Economy and Public Services

– in the House of Commons at 12:35 pm on 12th February 2003.

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Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer 12:46 pm, 12th February 2003

I beg to move,

That this House
acknowledges the serious concern about the current state of the UK economy, including economic imbalances, the failure of the Chancellor of the Exchequer to meet his economic forecasts, the ever higher taxes, the disproportionate fall in the UK stock market, the decline in productivity growth, and the crisis in funded pensions;
recognises the harm done to business and the enterprise culture as a result of increases in red tape and business tax since 1997, now estimated to cost up to £15 billion a year;
is shocked by the Chancellor of the Exchequer's complacency on these matters;
is concerned that the forthcoming rise in National Insurance contributions will have further adverse effects on jobs, incomes and economic confidence;
notes that tax revenues have already risen by £36 a week for every man, woman and child since 1997;
deplores the fact that, despite substantial increases in taxes and Government expenditure, the lack of real reform means that the promised improvements in public services have not materialized, with a recent rise of 22 per cent. in NHS funding leading to a rise of just 1.6 per cent. in the number of patients treated, with one in four children leaving primary school unable to read, write and count properly, with a crumbling transport system, and with only one crime in every 40 resulting in a conviction;
and calls on the Government to end its cycle of tax and spend and fail.

For the avoidance of doubt, I draw the attention of the House to my declaration in the Register of Members' Interests.

This debate is taking place just before Valentine's day, and it is appropriately timed. It is being held at a time when the British people's love affair with new Labour is coming to an end, when the unblinking loyalty of Labour Back Benchers is reaching breaking point, and when the sham marriage of the Chancellor and the Prime Minister—a marriage in which one partner thought that the pre-nuptial agreement would lead to No. 10 Downing street rather than the Back Benches—is falling apart. It did not have to be this way. If we had a Government who delivered, we would not be having this debate today. But they have not delivered; they have repeatedly broken their promises to those who have seen their personal pensions halve since Labour took office, to mortgage payers whose endowments will not match their liabilities, and to investors who have seen the stock market fall to a level far below what it was in 1997. Labour told all those people that things could only get better. What of the promises to those who rely on our hospitals and schools? They, too, have been failed by this Government.

Anyone listening to the Chancellor of the Exchequer could be forgiven for thinking that none of this mattered. He found time last week to deliver an Olympian address to the Social Market Foundation. In it, there was barely a word about the chronic failure of all too many of our public services, and barely a word about the serious imbalances in the British economy. Instead, he told the foundation that his policies were taking the country

"along the road towards a Britain of opportunity and security for all".

As the economics editor of The Guardian pointed out this week, either

"he has started to believe his own rhetoric, or he is living in a parallel universe".

The very week of the Chancellor's speech was another black week for the British economy. On Monday, BDO Stoy Hayward said that its optimism index of British business had fallen for four quarters in a row. On Tuesday, a Confederation of British Industry survey showed the highest proportion of firms operating below capacity for 20 years, and found that manufacturers' confidence had fallen in every region of the United Kingdom. On Wednesday, there were figures showing the weakest new business activity for a year. On Thursday, an interest rate cut was seen as such a sign of concern about the economy that share prices actually fell, and Friday saw the sharpest fall in manufacturing output and the highest number of insolvencies for a decade. If the Chancellor had not been living in his parallel universe, none of this would have come as a surprise.

Photo of Phil Hope Phil Hope Parliamentary Under-Secretary, Office of the Deputy Prime Minister

Speaking of parallel universes, will the right hon. and learned Gentleman confirm that, if his party were in government, it would introduce a 20 per cent. cut across the board in public spending? Yes or no?

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

Of course we are not going to do anything like that—we never said we would. We said that we would look to save money from the money that is wasted by the present Government, and they do waste far too much.

I want to return to the Chancellor of the Exchequer's parallel universe. After all, if one imposes burdens on business through taxes and red tape that the CBI estimates as costing up to £15 billion a year, why should anyone be surprised that corporate profitability is at its lowest level for nine years, that business investment has fallen more sharply than it has since records were first kept more than three decades ago, or that the rate of productivity growth has halved?

Several hon. Members:

rose—

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

I shall not give way for the moment.

If those burdens on business include a £5 billion a year tax imposed on pension funds, why should anyone be surprised when funds offload UK equities in favour of overseas equities and the UK stock market falls further and faster than those in the United States and France?

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

The shadow Chancellor said that he had said nothing of the sort, referring to Mr. Flight. Does he agree that the Leader of the Opposition, in referring to the hon. Member for Arundel and South Downs, said, "He is looking to see if he can get to that figure. He believes it is a rational target to look at."? Either the shadow Chancellor agrees with the hon. Member for Arundel and South Downs or he believes that he, too, is living in a parallel universe. Which is it, and if the hon. Gentleman is in a parallel universe why does not the Shadow Chancellor get rid of him from the Front Bench?

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

Let me try to explain the matter to the hon. Gentleman in words of one syllable. We believe that a great deal of money is being wasted by this Government, and every day more evidence becomes available that that is so. [Interruption.]

Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

Order. Mr. Gardiner intervened on the shadow Chancellor. He should have the courtesy to allow him to reply. That goes for all hon. Members—it is far too noisy.

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

We believe, to complete my answer to the hon. Gentleman in words of one syllable, that we have a duty to the British taxpayer to examine and to remove the waste that has come from the policies of the present Government. The more that the hon. Gentleman and other Labour Members bleat about that, the less credit they will be given by the electorate.

Now I want to talk about what the Government are doing. I remind the House that as the Chancellor was delivering his Olympian address to the Social Market Foundation last week, 15 new regulations were being introduced, as they have been on every working day, on average, since the Government took office. That is the real world. That is the world in which British business has to live. That is the world in which 95 per cent. of company leaders say that regulation has increased over the past five years. That is the world in which Britain has fallen out of the top 10, down to 16th, in the world competitiveness league. It is a world in which the Government have steadily, relentlessly and remorselessly undermined the ability of British business to win orders and to create jobs.

What is the result of all that? In the real world, Britain has recorded a trade deficit in every month since January 1998, and this week the deficit in goods in 2002 was shown to be the largest since records were first kept—in 1697. In the real world, as the director general of the British Chambers of Commerce said this week,

"The UK economy is obviously losing its competitive edge in the international marketplace."

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I do not want to remind the right hon. and learned Gentleman of the cuts that were made and the many jobs that were lost when his party were in government, but, on the balance of trade, would it not be reasonable to compare the balance of trade of this nation with that of all other nations? If he looks at the records, they will show that the balance of trade here is exactly equal to that of the Organisation for Economic Co-operation and Development and the European Union as a whole.

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

It is reasonable to look at our record today compared with our record in the past. The fact that we have the biggest deficit since 1697 indicates that not everything in the world is as wonderful as the Chancellor of the Exchequer suggests that it is in his parallel universe.

In the real world, pensions are in crisis. The value of personal pensions has halved in the past five years. Fewer than four in 10 final salary schemes are open to new members, and half of those are contemplating closure. Of course, for those living in a parallel universe the Chancellor's decision in 1997 to tax the dividend income from pensions savings at £5 billion a year—equivalent to £400 per contributor per year—had absolutely nothing to do with that lamentable performance.

According to the Chancellor, none of this matters. He says that what he refers to as "the fundamentals" are all doing fine. Of course, we are all pleased that unemployment overall continues to fall, but does the Chancellor recognise that manufacturing employment also continues to fall, that it has fallen by 600,000 since Labour took office, that manufacturing output fell by 4 per cent. last year, and that both manufacturing output and manufacturing investment are at lower levels than they were in 1997, when this Government took office? Is it the sign of a fundamentally sound economy when manufacturing has been teetering on the brink of recession, while consumers are saving less and have built up higher debts than ever before? Indeed, the Labour-dominated Select Committee on the Treasury highlights the imbalances in our economy, which it describes as "potentially serious and increasing".

Not only is the economy unbalanced, but the Chancellor's forecasts for growth, which he said were cautious and prudent, had to be downgraded. He boasted at the weekend that growth in 2002 was 1.7 per cent., but he had forecast 1.6 per cent. He somehow forgot to mention that in his Budget he had forecast growth of between 2 and 2.5 per cent. The 1.6 per cent. was his downgraded forecast made on 27 November. If the Chancellor is reduced to boasting that he got right a forecast that he made on 27 November for the calendar year 2002, that shows just how far his reputation has fallen.

The Institute for Fiscal Studies says that even if the Chancellor's growth forecasts are correct, he will still have to borrow more than he currently plans. By 2005–06, it expects a £4 billion deficit on the current Budget, compared with the Chancellor's forecast of a £5 billion surplus. Yet, over five years, his own figures on borrowing have already leaped from £30 billion in the 2001 Budget to £66 billion later that year, to £72 billion in last year's Budget, and to more than £100 billion in the latest pre-Budget report.

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

I am afraid that Labour Members will have to listen to this for a while longer.

The IFS does not think that the Chancellor is on course to meet his so-called golden rule in the next economic cycle. It says that he will have to raise taxes from April 2005 by another £11 billion if he wants to meet his rule with his—allegedly—planned level of caution. That was the golden rule that was meant to be rock solid—the lynchpin of his entire approach. What would he say to the Labour-dominated Select Committee, which now does not even trust him to determine the economic cycle on which his rules depend? It says:

"There is a danger that decisions by the Treasury and the determination of the economic cycle could be seen to be taken simply in order to comply with the golden rule."

It wants an external body, such as the National Audit Office, to "validate the decisions." Does not that speak volumes about the Chancellor's downgraded reputation and fiscal rules?

Photo of Mr Gareth Thomas Mr Gareth Thomas Labour, Clwyd West

The right hon. and learned Gentleman is a fair man. Will he give credit where it is due? Is not it true that, in a difficult global climate, the British economy continues to grow faster than that of any other G7 country?

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

No, it is not. The Chancellor has had stewardship of the economy for nearly six years. In that time, it has grown more slowly than that of the United States. It has also grown more slowly than in the last five years of the Conservative Government. The hon. Gentleman should bear that in mind before asking such a question.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Will the right hon. and learned Gentleman give way on that point?

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

No, I want to deal with the Chancellor's rules. I have spoken about his golden rule and I want to move on to his sustainable investment rule.

The Treasury Committee also called for all the Government's contingent liabilities to be recorded in the Red Book. If the Chancellor had not put more than £100 billion of his potential liabilities off balance sheet, Enron-style, public sector debt would already have reached his rule's 40 per cent. limit.

The further tax rises that the Institute for Fiscal Studies predicted would be on top of those that are already on course for April. The Chancellor's response to the anxieties of business and investors about the burdens that he has imposed on them is to add to them. There have been 53 tax rises since 1997. In 53 days, on 6 April, national insurance rates will increase for employees and employers. That is a tax on pay and on jobs.

The Chancellor imposes a tax on pay at a time when people are feeling nervous about the future, exposed and under pressure. For example, the nurse consultant on £34,000 a year will be £26 a month worse off. The police inspector on £37,000 a year will be £30 a month worse off. The Chancellor imposes a tax on jobs at a time of growing economic uncertainty. Does he recall that after the 2000 Budget he issued a press release that said that lower national insurance contributions would "promote employment opportunities"? What does he believe that higher contributions will do?

The increase in national insurance contributions is a damaging tax that is imposed in the wrong way for the wrong reasons at the wrong time. For many people, it will be the ultimate injustice. People already have to pay out of their own pockets, on top of taxes, because of failing public services. Two hundred and fifty thousand people a year, who are not covered by an insurance scheme, pay for their operations because the Government are not providing the improvements that they promised in the national health service.

Every year, the Government promise better public services in return for higher taxes, but we get only the higher taxes. In the Chancellor's parallel world, public services are improving wonderfully. He told the Social Market Foundation that the Government had set out a "modern model" for the NHS. However, in the real world, a 22 per cent. increase in health spending in two years led to an increase of less than 2 per cent. in the number of people receiving hospital treatment. What sort of modern model is that?

What sort of modern model has more than 1 million people on waiting lists, and accident and emergency departments where patients have to wait hours, first to be seen and then to be admitted? We were told yesterday that patients are kept in ambulances for hours to fiddle the Government's figures. Does a modern model for schools lead to one in every four children leaving primary school unable to read, write or count properly, and mean that an increasing number of children in inner cities leave school without a single GCSE? In a modern model, do violent assaults on teachers quadruple, teacher vacancies double and fewer than 50 per cent. of teacher trainees still teach three years later?

Does a modern model for transport mean increasing congestion and the longest commuter travelling times in Europe? Rail delays have doubled under Labour, with one in five trains running late.

Several hon. Members:

rose—

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

In the Chancellor's parallel universe, none of that matters—[Interruption.]

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

The Chancellor says that there is nothing to worry about because his public service agreements will sort everything out. In his parallel universe, they are a great success. He believes that they are a shining beacon of reform for the rest of the world to admire. At the Social Market Foundation, he spoke about clear objectives, well-defined targets, consistency, accountability, equity and flexibility.

In the world that the rest of the country inhabits, the Chancellor's ludicrous targets are objects of scorn. People now know about the Chancellor's vague and ill-defined targets, and his targets to set targets. They know about stifling local initiative, diverting time and energy from front-line services and redefining trolleys as "beds on wheels" so that the Chancellor's targets can be achieved.

