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I know that all sides of the House share the aim of raising the educational achievement of all young people, especially for children from low-income households and disadvantaged backgrounds. This is not only critical for social justice; it is also vital for the competitiveness of the British economy. Young people have always borne the brunt of increased unemployment, and it is the same again this time. The IFS recently reported that,

That is why the education maintenance allowance was designed to encourage young people from less well-off households to participate in educational training after

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the school leaving age. I wish it had been around when I was 17. This allowance is no free lunch. Young people have to turn up, on time and participate fully in their learning agreements. If they do not, then they are penalised by losing their weekly payment. If they do, then a bonus is paid, linked to performance.

The Chancellor has said that the education maintenance allowance is to be replaced by "more targeted support". I should be grateful if the Minister could provide some detail in his response today. For young people contemplating their future, it is important to know as soon as possible what that more targeted support is likely to mean. This is especially important for students who will find themselves studying in the period between the abolition of EMA in 2011 and the introduction of the raising of the participation age to 18 in 2015. For them, the future starts now, and a great number of them will need our help to achieve their full potential. In an era where some cuts are necessary, this sort of support would be one cut too far.

I should like to end by thanking the noble Lords on both sides of the House who have played formative roles in my political life. One thing I do know about the red carpet is that this is a place where old political foes can become the best of friends. And in that spirit I should like to thank the Minister for his work in the Treasury on financial regulation, when he gave invaluable advice to the then Chancellor of the Exchequer and the Labour Government. I wish him well on his return to the Treasury in his new role.

9.01 pm

Baroness Liddell of Coatdyke: My Lords, it is a real privilege for me to respond to the maiden speech of the noble Baroness, Lady Nye. I do not think that either of us believed that this day would come when we met in the old North British Hotel in Edinburgh in about 1978. The noble Baroness was at that time a civil servant working for the then Prime Minister, Jim Callaghan, and I was the general secretary of the Labour Party in Scotland. We were moving towards one of the most difficult general elections that we have ever experienced. Shortly after that, with a certain Gavyn Davies, I wrote a report for Jim Callaghan on the truck dispute that was then causing chaos. For some reason, that report was never given to the Prime Minister and he made the famous "Crisis? What crisis?" speech. However, Gavyn Davies was to go on to do better things and to become the husband of the noble Baroness, Lady Nye.

I can think of no one from this side of the House who would have anything other than the utmost respect and affection for the noble Baroness. She is held in high regard by members of the Labour Party the length and breadth of the country. Always silent, always calm and always good-humoured, in her working life from the 1970s onwards she has worked for four Labour leaders and two Prime Ministers. They were always much better when they took her advice. The noble Baroness has today made what she says is her first public speech. We have heard eloquence and, for the first time in this lengthy debate, we have heard the global financial crisis put into context. Many of us had forgotten the circumstances around it in its detail and it was for the noble Baroness to put it into

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context. This House is much enriched by having her among us and those of us who are her friends are delighted to see her here.

Going on to the context that the noble Baroness set out, I watched the global financial crisis develop from the other end of the world. We have perhaps forgotten the extent to which the rest of the world looked to Britain to provide leadership. That initiative, taken with the Prime Minister of Australia at that time, Kevin Rudd, to make the focus not the G7 or the G8 but the G20, was of real significance. It was a moment when the financial architecture of the world changed, because it involved the emerging markets, many of them critical to our long-term well-being in this country.

Like many noble Lords, I am concerned about the lack of attention to growth in the economy, because growth will be much needed to get us out of the situation that we find ourselves in. The noble Lord, Lord Skidelsky, put it in very blunt terms, but I notice that the Chancellor was celebrating the fact that the recovery has proved to be stronger than we had anticipated. Quite frankly, that was as a result of the Labour Government's policies. I draw to the Minister's attention the fact that a key part of those growth figures are construction figures. Many of those construction figures came as a consequence of actions taken by the previous Government. While I am not in the league of the noble Lord, Lord Skidelsky, I know that in economics there is a very important law: the law of unintended consequences. When the Minister reflects on Sir Philip Green's prescription for the Government to get themselves into a new kind of shape, would he reflect that he advocates getting rid of government property? Now, all of us might think, "Yes, get rid of some of the buildings and sell off some of the stuff that we do not need", but that means £25 billion of commercial property coming to a city centre near you. That is a troubling and disturbing aspect for future economic growth.

I shall move on to an area that is close to my heart: SMEs. I shall talk just a little about tourism. With all respect to the noble Lords, Lord Plumb and Lord Clark, both of whom made very convincing cases for economic regeneration in rural and remote areas through agriculture and forestry, I argue that one thing that can bring rapid economic growth to remote areas is tourism. In this country, tourism is one of our major industries; I should say at this point that I am a member of the board of VisitBritain, the international marketing arm of our tourism industry. Tourism supports 2.6 million jobs. One in 12 jobs in the UK is in tourism and, with over 200,000 small and medium-sized businesses, it already contributes £115 billion, or 8.2 per cent, of the UK's GDP. It is set to be one of the best-performing sectors over the coming decade, better even than some of our technology-led industries.

One reason why I am concerned about tourism in the future-I am not going to whinge about more than a third of the budget being cut from VisitBritain-is that if we do not give rapid support to our tourism industry we run the risk of losing the opportunity of a lifetime. The depreciation of sterling has meant that Britain is a much more affordable marketplace. Allied to that is the run-up to the Olympics in 2012, the

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Commonwealth Games in 2014 and the Decade of Sport. Tourism can get to those parts of the British economy that other economic instruments cannot reach and I urge the Minister to look carefully at the opportunities that can exist for tourism.

VisitBritain has already taken substantial cuts; its aim is to do better with less. Over the past two days, it has been named as the only public sector organisation to come in the top 30 Twitter sites in the UK, as modern marketing tools are used to market British tourism abroad. While the B&B in Truro, the chocolate factory in Oban and the inn in Glenelg cannot market internationally, VisitBritain can. We need to allow our tourism industry to fill the market gaps that are created. Through no fault of anyone, there is market failure in the international marketing of tourism, because it is an agglomeration of small businesses.

I have one final point, although I do not want to take up too much of the House's time. The noble Lord, Lord Haskel, pointed to the supply-side issues that have not been properly addressed in the comprehensive spending review and spoke about innovation centres. Innovation centres are a great idea. They were a great idea in the 1970s, 1980s, 1990s and 2000s. They are a critical way of taking the genius of our universities and turning it into businesses. However, that is not an easy job for the simple reason that, contrary to what many people believe, the banks are an inhibitor to the development of SMEs. Public sector involvement through innovation centres brings in the public sector and its aversion to risk. Raising money for SMEs and business start-ups in high-tech areas is a nightmare. I know; I have done it. There is the dilemma of risk in the public sector. There is an understandable venture capital gap in this country. It takes more to promote an investment of £1 million than an investment of £100 million. Many people set up high-tech businesses based on personal guarantees to banks and the banks are not lending. In conclusion, I ask the Minister to look closely at how the financing of innovative businesses can be secured when we have this dearth of lending from the banks and at how a framework can be created to allow a more adventurous attitude to risk. Without risk, we will not get innovative companies developing.

9.11 pm

Baroness Browning: My Lords, it is a great pleasure to follow the noble Baroness. I apologise to my noble friend the Minister; I very much regret that I arrived just after he had sat down. However, I was here for the opening speech from the Labour Benches and am pleased to say that I heard it in full.

It was a great pleasure to listen to the maiden speeches today from my noble friend Lord Allan of Hallam and the noble Baroness, Lady Nye. I am looking forward to hearing the speech of the noble Baroness, Lady Healy of Primrose Hill, in due course. This is the first speech that I have made since my introduction and maiden speech to your Lordships' House.

The CSR is extremely radical and wide-reaching. We all appreciate that. I expected there to be challenges and criticism of it on all sides of the House; indeed, I

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alert my noble friend the Minister to the fact that I have one or two criticisms myself, on disability, which I will come to in a moment. None the less, I have been surprised by the collective amnesia on the Labour Benches. It is almost as though, after 6 May, the mists of Brigadoon descended over the Labour Party, not just in this House but in another place. I have observed some of its debates on the inheritance-the state of the economy and the state of the country generally as it was left by the outgoing Labour Government. I was in another place for many years. I understand what a bitter pill it is to swallow when you lose office. It takes a little adjustment. Sometimes I think that a period of quiet reflection is not too harmful. However, I have been surprised tonight by the total collective denial that there is a problem of the scale that has required the sort of actions that the coalition Government have needed to make in this CSR.

The thrust of the CSR is absolutely right and the scale of the problem is as outlined. It is not political shenanigans. We have a serious problem. In his opening speech, the noble Lord, Lord Myners, said that the problem with the national economy was sometimes likened to a domestic situation, which he did not feel was appropriate. That may well be the case, but every household in this country understands that, if you borrow and borrow on your credit cards to the extent that you have to take out new credit cards to service the debt on the existing ones, there is a problem that must be addressed. We now need to borrow to service debt that we have already incurred.

The questions-your Lordships have addressed them in this debate-are of the scale, the timing, the measures and the choices. All of them are quite legitimately subject to a debate on how the coalition Government have brought forward their proposals. The main thrust is right, but I will draw to the House's attention some issues about how they are put into practice.

The Government have certain options. They can look at taxation and at cutting expenditure, which, of course, they have done. It is much easier to cancel projects that are already in the pipeline, many of which did not carry a purse of money to fund them, but nationally it is not popular to cut something that has already been announced or of which people have an expectation. However, these are perhaps some of the easier ways to bring down expenditure.

I wish to draw to your Lordships' attention and that of my noble friend the fact that in another place I spent several years on the Public Accounts Committee, where, twice a week, we received well researched and well presented reports from the National Audit Office on matters right across government. The reputation of the National Audit Office, across the parties, was that it was reliable. You paid attention to its findings. I want to talk about the reports on procurement that we received. There is a systemic problem with procurement on larger projects across government departments. It is not just a matter of cutting expenditure, because the Government will still be spending money, as we know; it is a matter of addressing these problems. They go right down to basics. They involve how procurement works, how contracts are issued, how the specifications are drawn up prior to contract, how the project is

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managed-sometimes the project management goes on for many years-and how a project is delivered on time and on budget.

In some departments-I have to name the Ministry of Defence as being the worst-there has been the most outrageous waste of public money. We are not just talking about a few beans; we are talking about big sums of money. If we can address this problem, I believe that it will make a huge contribution to the need for the Government to bear down on waste, on the way in which public money is spent and getting value for money. The House will be relieved to hear that I shall not go into all the issues, but that is something that needs to be addressed.

People who come into politics from a business background, whether to your Lordships' House or another place, often find the legislative process frustrating. There is no doubt that what happens in the two Houses is very different from what happens in the business world. I came from a manufacturing background, having worked for a market leader, after which I ran my own business for 10 years. I found it very frustrating. Often people make comparisons with business, saying, "Business does things this way and we need to be more businesslike". We have not even scratched the surface as regards the way in which the Government do business and procurement. Businesses out there would have gone bust years ago if they had followed the procedures that government departments follow in procurement. Everyone has heard of the classics, such as the big IT project. I am glad to have my noble friend here, who I am sure will point us in the right direction. However, it is not just about expenditure, although we are concentrating on that in this take-note debate; it is about the consequences for those who are the end users of those policies and procurements. I urge my noble friend to take some specialised advice to ensure that, in the future, the Government address these problems and get them right.

Taxation is another arrow in the quiver. As someone who believes that tax should be used as much as an incentive as a penalty, I hope that in the next few years the Minister will bear in mind, in the interests of fairness, the need to ensure that taxation and bureaucracy do not overburden particularly the small business sector, on which I believe he will rely quite considerably for the growth that is being talked about in today's debate. This is where the jobs and growth will come from. One of the big problems that we face in this country is with the growth of small businesses into medium-sized enterprises. Other countries have been much better than us in the past at making that leap from small business to medium-sized business. Again, I ask my noble friend to take a look at the microbusinesses that employ fewer than five people. I particularly draw attention to the requirements on them in providing pensions for staff, but there will be other areas as well. If we really want those businesses to grow, we need to ensure that we recognise that point.

My final point is about disability. I thought that the speech of the noble Baroness, Lady Campbell of Surbiton, was very well made. It is a fact that there is no like-for-like comparison between people who are in residential care and people who are hospitalised. When we talk of residential care, all too often we think of

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very elderly, infirm people who cannot move and whom it would be difficult to take out. However, there are many people who are able get out to lead lives at some level of independence and maintain family contacts.

In that spirit, on disability, I say to my noble friend that one group of 250,000 people are still on severe disablement allowance, a benefit that was stopped in 2001. They were allocated that benefit at the time because they were deemed to have lifelong disabilities. Many of them-most of them, I would suggest-have never been in work. I declare an interest as a carer for one such adult. When we talk about getting people back into work, it is very worrying to me, as a carer. I am not saying that all of them could not be helped into some sort of work, but the nature of their lifelong disabilities-I am speaking particularly about conditions such as autism and people on the autistic spectrum-means that these are not people to whom we will be doing any service if we suddenly turn up one day and say, "It's time for you to go to work after 38 years". I hope that my noble friend will take that into account.

9.22 pm

Baroness Healy of Primrose Hill: My Lords, it is with great pleasure and equal trepidation that I rise to speak for the first time in this House. I thank the Government for giving time for this debate on such an important issue. The CSR will have a great impact on the future of this country and the kind of society we will become.

First, however, I wish to thank the Labour Party for a long and interesting career in politics, dating back to the 1970s. In opposition I worked for great Labour parliamentarians, some sadly no longer with us, notably John Smith, Robin Cook and Donald Dewar. I have also been fortunate to work in government as an adviser to many extraordinary politicians. I wish to acknowledge two women in particular. First, there is the late Mo Mowlam, Northern Ireland Secretary during the Good Friday agreement; and secondly, Harriet Harman, Leader of the House of Commons in the previous Government and a formidable campaigner on behalf of women.

I will always be indebted to my sponsors: my noble friend Lady Ramsay of Cartvale, whose wisdom and knowledge of international affairs are hard to match; and my noble friend Lord Macdonald of Tradeston, to whom I acted as adviser when he was Minister of Transport and again when he was in the Cabinet Office. He is a man of immense talent and wide-ranging experience. To both I am profoundly grateful for their support and guidance on the mysteries and magnificence of this House. I am also delighted to be reunited with many other friends who I have worked for in the past, most notably my noble friend Lord Cunningham of Felling. I am thankful to have been warmly welcomed by the staff and officers of this House. Their reputation for kindness, patience and general helpfulness goes before them. It is well deserved. My family still talk of the day of my introduction. Not about me, I hasten to add, but about the amusing stories our Doorkeepers regaled them with.

My family came from the west of Ireland-from the villages of Barnatra in Mayo and Mountbellew in Galway. They arrived here in London in the 1950s.

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They settled in Primrose Hill in the borough of Camden, where I was born. The welfare state was already making an impact on people's lives and Britain was the beacon of hope for many migrants, just as the USA had been for earlier generations. My grandparents had left Galway to make a new life in America, arriving at Ellis Island, New York, in 1910. They returned to Ireland before the great depression.

I grew up in London. I benefited from the welfare state, free education and the National Health Service. I believe in the importance of maintaining these for future generations. Today we debate what kind of future Britain can look forward to following the global economic crisis. I believe that the previous Labour Government had to incur the deficit to help keep as many people in their jobs and homes as possible. All parties acknowledge the need to tackle that deficit and it is in the debate on how best to do that where opinion varies. Noble Lords have so ably demonstrated that today. There are different views as to how far, how fast and how deep these cuts must go. We on these Benches suggest a different balance between cuts and tax rises to bring down the deficit, boost growth and protect the recovery.

Today, however, I wish to raise some concerns about the possible unintended consequences of the CSR. When I worked for the MP John Cruddas-and here I should declare an interest: he is my husband-I was continuously struck by the absolute determination of many struggling families to do what was best for their children. But the harsh realities of life, like ill-health or loss of work, could trigger a series of events that could lead to family break-up and loss of a home. This is what concerns me with the CSR. For example, housing benefit changes might mean that families have to leave their homes, removing children from schools and away from support networks of extended families, friends and churches. The CSR also announced that the percentage of child care costs covered by tax credits will be reduced from 80 per cent to 70 per cent. This could cost a low-paid worker with two children up to £30 a week, and, after one year, some people will lose their entitlement to employment and support allowance. A family where one adult is in paid work and the other receives ESA could lose up to £91.40 a week. Even if they then claim jobseeker's allowance, they will still lose more than £30 a week.

I am also concerned about the effects of the CSR on carers. A report just published by the charity Grandparents Plus states that welfare reform and spending cuts could penalise the forgotten army of grandparent carers. According to this report, there are 200,000 family and friend carers-mostly grandparents-raising some 300,000 children. They save the Government some £12 billion a year. Over half these carers had to give up work or reduce their paid hours because of their caring duties. A third are dependent on benefits for their income and one in three is on discretionary local authority allowances. Many families could really struggle over the next few years.

I want the welfare state to remain the beacon of social progress and the foundation of a good society-the society that was so admired from the west coast of

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Ireland. One generation on, I am proud to stand in this place on behalf of the party I love. In this House, I will seek to speak up on behalf of those who have most to lose if society's safety net is weakened.

9.28 pm

Baroness Gould of Potternewton: My Lords, it gives me enormous pleasure to congratulate the noble Baroness, Lady Healy of Primrose Hill, on her very thoughtful and excellent maiden speech. I should also like to add my congratulations to the noble Baroness, Lady Nye, for it must be a unique occasion to be able to welcome two such good friends-both of whom I have known for more than 30 years.

I first met the noble Baroness, Lady Healy, when she joined the staff of the Labour Party in the press department in 1978. I think her boss at that time must have been the noble Lord, Lord Mandelson. I worked with her as a colleague for the following 10 years, until she moved over to work here in Westminster-first for the Parliamentary Labour Party, and then as a special adviser to shadow Ministers and Ministers. The noble Baroness has many friends on these Benches because of the long service she has given to the Labour movement, service that we have all appreciated over the years. Very often, though, she has been behind the scenes, but we have known that Anna has always been there giving good advice and support and we all appreciate that enormously. Your Lordships will, without doubt, benefit from the knowledge that she has gained over those years. Although she has a calm and dignified demeanour, do not be fooled. She is very determined and positive of views, which I know will come across in the significant contribution that she will make to your Lordships' House. I congratulate her again and welcome her enormously to our Benches.

Fairness, we were told earlier today, runs through the heart of the Government's decision-making. I make no apology for repeating that there is certainly no fairness to poor families, pensioners, women or the disabled in either the emergency Budget in June or in the comprehensive spending review. It is difficult to comprehend how, using the Treasury's own figures, it can admit that the poorest 10 per cent of the population will bear the brunt of the cuts, and then have the audacity to say that that is fair.

There is another element to the package-the increase in VAT. I need to refer to the Prime Minister. He said-I paraphrase-that an increase in VAT is very regressive; it hits the poorest the hardest. It is a great pity that he has forgotten those words. Nor is it fair that direct support for children is being cut by £66 billion-three times more than the banks. Is it fair that almost half a million low-income families are to be affected by cuts in childcare support and lose up to £30 a week? That may seem to be a small amount to some, but, as my noble friend Lady Sherlock said, for families on low incomes it is an enormous amount of money, which they certainly cannot afford to lose. It is the difference perhaps between being able or not to put something decent on the table to eat. The loss will also make it harder for parents to be better off in work. We have been told about the ladder of opportunity, but where is the ladder of opportunity for those parents? Perhaps the Minister can tell us.

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We have been told that the spending review provides compensating measures and that child poverty will not increase for the next two years. That was an extraordinary statement; we do not want child poverty to increase at all. I do not understand what will happen when the two years is up. Many of the cuts in welfare spending will come into effect after 2012 and reduce the income of families in poverty unless compensatory measures are announced in the interim. Will they be announced?

The analysis by the End Child Poverty campaign makes it clear that,

A consequence of the lowering of standards of living will be that such families will need greater support from health and social services. We also find that for the health service, which we are told is to be protected, the baseline has been changed, and money switched from health into social care, and the personal social services budget moved from the Department of Health to councils, which are to be strapped for cash. What guarantees will there be that the social services budget will survive?

We are told that work pays-and that is right-but it pays only if you have a job to go to. Not only will there be job losses in the private sector, as we have heard, but the Government forecast half a million job losses in the public sector. We have heard that the job losses, on any analysis, will impact more heavily on women, who make up 65 per cent of public sector workers, 77 per cent of the NHS workforce-many thousands of whom will be affected by the cuts in public health front-line services and the abolition of primary care trusts and SHAs-and 75 per cent of local government employees. The Local Government Association predicts that the cuts will mean the loss of many dedicated women workers in local government. These measures are already taking effect. In September, 79 per cent of those newly signed on for unemployment benefit were women. We need to ask why. However, it does not stop there. That loss of income will go on to affect future pensions. Will these women be joining the older women who are currently facing cuts in pension credit, public sector pensions, attendance allowances and carers' allowances?

Many other noble Lords have referred to the effect of cuts in public services. But it is the poorer households and women who need public services the most-because of pregnancy, longer life-expectancy, lower earnings and assets, and assistance in managing caring responsibilities. There are already signs of crucial services under threat, including children's services, support for teenage parents and midwifery support. Similarly, because of women's relative inequality and poverty, women are the main recipients of benefits and tax credits-they receive 70 per cent of tax credits, 60 per cent of housing benefit, and 94 per cent of child benefit. In spite of the importance to women of receiving those benefits, it is proposed that there be a universal benefit to be paid to the main earner in the family, which is almost certainly, in the vast majority of cases, going to be a man. This move will put women's access to an independent income under threat and reverses at a

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stroke all the redistribution from wallet to purse-mostly in recent years, but it was a redistribution that was started with the introduction of child benefit in 1977. That date is fixed in my mind, because myself and other colleagues on these Benches fought very hard with the then Labour Government to ensure that child benefit-which had previously been the family allowance-went from the father to the mother. How important that has been over the years. That independent income has been crucial to so many women and has on many occasions enabled a mother and her children to escape an abusive relationship. That is going to be impossible for her in the future-a very backward step.

The Government insist that it is impossible to say that women will be disproportionately affected by the cuts, because they have conducted an equality assessment of the measures in the comprehensive spending review. The impact assessment on gender that was carried out covered only two of the nine departments. The Government have avoided looking at the gender impact on tax and benefits because they said they could not determine how income is shared within a household. It sounds more like an excuse than an actual fact. Clearly there has been no in-depth analysis, in spite of the law requiring that all public authorities, including the Government, have to assess the impact of their current and proposed policies and practices on gender equality to ensure that neither sex is disadvantaged. The proposals fail to take into account the different barriers to employment faced by women, their particular reliance on benefits and tax credits as social protection, and the value to society of women's employment. If they had done a proper analysis, perhaps they might have been convinced to distribute the burden a little more fairly, to focus a little more on tax cuts as opposed to spending cuts, but somehow I doubt it because, as my noble friend Lady Turner said, it is all about ideology-it is certainly not about fairness.

9.38 pm

Lord Greaves: My Lords, this very great debate has concentrated on four aspects of the spending reductions: the timing, the speed, the size and the distribution. Along with other noble Lords, I want to concentrate particularly on the last of those-the distribution. In doing so, I follow some excellent contributions from the right reverend Prelate, the Bishop of Leicester, and the noble Baronesses, Lady Campbell and Lady Hollis, among others. I want specifically to talk about the situation in local government, and in doing so I declare an interest as a member of Pendle Borough Council in Lancashire.

If there are to be cuts, no one in local government believes that local government should not carry its fair share; the question is what the fair share is. There is an increasing concern and realisation within local government that the sector is perhaps being hit rather worse than others. The figure of 28 per cent over four years has been given as the reduction in the government grants. The problem with local government finance is that it so is complicated that, as the Government have not yet made any crucial announcements about the distribution of the cuts, it is difficult to be certain what will happen. However, there seem to be at least three major problems.

