began by saying that we were being reckless. Then he said that we were not spending enough.
Obviously, the shadow Chancellor has taken a leaf out of the book of the right hon. and learned Member for Rushcliffe. On the "Today" programme yesterday, the shadow Chancellor was asked whether he could have it both ways about whether we would be spending more or less. The only thing that he could say was that he could have it both ways. That is the man who is pretending that he knows how to run the country.
The right hon. Member for Wells (Mr. Heathcoat-Amory) most displayed the complete lack of imagination and credibility of Conservative Members. They have had since Tuesday to work out their line on the comprehensive spending review and tell us what they would cut. They have not told us what they would cut.
Mr. Kenneth Clarke: Will the hon. Lady give way?
Mrs. Liddell: I shall give way to the right hon. and learned Gentleman in due course.
The hon. Member for Cotswold (Mr. Clifton-Brown) gave the game away, because we discovered from him what Conservative Members would cut—pensions, child benefit and help for the disabled. From this day on until the next general election, we can point to Conservative Members and say that they are the ones who will cut pensions, cut help for the disabled and cut child benefit. We see the true, right-wing members of the Conservative party on the Opposition Benches.
Mr. Clarke: Following the hon. Lady's kind remarks, I shall try to give an intervention in the round.

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I welcomed the spending on health and education, although I said that the total was too much, and I mentioned the working families tax credit, which I opposed when it was announced in the Budget. After the Budget, it turned out that the Government had underestimated its cost by £18 billion over this Parliament. Now they are tucking it away in the accounting adjustments to try to get rid of its cost. What kind of welfare reform brings in an innovation that costs far more than the Government intended and which has to be secreted away in the books?
Mrs. Liddell: What kind of former Chancellor cannot make his mind up about whether we are spending too much or too little? The working families tax credit is aimed at getting people from unemployment into work. [Interruption.] From a sedentary position, the right hon. Member for Horsham (Mr. Maude) says that I cannot listen. Conservative Members are supposed to be listening, but they did not listen on 1 May when the electorate said that they were a shoddy apology for a Government, who had betrayed the people of this country for 18 years.
Tonight, we have seen—[Interruption.] From a sedentary position, the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) says, "It's a disgrace." The disgrace is the performance of Conservative Members throughout the debate. Time after time, we asked, "What will you cut?" Time after time, we were told that that is not relevant to the debate. The people of this country want answers.
Mr. Clifton-Brown: Will the Economic Secretary give way?
Mrs. Liddell: Perhaps the hon. Gentleman will explain how much he wants to cut from pensions, child benefit and the disabled.
Mr. Clifton-Brown: The Economic Secretary has totally misrepresented what I said, which was that I would control the social security budget better and that I would control the £7 billion of fraud that takes place—that is £150 for every man and woman in this country. What will she do about that?
Mrs. Liddell: We had 18 years of government by the Conservative party; to use an expression of my own Lanarkshire, "They couldn't run a menage." The right hon. Member for South Norfolk will understand what that means, coming from where he does. Conservative Members should be telling us where money could be better spent in the economy—they had 18 years to come to their conclusions.
The hon. Member for West Worcestershire (Sir M. Spicer), who seems to be suffering from short-term memory loss, talked about the mid-1970s and the International Monetary Fund. My hon. Friend the Member for Shipley (Mr. Leslie) pointed out that he was two at that time. The short-term memory loss of the hon. Member for West Worcestershire causes him to forget what happened on black Wednesday, which showed how good Conservative Members were at running the economy.
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In a pointed speech, my hon. Friend the Member for Coventry, South (Mr. Cunningham) referred to the failures of Conservative Members. One critical failure is their loss of short-term memory about their time in office: manufacturing output fell by more than 7 per cent., investment in the whole economy fell by 16 per cent., business investment fell by 20 per cent. and manufacturing investment fell by 27.7 per cent. Do they really want me to go on with their catalogue of failures?
Mr. Gibb: Will the hon. Lady give way?
Mrs. Liddell: I am not prepared to give way any more.
We have heard many views from Opposition Members, and I shall deal with some of the remarks made by the other opposition parties. The hon. Member for Gordon (Mr. Bruce) recognised that the Labour Government are living up to the commitments we made during the general election. The comprehensive spending review has meant that we have delivered benefits that are three times greater than the Liberal Democrats were talking about at the general election. He cannot acknowledge that.
