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Mr. David Ruffley (Bury St. Edmunds): It is impossible to have an efficient economy if the biggest single spender in that economy is itself grossly inefficient. Last week's comprehensive spending review will pour billions of pounds into an unreformed leaky public sector bucket. It will pour an extra £10 per household in real terms per day, or £3,650 a year, in extra money. Spending as a share of national income in this country is rising at precisely the time that it is falling in other European Union countries. If the Chancellor carries on in the way that he is doing, within 10 years, the share of national income taken up by public spending will converge with the EU average. That is not in the national interest.
I want to show that, behind the tiresome rhetoric of money for modernisation and investment tied to reform, lies an old Labour model, not a new one. The Chancellor's model is, in fact, about 50 years out of date. I also want to suggest a modest and positive Conservative proposal as an alternative, in which the state remains the key funderalthough not on the incontinent new Labour levels that we saw last weekbut not the central provider chasing ever-illusory national targets. The Conservative vision will demand more genuine competition and choice for the citizen and the reform that is essential for a more responsible civil society and a wealth-creating economy. Above all, it will produce a set of reforms that never forgets that those most let down by failing public services are often the poorest in society, who have the least opportunity to opt out, unlike the middle classes.
The great public services were designed in the decade after the second world war, when resources were very scarce. For practical and moral reasons, a consensus arose across society whereby the state would be the prime funder and intervene to ensure that rationing was delivered equitably across all sections of society. That consensus was of its time, and it has broken down and been overtaken by the realities of modern life. With increasing prosperitydriven, I am delighted to say, from 1979 onwards by the necessary supply-side reforms of Mrs. Thatcherliving standards rose. That brought a rise in consumer culture, which is desirable, and a rise in voters' demands for more responsiveness and flexibility from the great public services. Those voters now know that those services are failing.
In his statement last week, the Chancellor invited us to believe that the wants of our citizens can be met by huge public spending increases. Sadly, that logic is hideously flawed. The Chancellor is shifting the balance of the economy in favour of public sector activity at the expense of private sector activity, and in so doing he is going against international trends.
Mr. Salmond: Before the hon. Gentleman leaves that point, can he tell us whether the current percentage of public expenditure in relation to GDP is higher or lower than it was in 1983 during the golden age of Baroness Thatcher?
Mr. Ruffley: It is roughly the same, or perhaps even slightly lower, than in 1983. The hon. Gentleman must stop picking convenient dates. When my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) left office after his hugely distinguished tenure as Chancellor of the Exchequer, with record low levels of unemployment and inflation, falling debt and growing employment, the share of GDP was just under 40 per cent. That is the answer to the hon. Gentleman's question, but he must stop being selective about his dates. He is getting like Government Front Benchers in that respect, and I do wish that he would grow up.
Unfortunately, most commentatorsand I am included in this listlook at what the Chancellor did in his two preceding comprehensive spending reviews. What has he done? In the middle of the so-called three-year fixed period, he has added more money to the totals that were allegedly fixed. No one believes that this Chancellor will stick to the same figures for 200405 and 200506 that were published in his documents last week. Why should anyone believe him this time when he has bust the limits in the past two spending reviews? As Andrew Dilnot of the Institute for Fiscal Studies has said:
It is also regrettable that this Chancellor publishes no assessment of the benefits of increased spending as against the full economic cost of that spending in lost output caused by the higher taxation that he has had to levy to finance the high spending. The United States Joint Economic Committee of Congress has done some interesting work that the Government choose not to do for this country. It notes that, in the United States, the economy loses 40 per cent. in economic welfare per tax dollar levied at current levels. The Centre for Economics and Business Research in this country has done a similar calculation, and argues that each pound raised in tax in the UK reduces national income in the medium term by more than £1.
That defect is compounded by the knowledge that the extra spending announced last week is to go into state monopoly enterprises, where, as we know, competition and proper price transparency do not exist. Instead of real reform to address those problems, the Chancellor offers us more centralised command and control state planning, which frankly owes more to eastern bloc ideas before the wall came down than to the marketised disciplines of the United States to which the Chancellor so noisily and disingenuously pays homage whenever he talks to City audiencesbut not to anyone else.
The subtitle of last week's spending review should have been, "Welcome to Gordon's Gosplan", where we will have more auditors to audit and more inspectors to inspect, we will have more targets, commissions and delivery units worrying about more OPAs, PSAs, SDAs, more general targets and a hundred more pen-pushing, paper-chasing initiativesa public spending inspector perched on the shoulder of every hospital manager, school head teacher and police inspector and every manager of our prisons and transport systems.
Unfortunately, the Government are obsessed with national standards and national targets. They think that that is the answer. The problem, as we all know, is that national standards eliminate diversity; they are its enemy. New Labour national standards are code for, "Here is what you must deliver because we say so, if you want Government funding."
A state-led, national standarda one-size-fits-all approachis convenient for central Government but less good for local head teachers, NHS hospital trust managers and police inspectors, because funding is allocated to them on the basis of a centralised decision. The standards that they are told to implement are not local. Their activity will be continuously monitored centrally in a way that will undermine their freedom to innovate. Talk of devolution is therefore a cruel and empty deceit.
As evidence for that proposition, we have only to look at the wise words of Sir Steve Robson, who until recently was the second permanent secretary at Her Majesty's Treasury and, I understand, a man who thanks the Chancellor for his knighthood. A moderately dispassionate observer, he said that the forest of new targets creates
What is truly astonishing is the Government's apparent belief that this year'sthe 2002model of public sector reform should be taken any more seriously than the 1998 version, or the 2000 version. In 1998, at the time of the first review, the Prime Minister stated: