§ 3.57 p.m.
§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport: (Lord McIntosh of Haringey)
My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Chancellor of the Exchequer on the 2004 spending review. The Statement is as follows:
§ "Mr Speaker, 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.1025
§ "That investment is 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—our national debt today being the lowest of our main competitors. Our discipline has reduced debt interest payments, which consumed, in 1997, 3.6 per cent of national income, but now cost just 2 per cent, the lowest since 1915. Unemployment, which, in 1997, cost 1 per cent of national income, now costs a third of that, just 0.3 per cent—the lowest 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 our 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 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.
§ "So 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 £279.3 billion this year, will rise to £301.9 billion next year, to £321.4 billion in 2006–07 and £340.5 billion in 2007–08.
§ "So, 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.
§ "By insisting on further reform we are able to do even more to get more money to the front line and raise public investment substantially in all our priority areas.
§ "It is to ensure that new resources yield the best results that we have 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 their new plans to implement efficiency agreements with the Treasury.
§ "Alongside Sir Peter Gershon, I want to put on record my appreciation of the work of our Civil Service and its commitment to the ethic of public service. But it is precisely 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 1026 detailed plans that departments are publishing for the years to 2008, a gross reduction in Civil Service posts of 84,150 to release resources from administration to invest in the front line.
§ "With, in addition, the devolved administrations in Scotland and Wales and the Northern Ireland Office also having announced that they are engaged in spending review 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 annual efficiency savings applied 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.
§ "Because of the scale of the overall reductions, I can tell the House that in each area of the country, public servants asked to change jobs will be offered support with retraining, and we are ready to work with the workforce and their unions to provide that help.
§ "Today I am also 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 from the Department for Work and Pensions, 3,900 from defence and just under 1,000 each from the departments of health, education 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 to Yorkshire and just under 100 from the Department for International Development to East Kilbride. And I know that for the remainder of posts being relocated, towns and cities across the country will want to make their case.
§ "I can also announce that, for all departments making future job 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 number of posts relocated to the regions will be 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, not subject to formal medical certification. And because the current arrangements for sickness leave across the Civil Service and public services are open to abuse, I am also today publishing plans which we propose to implement to curtail uncertified absences. The Secretary of State for Work and Pensions will report by the autumn on future management of public sector sickness absence and on measures to help those signed off for the long term back into attendance at work.1027
§ "I can now announce that by 2008 there will be a real-terms fall in administration costs in the Department for Work and Pensions by 9 per cent, the Department of Trade and Industry by 15 per cent and the Department of Health administration 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 original Gershon plan of, by 2008, £20 billion. And I can announce that the savings available for front-line services now amount to £21.5 billion a year. And we have also accepted Sir Peter Gershon's recommendation that to go beyond this 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 arrange sales and disposals. I can tell the House that the objective that I am setting is the overall total of £30 billion of assets sales.
§ "So it is because of 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, which are the three drivers of change releasing substantial new money for front-line services—that we can now take the next steps in a decade of rising investment for Britain and fund our priorities, the country's priorities, first, to meet the security and defence needs of the nation; secondly, to equip our economy technologically and educationally to meet the global challenge ahead; and, thirdly, to renew our public services and the public realm in this generation. And in each of these services we have agreed, in return for investment, further reform 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 September 11, the needs of national security at home and action against terrorism abroad have rightly assumed a new importance.
§ "Recent events demand that we strengthen not just our national security and our capacity to prevent terrorist incidents but our national resilience, our capacity to respond. And to bridge the security gap identified by the Prime Minister and the Government after September 11, 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 that our national security budget must discharge.
§ "Before September 11, spending on security at home was £950 million a year. Having agreed a set of reforms that modernise our border security, our 1028 counter-terrorism capabilities, our radio communication systems and our arrangements in respect of nuclear and chemical decontamination, and added 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.
§ "And I can also inform the House that in place of the old system of civil defence, we are establishing and funding a new framework of civil protection with a doubling of current provision for local authority emergency planning.
§ "In the last spending review, the Ministry of Defence and our Armed Forces, upon whom the defence of our country depends and to whom we owe, especially 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 also to modernise for the long term, and to increase its efficiency and to make the changes that are now necessary to continue to adapt technologically and strategically to the threats posed by international terrorism, the proliferation of weapons of mass destruction and the rapidly changing global environment, I propose to increase the Defence Modernisation Fund, so that over the period to 2008 it will be worth £1 billion.
§ "The Secretary of State for Defence will set out the detailed allocations of the full budget for our Armed Forces, which will rise from £29.7 billion this year to £33.4 billion by 2007–08–£3.7 billion a year higher than now, which is an average annual 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 which may arise—aside from operations—in the future, we will provide the Ministry of Defence with guaranteed access to up to £300 million in 2007–08.
§ "Taken together, these rises provide for a faster rate of real-terms growth in this spending round than the last and ensure the longest sustained real-terms increase in defence spending for 20 years.
§ "Since September 11, international diplomacy has also assumed an even greater importance. Because of this, and the security risk faced by our Foreign Office and consular staff in overseas embassies, the Foreign Secretary's budget will rise from £1.5 billion this year to £1.6 billion by 2007–08—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 British Council's budget but will increase it from £173 million this year to £197 million by 2007—08. And the budget for the BBC World Service—whose 150 million a week 1029 audience is now its largest ever—will not be cut, but will be increased from £225 million this year to, by 2007—08, £252 million—£27 million more.
