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Lord McIntosh of Haringey: My Lords, my noble friend asked first about the golden rule. However, he over-simplified it grossly. He said that revenue should exceed expenditure. The golden rule states that it should exceed expenditure over the period of the economic cycle--the difficulty being that we do not know what the economic cycle is. My noble friend is being, uncharacteristically, too simplistic.

He asked what would happen in a worst case scenario: if there were to be a shortfall in revenues or an increase in demand for expenditure. The estimates that we have made are extremely cautious and conservative. They have been audited by the National Audit Office. Even after that, we have erred on the side of pessimism rather than optimism. Therefore I do not believe it would be appropriate for us to be warning departments now about a matter for which we have fully provided in the projections and allocations that we have made.

My noble friend asked whether the new Cabinet committee will involve changes in responsibilities within the Treasury. I am sure that he will await, as I shall, with interest the Prime Minister's decisions on that matter in due course.

My noble friend asked about a "Barnett formula mark II", for which he understandably has a concern. We made it clear last year that we would continue the Barnett formula, particularly in the context of Scottish and Welsh devolution. It works, it is well understood by what are called the home countries, and we have no particular plan to change it.

My noble friend also asked about the number of government reviews taking place. If we examine the White Paper, we see the result and completion of major reviews that have taken place over the past 14 months and which have resulted in the interdepartmental spending programmes to which there has been no reference in this debate but which form an important and valuable part of the Government's proposals.

Lord Peston: My Lords, I congratulate my noble friend and, through him, my right honourable friend the

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Chancellor of the Exchequer on this tremendously important Statement. That said, it is a terrible state of affairs when a major Statement of this kind, containing enormously important policy initiatives, is not debated in this House. We can spend only 20 minutes on it, and we have to share that time with my noble friend the Minister. I do not say that with any disrespect to him. When I think of how much time we have wasted on ludicrous legislation over the past few weeks and the fact that this House will not be debating an incredible number of important initiatives, I feel very sad. That point might be noted by the usual channels.

I cannot have a great row with the noble Lord, Lord Higgins, on the classification of the accounts, on whether the policy is contractionary or expansionary and, above all, on leaks--except to say that I strongly believe that there should not be any leaks, because all documents should be placed in the public domain immediately they are produced, even though that would put at least one very important journalist out of business.

First, I wish to ask my noble friend whether there is a document called the Comprehensive Spending Review? Shall we receive a bigger document which we can read in due course which would contain a good deal of the detail in which we are interested?

My second question was raised by my noble friend Lord Barnett. The Statement says that:


    "current spending will grow by no more than 2¼ per cent."

It does not say "per annum" so I wonder whether it means "per annum". It also does not say "at constant prices". Does it mean that? Those are specific questions.

With regard to the departments, I welcome the three-year approach to public expenditure. I totally support my noble friend's view that those of us who favour public expenditure, as I do, have a particular responsibility to support those who wish to see resources used efficiently. There is no argument about that. As a result of the Statement, I ask my noble friend whether it will bring to an end the second-guessing of the departments by the Treasury. In particular, will the departments be set free to manage the resources that they are given so that they can both manage them efficiently and be brought to account? Can my noble friend give me the answer?

I entirely support the extra funds for science. I have some questions on which my noble friend may wish to write to me. Will the new level be a plateau to which science will grow, as I hope? Alternatively, will it simply be a once-for-all change which means that we will have another crisis in science financing before we can turn round? I certainly wish to know the answer to that.

One of the document's great initiatives is the new educational maintenance allowance. Some of us have been looking for this for 25 years on grounds of both efficiency and equity. It has never been obvious why one could find money for university students but none for 16 year-olds. I am slightly confused; in one part of the Statement it is said that the Government will introduce it and in another it is said that if it succeeds they plan to introduce it nationally. The first statement seems to imply that the allowance would apply to

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everyone, so I do not understand the second statement that if it succeeds it would be introduced nationally. Could we be given the answer to that?

As my noble friend is well aware, I could produce many more questions but it would be unfair to other noble Lords who wish to speak. However, we ought to have a chance to debate such matters in detail.

6.1 p.m.

Lord McIntosh of Haringey: My Lords, I am sorry that we only have 20 minutes, but it always seems that some part of the 20 minutes is taken up by people complaining that we only have 20 minutes.

My noble friend asked whether there is a document. There is indeed and it is called: Modernising Public Services for Britain: Investing in Reform. It is available in the Printed Paper Office and will be followed by a series of documents to be produced between now and the end of the month by each individual department. It would certainly not be appropriate for the Chancellor of the Exchequer to set out or present the detailed expenditure plans of each department. Those will be presented by the appropriate Secretary of State in due course. All we could do this afternoon was give the financial framework in which those spending plans will be formulated and a flavour of the targets which the Government will set for departments.

My noble friend asked whether the growth was in constant prices. Yes, of course it is. We are talking about real growth, although it may vary between years.

The issue of management by departments is extremely important. My noble friend was quite right to raise it. Our intention is set out clearly in Modernising Public Services for Britain and also in the document entitled Aims and Objectives which sets out the departmental aims and objectives for each department and each agency. It is our intention that departments should be held to account, as private businesses are held to account. They should say what they are going to do and know what money they have to do it with. If they cannot do it within that sum then they are in trouble because the targets are firm and agreed between the departments and the Treasury. They will have to be adhered to.

My noble friend asked about the educational maintenance allowances. The Statement said that the first step would be pilot projects, but that they would be followed by national implementation if--as my noble friend and all of us hope--it is shown that educational maintenance allowances encourage greater staying on in education by students after the age of 16.

6.4 p.m.

Lord Marlesford: My Lords, I welcome the whole approach that the Government have taken towards public spending. In its methodology it very much builds on the remarkable changes which my noble friend Lady Thatcher introduced during the 18 years of Conservative government. In particular, it does so through such avenues as the private finance initiative--a huge change. I note from the publication to which the Minister referred that that is to be enhanced and

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increased. Most important, in my view, that is to be done by judging new expenditure against old expenditure rather than new expenditure against new expenditure, so that resources can be shifted to today's priorities.

Having said all that, I found what the noble Lord, Lord Barnett, said rather ominous. I am afraid that I very much agreed with him. The Minister knows that the OECD economic report for June anticipated that economic growth in the United Kingdom will be 1.7 per cent. of GDP for 1998--only half the 3.4 per cent. that it was in 1997. If that is the case, I wonder whether the Government have been wise to put forward major increases in public spending--desirable and popular though they may be. I ask the Minister whether it is not harder in political terms to cut spending than it is delightful in political terms to increase it. It might not be the fault of the Government, it might be world affairs, but if the economy develops a significant downward rate of growth and the Government are forced to choose between increasing taxation or cutting the new spending plans, can the Minister give me the assurance that the Government would not increase taxation as the noble Lord, Lord Taverne, seemed to indicate? If they were to do so, it would shoot out of the water the whole of the sound approach the Government have been taking on economic policy.


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