Spending Review

HC Deb 12 July 2004 vol 423 cc1129-55 3.30 pm

The Chancellor of the Exchequer (Mr. Gordon Brown)

In the Budget, I reported that, with inflation low, Britain is now enjoying the longest period of sustained economic growth on record. In this spending review, I can report that, with debt low, Britain can continue with historically high and rising investment in hospitals, schools and our public services, so combining the longest period of sustained economic growth for a generation with the longest sustained investment in public services for a generation.

This investment has been made possible because since 1997 our monetary policy has met our inflation target, now 2 per cent., with stability achieved; our fiscal policy has reduced the national debt from 44 per cent. of national income to 34 per cent., making our national debt today lower than that of all our main competitors; our discipline has reduced debt interest payments, which consumed in 1997 3.6 per cent. of national income and now cost just 2 per cent., the lowest since 1915; and unemployment, which in 1997 cost 1 per cent. of national income, now costs a third of that, just 0.3 per cent, lower than that of our major European competitors.

It is because unemployment and debt interest payments now consume just 2.3 per cent. of national income—half the 4.6 per cent. of national income of 1997—releasing £26 billion for investment, that we are today able to allocate substantial extra resources to front-line public services.

A decade ago, three quarters of all new spending went to debt and social security costs, and just a quarter of new spending under the last Government could go to health, education, transport, defence, and law and order. In this spending round, three quarters of all new spending is going to these vital front-line public services.

Let me tell the House the detailed figures. Holding strictly each year to the discipline of the total spending envelope, and fully affordable as we meet and will continue to meet all our fiscal rules, departmental spending, which is £279 billion this year, will rise to £301 billion next year, and then to £321 billion in 2006–07, and £340 billion in 2007–08. While overall spending in 2006–08 grows by 2.8 per cent. in real terms, low debt and low unemployment mean that departmental spending—spending on front-line services—will enjoy a real terms rise averaging over the three years of this spending review 4.2 per cent. a year.

By insisting on further reform, we will be able to do even more to get more money to the front line and raise public investment substantially in our priority areas. To ensure that new resources yield the best results, we have already introduced independent audit and inspection; strict three-year budgets; the devolution of funding direct to the front line; and more flexibility and choice in delivery.

Now, following the work that the Prime Minister and I instructed more than a year ago under Sir Peter Gershon—whom I thank—and after a rigorous review of procurement, back-office services and work practices, Departments are today publishing new plans to implement efficiency agreements with the Treasury. [Interruption.] Alongside Sir Peter Gershon, I want to put on record my appreciation of the work of our civil servants and their commitment to the ethos of public service. [Interruption.] It is precisely because the public sector has invested £6 billion in new technology— [Interruption.]

Mr. Speaker

Order. I want the Chancellor to be heard.

Mr. Brown

It is because the public sector has invested £6 billion in new technology, modernising our ability to provide back-office and transactional services, that I can announce, with the detailed plans that Departments are publishing for the years to 2008, a gross reduction in civil service posts of 84,150, in order to release resources from administration to invest in the front line.

With the devolved Administrations in Scotland and Wales and the Northern Ireland Office having also announced that they are engaged in efficiency and evaluation exercises as ambitious as those in England, with reductions also in back office and related areas; and with the 2.5 per cent. efficiency savings applied also to the settlement for local government in England, this allows for—in addition to the 84,150 posts—a reduction of a further 20,000.

Following further detailed work, the merged Inland Revenue and Customs and Excise are announcing today that the gross reduction in their posts, which was provisionally set at 14,000, is now set at 16,000. And because of the scale of the overall reductions, I can tell the House that in each area of the country, public servants who are asked to change jobs will be offered support with retraining, and we are ready to work with the work force and their unions to provide that help.

Today, I am publishing Department-by-Department plans to relocate further civil service jobs out of the south-east, including 5,000 staff posts relocated from the Treasury's departments, 4,000 to be relocated from the Department for Work and Pensions, 3,900 from the Ministry of Defence, and just under 1,000 each from the Department of Health, the Department for Education and Skills, and the Department of Trade and Industry. I can already announce the first sites for location, including 600 jobs from the Office for National Statistics moved to south Wales or Bristol, 250 posts from the Department for Environment, Food and Rural Affairs moved to Yorkshire, and just under 100 from the Department for International Development moved to East Kilbride. I know that for the remainder of posts being relocated, towns and cities across the country will want to make their case for being selected.

I can also announce that for all Departments making future decisions, our policy will be a presumption in favour of location in the regions. And I can tell the House that after Departments make their announcements today, the numbers of posts relocated to the regions will add up to a total of 20,030 civil service jobs.

I turn to further reforms in work practices. Eighty per cent. of sickness absences in the civil service are self certified, and they are not subject to formal medical certification. Because the current arrangements for sickness leave across the civil service and across the public services are open to abuse, I am today publishing plans to curtail uncertified absences. The Secretary of State for Work and Pensions will report by the autumn on the future management of public sector sickness absence and on measures to help those signed off for the long term back into attendance at work.

I can now announce, therefore, that by 2008 there will be a real-terms fall in administration costs in the Department for Work and Pensions by 9 per cent., in the Department of Trade and Industry by 15 per cent., and in the administration of the Department of Health by 18 per cent.; that Sir Peter Gershon has laid down plans that will deliver £6 billion in procurement savings by 2008; and that total annual efficiency savings that now exceed 2.5 per cent. a year will boost effective front-line service delivery by a figure higher than the Gershon plan of, by 2008, £20 billion. The savings available for front-line services now amount to £21.5 billion a year. We have also accepted Sir Peter Gershon's recommendation that to go beyond that figure would put the delivery of front-line services at risk.

As a result of this relocation and rationalisation, I can now make a further reform. I will also today set a new objective for the disposal of Government assets for the period from now to 2010. I have asked Sir Michael Lyons to work with each Department to rationalise its use of property and land and, where necessary, to arrange asset sales and disposals. I can tell the House that the objective that I am setting is an overall total of £30 billion of asset sales.

Because the three major drivers of change—the three sources of new resources that I have highlighted: a cut in debt, a cut in unemployment, and now a cut in administrative posts—are releasing substantial resources for front-line services, we can now take the next steps in a decade of rising investment for Britain and fund our priorities, the country's priorities, which are: first, to meet the security and defence needs of our country; secondly, to equip our economy technologically and educationally to meet the global economic challenge; and thirdly, to renew our public services and the public realm for this generation. In each of these services, we have agreed, in return for new investment, further reforms to achieve better results and a better service to the public.

Our first duty is the defence and protection of all citizens of our country.

Since the tragic events of 11 September, the needs of national security at home and action against terrorism abroad have rightly assumed a new and heightened importance. Recent events demand that we strengthen not just our national security—our capacity to prevent terrorist incidents—but our national resilience, our capacity to respond. To bridge the security gap identified after 11 September, we have, with the Home Secretary leading, reviewed our security needs in depth and, for the first time, our spending review brings together all security costs and sets out the responsibilities our national security budgets must discharge.

Before 11 September, overall spending on security at home was £950 million a year. Having now agreed a set of reforms that modernise our border security, and modernise also our counter-terrorism capabilities and our radio communication systems, improve our arrangements in respect of nuclear and chemical decontamination and add 1,000 staff to our intelligence services, overall security spending will rise from £950 million in 2001 and £1.5 billion this year to reach, by 2007–08, £2.1 billion—a 10 per cent. annual average real-terms rise in spending on security.

In place of the old system of civil defence, we are establishing and funding a new framework of civil protection, and there will be a doubling of current provision for local authority emergency planning.

In the last spending review the Ministry of Defence and our armed forces—upon which the defence of our country depends and to which we owe, particularly in this recent period, a debt of gratitude—were awarded the largest spending increase for 20 years. In this spending review I have matched that increase. Indeed in this spending review the increase is higher.

To enable the Ministry of Defence to modernise for the long term, and to increase its efficiency and make the changes that are now necessary to continue to adapt strategically and technologically to the threats posed by international terrorism, the proliferation of weapons and the rapidly changing global environment, I propose to increase the defence modernisation fund so that in the period to 2008 it will be worth £1 billion.

The Secretary of State for Defence will set out the detailed allocations of his full budget for our armed forces. It will rise from £29.7 billion this year to £33.4 billion by 2007–08—£3.7 billion a year higher than now, an annual average real-terms increase of 1.4 per cent. for defence. In addition, I will continue to meet the additional costs of military operations in full from the reserve, and to meet the costs of Iraq and Afghanistan, we have provided, to date, an additional £4.4 billion. To meet other pressures that may arise, aside from operations, in the future, we will provide the Ministry of Defence in 2007–08 with guaranteed access of up to £300 million. Taken together, these rises provide for a faster rate of real-terms growth in this spending round for defence than in the last and ensure the longest sustained real-terms increase in spending for two decades.

Since 11 September, international diplomacy has also assumed greater importance. Because of that and the security risk faced by our Foreign Office and consular staff working in overseas embassies, the Foreign Secretary's budget will rise from £1.5 billion this year to £1.6 billion—a 1.4 per cent. annual average real-terms rise. I can also announce that, despite all our other pressures, we will not cut the budget of the British Council but will increase it from £173 million to £197 million. The budget for the World Service—whose 160 million-a-week audience is now its largest ever—will not be cut but will be increased from £225 million to £252 million by 2007–08.

As the Prime Minister has said, 2005 is the year when the needs of Africa will be the focus of the UK's G7 presidency—a presidency for development. Our country's obligation is not to cut overseas aid, but to increase it. In 1997, Africa received just £450 million of UK bilateral aid. By 2007–08, Africa will receive £1,250 million to fund health, education and anti-poverty programmes—an increase of 300 per cent. To promote treatments and cures for HIV/AIDS across the developing world, we will allocate in each of the next three years £450 million, £500 million and £550 million—£1.5 billion in total—to tackle this scourge. So to meet all our international obligations, including the recommendations of the Africa Commission that the Prime Minister set up, the Secretary of State for International Development is announcing that he will increase his budget for aid from £3.8 billion this year to £5.3 billion by 2008, an average annual real terms increase of 9.2 per cent.

Total UK aid, which fell in real terms by 23 per cent. in the 1980s and early 1990s, will by 2008 have risen since 1997 by 140 per cent. in real terms. For every £1 of UK aid spent in 1997, we will be spending £3 cash by 2008 and, along with debt relief, raising UK official development assistance from the 0.26 per cent. of national income that we inherited to 0.39 per cent. next year, 0.42 per cent. in 2006–07, and 0.47 per cent. in 2007–08. We wish to maintain those rates of growth in the overseas aid ratio, which on that timetable would rise beyond 0.5 per cent. after 2008 and reach 0.7 per cent. by 2013. I can also tell the House that if Britain's plan. the new finance facility, is agreed internationally, the objective of 0.7 per cent. could be achieved earlier, by 2008–09.

Today, the humanitarian tragedy in Sudan is deeper even than at the time of Live Aid, which started in Sudan 20 years ago. The Secretary of State for International Development is today announcing that he is setting aside now, to be made available immediately a peace agreement is signed, emergency and other relief to address Sudan's crisis—a total over the next three years of at least £150 million more for Sudan.

I thank the Churches, faith groups and non-governmental organisations for their representations. To date this year, for this spending round, the Treasury has received more than 15,000 representations that we should raise spending on aid and not cut it. I have received many other representations, of course, not just on international development, but on defence, national security and law and order, including from the shadow Chancellor, who has called for real-term Budget reductions in all these areas. But I have to tell the House that I have been more impressed by the representations of the shadow Defence Secretary, the shadow Home Secretary and the shadow International Development Secretary, one of whom said that such reductions would be damaging, and another that they would be "outrageous".

Our determination to protect and defend the people of Britain is matched by our determination to equip Britain for the global economy. The future of the British economy depends on the future of British science. The 10-year framework for science that we are publishing today is designed to make Britain the best and most attractive location for science and innovation in the coming years. After rigorous selection of priorities within the industry budget, a reduction of Department of Trade and Industry headquarters posts and further reductions in its agencies, we are able to announce substantial new funding to support science teaching in our schools, improve salaries and stipends for graduate scientists and engineers, and support technology transfer and university-business link-ups, as well as pure research.

Government funding for science will therefore rise from £3.9 billion this year to £5 billion by 2008–£1 billion extra for science, a 5.8 per cent. average annual real terms rise, and in cash terms a doubling of spending on science since 1997. As a result of the investment that we are making, the Wellcome Trust is today announcing a partnership with us to invest in UK research. They will match our commitment, investing over five years at least £1.5 billion more. With these two new investments—an extra £2.5 billion being invested in British science—and now the largest sustained increase in science spending for a generation, our objective for Britain is to raise overall spending on private and public research and development from 1.9 per cent. of national income, which has been among the lowest of our main competitors, to 2.5 per cent. of GDP by 2014, which will be among the best of our competitors, and the best guarantee of a successful economic future for this country.

I can tell the House that, in preparing our spending review, I have consulted not only the scientific community but the Confederation of British Industry, business organisations, trade unions and regional organisations in every part of the United Kingdom, among whom there is remarkable agreement, a shared consensus and determination that it is in the national interest not to cut science, transport, housing or infrastructure investment but to press ahead with continuous and sustained long-term investment.

To finance the detailed reforms in the rail industry and our road programme, the transport budget will rise faster than originally set out in the 10-year transport plan, from £10.4 billion this year to £12.8 billion by 2007–08£an average real terms increase in the transport budget of 4.5 per cent. a year. Total cash spend by the Department over the spending review period will be £2.9 billion more than we set out in the 10-year plan. By 2008, transport spending—even after inflation—will be 60 per cent. higher than in 1997. Full details of the rail reforms and the long-term transport strategy will be announced in statements by the Transport Secretary later this month.

For decades, our country has seriously neglected investment in housing, both in building and in improvement. Forty years ago we built 400,000 houses a year; since the beginning of the 1990s, however, we have built only 200,000 a year. Following consultation over the Barker report and the announcement of 200,000 extra homes for the south-east, the Deputy Prime Minister will tomorrow announce the next stages in increasing the supply and affordability of housing. For England, the housing budget will rise from £5.9 billion this year to £7.2 billion by 2007–08, a 4.1 per cent. average annual real terms increase. That will mean that cash investment in housing has more than doubled since 1997. The Deputy Prime Minister will give details of a new £150 million fund to finance infrastructure around new housing developments. There will be new money to speed up the planning process, a 50 per cent. increase in social housing by 2008—urgently needed in our country—and a trebling of investment in renewal and renovation in low-demand areas in the north and the midlands.

Investment not only in science, transport and housing but in enterprise, skills and economic development hold the key to modern manufacturing strength in our country and balanced economic growth in every region. To meet new and additional commitments to improve small business services, to meet adult skills needs, to support inward investment, to promote enterprise in disadvantaged areas—including supporting the Northern Way—and to devolve decision making further out of Whitehall, funding will rise from £1.8 billion this year to £2¼ billion a year by 2007–08, shared between our nine regional development agencies.

To meet our environmental improvement targets for 2010—a 20 per cent. cut in carbon dioxide emissions, a target of 10 per cent. of electricity from renewable sources and a reduced reliance on landfill—the spending review will provide additional funding to sponsor low-carbon technologies to give more support through recycling landfill tax revenues for businesses that are energy efficient to minimise waste, and, with additional private finance initiative credits worth £155 million a year by 2008, to provide support for better waste management by local councils.

To take forward the Haskins report on the rural economy, the budget of the Secretary of State for Environment, Food and Rural Affairs will rise from £3.2 billion this year to £3.5 billion in 2007–08, an annual average real terms rise of 1.2 per cent. a year. To tackle one of the biggest problems of poverty—the problem that many elderly people face in heating and insulating their homes—we have extended the winter fuel allowance, introduced the pension credit and improved the energy efficiency of 600,000 homes over the last three years. A further £140 million will now be set aside to enable pensioners and other families to insulate and heat their homes. The Government's objective is to eliminate fuel poverty among the elderly by 2010, and to eliminate it in its entirety by 2016.

I turn to public services and new public service agreements, which we are publishing today for the period to 2008. They set out the performance targets and reforms expected in our public services. Since 1998, we have offered every Government Department three-year budgets and three-year funding. Today, the Deputy Prime Minister will answer a persistent complaint of local authorities and for the first time they, too, will have three-year budgets allowing local authorities to plan ahead. Public service agreements will also offer high-performing local authorities greater freedom and greater flexibilities.

In the last four years of the last Government, local authorities' grants were cut by 7 per cent. In the most recent four years of this Government, they have been raised by 23 per cent. and later the Deputy Prime Minister will set out the full details of the real-terms rise in the annual grant to local authorities—an average rise of 2.7 per cent a year, substantially above the average settlements received by local authorities in the last three decades.

I can also announce the settlements for the devolved Administrations and Northern Ireland. The last spending round awarded the Welsh Assembly an additional £492 million to ensure funding of objective 1 and European social fund allocations to ensure the economic regeneration of Wales. I can now announce that, over and above the Barnett additions, Wales will receive even more for the coming three years—an additional £550 million. The Welsh Assembly and the Scottish Executive will publish full details of the allocations later. Overall, by 2007–08 there will be an extra £2.5 billion for Wales, raising the Welsh budget from £11.1 billion to £13.6 billion. With objective 1 funding, that amounts to an annual average real-terms rise of 4 per cent. For Scotland, there will be a total of £4.2 billion, raising the Scottish budget from £21.3 billion to £25.5 billion—an annual average real-terms rise of 3.5 per cent. With additional funding for the European Union peace programme, Northern Ireland will receive an additional £1.2 billion a year—an annual average real-terms rise of 3 per cent.

In the Budget in 2001, we made a decision to open national museums free to the public. Since then, museums that have abolished charges have seen their attendances rise by 70 per cent. from 7.7 million to 13.3 million a year. Today, after discussions led by the Chief Secretary and Culture Secretary, I can announce an extension of free access to university museums, too. With increased funding for arts organisations, local creative arts partnerships and the revitalisation of regional museums—and with increased funds nationally and regionally for sports and sports facilities—the budget of the Secretary of State for Culture, Media and Sport will rise from £1.4 billion this year to more than £1.6 billion by 2007–08—a real-terms average annual rise of 2.3 per cent. Looking ahead, and to ensure far better co-ordination of national sports effort and resources, Pat Carter will report on the proposal to involve private and public sectors together in a new national sports foundation.

I am also announcing funding for social services, especially to improve community care for the elderly. The social services budget will increase by just under £2 billion—from £10.6 billion this year to £12.5 billion by 2007–08. That is a real-terms average annual rise of 2.7 per cent. a year. As a result of the spending review, the Secretary of State responsible for social services is also extending, in every area of the country, the provision of care alarm systems for the elderly so that elderly and disabled people can stay in their own homes and yet have access to the support that they need. An additional 160,000 of the very elderly will be able to install these care alarm systems. In total, we expect 1.5 million pensioners to benefit by 2008.

I can confirm that, as announced in the Budget, funds for the national health service will increase from £69 billion this year to £92 billion by 2007–08—an annual average real-terms rise of 7.1 per cent. allocated to health that will go to and be spent through the NHS and by the NHS on patients treated free at the point of need—not spent to subsidise private medicine.

For decades, this country neglected investment not only in hospitals, social services and schools, but in our criminal justice system, in policing, in tackling antisocial behaviour and in improving the quality of life in our neighbourhoods. So the final obligation of this spending review is to make the investments necessary to create in our country stronger and safer communities.

Since 1997, there has been a 25 per cent. reduction in crime, a 40 per cent. reduction in domestic burglary and, for persistent young offenders, we have cut the average time from arrest to sentence from 142 to 66 days by contrast with a cut in police numbers of 1,100 under the last Conservative Home Secretary, there has been, under this Government, a rise of 11,000 policemen and women. Today, this Government will not take the advice of the Opposition to cut the budget for law and order; we will increase it substantially to tackle crime, to prevent crime and to reduce the fear of crime.

First, there will be new resources to tackle crime to fund the Home Secretary's decisions—to create a new National Offenders Management Service, bringing together prison and probation; to create a reformed charging and sentencing system; and to create a new serious organised crime agency. For those treated, drugs rehabilitation has also succeeded in cutting reoffending by 50 per cent. Together, the Home Secretary and the Health Secretary will also increase the numbers benefiting from drug rehabilitation from just 100,000 six years ago to 200,000 a year by 2008.

Just as our society must make it clear that no crime is acceptable and no criminal act excused, so, too, our society must acknowledge that in past decades we have not done enough to tackle the sources of crime, particularly among young people. We are agreed that we must now provide new resources and that all Departments must play their part in an alliance with voluntary and local organisations to prevent crime.

The Deputy Prime Minister will announce details tomorrow of a new fund to finance community-based measures that, on the one hand, tackle antisocial behaviour and, on the other, build and develop the facilities and public spaces that are the bedrock of successful local communities. It is right to expect responsibility from young people, and every community knows that the answer to young people hanging around street corners is to provide other places for them to go. Later this year, starting from three-year allocations in this spending round, the Education Secretary will publish a Green Paper on the reform of services for young people in this country, and next week the Home Secretary will announce plans, financed by the spending review, to extend the support provided to troubled teenagers at risk of reoffending.

The neighbourhood renewal fund, under the Office of the Deputy Prime Minister, is designed to improve the safety and quality of previously run-down neighbourhoods, to tackle the causes of crime and to address deep-seated inequalities in our country. Results now show that following the agreed four-year programme of sustained investment, neighbourhood renewal areas are seeing faster improvements in job creation and in educational attainment, and there are greater reductions in property crime than in other parts of the country. So the Deputy Prime Minister will not abolish the neighbourhood renewal fund; he will extend it with a budget each year of £525 million until 2008.

With the Home Secretary in the lead, our increased support for the work of community, charitable and voluntary organisations will, in this spending round, also be focused on building stronger, more stable communities and on engaging, most of all, the young as we consider new mentoring, gap year and volunteering initiatives for teenagers and others. A £30 million pound a year fund is being established by the Home Secretary to support the victims of crime, not least those who suffer the crime of domestic violence.

There is one further investment that the Home Secretary believes is essential for stronger and safer communities. There is a clear consensus among the people of this country that to modernise the way in which we tackle crime and the fear of crime we need, on our streets, not just policemen and women but community support officers at the heart of each neighbourhood who can also patrol our streets, build links with local people and prevent antisocial behaviour.

Just as reform in education means that we are strengthening the effectiveness of teachers by matching them with classroom assistants, and reform in the NHS means that we are strengthening the effectiveness of doctors by matching them with nurse practitioners—in a country that is proud of our public servants, investing in our public services—so, too, the Home Secretary proposes that reform in the criminal justice system means strengthening the effectiveness of police by matching the record number of police achieved by this Home Secretary, which is now 138,000 in total, with a new group of community-based officers.

Scotland and Northern Ireland will make their own announcements. Today, the Home Secretary is announcing that he will fund community support officers and neighbourhood wardens—numbers that will rise year on year to 2008. To pay for those and his other responsibilities, the budget of the Home Secretary will rise from £12.7 billion to £14.9 billion by 2007–08—an increase of nearly £2.2 billion, and an average real-terms rise of 2.7 per cent. With the immigration and nationality directorate budget now flat in real terms, the rest of the Home Office budget will see an annual real-terms increase of 4 per cent. Next week, the Home Secretary will announce the detail, with money now available to finance a record level of 138,000 police officers, which is matched by finance available to increase neighbourhood policing providing for a total of 20,000 community support officers by 2008, as we tackle crime and the fear of crime in our country.