§ "2005 is the year where, as the Prime Minister has said, the needs of Africa will be the focus of the UK's G7 presidency as a presidency for development. As we play our part in addressing global injustices, 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. 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 recommendations from the Prime Minister's Africa Commission, the Secretary of State for International Development is announcing that we 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 to nearly £6.5 billion. For every £1 of UK aid spent in 1997, we will be spending £3 by 2008, along with debt relief, raising UK official development assistance from the 0.26 per cent of national income we inherited to 0.39 per cent next year, to 0.42 per cent in 2006–07 and to 0.47 per cent in 2007–08. We wish to maintain those rates of growth in the overseas aid ratio, which on this timetable would rise beyond 0.5 per cent after 2008 and reach 0.7 per cent by 2013. I can also state 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.
§ "But, today, the humanitarian tragedy in Sudan is deeper than at the time of Live Aid—which started in Sudan 20 years ago—and we must act now. The International Development Secretary 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. I thank the Churches, faith groups and non-governmental organisations for their representations to date to the Treasury—more than 15,000 representations on this spending review that we raise spending on aid and not cut it.
§ "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 and innovation that the Secretaries of State for Industry and for Education and I are publishing today is designed to make Britain the best and most attractive location for science and innovation in the world.1030
§ "After rigorous selection of priorities within the industry budget, after a reduction of 1,010 DTI headquarters posts and further reductions in its agencies, we are able to announce substantial new funding to support science teaching in our schools, to improve salaries and stipends for graduate scientists and engineers, and to support technology transfer and university-business link ups.
§ "Government funding for science will rise from £3.9 billion this year to £5 billion by 2008: £1 billion extra for science by 2008—a 5.8 per cent average annual real-terms rise representing a doubling of cash spending on science since 1997. As a result of our investment, the Wellcome Trust is today announcing a partnership with the UK Government to invest in UK research. It will match our commitment, investing over five years at least £1.5 billion.
§ "With these two new investments—an extra £2.5 billion being invested for British science—and now the largest sustained increase in science spending for a generation, our objective is to raise overall spending in Britain on private and public research and development from 1.9 per cent of national income—among the lowest of our competitors—to, by 2014, 2.5 per cent of GDP—among the best of our competitors; the best guarantee of a successful economic future for our country.
§ "I can tell the House that in preparing our spending review, I have consulted not just the scientific community but the CBI, business organisations, trade unions and regional organisations in every part of the UK, among which there is a remarkable agreement, a shared consensus and a determination that it is in the national interest not to cut science, transport, housing or infrastructure investment but to press ahead with 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 of 4.5 per cent a year. Total cash spend by the department over the spending review will be £2.9 billion more than 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 also seriously neglected investment in housing—in building and improvement. Forty years ago we built 400,000 homes a year. Since the early 1990s we have built only 200,000 a year. So I reject proposals that would freeze or cut investment in housing.
§ "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 stage in increasing the 1031 supply and affordability of housing. For England, the housing budget will rise from £5.9 billion this year to, by 2007–08, £7.2 billion; a 4.1 per cent average annual real-terms rise. It means that since 1997 cash investment in housing has more than doubled.
§ "The Deputy Prime Minister will give details of a new £150 million fund to finance infrastructure around new housing developments, new money to speed up planning, and–urgently needed in our country—a 50 per cent increase in social housing by 2008 and a trebling of investment in renewal and renovation in low-demand areas in the north and the Midlands.
§ "Investment, not just in science, transport and housing, but in enterprise, skills and economic development, holds the key to modern manufacturing strength 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 and better business-university links, to promote enterprise in disadvantaged areas, including supporting the Northern Way, and further to devolve decision-making out of Whitehall, funding will rise from £1.8 billion this year to—by 2007–08—£2.25 billion a year shared between our nine regional development agencies.
§ "To meet our environmental improvement targets for 2010—a 20 per cent cut in carbon dioxide emissions, 10 per cent of electricity from renewable sources and a reduced reliance on landfill—the spending review will provide additional funding for low carbon technologies; more support through recycling landfill tax revenues for businesses that are energy efficient and minimise waste; and—with additional PFI credits worth £155 million a year by 2008—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 many elderly people face heating their homes—we have extended the winter fuel allowance, now worth £300 for the over-70s, introduced the pension credit now paid to 3 million pensioners 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 poor families to insulate and heat their homes. Our objective is that by 2010 we will eliminate fuel poverty among the elderly, and by 2016 to eliminate fuel poverty in its entirety.
§ "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 of our public services. Since 1998, we have offered every government department 1032 three-year budgets and three-year funding. Today the Deputy Prime Minister will answer a persistent complaint of local authorities. 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 flexibility.
§ "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. Later the Deputy Prime Minister will set out the full details of the real terms rise in the annual grant to local authorities at an average of 2.7 per cent a year—substantially above the average settlements received by local authorities in all 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 for 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, in total an additional £555 million. The Welsh Assembly and the Scottish Executive will publish full details of their funds. Overall for Wales—by 2007–08, an extra £2.5 billion. That will raise the Welsh budget from £11.1 billion to £13.6 billion, and with Objective 1 funding an annual average real-terms rise of over 4 per cent.
§ "And for Scotland, by 2007–08, there will be a total of £4.2 billion more, raising the Scottish budget from £21.3 billion to £25.5 billion, representing an annual average real-terms rise of 3.5 per cent.