Have not the Chancellor and his colleagues used targets as a substitute for genuine, decentralising reform? More than a year has passed since the Chancellor said:

"I'm going to insist that any additional resources must be matched by reforms so that we get the best value for money. There is not to be one penny more until we get the changes."

Throughout their time in office, the Government refused to introduce genuine reform. Its absence explains their cycle of ever-higher taxes and declining public services. Their only answer is higher taxation. When that fails, they impose even higher taxes.

Photo of Bob Blizzard Bob Blizzard Labour, Waveney

Will the right hon. and learned Gentleman give way?

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

No, I want the hon. Gentleman to pay special attention to my point.

From April, Government spending will race ahead for the first time at more than 50 mph—million pounds per hour. The Chancellor boasts about April's tax on pay and his tax on jobs. He treats ever-higher taxes as a badge of honour. However, they are a sign of his failure and that of his Administration.

Reforming public services is the only way to break the vicious circle. It is the key to everything that we want to achieve. The need for it is urgent and pressing. Only through genuine reform will we obtain the first-class public services for which our people cry out. It is vital to achieve that goal for parents, patients and passengers. It is vital for business and for millions of hard-pressed taxpayers.

The Chancellor promised no more boom and bust. He has managed to provide both at the same time. He promised prudence with a purpose, but he has been neither prudent in handling the nation's finances nor purposeful in reforming public services. He has presided over missed growth forecasts, halved productivity growth, a pensions crisis and increasing Government debt.

The Chancellor excelled in soundbites, but they are now turning to ashes in his mouth. Colleagues, past and present, are queueing up to criticise him. Only yesterday, the Secretary of State for Health and the Secretary of State for Education and Skills held a press conference at which they rubbished the basis of his Social Market Foundation speech. Mo Mowlam calls for him to be moved. Andrew Rawnsley asks in The Observer whether his next Budget might be his last. Peter Preston writes in The Guardian[Interruption.] Labour Members may find that they dismiss The Guardian at their peril.

Peter Preston said:

"the chances of Gordon Brown ever becoming Prime Minister have diminished, are diminishing—and will continue to diminish inexorably. A sad, sad song".

The saddest song of all, however, is that of the British people. They do not live in the Chancellor's parallel universe; they know all too well the reality of the Government's broken promises. Daily they must pay the price of his failure, and more and more and louder and louder they find themselves saying of the Chancellor and of this Government "Enough is enough."

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer 1:10 pm, 12th February 2003

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

"notes that as a result of this Government's economic management, even in times of global economic uncertainty when the world economy is experiencing the first simultaneous downturn for nearly thirty years and twenty of the world's biggest economies including the United States, Japan, Asia, much of Latin America and Europe have been or are in recession, the UK economy continues to grow with low levels of inflation and low interest rates;
welcomes the 1.5 million extra jobs created since 1997 and resists any attempts to abolish the New Deal and the tax credits that make work pay;
further welcomes the cuts in the rates of corporation tax, capital gains tax and small business corporation tax since 1997 and the introduction of the R&D tax credit;
and believes that after years of neglect between 1979 and 1997 it is even more important to invest in public services and to support the Government's record extra investment in Britain's health, education and other public services combined with reform to build high quality public services for all and its resistance to any attempt at this time of global uncertainty to cut public spending."

Mr. Howard—the shadow Chancellor—omitted to tell the House today the central economic facts. We have the lowest inflation that we have had for 40 years this year, as we did last year and the year before that. We have the lowest interest rates that we have had for 48 years, and we have lower unemployment than America, Japan and the rest of Europe for the first time since 1945. Today's employment figures, which the shadow Chancellor glossed over—

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

He mentioned them, but glossed over them. They show that the number of people claiming unemployment benefit have fallen by 3,500 in a month, that unemployment fell by 36,000 over three months, and that despite all the economic uncertainties and the restructuring, which I acknowledge is taking place in the British economy, employment is up by 150,000.

Photo of Julie Kirkbride Julie Kirkbride Conservative, Bromsgrove

Does the Chancellor think it is a good thing that one person in four now works for the Government?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

It is right that we have more doctors in the health service. It is right that we have more nurses, more teachers, and more policemen and policewomen.

Running through the shadow Chancellor's speech was one assumption and one assumption only: that the answer to every problem was public expenditure cuts. There are more people in work today than there have been at any time in our history. There are 1.5 million more people in employment now than there were in 1997. There is more employment in every region of the country. Let us remember that in the 1980s 350,000 young people had been unemployed for more than a year—hundreds in each of our constituencies. Today the figure in Britain is 5,000, an average of eight per constituency. Moreover, far from there being an inflation problem, the figures show that earnings growth has fallen to 3.7 per cent.

In the face of the global slowdown that every country has had to confront—we have seen recession in America, recession in Japan and recession in Germany—our monetary and fiscal policy, and the changes that we made in 1997, have not just enabled us to cope with that global slowdown without recession but have enabled growth to rise in every quarter of nearly six years of this Labour Government. The worst policy that could be pursued is that of the shadow Chancellor—to cut spending, abolish the new deal, get rid of tax credits that make work pay, and end up repeating the mistakes that the Conservatives made in the early 1990s.

Photo of John Redwood John Redwood Conservative, Wokingham

Is the Chancellor proud of the fact that 600,000 people have lost their jobs in manufacturing? Is he proud of the two manufacturing recessions over which he has already presided? Is he proud of what is happening in manufacturing today? What does he say to those people?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

What I am proud of is this: we have cut corporation tax, introduced a research and development tax credit for manufacturing, and introduced capital allowances. When the right hon. Gentleman was a Minister in the Conservative Government, 3 million manufacturing jobs were lost.

When it comes to solutions to the problem, we must recognise that the shadow Chancellor and the right hon. Gentleman are not saying exactly the same things. What did the right hon. Gentleman say in his election address in 2001?

"We need a Government that recognises that teachers, nurses, doctors and policemen in the Thames Valley need pay that meets the cost of living."

The shadow Chancellor is not prepared to say that.

Worse than the danger of abolition of the new deal and tax credits is a proposal advanced by the Leader of the Opposition in an interview on 30 December 2002, when he announced that a study was being conducted by Mr. Flight, the shadow Chief Secretary to the Treasury. The study, he said, was

"looking at the target of 20 per cent. savings across the board in Government spending".

[Interruption.] I will quote the whole interview. The interviewer said to the Leader of the Opposition:

"I'm after a precise figure."

The answer was:

"And we're looking at savings. Well I'm telling you. That's exactly what Howard Flight said."

The interviewer said:

"And you would concur with up to 20 per cent.?"

The answer was:

"He said quite categorically yes. Well that's what we're looking at. What we're trying to say is that here is a Government that is wasting money dramatically".

Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary to the Treasury

If the Chancellor had done us the courtesy of reading the report to which the Leader of the Opposition referred, he would know that it referred to areas of potential for savings. That was absolutely clear. Moreover, the report stated twice that it did not refer to cuts in health or education spending. I ask the Chancellor to end the spin propaganda in which he has been indulging.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Now we are getting to the heart of the matter. "Potential" cuts of 20 per cent!

The hon. Gentleman says that that did not apply to the health service. In that "World at One" interview on 30 December, however, the Leader of the Opposition said that he was looking at cuts

"in extra staff that don't deliver in the NHS and also costs and wasted consultants; he's looking at all of that area".

Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary to the Treasury

I am surprised that the Chancellor of the Exchequer displays such economic naivety. The scope that exists, to an extent, to make economies in some areas accommodates extra spending in others. The virtuous action of looking for areas of waste, which the Chancellor should be doing, would enable him to deliver much better services by redeploying funds.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

This is very helpful. The shadow Chancellor will be very pleased that the shadow Chief Secretary has joined us. He has confirmed the "potential" for savings. He has confirmed that the study has taken place. He has not denied the Leader of the Opposition's statement that he was looking for

"extra staff that don't deliver in the NHS".

Is the hon. Gentleman saying that the Leader of the Opposition was misleading people in that interview?

Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary to the Treasury

The Leader of the Opposition was clearly referring to my comments and to the potential, not to an across-the-board figure. I repeat: I am astonished that the Chancellor has to resort to such cheap, false propaganda to establish his credentials.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

The hon. Gentleman has not denied my point that he is looking at cuts in the national health service. That is what the Leader of the Opposition said. [Interruption.]

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I suggest that we take up the offer made by the shadow Chief Secretary to give us a copy of his report when it is completed. He has identified the potential for savings, and he has not denied that the national health service is part of the investigation. Either that, or the Leader of the Opposition is misleading people.

When asked:

"And you would concur with up to 20 per cent.?", the Leader of the Opposition replied:

"He said quite categorically yes. Well that's what we're looking at."

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

May I remind the Chancellor of a sentence that appeared in his party's 1997 general election manifesto? Funnily enough, it is directly relevant. The manifesto contained the following sentence:

"The level of public spending is no longer the best measure of the effectiveness of government action in the public interest."

Does the Chancellor still adhere to that?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Yes, and because we are increasing value for money and the amount of public money spent, there are more doctors, more nurses, more teachers and more police. The shadow Chancellor cannot get away from the fact that he is embarrassed by what the shadow Chief Secretary has been up to. The interesting thing—I ask the shadow Chancellor to confirm this—is that, in 1997, he made a speech to the British Chambers of Commerce in which he recommended that public spending be reduced to 35 per cent. of national income, and said that that was the right target to aim at. What is 35 per cent. of national income but a 20 per cent. cut in public spending? Until the Conservatives come clean on what their real proposals are and how they would affect the national health service, in every constituency in this country they will be offering explanations as to the number of doctors, nurses and teachers, and they will have to offer such explanations every weekend.

The shadow Chancellor may have something of a problem in that regard. I have in front of me an article that he wrote in the Folkestone Herald. Of course, he is adamant that he does not want to make any spending commitments. However, he said in that article:

"I was told . . . about the difficulties . . . as a result of the shortage of GPs . . . Overall Shepway has 44 full-time GPs. It should have 53 . . . The present state of affairs is unacceptable."

Is that not a demand for nine more GPs? Does that not cost at least £500,000? If that were repeated throughout the country, would we not need to spend more on the national health service? How can the shadow Chancellor say that he refuses to spend more on the national health service? Just to show that he is consistent in what he is advocating locally but not telling us nationally, I refer the House to an article that he wrote only a few days ago, in the Folkestone Herald of 9 January, entitled "Housing must be our priority". What does he say now about public spending? He states:

"I believe we need more social housing . . . This is something that needs to be addressed as a matter of urgency."

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

How can the shadow Chancellor square his demand for extra public spending in Folkestone with the shadow Chief Secretary's demand that it be cut by 20 per cent.?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall give way to the former shadow Chief Secretary, and then I hope to make some progress.

Photo of John Bercow John Bercow Conservative, Buckingham

I thank the right hon. Gentleman for giving way. Given that activity rates in the national health service are now rising at only one fourteenth of the level of the increase in NHS expenditure, given that last year alone 6,000 nurses left the United Kingdom to go overseas, and given that the right hon. Gentleman failed to meet and then scrapped his own target, set in 1998, for a reduction in truancy, is it any wonder that the British people and his own Cabinet colleagues are selling shares in this Chancellor?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

This debate must be the first time Conservative Members have regretted the hon. Gentleman's resignation from the post of shadow Chief Secretary, because they have now been landed with the hon. Member for Arundel and South Downs. As far as the health service is concerned—

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

If I remember rightly, the shadow Chancellor gave way only four times. I have already given way to shadow Front Benchers at least six times, and I now have the alternative Front Bench lining up to make their case for office under the Leader of the Opposition—or should I say the current Leader of the Opposition?

There were 4.5 million elective admissions in hospitals when we came to power; there are 5.3 million now. There were 11.3 million outpatient attendances when we came to power; there are 12.7 million now. There were 1.8 million emergency admissions; there are 2.25 million now. Do not let people say that the health service is not having, and dealing with, more admissions, more outpatients and more emergency admissions. It is about time Conservative Members started to praise the national health service, instead of calling it a Stalinist creation.

Several hon. Members:

rose—

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I have to make progress, and I want to make two announcements that I believe will be of interest to the House. In the pre-Budget report, I set aside £1 billion to be drawn on by the Ministry of Defence for security and military matters, if and when it becomes necessary. Nothing should prevent us from equipping and supporting our armed forces, who perform a great service for Britain, as do our security services. Money is being drawn down by the MOD to meet the costs that it is entailing. I shall report to the House again in full in the Budget, but I can tell it today that in this financial year I have increased this sum from £1 billion to £1.75 billion, to be set aside for possible commitments, and to be drawn on only if and when necessary. This is, of course, a time of great risk economically and geopolitically, and I believe that most Members of the House will support what I am doing.