The Budget set out the education settlement. I can confirm the rise in UK spending on education from £63 billion to £77 billion by 2007–08, which has led to the five-year strategy announced last Thursday by the Prime Minister and the Secretary of State for Education and Skills.

So, over the whole 10-year period to 2008, and in addition to policing, overall spending on education will have risen in real terms by an average of 5.2 per cent. a year, on transport by 5 per cent. a year and on health by 6.5 per cent. a year. That is a decade of rising investment which, taken together, is giving us in Britain more teaching staff in our classrooms than ever before, more doctors and nurses in our hospitals than ever before, and more police and support officers in our communities than ever before. Because of low unemployment, low debt and lower administrative costs, we have been able at the same time to fund the best defence settlements for 20 years, and in this spending review to fund a 4 per cent. average real-terms rise in housing, a 5.8 per cent. rise in science and a 10 per cent. rise in security spending. We have a Britain that can succeed because of stability, hard choices and rising investment.

There is one additional reform that has the potential to transform opportunity for every child and to be a force for renewal in every community, and on which the Government wish to make progress today. While the 19th century was distinguished by the introduction of primary education for all, and the 20th century by the introduction of secondary education for all, so the early part of the 21st century should be distinguished by the introduction of pre-school provision for the under-fives and child care available to all.

Today I can announce that, having already provided nursery education for three and four-year-olds six months ahead of our plans. we will pilot as an experiment in 500 areas of the country the extension of nursery education to two-year-olds. Because it is our basic belief that every child should have the opportunities available only to some, we will extend the Book Start scheme, and at nine months, 18 months and then at two years old we will provide free books for every child. For 2 million children a year, that will be their first introduction to learning: an investment not just in every child but in the long-term future of our country. I can also inform the House that this spending review will set aside funds so that by 2008 we will have created at least 120,000 more child care places.

The challenge that we are setting today goes beyond this spending round, so we will publish in the pre-Budget report a plan for the years from now to 2015, to make a reality of our vision of choice for parents and high quality provision for all under-fives. As a first step, I can today say that, in order to bring forward the building of new children's centres in our country, I can now allocate from the capital modernisation fund an extra £100 million. From the 260 today, and the 1,700 proposed in the Budget, we can move the number of children's centres we build and open between now and 2008 up to 2,500, as we advance further and faster towards our goal of a children's centre in every community and in every constituency of this country.

All those investments are possible because I have rejected the proposals of those who would cut spending on important services: more investment, not less, now and into the next Parliament. We are rebuilding our communities; there is such a thing as society. Our prudence is for a purpose, and I commend this statement to the House.

Mr. Oliver Letwin (West Dorset) (Con)

What we have just heard is a manifesto for fat Government and fake savings. The last time the Chancellor told us that he was going to make tens of thousands of cuts in the civil service was three months ago. Why has he been adding to civil service numbers since then? What the review really means is more bureaucracy, more targets, more initiatives, more taskforces, more centralisation, more regulation, more borrowing and more taxes.

The Chancellor told us about waste—£21.5 billion of waste£yet the entire spending review is about spending more money. Why is the Chancellor the only person in Britain who thinks that the way to waste less is to spend more? [Interruption.] People up and down the country will be asking themselves this question: who was it that wasted all that money? Who was in charge when 52,000 civil servants were added to Whitehall? [Interruption.]

Mr. Speaker

Order. That is enough of that noise. I will not tolerate it, and someone might well be expelled from the Chamber for making it.

Mr. Letwin

Who was in charge when the number of senior managers in the national health service increased three times faster than the number of nurses? Who was in charge when the Home Office built a new building—for £311 million—that is not even big enough to accommodate all the extra civil servants that have been hired? Who is the mystery man who was in charge of all that waste? The Prime Minister knows the answer: it is the Chancellor of the Exchequer.

The Chancellor told us today that he has wasted £21.5 billion—and not a word of apology. Now, he sets himself up as the great wastefinder-general. Does anyone think that he will succeed? Not the Minister for Energy, E-Commerce and Postal Services, who said: we've paid a lot of taxes, but what has really been achieved with all that money? Not the Minister for Local and Regional Government: when he said that it would be a miracle if the Government found the savings, the right hon. Gentleman was not only honourable, but right.

Why do the latest figures on public sector employment show that of 88,000 extra jobs in education in the last recorded year, only 14,000 were for teachers and teaching assistants? Now, that is a miracle. The Chancellor first announced massive reductions in the number of Department for Work and Pensions staff two years ago. Why has the number of DWP staff increased by 3,500 since then? That, too, is a miracle. The Chancellor said two years ago that his new smart procurement initiative would save £750 million on defence procurement, so why did the defence procurement budget overrun by £3 billion last year? That is not just smart—that is definitely a miracle.

When will the Chancellor acknowledge that while Ministers have been preaching about obesity, their Departments have been getting fat on taxpayers' money? When will he accept that if government is really going to cut out the flab what is needed is a complete change of lifestyle? The fact is that fat Government is not fit enough to deliver.

Why, after £305 million a year of spending on the new deal for young people, are there still 1 million young people not in work, not in training and not in education? Why, after an increase of £30 billion in NHS spending, are there still 1 million patients on NHS waiting lists? Why, after the Chancellor has doubled spending on the Home Office, are there still 1 million violent crimes a year? Why, after all that spending, can he not even match our commitment to 40,000 extra police officers?

The only thing that the Chancellor's fat Government have delivered is fat taxes. He is planning to spend £1 million a minute of taxpayers' money by 2007. As the Governor of the Bank of England has pointed out, the Chancellor cannot go on borrowing to pay for that big spending. When will the right hon. Gentleman admit that he is spending beyond his means and that his policies mean third term tax rises under Labour?

I confidently predict that in a moment or two when the Chancellor stands to respond, he will—with huge bravura—proclaim that his vast expenditures of other people's money contrast with so-called Conservative cuts—[Interruption.] Yes, Labour Members are already cheering at the thought, so may I tell them about those Tory cuts? We will cut bureaucracy. We will cut inefficiency. We will cut the quangos. We will cut the regulations. We will cut the armies of interferers who do nothing good for the people of this country. We will cut borrowing. We will cut waiting lists. We will cut failure in schools. We will cut crime. We will cut this big, fat Labour Government down to size.

Mr. Brown

The shadow Chancellor does not seem to realise that administrative spending is falling substantially as a result of our proposals. He also does not realise that as a result of his statement, while we are spending more on defence—£33 billion—he will be telling the shadow Defence spokesman that he can only spend £30 billion—a £2.6 billion cut. While we are spending £14.8 billion on law and order—I have the figures and the right hon. Gentleman has announced them—the Conservatives would spend £1.6 billion less. While we are spending £12.8 billion on transport, they would spend £1.8 billion less—£11 billion. While we are spending £5.3 billion on international development, they would spend £4.5 billion. The shadow Chancellor cannot escape the consequences of his statement. He announced that outside health and education there will be real reductions in spending in all other Departments.

The glummest faces in the Chamber are those of the shadow Defence Secretary and the shadow Foreign Secretary, because they know exactly what will happen. I will tell the shadow Chancellor what waste is about. Waste was 3 million unemployed. Waste was the poll tax. Waste was two recessions under the Conservative Government—[Interruption.]

Mr. Speaker

Order. I do not like to interrupt, but Members are getting very excited.

Mr. Brown

It was the shadow Defence Secretary who said that the cuts proposed by the shadow Chancellor were unacceptable. Other shadow Cabinet Ministers know that the Tory party of Robert Peel is now about cutting the police. The Tory party of Winston Churchill is proposing to cut defence. The Conservative party will sooner or later have to face the fact that its policies make it weak on defence, weak on law and order and weak on infrastructure investment. As far as health and education are concerned, we know what its policy is—it is to transfer money out of the health service into the private sector and out of the school education sector into the private education sector.