§ "With additional funding for the EU Peace Programme, Northern Ireland will receive by 2007–08 an additional £1.2 billion a year, representing 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 a year to 13.3 million. Today, after discussions led by the Chief Secretary, I can announce an extension of free access to include all university museums.
§ "And with increased funding for arts organisations, local creative arts partnerships and to revitalise 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 over £1.6 billion by 2007–08, a real-terms annual average rise of 2.3 per cent. Looking ahead, and to ensure a far better coordination of national sports effort and resources, Pat Carter will report on the proposal to involve both the private and public sectors in a new National Sports Foundation.1033
§ "Today, I am announcing funding for social services, especially to improve community care for the elderly. The social services budget will increase, by 2007–08, by just under £2 billion, from £10.6 billion this year to £12.5 billion by 2007–08, representing a real-terms average annual rise of 2.7 per cent a year.
§ "As a result of the spending review, the social services Secretary is also extending in every part of the country the provision of care alarm systems so that elderly and disabled people can stay in their own homes and yet have access to the support they need. An additional 160,000 of the very elderly will be able to install these care alarm systems. In total we expect that, by 2008, 1.5 million pensioners will benefit. And I can confirm that, as announced in the Budget, funds for the NHS will increase from £69 billion this year to £92 billion by 2007–08, representing an annual average real-terms rise of 7.1 per cent allocated to health that will go to and be spent through the National Health Service and by the National Health Service on patients treated free at the point of need and not to subsidise private medicine.
§ "For decades this country neglected investment not only in hospitals, on social services and in schools, but also investment in our criminal justice system; in policing, in tackling anti-social behaviour and on improving the quality of life in our neighbourhoods. So the final obligation of this spending review is to make investments today to create in our country safer, stronger communities today and tomorrow.
§ "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; and in contrast to 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 cut the budget for law and order, we will increase it substantially: first, to tackle crime; secondly, to prevent crime; and, thirdly, to reduce the fear of crime.
§ "There will be new resources to tackle crime to fund the Home Secretary's decisions to create a new National Offender Management Service, bringing together prison and probation, a reformed charging and sentencing system and a new Serious Organised Crime Agency.
§ "For those treated, drugs rehabilitation has succeeded in cutting reoffending by 50 per cent. So the Home and Health Secretaries will also increase the numbers in drug rehabilitation from just under 100,000 annually 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 our society must also acknowledge that in past decades it has not done enough to tackle the sources of crime, in particular among young people. The 1034 Home Secretary and I are agreed that we must provide new resources and that all government departments play their part in an alliance with local, voluntary and community organisations to prevent crime.
§ "Tomorrow the Deputy Prime Minister will announce details of the Safer. Stronger Communities Fund to finance community-based solutions that, on the one hand, tackle anti-social behaviour and, on the other, build and develop the facilities and public spaces that are the bedrock of our 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 our country. Next week, the Home Secretary will announce plans 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 rundown 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 greater reductions in property crime than other parts of the country. So the Deputy Prime Minister will not abolish the Neighbourhood Renewal Fund but extend it, with a budget each year of £525 million until 2008.
§ "With the Home Secretary leading, our increased support for the work of community, charitable and voluntary organisations will, in this spending round, also be focused on building stronger and more stable local communities; on engaging most of all with the young, with money for initiatives to support volunteering and voluntary community organisations, and to encourage a national framework for mentoring; and considering the recommendations of the Russell Commission on youth volunteering and proposals for bursaries to stimulate gap year engagement by young people. A £30 million a year fund is being established by the Home Secretary to support the victims of crime, not least the crimes of domestic violence.
§ "But there is one further investment that the Home Secretary and I believe is essential for stronger and safer communities. There is a clear consensus among the people of this country that in order to modernise the way we tackle crime and the fear of crime, we need on our streets not only policemen and women, but also community support officers at the heart of each neighbourhood who can also patrol our streets, build links with local people and prevent anti-social behaviour.1035
§ "So just as reform in education means that we are strengthening the effectiveness of teachers by matching them with classroom assistants, and in the NHS the effectiveness of doctors by matching them with nurse practitioners—a country 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 our record number of police achieved by the Home Secretary, 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.
§ "So to pay for these and his other responsibilities, the budget of the Home Secretary will rise from £12.7 billion this year to £14.9 billion by 2007–08, an increase of nearly £2.2 billion a year, an annual real-terms rise of 2.7 per cent. But with the Immigration and Nationality Directorate budget now flat, the rest of the Home Office budget will see an annual real-terms increase of 4 per cent. So next week the Home Secretary will announce the detail, with money now available to finance the number of police officers—now at a record level of 138,000—matched with finance available to increase neighbourhood policing, including by providing 20,000 community support officers by 2008.
§ "The Budget set out the education settlement. Today I can confirm the rise in UK spending on education from £63 billion this year to £77 billion to 2007–08. That has led to the five-year strategy announced last Thursday by the Prime Minister and the Secretary of State for Education.
§ "So over the whole 10-year period to 2008, in addition to policing, overall spending on education will have risen in real terms by an average of 5.2 per cent a year, transport by 5 per cent a year and health by 6.5 per cent a year—a decade of rising investment which is giving us more staff, teachers and teaching assistants, 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.
§ "But because of low unemployment, low debt and lower administrative costs, we have been able at the same time to fund the best defence settlement for 20 years, and in this spending review a 4 per cent average annual real-terms rise in housing, a 5.8 per cent annual real-terms rise in science and a 10 per cent a year average real-terms rises in security spending—a Britain that can succeed because of stability, hard choices and rising investment.
