HC Deb 20 July 2000 vol 354 cc570-608

[Relevant document: The Minutes of Evidence taken before the Treasury Committee on 10th May (Spending Review 2000), HC 485-i.]

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Jamieson.]

Mr. Deputy Speaker (Mr. Michael Lord)

May I advise the House that Madam Speaker has placed a time limit of 15 minutes on all Back-Bench speeches?

2.16 pm
The Chief Secretary to the Treasury (Mr. Andrew Smith)

I commend the spending review and the White Paper to the House. but let me start on a note that I hope the shadow Chief Secretary to the Treasury and his right hon. Friends will endorse. I doubt whether they will find much else in my speech to endorse, but anyone who has seen from the inside the phenomenal amount of work that goes into a public expenditure review will know just what a vote of thanks we all owe to the officials, who often work long hours under pressure to meet the demanding deadlines of such an extensive exercise. We see here the civil service and the Treasury at their best.

As well as policy advice, we have all the energy and dedication that goes into administration, co-ordination and information. Without it, we could not complete a spending review and Parliament and the public would be denied the quality and objectivity of information necessary for informed debate. I place on record our thanks for the high standard of that enormous effort.

The political choice, though, is ours. The Government have made our choice, built on a solid foundation of stability. We have chosen to make a prudent investment to improve key front-line services and to upgrade our infrastructure.

With Labour, people know that those who need care will get better care and that children and adults will be helped to achieve higher standards in education. We are strengthening the hand of the police in fighting crime and making our communities more secure, improving our transport system and tackling the drugs menace. So when we now commit to real average increases of 5.7 per cent. in health, 5.4 per cent. in education, 3.8 per cent. in policing and 20 per cent. in transport over the next three years, we are addressing the public's priorities for better health care, properly equipped schools, less crime in the estates and elsewhere, and better journeys to work and to shops.

We have no doubt that, building on the progress that we have already made, people want to see investment in these and other front-line services. The challenge for the Conservative party is to say where it stands. What is it that it is guaranteeing?

Not so long ago, the shadow Chancellor of the Exchequer was keen on guarantees. On GMTV three months ago, he said of the tax guarantee: It is a guarantee of honesty. Just three months later, refusing to answer five times the question of where he would cut spending, what did the man who had made the guarantee his hallmark of honesty say? I'm not getting into the business of guarantees.

Mr. John Bercow (Buckingham)

Given that the right hon. Gentleman has already admitted that he is this year spending £20 million on the national handover plan, and the further evidence from national health service trusts that an extra £95 million is being spent on proposed conversion to the euro, is he proud of the fact that he is plotting the abolition of our national currency with resources that would otherwise pay the annual salaries of 7,500 nurses?

Mr. Smith

With the huge investment going into information technology and computers it would be foolish not to make the alterations which have to be made. It is no change on the plans and policies that we have announced on this for the future. The hon. Gentleman and his hon. Friends must tell us where they will find the £16 billion of cuts. Not from that, evidently. He, the shadow Chancellor and the rest of them claim that our spending settlement is unaffordable, but they refuse to say where their cuts would fall.

The other night I had some sympathy for the right hon. Member for Wells (Mr. Heathcoat-Amory), who was left forlornly to wander the television and radio studios with no intellectually coherent argument whatever to make against the shadow Chancellor's statement. After all, it follows arithmetically that if the Tories are saying that public spending should grow at 2 per cent. instead of 3.3 per cent., they must be committed to cutting our programme by at least that £16 billion. The Tory research department has accepted that figure in this helpful document. Hon. Gentlemen must now tell us where that axe will fall.

The document takes us some way further forward. It helpfully includes at the end a table, by region, of where £16 billion of cuts, allocated in proportion to taxpayers, would come. It would be £1.8 billion in London, £3.84 billion in the south-east, £606 million in the north-east, £1.4 billion in Scotland and £714 million in Wales. Let Tory Members put on record today for all their constituents to see where they would cut health, which schools would go without and which bits of police spending they would hack back.

The Tories are frightened to do that because they know that it would be unpopular. They try to have it both ways and to con the electorate. That comes out most clearly from the model news releases and briefs, again helpfully prepared by the Conservative party research department, which suggests that hon. Gentlemen use them. I cannot see many hon. Members clutching them this afternoon, however. They are obviously embarrassed by the product of their research department.

Let me show hon. Gentlemen which one I am looking at. It is this one. It provides some further information, but it is hardly profound stuff from the party of "lower but better" spending. It says of transport: We believe transport is important … We want to get more money into transport. It says of agriculture: We believe agriculture is important … We also want to get more money into rural Britain. It says of education: We believe education is important … We want to get more money into education. So the document goes on. Even on social security it has the nerve to say: We believe social security is important. Mind you, Mr. Deputy Speaker, it also says: We believe all the areas covered by DCMS are important.

It is clear from the documents that on education, transport, law and order and the public services, the Tories do not commit to the investment that we are making. They cannot do so because, they argue, our spending plans are somehow imprudent or unsustainable. They are wrong on both counts.

Mr. Richard Livsey (Brecon and Radnorshire)

The Chief Secretary rightly castigates the Conservative Opposition for their wish list and the £16 billion hole in their budget. Will he tell me whether there were discussions prior to the settlement on public expenditure about public expenditure match funding to go with European objective 1 funding for Wales? We are grateful for the European public expenditure survey cover, but we do not appear to have public expenditure for match funding.

Mr. Smith

I find those remarks surprising, given the warmth of the welcome for our spending review announcement and the benefit that it brings to the objective 1 areas in Wales and the regions. The 5.4 per cent. real increase for Wales, as well as the objective 1 public expenditure cover which we have provided, will more than facilitate match funding and enable west Wales and the valleys to benefit from objective 1 funding to the full.

I was dealing with the Opposition's argument that our plans are imprudent or unsustainable. We have put these plans forward on very cautious assumptions. The assumption of 2¼ per cent. growth is based on the figures published in the Red Book. These assumptions are tested against trend output, which is 1 per cent. lower than that. It is there for all to see, on page 8 of the spending White Paper, that even if growth were lower, we would meet the golden rule.

These cautious assumptions on growth, unemployment and market expectations of interest rates have all been audited and confirmed as reasonable and prudent by the National Audit Office. They are affordable within the Budget arithmetic in the Red Book, which shows the tax share of GDP falling and which the shadow Chancellor endorsed the day after the Budget when he said: The Red Book, which is the document that accompanies the Budget … shows that the Government expects the tax burden to fall during the next Parliament, which is exactly what we expect.

These plans are sustainable because of our cautious assumptions and because we have sorted out the public finances, so that not only is debt interest £5 billion a year lower than it was, and not only are we meeting the golden rule, but the projected current surplus goes from £14 billion this year to £16 billion. £13 billion, £8 billion and £8 billion, with net borrowing lower in every year than in any year of the last Parliament.

Mr. Michael Fallon (Sevenoaks)

The Chief Secretary described all these assumptions as cautious. What does he say to Goldman Sachs's assessment today that as a result of the public spending plans interest rates will be higher and the pound stronger?

Mr. Smith

The spending plans entirely meet the conditions that we set out in the Budget settlement. They therefore reflect that locking in of extra fiscal tightening. They are entirely within the envelope on expenditure—the 2.5 per cent. increase in current spending, and the doubling of investment as a proportion of GDP from 0.9 per cent. to 1.8 per cent—which we set out at the time of the Budget. There is thus no reason to expect the judgment on the macro-economic fiscal fundamentals to have changed since the Budget. These are prudent, sustainable plans both because we comply with our golden rule and, as I have explained, because we have straightened out public finances. This is prudent spending; it is spending for a purpose.

When the Tories were in Government, from 1979 to 1997, 42p of every extra pound they spent went on debt interest and social security. We will spend only about 17p in every extra pound we spend on debt interest and social security. More than 80 per cent. of our extra spending, then, goes to front-line services and investment.

The Tories do not have a leg to stand on with their claims of unaffordability or unsustainability. No matter how hard the shadow Chancellor wriggles around on spending, he cannot escape the logic that he would cut our plans, thereby putting a £16 billion axe to our crucial public services.

Caroline Flint (Don Valley)

My understanding is that during the course of the Finance Bill, the Conservatives asked for concessions to the tune of £4 billion. Rather than £16 billion-worth of cuts, therefore, would the figure not be nearer £20 billion?

Mr. Smith

My hon. Friend is entirely right: the Conservatives crank this up by the day. They made spending commitments for an extra £4 billion during proceedings on the Finance Bill, and their document outlines all the extra spending that they say they want to put into services. That all adds to the figure of £16 billion, which is the logical consequence of moving from 3.3 per cent. expenditure growth to 2 per cent.

The Conservatives' position is unsustainable, and it will not be believed by the British public. With their record of broken tax promises, mounting debt, mass unemployment, inflation, and boom and bust, they cannot be trusted by the British people again. Their position is in clear contrast to ours—we want stability, investment, quality public services and a rebuilding of our country. With this review, the Government have made clear the next stage in the renewal of Britain.

Mr. Geraint Davies (Croydon, Central)

I note from studying the statistics that the cost of unemployment benefits will have fallen by 40 per cent. by 2001–02 from the time when the Government took hold of the economy. Does my right hon. Friend think that the Opposition will target expenditure cuts on social security? Where do they intend to make these cuts? Will they come from families, children, pensioners and people with disabilities? Even if the Conservatives squeezed the poorest as much as possible, they would have to go even further in cutting expenditure on health, education and front-line services. There is no place to make the sort of cuts they want, and the British public need to know that.

Mr. Smith

My hon. Friend is absolutely right. The Conservatives could not find that scale of spending cuts in social security which, along with debt interest, consumed 42p in every extra pound that they spent throughout their period in Government. It was actually 55p in every pound when the shadow Chancellor was Chief Secretary to the Treasury.

My hon. Friend is also right about the benefit to the fiscal position, as well as the incalculable benefit to individuals and their families, of the 1 million extra people we have got into jobs. That contributes £3.5 billion to our fiscal position, just as the savings on debt interest contribute some £5 billion. We are able prudently to undertake this investment because we have saved on the costs of unemployment and on that millstone of debt that the Conservatives strung around our neck.

The review represents movement through to the next stage in the renewal of Britain. Our first priority was to build a platform of economic stability, which is a crucial precondition to achieving stable and steady growth in a modern economy. We made tough choices to sort out the public finances. Our next goal was to provide employment opportunity for all—to get more people into work than ever before. With the help of the new deal, by making work pay, there are now 1 million more people in work than in 1997. Indeed, there are more people in work than ever before.

Now, as we maintain a platform of stability and continue to create new employment opportunities, we are investing in the future of our country—its public services, its infrastructure, its skills and its people. We are tackling that legacy of neglect, the years of underinvestment and the damaging short-termism. Tackling that was never going to be easy—we never said that it would be—but we are doing it and we are determined to build a Britain where there is opportunity and security for all.

What does the Conservative party want to do, apart from wielding its £16 billion axe? It wants to return us to the short-termism that saw our public services, infrastructure and skills base fall into decline and led our economy into boom and bust and stop-go. The shadow Chancellor has confirmed that approach. He told Sir David Frost that he would plan "year after year". The right hon. Gentleman plainly opposes setting out three-year plans; he claims that they are unsustainable. He is not getting into the business of guarantees; he would plan year by year. That would move Britain back to chronic short-termism—the boom and bust, the excesses, the unemployment, the high inflation and high interest rates, and everything else that did so much damage to our country before.

By contrast, we are moving Britain closer to our goal of opportunity and security for all. We are laying the foundations for the future—foundations for increased productivity, a faster, integrated transport network, a renewal of Britain's neglected science and research base, and the investment that will modernise our schools and hospitals and give the police the increased resources that they need to crack down on crime.

What is more, our new spending plans are about delivering employment and education opportunity for all, building on the success of the new deal and our other policies that have helped more than 200,000 young people into work and cut youth unemployment by more than 70 per cent., just as we have cut long-term unemployment by more than 60 per cent.

As we take the next steps towards our goal of full employment, we recognise the importance of education and lifelong learning as the surest route to employment and employability. That is why education spending across the United Kingdom will grow by 5.4 per cent. over the next three years. Indeed, with the additional resources provided for education at the time of the Budget, over the four years to 2003–4 education will benefit from an annual growth rate of 6.6 per cent. in real terms—the largest sustained investment in our country's education for more than 50 years. In fact, over the five years covered by the Government's two spending reviews, education spending will have risen by 33 per cent. in real terms—more than it rose in the entire period of the Tory government, from 1979 to 1997. That is money for schools, teachers, books, new equipment—investment to give our children the best start in life.

Education cannot be limited to the few. In the 21st century, the need to learn new skills will be very important to adults who want to get on and make the most of their talents. We must tackle the scandal of the 2 million adults in Britain who have literacy and numeracy skills equivalent to those of a seven-year-old. That is why the settlement makes a commitment to investment in adult basic skills and education.

With extra resources comes the responsibility to deliver results. This spending review is not only about the amount of money that each Department will get, because with each allocation will come public service agreements to achieve real improvements in all our services. In education, we have set the target of increasing the percentage of 16-year-old pupils obtaining five or more GCSEs at grades A to G, including English and maths, to 92 per cent. by 2004, from the 86 per cent. that it was in 1997. These are resources for results.

Mr. Phil Willis (Harrogate and Knaresborough)

I am grateful to the right hon. Gentleman for giving way, and I apologise for arriving late for the debate. Does the Minister agree that the real challenge in our education system is not to raise the number of five A to C grades achieved but to deal with the 9 per cent. of young people who, under this Government, as under the previous Government, leave school with no qualifications and have no jobs or training? What target is the Minister setting for those young people? That is how people will judge the success of the Government's education policy, not by an arbitrary target of obtaining five or more grades at A star to C.

Mr. Smith

We are doing those things. There are targets for the numbers who will gain qualifications. We want to lever up the performance of those who leave school with no qualifications. We are introducing education and maintenance allowances and giving extra help to those who have been denied it in the past. In our overall settlement, moreover, there is a particular concentration on the most deprived areas, which is where the problems of underachievement to which the hon. Gentleman refers are most acute.

Our next objective is to build responsible and secure communities across our country, where everyone has the opportunity to participate. In his statement to the House yesterday, my right hon. Friend the Home Secretary announced that he will tackle crime, with increases in spending over the next three years of some 3.8 per cent above inflation—money to recruit more than 4,000 police officers and to ensure that they are fully equipped with the latest DNA technology and modern communications, so that they can provide the service that every member of the community wants.

In return, the Home Office will meet its public service agreements; car crime will be cut by 30 per cent., burglaries by 25 per cent. and robberies in our major cities by 14 per cent.

Mr. Tim Loughton (East Worthing and Shoreham)

In the event that the Home Office fails to meet those public service agreements, will its funding be cut? Will the Home Secretary have to come to the House to announce that the 4,000 promised policemen will not be funded?

Mr. Smith

The appropriate response in any instance of Government or agency policy underperformance is, first, to analyse properly the variations in performance and to adopt good and accurate measures of efficiency. Recently, the public services productivity panel published proposed measures of efficiency on that very issue.

Secondly, those measures should be applied, with a proper strategy to lever up standards of performance; resources should be available in return for performance and there should be graduated intervention—from improving strategy to changing personnel. That will be a crucial test of the efficacy of our investment. That is why we have set out performance targets in the spending review White Paper.

Mr. Bercow

Will the right hon. Gentleman give way?

Mr. Smith

I have given way several times; I am anxious to make progress.

We have announced plans for a neighbourhood renewal fund; £100 million, and thereafter £300 million and £400 million will be allocated to raising the quality of life in our most deprived areas. That crucial dimension of our settlement again sets us so much apart from the Opposition. When they were in government, they showed every sign of not caring for the poorest and most disadvantaged communities. The previous Government were content to tolerate conditions that they would not have wanted for themselves or any member of their family. That is why the Labour Government are investing in public services for all. We want to narrow the gap between the most disadvantaged in our community and the rest. The neighbourhood renewal fund will make an important contribution to that.

Mr. John Wilkinson (Ruislip-Northwood)

Will the right hon. Gentleman give way?

Mr. Smith

No. I want to make some progress.

Strong communities must mean healthy communities. On Tuesday, my right hon. Friend the Chancellor confirmed the allocation for our health service announced in the Budget: an average 6.1 per cent. real-terms increase—more than double the rate of growth achieved by the previous Government. Next week, my right hon. Friends the Prime Minister and the Secretary of State for Health will give more details of our vision for Britain's health. The resources are in place. The investment is committed. Our communities—individuals and their families—are benefiting from a commitment by the party that created the NHS, believes in the NHS and invests in it.

Our next objective is to raise Britain's productivity and to provide enterprise opportunity for all. For too long, the under-investment that has plagued our science and research base has hindered the development of our economy. The failure to match enterprising and innovative talent with resources has set Britain back. We have announced a major package of resources, covering every part of the country, to improve our productivity and to extend new enterprise opportunities so as to rebuild Britain's reputation as a global leader in scientific research. The spending review provides a real-terms increase in funding of about 5 per cent. a year until 2003–04, to improve our science and engineering base. That includes the £1 billion science research investment fund set up in partnership with the Wellcome Trust.

The plans announced this afternoon by my right hon. Friend the Deputy Prime Minister are crucial to our economic performance. We are doubling public sector investment in our transport system. In a modern economy, work force mobility is a key driver for economic success and increased productivity. By sharp contrast with the short-termism of the Conservatives, the initiatives set out today will make Britain a better place in which to do business, with a modernised infrastructure and better-quality public service provision.

I realise that there will be a time limit for Back-Bench speeches, so I shall draw my remarks to a close. In summary, the investment announced in the spending review is not only for individual initiatives or Departments; it will prepare our economy and our country for a new role in a modern world. Our approach is forward looking—based on stability and built on our fiscal rules. We are investing in our public services and in our science and skills base. We are strengthening our communities and our infrastructure and building a Britain where there is opportunity and security for all.

The policies of the Opposition are in complete and evident disarray. The Opposition have failed the most elementary economic tests. They failed to recognise the need to invest; they failed to see the damage that their policies did in the past and would do again, if they were given the chance. They divided Britain with cuts to services, underinvestment, short-termism and boom-bust—the same old mistakes from the same old Tories.

Our priorities are clear: investment in our infrastructure, in our skills and research base, in education, in our communities and public services. Those are investments not only in individual services, but in the well-being of our whole economy and society and in our country's ability to succeed in today's global economy.

While recognising that to flourish we must invest in our infrastructure, we realise the importance of investment for the long term, within prudent limits and supported by the fiscal rules that guide our planning at present as they will continue to do in the future. Those are the guiding lights of our economic approach and of the spending review.

The Government have made their choices: between stability and the stop-go of the Conservatives; between employment opportunity and unemployment; and between investment and public service cuts. Our choices and priorities reflect the priorities of the British people. I commend the spending review to the House.

2.48 pm
Mr. David Heathcoat-Amory (Wells)

On Tuesday, the Chancellor drew a large cheque on the future. The figures are already disintegrating. Yesterday, the Institute for Fiscal Studies pointed out that the Chancellor's calculations were based on a hypothetical figure and that the figure of £43 billion was not meaningful. That was the amount that the Chancellor boasted would be allocated to front-line services.

If we compare last year with 2003–04, the real figure for the total increase in public expenditure is no less than £99 billion. That is almost 12 digits—a telephone number amount. It is a colossal amount and wholly unsafe.

That figure is not merely an aspiration. The Government are making an irreversible commitment to spend those sums over the next four years. Whatever happens to the economy, whatever happens to the global economy and whatever happens to the business cycle, the Government are locked into an expenditure commitment of that scale, way above their own projected growth rate for the economy.

It is not surprising, therefore, that the Bank of England has taken fright. It was told of these figures in advance, and the minutes of the last meeting of the Monetary Policy Committee record the fact that many of its members believed that if this was attempted, interest rates would have to rise in future. [Interruption.]

Mr. Deputy Speaker

Order. We cannot have these interventions from a sedentary position. The House listened very carefully to the Minister and it should do the same now.

Mr. Heathcoat-Amory

Thank you, Mr. Deputy Speaker. Labour Members may not like these facts, but they are going to listen to them because they are all based on the truth—either the figures in the Government's own document or comments by respected independent outsiders.

Mr. Andrew Smith

A few minutes ago, the right hon. Gentleman plucked out of the air the figure of £99 billion. Does that mean that he will cut £99 billion, or will he keep the cuts to the £16 billion that we have identified so far?

Mr. Heathcoat-Amory

I shall discuss the question of the year 2004, but before I discuss the expenditure that we shall be undertaking in that year, I shall discuss what the Government have been spending and taxing in the last three years. Let us look at the record; let us read the book before we attempt the crystal ball.

What we do know, beyond dispute, is that it is the taxpayer, particularly the poor taxpayer, who will have to end up paying for all this. How do we know that? Because it has all happened already, despite all the pre-election promises. We remember the Prime Minister saying that he had no plans to increase taxes at all. That is what he said before the election. It was never disputed, it was never contradicted and it was never corrected at the time. Despite all that, we have since had four Budgets, all of which have put taxes up. Road transport, savings, marriage and housing—they have all gone up, and in the Finance Bill, which the House debated last night, there is a new tax, the energy tax, which will be paid by all businesses from April next year.

What is really scandalous about this series of tax increases is that they are very often targeted on the poorest people in the country. In 1997, the Government abolished dividend tax credits. It is bad enough that that means taking £5 billion out of pension funds every year, which has led to a collapse in the savings ratio—which the Government do not dispute.

However, the terrible effect has been on some individuals—but not higher rate taxpayers, who were all protected against that particular tax increase. It is the non-taxpayers—the non-taxpayers relying on small savings—who now get no repayment. The Chief Secretary obviously finds that amusing. I invite him to do what I have done, which is to talk to one of my constituents, a Mrs. Pratt, who has written to me from Glastonbury. She has described how, last year, she received a tax repayment of £583; this year, she is not eligible for that. She actually has to make a tax payment.

Mrs. Pratt is 87 years old; she is blind and she is disabled. She has asked me to ask the Government why they are doing this to her. If the right hon. Gentleman wants me to debate mythical expenditure cuts in four years' time, I will go down to Glastonbury with him to tell Mrs. Pratt about our expenditure plans—if he guarantees to explain to her why he has taken £600 out of her income. That is the deal that I offer.

I also have a letter—I cannot be alone in having been written to by many constituents suffering in this way—[HON. MEMBERS: "You are not."] We have the example of Mr. Brian Speakman, who says that he wrote to the Chancellor—he has not had a reply, of course—asking how he had the audacity to claim that this child tax credit replaces the married couple's allowance. He explained how he would lose approximately £20 a month from his small pension. He finished: I find that as a lifelong socialist, an ex Labour party member, with a son who is a Labour councillor … my vote will go elsewhere in future. Those are real examples from real people.

