I should like to give a wholehearted welcome to the autumn statement. I should have liked to give it a fulsome welcome, but, with the constraints of the 10-minute rule, suffice it to say that with the lowest interest rates and tax rates in Europe we now have the basis to rebuild consumer confidence, which is crucial. We hear so much talk about investment as though it were virtuous and consumption was somehow naughty. The only reason for investment is that there is already consumer demand, which the investment is aimed at meeting. I have no hesitation in emphasising the elements of the Budget that will encourage consumers to spend more.
The figure for lending in October was £5·1 billion—the highest since November 1990. That is one small sign that perhaps consumers are feeling more optimistic about the future. It was an encouraging indicator.
I know that many people in the Treasury still have at the back of their minds the terrible warning of 1972, when we left the previous attempt at a fixed exchange-rate link with the continent of Europe. It was the basis on which the Barber boom subsequently took off. We allowed borrowing to rise out of control and eventually suffered the inflationary consequences.
Although I welcome the cuts in interest rates, I hope that the Chancellor and the Financial Secretary will be able to make it absolutely clear that, if there is any prospect of inflation rising above the target range, and particularly if the growth of M0 and M4 are rising towards the top of their target range, they will have no hesitation in increasing interest rates. The only thing that would be worse than the recession of the past two years is if it were to be followed by the same mistakes as happened during the Barber boom.
I want to dwell briefly on one exciting element of the autumn statement—the proposals on private finance for public projects. I welcome the special responsibility that the Financial Secretary is being given to carry that initiative forward. I am sure that he well knows that there is a history of Treasury teasing on the subject.
We have been told before that liberalisation of the rules on private finance for public projects is to take place. Ingenious schemes are proposed by merchant banks and construction companies for building and operating prisons, roads or hospitals, but the Treasury says, "'This is all very interesting and is a good idea, but, of course, it would be cheaper if it were carried out in the public sector, with borrowing at gilt rates"—and, sadly, we decide not to carry them forward. According to that argument, we would nationalise ICI to reduce the cost of borrowing to finance investment. I hope that this time around the changes are serious.
I have noted in particular how the stress has been put on private sector road building and toll roads. Of course I welcome interesting innovations, but the significant feature of the roads example is that there is a private stream of revenue that the firm operating the road can enjoy. The significant challenge or test for the Treasury is whether it is prepared to bring private finance into schemes where services will be sold to the public sector.
I am rather troubled to see that such schemes are described by the Treasury in the autumn statement as leasing arrangements. I regard leasing as financial engineering to get around a public expenditure constraint. I would not support leasing fiddles where something impossible under normal public expenditure disciplines was allowed simply because of a change in the financial structure. That is not what we are looking for. We are looking for Treasury recognition that, if the private sector is free to build and operate a private prison or hospital and sell its services on a long-term contract to the public sector, that arrangement may release new ideas for better management, use of labour and maintenance of capital and achieve improvements that, sadly, have not been realised in the public sector.
Hitherto, Departments have not registered the fact that, if the public sector is to run a hospital in a different way—possibly by saving staff or using them differently —it wants to be able to design the hospital so that the physical plan matches the way in which it wishes to use staff. In other words, if I may slip into the jargon of economics, it wants the physical capital for which it is responsible to embody working arrangements that it can achieve but which have not proved possible in the public sector.
The ultimate argument in favour of private finance and private management for such projects is that they are better managed and more efficient and innovative than if they remain in the public sector. They are far from being leasing fiddles. I therefore very much hope that the Financial Secretary will be able to assure us of the energy with which he will approach his exciting remit.
The Chief Secretary should be congratulated on the way in which he has conducted the Treasury's negotiations. He has at last been able to get the message home that, if public expenditure negotiations are to be responsible, they should be on priorities within an agreed total rather than attempt to overturn financial discipline. I welcome the new public expenditure control arrangements, which seem to have achieved that conspicuous success.
I welcome the statement's focus on the medium term. Too often, public expenditure negotiations have degenerated into horse trading about next year, with years two and three in the survey largely being ignored; they are left for next year's negotiations. This time, we had serious negotiations on years two and three, and the Treasury achieved new figures for growth in years two and three of 0·75 per cent. real growth and 1 per cent. real growth. That is a conspicuous achievement, on which I congratulate the Chief Secretary.
Having achieved those marvels of public expenditure control under the new Cabinet Committee arrangements, I am surprised that the Treasury is further considering more institutional change next year. My right hon. Friend the Member for Worthing (Mr. Higgins) spoke about that. I am worried about the change in the timetable for economic decision-taking, so that expenditure and tax announcements are brought together in the autumn.
There are three reasons for my concern. First, I hope that my hon. Friend the Financial Secretary will accept that I am truly concerned about the work load that is falling on him and other Treasury Ministers. I am sure that being a Treasury Minister is a tough job. Between September and December, there will be the major international conferences, the tough public expenditure negotiations in the Committee that is now chaired by the Chancellor, with the Chief Secretary actively involved; and at the same time the Chancellor and the Financial Secretary will be considering Budget starters and trying to reach tax decisions. That is a heavy burden.
My second concern is an operational one. Many public sector bodies such as local authorities and district health authorities need to know as soon as possible what their budget will be for the following year. After the autumn statement, Departments spend weeks working out what the overall expenditure figures mean for local authorities, health authorities, the remaining nationalised industries and other public bodies. Next year's autumn statement may be a month later than this one, so there will be less time for public bodies to take important operational decisions.
Finally, there is a risk of the Treasury, having established control over public expenditure this year, sacrificing control over taxes next year. If public expenditure negotiations and tax negotiations are being conducted together, spending Departments may be tempted to press for tax increases to finance higher departmental expenditure or at the very least to undermine the Treasury's wider fiscal position. I therefore hope that Treasury Ministers will be able to make it clear that the new arrangements to be implemented next year will avoid those pitfalls.