§ "But there is one additional reform that has the potential to transform opportunity for every child and be a force for renewal in every community on which the Government want to make further progress today. While the 19th century was distinguished by the introduction of primary 1036 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 marked by the introduction of pre-school provision for the under-fives and childcare available to all.
§ "Since 1997 we have introduced Sure Start for the under-fives, nursery education for three and four year-olds and 1 million new childcare places and are meeting our target, set by the Prime Minister, to cut child poverty. Today I can announce that having achieved nursery education for every three and four year-old—and having achieved this six months ahead of plans—we will pilot, in an innovative 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 today available only to some, we will extend the Bookstart scheme and at nine months, then at 18 months and then at age two, provide free books universally for every child. For almost 2 million children a year their first introduction to learning—an investment not just in every child but an investment in the future of our country. I can inform the House that this spending review will ensure that by 2008 we can create at least 120,000 more childcare places.
§ "The challenge I set 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 for choice for parents and high-quality provision for the under-fives. Today, as a first step, I can announce 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. So that from the 269 children's centres this year and the 1,700 proposed in the Budget, we can now move the number of children's centres we build and open between now and 2008 up to 2,500 children's centres as we advance further and faster towards our goal of a children's centre in every community and in every constituency in our country—investments made possible only 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. Rebuilding our communities. There is such a thing as society. Our prudence is for a purpose. I commend this Statement to the House".
§ My Lords, that concludes the Statement.
§ 4.36 p.m.
§ Baroness Noakes:
My Lords, I thank the Minister for repeating the marathon Statement made by the Chancellor in another place. I also thank him for making available to me ahead of time a copy of most of the Statement, together with the supporting documents. I say "most of the Statement" because my copy excluded the electoral "giveaways" at the end of the Statement in relation to pre-school arrangements for children. However, that will not be the most important feature of our considerations today. 1037 The Minister put on a brave face when repeating the Statement—he is good at that. He will have to be even better at it because the truth which lies beneath the surface of the Chancellor's economic stewardship is now becoming clear. The economy is like an iceberg; only a small part of it is visible to most people. The Chancellor constantly tells us that the economy is doing fantastically well, and he rattles off statistics about spending increases, about lifting people out of poverty, about international comparisons. In those terms, the economy does indeed seem to be doing well.
But nine-tenths of an iceberg is below the surface and is very different. Perhaps I may tell the House of a few of the things that lie below the surface. In the past seven years Britain has slipped down the international competitiveness league table, from fourth place to fifteenth; our productivity growth rate has dropped by one-third; our savings ratio has halved; our growth rate has been the slowest in the Anglo-Saxon world; and we have the biggest trade deficit since the 17th century.
Below the surface, the Chancellor has been crafting his economic policies according to one truly dreadful guiding principle—the fatter the Government the better. He has continued to increase public sector employment while private sector employment has been falling. He has massively increased public spending but has failed to produce better public services.
The Chancellor orchestrates a plethora of initiatives, quangos and targets which, in turn, beget a massive bureaucracy. Civil servant numbers have increased; NHS managers are growing three times as fast as front-line staff; in education, 88,000 extra people were taken on last year, but less than one in six found their way to front line teaching.
The Chancellor's policies for business include hammering it with 15 new regulations a day. If business seems ungrateful for his fat Finance Bills, that is because they usually do as much fiscal harm as good.
The Chancellor appears to have had a Damascene conversion to the need to find public sector efficiency—and not before time. For example, in the NHS over the past three years we have witnessed an annual loss of efficiency of 6 per cent—and this is after the Office for National Statistics improved the output data last week, as the Prime Minister had asked it to do. We could argue all day about what that analysis does not capture, but I do not believe that even the Minister can argue that we have had quality improvement in the NHS of 6 per cent or more to counterbalance that.
The Chancellor's conversion to public sector efficiency is welcome, but there is a big problem. He wants to make the public sector more efficient so that he can extend public spending even more. He wants the state to be even fatter. He wants the percentage of GDP taken by the state to rise. We want it to fall. The Chancellor is spending our money—taxpayers' money—inefficiently. That is the admission that lies behind this Statement, and he wants to spend more. That too will be inefficient, because the Chancellor has 1038 not yet grasped the fact that better public services will not be delivered by ever fatter government. They will be delivered only with serious reform. Fat government is not the same as fit government. The tragedy is that the Chancellor does not know the difference.
I have some specific questions for the Minister. Will he update the House on the golden rule which had only the smallest of margins at 0.1 per cent at the time of the Budget? Last week there were revisions to the borrowing figures for the previous two years totalling £6.3 billion. Will the golden rule still be met over the current cycle? Secondly, the Government's track record on delivering efficiency savings is patchy at best. For example, in 2002, the Department for Work and Pensions said that it would cut 18,000 staff, but it has so far increased its staff by 3,500. What mechanisms are there to ensure that savings are actually made? The staff cuts seem to be significant, so the mechanisms are particularly important. I will not be impressed if the Minister answers that we have the new public services agreement, given the past experience of such agreements and when, for example, the Treasury fails to come up with a way of measuring its own 2.5 per cent efficiency target.
The Minister knows that many external commentators such as the OECD and the IFS, as well as those of us on these Benches, have been warning that the Chancellor's future path of spending will inevitably result in tax rises. There is nothing in this Statement to counter that analysis. Will the Minister assure the House that these spending plans will be delivered without the Chancellor raising taxes or national insurance over the whole period to 2007–08?