The shadow Chancellor had better go back to his drawing board and think again. Unless he can tell us that his cuts will not be imposed on those Departments, the public will draw the conclusion that we all draw, and Conservatives will have to explain in every constituency how many community support officers, how many police, how many wardens, how many home helps, how many carers, how many NHS nurses and how many teachers will be sacked. That is the problem that the Tories now have.

Dr. Vincent Cable (Twickenham) (LD)

May I start by saying that there are elements in the statement with which I agree? I welcome the sustained commitment to more resources for education, health, law and order and foreign aid, in marked contrast to the Conservatives. I also welcome the fact that the Government have taken up our proposal to put the Treasury at the head of Government Departments to be relocated to the provinces. It is a timid programme but the Chancellor has put the Treasury at the head of it, at last.

Fundamentally, the statement is about reducing the rate of growth of public spending. Hence we have the mock battle between the Conservatives' slash and burn versus the Chancellor's somewhat more cautious trim-and-singe approach to public spending. However, conceptually they are the same. They are both arguing that we can have lots of good things—more public services or tax cuts, or both. It is all going to be funded by the magic ingredient that is called cutting waste.

I am happy to subscribe to an agenda for cutting waste, if it can be genuine and if it can be found. It strains credibility when the Government argue that they can suddenly produce a rate of growth of productivity in the public sector of about 2.5 per cent. a year. Even the Treasury does not believe in it. It put out a statement last week on this new productivity target, saying because it has not been possible to measure efficiency for the whole of the Treasury in these terms the Treasury will not be adopting it.

If the Treasury does not believe in the Government's productivity target, why should anybody else?A more fundamental question is: if this waste is so easily available, why has it not been dealt with already? Had it been, we would have decent pensions and there would be no university tuition fees.

Our approach is different. We believe that, in order to fund priority areas, clear choices have to be made. That is why we argue that, in order to have decent state pensions without means-testing, a lot of money has to be found. We argue that we should take industrial subsidies and other subsidies and cut them, making a clear political choice. If more money has to be found for the police force, some of the Home Secretary's extravagancies, such as the £3 billion identity card scheme, must be cut. If more money has to be found for early years and primary schools, the Treasury's extravagance, the baby bond, must be cut.

One of the things that was very striking about the Chancellor's statement was that it contained no reference whatever to the Prime Minister's enthusiasm for choice in public services. The phrase was not even mentioned. [HON. MEMBERS: "It was."] If the Chancellor did mention it, can he be a little bit clearer? What choice in public services means is building in spare capacity. How much spare capacity is he building into the next spending plan to allow for choice, and how much will that cost?

The core of the Chancellor's proposal was the loss of public sector jobs. Anybody who has worked in the private sector or has had anything to do with it will be amazed that he has entered into a competition with those on the Conservative Front Bench for headcount reductions. Employing Ministers and senior civil servants costs 10 times as much as hiring tea ladies, but when there is a headcount reduction, it is the low-paid staff who get sacked. Will he spell out clearly how many Ministers and senior civil servants there are among the 84,000 redundancies?

Can the Chancellor explain how the 40,000 cuts in the Department for Work and Pensions will operate? If there is not going to be a reduction in complexity and means-testing, is it not inevitable that our pensioner and other constituents will find the service even more inefficient than they do already?

In conclusion, the search for waste, desirable though it may be, is evading the key issue—choosing the areas of government from which the Government can withdraw and then deducing the manpower implications, rather than starting with an arbitrarily chosen headline cut in numbers and then working out what the implications for services will be.

Mr. Brown

When the Liberal spokesman said that he was going to be tough and make the hard choices, but concluded that he was not going to go ahead with the 84,000 job reductions that we were proposing, it showed exactly what the Liberals are like—always looking in two directions at the same time. As for his hard choices, I have looked at all the press releases he has allowed to be issued over the past week. They mention state-of-the-art schools and more for care homes, child care, local authorities, buses and rail and small businesses. There is no discipline at all in the Liberal party when it comes to spending commitments.

As for the hon. Gentleman's point about industrial subsidies, we have already announced in the Budget, as he knows, that we are eliminating permanent ongoing industrial subsidies in the old industries that exist around the country, but is he really saying that there should be no launch aid at all? Is he really saying that we should do nothing to support the innovative developments in the modern industries of this country, when every other country does so? Does he not know that on the issue of identity cards, the Home Secretary is arranging that that be by charge? Is he really going to fight the election telling every parent that he is against the baby bonds that we are introducing, which I believe do something not only about inequalities in income in our country, but about the vast inequalities in wealth that also exist? It seems to me that those in the Liberal party should go back to their constituencies and decide whether they have a policy at all.

Mr. John McFall (Dumbarton) (Lab/Co-op)

May I join the shadow Secretary of State for Defence, the shadow Secretary of State for Health, the shadow Home Secretary and the shadow Secretary of State for International Development in welcoming the extra spending announced by the Chancellor today? In particular, I welcome the 0.7 per cent. target for international development by 2013, which will be warmly welcomed around the world. Will the Chancellor indicate his plans for Africa during the UK's presidency of the G8 in 2005?

Mr. Brown

I am grateful to my right hon. Friend, who is Chairman of the Treasury Committee. He is a powerful advocate of reforms in how the economy is managed and of international development. We will pursue our Africa agenda, and the Commission for Africa has been set up. At the same time, we take the view that more resources will be needed in Africa for health care and for economic development, particularly if we get results in the trade round. I assure my right hon. Friend that we will continue to push faster and further, so that the international community adopts our proposals on an international finance facility.

It is right to point to the shadow Secretary of State for International Development, who said: If we are to be taken seriously as a party of government which cares about the most vulnerable people on the planet, then there has to be a public spending commitment. That is the shadow Secretary of State for International Development telling the shadow Chancellor that he does not agree with his policies.

Mr. Kenneth Clarke (Rushcliffe) (Con)

The Chancellor will win all the prizes going for sheer brass neck, but not those for consistent policy making. Will he acknowledge that he has just announced a sharp reduction in the growth of public spending, but tried to make it sound as though he is dispensing largesse in all directions? He tried to make the announcement sound like a pre-election spending spree, but he is dealing with the consequences of the last pre-election spending spree, which started in 2000. Does he accept that the warnings that he was given that he could not increase public spending at the rate that he has in the past six years without reducing productivity and value for money in the public sector were right, however much the statistics are changed?

Does the Chancellor now accept the advice that it is complete folly to believe that rapid job reductions and efficiency savings—however worthy they may be—will achieve such savings without policy changes? He announced no policy changes at all in the domestic sphere, except for the introduction of nursery education—and no doubt a national curriculum—for two-year-olds. Given that the slow-down in the growth in public spending still sounds as though it is above the likely trend growth for the economy, does he accept that he has not corrected all the errors of his tax and spend years? He would almost certainly have to raise taxes again if a Labour Government were returned to office.

Mr. Brown

I am surprised that a former Education Secretary is so against improving learning opportunities for two-year-olds and laughs at such a serious proposal. Everyone knows that the first few months of a child's life are crucial to their later educational development. With the help of Sure Start and other programmes, we can do more as a community. I would have thought that he would support those measures, rather than encouraging his Conservative supporters, who do not want public spending, to ridicule them.

On the right hon. and learned Gentleman's general point about public spending, he knows that when we came to power in 1997, we had to deal with a situation in which inflation was rising. We had to bring interest rates and inflation under control, and we froze public spending for two years at the same time. The right hon. and learned Gentleman said that we could not implement the freeze, but we did it. Because of the need for investment in our country and the neglect of infrastructure over the decades, we have invested more in education, health, transport and policing, and I would have thought that the right hon. and learned Gentleman would support that.

On the right hon. and learned Gentleman's idea that we have made mistakes in macro-economic policy, the general view is that, uniquely, Britain has survived a world recession without going into recession itself. He should praise us on the conduct of economic management by the Bank of England and on our fiscal policy, rather than criticising. As for his advice for the future, he advised us that we were wrong to make the Bank of England independent, so I have been careful about taking his advice ever since.