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The first is that the cut to the main grant to local authorities-the formula grant-is to be front-loaded. That will put local authorities in an immediate difficulty because, of the four years of cuts that are to come, the highest cuts are to be in the first year. The treasurer of my council suggests that the cuts will be 10.7 per cent in the first year, then 6.4 per cent in the second year, 0.9 per cent in the third year-which is a curiosity that I do not understand-and 5.6 per cent in the fourth year. My view is that, as the fourth year will be a general election year, that 5.6 per cent cut will probably not happen, but the first two certainly will and they will cause real difficulties.

The second general problem is that, for the very best of reasons, specific grants are being abolished and "rolled up" into the formula grant. The way in which that will impact on individual authorities is problematical, to put it mildly. Many of the specific grants-area-based grants and others, such as the working neighbourhoods fund-have been specifically allocated to authorities on the basis of indices of disadvantage. There is a real danger that, if those grants are wrapped up in the general grant, the authorities that have been defined as being in the most need will miss out the most.

The third problem is that the proportion of council budgets that is accounted for in formula grant and revenue grants varies enormously from council to council. The figures that I was given in a Written Answer just before the summer suggest that the proportion varies from 10 per cent to two-thirds of a council's budget. Most of the councils that you would think of as being in disadvantaged areas-if I may use that phrase-are clearly those that receive a higher proportion of grant. That is for very good reasons: namely, their needs are greater and their local resource base is smaller. However, there is a real risk that, in rolling everything up into the formula grant, the councils that will be hit hardest will be those most in need of support. In other words, the changes in local authority grant will result in a redistribution from poor areas to rich areas, to put it in fairly basic but accurate terms.

For my council and neighbouring councils such as Burnley and Blackburn, which are in the top 50 in the country under the indices of disadvantage, it is suggested that the revenue grant reduction, taken as a whole, may well be over 20 per cent. Similar-sized councils in leafier areas-not all but many of them in the south of England-may get by with significantly lower reductions. This is, I believe, a major test for the coalition Government. If the fears turn out to be true, the coalition will be wide open to accusations of favouring rich Tory areas against perhaps less rich Labour and Liberal Democrat areas. That is not what I am saying, but that is the accusation that will be made and it will be very difficult for people like me to defend it. In fact, I shall be standing up and saying it myself if that happens.

I want to give the House one example of the difficulties caused by the move from specific grants to rolled-up general grants. The example relates to the position of the Lancashire Police Authority-which covers the area in which I live-on police community support officers, or PCSOs. There are 427 full-time

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equivalent PCSO posts, of which 409 PCSOs are in post at the moment. The police authority has started a formal 90-day consultation process with a view to disestablishing all 427 PCSO posts from 31 March 2011. In other words, there is the potential for all the PCSOs to lose their jobs and for the work that they do in the county to be closed down.

The basic problem is that the PCSOs are all funded by specific grants to the police authority rather than from the police authority's general budget. If that grant was taken away and the police authority general budget was secure and not being reduced, the authority might be able to cope, but at a time when the grant towards its core budget is being reduced, the police authority will find it impossible to fund the £10.5 million a year that the PCSOs cost. Some £8.2 million comes from direct PCSO grant from the Government and the rest-£2.3 million-comes from other contributions, many from district councils and unitary authorities within the police authority area that will obviously be under very severe pressure in respect of their own services. Therefore, the relationship between the specific grant and core funding-and whether the new system in which all the grants are rolled up takes account of the existing provision provided by those specific grants-is crucial. We will wait to see what happens.

Why do PCSOs matter? They are the basis of an extraordinarily successful community policing system in Lancashire, which was a pioneer of modern community policing about seven years ago. That system has been rolled out throughout the county and is a fantastic success. Every ward in the county has a small community policing team consisting of a constable called a community beat manager and a community support officer-a PCSO. They act as friends and support for residents. They do an enormous amount of useful work in the community among traders, schools and wherever there are problems. They act as the eyes and ears of the police in the community. There are residents meetings called PACTs-police and communities together-as well as a community safety partnership involving councillors, residents, traders and voluntary groups. It is incredibly successful. It works. I have received two pages written by a local PCSO that have been provided to me by the county's UNISON branch.

What PCSOs do is fantastic. They are involved in everything from keeping a friendly eye on well-known local criminals, and making sure that they know what those people are up to, through to road safety for kids. It works. The levels of local crime-burglaries, drug offences, vehicle crime, criminal damage, less serious assaults and, in particular, anti-social behaviour-in my part of the county and throughout the county have plummeted. PCSOs are there on the ground doing what everybody wants them to do when we talk about bobbies on the beat. They are a modern form of bobbies on the beat. They do not just walk up and down every street in a regulated way; they are part of and work with the community. As somebody who attends the PACT meetings in my ward and works with the local community police, I can say that it really works. The detection rate in Colne at least, which is the highest in the county, is about 40 per cent. That is incredibly high. In the case of serious and organised crime, the PCSOs are the people on the

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ground who have the basic information when something important happens, so we do not have to start from scratch.

Community policing has been a Liberal Democrat talisman policy for many years; the Conservatives have always stood as the party of law and order. These are front-line services-the front line of the thin blue line, if you like-and they are the big society, because the whole community is involved in what goes on. I do not believe that a Government consisting of Liberal Democrats and a majority of Conservatives can possibly tolerate a situation in which the incredibly successful scheme that has been created throughout Lancashire in the past few years is done away with. Building things up takes time; doing away with them can be achieved overnight. I do not expect the Minister to give me detailed answers on this, but I hope that he will bring my remarks to the attention of his colleagues in DCLG and the Home Office.

9.50 pm

Lord Watson of Invergowrie: My Lords, this view has been expressed on numerous occasions in the six or so hours over which we have debated the spending review, but I believe that it bears repeating. Contrary to what we have heard from coalition Ministers-including the noble Lord, Lord Sassoon, in his opening remarks-the measures announced in the spending review on 20 October were not inevitable. In point of fact, the economic crisis is the opportunity that many Conservatives-although I can see just three Conservatives opposite, apart from those on the Front Bench-have been waiting for. That was demonstrated by the crass and vulgar waving of Order Papers at the end of the Chancellor's speech almost two weeks ago.

The coalition has seized the chance to reshape the economy by announcing an £83 billion shrinkage of the state. In the Financial Times on the day after the Chancellor's Statement, Martin Wolf, who is widely considered to be one of the world's most influential writers on economics, dismissed the Chancellor's claim that cutting the fiscal deficit and reducing the share of public spending in GDP was unavoidable. Martin Wolf said:

"This is not so. It was a choice to concentrate so much of the fiscal adjustment on spending. Similarly, the UK government was never Greece or Ireland ... The chancellor presents the hypothesis of looming national 'bankruptcy'. If so, the UK must have been bankrupt for much of the past two centuries".

I am not suggesting that reducing the fiscal deficit could be avoided, but the choice of how and how quickly it should be done is a matter of political judgment-or, perhaps, of ideology. The coalition has adopted the maxim that a good crisis should not be allowed to go to waste. That view is propounded by the Chicago school's spiritual leader, Milton Friedman, who is on record as saying,

He also wrote that, after a crisis has struck,

That helps to explain why the coalition is forcing through a raft of cuts for which it has no mandate.

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The coalition is doing so not because the economy is on the verge of collapse-it is not-but, as the Nobel Prize-winning economist Paul Krugman has said, because,

That point has been made by many noble friends on these Benches today.

Not only does the spending review herald the harshest public spending cuts since the 1920s, but the coalition is using the economic crisis to reign in the state and to reorganise society. I can understand the Conservatives doing that, but my main point is that, to their shame, the Liberal Democrats are allowing themselves to be used in this iniquitous process, which is nothing less than social engineering. Neither party has a mandate to embark on this course or for the string of decisions that have been announced in blatant violation of pre-election pledges, from the abolition of universal child benefit to the privatising transformation of the NHS. That is what most people voted against in May.

Following the months of leaks about cuts that were used to soften up the public with the fatuous theme of "We are all in this together", I would like the Minister to say how exactly the Cabinet and their families-with their trust funds and prep schools for their children-will suffer. We should be told just what sacrifices they feel they will have to make. I will not be holding my breath.

When the Labour Government proposed any policy perceived as affecting the well-off disproportionately, the usual media suspects would characterise it as a class war, but the silence from those same mouthpieces over the past two weeks has been deafening. Just what is different about the coalition attacking the poor? Millions of people really will suffer as a result of these cuts. Over the next four years, Government departments face average cuts of 19 per cent in real terms, of which the heaviest-of at least some £18 billion-will be to welfare, which is targeted at the most vulnerable.

Much has been said and written since the spending review was announced about the distributional impact, but the bottom line is that the Institute for Fiscal Studies-which, incidentally, is described even by the Daily Telegraph as the country's most respected economic forecaster-states:

"Our analysis ... shows that ... with the notable exception of the richest 2% ... the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way".

The IFS is an independent body, whose former director, we should not allow it to be forgotten, is now the head of the coalition's Office for Budget Responsibility.

There are to be deep cuts to public services that are disproportionately used by the poorest households, such as social housing and social care. The Chancellor's insistence that those with the broadest shoulders would bear the greatest burden and that his cuts would hit the richest hardest would be laughable if it were not so serious. His own figures show that the poorest 10 per cent will bear the largest share of the spending review announcements. Even when all tax and spending measures are taken into account, the poorest 10 per cent end up second worst off of all income groups-and that is only because the Government's calculation

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boosts the impact on the top 10 per cent by including the 50 per cent tax rate announced by the previous Government.

The coalition appears to be relying on the private sector to ride to its rescue by hoping for public acceptance of the endlessly repeated falsehood that Labour profligacy created the deficit that the coalition now faces. The facts tell a rather different tale. Britain's budget deficit has mirrored the average deficit rise across the 33 most developed countries. The deficit increased from 1 per cent of GDP in 2007 to 9 per cent in 2009 as tax receipts plunged and benefit payments increased due to the crisis of 2008.

There are many other areas that could be highlighted, were there the time. For instance, why should universities be expected to face deep cuts when we need to maintain the expansion of higher education to help grow the economy? Why should the Government continue to pay to schools and academies a greater amount of money to educate each 16 to 19 year-old than they do to FE and sixth form colleges, despite evidence that colleges recruit a more disadvantaged group of students?

One area that I must highlight-as many have already done, not least my noble friends Lady Turner of Camden and Lady Gould of Potternewton-is the effect of the spending review on women and, by extension, on families. The coalition's cuts will fall disproportionately on women, who are more likely to work in the public sector. According to research by the House of Commons Library, measures announced in the spending review will hit women twice as hard as men. That seems hard to believe, but it is because benefits typically make up one-fifth of women's income as opposed to only one-tenth of men's. For instance, 1 million more women than men claim housing benefit and many of those will be lone parents who now face poverty as a result of the cuts and restrictions about to be imposed. Of the £8.5 billion that will be raised by cutting direct payments to individuals, two-thirds will come from women-again that is revealed by the House of Commons Library. In June's emergency Budget, £5.8 billion was raised from women and £2.2 billion from men. Of the £16 billion in total that is being clawed back through direct tax benefit changes, £11 billion will come from women. Yet we are told the spending review is fair.

Tories and Lib Dems do not seem to understand the way that many poorer families live. Clearly, they believe that supporting families makes them dependent, whereas the reality is that such support helps working parents to become more independent. Everyone knows that women in general live on lower incomes, yet the coalition has chosen to force them to bear a greater share of the burden.

In finishing, I will say a brief word on the effects of the cuts in housing benefit, which has also been referred to by many noble Lords. I just wish that Ministers would admit that housing benefit is not just for the unemployed. Some 300,000 people in employment receive housing benefit. The issue is about much more than a few well-off areas of London-although you would be hard-pushed to know that given the media coverage of the past two weeks-and more than 750,000

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claimants could be affected by the changes to the way local housing allowance levels are calculated. That will involve families in many communities across the UK. Indeed, Department for Works and Pensions figures show that Scotland will be hard hit. Around 40,000 people in Scotland will have their housing benefit cut from next year and will lose £7 a week-over £350 a year on average-because of the changes, even before the 10 per cent reduction for the long-term unemployed is taken into consideration.

On that issue, the coalition has been forced to think again, and rightly so if it genuinely intends that the effect of the spending review should be fair. I have to say that that claim has already been revealed to be a hollow one, as millions of people will, I fear, discover to their cost in the years ahead.