The hon. Gentleman went on to discuss the situation in Scotland, which is something in which he and I have a common interest. I seem to remember that, during the referendum campaign, the hon. Gentleman joined the Labour party in supporting the Barnett formula, but his arguments tonight were against the operation of that formula.
I should tell the hon. Member for North Tayside (Mr. Swinney), that the Barnett formula is not about cuts but about convergence. It is about the convergence of the economies of the less prosperous parts of the United Kingdom with the economies of more prosperous parts of the United Kingdom.
The right hon. Member for Wells said that the comprehensive spending review does nothing to improve the productive potential of the economy. The hon. Member for Cotswold condemned his own Government for their failure to act to increase productivity.
This Government are improving the productivity potential of the economy by investing in education, skills and infrastructure and by our strong belief in value for money. All those things will enhance the productive potential of the economy significantly. When Conservative Members were in government, they should have been doing that. If they had, our manufacturing industry would not be experiencing some of the difficulties it is experiencing now.
Another example of short-term memory loss concerns the fact that sterling had appreciated by 66 per cent. on 1 May last year—before the general election. The right hon. and learned Member for Rushcliffe is very quiet about that. The hon. Member for Cotswold said that we should have seen an increase in interest rates 18 months ago. Who was in government then? We know that it was the Conservatives.
Mr. Clifton-Brown rose—
Mrs. Liddell: I want to make some progress.
The right hon. Member for Wells accused us being inflationary in our tax and spend policies. How so? If we look at the current surplus figures and the debt-to-GDP

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ratio for the next three years, and we consider net borrowing and the net cash requirement, we can see that they are all extremely prudent. Prudence has been much maligned tonight, but prudence can be found within the economic and fiscal stability report, which was published a month ago, and within the CSR.
A key aspect of the paucity of Opposition Members' arguments is that they have completely failed to address the real issues contained within the comprehensive spending review.
Mr. Tyrie: Will the hon. Lady give way?
Mrs. Liddell: In due course.
If the Opposition really cared about the operation of the UK economy, they would not be sitting whingeing as they have tonight, but would be entering into a constructive dialogue to see how the benefits that will accrue in health and education—[Interruption.]
Mr. Gibb: Will the hon. Lady give way?
Mrs. Liddell: Will the hon. Gentleman shut up? He spent all his time in the Finance Bill Committee trying to find ways to ensure that £6 billion of revenue would be left out of the Exchequer. That money would go in tax cuts and would be taken away from the pensioners, the disabled and from child benefit.
The hon. Member for Chichester (Mr. Tyrie) did some of his more interesting arithmetic gyrations. I commend to him page 116 of the CSR which will set out for him the difference between total managed expenditure and central Government expenditure. I will not take up time now going through something that the hon. Gentleman should have had time to read.
Mr. Tyrie rose—
Mrs. Liddell: No, I will not give way. I want to make some progress.
The right hon. Member for Wells talked about the Tories' golden economic legacy—
Several hon. Members rose—
Mrs. Liddell: I am not giving way.
That golden legacy is fool's gold. They gave us boom and bust. The hon. Member for Chichester accused us of ignoring economic cycles. Our economic policy is designed to even out the worst impacts of those cycles on ordinary men and women who suffered because of the economic illiteracy of the Conservatives during their 18 years in government. We inherited a history of excessive Government borrowing and rising public debt. Public investment was neglected. The true benefits to the economy will flow from investment not just in our infrastructure but in our people.
The Conservatives say that they are a listening party, but they cannot listen. They are afraid that, if they listen, some of the errors of their ways may come back to them.
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They should have invested in Britain' s infrastructure and in its people. The Labour Government will do that. I shall now deal with the ratio of GDP to debt.
Mr. Tyrie: Will the Minister give way?
Mrs. Liddell: No. I do not intend to give way again.
Mr. Maude: We want constructive dialogue.
Mrs. Liddell: The right hon. Gentleman has not been here for much of the debate. All he can do is shout from the sidelines rather than contribute.
The hon. Member for Gordon spoke about monetary policy and inflation. He, of all people, should recognise the reason for our changes to the Bank of England. Some of his hon. Friends recognised the wisdom of those changes to ensure achievable inflation targets and a consistent monetary policy. How many times did the previous Government manage to achieve their targets? We have been in government for 14 months. The Conservatives were in government for 18 years and their governance was a saga of missed targets.