Lastly, the Statement contained not a single reference to prudence. Will the Minister confirm that the Chancellor and his former muse are no longer an item?
§ 4.43 p.m.
§ Lord Newby:
My Lords, any comprehensive spending review raises a number of key questions. The first is whether the total level of spending is right. Secondly, are the priorities right, and thirdly, are the projections credible? Will the Government be able to carry out their plans in practice?
§ We do not have any major objection to the projected level of spending over the planning period. After all, it is significantly lower as a proportion of GDP than during the majority of the Thatcher years. However, we see a major advantage in keeping spending at broadly the same level of GDP over the medium term. Our criticism of this Chancellor in relation to public spending is that he has gone from famine to feast. During the first Parliament, there was a 1.6 per cent average increase—approximately half the level of the growth in the economy. During this Parliament, there has been an average increase of 4 per cent in real terms, which is almost twice the level of growth. It is no wonder that a number of elements of indigestion are apparent in the public services.
§ Are the priorities right? We would have done some things differently. We believe that the Government could have made more progress in some of their 1039 objectives with which we agree by cutting something else. Although we obviously applaud the increase in police funding, we believe that it could be increased further in the medium term by scrapping the Home Secretary's £3 billion ID card scheme. We believe that the pace at which the improvement in Sure Start-style child centres is advancing could be increased if the Government scrapped their completely wasteful and ineffective baby bond scheme. Thirdly, we want to see a generous non-means-tested pension. We would scrap industrial and other subsidies to pay for it.
§ We would also put more impetus into the relocation of government departments leaving London. One of the failures of this Government's economic policy making is that the gap in growth and wealth between the north and south has increased during their tenure in office. The Government could do more about that. For example, how many members of Treasury staff as opposed to Treasury department staff will leave London as a result of the Government's plans? Also, will the Government institute a ban on any new quangos establishing themselves in the south? In recent months, several new bodies such as the pension protection agency, have announced that they will be located in southern England, when they could just as well have been located in the north.
§ Will the Government's plans work? We have a number of major reservations. It is clear that much less red tape and central control is required in education and health, but the Government's current policy is a complete muddle in those areas. They have abandoned some targets, but as far as education is concerned, they seem intent on bringing more power to the centre and reducing the role of the LEA, which seems a retrograde step.
§ The great increase in capital spending in health and education appears to be leading to significant capacity problems. On one hand there is now a shortage of contractors bidding for PFI work, and on the other, some contractors—of which Jarvis is the most notable exception—have clearly bitten off more than they can chew and may well find themselves going bust. Are the Government confident that they can meet their school and hospital building programmes?
Finally, the assumption of productivity growth of 2.5 per cent is impressive, but we are extremely cautious and worried about whether that can be met. Unfortunately, the Treasury apparently does not believe in it. When asked about how it would meet its 2 per cent target, an official replied that it did not apply to the Treasury,
because it has not been possible to measure efficiency for the whole of the Treasury in these terms".
If the Treasury will not meet its target, why should other government departments, and why should other permanent secretaries and their staff take lessons from the Chancellor on efficiency savings that he is not even prepared to contemplate himself?
§ The challenge that the Government face is not only to set the right priorities, but to deliver them. On the basis of today's Statement, we remain unconvinced that they will do so.1040
§ 4.48 p.m.
§ Lord McIntosh of Haringey:
My Lords, I am grateful to both noble Lords for their responses to this spending review, especially since they have been scratching around at the margins rather than even attempting to attack the Chancellor's record or criticise the fundamental features of this spending review. The fact of the matter is—and this has not been challenged either by the Conservative Party or the Liberal Democrats—that this Chancellor has been outstandingly successful in the past seven years in economic growth and in social reform. When and if I hear criticisms of the fundamental achievements of this Government, I will know on what basis the parties opposite intend to lose the election—because that is clearly their objective from the responses that we have had this afternoon.
§ The noble Baroness, Lady Noakes, made several comments about the comparison between us and other major industrialised countries. I notice that she shifts her ground occasionally when it is not convenient to talk about other major industrialised countries—she suddenly compares our growth with the Anglo-Saxon world to ensure that our achievements do not resonate as they should. Nevertheless, it is a legitimate argument.
§ The only point that I make, having stood at the Dispatch Box and done this for the past seven years, is that I have been listening to all these prophets of doom. I have been listening to everybody who has said that the Chancellor was riding for a fall and that his estimates of economic growth and the prospects for improvements in our public services were grossly exaggerated. Every year I have waited for noble Lords opposite to say, "I did say this last year or the year before, and I am sorry, but I was wrong", because they always have been wrong. That has been the case as much, if not more, for the Liberal Democrats as it has been for the Conservative Party.
§ I am also sorry that the noble Baroness, Lady Noakes, thought fit to revive the old canard of public sector productivity. Of course it is a challenge for all of us to ensure that public spending on the things which the people of this country want goes towards improving public services. That is undoubtedly the correct criterion by which to judge our spending plans. But unfortunately, that argument is muddied by the entirely false argument of public sector service productivity, which seeks to assess public service productivity in comparison with private sector productivity in a sphere where it is not possible to measure outputs in the same way.
§ Using the measurements which, alas, are still produced by the Office for National Statistics, a decrease in school class sizes of 100 per cent—educationalists and most people would agree that halving class sizes is thoroughly desirable—would decrease public sector productivity. That is the nature of the way in which it has been calculated. That is why we are profoundly dissatisfied with that sort of measure and have asked Sir Tony Atkinson to report, as he will do very shortly, on how to improve the 1041 answer to the legitimate question: is public spending resulting in an improvement in public services? Unfortunately, the queries which have been raised this afternoon do not go any way towards denting the Government's arguments.