9.58 pm

Baroness Hughes of Stretford: My Lords, it is with great pleasure that I have listened to the maiden speeches tonight. They were all excellent, particularly those of my noble friends Lady Nye and Lady Healy. There were also a number of other very notable speeches on this subject. In the short time that I have, I wish to address the four spurious claims that the Government are making to justify the plans that they have produced in their comprehensive spending review.

The first is that the current crisis is the legacy of the Labour Government's handling of the economy. When the credit crunch started in 2008, as we have heard in great detail from the noble Baroness, Lady Nye, and the noble Lord, Lord Low, Great Britain had one of the lowest debt-to-expenditure ratios among comparable countries. It also had lower debt as a proportion of GDP than the debt which the Conservative Government left us in 1997. It was a time of low interest rates, low inflation and low unemployment. It is quite clear that public spending did not cause the scale of the credit deficit. That was caused by a global financial crisis in relation to which the Labour Government took decisive action, not to shore up the banks as an objective in itself but to protect people's savings, people's jobs, people's homes and livelihoods and to protect businesses. As a result, unemployment rose by only half as much as in previous recessions, and there was a more rapid return to growth, the momentum of which is still with us, just about, in the quarter 3 figures published this week, although it is clearly dwindling because of the lack of a growth strategy from the Government and their slashing of capital projects. Construction is still the main contributor to the growth that we have seen so far.

My noble friend has just touched eloquently on the second claim: that the scale and pace of these cuts are avoidable. In his opening remarks the Minister said that it was about striking the right balance. He is right, but implicit in that acknowledgement is that choices are being made. I have been in government for 12 years and I know that in meeting and solving a problem you always have choices. Generally speaking, you try to make the choices that most fit with your value set, ideological position and political objectives. As several of my noble friends and others have commented today, the Government have chosen to make the cuts

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deeper and faster than necessary. This is a political agenda, not an economic objective, which will have serious long-term consequences for this country and our citizens.

The third claim is that in the midst of these proposals the Government are protecting key public services. This is, frankly, incredible. We need only look back at what happened under the previous Tory Government-this is, of course, a Tory Government despite the fact that it is called a coalition-when Margaret Thatcher's cuts, which pale into insignificance when compared with what is being proposed in this spending review, led to long-term damage for our country. The noble Baroness, Lady Browning, who is not in her place, referred to amnesia. There is amnesia on that side of the Chamber, too, because Members there seem to have forgotten the dilapidated state of schools and hospitals, the leaking roofs, school standards that had flatlined, people waiting 18 months to two years for elective surgery and outpatient appointments, unemployment rising dramatically, youth unemployment hitting record highs, pension poverty doubling during the 1980s and 1990s and child poverty more than doubling. It is inconceivable that the impact of the cuts now proposed will not be even worse than the ones that we saw in the 1980s and 1990s.

The damage the country sustained then was long term and, despite all the improvements and investment that the Labour Government made to redress that damage, we are still left with that legacy in part. Key public services will not be protected; they will be decimated by these cuts. People do not yet understand the depth of the damage that will be done.

The fourth and final claim that the Government are making-again already referred to by many Members-is that the cuts are fair and will fall on the broadest shoulders. I wish to draw attention to their impact on those least able to speak for and protect themselves against the Government-that is, children and young people. Cuts from a variety of different sources will impact negatively on children and young people, and on the most vulnerable children and young people the worst. First, there will be an impact on schools. We have heard about the pupil premium for schools with disadvantaged children. We were told by the Prime Minister and the Deputy Prime Minister that this would be paid for by money outside of and additional to the Department for Education's budget. We now know that the Secretary of State has had to admit that that is not true. He also admitted that the settlement for schools will mean real-terms cuts because there is no element in the settlement for schools to cover the rise in pupil numbers over this period. The IFS has estimated that 60 per cent of primary school children and 87 per cent of secondary school children will experience cuts in their school's budgets.

Secondly, there is the non-school budget, because in order to sustain the settlement for schools, such as it is, the Department for Education will experience a 12 per cent cut in its non-school budgeting, achieved by, and I quote from the Government's document here,

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This means that some of the things that we have not yet heard about, because we have not seen the Department for Education's budget plan, have gone. Support for the strategy to reduce the rates of teenage pregnancy across the country has gone; support for the strategy to reduce the number of young people not in education, training or employment has gone; the Youth Taskforce, working to help some of the most vulnerable young people to reduce antisocial behaviour, has gone; and the City Challenge in Greater Manchester, the Black Country and London to raise aspirations and standards among some of the most disadvantaged children has just been scrapped. Young people's services, support for parents, and support for disabled children and their families have simply all been stopped, and I think we will see a severe impact from the cessation of those programmes.

Thirdly, there is the reduction in local government spending of 7.1 per cent in each of the four years covered by the spending review. I have been talking to a number of chief executives and directors of children's services over the past few weeks who tell me that such is the level of cuts they are facing that their councils cannot protect children's services, that they will be able to preserve only the minimum level of statutory provision, and that a lot of the progress we have seen in local children's services over recent years, with a focus on early intervention and prevention to stop some of those problems escalating, will simply go.

Last but not least, it is families with children, as my noble friend Lady Sherlock mentioned earlier, who will be the biggest losers from the array of tax and benefit changes that are proposed. Page 98 of the document published by the Government says that the negative impact of freezing child benefit and withdrawing it from those who pay higher-rate tax will be offset by the indexation of child tax credit and ensure,

That is simply risible.

What we do not have in the documents produced by the Government is any comprehensive assessment of the cumulative impact of all these cuts from different sources on children and young people. It is not simply about child benefit; it is about the cumulative impact of the four housing benefit changes and the changes to working tax credit, to childcare tax credits and to parents losing their jobs and going on to time-limited benefits, as well as the service issues that I have outlined. It is inconceivable, frankly, that child poverty will not rise as the Joseph Rowntree Foundation predicts. I know that there are Members on the Benches opposite who are also concerned about children, and I hope when the time comes that they will scrutinise all these proposals for their cumulative impact on children and young people.

I also ask the Minister if he will commit in his summing-up to producing a comprehensive impact assessment of all these changes together on children and young people. These cuts will not fall equally across the income distribution but will be concentrated on some families rather than others, so some children and young people will be very severely damaged.

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10.04 pm

The Earl of Listowel: My Lords, I shall endeavour to be brief, as the hour is late. I thank the Minister for his opening remarks and particularly for the emphasis that he put on protecting the vulnerable in society, especially children, in this very difficult time. It is an honour to follow the noble Baroness, Lady Hughes, who championed children, particularly children in care, during her term in government. I acknowledge the support that she gave to support workers and the introduction of newly qualified social worker status, which is so important. I share her concerns.

I understand and applaud the Government's general emphasis on devolving decision-making to those who are nearest the front line, whether they be doctors, social workers or local authorities. I applaud the principle of that. But every principle needs a balance; there is an exception to every rule. I recall particularly the role of Louise Casey, employed by the previous Government to tackle the problem of rough sleeping. During her three years as the homelessness tsar-I followed her progress from the very beginning-she managed to reduce the level of rough sleepers on our streets by a third. She could do this because she was able to knock heads together; she could act strategically. Although charities had been doing a good job for many years, they were not succeeding in getting adults and young people off the streets. They were pushed to work together and achieve their goal. Some issues require a strong central focus if they are to be addressed.

I also share the noble Baroness's concerns about councils not being able to protect the most vulnerable children. Each year, inspections show the difficulty surrounding thresholds for access to services. Those thresholds will inevitably be pushed up if those services are not funded adequately.

I ask the Minister to consider the impact of budget cuts particularly on child and family social work. I know that it goes against the grain of all current policy, but will he consider ring-fenced funding to support such work? I ask him to monitor closely the impact of cuts on child and family social work numbers and on child and family social work caseloads. Will he examine the early intervention guidance-I welcome the early intervention fund that the Government have introduced-to examine how that might benefit child and family social workers?

History tells us what happens when child and family social workers are neglected. It is arguable that the whole profession has been demoralised after decades of neglect. In evidence to the inquiry led by my noble friend Lord Laming into the death of Victoria Climbié, Haringey Council was described as being overwhelmed by the demands on its child protection service. The principal social worker involved was young and inexperienced, and had above the recommended caseload.

The right honourable Ed Balls, the Secretary of State for Children and Families in the previous Government, said shortly before the last election that if he had one regret, it was that he had not done more for social work earlier. Tim Loughton MP, when shadow Minister for Children, published a report for the Conservatives, assisted by the noble Baroness, Lady Morris of Bolton, entitled No More Blame Game,

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considering how the profession of child and family social work could be given the status it deserves. Many have welcomed the measures that the previous Government and the new coalition have taken to raise the status of child and family social work, to address its variable quality and to recruit and retain sufficient good social workers.

In the past week, the chief executive of the Children and Family Court Advisory and Support Service, Anthony Douglas, has told me that, every month so far this year apart from June, there has been a rise in the number of children being taken into public care. Paul Ennals, chief executive of the National Children's Bureau, has told me that the number of children classed as at risk, the number of children for whom care orders are being sought and the number of children for whom a court order is secured are all rising. In a time of recession, and following the Baby Peter case, the burden on child and family social work increases. At the same time, local authorities will see a cut of 28 per cent in their budgets-7.1 per cent per annum.

I welcome what the Minister said about the £2 billion additional funds for social care. However, that is somewhat of a small amount compared with the amount being cut. I am sure that local authorities will not wish to touch child protection and wish to support children in care. However, many may feel obliged to, as the noble Baroness, Lady Hughes, said. One risk will be the decline once again in the quality of child and family social work.

Indicative of the success of past investment is the rise in the number of children leaving care to enter university. About 10 years ago, Professor Sonia Jackson put this at 1 per cent of care leavers-a shocking figure. Recent research from the Institute of Education has pointed to a rise to 9 per cent of care leavers now attending university. That is well below the 40 per cent national average, but still a 900 per cent improvement on 10 years ago. I hope noble Lords will agree that that is very significant and good progress.

One of the many highlights of my short career in the Lords was becoming acquainted with a young woman who was in her final year at Oxford University. She had left care with no qualifications, but she had been befriended by the head teacher of an independent sixth-form college, who supported and encouraged her. She kindly corresponded with me and wrote to me when she successfully graduated. It is so marvellous to think that there are possibilities for more young people to have that sort of achievement. A significant section of those young people might have done so much better in their education and careers. I am afraid that we have let them down; we have not met the challenge of supporting them to achieve their goals. Many of them are very intelligent but they have not had the support to have a go at it.

If the quality of child and family social work is compromised, fewer young people in care are likely to make it to university. We are also likely to have more cases similar to that of Baby Peter. The reputations of local authorities will once again be besmirched. Some of the stain may also stretch to the Government, undoing the work that the right honourable Iain Duncan

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Smith and others have done to show that this Government serve all and have a particular interest in vulnerable children.

What can the Minister do? First, I ask him to consider ring-fencing some funds and offering them to local authorities for investment in their child and family social workers. Every rule should have an exception; child and family social workers provide a service almost exclusively to the vulnerable. There are no confident, eloquent, well educated middle-class parents to take up their cause. Savings in social work could be made in several ways; the noble Lord, Lord Newby, alluded to some in adult social care. He may wish to know of the work of Paul Fallon when he was director of services at Barnet, where he reduced the vacancy rate of social workers from 30 per cent to 3 per cent in three years. By taking money in advance, he could take so many social workers employed on a temporary basis and turn it into a permanent basis, thereby saving a great deal of money for the buyer. There is also the model at Hackney, which has been employed for the past two or three years and has produced a saving of 5 per cent and turned around cases much more quickly, so saving money in that fashion. So there are means to save money, but even with these, a service starting from such a low base must be at grave risk in the face of such severe cuts. I urge the Minister to consider a ring-fenced fund for child and family social work for the next three years to help social work to survive the transition to the new funding climate.

The Options for Excellence ring-fenced funding for children in care provided 10 years ago for a three-year period has contributed to the dividends that I have described, and was very much welcomed at the time.

I ask the Minister to consider the guidance on the early intervention fund. I welcome Her Majesty's Government's introduction of such a fund to protect early intervention with families. I ask them to consider whether guidance on this fund might encourage local authorities to apply it to child and family social work, to child protection and to supporting children in care.