During debates on the Finance Bill, the hon. Member for Gordon and his hon. Friends proposed amendments that would have led to an 8p increase in income tax. That would have been ludicrous. He claims that there was no consultation on the comprehensive spending review. The parameters under which it was conducted were announced by the Government, and there was adequate opportunity for him to make known his views. He asked how we chose our priorities. The people elected us on specific manifesto pledges and Tuesday's historic statement means that, for the first time in 18 years, Britain has a Government who live up to their manifesto pledges.
Mr. Malcolm Bruce: Will the Minister give way?
Mrs. Liddell: No. I am running out of time and there are other points to which I would like to respond.
The right hon. Member for Wells complained about welfare spending, again revealing that that is what the Conservatives would cut. We are cutting the impact of economic failure, thus freeing the money that will allow us to give a decent living to our pensioners, pay decent child benefit and provide decent help for the disabled. The Opposition know little about that.
The right hon. and learned Member for Rushcliffe spoke about the net cash requirement and how it differed from that of the previous Government. They called it the public sector borrowing requirement. In 1992–93, it was 6 per cent. of GDP; in 1993–94, it was 7 per cent.; and in 1994–95, it was 5 per cent. Under this Government it will be 0.4, 0.4, 0.3, 0.5 and 0.5 per cent.
The right hon. Member for South Norfolk spoke about public service recruitment and retention. That is rich from an Opposition Member. Does it not occur to the Opposition that the fact that they made public sector workers pariahs had some impact on public sector morale? We will not take any lectures from them about public sector pay. The right hon. Member for Wells had the audacity to complain about the level of public sector pay, although his Government were responsible for it, and

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in the next breath he attacked the national minimum wage. The Opposition do not know whether they are coming or going.
Mr. Leslie: Is my hon. Friend aware of the example set by the shadow Chancellor as a director of Gartmore shared equity trust? This year, he awarded himself on the board a pay rise of 13.3 per cent. in one year.
Mrs. Liddell: There is no answer to that. I think that that reveals the hypocrisy of Conservative Members.
Mr. Swinney: Will the hon. Lady give way?
Mrs. Liddell: I am sorry. I have less than a minute left, but I will turn to the point that the hon. Gentleman made. He criticised the settlement for Scotland. That settlement will deliver outputs that are three times better than his party offered in its manifesto.
Mr. Swinney rose—
Mrs. Liddell: I do not have time to give way. This is the hon. Gentleman who believes that economic policy should be based on crossing one's fingers and hoping for the best.
I commend the comprehensive spending review to the House.
It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put, pursuant to the Standing Order.

Community Hospitals (Powys)
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert Ainsworth.]
10 pm
Mr. Richard Livsey: It is my privilege to introduce this Adjournment debate. I am grateful to be given the time to look at the future of community hospitals in Powys.
This debate focuses on Powys. In the past 10 years, it has lost its health authority, its ambulance service and its fire service, and now there is the final nail in the coffin: a proposal for Powys to lose its health care trust. That is totally unacceptable to the people of Powys.
Powys occupies a quarter of Wales. The people of Powys believe that the fact that it has 10 community hospitals and 18 general practitioner practices within its boundaries gives it a comprehensive service in the NHS. I advise the House to remember that Powys is 130 miles in length. If one visited all 10 community hospitals, one could clock up in excess of 300 miles in a car.
Powys is a vast, sparsely populated area. The only other area with which it can be compared for sparsity is the highlands of Scotland. There is only one town in Powys—Newtown—with a population in excess of 10,000 people. Half the population live in the countryside. Those facts dictate why there is no district general hospital in Powys.
The strategy of the present Powys Health Care NHS trust and its predecessors has been to develop a successful network of community hospitals. Those hospitals now carry out about 40 per cent. of all patient operations, mainly through GPs. They provide a superb service and, because of that, attract intense loyalty from people in local communities.
Each hospital has an active league of friends: two in my constituency have raised £500,000 and £750,000 respectively in the past 10 years for capital projects to expand their hospital services. Local communities feel that they have ownership of those hospitals, and rightly so. That is demonstrated by the creation of Powys Action for Patients, which represents GPs, community health councils, nurses and communities in Powys in the fight to maintain our NHS trust in Powys.