§ I like the new phrase "fat government". I have always liked that sort of phrase. The Republicans in the United States have always talked about wanting small government and big people. This is not a comment on obesity, either in the United States or here, but the sad truth is that pursuing that ideal of small government regardless of the kind of services which people want and need in this country leads to what we had when we took office in 1997—decades of underinvestment in our public services, which has been the bane of our lives.
§ The noble Lord, Lord Newby, says that we have gone from famine to feast in our public spending policies. Yes, it took at least two years for us to get ourselves up off our knees as a result of what 18 years of Conservative government did to our public services, but that is what we had to do and that is the way in which we had to do it. I am afraid that there is not any alternative to it.
§ The noble Baroness, Lady Noakes, had some specific questions which I shall try to answer. First, she asked whether it is our expectation that we will adhere to the golden rule. Yes—taking the most cautious assumptions, our view is that public sector net debt, if it rises at all over the next few years, will rise to a figure of approximately 36.5 per cent, compared with the golden rule figure of 40 per cent. That is within the golden rule. There are all sorts of arguments about definitions, but that is what we expect.
§ The noble Baroness asked about our track record on efficiency savings and whether we are putting into place mechanisms to ensure that the savings actually take place. We have entrusted Mr John Oughton with the responsibility of monitoring these improvements in our achievements and of our achievement of the public service agreement framework. In doing so, we have very considerably increased the flexibility of public service organisations to adhere to their targets without excessive targets being set by us. For example, we have reduced the number of targets from around 600 in the 1998 spending review to 110 now, with the result that there is only, on average, one target for every —5 billion of expenditure. I do not think that we can be accused of excessive centralisation in that respect.
§ The noble Baroness asked about our assumptions on tax rises. These are set out in the Budget and in the Pre-Budget Report rather than the spending review, but there is no assumption of tax rises in what is being proposed in the spending review.
Finally, the noble Baroness asked what happens to prudence. She may have been preparing to rise to her feet when I repeated what were almost the last words of the Statement:
Our prudence is for a purpose".
It is indeed for a purpose, and this is the purpose becoming evident.
§ I was very interested in the priorities of the noble Lord, Lord Newby. If he goes before the electorate with different priorities which consist of, but do not include, scrapping ID cards, child tax credits and industrial support schemes, having greater relocation than is at present proposed and a ban on new quangos in London, I doubt whether he will hit the spot. I very much doubt whether such modest changes as his party wants will resonate with people who really are concerned, as we are, with a healthy, well educated nation with a growing and successful economy which is fair to all.
§ 4.57 p.m.
§ Baroness O'Cathain:
My Lords, I should like to ask the Minister three questions. Before I do, I congratulate him on a 38-minute Statement, which was delivered at the rapid rate of a mile a minute. So it was a bit more than the marathon that my noble friend referred to, as that is only 26 miles.
§ We have had the real-terms average annual rises for every single activity in which the Government have their fingers. It is extraordinary to think that agriculture, the bedrock of our country, which is going through such troubled times, gets a real-terms average annual rise of the lowest of the lot at 1.2 per cent. This is at a time of great change, when the farming community, and the rural community in general, faces huge crises of one sort or another. To compare it with other figures, science gets 5 per cent, arts, sports and media get 2.3 per cent and health gets 7.1 per cent. That is all great, but I wonder about agriculture.
§ Secondly, it is rather facile of the Minister to say that he does not deal with the Budget, that it is a pre-Budget speech, that we must look at what the income will be and that we can spend, spend, spend during the spending review. When he says that there are no tax rises, how will he fund all this expenditure, and on what national growth rate is it predicated?
§ My third question is about the logistics of people on the Back Benches dealing with a Statement such as this. We have had 38 minutes of a Statement, giving a massive amount of figures. If we had been given a copy of it as the Minister rose to his feet, we would have been able to highlight the things we wanted to bring to his attention. It has been so difficult. I have scribbled on two sides of A4, and can hardly read my own figures. The Front Bench spokesmen were, quite rightly, given the Statement, but I think that in future the House authorities should consider the possibility of dealing with this very complex Statement by handing out a copy at the time it is made so that we can contribute.
§ Lord McIntosh of Haringey:
My Lords, the noble Baroness, Lady O'Cathain, asked three questions, which I shall attempt to answer. First, she picked out agriculture from the figures that were given of real terms annual rises. It is not possible to separate agriculture from the other responsibilities of the Department for Environment, Food and Rural Affairs, but the noble Baroness is right in saying that for that department as a whole, the average annual 1043 growth rate in real expenditure—there is no cut involved here—is 1.2 per cent. How that is divided between the responsibilities of the Secretary of State for Environment, Food and Rural Affairs is a matter for the Secretary of State, and she will no doubt make an appropriate announcement in due course.
§ The noble Baroness criticised me for relying on the Budget and the Pre-Budget Report for making statements about funding. That is the way that it is done, and the way that it has always been done, except that this Government now make estimates of revenue receipts and economic growth twice a year, instead of only once a year as used to be the case. We do not interpolate new estimates at the time of a spending review, and the noble Baroness will have to wait until the Pre-Budget Report before we make our next assessment of revenue receipts, capital receipts, and national growth rates. Under criticism from the Benches opposite over many years, including at the time of the last Pre-Budget Report, government estimates have been a good deal better than those not just of noble Lords opposite and of the opposition parties, but of the consensus of independent forecasters.