If child and family social workers are not replaced as they move on, if vacancies and caseloads rise, we will have more Victoria Climbiés and Baby Peters. I ask the Minister to consider how he will work with local authorities to prevent this happening. Also at stake are the reputations of local authorities and this Government.

10.20 pm

Lord Graham of Edmonton: My Lords, at the end of such a long debate, one tends to hear phrases such as, "Everything that can be said, has been said". However, if you listen carefully, you hear a small voice, which is mine, saying, "Yes, but not by everybody". I intend to make a contribution not relying remotely on the forensic way in which my colleagues have dealt with the case put forward by the Minister. They were brilliant. When I heard the noble Lords, Lord Myners, Lord Peston, Lord Haskel and Lord Watson, and the noble Baronesses, Lady Hollis and Lady Hughes, among others, quite frankly I thought that they had done my job for me. They have all collectively made this old man very happy. We have on the Labour Benches

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now-we have had this before, but it has been renewed since the election-a bevy of politicians who I can sense are going to make a great impression here.

The main point that I want to deal with is that the case that the Minister and other colleagues on his side of the House have made is based on an untruth. That untruth is that the situation economically rests wholly at the door of the Labour Government. In my view, that cannot be sustained. The case that was made devastatingly in a wonderful maiden speech by the noble Baroness, Lady Nye, and supported by the noble Baroness, Lady Hughes, indicated quite clearly the genesis of the matter. Having been in both Houses for more than 30 years, I can read very well the tactics of the Government. A noble Baroness said to us that there has been a bout of amnesia on this side of the Chamber. Well, I think that I know where we got it from; it came wafting from the Benches over there. It does not do the House any good when we are seen to be so one-sided and so tardy in recognising the past that it is completely ignored. What has been said is not true.

When we look at the economic situation that was inherited by this Government, or left by the last Government, we are led to believe that the stewardship of this economy was unique. What about Ireland, Greece, Spain, Portugal, Germany, France and Italy-all European countries and all victims of the global collapse in financial support? If one is going to point to anyone in this country who had a share in the demolition of financial support in this country due to the subprime mortgage fiasco, one should not point at the people whom I represented, or my family, or the community that I work in. It was the financial sector, especially the banks. They were greedy, all right? Lax regulations might have allowed them to act as they did and no doubt we will hear ever more that it is the intention of this Government to tackle the greed of the banks. I will believe that when I see it. I will believe it when the banks squeal-not the pips-that they are being unfairly treated. If any one sector in our community carries responsibility for landing us in this trouble, it was the banks. Completely forgotten by the other side are the activities of Gordon Brown and Alistair Darling in persuading the rest of Europe to get behind economic policies to such an extent, as the noble Baroness, Lady Hughes, said, that they rescued not just the banks but the people whose money was in them. They were saved then, so the Government have a difficult job in trying to persuade us that they are on the right lines.

The Labour Party admits, as I certainly do, that we did not win the election. The Conservatives did not win the election and the Liberal Democrats did not win it. We are where we are with this situation. Quite frankly, it is not my job to thrash about and try to pick points in that way. When a professor was asked what he thought the effects of the French Revolution would be, he said, "Well, it's too soon to say". That is my comment on the coalition. I wish it well, sincerely, in solving the economic problems of the country because I have as big a stake in it under this Government as I did under the last, but it will have to go some in order to get out of this. The phrase was used earlier, "We have to keep our fingers crossed". That is right. I believe that the Government, with the best of intentions, are going about this in the wrong way.

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I do not have the time to deal with or duplicate the arguments that have been made, but I make the point that people are looking forward-not with relish-to the economic situation of the country. Because of my age, I can remember back to the 1920s and 1930s. For nine years-most of the 1930s-my dad was on the dole and in 1937 my mum and dad had 37 shillings a week to feed seven of us. Children at that time were worth two shillings a week; there were five of us, so 10 shillings came into the house. When I left school at the age of 14, I was the head boy and had passed my secondary exams but could not go on because, like many children, although I had the ability and had earned it, my circumstances were such that the cost of having to buy boots, shoes, PT kit and other things was beyond us. I had to wait until 50 later for the Open University. I am not looking at him now but I know that the noble Lord, Lord Shipley, will be pleased at the reference: I got my degree from the Open University and an honorary degree thereafter. When Harold Wilson was asked, "What would you like to be remembered by?" he said, "The Open University"-that was the one thing. If I was looking at the one thing out of many from the Labour Government that I would be proud to be associated with, it could be equality, the minimum wage or a number of things. It is a canard to say that all we are concerned about now is the economic situation that we inherited.

Yesterday was a red letter day for me, because Newcastle beat Sunderland 5-1. I sang, as I always do. My boys think that it is not on, but whenever Newcastle is on I join in with the crowd and sing the "Blaydon Races":

"Gannin' alang the Scotswood Road".

I was born on Scotswood Road. The Geordies will be as resilient as other communities throughout the country. They will be able to survive, come what may. All I say to the Minister and his colleagues is: I give you a fair offer. If you stop telling lies about us, we will stop telling the truth about you.

10.29 pm

Viscount Eccles: My Lords, it is complicated to follow the noble Lord, Lord Graham of Edmonton. I will not even compete on the subjects of the Scotswood Road and the Geordies, although I have a daughter who lives in Newcastle.

Listening to this debate, what can one conclude? Certainly that the Government have made a big call, sometimes described as a gamble. They have made a call to reduce and reform public expenditure, most notably welfare expenditure, to end the structural deficit within the Parliament and to set a date for peak national debt. In doing so, they have predicted that economic growth will continue and will provide the necessary returns. Of course, nothing is certain. Unfortunately, Governments of any complexion do not command economic growth; they only set the scene. To expect supply-side policies, however elegant, to do the trick, as the noble Lord, Lord Myners told us, is to deny all our post-war experience.

Is there an alternative big call on offer? Yes, possibly. It seems to be unreconstructed Keynesianism-basically, a call to leave well alone. "The deficit is not too big,

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the debt is sustainable. Protect aggregate demand and all will work itself out. There is no need for reform or change".

This is not the time for a detailed analysis, but I have three points. No two recessions have ever been the same. Therefore, we cannot rely on past experience alone. Our economic circumstances are so different from those of the 1930s that we must be cautious before reading too much into a Keynesian solution. Then, the world was not global. Then, manufacturing was a much larger proportion of our economy. Who will march from Jarrow today? Then, the real incomes were a quarter of those of today. Then, we believed in high interest rates and a strong pound, no matter what.

The timing of the coalition coming into power demanded decision. People expected firm action and they were right to do so. The Government have made their call. They are right to have done so and need our full support. If they get that support, the economy can continue to grow. Science and technology have seen to that. There are plenty of opportunities. Confidence will ensure that they are seized.

10.33 pm

Baroness Farrington of Ribbleton: My Lords, as other noble Lords have said, this stage of the debate is quite difficult. However, I refute what the noble Viscount, Lord Eccles, said, when he said that others say that nothing should be done. I cite the noble Lord, Lord Bilimoria, who said that it is a question of timing, severity and pace, and the current Government have got it wrong.

The noble Lord, Lord Stewartby, who is currently not in his place, spoke about people talking about gloom and doom in 1981 which did not happen. When I was on the Lancashire County Council with the noble Lord, Lord Greaves-now a member of a government party-Lancashire was knocked for six by government policies in 1981. Some of the Conservatives down in London never noticed it happen. Lancashire County Council's response concerned the discretionary element of local government-educational maintenance awards-particularly for young people in areas such as Skelmersdale. It is pretty horrific to see that progress being withdrawn.

The reduction referred to in local authority budgets is approximately 27 per cent over four years. The noble Lord, Lord Greaves, referred to the community and officers in Lancashire. All around the House, noble Lords know about the various local initiatives that have come from the flexibility of that part of local authority budgets where they can choose what to do. We are about to see the decimation of that across the country.

I have news for the noble Viscount-he may have missed it yesterday-but the Minister for children in another place suggested that local authorities could save money by recruiting volunteers to complement the work of social workers. I listened very carefully to the right reverend Prelate the Bishop of Leicester and others in the Chamber. I am a passionate supporter of and I declare a non-pecuniary interest in the Scouts and the youth service in Lancashire and I have local

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government experience. If we look to the big society to replace social workers, to replace all the services currently undertaken at local authority level, things will go wrong.

The day the Prime Minister was expanding on the big society, I happened to be in the garden at Dolphin Square speaking to a Republican Presbyterian minister from a small town in Texas. He said to me, "It's very funny in this country. Ronald Reagan had that idea. He came to visit our community in Texas and we worked it out that, to replace the publicly funded services, a church with the population of 200 regular communicants would have to raise $600,000". That is the issue.

The issue is not that those of us who argue with the concept of the big society are opposed to voluntarism. Like people across this Chamber, we have all been involved in the voluntary sector, worked with it and supported it. The right reverend Prelate the Bishop of Leicester was quite right to say that there is a lot going on out of there, but there is a great deal that can be damaged out there. The history of the charitable sector and true localism-by "true localism" I mean not cutting the discretionary budgets of local authorities-is innovation, initiative and meeting demand, which has then been taken over as a general universal right. My heavens, this Government's budget, with its crippling timing, pace and severity, is about to destroy what centuries of people have put right. My heart goes out to the right reverend Prelate the Bishop of Leicester on the issue of family and community stability. I represented part of Preston called Ribbleton for years. Terrible actions cause damage to the whole community and a whole generation of workers was wiped out because Courtauld moved in to get a grant and then moved out when the grant stopped and it was cheaper to go somewhere else. In that community we have some severe problems. The majority of people are stable, local people. They go to local churches. They will work with voluntary organisations. They help each other out. They visit the elderly down the street. However, if you start smashing their right to live in their social housing, all that will happen is that you will take the guts out of what is good in that community. That will be replicated up and down the country.

I did not think I would ever criticise the noble Lord, Lord Newby, for this in this Chamber but today the noble Lords, Lord Plumb and Lord Newby, raised the issue of public sector funding. The noble Lord, Lord Plumb, was probably the most honest; he got very close to saying, "What about more money for agriculture?". The noble Lord, Lord Newby, said that the previous Government were spending too much money. My heavens, I look around this Chamber, where people have said, "Why can we not have more money for cleaning up the sea? Why can we not spend more on footpaths? Why can we not spend more on roads? Why can we not spend more on trains? Schools want more". This has come from all around the Chamber. When we were in government the Conservatives and Liberal Democrats never once stood up and said, "When will this Government stop spending money on the things we think are important?".

I accept that growth is critical. I accept that reform is necessary-not reform imposed by Whitehall but reform through innovation at local level. Yes, there

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should be fairness. But, please, as we go through what will be a very grim experience-not for me or, I suspect, for many people in this Chamber-can we add the qualities of honesty and transparency?

10.42 pm

Lord James of Blackheath: My Lords, I do not know what you have done to deserve me this late in the evening but I am afraid that is where it is. It has been a fascinating day. I particularly enjoyed the comments of the noble Baroness, Lady Browning, on the subject of "Brigadoon", which was the first play I ever saw in the West End. I do not think she delivered the punchline. The whole point about "Brigadoon" was that it came out of the mist for only one day in every 100 years. That is a lovely idea for the Opposition.

We have heard today a great many tales of woe and dismay about the future, and some of optimism from this side. I am concerned about where the common ground is in that. One of the lessons of what is now quite a long life is that nothing is ever quite as bad or quite as good as you expect. It is probable that there will be a little more common ground between us than we might foresee at the moment. We might assist that process because growth will be what brings the two sides together. The more growth we can achieve, the more scope there will be to deal with some of the greater calamities that might occur unforeseen-since everything is unforeseen in politics.

I will talk a little about some of the growth opportunities that we might be able to harness and what we can do. As I have mentioned before, one of my great messages is a lesson from Sir Kenneth Cork, who taught me most of what I know about corporate rescue. It is that you cannot rescue a business that does not have a successful past. Anything that does not have a successful past is a failed start-up. Get rid of it and concentrate on the businesses that have a successful past. Where, today, are the businesses with a successful past? They are languishing in the intensive care units of the banks. They cannot get out because most of them have been the victims of expanding their capacity beyond the demands of the marketplace. That is a very expensive situation to get out of once you are in it. It was done with some dexterity and considerable success in the early 1970s through the initiatives that were forthcoming from three Is: investment in industry. One of the great tragedies of our economy at present is that we do not have three Is functioning in that form today. Boy, do we need them.