Photo of Patrick McLoughlin Patrick McLoughlin Opposition Deputy Chief Whip (Commons)

I am grateful to the Chancellor, who has just been very helpful to the House. Listening to last night's news, we were told that a number of new police officers had also been deployed to Heathrow airport as a result of yesterday's increased security measures. Does he intend to increase the budget to the Metropolitan police to cover that?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to the hon. Gentleman for that intervention. What he says is true, but he would not expect me to comment on operational matters relating to the police. However, the amounts of money made available in the spending round for policing in general and for the Metropolitan police in particular have increased substantially. I believe that, overall, there will be 5,000 more policemen as a result. So far as security is concerned, in these difficult days we will do whatever is necessary to protect and to make secure the British public.

Just as we are making provision for any necessary preparations for action, we are also providing to meet our responsibilities in terms of peace and tackling world poverty. I want the House to be the first to know of the new document on the technical details of the international finance facility, which I hope we can publish tomorrow with the support of all parties. It will show how aid can rise to $100 billion a year for the poorest countries, and I am grateful to Conservative Members in this House and in the House of Lords, and to members of all parties—Liberals and nationalists—for their support for this initiative.

I have a second announcement for the House. In addition to the work on the euro that is already under way, we will publish an additional four studies, which report on issues that the House will agree are important. The first study concerns the exchange rate and macro-economic adjustment; the second concerns the transition to the euro; the third explains the overall framework for the assessment of the five tests; and the fourth brings together specially commissioned papers by international academics on aspects of British membership of the euro. I look forward to giving evidence to the Treasury Select Committee on 27 February. Next Monday, before I meet the Committee, we will publish our progress report on European economic reform.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Yes, if it is on that specific point.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury

I am grateful to the Chancellor for giving way. If the assessment of the five economic tests, which must take place before June of this year, shows that Britain has not met them, will that rule out a referendum on the euro for the rest of this Parliament?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

We have been over this ground before and I am not going to pre-judge the assessment. It will set out the facts clearly, and the hon. Gentleman can make his own judgment afterwards.

I shall give full details of the updated figures on economic growth when we come to the Budget, but I can tell the House that last year, by contrast with growth in Germany of 0.2 per cent., in Italy of 0.4 per cent., in France of 1 per cent., and in Japan of minus 0.3 per cent., the economies of north America and Britain were the fastest growing of the G7 countries, as was stated earlier. So despite the events that have brought the first synchronised world slowdown, the Opposition are quite wrong to claim that we are not well placed to cope with it. Only a few days ago, the shadow Chief Secretary said in an intervention that we were facing likely recession and events analogous to the late 20s and early 30s, but I should tell him—[Interruption.] I ask him this: is he really saying that we face events analogous to the 20s and 30s? [Interruption.]

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I wonder whether the shadow Chancellor might allow the shadow Chief Secretary to have a higher role in the next debate. It is always illuminating to listen to his words. When Conservative central office had to explain his earlier intervention, it defended him not as a politician, but as a City expert giving his views.

In 2001, the UK was the fastest growing member of the G7. In 2002, with the north American countries, we were also the fastest growing. The Bank of England inflation report issued today states that, even before the effect of the recent interest rate cut, it expects growth to be 2.5 per cent. this year. Two underlying fundamentals matter if economic growth is to be sustained—that is why the shadow Chancellor's analysis is wrong—inflation and stability. Past Governments have been unable to act during a world downturn because inflation was too high and interest rates could not be reduced. Inflation was 6 per cent. on average, although it rose to 10 per cent. when the shadow Chancellor was Secretary of State for Employment. Under the Labour Government, even in the 1990s, inflation has averaged 2.3 per cent. Every year, we meet our inflation target. We shall continue to do so and we shall continue to exercise discipline in the settlement of wage claims.

As a result, we have achieved lower mortgage rates than those under the previous Government. They averaged 11 per cent. under the Conservatives, but only 6.5 per cent. under Labour. After all the shadow Chancellor's allegations, it is interesting to note that, over the last five years, 693,000 more people in England alone have become owner-occupiers.

Living standards have risen substantially. Despite the fall in equity markets across the world, total net household wealth is still up. Despite oil and other problems, we have achieved not only low inflation and low interest rates, but low unemployment. The figures that I read out today are not the only important ones in that regard; there are 600,000 vacancies and they are in every region—unlike the situation in the late 80s. Because of the new deal, which the shadow Chancellor would scrap and abolish, we have achieved the lowest long-term youth unemployment since records began. I urge the Conservatives, in their review of Government spending, not to abolish a new deal that has given hope to hundreds of thousands of young people throughout the country.

It is because we understand the slowdown in world trade and its impact on the stock exchange that, far from being complacent, we have seen interest rates come down, and small business corporation tax has been cut to 19 per cent; this spring, we are abolishing stamp duty for property purchases in disadvantaged areas; and tomorrow, because I believe that a consensus can be reached on measures that will help Britain to make the most of opportunities when the upturn in world trade takes place, we shall meet the CBI to follow up my meeting with Digby Jones and the joint note that we prepared.

Building on the cuts in corporation tax that we have already achieved, on the cuts in capital gains tax, from 40p to 10p for two years, and on the permanent capital allowances that we introduced, we shall examine investment incentives, especially in the venture capital sector. Building on the small business tax, which is down to 19 per cent., we shall examine how much more we can do to encourage enterprise in every area of the country. Building on the successful research and development tax credit, we shall examine measures for innovation. Building on the employer pilots for greater training and skills for the modern work force of tomorrow, we shall publish a skills strategy later this year. Building on the flat-rate VAT system that we are introducing in April, we shall attempt to do more to encourage flexibility in the economy, including labour market flexibility where there is indeed a case for more conditionality and compulsion in the new deal for the unemployed. I believe that we shall have support throughout the country for the measures that we are taking.

How different from the days of the early 1990s under the Conservatives! Then, when the shadow Chancellor was one of the architects of Conservative economic policy, unemployment went up by 1.4 million. Inflation was 10 per cent. Interest rates went up to 15 per cent. The record is undeniable. When there were difficult world conditions in the early 1990s, Britain did badly under the Conservatives, yet in the present difficult world conditions, Britain is doing well under Labour.

When I hear the shadow Chancellor's pronouncements—with no hint of embarrassment at his past record—on pensions, tax, jobs and public services, are we not entitled to remind people that, on pensions, the right hon. and learned Gentleman was the City Minister at the time of pensions mis-selling; that, on tax, he was the poll tax Minister and described the poll tax as "clear, simple and fair"; and that, on jobs, he was the Employment Secretary when we lost so many jobs in two years? On public services, of course, he was Home Secretary when crime doubled. As Home Secretary, the right hon. and learned Gentleman famously coined the phrase "prison works"—I suppose it did, for a number of his former colleagues.

We have taken the necessary action not only on monetary policy but on fiscal policy. In that area, too, the shadow Chancellor has misunderstood what it is right to do for a modern economy. In 1997 and 1998, in a period of growth, we actually froze spending. When others, including some of his colleagues, urged us to spend the proceeds—£22 billion—of the spectrum auction, we paid off debt. We deliberately ran up large surpluses in periods of higher growth and, in one year, we cut more debt—£37 billion—than in all the years from 1945 to 2000.

Let us make some comparisons. Debt is 31 per cent. of gross domestic product, but it is 45 per cent. in the United States of America; it is 47 per cent. in Germany, 55 per cent. in the euro area and 70 per cent. in Japan. As a result of cutting debt we have lower debt interest payments as a share of national income than at any time since 1915 and we can afford to take the action necessary in a period of low growth for the world economy. It is because our fiscal rules are set for the long term and because we paid off debt during times of high growth that our fiscal policies can adjust to the economic cycle.

The shadow Chancellor says that the position—

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I cannot resist the hon. Gentleman.

Photo of Peter Tapsell Peter Tapsell Conservative, Louth and Horncastle

I am grateful to the Chancellor.

The right hon. Gentleman is talking about his fiscal policy, but the great fault of his policies throughout his chancellorship has been the mismatch between his fiscal and monetary policies. We see that clearly at present when his Monetary Policy Committee is reducing interest rates just as he is about to put up national insurance. It is illogical for fiscal and monetary policy to operate in different directions.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I have a great deal of time for the hon. Gentleman, mainly because he attacks his party more than he attacks ours. However, may I remind him of what he said in the House of Commons, just after our announcement of rises in public expenditure? He said that

"the Bank of England will raise interest rates still higher, and that . . . will force up the exchange rate of sterling against the euro."—[Hansard, 18 May 2000; Vol. 350, c. 443.]

Neither has happened.

For fairness, we should consider the fiscal policy alternatives being offered by the other parties. The—

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

At a time when the Chancellor is asking everybody to pay more in order to invest in health and education, which is right, is he happy that the Inland Revenue disposed of its property to a company based in a tax haven in Bermuda in order to reduce costs to the Treasury?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to the shadow Chancellor for raising that point. His hon. Friend Mr. Laws, who is a member of the Treasury Committee, has been giving radio interview interviews on the matter. The report of the Select Committee will be studied in great detail by the Treasury. We have made a number of changes as a result of what we already know. We shall respond to the Select Committee and take whatever action is necessary. As a result of that, we do not believe that such a situation will be able to occur again.

The hon. Gentleman's intervention allows us to focus on the policies of the Liberal party. Conservative Members, too, will be interested in that. As we know, for the past 10 or 20 years, the Liberals told us that we needed more public spending to deal with every problem that we faced. However, I have a letter written by the shadow Chancellor—the one who lives in Truro—to Liberal Democrat MPs. The letter is about "Alternative Budget 2003"; it is dated 8 January and begins: "Dear Friends". The hon. Gentleman sets out views that we should share with every elector in every part of the country. He wrote:

"Unlike recent years, the budget proposals cannot simply be based on our past programme of tax increases . . . We have already agreed at shadow Cabinet to start from the premise that the Government are now putting in vast real terms expenditure increases . . . simply proposing further spending . . . rises at this stage of the Parliament is unrealistic."

I am grateful for that private, if belated, acknowledgement of what we are doing to make public services—

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

The hon. Gentleman may want to be shadow Chancellor, but I shall give way only to the shadow Liberal Chancellor on this occasion. The Liberal Democrats should forget every promise that they have made to groups of pensioners and others over the past few years. They should drop their offer to spend billions on education, because it is unrealistic. What happened in the first few days of this month? Press releases issued by members of the Liberal Democrat shadow Cabinet and others said that more money was wanted for teachers' pay, and referred to a "derisory" increase; and that there should be more bonuses for members of the armed forces; more beds for care homes after "chronic" Government under-investment; more housing for key workers; and more for the Post Office, because £2 billion was just sticking plaster. Those were the press releases of just a few days from the Liberal Democrats—the party that is supposed to believe in freedom of information.

Photo of Eric Forth Eric Forth Conservative, Bromley and Chislehurst

On a point of order, Madam Deputy Speaker. Is it not the normal courtesy for speakers, whether on the Front Benches or Back Benches, to address the Chair? Is it not totally discourteous to yourself, Madam Deputy Speaker, when the Chancellor persistently turns his back on you?

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

That is the normal courtesy but not one that is always followed by right hon. and hon. Members in all parts of the House.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Liberal Democrat Members should tell their constituents that which they have said among themselves in private—that they cannot make additional public spending commitments and that it is dishonest to do so. They should return to their constituencies and prepare to tell the truth.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

The Chancellor has revealed nothing by saying that Liberal Democrats welcome the Government's belated spending increases. We will lay out our alternative. We do not believe that the Government are spending their money well. Just today we discovered that thousands of old people are blocking hospital beds much needed for treatment because the Government are overseeing cuts in private nursing sector provision. It is possible to spend the money better than the Government are doing—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. That was a lengthy intervention.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

We face the next local elections and the Scottish and Welsh parliamentary and assembly elections with the nationalists proposing to cut spending, the Conservatives proposing to cut spending massively and the Liberals unable to say, as they always have done, that they would spend more. That is a welcome tune and welcome honesty from the Liberal Democrat party, and it should be explained to voters in every constituency.

Conservative Members said that they would not make any public spending commitments while in Opposition but would wait until they had evaluated the circumstances, yet at the Conservative party conference, among the 20 commitments to public spending was one, not to the national health service, but to private health care in this country. The first priority of the Conservatives as set forth by their shadow health spokesman is full tax relief for people taking out private health insurance—a policy that Nigel Lawson, when at the Treasury, rejected as a wasteful use of public money.

If Conservative health priorities, whether in Folkestone or elsewhere, are to prefer private health care funded by tax relief, with all the deadweight costs to the NHS, I do not think that the shadow Chief Secretary's review can yield anything but disaster for the British people. The Government are running the economy in the interests of all, not a few. The Government are running public services for the people. The Government believe in the health service. I commend the amendment to the House.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury) 1:43 pm, 12th February 2003

The Conservative party called the debate, so it is right to begin by commenting on its extraordinary proposition. Anybody reading the Conservative motion could conclude only that part of the Conservatives' proposals is a tax cut and a cut in public spending to go with it. The motion condemns current policy and the money that is to be put into the health service and education.

The Conservatives say that the problems of the British economy are predicated on tax levels under the present Government. However, the shadow Chancellor cannot or will not give any indication of Conservative tax and spending cuts. We heard not a single proposal for a tax cut from the shadow Chancellor, who says that the problems of the British economy are built on tax. Neither did we hear a single proposition for a cut in health or education spending.