Mr. Bercow

Do not both the record of the Government to date and their plans for the future underline the wisdom of what Lord Hattersley wrote in The Guardian on 13 March 1995? He observed: Labour now has a clear choice. It can either be the party of higher taxes and proud of it or it can be the party of higher taxes which it is ashamed to describe, afraid to admit and incapable of calculating with any accuracy. It cannot be the low taxation party.

Mr. Heathcoat-Amory

My hon. Friend is absolutely right, and the Labour party, when it does not find taxing poor people in this way funny, is in denial about it. The fact is—I am grateful to the Library for this figure—that the typical working family in this country is now paying an extra £670 a year. That is the record; so before we speculate about the future, let the Government admit that that is what they have done to working people in this country. After four Budgets in which the Government have done that, we may now be in an election year, so the Chancellor has gone on a spending spree.

Mr. Geraint Davies

Is the right hon. Gentleman aware of the regular Institute for Fiscal Studies reports after each Budget which show the distributional impact of each Budget? Is he aware that they show consistently for every Budget, and on aggregate for all the Budgets, that the bottom deciles of the population are consistently better off? Does he agree that when one looks at the distribution, it becomes clear that the bottom fifth in particular are much better off, and in fact no one is worse off? That has consistently been the shape of the distribution. That is in sharp contrast to the sort of things that have been thrown around in this Chamber in the last few days.

Mr. Heathcoat-Amory

That is flatly untrue. The bottom decile has actually had the biggest tax increases. On the question of figures, why have the Government dropped the previous Government's practice of publishing on Budget day the impact of all the taxes, direct and indirect, on typical households? We did that, and they dropped it. The Select Committee on the Treasury drew that to the Government's attention, without result.

Mr. David Ruffley (Bury St. Edmunds)

Does my right hon. Friend agree that the hon. Member for Croydon, Central (Mr. Davies) has completely misrepresented and distorted the IFS figures? The IFS makes it perfectly clear that the bottom decile figures to which he referred exclude housing benefit. Does my right hon. Friend agree with that?

Mr. Heathcoat-Amory

Yes. We are just hearing more of the fiddled figures, and I am disappointed that the hon. Member for Croydon, Central (Mr. Davies) has fallen for his own propaganda on these matters.

Mr. Alan W. Williams (East Carmarthen and Dinefwr)

We heard earlier about the lady from Glastonbury, and of course we all know that in our constituencies there are individual examples of gainers and losers. However, will the right hon. Gentleman say generally for elderly people how many losers there are, and will he compare that figure with the number of elderly people who now qualify for the minimum income guarantee and the number of working families who now qualify for the working families tax credit? I believe that something in the order of more than 1 million now qualify for the working families tax credit.

Mr. Heathcoat-Amory

The elderly lady who is my constituent is not at all unusual. What is more, the hon. Gentleman had an opportunity to help her, because we specifically raised that issue during consideration of the relevant Finance Bill when the dividend tax credit measure was taken through, and we gave the hon. Gentleman an opportunity to vote against it, which he failed to do. That is one of the points that I shall be making to Mrs. Pratt. The governing party just does not care. It has taken £600 a year away from her, and all that the hon. Gentleman says is that other people are better off. That is not the way that she sees it, down in Glastonbury.

In assessing the comprehensive spending review that the Chancellor announced on Tuesday, we are entitled to look back at the other spending review—the one that the Government announced in July 1998, two years ago. We recall that the Chancellor promised an extra £19 billion for education and an extra £21 billion for health—an extra £40 billion in all. We know now that that has not worked. We have longer waiting lists, larger classes in secondary schools and fewer policemen. I think that the Government are learning that it is easy to tax. Indeed, that is the easy part of politics, and that is what the Government are good at. It is difficult, however, to turn people's money into the services that they want. That is a skill that the Government have yet to master.

It is hardly surprising that that observation is shared on the Opposition Benches and by the Chancellor's constituents. ICM conducted a poll of the right hon. Gentleman's constituents on Tuesday night. It revealed that 72 per cent. of his constituents said that they did not believe the spending figure that he promised for the future, the reason being that 79 per cent. of them said that public services were not improving. They have seen tax increases, but not an improvement in public services.

Mr. Christopher Leslie (Shipley)

When will the right hon. Gentleman tell us about his guarantees?

Mr. Heathcoat-Amory

In answer to the Chief Secretary, I said that I would describe what we might be doing in office in four years' time. I shall start by sharing with the hon. Member for Shipley (Mr. Leslie) the Government's record over the past three years. I can tell that he does not like it, but he voted for it and he must live with it.

We all agree that some things have increased since 1998 in the most recent expenditure review. For example, crime has increased. The number of political advisers employed by the Government has increased; in fact, it has doubled. It is probably double the number of leaks coming out of Downing street. The cost of central government is eloquent on Labour's priorities in office.

I refer the House to another Government publication in April entitled "Public Expenditure", which shows that the cost of running central government Departments, which was static or slightly falling in the years of the previous Conservative Government, has increased since then by more than £2 billion. There is the example of the Inland Revenue, which is in a bit of trouble for having wiped off its computer 5 million tax records. We do not know what has happened to them. Rather lamely, the Inland Revenue says We haven't lost the records, we know they are in the system somewhere. However, it cannot retrieve them.

That is the same Department that has employed an extra 12,500 civil servants. That is not explained by the new responsibilities that it has taken over from the Department of Social Security. The net increase in employees in all Revenue departments is thousands. From the point of view of the taxpayer, that is entirely unproductive. The size and wealth of the state is increasing, but the wealth of businesses and taxpayers is not.

In addition, there is all the wastage, all the quangocracy, all the regional assemblies, the cultural consortiums, the taskforces and the bogus consultation exercises that the Government set up and then ignore. However, there are some things that are not in the comprehensive spending review documents. Where is the cost of converting to the euro? We know that the Government are committed to it, but where is it in their estimates?

Mr. Roger Casale (Wimbledon)

We have heard arguments before from the right hon. Gentleman about the cost of the changeover plan and the cost of central Government, for example. But does he agree with the right hon. Member for Kensington and Chelsea (Mr. Portillo), the shadow Chancellor, who has said that all the extra money spent on public services is money unwisely spent? If he does, will he come with me to Wimbledon to identify where he thinks that the extra money is being wasted or spent unwisely? For example, is it being wasted on the new accident and emergency unit at St. Helier hospital or on the refurbished Hillcross middle school? Is it not more sensible to spend public money—taxpayers' money—on investing in public services such as health and education, rather than on the cost of social failure and rising Government debt, as was done under the Tories?

Mr. Heathcoat-Amory

Yes, of course I agree with the hon. Gentleman. That is where we want to spend the money. I was saying that that will not happen if £3 billion is diverted into a national handover plan for the euro. We do not know the figures because the Government will not disclose them. In written questions, I have asked for the estimated costs of changing over to the euro. The Government say that they have no idea, even in the public sector. So outside estimates have been made by Chantrey Vellacott, an accountancy firm. It has come up with a figure of £36 billion for the economy as a whole. That includes more than £3 billion just for central Government Departments. It said that it was difficult to make an estimate because of the lack of information we were given from government departments. That being so, it took a cautious approach.

The Government are committed to something but they do not know what it will cost. Apparently it is not in their estimates—but perhaps it is. We should be told. Either the Chancellor does not believe that it will ever happen so it is not in his estimates or he believes that it will happen and has budgeted a sum for it. If so, where is it?

Mr. Nicholas Soames (Mid-Sussex)

Is my right hon. Friend aware, on the important point about the changeover plan, that in France and Germany, where large sums of public money have been spent on the changeover, the Commissioner with responsibility for the euro said the other day that despite these large sums, the effect appeared to be negligible? If a large sum is being spent to no great effect, does my right hon. Friend agree that it should be accountable through the Public Accounts Committee or the Select Committee on the Treasury so that the House may examine with great care how the money is being spent?

Mr. Heathcoat-Amory

I agree with my hon. Friend. If the Government are launched on a project that will cost more than £3 billion just for the public service, according to an estimate, and if they have agreed in principle to undertake that expenditure because they want to join the euro, I think that the House is entitled to scrutinise that estimate and have it explained. All my inquiries have met with responses from the Minister that the Government have no idea and that they have made no calculations. That is the height of irresponsibility, and I agree with my hon. Friend the Member for Mid-Sussex (Mr. Soames).

The Chief Secretary claimed that he had a strategy for productivity in the economy. He wants to make the United Kingdom a global leader. How does he reconcile those words with the news this morning that Veritas, one of the world's largest software companies, has put on hold its investment plans because of doubts about the Government's intentions in the high-tech sector, and particularly about their taxation plans?

The Financial Secretary to the Treasury (Mr. Stephen Timms)

I am glad that the right hon. Gentleman has referred to Veritas, which is the fourth largest software company in the world. Will he confirm that, contrary to what he has just said, Veritas is announcing today the creation of more than 2,000 new jobs in the UK, and that it has chosen to locate its European headquarters in the UK? I have the press release in front of me.

Mr. Heathcoat-Amory

That is a predictably misleading version of events. Rather than listen to the Chief Secretary, we can hear from the man who is running the company, Mr. Philip Bousfield, who is a senior vice-president of the worldwide operation. He has said that the company has halved its original investment plans because of uncertainty about the climate for high-tech investment created by inappropriate taxation. That is what the company is saying, which is rather different from the version given to us by the Chief Secretary.

Mr. Timms


Mr. Heathcoat-Amory

The Financial Secretary has had his chance and he has given his version of events. I have given the company's version, and it is rather different.

To return to the comprehensive spending review, the Chancellor said that this review—the second one—would be different. He said that the new resources that he was funding would be tied to results; they would be tied to output and performance. However, we have heard all that before. That is exactly what we were told in July 1998 when he announced a similar degree of extra spending on public services. At that time, he said that the spending would be tied to public service agreements set out in departmental objectives that had to be met. He portentously said: The Prime Minister has decided that that continuous scrutiny and audit will be overseen by a Cabinet Committee … Money will be released only if Departments keep to their plans.—[Official Report, 14 July 1998; Vol. 316, c. 188] We are entitled to compare that statement with what has happened.

Let us consider one or two examples. In the foreword to the document on public service agreements entitled "Public Services for the Future: Modernisation, Reform, Accountability", the Prime Minister gave one of the objectives as a reduction in the long-run rate of the growth of crime. We were told that that would be done by launching the new evidence based crime reduction programme with an additional £250 million. It is not a demanding target to cut the rate of growth in crime when the Government inherited a crime rate that was falling, but that is what they have done. They have turned a decrease in the level of crime into the increase that was announced this week.

There is an even bigger mystery about the targets for immigration controls and asylum seekers. That document, which was released in 1998, could not have been clearer. To be fair, it was absolutely specific. The aim was: To put in place firmer, faster, fairer immigration controls. More than that, the Government were definite that the time taken to reach decisions about asylum applications would be two months by the Home Office and a further four months maximum by the adjudicator—six months in total.

Two years later, we ask ourselves what has happened to that specific target. Therefore, we turn to the Home Office annual report for 1999–2000 and we find that the objective has completely disappeared. There is no reference to it whatever. On page 46 of the departmental report, all the those targets about firmer, faster, fairer immigration controls have become "Target to be developed". On page 47, we are told that Further work will take place … to develop the integrated planning mechanisms that will ensure that all those with an interest in immigration matters work in a joined up way. It is a little bit late for that. However, the real point is that a specific target announced by the Government, which would be overseen by a big, new Cabinet Committee and the fact that money would be taken from Departments that failed to meet their targets have been forgotten.

Mr. Loughton

My right hon. Friend is right. Is he aware of ever having seen the minutes of this great new Cabinet Committee that would oversee all the targets and audit all the functions? Is he aware of any Department that has not had its money released because it failed to meet any of the targets that were promised two years ago by the Chancellor? Has any of that happened, or was it all just a load of flannel?