I am very much a believer in the principle of the collective collapse of generic groups of businesses as entities. Let me give some examples. At the present moment this year, we have probably lost half a million cars in our British export market. They would have been a very big additional factor to the economy, both in production-the wages that would have gone to the people who built them-and in the export value they would have had. Why? It is because the banks played their usual dirty trick a year or two ago: they saw that there were big markets outside-big back-orders-so they let the businesses have the money that they needed to fund the delivery of the order books that they had. The orders came in; they took the cash, reduced the facilities and the automotive component industry did

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not have the working capital to gear up for the massive turn to the diesel engines, which were demanded, and the British export market could not maintain the export requirement necessary to maintain its position on the international scene.

That has largely been corrected now but a similar problem may well happen. The next big crisis is going to come in the second week of February next year when the huge crisis that comes cyclically every year afflicts the retail sector worse than ever. It is already bereft on the high street-with shuttered shops and redundant staff, and a very dismal sight it is. What happens in the banking industry is that it knows that in the first two weeks of February every year, all the credit cards that have been used to buy goods going into Christmas pay, and the retail industry has the lowest borrowings of the year. The banks lie in wait and they grab them. Remember Woolworths? Who is coming next?

So we need someone who can take a grip on a general strategy to save the retail industry from another calamity. One of the great regrets I have at the moment is that the person who would best be able to do that is Sir Philip Green, and he is doing something else. I hope that the Government will hold on to him, and once he has actually finished his present task, he will be told to go and cherry pick the entire retail industry languishing in the hands of the banks, and put together the next version of British Home Stores as a government subsidiary which needs funding and which can be imposed on the banking industry by grabbing each bit, despite the fact that there will be minority bank interests that will not want to sell out for the benefit of the major bank interest, which will get the cream of the equity conversion. That is what three Is should exist to do, and what it did so brilliantly before, and that is why we need it back now.

Another element of the world out there at the moment which is potentially waiting for the pratfall of a massive collective bankruptcy is the food processing industry. The more the accent is moved from the small corner shop to the big grocers, the more production has been stepped up by the food producers to satisfy the ever-increasing demands for cheap food coming through the grocery chains. Of course, they have fallen into the trap again of funding themselves to too high a capacity for the market demand with the result that the grocers can rub their hands with glee and say, "We can screw the margins down so tight you won't be able to breathe" and the suppliers are going to go collectively "pop" at some point in the next few months, because they will not be able to keep up and there is a big social factor coming. We will have the present dependence on cheap food to keep some sort of society structure fed, but we will actually end up being forced up on prices as the industry goes out of business in terms of its ability to keep supply going and prices are forced up in the grocery chains. This is going to be another calamity coming, and we need to have a top-down view as to what to do with it.

I have given your Lordships three examples of why I think we need something, but the creation of the three Is along the lines that I have been talking about would be of the order of a £5 billion cheque required

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to do it. However, we do not have £5 billion; we do not have half of £5 billion to put in to the creation of this at the moment, so what do we do about it? At this point, I am going to have to make a very big apology to my noble friend Lord Sassoon, because I am about to raise a subject that I should not raise and which is going to be one which I think is now time to put on a higher awareness, and to explain to the House as a whole, as I do not think your Lordships have any knowledge of it. I am sorry my noble friend Lord Strathclyde is not with us at the moment, because this deeply concerns him also.

For the past 20 weeks I have been engaged in a very strange dialogue with the two noble Lords, in the course of which I have been trying to bring to their attention the willing availability of a strange organisation which wishes to make a great deal of money available to assist the recovery of the economy in this country. For want of a better name, I shall call it foundation X. That is not its real name, but it will do for the moment. Foundation X was introduced to me 20 weeks ago last week by an eminent City firm, which is FSA controlled. Its chairman came to me and said, "We have this extraordinary request to assist in a major financial reconstruction. It is megabucks, but we need your help to assist us in understanding whether this business is legitimate". I had the biggest put down of my life from my noble friend Lord Strathclyde when I told him this story. He said, "Why you? You're not important enough to have the answer to a question like that". He is quite right, I am not important enough, but the answer to the next question was, "You haven't got the experience for it". Yes I do. I have had one of the biggest experiences in the laundering of terrorist money and funny money that anyone has had in the City. I have handled billions of pounds of terrorist money.

Baroness Hollis of Heigham: Where did it go to?

Lord James of Blackheath: Not into my pocket. My biggest terrorist client was the IRA and I am pleased to say that I managed to write off more than £1 billion of its money. I have also had extensive connections with north African terrorists, but that was of a far nastier nature, and I do not want to talk about that because it is still a security issue. I hasten to add that it is no good getting the police in, because I shall immediately call the Bank of England as my defence witness, given that it put me in to deal with these problems.

The point is that when I was in the course of doing this strange activity, I had an interesting set of phone numbers and references that I could go to for help when I needed it. So people in the City have known that if they want to check out anything that looks at all odd, they can come to me and I can press a few phone numbers to obtain a reference. The City firm came to me and asked whether I could get a reference and a clearance on foundation X. For 20 weeks, I have been endeavouring to do that. I have come to the absolute conclusion that foundation X is completely genuine and sincere and that it directly wishes to make the United Kingdom one of the principal points that it will use to disseminate its extraordinarily great wealth into the world at this present moment, as part of an attempt to seek the recovery of the global economy.

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I made the phone call to my noble friend Lord Strathclyde on a Sunday afternoon-I think he was sitting on his lawn, poor man-and he did the quickest ball pass that I have ever witnessed. If England can do anything like it at Twickenham on Saturday, we will have a chance against the All Blacks. The next think I knew, I had my noble friend Lord Sassoon on the phone. From the outset, he took the proper defensive attitude of total scepticism, and said, "This cannot possibly be right". During the following weeks, my noble friend said, "Go and talk to the Bank of England". So I phoned the governor and asked whether he could check this out for me. After about three days, he came back and said, "You can get lost. I'm not touching this with a bargepole; it is far too difficult. Take it back to the Treasury". So I did. Within another day, my noble friend Lord Sassoon had come back and said, "This is rubbish. It can't possibly be right". I said, "I am going to work more on it". Then I brought one of the senior executives from foundation X to meet my noble friend Lord Strathclyde. I have to say that, as first dates go, it was not a great success. Neither of them ended up by inviting the other out for a coffee or drink at the end of the evening, and they did not exchange telephone numbers in order to follow up the meeting.

I found myself between a rock and a hard place that were totally paranoid about each other, because the foundation X people have an amazing obsession with their own security. They expect to be contacted only by someone equal to head of state status or someone with an international security rating equal to the top six people in the world. This is a strange situation. My noble friends Lord Sassoon and Lord Strathclyde both came up with what should have been an absolute killer argument as to why this could not be true and that we should forget it. My noble friend Lord Sassoon's argument was that these people claimed to have evidence that last year they had lodged £5 billion with British banks. They gave transfer dates and the details of these transfers. As my noble friend Lord Sassoon, said, if that were true it would stick out like a sore thumb. You could not have £5 billion popping out of a bank account without it disrupting the balance sheet completely. But I remember that at about the same time as those transfers were being made the noble Lord, Lord Myners, was indulging in his game of rearranging the deckchairs on the Titanic of the British banking community. If he had three banks at that time, which had had, say, a deficiency of £1.5 billion each, then you would pretty well have absorbed the entire £5 billion, and you would not have had the sore thumb stick out at that time; you would have taken £1.5 billion into each of three banks and you would have absorbed the lot. That would be a logical explanation-I do not know.

My noble friend Lord Strathclyde came up with a very different argument. He said that this cannot be right because these people said at the meeting with him that they were still effectively on the gold standard from back in the 1920s and that their entire currency holdings throughout the world, which were very large, were backed by bullion. My noble friend Lord Strathclyde came back and said to me that he had an analyst working on it and that this had to be stuff and nonsense. He said that they had come up with a figure

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for the amount of bullion that would be needed to cover their currency reserves, as claimed, which would be more than the entire value of bullion that had ever been mined in the history of the world. I am sorry but my noble friend Lord Strathclyde is wrong; his analysts are wrong. He had tapped into the sources that are available and there is only one definitive source for the amount of bullion that has ever been taken from the earth's crust. That was a National Geographic magazine article 12 years ago. Whatever figure it was that was quoted was then quoted again on six other sites on the internet-on Google. Everyone is quoting one original source; there is no other confirming authority. But if you tap into the Vatican accounts-of the Vatican bank-you come up with a claim of total bullion-

Lord De Mauley: The noble Lord is into his fifteenth minute. I wonder whether he can draw his remarks to a conclusion.

Lord James of Blackheath: The total value of the Vatican bank reserves would claim to be more than the entire value of gold ever mined in the history of the world. My point on all of this is that we have not proven any of this. Foundation X is saying at this moment that it is prepared to put up the entire £5 billion for the funding of the three Is recreation; the British Government can have the entire independent management and control of it-foundation X does not want anything to do with it; there will be no interest charged; and, by the way, if the British Government would like it as well, if it will help, it will be prepared to put up money for funding hospitals, schools, the building of Crossrail immediately with £17 billion transfer by Christmas, if requested, and all these other things. These things can be done, if wished, but a senior member of the Government has to accept the invitation to a phone call to the chairman of foundation X-and then we can get into business. This is too big an issue. I am just an ageing, obsessive old Peer and I am easily dispensable, but getting to the truth is not. We need to know what really is happening here. We must find out the truth of this situation.

10.54 pm

Lord Shipley: My Lords, back to the spending review, which is understandably a tough settlement for the public sector. The reasons for cutting the overall deficit are clear in the face of the largest budget deficit in peacetime history. Cuts, however, need to be fair and deliverable.

I declare my interest as a member of Newcastle City Council and a vice-president of the Local Government Association. This is because I wish to concentrate on the impact of the spending review on local government: the overall cut, its front-loading to the first year, 2011-12, the distribution of the cuts through the spending formula and, finally, place-based budgeting, which I believe must now be speeded up.

Councils in England will have an average loss of grant of 7.25 per cent in real terms for each of the next four years. This will be accompanied by new financial freedoms and flexibilities as part of a decentralisation and localism agenda. Those new powers will be welcome. However, the level of savings required for local government is higher than had been anticipated and the front-loading

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of the savings into 2011-12 makes the settlement extremely challenging. There is a real cut of 28 per cent over the four-year period, despite growth in funding for a council tax freeze and £1 billion extra for social care. The formula funding in the CSR also includes further grants which have been rolled up into the baseline. Put simply, comparing the existing formula grant with that in 2014-15 without those transfers or the new adult social care and council tax support funding shows a real cut of 36 per cent in the formula grant.

Of particular concern is what appears to be a very large reduction in the existing formula grant in 2011-12-the first year of the settlement. It is reduced by £3.5 billion, or 14 per cent in cash terms and approximately 16 per cent in real terms. This is approximately double the average cut of 7.25 per cent quoted as part of the spending review by the Secretary of State.

My concern is compounded by the abolition of the working neighbourhoods fund. The ending of this grant was not, so far as I can see, included in the Chancellor's Statement on the spending review, in the Treasury's executive summary, in the Secretary of State for CLG's letter on the spending review or in any of the regional analyses of the spending review. I am unclear whether it has been included in the impact assessment included in the spending review document. The only certain reference appears to be on page 48, paragraph 2.35, of the main spending review document:

"As a result of this settlement, programmes including the Working Neighbourhoods Fund, Growth Area Funding and the Thames Gateway programme will end, in order to rationalise funding streams, make savings and take a more disciplined approach to Government spending".

It is unclear which of these three reasons relates to the working neighbourhoods fund grant.

