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"a wake-up call for policy makers that London's standing as a world-leading global financial centre should not be taken for granted."
If we are to fight that fight effectively, we must look to our social as well as our economic cohesion. Strangely, my upbringing took place on a co-operative farm. My father was a manager, and a Tory. I have stayed in the one-nation camp: I have not departed from that, and I have great sympathy with the renewed emphasis-it is not new-that my party is placing on social action and the voluntary sector.
I believe that the new emphasis will soften the harshness that any Government would have to impose on our society, and that it will help tackle the frustration that we feel as we see more of our lives and income going to the state. The state proclaims itself to be beneficent, but it does not really provide the services that we feel that we should get, and we do not have ownership of the process.
Most of us here can argue our way to getting our full share of the benefits of the public sector. However, I am always conscious of the people who, faced with that problem, come to see us in our surgeries because they are confused, demotivated and disempowered.
We in this place have a duty to think together about how we can equip all our people with a good education as a basis for personal and social development, and with the right mix of skills. They must also have a reasonable progression in employment, and in their chance to take personal responsibility. That should include a share in public and local decision making, which in turn implies a more decentralised public sector. If we do not get that, we will remain stuck with a high deficit, and with national underachievement and despair.
That brings me to my final point, which has to do with trust. The financial crisis was about a collapse in trust, and I shall always remember a cartoon that depicted a situation that I think that we have all seen. A person is about to a pay a filling station cashier. A queue is forming behind him, and the cashier says, "It's all right, sir. Your credit card's OK, but we're just making another call to check whether your bank is."
No one believes in the banking system. In the same way, no one believes in us as politicians. I think that it is all related. Whatever we say, people immediately throw it back at us. The answer is that we all have to learn to be more accountable, which involves more than process, or form, or box ticking. If we in this place want to be trusted again to make decisions on behalf of society, we need to know-and make clear-who carries the can for failure.
We cannot allow things to collapse through the middle, without anyone being responsible for what has happened. This recession has not been an act of God; it has been an act of man-a series of systemic failures. We need accountability at the highest level of state Government. We know that these have been difficult times, and government is never easy. Any Government would have been tested to destruction at the present time but, partly through their over-optimism, arrogance and rhetoric, we now find that this Labour Government have failed. I think that they will be held accountable for that very shortly.
Mr. Edward Leigh (Gainsborough) (Con): It is a great pleasure to speak in this debate. It is rather like the ones that follow a general election, when one has to speak after maiden speeches and say, "What a marvellous prospect my hon. Friend for Daventry will certainly be in the years to come in this Parliament, given that he has made such a brilliant speech!"
We have had some wonderful speeches-from the right hon. Members for Banff and Buchan (Mr. Salmond) and for Oldham, West and Royton (Mr. Meacher), and from the hon. Member for Wolverhampton, North-East (Mr. Purchase). We have had a lot of old Labour speeches: perhaps they are as much unreconstructed old Labour as much as I am unreconstructed old Tory. We have a lot in common.
The right hon. Member for Banff and Buchan made a most marvellous speech. We love him so much because we know that he really loves this place: for all that he is a so-called nationalist, he is very sad to be leaving, and that is why we hold him in such respect. We also had a marvellous speech from my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who totally confused us by trying to work out what a billion seconds add up to.
We got there in the end, but he was making the very important point that language has been so corrupted that no one-not the public, nor us-can visualise what a billion or a trillion is. That is why it is becoming increasingly difficult for us to put pressure on Governments to control public spending. However, it is worth saying that the deficit is so huge that the Government will have to borrow more in 2009-10 and 2010-11-£166 billion and £163 billion, respectively-than the entire income tax take last year. As my right hon. Friend said, that will raise the debt to £1.46 trillion.
What is £1.46 trillion? What is a billion? This is how I describe a billion to my constituents. Look at those mansions in the constituency of the Liberal party's spokesman, the hon. Member for Twickenham (Dr. Cable). He calls them mansions, but many of them are ordinary family houses worth £1 million, so 1,000 of those make a billion. That is how we have to visualise those figures to try to get home to the public the appalling difficulties that we are in.