John McDonnell (Hayes and Harlington) (Lab)

I declare an interest as the chair of the parliamentary group of the Public and Commercial Services Union. Will the Chancellor receive a delegation from that group to discuss the consequences of the 100,000 jobs that will go from the civil service? The vast majority of our civil servants provide us with an excellent service and have supported the Government well. Many will face compulsory redundancies. That will have an effect not only on their lives and future careers but on service delivery. I would welcome an opportunity for members to meet my right hon. Friend to go through the implications of today's announcement in some detail.

Mr. Brown

My hon. Friend the Economic Secretary met my hon. Friend and his delegation only days ago. Obviously, meetings will take place and I am happy to meet civil service union leaders to discuss those matters. However, my hon. Friend must put them in their proper perspective. We have invested £6 billion in new technology so that we can modernise the services that are available. With changed back-office services and the introduction of technological change, it is right to consider whether we need the same number of people to administer them and the transactional services in the next few years.

Investment in new technology and decisions that, although difficult, are necessary for the future mean that we can finance the development of front-line services. That means that, by 2008, there will be 80,000 more nurses, 20,000 more doctors, 90,000 more classroom assistants and more than 20,000 more teachers. I should have thought that most people, including my hon. Friend, supported that as the right way of moving to build up front-line services in the future.

Mr. Edward Leigh (Gainsborough) (Con)

I am asking this question on behalf of the Liaison Committee, whose Chairman cannot be here, as well as myself. Does the Chancellor believe that, if Parliament is to carry out its traditional role of scrutiny of public spending, Select Committees should be as well informed as possible? Will he therefore publish the letter that the Chief Secretary sends all spending Departments every July, which outlines their public service agreements and spending plans? It is currently kept under wraps, even inside Departments. Does the Chancellor agree that, if he published the letter, he would not simply pay lip service to openness but do a great deal for accountability of spending before Parliament?

Mr. Brown

Obviously, I shall examine anything that the Liaison Committee or the Treasury Committee submits to me. I shall answer questions at a meeting of the Treasury Committee on Thursday. The hon. Gentleman is unfair if he suggests that there has been a lack of transparency in the Government's operation of economic policy since 1997. We opened up economic policy in a way that had not previously happened both in the operation of the Bank of England and our fiscal policy. All our assumptions on fiscal policy have to be audited.

Under the previous Government, one could pluck out any figure from the air on, for example, privatisation revenues, unemployment, or indirect effects of savings, and make figures look as one wanted them to appear for a specific spending round. Under this Government, we have audited assumptions, which must be published. The National Audit Office reports on them and Parliament can question us on them. On Thursday, Treasury questions and a meeting of the Treasury Committee will take place. There is therefore a great opportunity for people to question us on the public spending figures. On Wednesday, we shall hold a debate on today's public spending pronouncements.

Mr. Tom Clarke (Coatbridge and Chryston) (Lab)

I welcome my right hon. Friend's comments about international development and I recognise that he is the first Chancellor in history to commit himself to a date on which the United Nations target will be achieved. Will he use his undoubted moral authority to appeal to British business and commerce to respond to a policy of fair trade so that the objectives that he wants to achieve are seen to be widely shared?

Mr. Brown

I am grateful to my right hon. Friend, who has taken a great interest in those matters over the years and been active in work in Africa and other parts of the world in promoting development. We are one of half a dozen countries that have recently said that they are setting a date for achieving the objective of 0.7 per cent. That is part of a wave of opinion that, in 2005, will insist that the developed world does more for the developing world. That is why we have set up the Africa Commission, proposed the international finance facility, and increased aid so substantially in the last few years and as a result of our decisions today.

As far as business is concerned, I will meet many international businesses in the next few days to try to persuade them that they should also be involved in the development process, particularly in relation to our Africa Commission. As my right hon. Friend has suggested, I will tell them that they too must play a part in unlocking the trade talks that are now stalled. It is necessary that large companies take a far bigger interest in the development of the continents that we are talking about. I see a greater interest than there was a few years ago, and it is now time for us in Britain to bring together business, exactly as the United Nations has done in the business round table.

Mr. Peter Lilley (Hitchin and Harpenden) (Con)

The Chancellor promised a gross reduction of 80,000 posts in the civil service over coming years. Can he tell us what the net reduction, or increase, will be over that period, and how many posts will simply be outsourced? Of the 88,000 extra posts that he created in education last year, how many does he now propose to abolish?

Mr. Brown

First, the figures that I announced were 84,000—

Mr. Lilley

Gross.

Mr. Brown

The figures were 84,000 for the UK Administration and 20,000 for the devolved Administrations. I announced in the Budget—[HON. MEMBERS: "Net."] Hon. Gentlemen do not want an answer; they want to provoke the House into not having a proper debate on these issues. I am going through the figures for the benefit of the right hon. Member for Hitchin and Harpenden (Mr. Lilley), who was, after all, the shadow Chancellor some years ago.

We announced in the Budget that as far as the Department for Work and Pensions was concerned, there would be a gross reduction of 40,000 and a net reduction of 30,000. I believe that the figures are 84,000 and 69,000 or 70,000, and on top of that, 20,000 from the devolved administrations and local government. Of course, we are relocating 20,000 jobs in total. That is why the administrative costs of the Government will fall to 3.7 per cent. I should have thought that the Conservative party—which has brought forward not one proposal about how to make those changes, despite all the talk of a so-called commission to examine the issue—would have welcomed the fact that we have done the serious and rigorous work that no previous Government have done, to make sure that we have the right civil service numbers for the future.

Mr. Tam Dalyell (Linlithgow) (Lab)

The paragraph at the top of page 6 refers to the additional £4.4 billion in relation to Afghanistan and Iraq. What exactly are the figures for the costs, which none of us would grudge? What we ask, however, is whether extremely expensive projects that looked important 10 years ago, such as the Eurofighter, should not have their expenditure at least contained, when the military objectives of such projects are now open to question.

Mr. Brown

One of the recommendations of the Gershon report is to improve procurement, and of course, one of the major areas for savings is in the Ministry of Defence, which is one of the biggest procurers in the country. Sir Peter Gershon has recommended that £6 billion of savings could be achieved by a better system of procurement. As for my hon. Friend's other questions about Afghanistan and Iraq, I shall write to him on the different costs relating to those countries. As far as the Ministry of Defence and costs are concerned, I shall write to him about the savings that will be achieved in relation to procurement in that Department.

Sir Patrick Cormack (South Staffordshire) (Con)

Can the Chancellor confirm that he said that he hoped to raise £30 billion from the sale of assets? Can he tell the House what sort of assets he has in mind?

Mr. Brown

I think that I also said to the House that land and property sales would form the major part. A further piece of work is to be done by Sir Michael Lyons, who did the relocation inquiry for us, in which he will work with Departments to identify land and buildings that are no longer necessary, partly as a result of the changes that we are making in the structure of the civil service and the public services, and partly to examine whether they are being efficiently used. He will work with Departments to arrange whatever dispositions of those assets, both land and property, are required.

Mr. Martin O'Neill (Ochil) (Lab)

I congratulate my right hon. Friend on the expenditure on science, and particularly on the moves that he is making to facilitate technology transfer. Can he guarantee that any fiscal obstructions that might have appeared can be dealt with as soon as possible to enable those companies to be established? Can he also tell us what he proposes to do to let traditional manufacturing take more advantage of emergent technologies and incorporate those in its investment plans? I am not suggesting simply another handout, but I think there is a case for more imaginative thinking so that our manufacturing base can be enhanced to take advantage of emerging technologies.

Mr. Brown

My hon. Friend has worked hard with universities and business to build up the country's technological base. In answer to his recommendations about fiscal policy, let me assure him that we will look at the problems experienced by spin-off companies from universities, to which he was undoubtedly referring. As I have said, that is something for the pre-Budget report. We shall also consider the tax treatment of assets, and what is happening in such companies. I shall report to the House on that in due course.

As for science generally and its effect on manufacturing industry, the £1 billion of extra money that we are investing in science as a result of the review will be of great help to the industry. It is also benefiting from the research and development tax credit—indeed, it is the principal beneficiary—and from the permanent self-assessment allowances that we have created and built on over the last few years. It is benefiting, too, from the closer financial links that we are encouraging between universities and companies.

We hope that in all those areas, our new science and innovation investment will do more. Our future as an industrialised country in a restructured global economy depends on value-added companies—companies that are technology-driven, making precision and niche products. With high technology invested in them, those are the companies that will create both wealth and jobs in the future. It is our duty as a Government to support the pure and applied science that can make their development possible.

Angus Robertson (Moray) (SNP)

On behalf of the Scottish National party, I welcome the announcement of the 0.7 per cent. aid target. It is only a shame that it has taken us so long to emulate the small, independent European neighbours that have already undertaken that obligation.

Today's statement contained the biggest announcement of job losses since Margaret Thatcher closed down the coal industry. The Chancellor spoke repeatedly about front-line services. I hope that he had in mind our service personnel, who are of course in the firing line in the Prime Minister's war in Iraq. Can he assure us that none of Scotland's historic regiments will be amalgamated or disbanded?

Mr. Brown

We have just produced a defence settlement involving a larger real-terms rise than earlier rounds, which will give our defence forces the resources necessary for investment in the future. That includes Army personnel, both in Scotland and the rest of the country and elsewhere.

I must say that for the Scottish National party to tell us that its policies for the break-up of Britain and the complete separation of Scotland could ever defend the British armed forces is quite ludicrous.

Chris McCafferty (Calder Valley) (Lab)

May I join others in welcoming the increase in the aid budget for developing countries, particularly for the purposes of health, education and anti-poverty strategies? May I also join others in congratulating the Chancellor on grasping the nettle and adopting a 0.7 per cent target for the very first time? Does he agree, however, that the best anti-poverty strategies are holistic? Should they not include good policies on reproductive health and maternal care, both before and after childbirth, and programmes to combat HIV/AIDS? Will he ensure that such programmes play an important part in the increasing aid budget?

Mr. Brown

I thank my hon. Friend for her comments, and her support for the statement of our objectives for international aid policy. She may have heard me announce that as part of the international aid budget, £1.5 billion will be provided over the next three years specifically for treatments and cures for HIV/ AIDS. That will rise from £450 million to £500 million, and then to £550 million, over those three years. As for maternal services and dealing with the problems of infant mortality, our contributions to both the global health fund and the Global Alliance for Vaccines and Immunisation fund for immunisation have increased in recent years. As part of the international aid budget, we will spend considerably more on health generally, both in Africa and elsewhere. What my hon. Friend suggests will be very much part of that budget.

Mr. Patrick McLoughlin (West Derbyshire) (Con)

In 2002, the Chancellor announced that he was going to reduce the number of staff in the Department for Work and Pensions by 18,000. Why has the number increased by 3,500 since that reduction programme started?

Mr. Brown

The hon. Gentleman cannot have been following the news in the past few days. The Secretary of State for Work and Pensions announced the locations of the DWP closures, the job losses in particular areas and the first stage of the gross reduction of 40,000 in civil service posts. The hon. Gentleman must look again at the facts. It is we who are taking the action necessary to cut back on bureaucracy, and we who rightly introduced the pension credit, which the Conservatives oppose. Of course we want the pension credit to be administered properly; the trouble is that the Conservatives do not want it at all.

Mr. Peter Pike (Burnley) (Lab)

My right hon. Friend will know how important the housing renewal pathfinder project is in Burnley and east Lancashire. What is the exact nature of the Government's commitment to that very important project over the next three years?

Mr. Brown

Tomorrow, there will be a statement by the Deputy Prime Minister on the issues affecting his Department, which include housing. My hon. Friend will be able then to get more details on what is a threefold increase in the money available for improvements to low-demand housing areas in his constituency—to which I believe he is referring—and elsewhere in the north and the midlands. We understand the representations that he and others have made, and that the housing stock needs renovation. That requires resources, and a special amount of money must be set aside, which is exactly what the Deputy Prime Minister has done. The question of the impact on individual areas is a matter for my hon. Friend and the Deputy Prime Minister to discuss—hopefully, when we debate these matters tomorrow.

Mr. Ian Taylor (Esher and Walton) (Con)

The Chancellor surely cannot be too surprised by the degree of scepticism about his plans, given that he is pre-committing expenditure before he has made the savings that he announced in order to justify such expenditure. Such savings will not come easily. As we know, many of the 84,000 people in question will be under contract, so redundancies will be necessary.

On a specific point, can the Chancellor assure the House that the budget for the research assessment exercise, which relates to the Department for Education and Skills, will increase in proportion to the welcome proposed increase in the science and technology budget? If the research assessment exercise budget is not increased in matching form the universities will have a real problem.

Mr. Brown

On the hon. Gentleman's second point, the science budget covers all Departments, not just one. I hope that his question about the science budget—which relates to the Department for Environment, Food and Rural Affairs and is a matter for the Secretary of State—will be answered. However, the science review was a cross-departmental review and does not relate to just one Department.

The Conservatives seem to be taking a very strange position on the question of job reductions in the civil service. We have announced that these jobs will have to go, and the Secretary of State for Work and Pensions has announced closures in particular areas. People now know where the first tranche of job losses will occur and how they will be affected, yet the Conservatives' position seems to be that nothing is happening. This is a painful process and we regret the tact that people have to lose their jobs, but we are helping them to get new ones. It really does nobody any good for the Conservatives to suggest that the big change that is taking place, and which has to take place, is not happening at all.

Mr. Gordon Prentice (Pendle) (Lab)

I listened carefully to what the Chancellor said to my hon. Friend the Member for Burnley (Mr. Pike), and I want him to know that east Lancashire has the worst housing in the country. There are 4,000 empty properties in Burnley and 2,000 plus in my constituency. I welcome the trebling of resources for the nine pathfinder areas, but can he reassure me that the money on offer will make a material difference and turn things round?

Mr. Brown

This could be a very expensive afternoon indeed if I were to agree to the representations made by my hon. Friends the Members for Burnley (Mr. Pike) and for Pendle (Mr. Prentice). The overall sum was announced today, and the precise allocation to different areas is a matter for the Deputy Prime Minister and his budget. Indeed, my hon. Friends should make their representations to the Deputy Prime Minister and to the relevant local authorities. However, such representations now have the effect that they want. Money has been set aside, and we will help them to deal with this important issue, which must be dealt with soon. I agree that empty properties and those in a dilapidated state must be dealt with as a matter of urgency.

Sir Teddy Taylor (Rochford and Southend, East) (Con)

While it would be wrong for any true Conservative not to applaud the Chancellor for his target of reducing the civil service by 84,000 jobs, which is more ambitious than anything proposed by Lady Thatcher's Government, is he confident that it can be done, bearing it in mind that, according to the figures that I have, the number of civil servants has been increasing by more than 500 every week over the past two years?

On relocation, will the Chancellor promise to bear in mind the fact that seaside towns such as Southend-on-Sea have far more unemployment and deprivation than other areas in the south-east?

Mr. Brown

I take it that the hon. Gentleman is making a representation for civil service jobs to come to his area, but the issue that he rightly raises is that a reduction of 84,000 jobs is a very serious matter. It is wrong of Conservative Members to suggest that it is nothing, or merely something flimsy—it is a serious issue, which deserves to be treated more seriously than they have done this afternoon. The fact is that 84,000 jobs are going; 20,000 jobs are being relocated; 20,000 additional job reductions will come as a result of what is happening in local authorities and in the devolved areas; £22.5 billion of efficiency savings will result; and then we will proceed to £30 billion of asset sales.