Mr. Heathcoat-Amory

The Cabinet Committee and the new penalties have vanished and all been forgotten. It was all talk. If that happened in 1998, we are entitled to ask whether the same will not happen in 2000 and beyond.

Many other targets were set. For example. Customs and Excise was going to collect each year the amount of forecast UK revenue yield from indirect taxes. Has it succeeded in that? Tobacco duty is a good item to consider. It was forecast to raise £8.9 billion in 1999, but the actual amount that Customs raised was £5.7 billion. That is a gap of more than £3 billion between what the Government said that Customs would collect and what it actually collected a year later. That is another target that has vanished. Will the Minister tell us whether any money has been taken away from Customs and Excise and the Treasury as a result?

Mr. Ian Stewart (Eccles)

The right hon. Gentleman referred to vanishing acts, and he will know that the Leader of the Opposition spoke to the conference of the Confederation of British Industry in 1999 and gave a tax guarantee of sorts, which he said was based on a moral argument. We hear that that tax guarantee has all of a sudden vanished, so does that mean that it was based on an immoral argument? What will happen because of the Conservatives' spending cuts, which will mean a loss of £25 million to my constituency? What does the right hon. Gentleman say to my constituents about the removal of that money?

Mr. Heathcoat-Amory

Yes, there is a moral case for low taxation. If one wants to encourage family life and marriage, one should not tax them. If one wants to encourage savings, one should not tax them. That explains the immorality of the Government's actions, so I agree with my right hon. Friend the Leader of the Opposition in setting out the clear moral case for bringing down the burden of taxation over the lifetime of the next Parliament.

Mr. Stewart


Mr. Heathcoat-Amory

I hope that the hon. Gentleman will catch your eye, Mr. Deputy Speaker, so that we can continue this discussion at greater length later in the debate.

Ms Karen Buck (Regent's Park and Kensington, North)

In view of the right hon. Gentleman's remarks about the moral basis of taxation, will he comment on the 22 tax increases that were introduced by the 1992–97 Government? They included slashing the value of the married couples allowance.

Mr. Heathcoat-Amory

The hon. Lady should understand that removing completely the married couples allowance when the Government are running a surplus is wrong and completely contradicts the Prime Minister's oft-repeated claim that he wants the Labour party to be the party of the family and the party that supports marriage. That is the moral argument and the Labour Government cannot duck it.

We are not just interested in the output targets that have all been breached by the Government. We are also interested in the fact that even their spending commitments have been breached. On Tuesday, the Chancellor of the Exchequer made much of the degree to which he wanted to encourage and promote public sector investment. He said that net capital investment would double by 2004—from £7 billion to £18 billion a year. He made exactly the same promise in 1998. Page 17 of the document on the comprehensive spending review forecast that net investment for the following year would be £8.6 billion.

Again, we are entitled to ask whether that target was met. Did the Government spend £8.6 billion in 1999–2000? According to the document that they published on Tuesday, the actual investment figure was £2.6 billion. What happened to the other £6 billion? They cannot even predict net investment by the public sector itself one year later. How can they expect us to believe what they say will happen to the economy in four years' time? That is the point. It is a giant exercise in underspin.

Dr. Stephen Ladyman (South Thanet)

Will the right hon. Gentleman give way?

Mr. Heathcoat-Amory

I am going to draw my remarks to a close so that the hon. Gentleman and others can contribute to the debate.

The answer to the questions of Labour Members, who have raised the mythical figure of the supposed cut of £16 billion in public expenditure in four years' time, is that Conservative Members will not base our plans for total expenditure on a Labour figure for total expenditure in four years' time because the Chancellor cannot even make accurate predictions for a year ahead for investment by his own Departments. In any case, the entire exercise is vulnerable to what may happen in the economy.

Mr. Andrew Smith

Will the right hon. Gentleman give a straight answer to a straight question? By how much would the Conservative party cut our spending plans?

Mr. Heathcoat-Amory

We have already made the answer to that perfectly clear. We are not going to underestimate expenditure plans drawn four years into the future, when the Government's own expenditure plans, which were drawn up two years ago, have already been found to be false in their output and investment targets. The right hon. Gentleman can build castles in the air and project imaginary cuts years into the future. However, the Opposition are entitled to examine the record and what the Government have so far delivered in office.

It is beyond dispute that the Government have spent their first three years taxing, and they now want to spend in the year before the election. However, the record is against the right hon. Gentleman, and the current spending review will be no more successful than the last one in meeting the public's demands, needs, requirements and aspirations. I agree with the 72 per cent. of the Chancellor's constituents who do not believe the figures either.

Mr. Deputy Speaker

Order. Before I call the next speaker, I remind the House that Madam Speaker has placed a limit of 15 minutes on Back-Bench Members' speeches from now on.

3.21 pm
Mr. Tom Levitt (High Peak)

I understand that my hon. Friend the Member for Tottenham (Mr. Lammy) may try to catch your eye a little later, Mr. Deputy Speaker, to make his maiden speech. We are looking forward to that occasion very much, so I hope that my hon. Friend is successful.

That reminds me of my own maiden speech, which came under the heading of public expenditure. I talked about education to some extent, and perhaps was a little foolish, as I tied myself down very specifically by saying that our party ought to be judged not on big figures and headlines, but on what happens in our localities. I named Chapel-en-le-Frith infants school as a school that, to my mind, would be the touchstone of whether our policies had been successful. That school was overcrowded, had a main road going down the middle of it and 50-year-old temporary classrooms, and was letting in water.

Six weeks after my maiden speech came the announcement that Chapel-en-le-Frith was having its infants school replaced, lock, stock and barrel. Earlier this year, my right hon. Friend the Secretary of State for Education and Employment came to my constituency and opened the new Chapel-en-le-Frith infants school, which means that that touchstone of success has been achieved. However, that was only the beginning as, since then, Tintwistle primary school in my constituency has been completely replaced; Taxal and Fernilee primary school has had a new classroom and an extension; Peak school, Chinley has been remodelled; Whaley Bridge primary school has had one extra classroom and Burbage primary school, two; Newtown primary school in New Mills has had one extra classroom. Throughout my constituency, outdoor toilets, which were to be found in all too many of those schools, have been eradicated.

There have been energy improvements throughout the schools of High Peak. No fewer than 30 schools in my constituency have had new classrooms, extensions to classrooms or other major capital expenditure on classrooms in only three years. Half the schools in my constituency have therefore received genuine benefit from the Government's spending programmes after a 10-year drought in which only a single school building was built in my constituency between 1987 and 1997.

Schools are not alone, as there have been other improvements on the ground that people notice. For example, their libraries are open for longer hours and Derbyshire was successful in getting £2 million of additional funding for rural buses. Our primary care groups are now changing into primary trusts and are much more proactive in their delivery of health care throughout the area. People who, only two years ago, complained to me that their four-year-olds were getting a raw deal now find that nursery or pre-school education is provided for four-year-olds. From September, that will extend to three-year-olds in Derbyshire, and is another major achievement that people can see on their doorsteps, in their streets and in their schools.

In High Peak, youth unemployment has been reduced by 78 per cent., and there are now few people who qualify for the new deal. That means not that the new deal is not affecting enough people, but that it has been so effective, as have general plans for generating jobs, that it is hardly being used. In the past three years, unemployment as a whole in my constituency has halved as a result of economic conditions created by the Government. In the next two years, there will be 101 more police officers in Derbyshire. I am sorry, that figure was correct until yesterday but, with further funding not just for 5,000 police officers, but an additional 4,000 throughout the country, we will get a share of that. Those are the real issues on which real people are demanding to see action, and our public spending policies are delivering them.

Those issues are genuine, in contrast to some of the absurd fantasies that we have just heard from the right hon. Member for Wells (Mr. Heathcoat-Amory), who does not seem to live in the real world or relate to the typical experiences of his constituents. The right hon. Gentleman made no mention of the four-year-olds whose education is now being paid for, or of the class size problem. We had a class size problem in Derbyshire, as 13,000 children in key stage 1 in our infant schools were in classes of more than 30 in 1997. We are on target to eradicate that class size problem in just a few weeks, which is long overdue and will be another achievement.

If I may, I should like to put down some markers for the future. If I were to make my maiden speech today, I might like to use as a touchstone the Buxton to Matlock railway line and the need to restore it. The Tintwistle-Mottram bypass is a good contender for funding. Elderly people in my constituency are looking forward very much to next week's announcement on funding for long-term care. Again, we have looked at that matter long and hard and I believe that, at last, next week, there will be an announcement of which I can be proud.

I should like my right hon. and hon. Friends to look at Derbyshire's position in the local authorities' league of spending. We have been down at the bottom for quite a long time, and we are still there, although the difference between top and bottom is not what it was. Derbyshire has had generous settlements for local funding in recent years which, while not quite generous enough to get us up the league table, mean that we are not as far from the top in cash terms as we used to be.

I am proud of the Government's record of public expenditure and know that, in years to come, I shall be proud of the delivery of what my right hon. Friend the Chancellor announced earlier this week. In complete contrast to our position is the play on words or joke that the shadow Chancellor was trying to make in his pathetic response to Tuesday's announcement. He was trying to make a joke of the idea that in our manifesto we said that we should not be judged on public expenditure alone. That is quite right, because if were to say merely that we believe in more public expenditure on the principle that more must be better, our hero would be the right hon. Member for Hitchin and Harpenden (Mr. Lilley), who saw social security expenditure go through the roof when he was in charge of the Department of Social Security.

The right hon. Gentleman spent more than any other Secretary of State for Social Security before him not because he was enjoying the fruits of success, but because he was paying the price of failure. He was paying the price of bailing people out of poverty and of giving benefit to the many people who were unemployed. We believe in public expenditure because it has a positive purpose; it is not just for providing safety nets and bailing people out of problems, which often are not of their making, but for building a coherent society. We have done that and will continue to do it because we have got the economy right, and we have the wherewithal and the determination to do it.

Because we have more people in work, we have more people paying tax. Because more people are earning more, they are paying more tax. There are now more people paying the higher rates of taxation, which could explain some of the barmy figures that we were hearing earlier. They are paying those rates because they are earning more, and they are higher up the income scale. I have no regrets at all about such an increase in the tax take.

We have done more: we have reduced the cost of debt to the Government and to householders throughout the country. One has only to consider mortgage rates to see what we have done to stabilise and rationalise our economy. We have a stable, low rate of inflation, and everybody, including companies coming into this country to invest and people planning their family's future, knows that it will continue to be stable for a long time. During the period of these long-term spending plans, there is no reason to believe that we shall have significant problems with the economy getting out of control.

Six basic principles should guide public expenditure. There may be more; I may have missed some out. First, we should get best value for the money that we put in. We should not only measure that in cash terms, but look at the qualitative responses that we get from investing money in services. The second principle is the measurement of outputs. It is essential that we are able to measure what public funding does so that we can assess whether we are getting best value.

Thirdly, we must not be afraid to make difficult decisions about priorities. We had a difficult period in our first two years when we were tied to the spending plans that we had inherited, and with those difficult decisions we got a taste of how bad it would be if we had to return to that situation. Fourthly, our spending decisions must be sustainable; they must not be a flash in the pan. We must not throw money at a problem, thinking that this will solve it. We must build on what has happened before and make sure that we can deliver in future.

Fifthly, our spending plans must be without dogma. By that I mean that the era of Labour Members saying that all public spending is good and all private spending is bad has passed. We must consider using partnerships and seedcorn investment. We must consider using any available money. There is enough capital flying about in this country which has no home to go to. We should find a good home for private capital and use it to underpin public services. I have no conscience about using private money or any money from a legal source to give a good foundation to our public services.