Photo of Liam Fox Liam Fox Shadow Secretary of State for Health

The hon. Gentleman's colleague and spokesman on health recently told the House that the Liberal Democrats would increase health expenditure through a new tax. Will that tax be set at such a level that health expenditure would be lower, the same or higher than it is currently?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

We welcomed the Government's increased taxes and argued that national insurance should pay for investment in the health service. We do not trust the present Government or future Governments to ensure that the extra tax will continue to go into the NHS, so we said that we would dedicate national insurance to the health service, ensuring that in future it will share in this country's increasing wealth, which it failed to do for many years in the past.

Photo of Liam Fox Liam Fox Shadow Secretary of State for Health

Will the hon. Gentleman answer my question?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

I have just said that we welcome the Government's expenditure and will make sure that it is dedicated to the NHS. I have not finished answering. I have a question for the hon. Gentleman: last year, he told the BBC that he conceded that taxes might have to rise for the NHS. He was immediately slapped down by his party leader, who insisted on taking him through a vote against increases in NHS funding. We know that the hon. Gentleman's position now is to spend billions less on the health service. Alternatively, he intends to raise the money by introducing charges for NHS operations. That is the position that he articulated before the last general election, and he has not said that he was wrong.

Photo of Liam Fox Liam Fox Shadow Secretary of State for Health

I asked the hon. Gentleman a simple question. The Liberals say that they will raise a health tax in a different way. Would that produce less, the same or more money than the Government are currently spending on health?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

The hon. Gentleman was not listening. I have said several times that we welcome the extra money going into the NHS. We do not believe that spending will rise from £45 billion under the Conservatives to more than £100 billion by 2008. Neither do we believe that it would be appropriate to argue at the moment for extra money. The issue is whether the money is well spent.

The hon. Gentleman opposed spending increases. Presumably he wishes that the Government had stuck to the funding plans in place when the Conservatives left office—not £1 billion or £2 billion less for the NHS but tens of billions. There would have been less for doctors, less for nurses and less in his constituency. We know that, instead, he wants more and more people to be forced to pay for private operations or to contribute to the cost of their operations. How do we know? Before the last general election, he was honest enough to say so. The Conservatives do not offer a single policy now. They have gone quiet. Theirs is a hushed-up policy. They make lots of criticisms but have nothing to say.

The fantasy offered by Conservative Front Benchers is irrelevant—no wonder their own focus groups laugh at any mention of the Conservative party. The Conservatives have no coherence and do not have the courage to spell out their alternatives because they are so unpopular.

The problem facing the Chancellor is whether he has a policy capable of delivering the changes for which he argues. The Monetary Policy Committee's decision to cut interest rates by one quarter of 1 per cent. has thrown the state of the British economy into sharp relief.

Photo of John Bercow John Bercow Conservative, Buckingham

On a point of order, Madam Deputy Speaker. I seek your guidance. Is there any known precedent for a Front Bench spokesman addressing the House, which Matthew Taylor is now doing, without a single Back Bencher of his party being present to support him?

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

That is not a point of order for the Chair.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

The Conservative party has a tiny proportion of its Back Benchers present. [Interruption.] It suddenly has five, but a moment ago it had three. No doubt the Tory Whips will bring in a few more, but despite the fact that this is their debate Conservative Members have not even bothered to turn up. The hon. Gentleman, who resigned from the Conservative Front Bench in despair over their policies, presumably agrees with much of what I am saying and should perhaps refrain from intervening. [Interruption.] The Whips are doing a good job, because Conservative Members are pouring in—there are now five of them.

Photo of John Redwood John Redwood Conservative, Wokingham

Does the hon. Gentleman think that it is right that there are now many more administrators in the health service than there are beds, or does he think that we might be able to save some money on the way in which the NHS is administered?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

The right hon. Gentleman may not have noticed, but although the Government took too few decisions about investment one of their early decisions was to get rid of the extraordinary bureaucratic architecture of the Conservatives' internal market in the NHS, so as to cut the number of bureaucrats and put more staff on the front line. Liberal Democrats welcomed that. Perhaps he should spend a little more time studying the failures of the last Conservative Government if he wishes to make such points.

The Chancellor's optimism looks increasingly delusional. He is in denial about the state of the economy. Today, the MPC cut its growth forecast, partly because of uncertainty over Iraq but partly because of collapsing UK investment. The concern is that a Chancellor who will not admit the problems of the UK economy will never introduce policies to correct them. If we are to believe the Chancellor, Britain is racing ahead of the rest of the G7 and is a beacon of success in a world economy clouded with difficulties. However, it is not only the world that is at fault. Our economy has been dangerously split between a manufacturing sector in deep recession and a buoyant, if now slowing, service sector, fuelled by rising debt that even the Governor of the Bank of England has described as unsustainable. The overvaluation of the pound has hit every company that competes with imports or exports. The 2001–02 manufacturing recession was the longest since 1945 and the deepest since 1981. In 2002, we had the largest trade deficit ever.

The Chancellor's response is to say that we should expect that at a time of worldwide economic difficulty and uncertainty, but the manufacturing recession is not simply a symptom of a world downturn, as a few international comparisons make clear. UK productivity growth, which the Chancellor originally set as the benchmark for his chancellorship, has been dismal since 1997 at little more than half the average rate since the 1960s and well behind that of our competitors. We have had lower productivity growth in this cycle than in previous cycles. Output per job has increased at an average annual rate of 1.4 per cent. since the mid-1990s and output per person has increased by just 1.2 per cent., compared with average productivity growth of just over 2 per cent. since the 1960s.

The UK failed on seven of the 11 targets that the Government set for productivity growth. Of the four successful measures, two were our performance as measured against Japan and two as measured against Germany—hardly difficult benchmarks to reach on recent trends.

Photo of Andy Burnham Andy Burnham Labour, Leigh

In his determination to paint a picture of doom and gloom, the hon. Gentleman is being a touch selective with the facts. He mentioned today's announcement by the MPC, but would he care to comment on another announcement made today—the unemployment figures?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

Unemployment figures have fallen today, but that is due only to marginal growth in the retail and hotel sectors and substantial growth in Government employment. Manufacturing employment has fallen by 500,000 since 1997. Over the past year, falls in employment in agriculture, manufacturing, other production and financial and business services have been joined in the past three months by falls in employment in other service sectors. The only major economy to suffer worse falls in manufacturing employment than the UK over the past year has been Japan. Moreover, the UK suffered a larger fall in manufacturing output in the past year than France, Germany, Italy, Japan and the USA. It is the hon. Gentleman who is being selective with the figures.

Photo of Andy Burnham Andy Burnham Labour, Leigh

Is the hon. Gentleman really saying to the 250,000 extra people in work, compared with the beginning of last year, that their jobs are not worth having?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

What about the people who are losing their jobs in manufacturing companies? What about the decline in investment, which tells us what will happen to employment in the future? Astonishingly, in the past 18 months, British investment has collapsed faster than it has in the supposedly stagnant economies of France, Italy, the USA and Japan. According to the most recent figures, investment is falling faster than it is in Germany. In fact, the fall in UK investment is the worst since records began.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

The hon. Gentleman is being selective in the figures he is using to expound his case. Why is he failing to expose the massive job losses that have been experienced across the world, which are much greater than any that we have experienced in the UK? The issue of manufacturing does need to be addressed, but it is only fair to say that job numbers in this country have risen and continue to rise year after year, compared with the eurozone, the OECD and Japan. The hon. Gentleman pretends that Japan is the only comparison, but he is skewing the figures.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

I have given the figures on investment, manufacturing employment and other employment sectors, and I have acknowledged areas in which there has been some growth, but let us consider what underlies that growth. While the internationally exposed sectors of the UK economy are suffering, it is true that the service sector has increased as the housing and consumer debt boom continues. That allows the Chancellor to point to employment figures and GDP growth figures that are better than those of our competitors. However, as the Governor of the Bank of England and everybody else who has considered the matter have concluded, that growth is unsustainable. The economy cannot indefinitely sustain growth based on the fact that debt is rising faster than wealth or incomes. That is plain to everybody. We cannot continue to increase our borrowing faster than the economy grows, as we have done in recent years.

Without rising debt, the British economy would look less like the best among the G7 and more like the sick man. Investment is falling faster, manufacturing is falling faster and our share of overseas investment is falling faster than in other economies. On what measure, therefore, does the Chancellor claim that the underlying economy—not boosted by rising debt and increasing consumption by the British consumer—is doing well? It is not productivity or long-term investment.

Photo of Adam Price Adam Price Plaid Cymru, Carmarthen East and Dinefwr

The figures for job creation mask a shift from high-wage jobs in manufacturing to part-time, lower-wage employment. That has hit especially hard the heartland manufacturing areas such as the one that I represent and those that many Labour Members represent.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

The hon. Gentleman may be right, but the biggest concern is that everybody will be affected. If the fast rise in debt, fuelled by house prices, stops—it is bound to stop, because it is unsustainable in the long term—the economy will not be underpinned by investment in business that could earn money in the long run, not only to deliver the standard of living and jobs that people need but to deliver the Chancellor's plans for investment in health and education.

It is worth looking internationally, because when the MPC cut interest rates again there was some criticism that the European Central Bank did not do the same. The truth is that UK real interest rates are substantially higher than those of our competitors, including our European ones, while investment is substantially lower. Our high interest rate in real terms keeps the brake on investment and keeps the pound uncompetitive.

The MPC has cut interest rates to help manufacturing and investment. Unlike the Chancellor or Labour Members, it has shown itself willing to face the problem. However, the Bank of England has one golf club—interest rates—to deal with one objective: inflation. It does an exceptionally good job in that respect, but it is the Chancellor's job to deal with the two-speed economy. He is so busy blaming everything on the rest of the world that he will not acknowledge the peculiarly British problem that this country faces.

For mortgage payers, of course, the news looks good. Interest rates are down, and another cut may be likely if the gloomy economic news continues. However, the Bank of England decision is a warning shot for householders, too. It implies that the MPC now believes that the threat from collapsing business confidence and investment outweighs the likelihood that house price rises and debt growth will continue to fuel the economy. In other words, the Chancellor may soon find himself with no clothes.

The implication is clear. Not only are house prices likely to go off the boil, in the MPC's view, but there is a risk of a downturn. If that leads to rising unemployment and falling consumer confidence, house prices could easily to start to fall. At that point, the rise in consumer spending will dry up overnight. There may be a return to negative equity and the one thing that is supporting growth in the British economy will have disappeared.

Over the past few years, when world growth sustained the British economy, the Chancellor missed the opportunity to take action to boost investment and productivity. He talks a lot about it, but he must know that his policies have failed because he can read the figures exactly like the rest of us. The record on productivity is catastrophically bad, as is the record on investment compared to that of our international competitors.

Of course, the Chancellor is right to say that inflation is low, which was not the case in the 1980s, and that that has allowed interest rate cuts to take some of the strain of the problems affecting the economy, but even with the interest rate cuts the picture remains unbalanced. Falls in the prices of goods are offsetting 5 per cent. inflation in services. Interest rates alone cannot tackle the wider problems in the UK economy. We need the Chancellor to take action in his Budget to tackle the problems that have made the two-speed economy worse—problems largely inflicted by the Chancellor in the first place.

First, he should stop adding more measures to complicate the tax system, and start simplifying it instead. The increase by one third in the number of tax complications since he took office has left business chasing accountants, while investment and productivity growth, supposedly encouraged by the various tax wheezes, has slumped. Productivity in the UK is dismal, and is growing dismally compared to our competitors. The Chancellor's micromanagement makes it worse—a tax complication here, a new piece of bureaucracy there, centralising targets everywhere. We need a Chancellor who meddles far less. It is time this Chancellor got off the back of business, because UK plc will not succeed if it is chasing tax breaks and fighting red tape.

The Chancellor also needs to take the exchange rate issue seriously. I was very pleased to hear today's announcement that we will get a report on the exchange rate issues associated with joining the euro. That is overdue, and it is a fundamental part of the question of euro entry.

The pound has persistently been in the range between Euro1.50 and Euro1.60. Although it is lower than it was, most economists reckon that it remains uncompetitive, and, worse, there is no confidence in industry that the recent fall against the euro will be sustained. The pound is now very high against the US dollar. That represents a double whammy for British exporters. No wonder Britain's share of inward investment in Europe has slumped from 28 to 16 per cent. since the euro was launched, while the eurozone share has risen. Again, that must, in the real world, be a concern for the Chancellor, even if he will not admit it here.

We already know from experience of the past few years that the merest mention by the Chancellor of the possibility of euro membership drives down the level of the pound, because almost everyone thinks that the pound is seriously overvalued. A more competitive rate would be needed before we could join the euro.

A positive assessment of the five tests may bring the pound down to more reasonable levels. If we joined the euro, it would permanently remove the exchange rate risk for more than half of our manufactured exports. With investment in the UK slumping, that is no longer a theoretical issue.