The fund has been used across the country to tackle worklessness by investing in voluntary sector partnerships, thus securing additional leverage and ERDF matched funding. It has helped to address community health and community safety issues. It has tackled economic deprivation and has targeted resources to those young people not in education, employment or training. The fund, worth £0.5 billion, has vanished. With substantial funds now flowing through to the voluntary and community sectors, the loss of the grant could have a serious impact on the viability of some of these organisations, which appears contrary to the desire to support and promote the big society and the third sector. As examples of the scale of this loss, Birmingham will lose £37.1 million, Manchester £27.7 million, Bradford £12.5 million and Leicester £8.3 million. There are also significant losses for London councils-Hackney at £12.2 million and Newham at £11.9 million. The north-east of England will lose £73 million, including £9.2 million from my own council. In total, 65 councils in England stand to lose. In the absence of the working neighbourhoods fund, we need to be much clearer about how the needs of areas of high deprivation will be addressed.

We have heard quite a bit recently about the need to do more with less. There is no doubt that we can, so long as we define carefully what we mean. For example, I doubt that we would do more adult social care if we had less money to spend on it. That we could do more

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with the same or the same with less is certainly true, but more with less in adult social care? I doubt it. As more money has been found for it-£2 billion by 2014-15-because of pressures on the service, it seems that these doubts are more generally shared.

Nevertheless, doing more for less would most certainly apply across the public sector as a whole in terms of place-based budgeting. The Local Government Association has concluded that £100 billion could be saved over five years if councils, and thus local people, were put in charge of spending on all front-line local services, overseeing economic regeneration, planning, housing and regeneration, home energy efficiency, managing flood and climate risks, adult skills, local transport, primary healthcare, policing and probation and support into employment for the long-term unemployed and workless, most of which currently lie outside local government's immediate responsibilities.

England has become too centralised and I welcome plans for the localism Bill later this month and for the first-phase pilots in 16 areas of England from April next year in community budgeting in some service areas. However, in my view, these pilots in localism are insufficient in scope and will prove too slow at meeting the challenge of budget reductions. We should never confuse localism with the atomisation of England, where central government continues to control local decisions by controlling the budgets directly through spending departments rather than handing the power and responsibility to local government. Silo central management with silo central cuts is not localism, but it is what will happen unless councils get additional powers more quickly.

There are three issues that I hope my noble friend will consider. First, there is a need to protect areas and people more deprived than others through the revenue support allocation, but how will that be done? Secondly, there is a need for real devolution to local councils to empower them to deliver more for less. How soon might this be addressed? Thirdly, why has the cut in formula grant been front-loaded in year one, well above the average of 7.25 per cent each year for four years? Is that front-loading wise?

Overall, councils will continue to have some of their income from council tax, fees and charges, which are not being cut. However, the rising costs for local councils, not least because of pension costs, general inflation and future workforce remodelling, require understanding and support to ensure that they do not compound the problems of cutting the grant and front-loading that cut into 2011-12.

11.07 pm

Baroness O'Loan: My Lords, we have heard much about the seriousness of the position in which the United Kingdom finds itself and the hard decisions that have to be made. Equally, there is no doubt that savings can be made, although often with some pain. It is important that the pain be managed.

First, I associate myself with the compelling and robust remarks of the noble Baroness, Lady Campbell, on the proposed removal of the disability allowance for those in care. She is right.

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There are three further issues to which I want to refer. The first is the situation in Northern Ireland. At this juncture I refer to the effect of the Troubles on the people of Northern Ireland. In 2009, living standards were around 80 per cent of the UK average, while 22 per cent of those of working age have no qualifications, compared with 12 per cent in the rest of the UK. The Troubles had the greatest effect in disadvantaged areas. According to the latest figures, the largest inequality gaps between disadvantaged areas and the Northern Ireland average were evident in alcohol and drug-related deaths, which were 121 per cent higher, in admissions for self-harm, which were 94 per cent higher, in teenage births, which were 80 per cent higher, and in suicide, which was 73 per cent higher. This comes as no surprise, for the suffering of these areas was and continues to be extreme. It is in that context and in the context of the employment situation, as in so many other contexts, such as the ongoing and increasing dissident republican violence, that Northern Ireland will face the proposed cuts.

The current situation is that some 28.5 per cent of our population is economically inactive for a variety of reasons, as opposed to the UK average of 23.2 per cent. Some 32.3 per cent of all employees are in public sector employment-a figure that is significantly higher than the 21.1 per cent in public sector employment in the rest of the United Kingdom. That situation, as noble Lords know, has arisen in part from the Troubles and the understandable reluctance of private sector investors to invest in territory in which there was a risk of Troubles-related violence, such as bombings, shootings, kidnapping and extortion. The consequence is that we have a significantly larger reliance on public sector employment than the rest of the United Kingdom. PwC, in research commissioned for the Northern Ireland Assembly, predicts a reduction in public sector employment of 41,200. The local private sector has continued to be slow to grow. Growth, such as we have had, has been largely in low-value jobs, such as in call centres. PwC estimates that Northern Ireland, with its existing high unemployment levels, could be facing potential job losses in the private sector of 5 per cent. There has been discussion of the possibility of a reduction in corporation tax, which would significantly improve the situation.

However, the consequence of the current situation associated with the 40 per cent reduction in capital spend over the next four years is that Northern Ireland will be particularly vulnerable by comparison with the rest of the United Kingdom. Given the vulnerability of so many people and given that the decisions as to how the cuts will be applied will rest with the devolved Government, it will none the less be profoundly important that the Government adhere to their commitment to fairness in relation to the reduction in spending on welfare. The impact of some of the proposed cuts on those who suffer from higher levels of physical and mental illness and disability and who are so much more likely to commit suicide will be very hard. It seems that across the United Kingdom there is an element that from those who have so little, much is to be taken.

Over the years of the Troubles, during direct rule, there was a consistent underspend on infrastructure in

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Northern Ireland. Our water and sewerage system was neglected for years and now requires massive investment to maintain levels of health and safety consistent with the first world. Our roads and transport system are significantly underdeveloped. Parts of our schools and hospital estate are in very poor condition. The cuts in capital spending will impact massively on the ability to sustain the infrastructure that is critical to society. I ask the Government to review the effects and extent of the proposed massive cuts in capital spending, with a view to alleviating some of the hardship imposed, consequential on the combined effects of the revenue and capital cuts on a part of the United Kingdom that has suffered so much.

There is one final issue to which I wish to refer and I crave noble Lords' indulgence. It involves relatively little cost, but it is profoundly important. Today, digging is beginning on a beach in Waterfoot in County Antrim as the Independent Commission for the Location of Victims' Remains seeks the body of 21 year-old Peter Wilson, who disappeared from his home in Belfast in 1973. The commission was established by Acts of Parliament here and in Ireland and is highly respected by the community and the families of the disappeared. It has achieved some remarkable results in profoundly difficult circumstances. On Friday night, in pouring rain and high winds, Peter Wilson's family and friends and a group of local people gathered to pray for the return of his body for Christian burial.

Of the 16 missing people, seven have been recovered and buried. One more body was found two weeks ago and is thought to be that of 24 year-old Gerard Evans, who disappeared while hitchhiking in 1979. Eight bodies are still missing. Two bodies have been found this year, but there are concerns that funding will cease this year as a consequence of the cuts. This is historic business relating to the time when Northern Ireland was governed in its entirety from Westminster. I ask the Government to ensure that, despite all the current fiscal difficulties, if further information is received about the location of the remains of any more of the disappeared, funding will be made available to enable the necessary searches. In UK terms, it will not involve huge spending, but the expenditure will further enhance confidence in the commitment of the United Kingdom to the often forgotten victims of the Troubles.

11.13 pm

Lord Eatwell: My Lords, this has been a remarkable debate. There have been some very fine speeches, mostly from these Benches, but also from the Benches opposite. We heard three remarkable maiden speeches from the noble Lord, Lord Allan of Hallam, my noble friend Lady Healy of Primrose Hill and my dear and noble friend Lady Nye.

Two questions have been central to the whole debate. The first is whether this policy is necessary and the second is whether it will work. Is it necessary? That depends on an assessment of the economic state of the nation and, in particular, the Government's inheritance from the previous Labour Government. Let us reflect on that inheritance for a moment. In 2007, before the recession struck, the economy was growing steadily at a little under 2.5 per cent a year and maintaining the continuing steady growth that characterised Labour's

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decade in office. Interest rates were lower than in the US and the cyclically adjusted fiscal deficit-as chart C6 of the Government's Budget Report shows-was less than a quarter of 1 per cent of GDP. Crucially, the ratio of public debt to GDP was, at 36 per cent, the lowest in the G7 and well below the 42 per cent that Labour had inherited from the previous Conservative Government. This was a time, as many noble Lords have reminded the Minister, when the main plank of the Conservative Party's economic policy was a commitment to match Labour's spending plans.

In response to the recession, the Labour Government acted decisively, devising the much copied model for rescuing the banks, cutting taxes and accelerating expenditure, particularly on construction. There were two main results. First, in the very depths of the recession, which, given the size of our financial services industry, hit Britain particularly badly, unemployment was the lowest in the G7 countries other than Japan. Secondly, as a result of the anti-recession policies, the deficit grew rapidly, faster than in any other country, although, because we started from such a strong point, even today it is still the lowest of the large G7 economies.

The strength of the British economy going into the recession meant that even in the face of a severe fall in tax revenues the Labour Government could afford to stabilise the financial sector to save jobs and to save businesses. When the Minister sums up, perhaps he will say what he would have done differently. Would he have spent less and taxed more? How much deeper would he have wanted the recession to be?

In his Budget of March this year, my right honourable friend Alistair Darling put in place a plan for growth and deficit reduction. The OBR Pre-Budget Report states that,

and in that fiscal year public sector debt reaches 74.4 per cent of GDP-still lower than any other major G7 country today.

The noble Lord, Lord Sassoon-he was echoed by the noble Lord, Lord Newby-is fond of telling your Lordships' House that Labour has no recovery plan, yet in the CSR Statement Mr Osborne cited the impact of Labour's plans and even costed them. He said:

"I have examined this proposal carefully and I have consulted the published documents of my predecessor".-[Official Report, Commons, 26/10/10; col. 965.]

Was the Chancellor making it up? No, he was not. It is the noble Lord who has been making up this fairy tale.

What has happened as a result of my right honourable friend's March Budget? Everything has turned out better than expected. Debt is lower than predicted and growth is higher. This Government's inheritance was an economy on the path to recovery. This year to date, as a result of Labour policies, the economy is growing at an annual rate of 3.25 per cent and is set to beat the target of halving the deficit in four years.

What was the new Government's balanced assessment of their inheritance? The new Ministers declared Britain "bankrupt" and "shattered"-that was a Liberal

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Democrat, by the way-and even, as a Tory Treasury Minister said, a "basket case". This hysterical nonsense became the considered foundation of economic policy. The party opposite seems to have entered the most dangerous realm of all-they believe their own propaganda. The hysteria has produced the policy before us today. At its core is the attempt to eliminate the deficit in four years, even at the immediate cost of lower growth and higher unemployment-hence 25 per cent cuts in total expenditure, heavily weighted towards cuts in welfare. Yet by 2014, the Budget Report states that there is a 50 per cent chance that growth will be at the level that Labour's plans would have achieved. How is that possible with the size of these cuts?

The predicted performance, the very core of the Government's policy, depends crucially on a fast and sustained recovery by the private sector to fill the gap left by the fall in public sector spending, and not of course on growth in private consumption; that is cut by higher taxes and unemployment. Instead, private sector investment and house building are forecast to contribute more to the growth of the economy than they did even in the good times before the recession.

Will it work? A little history may help us. As we all know, Tories love cutting the public sector. That is what they came into politics to do and that is what the noble and learned Lord, Lord Howe, did in his Budget of 1981, as the noble Lord, Lord Stewartby, reminded us. As he also reminded us, in response, 364 economists issued a statement that,


That statement has been much derided because, as we all know, the economy grew after 1981. However, what is not noticed is that "present policies" were not continued; they were radically altered. The next five years witnessed the most dramatic change in monetary policy since the war, resulting in an extraordinary explosion of consumer borrowing. Consumer demand filled the gap left by government cuts.

Can history repeat itself? It cannot in the liberalisation of credit-that has been done; nor in lower interest rates-they cannot go any lower; nor, of course, in growing consumer demand. As my noble friend Lord Myners pointed out, there is only one monetary policy weapon left: quantitative easing. I have severe reservations about the strategy of maintaining demand by quantitative easing. It may keep interest rates down at the short end, but the lack of long-term bonds is seriously increasing the riskiness of insurance companies and pension funds. It may mean that there is more cash in corporate hands, but will they spend it on investment when expectations of growing demand are so depressed? Is quantitative easing simply pushing on a string? In truth, no one knows.

The other leg of the Government's policy is their claim to have increased confidence. Confidence in the commitment to cuts, yes; confidence in the loss of jobs, yes. I know that the noble Lord is fond of fairytales but will the confidence fairy really wave her magic wand over a growing Britain? In truth, no one

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knows. That is why this policy is a huge gamble. For the sake of Britain we pray that it works, but there must be a high probability that it will not; as Mr Osborne says, there is no plan B.

We have the answers to our questions. Is the misery and destruction of this policy necessary? No, it is not; Labour had set Britain on a growth path to recovery. Will it work? No one knows, least of all the party opposite. What we do know is that vital political and economic debate in this country is debased by the Government's hysterical fantasies of bankruptcy and financial collapse and by their failure to recognise the strength of the policies put in place by Alistair Darling. Labour dealt with the recession and laid the foundations for recovery. It is the responsibility of this Government not to squander that inheritance.

11.23 pm

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, today we have had an important debate on the Government's spending review and I thank everyone for their contributions. I add my congratulations on the three notable maiden speeches. The hour is late and I will pick up on only a few of the points raised today. I have listened carefully and I will write in response to many of the detailed points.

Two weeks ago my right honourable friend the Chancellor of the Exchequer stood in another place and set out a clear plan to deal with our debts and to put the nation's finances back on a sustainable path. When we came to power we inherited an economy that was in turmoil, with no clear strategy for recovery, no ideas for reform and not a single penny of savings having been identified. That was at a time when we were borrowing £1 for every £4 we were spending. I do not know who runs the household budget for the party opposite, but it is not sustainable. We were, and are still, running the highest deficit in our peacetime history, the highest in Europe and the highest in the G20. We can wrap this up in all sorts of statistics and economic theory, but the simple fact is that Britain was not living within her means and the world knew it. That is why last year the IMF warned that we needed to accelerate the deficit reduction, and the World Bank, the OECD, and the Governor of the Bank of England all agreed. So in May we announced immediate reductions to in-year spending, avoiding the sovereign debt crisis that was engulfing the eurozone; in June we set out our emergency Budget, returning credibility to the nation's finances; and this October we have had the spending review, bringing years of irresponsible borrowing to an end. We have had to tackle the deficit and it has been unavoidable, but the decisions behind the reduction in the deficit have not been unavoidable.

We have made choices and we have chosen to spend our money on the areas that matter most to Britain: the education of our children, the healthcare of our people, and the infrastructure that sustains a prosperous economy. As I mentioned at the start of today's debate, underpinning all our decisions have been three guiding principles. The first of those principles is the need to support growth, and I am struck by the contrast today between the optimism-

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Lord Foulkes of Cumnock: We have sat through nearly eight hours of debate to which a large number of Members have contributed. Would it not be courteous to this House if the Minister actually replied to the debate instead of repeating the speech he gave earlier?

Lord Sassoon: I am struck by the contrast of the optimism that we have heard today from businessmen in this House and those who are not businessmen but have clearly been talking to business people on the one hand, and the pessimism on the other hand of the academic economists and others who, even though we have had three quarters of strong growth, want to see disaster coming round every corner. I do not make any judgment about who is responsible for the growth, but I think we can agree that we have had three quarters of strong growth. Yes, the recovery will be choppy, but we have heard from my noble friend Lord Bates just how business in the north-east of England is looking forward and generating jobs for the future. We have heard similarly from my noble friend Lord Plumb about how agriculture will play its part. My noble friend Lord Allan of Hallam has explained how the use of data and technology will assist the recovery. These are the pointers that show us how the economy is going to generate sustained growth. The noble Lord, Lord Eatwell, keeps saying that nobody knows. It is the businessmen of this country who write letters to the papers, urging us on with the deficit reduction we are set on, who know how the recovery is going to be sustained for the future.

While I do not agree with the doubts of noble Lords opposite about the overall judgments made by the Government, I do agree with some of the noble Lords opposite in a lot of what they said-the noble Lords, Lord Myners and Lord Haskel, for example, on the need for better infrastructure. That is precisely why we added nearly £9 billion of expenditure on infrastructure in this spending review. I agree with them on the need for investment in innovation, which is why we are investing £220 million in innovation centres and why we are investing £1 billion in the critical new technology of carbon capture and storage. Similarly, my noble friend Lord Newby identified science and apprenticeships as critical to growth. That is why we are protecting science spending in cash terms and why we are significantly gearing up on the number of apprenticeships compared with the plans of the previous Government.

Overall on growth, I was particularly struck by the contributions of my noble friends Lord Lamont of Lerwick and Lord Stewartby. They remind us that Conservative Governments have been here before, that Conservative Governments have taken us out of recession and rebalanced the economy, and we will do it again. For example, in the early 1990s, the public sector was reduced not by 490,000 but by 690,000 employees. At the same time, in the 1992 to 1996-7 period, the private sector generated 1.7 million jobs. I have every expectation-Members opposite may not-that the private sector again will rise to the challenge.

The second principle that I set out at the beginning is that our choices should be fair. We have heard some powerful speeches today, particularly from the noble Baronesses, Lady Hollis of Heigham and Lady Campbell

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of Surbiton, reminding us just how difficult it is to reshape the welfare system in the radical way that we intend at a time of considerable retrenchment in the public finances. I shall take away the points that they and others have made. In particular, I note carefully the concerns of the noble Baroness, Lady Campbell, about the mobility component of disability living allowance.

The spending review focuses support on those who need it most. It shifts the focus from welfare payments to services that improve social mobility in the longer term and to work incentives. The Government have sought to protect the most vulnerable. Working-age women, for example, tend to benefit disproportionately from health spending, which we have protected, and older women also benefit from additional resources for social care.

The universal credit will clarify and increase work incentives. Work will pay and will be seen to pay, but we must not rush the universal credit. As the noble Baroness said, it will take us two Parliaments to do that, because it is a difficult project and we must get it right.

We have also heard a lot on how young people will progress from care to university-points were made in different ways by the noble Earl, Lord Listowel, and the noble Baroness, Lady Nye. The Government are concerned to make sure that young people from the most disadvantaged homes get every opportunity. We are encouraging social mobility through maintaining Sure Start and extending early-years care. From 2012-13, we will introduce for all disadvantaged two year-olds substantial school premiums. The Government are also protecting the ability of those on lower incomes to go into higher education, including through a scholarship fund of £150 million by 2014-15.

Baroness Farrington of Ribbleton: My Lords, will the Minister care to fill in a little gap concerning the 16 to 19 year-olds?

Lord Sassoon: As I have said, we are coming forward with a £150 million fund that, by 2014, will enable those on lower incomes in that 16-to-19 age group to transfer into higher education.

Lord Knight of Weymouth: I have no wish to delay the House, but the Minister cannot be allowed to get away with that. The noble Baroness's question was about 16-to-19 year-olds in schools, but he gave an answer about access to higher education, which is the next phase. The concerns expressed during this debate by the noble Baroness, Lady Nye, were about the abolition of the education maintenance allowance. What is his response?

Lord Sassoon: My Lords, one of the responses is that if we give children who would not otherwise have the opportunity to go to the best universities the ability to look forward to a fund that will enable them to do so, that is one way in which we will help disadvantaged children, right through the chain, from the start, through higher education and beyond. In that context, the £2.5 billion pupil premium will be another critical component.

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Baroness Farrington of Ribbleton: Will the pupil premium be taken from funding for those young people aged 16 to 19 in schools?

Lord Sassoon: The pupil premium will be used to ensure that those schools that have a particular proportion of disadvantaged children will get a premium to ensure that there is an appropriate rebalancing.

Lord Knight of Weymouth: My Lords-

Baroness Anelay of St Johns: My Lords, I remind the House that it is a courtesy for a Minister to give way during the debate to answer questions. It is not a courtesy then to interrupt repeatedly. The House has had a long and testing debate and I am sure that we will return to these issues in detail in departmental debates.

Noble Lords: Oh!

Baroness Anelay of St Johns: I do not need to protect my Minister. My Minister is here to protect the economy of this country.

Lord Sassoon: My Lords, I have got all night. I am very grateful to my noble friend. It is late, and we will have an opportunity to come back to these matters again. Specific funding for 16 to 19 year-old learning will be announced in the statement of priorities for the Department for Education later this year, so we will have opportunities to come back to that.

I move on briefly to one or two further points on reforms to our public services. We will leave no stone unturned in our search for waste, while we devolve power and funding away from Whitehall. I was very struck by the contributions by my noble friends Lady Browning and Lord Newby, who reminded us just how much more we can get from Government by better procurement and cutting waste. It is in those ways that we will be able to target expenditure going forward on those who need it-whether that is for 16 to 19 year-old education or those with disabilities. We have to remember at all times that the attack on waste continues to be a high priority.

Rightly, concerns have been expressed about the transitional effects of the job losses from the public sector. The Government are also very concerned about easing the transition, which is why we have announced the initiative such as the £1.4 billion regional growth fund.

I conclude today's debate by saying that the decisions that we have taken have restored credibility to our public finances and stability to our economy. When we came to power, this coalition Government did face the worse economic inheritance in modern history. We have had to make tough choices-

Baroness Royall of Blaisdon: My Lords, the House will forgive me for delaying the Minister once more, but I thought that the noble Lord, Lord Shipley, and others raised incredibly important issues to do with local government funding in the forthcoming year. Would the Minister care to reflect or answer those questions?

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Lord Sassoon: A lot of points were raised today, and I said at the outset that I cannot address them properly today. On local government, one critical issue is that we have removed almost 5,000 targets. Of course local government will live within lower spending settlements, as the great majority of central government departments have to do, but we are balancing that by lifting a huge burden of ring-fencing of their decision making, which will enable them, within what is of course a lower settlement, to have much more power to decide where the money goes, without the heavy hand of Whitehall bureaucracy on them.

We are investing in growth, in schools and in the health of our people. We have cut welfare, we are cutting waste, we have made sure that everyone pays their fair share-

Lord Myners: My Lords, the Minister is getting close to the point where he will not answer any further questions. He quite correctly said that there are some issues that he will have to go away and reflect on and reply to in writing. However, there was one contribution from the government Benches that was targeted specifically at the Minister, which alleged incompetence and lassitude on the part of the Minister, and those were the comments from the noble Lord, Lord James. They were very specific and I think the House deserves a response on the issue that the noble Lord raised. Clearly, the noble Lord has access to the solution that, with one leap, will take all the Government's problems of financing to a better place. The Minister has clearly been remarkably bad at responding to the noble Lord and we look forward to the Minister's explanation now.

Lord Sassoon: I am very grateful to the noble Lord, Lord Myners. He had great trouble keeping a straight face. I have to say that I took extremely seriously my noble friend Lord James of Blackheath's suggestions

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that there were people who could help us out with our financial difficulty. The noble Lord, Lord Myners, thinks it is all a joke. I have been in detailed discussions over the past number of weeks with the noble Lord, Lord James of Blackheath, and of course we take seriously anyone who wants to invest in our economy. I know many people believe that there will be great opportunities in our infrastructure programme to invest in rebuilding our networks to underpin growth.

Baroness Farrington of Ribbleton: On a minor point of information, were any of the Minister's Liberal Democrat noble friends present at any of these meetings?

Lord Sassoon: My Lords, if we start getting into who was present at which meetings at this hour of the night, we will never get home. I do not start counting off who is a member of which party in coalition Government meetings. That seems to be an obsession of the opposition party.

I will conclude briefly. It has been a very difficult and challenging spending round but we have made sure, as far as we possibly can, that everyone pays their fair share. We have taken the country back from what was-I am happy to say it-the brink of bankruptcy.

Noble Lords: Oh!

Lord Sassoon: My Lords, our plan will help drive growth in this country. Our plan will create the jobs of the future and it will build the more dynamic, more prosperous and more sustainable economy that Britain deserves. I beg to move.

Motion agreed.

House adjourned at 11.43 pm.

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