The last principle, which the right hon. Member for Wells completely missed the point of, is that we must plan for the long term. He said that the Government claim to have put money into the national health service, but asked where were the results. If he can find a way of training nurses in 12 months, of training doctors in 18 months and of building hospitals in six months, let him tell us, because our investment in nurse training, doctor training and the capital programme in the health service cannot deliver overnight. We do not claim that it will do so, but we say that essential, long-term, planned investment meets the principles that I have outlined.

Dr. Jenny Tonge (Richmond Park)

I accept the hon. Gentleman's point about the length of time that it takes to train a nurse or doctor, but is that not more reason why the Government should have put more money into the health service at the beginning, and not stuck to Conservative spending plans?

Mr. Levitt

I find it odd that someone who is committed to a 1p rise in income tax to invest in education, health, transport and everything else says that we should have found more money. That money has been provided, and it has been invested in a sustainable way.

Those of my hon. Friends who know me best know that sycophancy is not something that I adhere to. I am a scientist by training and I like to look at issues objectively. I have looked very hard at the Government's spending commitments in the two days since they were published and I can sum them up in one word—brilliant.

3.35 pm
Mr. Matthew Taylor (Truro and St. Austell)

I am impressed that 30 schools in the constituency of the hon. Member for High Peak (Mr. Levitt) have new buildings. I shall reflect on the benefits of his seat being a marginal Labour gain at the last election. The picture has not been the same in my patch. I have been in touch with head teachers in Cornwall, and the great majority have had to cut staff since the election.

I want to examine how, on the one hand, the Government talk about huge increases in public expenditure and, on the other, the experience over the past three years is of teacher losses, growing class sizes, longer waiting lists and cancelled appointments—problems that led some Labour Members to resign ministerial posts and complain that the Government were out of touch. Even the Prime Minister has complained that he is losing popularity. That is because in the early years of the Parliament, the Government did not follow a progressive agenda of sustainable investment in public service; they followed a Conservative Budget plan that even the last Conservative Chancellor described as eye-wateringly tight. We know that even he would not have followed that plan in practice because the annual expenditure reviews at the time would have released more funds.

Expenditure on public services as a proportion of national wealth started high and followed a smooth curve over the past few years, ending up where it started. It is like the grin of a Cheshire cat; there is nothing to support it. That is why the Government are in great difficulty, and there is a difference between what they have said they will do about expenditure and people's experience on the ground.

That is an election headache for Labour Members, because even the funds that have been announced will take expenditure, as a proportion of national wealth, only back to the level that they inherited from the right hon. Member for Huntingdon (Mr. Major). For the most part, that expenditure will not take effect in time for an election. It is noticeable that the Government's announcements seem to wipe the slate clean of the £19 billion for education and £22 billion for the health service that we heard about two years ago, at the time of the last comprehensive spending review. That is hardly surprising because that money was never there, and it certainly has not been delivered.

Dr. Ladyman

Before the hon. Gentleman hits the moral high ground, I point out that my hon. Friend the Member for High Peak (Mr. Levitt) misled the House: the Liberal Democrat manifesto did not promise 1p on income tax for health spending; it promised £350 million for health spending from a change in national insurance contributions. How many hospitals in Cornwall would that money have built if it had had to be spread over the whole country?

Mr. Taylor

We also promised a steady 2 per cent. real increase in health spending thereafter, which the Government have not delivered. The key difference between what Labour has delivered and the Liberal Democrat manifesto is that we would have guaranteed upfront investment at the beginning of the Parliament, and not waited for later economic growth. We did not calculate in economic growth. We guaranteed immediate extra expenditure on health and education and for pensioners and others. That upfront expenditure is the gap between Labour's credibility and what it is saying about public expenditure.

Just look at the figures. In the first period of this Parliament, from 1996–97 to 1999–2000, there was a fall of almost 3 per cent.—2.9 per cent.—in the proportion of GDP being invested in public services, and the increase that has just been announced for the next year will be only 1.3 per cent. of GDP. In other words, at the time of the next general election, it will be lower than when the Government came to office.

Those figures hold even when social security is excluded. The Government make great play of the fall in unemployment allowing them to release extra expenditure, but if social security spending is excluded, the fall in proportion of GDP was 29.1 per cent. to 27.1 per cent., now rising in 2001–02, the probable general election year, to just 28.2 per cent.

The net result is that over this Parliament, public sector spending will grow over the first four years to the general election by 1.1 per cent. in real terms per year. That is worse than under John Major or even Baroness Thatcher. The growth announced in the Chancellor's new comprehensive spending review is real growth, but it comes on the back of an unprecedented squeeze in public service. That is at the root of the problem that the Labour party faces. Even on the new plans, current spending growing at only 2.5 per cent. a year is less than for most of the period under the Conservatives.

The Government like to say that the rate will be 3.5 per cent., but a large chunk of that is the increase in capital investment. That is a problem for the Government, but it is an even bigger problem for those on the Conservative Front Bench. At least the Government are now speaking of a real, sustained increase in public expenditure. Those on the Conservative Front Bench must explain how they will come up with £16 billion of cuts in public services, when we are currently spending less than the previous Prime Minister spent as a proportion of national wealth, and less than Baroness Thatcher spent as a proportion of national wealth when she was Prime Minister. If Baroness Thatcher could not do it, is the present leader of the Conservative party capable of delivering it?

On public sector net investment, the Government are trumpeting large increases in capital investment, but the problem for them is that in 1999–2000, public sector net investment is the lowest proportion of GDP since figures started. I have been looking through the figures, which go back on a roughly comparable basis as far as 1963–64, and none have been lower than the Government are currently delivering. On average, under the Government, it will be 0.6 per cent. of GDP, compared to 1.5 per cent. under John Major, a drop of 60 per cent. in capital investment, and in no year—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. As the hon. Gentleman has made the slip twice, may I remind him how he must refer to another hon. Member?

Mr. Taylor

I apologise, Mr. Deputy Speaker. I should do better.

The drop of 60 per cent. in capital investment will be reversed. The Chancellor has trumpeted that, but even in 2003–04, we will not reach the level of public sector net investment achieved in 1992–93, and by the end of this Parliament it will only just exceed the level when the Conservatives left office, with a huge fall in between.

It is true that debt has been substantially reduced. Pensioners were given a miserly 75p increase in March, yet a £2.5 billion surplus in social security funds was used not to increase that miserly pension rise, but to pay off national debt. They must wonder why a pension, which is among the lowest in the developed world, is not to go up, whereas we are to continue paying off debt that is the lowest of any G7 country. It seems an odd priority for a progressive Government, and I suspect that hon. Members will find over the next few months that pensioners are extremely angry about the fact that they got nothing from the distribution of the benefits of growth, which the Labour manifesto promised they would share.

In 1997 Labour decided for electoral reasons to adopt a Conservative Budget plan for two years or more—an electoral decision which proved unnecessary. I do not believe that the Labour party was right to think that it could not win seats without doing that. Indeed, Liberal Democrat gains show that they were wrong to take that view. Nevertheless, Labour decided to deliver a Conservative Budget. The Conservatives were out of office, but the Conservative Budget plans were still in government. The results have been appalling for pupils, patients, parents, and public services as a whole.

On crime, the Conservatives promised 1,000 extra officers in their 1992 manifesto, and 5,000 in 1995. In reality they delivered a reduction, and the Labour Government have continued to oversee reductions. A pledge of 5,000 extra officers has translated into almost 2,500 fewer since the general election. No wonder crime is rising.

Mr. Casale

I am grateful to the hon. Gentleman for giving way. Does he share my amazement, and that of my hon. Friends, at the speech of the right hon. Member for Wells (Mr. Heathcoat-Amory) who, speaking for the Opposition two days after the announcement of £43 billion extra for the public services, hardly mentioned health and did not mention education at all? Will the hon. Gentleman take the opportunity of going on the record and welcoming those public service increases?

Mr. Taylor

I am already on record as welcoming an increase that is overdue and insufficient, but at least it is happening. I agree entirely about the right hon. Member for Wells (Mr. Heathcoat-Amory), who read out a letter from a constituent in Wells who said that she did not plan to vote Labour at the next general election, but did not mention how she would vote. Given that it is a marginal seat between the Liberal Democrats and the Conservatives which I believe we will gain at the next general election, perhaps there are good tactical reasons for moving from the Labour party to the Liberal Democrats.

Mr. Heathcoat-Amory

The hon. Gentleman is muddling up two letters. One that I read was from the ex-Labour supporter in Merseyside who did not intend to vote Labour. The one that I read from my constituent in Glastonbury did not say which way she would vote or has voted in the past. It is an impertinence on the part of the hon. Gentleman to probe her political allegiances, rather than address the substance of the issue and the complaint that she was making against the Government.

Mr. Taylor

Given that the right hon. Gentleman has been reading out letters from correspondents about their political allegiances, I am not entirely sure that the impertinence is mine. I am not sure that his correspondents expected their voting preferences to be read out in the Chamber, but that is a matter for him to consider.

On education, the Conservatives say that they would spend less, so presumably the situation will be worse still. Even between 1991 and 1996 when they spent more than the present Government, the number of pupils in primary schools in England in classes of more than 30 children rose by 38 per cent.—a third of all primary pupils in England were taught in classes of more than 30.

Under Labour, although class sizes have been reduced for five to seven-year-olds, they are up for eight to 11-year-olds and at record levels for secondary school classes. Teacher shortages are worsening. There are 47 per cent. more vacancies than in 1997. In the last comprehensive spending review, the claimed £19 billion or 5.1 per cent. increase for education every year was in fact only 2.5 per cent. last year. The Government cannot even deliver the spending increases that they like to announce, so we must have some doubts about the new comprehensive spending review.

The issue for both parties is to explain away the fact that things were bad under the Conservatives and got worse under Labour, and now the Conservatives want to cut another £16 billion. At least Labour acknowledges its mistakes.

With regard to health, the picture is the same. Under the Conservatives, spending was greater than they now say they would spend, but there was a 41 per cent. reduction in beds, a 53 per cent. rise in waiting lists, and 20 per cent. of intensive care beds were lost between 1989 and 1996. Bureaucracy increased: 20,000 more managers 50,000 fewer nurses, and more than 50,000 people a year had their operation cancelled, but the Conservatives want to spend even less.

The Labour Government tried to spend less, with the result that the number of out-patients rose from 248,000 to 496,000. Their manifesto stated that they would save £100 million in red tape; they failed to do that, and the number of managers has increased while the number of beds has fallen by more than 5,000.

This is deceit, and it is hard for the electorate to discern what is really happening in public expenditure. The first deceit is the Government's refusal to acknowledge that they have cut the proportion of national wealth that is spent on public services. That is the reason for the problems of health, education and crime. The Government have stored up money and they are now able to announce big increases for the general election. However, those increases will not take us beyond the level that they inherited. That is also a problem for the Conservatives, and the reason for their bad performance in every interview on Tuesday.

If there are no big increases in public expenditure, which does not exceed the proportion of national income that was spent under the previous Prime Minister or even Baroness Thatcher, how can the Conservative party provide cuts of £16 billion in schools, hospitals, police forces and on pensioners, who are still struggling to survive?

Labour's policy is an election year bribe. It was always intended that expenditure would fall in the early years to allow an increase later. The cost has been borne by the people. The Government claim that they have turned round the management of the economy, that the economy is now about sustainable and that we should consider the increases. In eight Departments, the biggest increase in spending happened this year, in the run-up to an election. Ten more Departments will receive their biggest increase in 2001–02, election year. Only one Department will receive an increase of equivalent size after the general election. Five Departments get an increase only in general election year. That is not a policy of sustainable increases but a strategy that was designed to win the last election by adopting the Conservative budget to head off criticism, and to win the next election by pretending to spend substantially more when spending remains at the same level as when the Government were elected.