Those who do not want euro membership, and believe that we should put up with the fluctuations in exchange rates with the EU, our major home market, should provide some explanation of their alternative strategy for tackling a problem that has caused many of the manufacturing job losses—600,000 of them—that the Conservatives have described. I trust that when the Chancellor makes his assessment and subsequent announcements, he will acknowledge that the question goes beyond joining the euro. If he concludes that joining would not be right at this time, he must set out a strategy for dealing with exchange rates in the long term, in a world where speculation seems to be the driver of exchange rates, not underlying real values. Britain has lost hundred of thousands of jobs—probably millions—in the recessions of the early and late 1980s and now again in manufacturing. On each occasion, the pound has been very high compared with our major competitor currencies.

Photo of John Bercow John Bercow Conservative, Buckingham

Giving up British monetary policy in return for exchange rate instability against the dollar and the yen is not the height of economic wisdom, but will the hon. Gentleman say what assessment he has made of the effect of the rigidities of the planning process and of the Ofsted inspection system on the inadequacy of affordable and available child care in this country?

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

I am not sure that the hon. Gentleman will find any solution to the exchange rate problems in that, but since leaving the Front Bench he has become keen on a change in the Tory leadership. He would prefer to have Mr. Clarke, the former Chancellor, as leader of the party. I remind the hon. Gentleman that the right hon. and learned Gentleman agrees with me about the exchange rate. He definitely does not share the hon. Gentleman's view on the matter. If there is a change in Tory leader, the hon. Gentleman may still not find himself invited back to the Front Bench.

Photo of John Bercow John Bercow Conservative, Buckingham

On a point of order, Madam Deputy Speaker. Is it in order for a Front-Bench spokesman so to suffer from short-term memory problems that he thinks a reference to the planning process is about the Tory leadership?

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

I am pleased to say that that is not a point of order for the Chair.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Treasury)

I want to focus on the Government for a few final moments.

The Chancellor understands that unsustainable increases in consumer debt cannot save his spending programme for ever. He talks about trying to boost investment and productivity, and I share his determination to do so, but I cannot share the prescription that he has laid out over recent years. The micromanagement of the tax system and the attempts to introduce tax breaks here and there to achieve the targets that he has set have failed demonstrably. The Chancellor needs to recognise that.

Britain needs to earn the money to invest in hospitals and schools. The Chancellor's strategy will not deliver that if he continues to allow all the internationally exposed sectors of the economy to decline. He cannot expect the MPC alone to deal with the wider issues through interest rate cuts, as he knows full well.

The first step on the road to recovery is to acknowledge one's problems. The Chancellor would do well to acknowledge some of the real problems in the British economy that are apparent to all but which are not shared by our competitors. Over the coming months, the Chancellor will be forced to acknowledge those problems. It will look far better for him if he admits as much and acts to tackle the problems before he is forced to do so.

The Conservative motion refers not only to investment but to delivering public services. The Conservatives failed entirely on health, education, housing and transport—the list is comprehensive. The Government are now making much-needed investment, but they need to decentralise and to let go of the controls. When I hear Ministers describe decentralisation as handing down targets to hospital administrators for the delivery of national targets set by Ministers, I realise that they do not understand what decentralisation means at all.

Decentralisation is not setting national targets for local delivery, but allowing local people to set their own targets for their hospitals and schools so that they can design the best services for local implementation. [Interruption.] The Chancellor says that that is what he says, but it is not—line after line in his speech is about the process of centralised controls, PSA targets and the rest of it.

I simply do not believe that Ministers in Whitehall, second-guessing those on the front line—doctors in hospital wards or teachers in classrooms—can ever deliver effectively the investment that the Government are now making. Ministers have to be willing to let go. In some cases, they have to be willing to allow local failure to show how things can be done better, just as they need to allow local successes to show how things can be done better because, just possibly, Ministers may never have thought of them. That is the way to deliver successful investment, and it is what the Chancellor needs to do.

Photo of Phil Hope Phil Hope Parliamentary Under-Secretary, Office of the Deputy Prime Minister 2:11 pm, 12th February 2003

This is supposed to be an Opposition day debate, but I am struck by the absence of the Opposition—only four Conservative Members are in the Chamber. Still, that is up to them, I suppose. I had to check the date on the Order Paper because the motion has a lot more in common with the circumstances in which we found ourselves in the 1980s, rather than 2003. In the 1980s, the inflation rate was 10 per cent. for more than four years and the interest rate was at 15 per cent. for a year. Millions of people were unemployed, and millions more were on poverty wages. That was the state of the economy and public services then, not now.

The Conservatives have not learned the lessons, as we heard earlier from the shadow Chancellor. Their sole economic policy now appears to be to slash—to use a one-syllable word, as he said—public spending by 20 per cent. That is interesting, so let us just think about the figures. The statistics do not give the real picture of what life would have been like under the Tories if that kind of policy had been put into practice. The shadow Chancellor talked about being in a parallel universe. Let us imagine a day in the life of a Corby pensioner if the Tories had been in power and put in place their 20 per cent. slash in public spending.

Let us imagine that pensioner as she gets up in the morning and switches on her television. She will probably have to get rid of her telly because there is no free television licence under the Tories, as there is with the Labour Government. She leaves her cold flat because there is no £200 winter fuel payment a year, as is provided by the Labour Government. She goes out to catch a bus to visit her grandchildren, but she has to stand at a vandalised bus stop in the cold, waiting for a dilapidated bus that is probably running late because, unlike now, the Tories would not have put £1 million into Corby's urban bus challenge, which repairs bus stops, puts new buses on the roads and ensure that fares are affordable.

When the pensioner gets on the bus she now has a bus pass, provided by the Labour Government. However, 20 per cent. public spending cuts would have removed that pass from that pensioner if she had been living under a Tory Government. She would not have had a minimum income guarantee of £98.50. Her pension credit would not have been topped up from her late husband's steel pension because the Tories oppose the pension credit, and it would be cut by their 20 per cent. public spending cuts.

The pensioner arrives at her daughter's house to look after her grandchildren, but she has to do so because there is no £3 million sure start programme, as there is in Corby at the moment, providing help for parents with young children, and there are no nursery places for three and four-year-olds because the Tories would not match our pledge on that if they imposed their 20 per cent. public spending cuts.

While mum is at work, the pensioner decides to give her children some lunch when they come home from school, but, unfortunately, there is not enough money in the house. Child benefit was frozen under the Tories. She would not have the child care tax credit, the working families tax credit or the child tax credit, which is being introduced this April and which will put money directly into the pockets of poor families with children. Those families in Corby would have to live with the 20 per cent. public spending cuts.

So the children come home from primary school for lunch with my Corby pensioner who looks after the grandchildren at home. They are not doing too well because the school classroom is terribly draughty, as there has been no upkeep and maintenance because of the 20 per cent. cut in public spending under the Tories. There are no books. There are no computers to learn on, and there is certainly no literacy or numeracy hour, which the Tories oppose and which has dramatically raised educational standards for primary school children during the past six years.

The children have to keep their jackets and coats on because the council houses are incredibly draughty because they have not received the £3 million major repairs allowance that came to Corby council homes under the Labour Government. That money could not be spent with 20 per cent. public spending cuts under the Tories. So the pensioner says, "I'd better take the children out. I'll take them for a walk to the post office." Of course, under the Tories, £120 million would not be going into the post office network to support it, so the local post office would have been closed. Rural post offices, in particular, were closing hand over fist when the Tories were in power, and more would close if they were able to make their 20 per cent. cut in public spending.

On the way, the pensioner has to walk the children past the burnt out cars that litter the streets of Tory Corby. They would have to experience that because the measures and funding to deal with abandoned vehicles would not have been put in place or have been affordable under a Tory Government with 20 per cent. cuts in public spending. The new multi-agency team—we call it Caspar in Corby—which is successfully reducing antisocial behaviour would be swept aside because no one could afford to put the people on the streets to tackle that problem in Corby.

The council would have had another round of cuts. In the last four years of the Tory Government, we experienced a 7 per cent. cut in grants to local government. With the Labour Government, we have had a 25 per cent. real-terms increase in support for local councils—not a 20 per cent. cut in public spending, which the Tories would impose if they came to power.

Of course when the pensioner gets back home, she meets her son-in-law who has just finished his temporary job on poverty pay because, under a Tory Government, there is no minimum wage. At least, there would not be one for small firms because that is the little trick that the Tories would pull if they ever got back into power. There would be no protection for agency workers because the Tories do not support any of the new regulations. There would certainly be no new deal for that young chap, who got his job under the new deal for the unemployed. The Tories opposed the new deal for unemployed young people every time that it was considered in the House.

My Corby pensioner has toothache, and she would like to go to the new dental surgery. In fact, four new dental surgeries are being built in Corby to provide better dental care. With 20 per cent. public spending cuts, there would not be a single new dentist in Corby if the Tories were in power. Her day ends in misery, of course, when she gets a letter from her private health insurance company saying that she will have to find a little bit extra on the upfront excess to pay for her hip replacement. Under the Tories, there would be no hip replacements on the national health service; those operations would have to be done through private health insurance.

Thankfully, that nightmare life of a Corby pensioner under the Tories has not happened, but it could happen if they got back into power and introduced 20 per cent. cuts in public spending. Instead, we have the most successful economic performance in Britain's history. We are seeing step-by-step improvements to public services, and all hon. Members can see the tangible benefits in our constituencies.

Photo of Mr Ivan Henderson Mr Ivan Henderson Labour, Harwich

The chief executive and chairman of my local health trust have just released its annual report, which states that the Government have put unprecedented investment into my local health service. They cannot understand the remarks of the shadow Chancellor when he says that the NHS is failing. He is accusing every person working in the NHS of being a failure. Does my hon. Friend share my view that that is disgraceful?

Photo of Phil Hope Phil Hope Parliamentary Under-Secretary, Office of the Deputy Prime Minister

My hon. Friend is right. The worst thing is that, to make a political point, the Opposition run down civil servants and public sector workers who are doing such a huge amount to bring about change. We gave the public sector a real challenge. We put in investment, but asked for reform to go with it. The police, teachers and nurses have risen to that challenge and are now providing better services with real outcomes. There have been cuts in waiting times and waiting lists, and better hospital procedures. When I go to my local hospital, I usually have to wear a hard hat because there is so much building work as new departments and services are put in. I am sure that that is true in my hon. Friend's constituency as well.

Photo of John Bercow John Bercow Conservative, Buckingham

The hon. Gentleman talks about "real outcomes". Will he tell the House why the Government have abolished their own 1998 target for the reduction of truancy and presided over a quadrupling in the level of assaults on staff in schools? Why?

Photo of Phil Hope Phil Hope Parliamentary Under-Secretary, Office of the Deputy Prime Minister

The difficulty that the hon. Gentleman faces is his failure to grasp—

Photo of Phil Hope Phil Hope Parliamentary Under-Secretary, Office of the Deputy Prime Minister

I shall answer the question in a second. The hon. Gentleman fails to grasp the consequences of his party's policies in schools in my constituency and, I dare say, in every constituency in the country. Teachers are now achieving results that they were never able to achieve before. They are achieving those results because of the investment that we have put into schools. We have backed head teachers with that investment and by giving them new powers and delegated authority, allowing them to control and run their schools to greater effect. As a result, less children are truanting—

Photo of Phil Hope Phil Hope Parliamentary Under-Secretary, Office of the Deputy Prime Minister

I accept the hon. Gentleman's grammatical correction and thank him very much for it. It is the only thing that he has got right all afternoon.

Fewer children in my constituency are truanting. Unlike the situation under the Conservative Administration, when truant children were simply roaming the streets, measures are now in place to tackle truancy and ensure that those children are identified, provided with an education and brought back into schools, with—crucially—the involvement of their parents. The parents are involved in the school contract to ensure that they, and not only the schools, take responsibility. As a result, less children—fewer children—are leaving school inappropriately and more children are back in school and achieving a higher educational performance.

I will finish now as time is short.

Photo of Phil Hope Phil Hope Parliamentary Under-Secretary, Office of the Deputy Prime Minister

I will not give way now; I have answered the hon. Gentleman's question.

We have achieved a remarkable economic success. We are making step-by-step improvements to public services. However, there is another challenge—to improve people's quality of life. The challenge for the Labour Government, now that we have the economy right and now that we are seeing improvements to public services, is to raise the quality of life for every citizen in our communities.

Photo of John Redwood John Redwood Conservative, Wokingham 2:22 pm, 12th February 2003

I have declared my interests in the Register of Members' Interests.

So far in this debate, we have heard a most lamentable speech from the Liberal Democrat spokesman, Matthew Taylor. He should have died of embarrassment as he was wilting on his feet trying to deliver it. He could not answer a single intelligent question—and my colleagues raised several—on Liberal Democrat policy. He was left stumbling by the question on whether they wanted a massive increase in tax and waste, on top of the tax and waste that we have got used to from the Government. He was quite unable to explain how, if there were to be no further increases in expenditure under the Liberal Democrats, there could be any improvement in services. As we well know, they are quite unable to deliver such improvement when they are trusted in councils around the country.

I wish to concentrate on the complacent and unconvincing performance of the downgraded Chancellor—the Chancellor of tax and waste; the Chancellor of boom and bust; and the Chancellor who came to power saying that he would bring about a great manufacturing renaissance, only to dash hopes, sacrifice jobs, and lead many manufacturers to a valley of tears.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

If the Chancellor is complacent, will the right hon. Gentleman explain the complacency of the members of his own party? This is his party's debate, but where are they?

Photo of John Redwood John Redwood Conservative, Wokingham

This debate has been extremely well attended on the Front and Back Benches for the interesting speeches that were given by my colleagues.

Photo of John Redwood John Redwood Conservative, Wokingham

The Liberal Democrats have chosen to make this truancy hour, as we see from their absence from the Chamber. I am delighted to see the shadow Chancellor, my right hon. Friend David Davis, in his place. This is a team and we are heartily sick of the way in which the Government team have let down this country, let down their pensioners, let down their taxpayers, let down their users of public services and let down, above all, their manufacturers.

Photo of John Redwood John Redwood Conservative, Wokingham

Briefly and succinctly, I wish to highlight 10 massive errors of the Chancellor. First, this is the Chancellor of tax and waste. This is the man who has tipped so much money into the health service that we get no visible improvement at all in health care in my part of the world. Where has all the money gone? It is not buying us the nurses and doctors that we want; it is not delivering the extra operations; and it is leading to bed closures and shortages. There has been incompetence on an enormous scale from the Chancellor of tax and waste.

The second great error of this Chancellor was to destroy the savings and pensions industry in this country.

Photo of Andy Burnham Andy Burnham Labour, Leigh

Is the hon. Gentleman seriously suggesting that there has been no increase in the numbers of nurses and doctors, and no new NHS buildings and no improvement whatsoever in his local health service? I will look up the figures but I believe that he is wrong to say that. I would be grateful if he would be honest with the House.

Photo of John Redwood John Redwood Conservative, Wokingham

What can be achieved in my local hospital is all too little because of the changes in the way in which the health service is managed and because of the shortage of money to deal with the falling productivity that is the hallmark of the health service under this Government.

The Chancellor has a massive productivity crisis in the public sector and he has no idea what to do about it. The more targets and central controls that he heaps on the systems, the worse they become as local situations are undermined. I want more doctors and nurses, more treatments and more patient activity in my hospital. Despite the money, none of that is being delivered because of the fall in productivity

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

Will the right hon. Gentleman give way?

Photo of John Redwood John Redwood Conservative, Wokingham

I have already given way rather generously and I wish to make some progress.

I had moved on to pensions. The Chancellor tried to tell the House that a £5,000 a year stinging tax on pension savings would not be visible. He and the Prime Minister dared to say that, because the stock market was rising when that tax was introduced, all would be well and there would be magic money—pensioners and savers would be better off, and, of course, the Chancellor would be better off with his bags of gold swelling every day. As soon as the stock market started to fall, we saw absolutely nothing from the Chancellor by way of apology or adjustment to his policies.

The Chancellor seemed so little to understand what he had done that he did not realise that there would be a stock market fall in company shares as a direct result of taking £5 billion off the people who had invested in those shares. The market was selling on 20 times earnings at that time. I do not know whether the Chancellor was aware of that or whether he understands it, but it meant that there was bound to be a £100 billion hit on share prices that were held by my constituents and the constituents of hon. Members on the Labour Benches through their pension and insurance funds. Either the Chancellor did not understand, or he did not give a toss. Either way, it is very bad news for the Chancellor of the Exchequer that he was so careless of the savings and future pension entitlements of so many people. Where is he now to apologise? Where is he now to start reducing the tax burden? Where is he now to help savers before many of them reach retirement with a fraction of what they were expecting from the hard-earned money that they had saved? People have been robbed by a rip-off Government and robbed by a rip-off Chancellor.

The third error has been the Chancellor's failure to deal with the problems of manufacturing. Indeed, the Chancellor is the main problem for manufacturing. It is this Chancellor who has stung manufacturing by £15 billion a year through his extra impositions, controls and regulations. It is this Chancellor who believes that he can regulate, control and harry manufacturers, taking money away from them but mysteriously believing that that will do them no damage and that they will come up smiling and bouncing.

When the Chancellor was in opposition as shadow Chancellor, his idea of a good evening out was to sit in the House of Commons Library puzzling over all the numbers coming out month by month from the then Government's statistical machine. As soon as he found a single bad number—jobs lost or manufacturing output not rising—he was on to it and would claim that it was a scandal and a disgrace. Why does he not read the figures now? Why does he not see that he has already presided over two manufacturing recessions? The second was long and deep, and some people believe that he will preside over a third if he survives long enough in office given all the current rumours. This is the man who has let manufacturing down, who has destroyed good, well-paid jobs and who has led to a crisis in our export industries, because he has damaged the productivity and competitiveness of those who make things in Britain.

That leads me directly to the fourth huge error and problem with which the Chancellor has burdened us. It is a problem that he and his Labour predecessors as shadow Chancellor used regularly to complain about when Conservative Governments delivered more modest figures in terms of the problem than this Chancellor has done. I am talking about the balance of payments. It really takes the biscuit for someone who campaigned against any balance of payments deficit in the Conservative years not only to preside over, in the past year, the biggest bumper deficit in history but to say nothing of the fact that we buy £34 billion more of manufactured goods into this country, which was once the workshop of the world, than we are able to sell from it. That is the magnitude of the crisis that he has created in manufacturing.

Many Labour Members have now gone quiet. They know that there have been factory closures and job losses in their constituencies. They are under pressure from their constituents to put that right, but they know that they have nothing to offer because the Chancellor does not care.

Several hon. Members:

rose—

Photo of John Redwood John Redwood Conservative, Wokingham

I shall give way to Mr. Hendrick because he has not intervened.

Photo of Mark Hendrick Mark Hendrick Labour/Co-operative, Preston

Does the right hon. Gentleman agree that consumers, and not the Chancellor, purchase manufactured goods? In fact, the Chancellor has done a great deal to stabilise the economy.

Photo of John Redwood John Redwood Conservative, Wokingham

That was incredibly lame. The hon. Gentleman could not name a single thing that the Chancellor has done. I am glad that consumers are still allowed to make their own choices on some issues in this country, but I am sure that Labour is working on stopping that. When the Chancellor was in opposition, he said that he had all the answers. However, in government, he has adopted all the wrong policies. He is the man of taxation and regulation, so he is destroying jobs by his deeds. Lift the regulation, reduce the taxes and the situation would improve for many manufacturers.

The next issue on which the Chancellor has fallen down is the euro. Does he not realise by now that joining a Germany mired in recession, joining a large area where one interest rate certainly does not fit all and hitching our fortunes to the continent of Europe where growth rates and productivity growth rates are far worse even than in Brown's Britain would be the last thing that we need to do? Should he not now lift the burden and uncertainty from business?

One thing that the Chancellor could do today to make business a little happier would be to come to the House and say that he has decided that it would be quite wrong to destroy the pound and the separate controls over our economic life. He could say that business need not waste its time and money worrying about preparations and about whether the Government will hold a referendum. He could remove that uncertainty if nothing else.

The next thing that the Chancellor has done that shows how disastrous he has been was his pathetic sale of gold reserves. It was a signal to the market. If one had been looking for a contrarian view, one should have immediately moved in and bought however much gold off the Chancellor that one could afford to buy. He managed to find and create the deep bottom of the gold market. He sold this country out; he sold it short; he got it wrong; and he has never apologised for the losses that he has chalked up.

The losses to date are a mind-boggling £750 million. What could manufacturers have done with that sum if it had been given back to them as a tax reduction? What could my hospital and hospitals around the country have done with that money if it had been available to purchase enough nurses and doctors to get ahead of the productivity problem that the Government have created in the health service? This Chancellor decides that he can outwit the fund managers of the world. He sold the gold at the wrong price and, of course, he does not apologise. Britain is poorer as a direct result.

The next issue is the telecoms industry. The Government inherited a marvellous telecoms industry that had been created by the previous Conservative Administration's privatisation, liberalisation and deregulation. Their policies spawned thousands of new jobs, many new products, a great increase in exports, a huge improvement in service and an extension of telephony services to many people who simply could not afford them under a Labour Government with a monopoly public enterprise system. This sector of the market was leading the growth and the boom that Labour inherited. What did the Chancellor do? He imposed a swingeing telecoms tax on the industry, charging them £22 billion simply to stay in business.

I agree that that was very clever. The Chancellor wanted to maximise the take and he worked out exactly how to do that. He did that very well. However, he did not seem to realise that that would bankrupt half the industry, turn the other half into walking wounded, lead directly to huge job losses, slow down investment in new technology and extend the damage being done by the dotcom bubble bursting in the States. He made the problem more severe and more difficult in the United Kingdom. He decided to burst his own boom in the leading sector, and he did so dramatically with terrible results.

Photo of John Redwood John Redwood Conservative, Wokingham

No, I wish to conclude, because many other Members wish to speak.

Photo of Mr Ivan Henderson Mr Ivan Henderson Labour, Harwich

What about rail privatisation?

Photo of John Redwood John Redwood Conservative, Wokingham

The hon. Gentleman will be delighted to know that the next issue to which I shall turn is the railways.

This Chancellor took a private sector company that needed a modest amount of Government assistance to deal with the very large requirements that the Government were heaping on it to improve safety and standards on the railways and, through bankruptcy and the development of a new type of company—a third-way company, as they like to call it—he decided to waste billions of pounds of taxpayers' money that would not have been wasted if the Government had soldiered on with the system that they had inherited.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

At the time of privatisation—which was clearly a privatisation too far—why did the right hon. Gentleman's Government not think more carefully about how it should be conducted? Why did they split the industry? Why did they make it unsafe? Why did they make it uneconomic?

Photo of John Redwood John Redwood Conservative, Wokingham

We did not make it less safe than the nationalised industry that it replaced. Privatisation led to the great increase in ridership and usage of the railways to which Ministers often refer. They do not realise that they are contradicting themselves when they point out that element of success in the system that they inherited and that they then enjoyed in the good times. This Government bankrupted the private sector company; they decided to impose such strong requirements on the railway that it was not possible to finance it at the then rate; and they decided to tip at least £14 billion into an organisation only to discover that railway services are now worse than they were when they started the dreadful odyssey on which they embarked.

The Government are wasting billions on the railways but commuters from my constituency of Wokingham still cannot get to work on time on a reliable service. The Government's rail regulator is saying that it will now have to cut services because, despite all the money, there is not enough to spend on the things that need doing. Despite all the money, the service is going backwards rather than forwards. The Government will rue the day when they bankrupted that company; they will rue the amount of money that is gobbled up by their new creature without it achieving good results.

Photo of John Bercow John Bercow Conservative, Buckingham

Is not the ultimate evidence of the Government's chronic policy failures on Railtrack and of the disinformation provided to the House about such matters the reality that Mr. Byers, who was the Secretary of State responsible, scuttled off and resigned from office?

Photo of John Redwood John Redwood Conservative, Wokingham

Indeed, the right hon. Gentleman had to do that. His policy was disastrous and, at times, incorrectly presented to the House and to those outside.

That brings me to the Chancellor's and the Government's ninth catastrophic failure. If he wants to have a fast growing, modern and successful economy, he will have to learn that the first thing that he needs is a good transport system. Yet this Government have managed to combine big increases in public spending on transport with a massive failure of performance.

This is the Government who now nervously await the introduction of the congestion charge in London, knowing that London has been brought to a halt by a combination of central Government misdirectives and a Labour Mayor whose one purpose in life is to stop anyone driving anywhere, whatever the hour, however much it might be necessary to take their tools to work or to travel at times when public transport is not available.

Until this Government understand that a modern economy needs to let vehicle traffic get around as well as railways, until they understand that we need a massive increase in capacity of all types of transport, there is little hope of restoring the levels of growth that the economy once enjoyed, which are now slipping because of the dreadful policies of the present regime.

That brings me to the tenth of my 10 points [Interruption.] Labour Members must be very relieved to know that I have limited my speech to 10. I could have done another 10.

The tenth point I have chosen is the Government's strange view that third-way finance will ride to their rescue, that there is magic money in the private sector that can be attracted into public service without a cost to taxpayers. Again, they will rue the day. They will discover that many of the half-baked schemes they have constructed, starting with the London Underground, are badly thought through and will end up with enormous risk to the taxpayer.

My right hon. and learned Friend the Shadow Chancellor is right. The £100 billion-odd of liabilities that are potentially already out there should be on the Government's balance sheet and should be clearly understood by the Government. Next time the Government should pause before signing some of these contracts, because there must be honest finance for these projects. If they are public projects, they will end up with higher taxes, and higher taxes mean a weaker economy.

We desperately need a Government who will lift the burden of regulation, will start to concentrate expenditure on the people and things that are necessary and will hack away at the overgrowth and undergrowth of the political classes and the spin doctors, the administrators, the consultation experts and the great raft of colour brochures that this Government now churn out to substitute for proper policy and managing services on the ground.

There is massive waste in this Government. I say to them: start to chop it out. Give the money back to the people, give the money back to business, and then things could start to grow again.

The Chancellor has let the country down. He has robbed and pillaged the private sector. He has driven people out of work in manufacturing. He should be ashamed. He should apologise to the House.

Photo of Vernon Coaker Vernon Coaker Labour, Gedling 2:42 pm, 12th February 2003

I shall be brief, to allow other hon. Members to speak.

The debate is interesting because it shows that the Conservatives' tactics are to paint a picture of gloom and doom about our public services, to run them down and say that there has been no progress or improvement, whether in the health service, schools or anything else. Clearly, one of their prime activities between now and the next election will be continually to run down our public services.

It is important to acknowledge that we face challenges and difficulties, and that improvements are needed in some respects; but if all that we do in this Chamber is deny the improvement in public investment and progress that we see in my constituency, we shall not serve our constituents particularly well. I shall highlight some of the improvements that have taken place in public services, in the economy and in employment prospects, without failing to recognise that there are challenges in our public services that we need to meet.

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

I should like to remind the hon. Gentleman of one of the statistics to which I referred, which is that over the past two years spending on the national health service has increased by 22 per cent., but hospital treatment has increased by only 1.6 per cent. Does the hon. Gentleman deny those figures? I do not see how he can, because they come from the Government. Does he think that, in those circumstances, we should remain silent about them?

Photo of Vernon Coaker Vernon Coaker Labour, Gedling

I do not think that the right hon. and learned Gentleman should remain silent. What I am saying is that the Conservative party has clearly decided that in the run-up to the next election it will denigrate and run down our public services. The difference between us is that we are saying that we shall invest in and reform our public services, while recognising progress where there is progress and challenges where challenges remain. What we shall not do is say that the picture is of a complete mess and of failure.

On the number of people out of work, to which my right Friend the Chancellor referred, it is too easily forgotten that a few years ago people like me and many others used to go on marches for jobs. We carried banners at huge demonstrations, where we said that there could be no dignity for any family, no self-respect for any individual and no proper attack on poverty in society if we did not move towards full employment.

We too readily say that, whereas 3 million people were out of work, now the figure is less than 1 million. That reduction is a staggering achievement. It means that people have prospects in their lives. They have the possibility of inclusion, self-respect and dignity, which were denied them before. The reduction in unemployment in my constituency is a phenomenal achievement. In their welfare to work programme, the Government tried to tackle the problems encountered by people moving off benefit and into work caused by the benefits trap. Tax credits, the new deal and other measures introduced to deal with some of the difficulties have been a tremendous success.

I am proud of our record on employment and the fact that a Labour Government have delivered huge rises in the number of people in work and huge decreases in the number of unemployed. That is one of the greatest social steps that can be taken to tackle poverty and give people dignity.

In my local area, too, the increases in public spending have brought real benefits. It is clear from this debate that it is possible to take the Opposition's position. They can say that there is considerable waste, and considerable spending that should not be made, and that their policy is to reduce that spending by 20 per cent. because they think that it will deliver a better result. However, I must tell them that I shall not argue for a reduction in public spending when most people in my constituency are banging on my door calling for increased public spending. They want increases in the amount the Government are doing for their schools, hospitals, roads and transport. They believe not that there is over-investment in those services, but that the decades of under-investment in them led to the current problems.

We all accept that it is not possible simply to plough money in and expect services to improve. Reform is needed alongside the investment. Equally, it cannot be said that reform on its own will deliver improvements. Investment must be coupled with reform if we are to see improvements.

Photo of John Bercow John Bercow Conservative, Buckingham

It is a question not of denigrating the services, but of holding the Government to account for their policy failures, which make them worse than they would otherwise be. Will the hon. Gentleman tell the House, in response to the question that I posed to the Chancellor and that my right hon. and learned Friend Mr. Howard has just posed to him, why NHS activity rates are rising at a rate of only one-fourteenth of the increase in NHS expenditure? That is the question; what is the hon. Gentleman's answer?

Photo of Vernon Coaker Vernon Coaker Labour, Gedling

We are investing in capacity to deal with some of the problems. As I understand it, the shadow Chancellor said that public services have been denigrated. He painted a picture of complete failure in which no progress or advance had been made, but we are making progress—although I accept that real challenges remain. Mr. Bercow identifies the problem of capacity, but we cannot address that without investment. We certainly cannot do it by inflicting cuts.

Photo of Vernon Coaker Vernon Coaker Labour, Gedling

If my hon. Friend allows me to finish, one or two of our colleagues will also be able to speak.

My constituency of Gedling in Nottingham has new schools. Parkdale primary school has been rebuilt; millions of pounds of capital investment have gone into Arnold Hill school, Carlton-le-Willows school and Redhill school; and Arnold View school is to be rebuilt. There are new buildings at Arno Vale school; new classrooms at Burton Joyce; and a new hall at Seely church school. There are more nurseries, a sure start scheme and more teachers and teaching assistants. Colleges are expanding, and the Clifton campus of Nottingham Trent university is like a building site. Those improvements do not arrive out of thin air. They are possible only because of Government investment, and I am proud of that.

Building is going on at hospitals, too. The Queen's medical centre has a new accident and emergency unit; a new breast cancer unit is being built at City hospital, which I visited last Friday; a new urology unit and a new haematology unit are planned; and a cardiac unit is on its way, as are new wards for the elderly. There are more doctors and nurses, and the Gedling primary care trust is working to do something about substandard health centres. Just for the record, Nottinghamshire now has more police officers than ever before.

My central point is that the Government have invested huge sums in public services and we can see improvements at a local and national level. Of course it is necessary to have reform alongside that and to deal with some of the problems that investment brings, but there is a clear divide between those who believe that we can improve public services by making cuts and those who believe that we can do it by investment and reform. Another way would be to praise our teachers, doctors, nurses and police officers. We need to tell those people who work in our public services that we admire their work and understand the difficulties that they face. They need to know that we are proud of the progress that has been made.

Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield 2:52 pm, 12th February 2003

It is a curious experience to follow Vernon Coaker, who represents the constituency that I represented for 10 years between 1987 and 1997. Although I recognise his sincerity, he has not answered the Opposition's case. Before I go further, I draw the attention of the House to my entry in the Register of Members' Interests.

I hope to build on the outstanding speeches by my right hon. and learned Friend Mr. Howard and my right hon. Friend Mr. Redwood.

Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield

No, I have barely started.

I do not have a list of 10, but will comment on one or two of the points raised. Whatever else comes out of the debate, it must surely be the stunning complacency with which the Chancellor of the Exchequer accounted for the state of the British economy. Things started so well. I remember him saying, probably in song, that things could only get better. My right hon. and learned Friend Mr. Clarke bequeathed a brilliant economic platform on which to build. The Chancellor did the right thing with the Bank of England and stuck to Tory expenditure plans. He also accurately read the Asian crisis, for which he was rightly praised in the House and the City, when so many commentators got it wrong. I have said a number of times—I like to be fair—that he has been a successful and good Chancellor. However, like so many before him, he sadly believes his own propaganda, and hubris and nemesis are setting in. It will not be many months before he is reviled by every hardworking taxpaying family for presiding over what is about to come.

As the shadow Chancellor made clear, there are serious imbalances in our economy. Even the Liberal spokesman, Matthew Taylor, made the dangers in the economy clear. A housing boom led to a £12 billion withdrawal of equity in the last quarter of last year. A consumer boom has taken place. The Confederation of British Industry has issued dire warnings not only about the massive increase in taxation, but about the massive amounts of regulation that are being ushered in every hour of every day. We also have Labour's tax on jobs, which starts in April. Those events are taking place when the stock market in Britain has fallen by nearly 50 per cent. from its height and our economy is in a dangerous state.

I call on the Chancellor to announce that he will suspend the £5 billion a year tax on pensions. I do not expect him to abolish it, but it is doing a great deal of damage. Almost everyone agrees that it is vital to put more money into our pensions, but he is taking £5 billion every year. He should announce, at the latest in the Budget, that he will suspend that forthwith while the current economic circumstances prevail.

Photo of Andrew Love Andrew Love Labour/Co-operative, Edmonton

That has been one of the Opposition's themes for years, but every time they are taxed with the idea of giving a commitment to re-introduce the £5 billion, they remain silent. What is the hon. Gentleman's view on that?

Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield

The shadow Chancellor of the Exchequer will make plain our position on taxation before and at the next general election. My point is slightly different, however. I am asking for a temporary suspension of the tax, which is causing such damage to British pension funds, while we allow the economy to recover.

The Chancellor of the Exchequer has made things far worse. All the independent forecasters outside the House told him that his growth forecasts were wrong. Those people were rubbished and told that they had got it all wrong. Now it is they who are right and he who is wrong. Do we get any contrition from the Chancellor on his errors? We do not. Instead, we have to put up with the bombast, the guff about prudence, the puffed-up and stomach-churning lectures about his golden rules, and the ludicrous pseudo-intellectual speeches about the role of the public sector, such as the speech that he delivered last week to the Social Market Foundation.

Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield

The Government blandly go on roaring along with their spending plans, but who will bail them out? Perhaps the hon. Lady will tell us.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

It would be very nice if the hon. Gentleman could introduce some facts into the debate. He makes much about the forecasts. When did any Tory Chancellor get the forecasts right? Surely it is fair to refer to all the items in the Treasury Committee report that show that no one got the forecasts right, not even the independent forecasters. Let us get the facts straight.

Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield

I gave way in the hope that the hon. Lady would tell us who will bail out the Government. As she has not, I shall do it: it will be the long-suffering and greatly abused taxpayer. Had the Chancellor presided over such a failure as chairman of a public company, the company would have been forced to have a rights issue, the share price would have collapsed and no doubt the chairman and the chief executive would have been fired. Under the Government, however, the Chancellor will not be fired; he merely seeks a promotion next door.

We have the odious spectre of a grinning Government spraying around taxpayers' money as if it were going out fashion. They are frittering away the golden inheritance that they got from my right hon. and learned Friend the Member for Rushcliffe and failing to take tough decisions on public service reform.

I wish to make a few points about the six wasted years, the empty promises and meaningless sound bites that we have all had to put up with from this spinning Government. My hon. Friends will remember with affection the slogan, "Tough on crime, tough on the causes of crime." Violent crime and gun crime have risen. In New York, crime is down by 62 per cent, but in Britain it is rising again. We were then encouraged to believe that the Government were going to "think the unthinkable" on welfare. They appointed a Minister who genuinely thought deeply about those matters, then fired him. Since then, the welfare budget has soared and the Government have had to reinstate benefit rules on asylum seekers coming into this country. They had torn into Conservative Ministers for imposing those rules, describing them as wicked, but six years later they have had to reimpose them.

Then there was "24 hours to save the NHS". Waiting lists are still over 1 million, and we have heard the eloquent comments of my hon. Friend Dr. Fox about the state of the health service. Government Members should think about the following statistic—survival rates for prostate cancer in Germany are 68 per cent., but in this country, in my constituency and the constituencies of Labour Members, they are 44 per cent. As my right hon. Friend the Member for Wokingham said, spending on health has gone up by a staggering 30 per cent., whereas activity—operations—has gone up by only 2 per cent. In Scotland, Wales and Northern Ireland there is higher spending, but longer lists and worse cancer care.

We were told throughout the 1997 election campaign that there would be no rise in income tax, which was a deeply disingenuous piece of spinning. Today, there are 1 million more higher-rate taxpayers, and the tax burden has risen from 37 to 42 per cent. I could go on and examine transport, but my right hon. Friend the Member for Wokingham has already done so extremely skilfully. In the past six years, public spending has risen by a staggering £111 billion or one third. That money has been removed in tax from hard-working men and women who have paid higher tax and got precious little back. That is the catastrophic effect of Labour's experiment in throwing tax money at unreformed public services.

Photo of David Wright David Wright Labour, Telford

Does the hon. Gentleman agree that a key statistic in measuring economic success is the number of unemployment claimants in our constituencies? Is he aware that from 1997 to 2002 the number of claimants in his constituency fell by 33 per cent.?

Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield

There are two answers to that point. First, the hon. Gentleman knows that in Sutton Coldfield there is a tiny handful of unemployed people. He gave not a number but a percentage. Secondly, unemployment has fallen since 1997 because of the firm economic foundations that his Government inherited from their Conservative predecessors.

Finally, the Government have flunked reform. They had the opportunity, and we have heard about their interesting ideas on private investment in education and foundation hospitals, but they are fettered by old Labour dogma. Even the Blairite think-tank Demos in its interesting pamphlet "System Failure", published on 20 May last year, made it clear that those reforms are essential, but said that the Government have failed to implement them. They have failed to learn the lessons that Governments have had to learn since the second world war: government is too big. My hon. Friend Miss Kirkbride pointed out in an intervention that a quarter of the workforce, or 7 million people, are now Government employees. There is micromanagement by politicians, who are using a 50-year-old model that simply does not work. There is no competition or choice, and there is bureaucracy, regulation and waste.

Even the NHS says that 20 per cent. of its budget, or £10 billion, may be wasted, and there is serious capital under-investment in the health service because of the system. We have a poor service, and there is low morale among those who work in the NHS. Recent surveys show that a fifth of GPs say they want to quit and a third of teachers say that they want to quit within five years. The Government have failed to make reforms and have failed to learn lessons that have been learned overseas. If they cared to look at Denmark, Holland and Sweden, they would see that there is a free choice of school, whether public or private, which is paid for by the taxpayer. In Holland, 70 per cent. of schools are non-state owned; in France, a third of hospitals are non-state owned; and in Germany, 50 per cent. of hospitals are non-state owned. The eternal post-war truth that Government Members should have learnt is that choice and competition deliver for our fellow citizens.