Once again, the Chief Secretary, unfortunately, is not with us, although I hope he will respond to all these points, because that is what Parliament is for. It is not about making set-piece speeches; it is about responding to the debate. My appeal to the House and to those on all three Front Benches is that we should be honest. The fact is that in the next Budget, after the general election, for all classes of taxpayer-from those at the very
bottom to those in the middle and those at the top-the real burden of taxation will increase. It is better to say that now.
We will not be able to get that money off just the rich. True, the Government have increased taxation on higher income tax payers by £7 billion-they will do so by 2012-13-but the Treasury believes that the yield from the 50 per cent. rate, for instance, will be just £2.4 billion, because high earners will adjust their behaviour in ways that mean that they avoid incurring all the increased liabilities. We know that, so let us not delude ourselves that the rich will pay. We will all pay, from the bottom to the top.
The next point that I want to make about honesty is that all Departments of Sate will have to take cuts. That includes the Department of Health. That is the honest truth. Health spending has doubled in the past 10 years. We employ 1.6 million people in the NHS, which is, I think, the second largest employer in the world, but there has been a catastrophic decline in NHS productivity. I am sure that my hon. Friends, because they are honourable people, will meet their pledge to increase resources in real terms every year if they are lucky enough to form the next Government, but of course the famous Baroness Thatcher-the great right winger, so often referred to in the debate-did exactly the same. However, if health spending is increased by 0.5 per cent. in real terms, that will ensure a cut in health outcomes because of the ageing population and the increasing number of more and more expensive drugs.
Let us be honest with the people: everyone will end up paying more tax and they will all see cuts in Departments, including health, international development, education and transport. If health and international development, but particularly health and the benefits system, are absolved from cuts, that will ensure massive cuts in other Departments.
My Committee has already alluded to the black hole in the Ministry of Defence budget. Even if we assume the 2.7 per cent. increase in defence spending, which by the way will not happen because whoever forms the next Government will probably freeze the defence budget, there is a £6 billion black hole. If we start to make real cuts, that could rise to £80 billion. Let us be honest about it: there will be real cuts and real tax increases. There will also be these famous efficiency savings.
I hope that this is not my valedictory speech as a Member of Parliament-that is up to the good folk of Gainsborough-but it is certainly my valedictory speech as Chairman of the Public Accounts Committee. I think I know a little about efficiency savings. I have interviewed 1,000 civil servants over the past 10 years and chaired 420 hearings. Let us not place too much credence on efficiency savings.
The Budget promised, did it not, £11 billion-worth of efficiency savings. Many of the areas highlighted by the Government chime with areas that my Committee has had to focus on, such as the overuse of expensive management consultants, wasteful use of IT, inefficient management of the Government's vast property estate, poor procurement of goods and services and the desperate need of better project management. If there is one way to keep a secret, it is, as we all know, to make a speech in the House of Commons. The next best way is to send a letter to all colleagues, because it will certainly end up in the bin like these leaflets from the Conservative and
Labour parties, which we have all been putting through letterboxes. I have tried to outline in a letter to colleagues some of the lessons that can be learned.
Let me say a little about these famous efficiency savings. Last December, the National Audit Office-a non-political body-reviewed the savings claims made respectively by the Department for Transport and the Home Office. It cast enormous doubt on the reported savings. In 2007, we found that there was a question mark over nearly three quarters of the claimed £13.3 billion annual efficiency savings. The philosopher's stone has been referred to in the debate. People imagine that efficiency savings are like that-that somehow we can turn iron into gold. That simply does not happen. There is wishful thinking going on here.
Those claims, from either party, must be real and demonstrable. They must be delivered year after year. They cannot be just one-offs. They are not genuine efficiency savings if, as we have found in many cases, they are achieved at the expense of the quality of the service. This is an opportunity. Just as falling markets are an opportunity to promote efficiency in the private sector, so the freeze in budgets that we are now going to achieve, because we have no choice, should produce real efficiency savings. But do not assume for a minute that they can be achieved without some cut in the service provided to the public. I am delighted to see the hon. Member for Twickenham, because, like me, he has often questioned these efficiency savings.