Spending on education and health is welcome, but the Government should not be allowed to get away with the fact that it is at the expense of longer waiting lists, larger class sizes, cuts in the number of policemen and the measly 75p increase in pensions over the past three years.

3.52 pm
Mr. David Lammy (Tottenham)

It is with great pleasure that I rise to make my maiden speech. It would be remiss of me not to note, in passing, that I am almost certainly the last Member of Parliament to be elected to the House while Madam Speaker graces the Chair. As someone from a generation that grew up with Parliament being televised, I can safely say that Madam Speaker is truly a celebrity and that she will be missed.

I stand here with great humility as the newly elected representative of the people of Tottenham. Hon. Members know that I stand here only because of the sad and sudden death of Bernie Grant. I would dearly have loved to spend my first years in this place working alongside Bernie. Fate determined that that was not to be. I thank the people of Tottenham for their confidence in me, and I hope that I shall repay it in the years ahead.

Bernie made his maiden speech in July 1987 and demonstrated at once both his local knowledge and his confidence as a politician. He was a natural. He was authentic and brutally honest and, as has been said, He walked a tightrope between street heroism and government office. For us in Tottenham, he was exceptional and a first-class constituency Member of Parliament. You will understand, Mr. Deputy Speaker, when I say that you could not really describe yourself as a friend of Bernie's until he had had occasion to bark at you. I am delighted that, on the last occasion I saw Bernie, he did just that while lamenting my stance on the vexed issue of Mr. Mike Tyson's entry to this country. Bernie argued passionately against his entry and considered Mr. Tyson an unworthy role model for his young constituents. His concern for young people is well documented and remained a passion throughout his life.

In his maiden speech in 1987, Bernie said: unless the political system can offer some prospects, particularly to our young people and our young black people, they will find other means of expressing their frustration.—[Official Report, 6 July 1987; Vol. 119, c. 97.] He was referring to the Broadwater Farm estate and the disturbances that had happened there. He went on to talk about the way in which the local community and the local council had worked together after that to harness energies and regenerate the estate.

Bernie worked closely with his wife, Sharon, who was very much his partner in work as well as in life. I would like to thank Sharon for all her work on behalf of the people of Tottenham. For her and all of us, Bernie's legacy will live on. He is with us today in the memory of all who knew him. I know that he would forgive me for not wearing a dashiki today in his honour. In a very real sense, he is part of the reason I am here. I thank him for that, and I shall never forget him.

Tottenham is a constituency that has been well served by its Members of Parliament. Before Bernie, Norman Atkinson was our Member of Parliament for 20 years and he, too, concerned himself with the needs of the community and local government. He was also treasurer of Labour's national executive committee for five years. Before Norman Atkinson, Mr. Brown was elected as Tottenham's Labour Member of Parliament in 1959, but in 1962 he crossed the Floor and fought the 1964 election as the incumbent Tory Member of Parliament for Tottenham. It was said at the time that, by crossing the Floor, he raised the average IQ of both the party he left and the party he joined. You will agree, Mr. Deputy Speaker, that I follow in varied and interesting footsteps. However, I can assure you that I will not follow Mr. Brown's example.

I am glad to represent Tottenham, and not only because it is my home and the birthplace of the best football club in London. I am proud because in Tottenham, we have a grassroots intellectual tradition which has been nurtured on the margins of society. Although the margins of society have provided some of the worst statistics on social exclusion, they can also shed the most radical and exciting perspective on social thought. Although Tottenham is a constituency of much poverty, it has never been impoverished in its people. Through the centuries, many cultures of the world have traversed Tottenham High road—white English people, Russians, Huguenots, Spaniards, Greek and Turkish Cypriots, Africans, Irish, Hasidic Jews, Asians, Caribbean islanders and, more recently, Kosovans and other people from eastern Europe.

There is no need to go to New York or California to experience dynamic diversity and vibrancy. One need not look only to the Commonwealth for a model of communities coming together. Under our own eyes, people from the far reaches of the world are living happily together, from different backgrounds, races and religions. All contribute to the richness of Tottenham. All understand the importance of unity and working and living together. All celebrate and glory in the multi-faith, multicultural family that constitutes Tottenham. These people are a valuable resource. If that resource were an untapped oilfield or a new diamond mine, business would be queueing round the block to buy the rights. People are the best and most precious resource that we have. I am acutely aware that I am here today because, at every stage of my development, people have invested in me.

I have had the support of a dedicated mother and family, Haringey council, Haringey teachers, my church, my secondary school, the Labour party, mentors in the legal profession and lecturers at the university of London and Harvard law school. I have even had the support of my bank. No one said, "This isn't for you. Who do you think you are? Black men from Tottenham don't go to Harvard law school." People believed in me. They invested in me. Constituents such as mine want and deserve that same investment—investment in people and the funds and resources not just to take up employment, but to become self-employed by opening small businesses, dot.com enterprises, cafés and newsagents. They want to play football at White Hart Lane, play music in a band or create art. We must invest in people's souls as well as their skills.

It is an honour to make my maiden speech on the most crucial subject of public expenditure, because Government expenditure over the years has neglected to take into account some of the grave problems of the inner city, perhaps in the hope that poverty might disappear by itself. For too long, the state has said to too many people in Tottenham, "You've got nothing to offer. You must be stupid because of your background, because you don't speak English. What are you doing living here?"

The task ahead of us is to continue to search, in partnership with the community and the Government, for new forms of response to an ever-complex and changing world. For the general welfare, sound investment for business and for people is not best served by placing even the least political restraints on economic activity. Responsible government must work to secure social and economic justice. Perhaps that is a tightrope that we knew we would find ourselves walking, but it is one that the Government have trod remarkably well. We have a Government who recognise that public expenditure can liberate and nurture as well as simply provide public services.

Just over a month ago, the Government announced a £50 million package of investment through the new deal for communities programme for the Seven Sisters area of my constituency. That is more than just a band-aid; it is real money—£50 million of investment in the 10,000 people in the Seven Sisters area of Tottenham, which is plagued by poor housing, high crime and weak schools. On Tuesday, my right hon. Friend the Chancellor of the Exchequer announced the Government's massive nationwide investment in public services. His announcement means at least £50,000 for every secondary school in Tottenham every year for the next three years—all paid to the head teacher and all money to be invested in books, new information technology equipment and helping children to grow and develop.

There are 29 centres of early years excellence across Britain. Three are in Tottenham, which is the highest concentration in the country. We can provide an early years programme for almost all three and four-year-olds whose parents request a place. No four-year-olds in Tottenham will be of the opinion that they are stupid because of their race or because they do not speak English. They will look forward to studying in higher education establishments such as the university of Middlesex, which this week announced that it is to open a new site for 10,000 students in the heart of the regeneration zone in the centre of Tottenham.

The college of North East London has just undergone more than £19 million of development. That money will refurbish the buildings and install cutting-edge technology so that people in my community can learn directly. Tottenham is also the home of the Digital Arts centre, which offers state-of-the-art technology and facilities to a community that wants to engage in music and film. We have many artists in Tottenham, although not ones whose exhibits can be found in Tate Modern or the national gallery—at least not yet. There are plans afoot to bring more art and technology to Tottenham, because our young people and entrepreneurs are crying out for them.

The new deal has created opportunities for 139,000 young people across Britain to gain employment. The scheme has been effective in helping young people and the long-term unemployed to get real jobs, but Tottenham needs more. Our unemployment rate of 11.6 per cent. is the third highest in England and the new deal has not met the needs of all black youth in Haringey. It is vital that that flaw be swiftly addressed. I welcome the Government's assurances that that aspect of the new deal will be quickly improved.

I have the great privilege to represent the most multicultural constituency represented in the House. I am not just a black politician for black people; I am a politician for all people. Multi-ethnic means just that—all ethnic groups, black and white. When I see any section of my community disadvantaged or missing out on life's chances and opportunities, I will strive to support and speak out for it. That is what my constituents would expect me to do.

As a young representative, I am very aware of the lack of interest in the workings of Parliament among my friends and contemporaries. Recent elections have shown a certain lack of engagement between voters and politicians. Most worrying is the fact that younger people—those under 30—are particularly uninterested. They still engage in single-issue politics, but less so in national party politics. This year, I have fought the Greater London Assembly election and the Tottenham by-election. In both, the candidates promised to find solutions to real problems. That is what the voters demand and politicians strive to deliver. Why, then, does a persistent apathy creep in?

That apathy dictates that the politician's role is to fail and the elector's role is to be disillusioned. At the end of the cycle, the politicians are frustrated, the media cynical and the electorate turned off. For me, the real work begins now. Along with all Members of the House, I shall try to find ways to make new connections and to join an on-going dialogue with the electorate. Many people have invested in me. I look forward—with the Government and my right hon. and hon. Friends—to investing in the people of Tottenham. I thank the House for welcoming its youngest Member.

4.7 pm

Mr. Michael Fallon (Sevenoaks)

It is a pleasure to be the first to congratulate the hon. Member for Tottenham (Mr. Lammy) on one of the finest maiden speeches that I have ever heard. He paid the most moving tribute to his late predecessor and followed that with the most eloquent advocacy of the need to invest in his constituents. He made a beautifully judged speech and described Bernie Grant as positioned between street heroism and Government office. I see that the hon. Gentleman has selected a place halfway between the very Back Bench and the Front Bench, so he is well poised between Back-Bench heroism and Front-Bench office. I am sure that it will not be long before he moves further forward and I hope that it will not be long before the House hears from him again.

The comprehensive spending review needs to be set in its context. The first CSR was only two years ago, but already we hear that the third is pencilled in for 2002. Instead of being a three-yearly review as originally promised, the CSR has already become two-yearly as the third year of each seems to be subsumed by the first year of the next. It is perhaps important for the House to recall that the first spending review did not even last two years. It was announced in 1998 and began in April 1999, but it collapsed that first Christmas as the flu crisis hit the national health service and the Prime Minister panicked on the David Frost show.

Within a year of the first CSR, the Government were rushing emergency funds to the health service and emergency cheques to our schools. When we assess the first CSR review, we look in our constituencies for signs of delivery. Three years into this Government, Kent has no additional police officers, longer health service waiting lists now and no new hospitals in west Kent. My hon. Friend the Member for Tunbridge Wells (Mr. Norman) and I have campaigned for the dualling of the A21, but that has still not been done. My constituents have paid all the extra taxes and heard all the promises but, three years on, the Government have still not delivered.

Perhaps one merit of the second CSR is that it has acknowledged the extent to which the first CSR was ill judged. We have now had sudden large increases in health, schools and transport spending. That in itself does not help planning by Departments. The evidence of the first spending review shows how much underspending there has been as a result of departmental expenditure limits. That kind of lurching—stop and go—has not allowed the long-term investment that everyone wants in the public services. That is especially true of schools and hospitals.

Conservative Members want better public spending. That means more public spending front line and public spending that gets through faster. Let me deal first with the public service agreements that were supposed to underpin the first CSR. Originally, there were 600 targets. Within a year, 400 of those had been scrapped and we were down to 200. I now see from the document presented on Tuesday that we are down to what are called "key" targets. Perhaps when he winds up the debate, the Minister can tell us just how many targets are still in operation—or have we gone from 600 to 200, to just one, in order to regain some popularity in time for the next general election?

If those public service targets are to be taken seriously, we need serious measures of outcome that are openly understood by our constituents and can be properly audited. It is one of the greatest weaknesses of the present targets that they are self-audited—that the Treasury alone says whether they have been met. The Government have got into trouble, through over-counting and over-promising with vague targets, because the electorate cannot understand what is being delivered, when and where. That disillusion is setting in.

Secondly, we must ensure that the money gets through faster. When the Chancellor announced in March the emergency package of sending some school money direct to schools, I cheered. That is what we were trying to do with grant-maintained schools. The CSR announced on Tuesday refers to direct grants. We applaud those. The amount of money is minuscule.

Mr. Andrew Smith

indicated dissent.

Mr. Fallon

I do not know what happened in the Chief Secretary's constituency, but in mine it took seven weeks to get those small cheques through to primary schools. Interestingly, those cheques were still routed through the LEA. We are still waiting for that money.

As a further example, let me quote a letter that my local education authority has written to its schools about the devolved formula capital budget for 2000–01. It said: We have now had confirmation that the DfEE will be paying the money to the LEA on the following basis: 22 per cent. of the annual entitlement in June —that has not yet been received, by the way— 22 per cent. in September; 22 per cent. in December; and the balance at the end of the financial year. That is, 12 months on. The letter goes on: Clearly this phase method will be unhelpful to many schools who wish to carry out work over the summer and who do not have sufficient reserves to cover the possible cash flow implication.

If it is now common ground that we should go round the LEAs and get the money straight into the hands of head teachers, let us try to work out a faster way of doing it. I asked the Chancellor on Tuesday whether, if it was right to send every secondary school £70,000 direct, the whole lot should be sent direct. His answer was interesting. He said that the LEA would have to deal with special educational needs and school transport. I certainly agree on the first—special educational needs money could not be allocated by school; some kind of social services or education authority function must be at the centre to do that—but I do not particularly agree on school transport. What was interesting about the Chancellor's reply, however, was that he did not resile from sending the rest of the money direct to schools. That is good news, because it is our policy. It is called free schools: take the school budget and give it to the schools. We did that with grant-maintained schools and the Chancellor is just cottoning on. I hope that he will get on and do it with the rest.

Otherwise, we are waiting. Our schools are waiting for the money that has been promised, but is still to get through to governors and head teachers. West Kent is still waiting for the transport expenditure. We have been paying extra motoring taxes and more for petrol, but our new trains have not arrived and our buses are no better. For three years we have been paying more and getting less. Worst of all, we have been waiting for a better health service.

NHS waiting times have gone up. For three years, we have been campaigning for a replacement for our two hospitals: the Kent and Sussex hospital in Tunbridge Wells and the Pembury hospital on the edge of Tunbridge Wells, both of which serve the Sevenoaks constituency. The case went not to the previous Government, but to this Government in the summer of 1997. It was turned down. It went to this Government again in 1999, but it was turned down. We are still waiting for the Government to get the extra health spending through to our constituents. Until they start to do that and to deliver on the ground, they will have no credibility.

Mrs. McDowall from the village of Otford has given me permission to quote a letter sent to her from the Maidstone and Tunbridge Wells NHS Trust. It is dated 10 July, so it is fairly topical. It says: We have received an x-ray request from your doctor for you to attend for a routine MRI scan. At the date of this letter there is a waiting time of approximately 26 weeks for this examination. That is a routine, but necessary scan. Why is Mrs. McDowall waiting for 26 weeks to have a routine scan? She will have heard about all the extra billions; she heard about them when the first CSR was announced two years ago in 1998 and I am sure that she heard about them again on Tuesday. The money is not getting through. People in west Kent are waiting for money to get through faster to our schools, our public transport and our national health service. We are waiting for the Government to deliver.

There will be a limit to people's patience, as the Chief Secretary can see from Labour's falling position in the opinion polls. In the end, the people of west Kent and Sevenoaks will be waiting not just for more money for schools and the NHS; they will be waiting for the return of a common-sense Conservative Government.

4.20 pm
Mr. Stephen Hepburn (Jarrow)

I should like to touch on two specific areas of public expenditure that are of great importance to my constituents. First, I want to raise the issue of health spending, because recent figures show alarming discrepancies between my constituency and those in other parts of the country. Secondly, I shall talk about defence spending and its role in the key industries in my constituency, and its effect on the major issue of job creation, which leads on from that.

The Chancellor's statement was first class. There is no doubt that it was good news for the area that I represent, and for the north as a whole. The increase in Government spending will be welcomed by my constituents, but I should like to draw the House's attention to some other figures that were not given such a high profile as the Chancellor's statement—the annual performance figures for the NHS that were announced last week.

It is five decades since the Labour Government established the NHS, yet there has never been sufficient accountability for the quality of treatment that the health service provides to the public. The statistics were an illuminating source of information. We must be careful when using statistics, as it has been said that they are often used as a drunk uses a street lamp—more for support than illumination. However, the new NHS indicators cast a clearer light on the variations in performance across the NHS.

The shocking fact about the performance indicators for my constituency is that on most indices we are near the bottom, or bottom, of the league table. We are the third worst for the number of doctors per head of population. Obviously, if we do not have enough doctors, people's health will be worse. We are the third worst for the number of people dying from cancer, and we have one of the highest death rates in the country. Those figures are not a reflection on the staff of my local health authority, because the same performance indices show that they are among the best performers in the country. They have been swimming against a historic tide of staff shortages, lack of resources and a local population whose health has traditionally been among the worst in the country because of the concentration of heavy industry and the prevalence of deprivation.

I am sure that we all agree that health inequalities are immoral and unacceptable. I am pleased that the Government have announced that the abolition of those anomalies for ever is a priority. They cannot be abolished quickly enough, because my constituents are twice as likely to die as a person in a constituency in the south of England.

The Government have adopted a two-tier approach to abolishing inequalities—first, by giving greater resources to health authorities in more deprived areas to allow them to narrow the inequalities between them and other authorities. The investment announced this week will pay for the extra doctors and nurses that are needed, and to improve the equipment that, sadly, has been neglected for 20 years.

The second tier is tackling deprivation, which is one of the major of causes ill health, and that means tackling unemployment head on. The new deal has certainly had an impact in Jarrow. Already, youth unemployment is down by 78 per cent., and long-term unemployment is down by 62 per cent. On top of that, raising incomes in the constituency through the minimum wage, the working families tax credit and child benefit brings people out of the terrible spiral of deprivation that they have faced for so long.

I shall now refer to defence expenditure. The mainstay of the local economy in Jarrow is shipbuilding—it has been in the past, is now and I hope will be in the future. The shocking fact is that the average age of the skilled worker on the Tyne is now 50. Urgent investment in skills is required if we are to retain a shipbuilding presence on the Tyne.

We are currently awaiting an announcement from the Ministry of Defence about where the roll on/roll off ferries will be built. I appeal to Ministers to make an early announcement, and end the misery of the workers who want to know whether they will have a job or not. I also appeal to Ministers to give preference to the first-class Maersk bid, which unselfishly—I stress the word "unselfishly"—splits the work between the work force of Cammell Laird in Liverpool and the rest of Merseyside, and the work force in Tyneside. They have come up with a solution involving workers from across the country with similar problems who are not currently using their skills.

I do not underestimate the importance of that order for my constituency. It involves significant defence expenditure. A positive announcement would provide employment for about 1,500 new workers in my constituency and up and down the Tyne. It would provide new apprenticeships to replenish depleted skills. The wages alone would inject about £650,000 into the local economy, not to mention the knock-on effect of a further 1,500 jobs or more in the local economy through support for local businesses.

I shall end on that note. I hope that Ministers take on board the issues that I have raised about health inequalities and the lack of shipbuilding orders on the Tyne. The Chancellor is taking positive action by providing increased expenditure, and the Secretary of State for Health is taking positive action on health. In my area and in Tyneside as a whole, we also need positive action to ensure that our industrial base—and shipbuilding in particular—has a future.

4.26 pm
Mr. John Wilkinson (Ruislip-Northwood)

We have heard two speeches of outstanding quality. I was much moved by the contribution of the hon. Member for Tottenham (Mr. Lammy). He said of Bernie Grant that he was natural, authentic and brutally honest. I am sure that the hon. Gentleman shares those qualities with his predecessor. He spoke about there being no need to go to New York or California to discover a myriad of diverse vibrancies, and I am sure that many a Select Committee could bear that advice in mind before deciding on its travel programme.

Some people say that there is no gratitude in politics, but the hon. Gentleman showed the opposite. I was especially touched by the warm tribute that he paid to his mother, his family, his teachers, his friends, those in his political party and those who had brought him to where he is now. I am sure that he will fulfil a distinguished role as the hon. Member for Tottenham.

The other remarkable speech, which followed a series of remarkable speeches, was that of my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). It was full of rigour and intellectual honesty, and to the point. It was the culmination of a series of distinguished speeches that he has made on the Finance Bill, the last of which I heard on Third Reading last night. Each one has been of the highest quality. I wish that more right hon. and hon. Members had been present to hear him.

As my right hon. Friend warned us, the public expenditure statement has all the ingredients of an inflationary package. It is almost certain to increase interest rates, as the Monetary Policy Committee of the Bank of England has warned us. The likelihood is that in the medium to longer term, it will cause taxation to rise as well. The interesting thing is that the projected figures for the last part of the triennial period show that there will no longer be a budgetary surplus, and by then the deficit will have to be made up with taxation.

I am sure that the Government do not want to talk about that additional burden of taxation now. When the Lex column in yesterday's Financial Times spoke of "Pumping for a purpose" in connection with the public expenditure statement, it defined it in entirely correct terms. The Government are pumping the economy for the purpose of winning the next general election. It is an irresponsible additional injection of public money into the economy at a time in the cycle when there are inflationary pressures and pressures on capacity. I am sure that the Monetary Policy Committee is wise to warn of the dangers.

Mr. Alan W. Williams

This is the second or third time this afternoon that we have heard that the Government are pumping the economy for the general election. Does the hon. Gentleman accept that the programme starts on 1 April 2001 and continues for the three subsequent years, and all the guessing suggests that the election could be on 1 May next year? So it is a post-election package rather than a pre-election package.

Mr. Wilkinson

I do not think that it will help the Government, whenever the election comes. The electorate will not be taken in by what constitutes an extra £100 billion of public spending being put into the economy over the period from last year until the financial year 2003–04. The electorate will judge the Government on their performance.

I can only quote the experiences in Ruislip-Northwood, and they are dire. Only last Thursday, consultation started on the closure of Harefield hospital, the country's premier heart hospital, which has carried out more heart transplants than any other in the world. It is threatened with closure at a time when the Government are supposed to be having a drive against heart disease and placing particular emphasis on cardiothoracic treatments, which are the speciality of the hospital.

Education is a continuing problem. The schools in Ruislip-Northwood are exceptionally good, particularly in the secondary sector. Pupils come flooding across the borough boundaries, and as a consequence, my constituents cannot get their children into the local schools. Quite rightly, they are extremely upset about it. None of the proposed measures will change that, because the Government are not prepared to alter the Greenwich judgment.

Police numbers are continually falling. A policeman on the beat is almost as rare as a swallow in winter, and people are desperately worried because crime rates are rising in parts of outer London that never knew a crime wave before. They now have one with a vengeance; they suffer all the time and there are endless complaints to me and other local representatives. We have done everything possible. We have seen the Home Office Minister, Lord Bassam, the Commissioner of Police of the Metropolis, the district commander for north-west London and our own chief superintendent. We have done everything, but police numbers continue to fall, crime statistics continue to rise and public disillusion grows. Although more money is being provided, experienced officers and personnel are leaving the Metropolitan police in droves because they can get a better quality of life outside the force. Even this injection of extra money will not change that.