§ On the third point, I entirely sympathise, having done this in opposition for 14 years, about the desire of the noble Baroness for noble Lords to be given copies of the speech. If I tell her that I did not receive the final copy of the speech until after 3 o'clock, perhaps the sympathy will be shared.
§ Lord Roberts of Conwy:
My Lords, if one is hesitant to welcome some aspects of this review, it is because one has a feeling that the Chancellor is counting his chickens before they have hatched. Of the £21.5 billion of target efficiency savings to be achieved over three years, how much is being spent before it is achieved? My impression is almost all of it. What about the £30 billion, if I heard correctly, of sales that are anticipated? Does all that go into public expenditure as well? What percentage of GDP will public expenditure have achieved by the end of this period?
§ Lord McIntosh of Haringey:
My Lords, I sympathise with the noble Lord's hesitation in welcoming the spending review. After all, from the Benches on which he sits it would be most unusual to welcome a government of the opposite political persuasion, but I take it that his hesitation rather than his determination to oppose it is because he recognises that we have got it pretty right, and we have been getting it pretty right for rather a long time now. He has my sympathy, and he has my admiration for the way in which he is separating himself so delicately from the point of view of some of his colleagues.
§ None of the £21.5 billion that is to be saved from Gershon is to be spent in advance. The savings are over a period of three to four years. I know that the noble Lord has not yet had an opportunity to do so, but if he reads the White Paper he will see that, if anything, the expenditure is backloaded rather than frontloaded. In 1044 other words, in what some people may think to be an election year, there are fewer increases in public spending than will be possible in later years.
§ Our estimate is that by 2007–08 public spending as a proportion of GDP will be 42 per cent. Let those who wish it to be lower say what cuts they propose.
§ Lord King of Bridgwater:
My Lords, does the Minister recall the late lain Macleod's rule of Budgets, that the first impressions are nearly always wrong? That certainly applies to expenditure reviews as well. This Statement has been made on a Monday, which might be considered unusual, except that it means that the Chancellor makes the Statement at 3.30 p.m. and not at 12.30 p.m. as it would be at another time in the week. Other Members may have noticed that this gives commentators the least possible time before their deadlines to spot the gaps. It is impossible to respond to a Statement of this length.
§ It might be helpful if in the future in the midst of the Chancellor's bombast, which we notice on such occasions, we were reminded of last year's speech on each occasion, and what actually happened; or that of two years ago, and what actually happened. The Chancellor is always moving on in the hope that people do not remember what he said before.
§ In that connection, I do not think that the Minister replied to the question asked by my noble friend Lady Noakes. Will he give an assurance that these substantial increases in expenditure do not involve any increase in either direct taxation or national insurance over the planned period?
§ Lord McIntosh of Haringey:
My Lords, as I said, I sympathise with those who are worried about the timing of these Statements. It has always been a difficulty for me. I am prone to a conspiratorial view of history, so I have a lot of sympathy with the concerns expressed by the noble Lord, Lord King. I very much doubt that it has been as finely calculated as that.
§ The truth of the matter is that the spending review Statements are always difficult to interpret, not because there is anything concealed or deceitful in the way in which they are presented, but because they give the envelope of spending for each department. It is then up to each department to decide how to allocate the money that is available for their different purposes. Therefore, the announcements about, for example, a particular road scheme, or hospital, or university, will have to be made after the Chancellor's Statement, because he cannot include them all.
§ The consolation that I offer to the noble Lord is that there is less in the Statement that is a surprise than might otherwise be thought to be the case. The overall envelope for public spending—which is the new cant phrase—was set out in the Budget this year. Some of the major departments' expenditure, for example, on health, education and international development, was set down before this public spending Statement.
§ Although the Statement confirms and gives the reasons for our ability to continue to invest in our public services, it is very much dependent on the 1045 overall figures that were set out in the Budget earlier this year. I am sorry, what else did the noble Lord ask about?
§ Lord McIntosh of Haringey:
Yes. My Lords, I gave an assurance that the assumptions behind this spending review were the same as the assumptions in the previous Budget: in other words, no change in taxation as a whole. The noble Lord is asking me to be specific about individual types of taxation. I do not think that it would be appropriate in the context of a spending review.
§ Lord Higgins:
My Lords, the Statement said that the pension credit is now paid to 3 million pensioners. How many pensioners who are entitled to the credit are not being paid it, and what would it cost if they were? It is said that the staff of the Department for Work and Pensions are to be cut by 30,000. Why were they employed in the first place?
§ Lord McIntosh of Haringey:
My Lords, I do not know the answer to the first question. It does not arise from the spending review. Well, the amount that is being spent arises. However, there will be opportunities in debates on the policies of the Department for Work and Pensions for the noble Lord, Lord Higgins, to raise that matter. If I had it before me, I would undoubtedly have been able to give it to him.
§ Having said that, I have forgotten the second question.
§ Lord Higgins:
My Lords, there are 30,000 jobs to be cut from the Department for Work and Pensions. Why were those people employed in the first place?
§ Lord McIntosh of Haringey)
My Lords, the Department for Work and Pensions, as the noble Lord knows better than most in this House, has had a programme of information technology projects which has not perhaps been of the happiest. Some of them have been over-budget and some of them have been delayed. During the period in which it has not been possible for them to be in operation, a great deal of clerical work has been necessary. I am glad to say that, after delays, many of those projects are now coming on-stream, and it will be possible for the work to be done other than in old-fashioned clerical ways.