We have already started the process of reducing jobs, and it will happen, but I certainly understand the difficulties of areas, such as the hon. Gentleman's constituency, that have higher unemployment rates than others, perhaps in some cases seasonally, and that is why the new deal is being brought into play to help with the transition, including help for public servants moving to new jobs as a result of the changes. Our desire is not to leave people isolated as they face change but to help them through it and to equip them for the jobs that certainly are available, as witness the 600,000 vacancies in the economy today.

Linda Perham (Ilford, North) (Lab)

I warmly welcome the increase in the transport budget to £12.8 billion, but does the Chancellor acknowledge the importance of the Crossrail project to equipping Britain for the global economy and to the regeneration of east London? Will Government funding for the project feature in the comprehensive spending review?

Mr. Brown

There is a rise of 4.5 per cent. in real terms over three years in the transport budget. The Secretary of State for Transport will make announcements about the future allocation for that project in the next few days, and I hope that my hon. Friend will wait for those announcements and question him on them then.

Bob Russell (Colchester) (LD)

Do the calculations for defence expenditure involve the closure or amalgamation of any regiments, battalions or other units of the British Army? Will there be more soldiers, fewer, or the same number? The Chancellor must know the answer. Why will he not tell us?

Mr. Brown

The precise decisions about the configuration of our forces are a matter not for the Treasury but for the Ministry of Defence and the Chief of Defence Staff, working with the Defence Secretary. What I can say, however, and what Opposition parties cannot deny, is that we have made available the money for the next few years, until 2008, to ensure the proper equipping of our forces. The Liberal party is now urging that we spend more on defence in addition to all—[Interruption.] Now the Scottish nationalists are shouting, so I remind the House that their proposals for the future of UK defence would mean that there was no UK defence at all.

Jeremy Corbyn (Islington, North) (Lab)

Can the Chancellor give us some estimate of the redundancy costs of the 84,000 job losses in the civil service? What consultations will be held with the civil service trade unions? What proportion of the work will be outsourced to private sector organisations? What impact assessment has been made of the likelihood of local unemployment in particular areas where there are large numbers of civil service jobs?

Mr. Brown

It is precisely for those reasons that change is taking place. I said in my statement that we are ensuring that the new deal and the Employment Service will be involved in helping people as they try to move between the jobs that they have at the moment and the jobs that exist in the economy.

As for consultation on these issues, that has already begun. I have had meetings, and other meetings will take place. Some have been taking place today. I assure my hon. Friend that the proper consultation process will be gone through. In the interests of our defending public services in the longer run, he must face up to the fact that if we are investing substantial sums in new technology and do not need the same numbers of people to provide back-office or transactional services, it would not be the right policy for us to maintain them in jobs that no longer need to exist. It is right to release these resources so that we can have more nurses, doctors and front-line people in the health service, and more people in our schools, community services, and law and order services. That is the right way forward.

My hon. Friend talks about the effects of redundancies. I have to tell him that as a result of the new deal and the Employment Service, thousands of people find new jobs every day. There are 600,000 vacancies in the economy. I hope that the House will give the Government credit for the 2 million new jobs in the economy since 1997.

Mr. Michael Fallon (Sevenoaks) (Con)

Does the Chancellor accept that any business man will tell him that efficiency savings are always easier to announce than to secure? If his are not realised in full, what guarantee does the taxpayer have that taxes will not have to rise to fund the difference?

Mr. Brown

As everybody knows, the decision in the last Budget was whether to cut taxes or to invest in public services. I believe that I made the right decision for the country in saying that we wanted to invest more in education, in health, in transport, and in law and order and policing. The decisions on investment that have been announced today resulted from that decision in the Budget.

As for efficiency savings, we have already started the process of making reductions. Announcements have already been made, and more will follow. The Opposition seem to be taking the view that we will not go ahead with these reforms and reductions, but I can tell the hon. Gentleman that we are already doing so. It is not a very good Opposition campaign to tell people who are losing their jobs that they will not lose them.

Mrs. Anne Campbell (Cambridge) (Lab)

May I, too, warmly welcome the increase in science spending and tell the Chancellor that that will be extremely popular in my constituency? In the lead-up to his statement today, did he receive any representations on abolishing the Department of Trade and Industry, and if so, could he say why he rejected them?

Mr. Brown

There have been representations from the Liberal party; the same people wanted to move the Treasury to Liverpool.

Mr. Richard Bacon (South Norfolk) (Con)

Does the Chancellor of the Exchequer agree with GP magazine that the national programme for IT in the health service is more likely to be a fiasco than the Dome"; and should not he be rather worried that the Department of Health is about to squander £6 billion?

Mr. Brown

The hon. Gentleman should be cautious about what he says about these things. A great deal of work has been done in setting up that very extensive IT programme. As I understand it, the national health service uses more IT than any organisation outside NASA—the space centre—in the United States of America. It is therefore very important that it is got right. New people have been brought in and the whole system has to be modernised. It is important that electronic records can be properly developed and that nurses and GPs' surgeries can be in regular contact with hospitals. It is in all our interests that the programme works. Before the hon. Gentleman pronounces that it is not working, he should look at the evidence of all the efforts that have been mad to ensure that it does. It is certainly very important to the future of our health service—we would agree on that.

Mr. Harry Barnes (North-East Derbyshire) (Lab)

In connection with the welcome increase in expenditure on social housing, how much of it would be directed towards council housing being democratically controlled by its local authority?

Mr. Brown

That is a matter for the Office of the Deputy Prime Minister. The Deputy Prime Minister will make further announcements on how he sees housing developing in future. It will also depend, of course, on the decisions that are made by local people about what they wish to do in terms of housing associations and the control of local housing. I can say, however, that we have recognised the great need for social housing, for which my hon. Friend has always campaigned, in all parts of the country. There is a need for affordable housing and for new build. Achieving the level of house building and house improvement that is essential will necessitate combined efforts on reforming the planning system, releasing more land, encouraging reform in the house building industry, encouraging the rented sector to move forward, and financing the housing associations and housing authorities to which my hon. Friend refers.

Several hon. Members

rose—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. I want to try to call the remaining hon. Members who want to ask a question. There is big pressure on the business of the House today, so I appeal for very short questions, as well as very short answers. I call Angela Watkinson.

Angela Watkinson (Upminster) (Con)

Thank you, Mr. Deputy Speaker. Will the Chancellor tell the House how much he has added to the national debt in each of the years since 1997, and how much will he add this year?

Mr. Brown

The national debt was 44 per cent. of national income when we came to office; it is 34 per cent. now. That is a substantial reduction in the proportion of debt to income.

Mr. Owen Paterson (North Shropshire) (Con)

For the third time of asking, can the Chancellor say, in reply to my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) and the hon. Member for Islington, North (Jeremy Corbyn), how many of the posts whose number he intends to reduce will be outsourced to agencies offering services such as IT, and so will effectively remain a burden on the public purse?

Mr. Brown

I do not accept the hon. Gentleman's proposition that the reductions that we are bringing about are somehow transfers from the public sector to the private sector. That is not the case. We are not proposing to outsource those jobs to the private sector. We have decided, as a result of our review, that the hack-office services provided need fewer people to administer them. That is why we are making the reforms, which involve a gross reduction in staff of 84,000. His question is based on a misunderstanding: we are reducing the number of staff, not using the proposals to outsource staff.

Mr. Geoffrey Clifton-Brown (Cotswold) (Con)

The Chancellor of the Exchequer has painted a rosy picture of the economy this afternoon. Can he explain what he is doing about last month's almost record balance of payments deficit of £3.6 billion—or, for that matter, why the savings ratio has halved under his Administration?

Mr. Brown

If the hon. Gentleman looks at the American trade deficit, he will see it is a great deal higher than ours, and I suppose that he would say that the American economy is moving forward with one of the highest growth rates in the industrialised world. I remind the House that he has said: I give the Chancellor credit for achieving his predicted growth rate this year".—[Official Report, 23 March 2004; Vol. 419, c. 775.] He really should use his own questions, and not those given to him by Conservative Front Benchers.