I am sure that the Minister will remember recently opening Ystradgynlais community hospital's celebration of 50 years of the NHS a week ago last Saturday. I was there in the afternoon later on, and I know that he enjoyed himself. The hospital is the pride of local people. It is an excellent example of a modern community hospital.
Acute services in Powys are provided by 12 district general hospitals outside the county, with patients going to the nearest DGH. Services are delivered from many contrasting points—for example, Shrewsbury in the north-east and Swansea in the south-west. Only 8 per cent. of Powys patients travel to the district general hospital at Aberystwyth, while 92 per cent. are treated elsewhere. Patient referral patterns are widespread indeed. Frequently, patients have to travel 45 miles by ambulance—a 90-mile round trip—to get to a district general hospital. That happened to my hon. Friend the Member for Montgomeryshire (Mr. Öpik) when he had his recent accident.

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Mental health care is delivered from within Powys by the current Powys national health service trust. Mental health services are not, for example, delivered within Ceredigion, but accessed via the Pembrokeshire and Derwen NHS trust, outside that new county.
A major paradox in the planning of health care is provided by the present state of community hospitals. At a time when their value is increasingly recognised by central planners in the Department of Health and the national health service executive, there are more threats to their role and existence than at any time in the past 50 years of the existence of the NHS. Thirty five out of the 350 community hospitals in England and Wales are under threat of closure. By contrast, in Scotland, the status of the 70 similar hospitals is relatively protected by the Scottish Office.
All threats are on financial rather than clinical grounds, as less conscientious authorities and trusts attempt to balance their budgets by withdrawing services. In no case that has been critically appraised will savings ultimately result, as the cost of re-provision of services at a distance from the community is invariably higher, and issues of quality, including access in time and place, are habitually ignored. The tensions inherent in sharing a limited health care budget are responsible for that.
The view that community hospitals are expensive to run and under-utilised, which is frequently aired by detractors who want to devote increased resources to district, general or regional hospitals, must be questioned. The demands for high-tech care of all forms, with inevitable centralisation of services, must be met on the clear understanding that that represents only a minority of in-patient care, and that it is a mistake to admit any patient to a level of hospital care that is higher than necessary. Indeed, one can envisage a situation in which in Powys, with its 12 adjacent DGHs, telemedicine might come into its own and more patients could be treated in community hospitals in the future.
Why does the Welsh Office want to reorganise health care in Powys? Why sideline the Welsh assembly before it has a chance to contribute to the debate? We are told that the status quo is not a runner, but Powys rejected the model of a combined single district general hospital and community hospital service 10 years ago. The adopted strategy, rightly, was to develop the network of community hospitals and upgrade the services available, which made a great deal of sense with such a sparse population—it was the most appropriate type of development.
The proposal for amalgamation with Ceredigion in the reconfiguration exercise is intended to save money, not to save lives. It is driven by Welsh Office civil servants and by managers in the Dyfed Powys health authority, who want solutions that are just that much too neat. Clearly, Mr. Peter Gregory, the senior health civil servant in the Welsh Office and Mr. Peter Stansbie, the chief executive of Dyfed Powys health authority, have their own agenda of imposing models of health care that are totally inappropriate for the extreme rurality of Powys. The outcome will be patient disadvantage. Rural Wales does not lend itself to the DGH-type model, which is too simplistic and far too expensive for our area. The existence of 10 community hospitals in Powys proves that. Hospital beds in those community hospitals cost £115 per night, compared with £250 in a DGH.
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The Under-Secretary of State, the hon. Member for Bridgend (Mr. Griffiths), has told us that he wants to reduce the number of quangos. I understand that, but why does he not abolish the health authorities in Wales and have only one? That would save a lot of money—£4.5 million per annum by axing Dyfed Powys health authority for a start.
The people of Powys were outraged when they realised that the Powys and Ceredigion project team had a budget of £40,000 to promote the proposed amalgamation. That is taxpayers' money, whereas Powys Action for Patients has had to collect £15,000 of Powys people's own money to fight against the amalgamation with Ceredigion. Even the proposed name of the amalgamated trust—Canolbarth Cymru—will not be understood in many parts of Powys, which I regret: for example, only 2 per cent. of the population of Radnorshire speak and understand Welsh.
The experiment was put in motion because of the cumulative deficit compounded by the Ceredigion trust, which amounted to more than £1 million. The cumulative deficit in Powys was originally only about £50,000. The health authority financial projections in the document "Effective Care and Healthy People" showed that, if the two trusts were run separately, the annual deficit for Ceredigion would be £1.23 million in 2003, whereas that for Powys would be £420,000, which would be written off in six years. The plan to force Powys to amalgamate with Ceredigion would result in a total mismatch of functions. Moreover, the finances would not add up.
Conditions in rural areas are not conducive to such a model. There is no duplication of services and no competition between services—certainly not between Bronglais district general hospital and our 10 community hospitals. A city dogma is being applied to the countryside. The Welsh Office has a mindset that the urban model of health care applies to the whole of Wales, no matter how rural an area. Conditions in the M4 corridor and the valleys are very different from those in rural Powys.
The Welsh Office estimates that annual management savings from each trust merger will be £500,000 a year and that the cost of the merger will be equivalent to approximately two years' savings, or £1 million per merger. Those figures are a bit too convenient and need to be challenged. In the first draft of its merger document, the Ceredigion-Powys project board estimated a reorganisation cost of £2.79 million. Lo and behold, in the final draft, after Welsh Office persuasion, that figure had been massaged down to £1.2 million, so as to fit in with two years of savings at £500,000 a year.
We believe that those figures have been cooked. They are all guesstimates which have been plucked from the air. What about redundancy costs, for example? I know someone whom it would cost £300,000 to make redundant, but many others would attract redundancy costs. In Powys, redundancy costs alone could be more than £1 million. Those costs apply across Wales, where the trusts are of wildly different sizes and natures. It is projected that the 26 trusts will be reduced to 15. Does the Minister really believe that he will save £10 million by that exercise? I think not.

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The costs of integrating IT systems between Dyfed and Powys would be enormous—two completely different computer systems would have to be married. Imagine the costs of employing one IT consultant to straighten that out. Studies in the USA have shown that savings from health mergers are usually only a seventh of what was estimated, so if the reorganisation costs £2.79 million and the savings are only £70,000 per annum, the new trust will be in for a shock and services will need to be reduced. We should also take into account the massive deficit that it is estimated the new merged trust would have.
The major reasons for opposing a trust merger in a rural area are that it would do no good and save no money—it would not solve any problems; indeed, it would bring its own. All that we need is a reorganisation and more local management. Health care in Powys would improve far more if the Minister said—as I am sure he did in Ystradgynlais—how proud he was of our community hospitals. A merger will not solve the problems of Bronglais hospital. I have a great deal of sympathy with the situation in Ceredigion, where I lived for 14 years—my youngest son was born in Bronglais hospital and I have many friends there. However, the two trusts do not match up.
All the pointers are that, if the merger goes ahead, at least three community hospitals in Powys will have to close. That is clearly shown in the Dyfed Powys health authority document "Effective Care and Healthy People", published this spring.
The document says that groups of hospitals are viable, but does not say which ones will close. Brecon is twinned with Bronglais, and Welshpool with Newton and Llanidloes, suggesting that some will have to close. We believe that that is a disaster course and that the situation in Powys is, indeed, perilous. We stand to lose an enormous amount.
A merger of the Powys and Ceredigion trusts is a mismatch of serious proportions. Transitional costs are likely to be high, the district general hospital model is not appropriate and Powys delivers mental health services, which Ceredigion does not.
Mr. Lembit Öpik: Does my hon. Friend agree that the people of Powys are united against any prospect of a merger and that hospitals such as Llanidloes, which helped to save my life, are under a serious threat that has not been democratically sanctnioned?
Mr. Livsey: Indeed, I agree completely. The merger is opposed by all GPs in Powys—that is, all the 151 British Medical Association members; all the consultants who treat Powys patients; Powys county council, which wants to co-operate further with the NHS through social services; both community health councils, in Montgomery and in Brecon and Radnor; both Members of Parliament; all nurses; and all trade union members in the NHS in Powys.
The Minister has a straight choice: allow the community hospitals in Powys to collapse, or use this opportunity—I hope that we are convincing him tonight—to build a superb NHS service, based on primary care and
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locality groups. That would be the ideal clinical model for Powys, the most remote and sparsely populated area in England and Wales.
10.16 pm
The Parliamentary Under-Secretary of State for Wales (Mr. Win Griffiths): I congratulate the hon. Member for Brecon and Radnorshire (Mr. Livsey) on securing this debate. I thank him for giving me the opportunity to consider some of the issues that he has raised.
Community hospitals have for 100 years or so played an important role in all our communities. Over the years, their place in the national health service and their relationship to the larger and more specialised district general hospitals have fluctuated, but there is now a wide acceptance that such hospitals, and other related local facilities, can provide an important complementary range of services.
Traditionally, the care provided in community hospitals is intermediate between care at home and that requiring specialist resources in large acute hospitals. They relieve pressure on acute hospitals by admitting and treating patients who otherwise would have to be admitted to general hospitals, by allowing the early discharge for rehabilitation and recovery of patients not yet ready for home care, and by providing respite and rehabilitation in a planned way.
Within that broad understanding of the services that may be appropriate in community settings, a number are particularly important: out-patient clinics with specialist clinicians, to avoid patients having to travel long distances; in-patient beds with care provided by local doctors, specialist doctors and nurses; minor injury services provided by local general practitioners with access to a wider range of facilities and support services than are available in surgeries; and, in some places, maternity services provided by local doctors and midwives.
In all those services, a balance needs to be struck between the convenience, practicality and efficiency of having them available locally, and the economy and clinical security of concentrating them in larger centres.
Community hospitals can also act as a resource and a focus for wider health activity in the area. The hon. Member rightly praised the work of hospital leagues of friends, which can coalesce around a hospital and help to improve not only the hospital service but the community spirit of an area. Community hospitals can provide a base for out-of-hours GP services; be the home of community mental health and learning disability teams; be a base for the provision of therapy services and community dental health services; and the list goes on impressively.
It is for health authorities, working with NHS trusts, local primary care professionals, local government and other interested local agencies and groups to decide what range of facilities is appropriate locally, and how they should be run. Yes, I very much enjoyed my visit to the Ystradgynlais community hospital and I am impressed by the service provided there. I have not forgotten that the hon. Gentleman is concerned about the provision in Powys and the need for a range of facilities and services that reflect its particular character. Community hospitals and other related health facilities have a distinctive role to play, but we need to make sure, too, that they reflect

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healthcare provision for the 21st century, are in the right places, are the right size, and provide the right range of health and other services.
Dyfed Powys health authority is responsible for assessing the health needs of the people of Powys and, in consultation with its partner agencies and local people, for planning and commissioning services to meet the needs of the people in Powys. In future, much of that responsibility will pass to the Powys local health group, which is being introduced following the publication of the White Paper "Putting Patients First", with the Dyfed Powys health authority providing a strategic overview and ensuring that services are matched to need and available resources, and reflect best clinical and operational practice.
Yes, it is true that, under the trust reconfiguration, the Powys healthcare trust may disappear, but Powys will gain a local health group which will have a far greater say in the provision of services in Powys than has ever happened before. It is important to bear that in mind. There will be far greater local management. Local GPs, the local Powys county council, local voluntary groups connected with the health service and other primary health-care professionals will make the decisions about commissioning healthcare in Powys. They will decide where the community hospitals will be.
Let us make it absolutely clear right now: there is nothing in the trust reconfiguration process which will affect the services provided by community hospitals in Powys.
Mr. Livsey: I understand what the Minister says. Our proposals, which are new proposals for Powys with a primary care, clinically led trust, are similar to his. The main thing is that the authority covers the whole of Powys, has a budget, and can make decisions strategically. The damage of taking that away will cause the closure of our community hospitals.
Mr. Griffiths: It will not, because the local health group, starting as a sub-committee of the health authority, will nevertheless have its own budget and be able to make its own commissioning decisions. That needs to be made absolutely clear. A problem with this debate is that people think that the new NHS trusts will be exactly the same as the old ones. They will be quite different.
I turn now to the Dyfed Powys plan for making recovery from the deficit which exists within the Dyfed Powys area. That is both a health authority and an NHS trust responsibility. Today, there was a meeting at which the partners with the Welsh Office agreed on a way forward and on measures to achieve a break-even point.
There was a stab at the strategy outlined in "Effective Care and Healthy People", but it was rejected by people in Dyfed Powys. In the light of those comments, the Dyfed Powys health authority revised its strategy. A new document is now available. It commits the health authority to a joint review with the Powys NHS trust of community hospitals in Powys. It is important that this review goes ahead quickly, is robust, and reaches conclusions which will allow services in Dyfed Powys to be developed in ways that will stand the test of time.