We hear so often about the sharing of back-office services, as if this was a great achievement. The PAC has heard great claims about these back-office functions. Let us look at one. The Department for Transport planned and implemented a shared corporate services project. That is the sort of language that the Treasury loves. This was carried out with stupendous incompetence. Rather than saving the taxpayer £57 million over 10 years, which, of course, all adds up to these £11 billion of efficiency savings, it will, because of the incompetence with which it was carried out, cost the taxpayer an extra £81 million, so no efficiency savings there. Perhaps one reason was that the computers spewed out instructions in German. Perhaps the thinking was that the only way to be efficient in Whitehall is to speak German. Unfortunately, most of the clerks in the Department for Transport do not speak German, so do not place too much credence there.
Time is short and I could go on and on, but I will not because it will bore hon. Members and anyway I will be called to order in a couple of minutes. The Budget announced plans to realise property savings of £5 billion a year in running costs and £20 billion in disposals. If we believe that, we will believe anything. The Inland Revenue, of all people, was to save £236 million by reducing the size of its estate. We looked at the Mapeley STEPS contract. What an extraordinary contract that was. Not only was it carried out in such a way that it did not provide value for money, but the Inland Revenue was giving the contract to an offshore provider. The Inland Revenue of all people, which was supposed to raise taxes, hired as its estate provider somebody who is a taxpayer offshore.
Consultancy spend, we are told, will be cut by 50 per cent., but the PAC found that central Government alone was paying out nearly £2 billion a year in consultancy fees. A further £100 million is to be saved by cutting
benefit fraud. Benefits are staggeringly complex, but we have to take action. Last but not least is wiser and more effective IT spending. Apparently, if the Treasury is to be believed, the budget will be cut by £500 million. Look at the Rural Payments Agency, look at the NHS computer system. It will not happen. If we are to have real efficiency savings, we have to have an honest debate. As I said at the beginning, we have to raise taxes, balance the budget and produce real cuts in all programmes. Let us be honest with the people as we go into this general election.
Sammy Wilson (East Antrim) (DUP): This has been an enjoyable debate. Listening to the valedictory speeches from a number of well-respected Members has been a great experience. In particular, because I served under him in Northern Ireland Affairs Committee, I want to refer especially to the help that the hon. Member for South Staffordshire (Sir Patrick Cormack) has been to me as a new Member of the House, and the enjoyable time that I had under his chairmanship. Some Members are leaving public life altogether. The right hon. Member for Banff and Buchan (Mr. Salmond) is now going to run part of the Celtic fringe of this great United Kingdom, and I wish him well in that.
The debate started off with an exchange between the Secretary of State for Children, Schools and Families, who probably would like to be the Chancellor, and the shadow Business Secretary, whom many on the Opposition Benches might wish was the shadow Chancellor. But the one thing that became clear during the early exchanges in this debate was that this Budget is not the real Budget; it is a phony Budget. As the debate has developed, we have heard people talk about the hard choices that lie ahead and the difficult decisions that have to be made, but none of those difficult decisions has been made in this Budget; it is quite modest. Indeed, it contains about £1.4 billion of new measures, as opposed to the £5 billion of new measures that were in last year's Budget.
Coming from Northern Ireland, I welcome some measures, such as the delayed increase in fuel duty, which in my constituency, with its large rural area, will be welcomed by those who cannot avoid using private transport and do not have the option of public transport. The fuel duty increase would have been a huge imposition on them. Doing away with stamp duty for the first-time buyers of houses worth less than £250,000 will also be welcomed in Northern Ireland, where house prices ran well ahead of first-time buyers' ability to enter the housing market. With almost 20 per cent. of people in Northern Ireland in fuel poverty, the additional winter fuel allowance will be welcomed, too. The Northern Ireland Executive will benefit by about £12.1 million in Barnett consequentials, and, even though that money will be offset by additional efficiency savings of almost £122 million this year, it will nevertheless be welcomed.