§ Lord Stoddart of Swindon:
My Lords, like the noble Baroness, Lady O'Cathain, and the noble Lord, Lord King, I agree that it would be very nice to have a little more time to read a Statement before it is made. Nevertheless, on a first reading I must say that the Statement does not look too bad to me. I congratulate the Government particularly on the progress that they intend to make towards attaining the 7 per cent target for overseas aid. That is very necessary indeed. 1046 I am particularly pleased about the £1,250 million that is to be allocated to Africa by 2007. Is that bilateral aid, or is a third of it going through the mincer of the European Union, so that the EU rather than the British Government will decide some of the priorities? There is a good deal of concern about the way in which the European Union handles overseas aid. I hope that the aid will be direct aid to Africa, and that we shall have every say in the priorities.
§ Lord McIntosh of Haringey:
My Lords, I am grateful to the noble Lord, Lord Stoddart, from our sister party, for his congratulations on the Government's economic policy. Perhaps it might have come well from noble Lords who are still members of the Labour Party—but there we are.
§ The noble Lord is right in saying that the Chancellor has been outstanding in promoting overseas development aid. He has already increased it substantially, has now proposed to increase it to 2008, and—unusually for him—is prepared to say that if the same policies were pursued for another five years we would reach the United Nations target of 7 per cent of gross domestic product.
§ The noble Lord, Lord Stoddart, is right in saying that we are not in control of all our overseas budget and that some of it goes through the European Union. It is a matter of record that the Secretary of State for International Development and the Chancellor have expressed concern about the way in which the European budget is spent. We are determined that as much as possible of our overseas aid budget should be spent in the areas of most need, in the very poorest countries and on the most urgent needs of water, health and primary education. To that extent, I have some sympathy with what the noble Lord says.
§ Lord Brooke of Alverthorpe:
My Lords, I apologise for arriving in the Chamber late, after the Statement had commenced. I also apologise to the House for unwittingly leaving my mobile telephone on.
§ On behalf of Peers on the Labour Benches, I embrace the review with enthusiasm and with great acclamation for the efforts undertaken by the Chancellor. I believe that the noble Lord, Lord King of Bridgwater, was also like myself late arriving in the Chamber for the Statement. It has been said that first impressions can often be wrong. I wonder, in that light, whether the Minister would be prepared to repeat the comments that he made earlier, that invariably the initial reaction of the Opposition to the Chancellor's pre-Budget Statements and on the comprehensive spending reviews has been wrong, as has the initial reaction from independent economic advisers, and the Chancellor has been proved right. Would the Minister care to repeat that so that everybody understands it?1047
§ Lord McIntosh of Haringey:
My Lords, unfortunately I have civil servants who report to me and brief me, so I cannot do the kind of political activity that I would wish to be done and which I am sure could be done. I am sure that my noble friend Lord Brooke is right that I could not only assert but prove, if I had the resources to do so, that the Chancellor has, in every one of the Budgets that he has produced, been more accurate in his forecasts than either the opposition parties or independent forecasters. Someday I shall get to prove it.
§ Lord Marlesford:
My Lords, the Minister knows that I have always been prepared to pay tribute to the Chancellor for the fundamental approach that he has taken to economic policy, particularly in the early years of the two governments over which he has presided. But I have always pointed out that that approach has been based on the sound economic Thatcherite policies to which he has stuck pretty well.
§ Does the Minister recognise that to propose increases in public spending of £61 billion, which is 5.5 per cent of the current GDP of £1.1 trillion, is a very big increase? The source of money for such an increase is very doubtful, because the Chancellor has already had the great savings from unemployment reduction, and the reduction in debt payments. It is unlikely that unemployment will go down further, and interest rates are going up rather than down. When the Chancellor says that the increase is based on savings on people—apart from the fact that the number of people involved in government has increased hugely under the stewardship of Mr Blair—does he recognise that it is likely that the tide is coming in faster than he can bail out the pools on the beach?
§ My final question is quite simple. If it comes to a choice between cutting spending and increasing taxes, which is the Chancellor likely to do?
§ Lord McIntosh of Haringey:
My Lords, when I agreed with my noble friend Lord Brooke that the Chancellor had been a better forecaster than independent forecasters or the opposition Front Benches, I can make a modest exception for the noble Lord, Lord Marlesford. At some risk of heresy, he has expressed support for much that the Chancellor has done over a period of seven years, and I pay tribute to his independence of mind in that regard. But now he is joining the doomsayers—and we shall see who is right.
§ Noble Lords should consider our track record and the arguments that the Chancellor deployed at the beginning of his speech, which I believe to be particularly significant, about what we have saved by our reduction in debt interest and payments for failure—in other words, for unemployment. When the noble Lord has an opportunity, which I know that he has not yet had, to read the White Paper in detail—which I also know, knowing him, that he will do—I hope that he will find that the figures are not only soundly based but extremely cautiously based. I would be glad to discuss those points with him. As was always the case, the assumptions made on public expenditure have been audited by the National Audit Office and, when appropriate, by the Audit Commission.1048
§ I take slight issue with the noble Lord when he says that all the savings that we are proposing are savings on people, exactly for the reason that I have just given—that it is the benign result of years of investment in public services. That increase in capital expenditure in public services has made it possible to have the three-year spending review that I have already commended to the House.