My Department has taken a close interest in the authority's planning. I met the former chair of the health authority last month to discuss the position. My officials
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held meetings today, and I am sure that between us we will tackle the problem successfully. However, I cannot comment on particular aspects of the Dyfed Powys strategy, because, if there are disputes to be resolved within Dyfed Powys, they will come to the Welsh Office, to my right hon. Friend the Secretary of State, for decision.
However, I am absolutely confident that the community hospitals in Powys are more likely to be strengthened by the reconfiguration of the trust, because it will make more money available directly for patient care, and the local health group in Powys—the doctors, the primary care professionals, the local voluntary groups, local government and Powys county council—will be at the heart of the decision-making and commissioning. The new NHS will give Powys a far better deal than it has ever had before.
Mr. Öpik: Is the Minister aware that, for all the promises of extra money made for health in Wales this week, unless he resists what we regard as a potentially expedient bringing together of Powys with Ceredigion, that extra money is not worth the promises made in the Chamber? Within that, will he reaffirm the promise made by the Secretary of State for Wales when he was the shadow Secretary of State, that he would resist the closure of any community hospitals if that was proposed in Powys?
Mr. Griffiths: I make it quite clear that this year already we have provided about £140 million extra for the health service in Wales. Dyfed Powys health authority has £3 million of the £20 million to tackle the waiting list problem. We are investing more money in the health service in Wales.
Yes, we recognise that not sufficient was invested in the past, and that there are some historical problems to be dealt with. But my right hon. Friend the Chancellor's public expenditure announcement gives us another £175 million next year on top of what we had this year, the following year the accumulated extra will be £345 million, and in the third year the accumulated extra will be £510 million. All told, during the three years, more than £1 billion extra will go into the health service. Dyfed Powys health authority and the Powys local health group will get their fair share of that money to develop services within the area.
It is clear that the Dyfed Powys health authority strategy will enable community hospitals to prosper where they provide an effective local service. From what I know of the Powys area, most fall into that category. I am sure that the local doctors, the primary care professionals, who want to strengthen the role of community hospitals, will be given the capacity to do so by the local health groups. There is no problem there. As we provide more money for the health service, more money will go to Dyfed Powys.
Mr. Öpik: I am sorry to press the Minister on this point, but will he give us an assurance that he will honour the pre-election promise by the then shadow Secretary of State for Wales, now the Secretary of State, that he would resist the closure of community hospitals if they were proposed in Powys?
Mr. Griffiths: That is impossible, because in Dyfed Powys, the closure of Tenby cottage hospital has already been agreed with the community. The facilities available in Tenby will be provided in another way in the town. I understand that everyone is happy for that to happen. If the hon. Gentleman is saying that the Secretary of State should have stepped in and told people in Tenby that that hospital could not be closed because of a promise made before the election, that is ludicrous.
Let us get down to the serious issue of ensuring that we provide a high-quality health service throughout Wales. That has nothing to do with what the head of the Welsh Office health division or the chief executive of the Dyfed Powys health authority wants; it is all about what the Labour party promised before the election. It said then that it would rationalise the trusts in Wales to save money. The hon. Member for Brecon and Radnorshire mentioned £10 million, but in fact it will be between £7 million and £10 million. I would not plump on £10 million exactly, but more than £7 million of savings will go directly into patient care, and will help to keep hospitals open in the Dyfed Powys area.
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I also want to make it explicit that doctors in Powys will be able to send their patients to the appropriate district general hospitals outside their area where they consider that their patients can attain the best treatment. That is critical, because doctors will have far more say than they ever had before. I am sorry that the hon. Member for Brecon and Radnorshire has not taken up the offer made by the chair of the local project group for the trust reconfiguration to meet Powys Action for Patients.
Mr. Livsey: I intend to do that, but it has not been possible to do so yet.
Mr. Griffiths: I am pleased that that will happen, because I know that so far she has heard nothing.
On behalf of the Welsh Office, I give an absolute commitment that community hospitals which provide an effective service in Dyfed Powys will continue to do so, and that the trust reconfiguration exercise will make that more rather than less likely.
The motion having been made at Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at half-past Ten o'clock.