However, we all recognise, and have recognised during this debate, the need to reduce public borrowing. Although the Chancellor has made much of the fact that borrowing is £11 billion less than he expected, it has nevertheless increased by £20 billion since last year, and our total borrowing is now 12.6 per cent. of GDP, with interest payments amounting to the same as that which we
spend on defence. We know that that situation is unsustainable, and, as the hon. Member for Gainsborough (Mr. Leigh), the Chairman of the Public Accounts Committee, has pointed out, we need to be honest with people. We cannot pretend, as some Members have done, and say that after the second world war we had a huge debt and waited until 2002 to pay it all off. We do not have that luxury, given the financial situation and how the banking system and financial markets will view the deficit, so we need a degree of candour with the electorate. We need also to tell the electorate that the issue will not be dealt with just by efficiencies; there will be cuts to front-line services, and we will need to look at some things that we do in the public sector and whether we should continue to do them.
I hope that this does not sound contradictory, but I welcome the fact that, although we are at least now considering how we reduce the deficit, the Chancellor has not jumped in to take action and make swingeing cuts. Whether they are as deep as the cuts that Mrs. Thatcher introduced in the 1980s, or more modest, when I look at the issue from the perspective of Northern Ireland, I think that this would have been the wrong time to make them. Northern Ireland is still not out of the recession, and, while there has been a gradual upturn in other parts of the United Kingdom, unemployment is still increasing in Northern Ireland, house prices are still falling and the purchasing managers index, which shows the orders that are coming through for businesses, has fallen in Northern Ireland while it has increased elsewhere in the country. Although we will have to face the deficit, there are nevertheless good grounds for saying that the reductions should not be introduced immediately.
There has been some debate about whether there is any connection between spending now and the recovery. I would argue, after looking at some public sector infrastructure projects in Northern Ireland, that spending now gives us better value for money. Construction costs are down by 20 per cent. Because of the state of the construction industry, we can get six schools for every five that we purchased before, or we can get extra miles of road. Indeed, were it not for public investment in Northern Ireland, the construction industry, which now has about 53 per cent. of its work coming from the public sector, would have even greater levels of unemployment than it has at present. In the past year, there has been a reduction of more than 7,000 in jobs in the construction industry, but that could have been far worse without continued public spending. I recognise, however, that that cannot go on for ever. I also accept that Northern Ireland cannot be exempt from what happens in the rest of the United Kingdom.
Two things are essential. First, we must have a greater degree of certainty about what is going to happen with the level of cuts and reductions. That has not been the case to date. Departments need to plan ahead to see how they can deal with the reductions that are going to be made. Those reductions cannot suddenly be parachuted in-some preparations must be made.
That brings me to my question for the Chief Secretary; I hope that we will get some answers when he replies to the debate. If the plans are
there-if it is known what will happen to departmental expenditure levels-why is that information not being passed down so that proper plans can be made by Departments and, especially, devolved Administrations, and they can play their part in a constructive approach to the difficulties that face us as a nation? As the position develops-the plans that are in place may well change-why cannot information be continually fed to devolved Administrations so that they know how the situation is changing?
Secondly, there are ways of protecting public services, one of which is a cap on public sector pay. I know that the Chancellor has indicated that he does not want to see pay increases of more than 1 per cent. However, we still have a bonus culture in the public sector. Ironically, Northern Ireland is the only part of the United Kingdom in which, despite the recommendations of the Senior Salaries Review Body, bonuses for senior civil servants were not implemented last year. That is in keeping with the approach that we need. Bonuses often take up a huge part of public sector pay and are a cause of public resentment, as well as queries as to why people are getting paid huge bonuses when Departments are not performing. It would be useful to hear the Chief Secretary's thoughts about ongoing public sector pay negotiations and whether a pay freeze would be a way of protecting, at least to some extent, the provision of public services.
I do not believe that the current situation is still sustainable, and anyway, I am a natural philosopher and my view of life is that I would rather people have their own money to spend than have it taken off them in tax increases and spent by the public sector. There is a balance to be a struck and a need for certainty, and the importance of timing cannot be overestimated. We will gain in credibility as a Parliament only if we approach the financial difficulties in an honest way, as the hon. Member for Gainsborough said. We must lay out all our cards for the public. I listened to interviews on "Newsnight" the other night, and people were saying, "Do they think we're fools? We know that if we're spending more in our own houses we have to cut our spending, and we know you've got to do it for the nation."
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