Last but not least, I turn to transport. We were told at the last general election that the public-private partnership would revolutionise the tube, that the service would be modernised and that the lives of my constituents who depend on commuting into central London would be much improved. The facts are different. We heard a statement from the Deputy Prime Minister only this afternoon. The initial headlines were very favourable and the first edition of the Evening Standard paid glowing tribute to the effects of the extra moneys which were to be provided. The headlines were: Ken gets £3.2bn for Transport … CrossRail to go ahead … New east London Tube … Huge boost for buses However, the second edition carried the headlines: Ken rages at tube "Stitch-up" … Prescott's extra £3.2bn for London ignores huge Jubilee bill, says Mayor.

This is typical of all Labour's pronouncements. They appear very attractive, but when one reads the small print one sees how unattractive they are. Because the current administration at county hall—or wherever the Greater London Authority headquarters are—will have to pick up the tab for the overrun in the Jubilee line extension, there will be virtually nothing left to pay for improvements in services. The office of the hon. Member for Brent, East (Mr. Livingstone) put it rather well. A representative told the Evening Standard that by the time the extra money has been found for the Jubilee line extension, the GLA will be left with "peanuts". That was not how the Deputy Prime Minister put it in his statement on public expenditure.

Finally, I turn to the area of departmental spending that I know best, because it demonstrates the sleight of hand of the current Administration. It was the first departmental sector referred to by the Chancellor in his statement on Tuesday, when he said: I turn now to the departmental allocations. In recent years, in addition to their conventional responsibilities, Britain's defence forces have taken on a new and valued role in international peacekeeping and in conflict prevention, promoting human rights and peace throughout the world, including in Sierra Leone and Kosovo. To complete the restructuring agreed in the strategic defence review. and to fund new equipment and increase the mobility of our front-line forces, defence spending, which has fallen in real terms every year since the end of the cold war, will now increase in real terms.—[Official Report, 18 July 2000; Vol. 354, c. 221.] The press release on that subject was challenged by The Daily Telegraph yesterday because the facts are otherwise. In 1996, the Government of my right hon. Friend the Member for Huntingdon (Mr. Major) announced a budgetary increase in defence expenditure of 0.4 per cent. in real terms. So the civil servants had to correct that in a hurry.

It is clear that the commitments in Tuesday's statement are shallow, insubstantial and inadequate. Let us look at the roles. The British armed forces have always been involved in international peacekeeping, conflict prevention and promoting human rights throughout the world. That is why they fought in Korea, and that is why they have been engaged in countering terrorism in Northern Ireland and supporting United Nations operations from East Timor to Kosovo. There is nothing new about that; they have always done it. The amount of extra money is actually very small. In real terms, it is 0.1 per cent. in the financial year 2001–02, 0.2 per cent. in 2002–03 and 0.7 per cent in 2003–04.

The major projects report for 1999 from the National Audit Office shows that cost overruns continue to escalate. Between 1993 and 1999 they increased in absolute and in percentage terms—so much for smart procurement. In fact, they are getting worse. In 1999 they amounted to £1.36 billion, increasing by 6.3 per cent. in one financial year. Against that background, how will the armed forces be able to redress the shortfall in the infantry of some 5,000, the deficiency in fast jet pilots of some 120, and the constant outflow of experienced personnel who vote with their feet, or on the dictate of their wives, who can no longer stand the long separations?

In short, the increases are basically a fraud. That is not limited to the defence sector, but applies to many other Government Departments.

4.38 pm
Mr. Malcolm Chisholm (Edinburgh, North and Leith)

I thank the hon. Members for Ruislip-Northwood (Mr. Wilkinson) and for Sevenoaks (Mr. Fallon) for their warm tributes to my hon. Friend the Member for Tottenham (Mr. Lammy) on his maiden speech. I join them in congratulating him on a superb speech, which included a moving tribute to the great Bernie Grant and highlighted the importance of public expenditure in Tottenham.

This week, we can all celebrate a massive expansion of public expenditure that is based neither on rising taxation nor on high levels of borrowing, but on the successful running of the economy during the past three years. One of the most interesting aspects of the public expenditure statement was the revelation that, under the previous Government, 42 per cent. of additional expenditure went on debt repayment and social security, whereas, in the coming period, by contrast, the figure will be 17 per cent.

We must emphasise the importance of increasing employment in enabling the public expenditure increase to take place. I will probably be the only Scottish speaker today, so I shall speak about Scotland as much as I can. We have in Scotland the highest number of people in work since England won the world cup—that also happened under a Labour Government. Contrary to what the Conservative party said would happen, that large expansion in employment took place after the introduction of a minimum wage and improved conditions in the work place.

If a choice has to be made about raising taxation, I would personally argue that that may be justifiable, because I agree with Larry Elliott's assertion in The Guardian this week that tax is the price that we pay for a civilised society; but it is most important to emphasise that, over the period in question, tax as a percentage of GDP will fall. As my right hon. Friend the Chief Secretary said, net borrowing over the period will be lower than at any point in the previous Parliament.

Conservative Members have emphasised what they call the macro-economic dangers of the Government' s public expenditure stance, but it should be noted that the Bank of England's most recent quarterly inflation report, written at a time when it knew exactly what growth in public expenditure was planned, because of the Budget statement, said clearly that the Budget's macro-economic effects were unlikely to be large.

The minutes that have been quoted liberally and one-sidedly by Opposition Members today reflect some division between various members of the Monetary Policy Committee. For example, David Walton of Goldman Sachs, as quoted in this morning's Financial Times, pointed out that several members of the committee think that interest rates will be able to fall, even with this public expenditure projection, partly because average earnings growth has been slowing.

Mr. Ruffley

Does the hon. Gentleman accept that it is not just the aggregate increase in expenditure but its composition that the Monetary Policy Committee will have to consider when it meets next month to decide on interest rates?

Mr. Chisholm

I am just coming to the composition of public expenditure. Obviously, one of the virtues of increased public expenditure is that it can help the economy, and sustainable growth in particular. I am thinking particularly of my right hon. Friend the Deputy Prime Minister's statement today, in which he said that capital investment in transport was to be doubled. My right hon. Friend the Chief Secretary to the Treasury reminded us about education expenditure, which again is crucial for economic as well as other reasons. He informed us that the increase in education spending over the five-year period will be greater than in the whole 18 years of Conservative government. He also spoke about the important investment in science and research.

This is a significant moment, when public expenditure is once again set to climb above 40 per cent. of gross domestic product. I certainly hope that, when we have variations in public expenditure during the next decade or so, they will be within a spectrum above 40 per cent. of GDP, which is still significantly lower than in other European countries.

Public expenditure is important not only for economic efficiency but for social justice. One of the main points that my hon. Friend the Member for Tottenham emphasised was the importance of public expenditure for an anti-poverty strategy. Part of that strategy comes through the main spending programmes. Clearly, the attack on health inequalities is a priority both here and in the Scottish Parliament. I believe that it will be one of the targets in next week's health statement. There are many admirable new initiatives, which we have so far heard about only in relation to England, such as the children's fund and the neighbourhood regeneration fund. No doubt, we will hear about similar measures for Scotland in the autumn.

Sir Robert Smith (West Aberdeenshire and Kincardine)

Does the hon. Gentleman think that one of the consequences of a stop-go funding policy for health is the creation of a serious crisis in recruitment? The problem with getting a radiology appointment is the shortage of radiologists. Spending extra money will not train them overnight.

Mr. Chisholm

The simple fact is that health funding has never stopped—even in the difficult first two years of this Government, extra money was found for health—but the hon. Gentleman makes the sensible point that it takes longer for health initiatives than, for example, for certain education initiatives, to come on stream.

Apart from the mainstream programmes, there are many specific initiatives in the anti-poverty strategy. The research last week by the National Institute of Economic and Social Research has been misrepresented. It confirmed the importance and success of the new deal, and of the working families tax credit and the minimum wage in terms of making work pay. All those initiatives would be threatened, if not abolished, by the Conservative party.

The figure of 17 per cent. as against 42 per cent. of additional spending on social security and debt repayment is important. I would prefer it if we could split up the social security budget so that the money going into unemployment benefit is separated from what Labour Members see as the desirable features of the social security budget. Many aspects of the social security budget are important in the formulation of an anti-poverty strategy.

We will obviously hear more about pensions in the near future, and I will not complain about not hearing more about them this week, as long as I hear more about them in the autumn. The Scottish Affairs Committee recommended the restoration of the link with earnings, which I applaud, and came up with the interesting suggestion that perhaps the working families tax credit could be improved if we dealt with the issue of the withdrawal of housing benefit. I hope that the recommendation for a pilot study will be considered favourably.

There are important parts of the social security budget that must be improved as part of an anti-poverty strategy, but that is not to take anything away from the great improvements in the spending Departments, many of which will impact directly on those living in poverty.

One of the reasons why we have no more Scottish speakers today is that the money for Scotland will not be distributed until the Scottish Parliament reconvenes in September, so all that we know is that we will get a global increase of 4.4 per cent. a year in real terms, which is a significant and welcome increase. The only decision that has been made relates to health, as the health announcement was made in the Budget.

I hear a lot of talk in public and in private about the Barnett formula, so I should share with English Members the fact that, in Scotland, as the Scottish National party keeps saying, the percentage increase that we are getting—health is the only one that we know about so far—is less than in England. That mathematical fact is not especially surprising, but a lot of English Members do not appreciate it. In other words, the Barnett formula is a convergence formula. As Scotland starts with a higher base and gets the same increase per head, that translates in each of the spending programmes into a lower percentage increase. People who criticise the Barnett formula should understand that. Even those who want to get rid of the formula surely would not want to pull the plug on Scotland—not unless they wanted to create an independent Scotland, which would be the general effect in political terms of slashing public expenditure in Scotland.

Some Liberal Democrat Members support the Barnett formula. However, another third of the party wishes to proceed to a new needs assessment for Scotland, while the final third supports fiscal autonomy for the Scottish Parliament. In the short term, it is better to stick with the Barnett formula, although I am not lacking in confidence about the ability of Scotland to argue its corner in terms of need.

In Scotland, the health budget is bigger per head than the English budget but is growing significantly more slowly. If we look at health from the point of view of need, the health needs in Scotland are significantly greater than in England according to all statistics, for the simple reason that people die significantly younger. All the health indicators are worse in Scotland than in England. Given that health accounts for one third of the Scottish Parliament's budget, it would be easy to put up a strong case for the levels of health expenditure that we receive.

What would be indefensible in a Scottish and UK context is to argue for the massive public expenditure cuts that are the implication of the Conservative party's arguments this week. I thank my right hon. Friend the Chief Secretary for pointing out, courtesy of a Conservative briefing, that £1.4 billion would be cut from the Scottish budget if the Tories were to have their way. I have yet to hear any explanation from the Conservatives of where they are to make cuts.

I almost felt sorry for the shadow Chief Secretary, who was sent round the television studios the other night by the shadow Chancellor. When asked how he would find £16 billion of cuts, all that he could come up with were a few political advisers. I do not know how much he thinks Labour political advisers are paid, but he will have to come up with something better than that.

Sir Robert Smith

If those political advisers were paid £50,000 a year, it would mean that there were 320,000 spin doctors.

Mr. Chisholm

I thank the hon. Gentleman for his helpful point.

I conclude by welcoming this significant boost to public expenditure. This is a significant political moment, when the balance of argument has shifted decisively in favour of public expenditure after two decades in which the assumption has been, in England at least, that high levels of public expenditure were not politically popular. Now the climate seems to have changed in England—although I must say that it has always been the case in Scotland that we support high levels of public expenditure.

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