The Government and those on the Treasury Bench have forgotten those lessons. The Government are bent on an orgy of spending our hard-earned taxes, but they are unwilling to make that spending count by making fundamental reforms. They have been found out. Increasingly, they will find themselves paying a terrible price for wasting our hard-earned tax money, and frittering away and destroying the good will and opportunity that they clearly had when they came to power in 1997.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley 3:06 pm, 12th February 2003

We have heard some deluded comments and nonsense—it is a case of collective false memory syndrome on the Opposition's part. I was going to give a brief speech, but as only one Opposition Member still wishes to speak, I shall allow myself a little more time. We have been presented with another rehearsal of the same ideas, but Opposition Members are blind to the truth. We have been offered a new opportunity to increase unemployment by 3 million; a new opportunity to cut nursing training places; a new opportunity for yet more privatisation. The cat is out of the bag. We have just been told that the way forward is to privatise, privatise and privatise again until everybody pays through the nose for what they are now getting free at the point of delivery. I cannot accept that Opposition Members truly believe that a mix of markets in public sector services would be more efficient or cost-effective or, indeed, deliver the services that people need when they need them.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I shall give way to the hon. Gentleman—it might be interesting.

Photo of Liam Fox Liam Fox Shadow Secretary of State for Health

I believe:

"Choice mechanisms enhance equity by exerting pressure on low-quality or incompetent providers . . . Competitive pressures and incentives drive up quality, efficiency and responsiveness".

I hope that the hon. Lady does too, as those are the words of the Prime Minister.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I hope that the hon. Gentleman is not saying that the vast majority of public sector workers are incompetent or unable to do their job. There is, quite rightly, a case for introducing measures to make a work force more effective, such as mechanisms for dealing with a teacher who is not delivering in the classroom, a nurse or doctor who is not treating patients well, or a police officer who is no longer fit for service. However, that is not what the Opposition are talking about. They are saying that a new infrastructure is needed for privatisation, as nationally delivered services are incompetent and incapable of delivering. The Wanless report, however, clearly showed that the NHS is the most efficient and cost-effective way of delivering services to the vast majority of people.

I cannot imagine why the Tory Government in 1996 thought that cutting 7,000 nursing places could increase capacity in the NHS or improve standards. To improve nursing standards, we should give nurses a clear career path and incentives in their pay structure. They should have ways of demonstrating clinical skills so that they can have enhanced job satisfaction and improve delivery of services to patients.That is the sort of reform that we want. We do not want reform ensuring that one of part of the population gets one sort of service, while another part—those who can afford to pay—gets the cream of the services. The people who are in the middle and have managed to put away a little bit of money should not suddenly find that that money does not cover all the health provision that they hoped it would. That is not the sort of health delivery that I want.

Nor do I want a mixed-market economy for education in which people get their children into classes of 12, 13 or 14 if they can afford to do so, while the children of people who cannot afford such provision end up in a class of 50 or 60 pupils at primary age. That is the situation that we inherited in 1997. It was not some sort of Utopia, but a nonsensical education system that did not deal with the basics. It was a system in which not one or two children came out of each school at 11 to contribute to illiteracy levels; in some areas, 25 per cent. of children were unable to read and write before they went into comprehensive education.

How could we possibly expect a child to develop, grow and be able to gain some sort of advantage from their secondary education if we never got the basics right? Merely to consider a one year downturn in standards without looking at all six years under this Government and the year-on-year improvements in literacy and numeracy is simply ridiculous. Hon. Members talk about a 1.6 per cent. decrease this year, but let us have a look at the 25 per cent. increases in standards year on year.

I am proud of pupils in my constituency, who have this year lifted standards beyond anybody's expectation. That has happened not only in well-off areas, but everywhere. Children who have a history of parents, grandparents, aunties and uncles being out of work now have the prospect of work. In my constituency, nobody leaving school in the past three years has been incapable of getting a job. That even includes people leaving education with special educational needs and disabilities. The new deal programme has ensured not only that the majority can get jobs, but that those who previously found it hard to be placed in a job can gain employment. We are now saying to employers—this is the sort of measure that the Opposition do not want—that we will be fair to people with disabilities and find ways of ensuring that they get the same opportunities as everybody else.

Of course, that is the so-called new red tape that we are all supposed to be throwing away. That red tape, which the Opposition hate so much, is the very protection that people need. Let us think back to the situation when we had the sort of Government who hated red tape and did not believe in the public sector. What did they say? They said that they would cut red tape, which would instantly mean cutting civil service jobs.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

Will my hon. Friend comment on the bombastic rant that we have just heard from Mr. Mitchell, who was not gracious enough to accept my intervention or to remain in the Chamber to hear the next speech? He was gracious enough, however, to remind the House that he had been the Member of Parliament for Gedling between 1987 and 1997—

Photo of Liam Fox Liam Fox Shadow Secretary of State for Health

On a point of order, Madam Deputy Speaker. It is only fair to say to the House that I believe that my hon. Friend Mr. Mitchell has told those on both Front Benches, both Whips and you that he is attending a Select Committee sitting.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

That may be the case, but I am sure that the hon. Member for Sutton Coldfield would have had time to accept my intervention. Indeed, his having to leave the debate after making his speech was perhaps even more of a reason why he might have accepted interventions.

Will my hon. Friend Kali Mountford comment on whether the hon. Member for Sutton Coldfield lost his seat in 1997, as he reminded the House, because the verdict of the electorate at that time—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Gentleman should bring his remarks to a close. His contribution is very lengthy for an intervention.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I assume that my hon. Friend was rightly reminding the House that the Opposition lost the election because of the very measures to which I have been referring.

As I said, the hon. Member for Sutton Coldfield is simply suffering from false memory syndrome. He has forgotten what it was like in those dark old days. He said a great deal about Mr. Clarke, but what did he do? Immediately before the election, when everybody thought that interest rates should have gone up, what did the former Chancellor do? He sat on his hands. Why did he do so? He was worried about the election, but even that decision did not buy the election result for which the Conservatives hoped.

That is why the current Chancellor rightly dealt with the Bank of England and said that we must be independent and that interest rates should not be tied to the electoral benefits or disbenefits of the Government of the day. It was perfectly correct to do that and it is right that that freedom exists for the Bank of England, but the Conservative party never had the guts to introduce it, as they had to have control to fool the electorate repeatedly and bribe them by saying "We should not take this measure now, but we need to deal now with taxes, interest rates and the retail price index." At each general election, they had to buy off the public. In the end, the public saw through that approach and showed that they cannot be bought off with short-termism. That is what we are hearing today—short-termism and a failure to look to the long term. People are looking only at what affects us today.

Let us consider the long term and Britain's overall performance. It is uncharacteristically unfair of the Opposition to say that Britain is in doom and gloom and is about to be in a slough of despond. Nothing could be further from the truth. Let us consider some fair comparisons. On every economic indicator, Britain performs well against all its major competitors. It is easy for the Opposition to denigrate the Japanese performance, but let us remember Japan's position in the past. It was the envy of the world and it had the economy to which we all aspired, but now that economy has slumped. Have no lessons been learned from that?

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I see that the hon. Gentleman is twitching in his seat.

Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary to the Treasury

I thank the hon. Lady for giving way. Does she have any worries at all about the crowding out of the private sector, which produces the money and wealth to pay for the public sector, after we have seen a halving of the stock market in the past three years?

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

The hon. Gentleman raises a very interesting point. Indeed, it is a point that I raised when the Labour party was in opposition. At a party conference, I expressed concern about the same issue with regard to the then leader of the Conservative party, Margaret Thatcher. At that time, we saw absolutely desperate measures being taken, and she told us that we were going to be the shopkeepers of the world and that that was how we would support our economy. I could not understand how an economy based on only one strand of activity could possibly be successful and believed that it would be wrong to let all the manufacturing base simply dwindle away.

Two parts of the manufacturing base are under particular stress—textiles and steel. It is false to say that the whole of manufacturing is declining at the same rate or that it is declining only in the UK. We must consider the whole world economy and the changing economic base. We must look at the new industries, which are not only service industries. In the 1980s and 1990s, I was terribly worried about the growth rate of hotels and the disappearance of the steel and coal industries. Perhaps Opposition Members should be giving us some lessons about what they did wrong at that time, but in similar circumstances, we must ask what is different today.

Let us consider new measures and issues such as the amount of equity release, which was mentioned by the hon. Member for Sutton Coldfield and was also part of the total collapse of the economy under the Tories, when house prices were fired above inflation so that people could not afford to keep up. What is different now is the stability that we have in the economy. We do not have the soaring interest rates of 15 or 20 per cent., the rocketing inflation rates or the massive unemployment that we used to have. We have greater confidence in people's own abilities to sustain themselves, and that matters a great deal. If we keep talking down people's confidence and the confidence in the markets, and if we keep talking down Britain, that will become a self-fulfilling prophesy. It is madness, if we look around the world today and see how Britain is faring, even against the strongest economies such as the United States and Germany—

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

The hon. Gentleman is disparaging Germany, but I seem to recall that it is one of the G7 countries, and one of the four biggest economies in the world. It is another economy that we once aspired to be like, along with that of Japan.

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

Is the hon. Lady seriously suggesting that we want to aspire to be like the German economy? In its latest unemployment figures, 400,000 more people were put out of work, and nearly 5 million people are out of work altogether. Its growth forecasts have recently been reduced so that they show barely any growth at all. Is the hon. Lady seriously suggesting that we should aspire to be like the German economy?

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I realise that the shadow Chancellor never really wants to hear anything that I say, and that he has probably been half asleep while I have been speaking. I was saying that we used to aspire to be like countries such as Germany and Japan, but we now fare far better than them. They had the strongest economies in the world, but they are now a long way behind the United Kingdom. [Interruption.] The right hon. and learned Gentleman obviously does not want to hear this, but the UK economy is stronger than the German economy. During his time in government, however, it certainly was not. That is my point.

Photo of Mr Howard Flight Mr Howard Flight Shadow Chief Secretary to the Treasury

I thank the hon. Lady for giving way. May I ask her for her views on why the German economy has gone off the rails so much? Will she not concede that part of the problem is that the private sector has withered because the burdens that have been put on it have been too great for it to sustain growth under them?

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

The hon. Gentleman is forgetting the great number of people who went to Germany after the Berlin wall was pulled down, which was an effort for peace that we all wanted but which had a great economic impact on the German economy. There were outflows from that. Every country has to go through the economic cycle and, to be fair to the German economy, it is at the downward end of its economic cycle now. That is one of the problems for convergence, because the cycles simply do not match up at the moment.

Photo of Mr Roger Casale Mr Roger Casale Labour, Wimbledon

Does my hon. Friend share my surprise that this Opposition day debate has been called one week after interest rates were cut to their lowest level in 50 years, and on the very day on which unemployment figures have fallen by 36,000 to a new historic low? That is the day on which the Opposition have chosen to discuss the Government's failure in economic management.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

The key fact that my hon. Friend mentioned is the job figures. A Conservative Member tried to imply earlier that the new jobs in the economy were somehow detracting from the manufacturing sector, and that they were poor, part-time jobs that nobody really wanted. But we have to consider those jobs against the background of average earnings. Earnings have risen year on year over the last few years. In the public sector, earnings have risen by 5.7 per cent. in the last year. I do not call that peanuts. In the economy as a whole, earnings have risen by 4.9 per cent. If those jobs were rubbish, we would not be seeing that level of increase in overall earnings.

Photo of John Bercow John Bercow Conservative, Buckingham

I am very grateful. Given that the hon. Lady referred earlier to housing, what assessment has she made of the effect of the change, during the last Parliament, in the rules on the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

The hon. Gentleman is digging a hole for himself. I was a member of a council at a time when capital receipts were not allowed to be spent on housing in any way, shape or form.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

If the hon. Gentleman will let me finish, I will tell him that the whole point of housing receipts was that they ought to have been ploughed back into housing. This Government have insisted that, at the very least, that money should be released for investment in social housing and, most importantly, in improving the quality of that housing.

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I have not quite finished my point, but since the hon. Gentleman and I have been old friends on the Select Committee, I cannot resist him this time.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury

I am most grateful to the hon. Lady. I agree that it is important that the receipts from the sales of social housing should be able to be reinvested. Is she not, however, somewhat concerned and embarrassed that, since her Government came to power in 1997, the number of social housing starts and completions has halved from the level at which it stood in 1996–97?

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

I point the hon. Gentleman to the Local Government Bill that is going through Parliament now, and to the housing strategy that has been announced by my right hon. Friend the Deputy Prime Minister. I would be embarrassed if that money had not been invested in improvements to the housing stock, over whose deterioration Conservative Members presided. If we do not invest in housing—in terms not only of numbers but of quality—there will be no social housing available and nobody would want to live in it anyway.

It is an important aspect of the economy that we get the housing strategy right. While there is scope for more house building, we must also look at properties that are hard to let because they are in undesirable areas or simply empty because people have moved out to new areas. That relates to some of the differences in the growth of the economy between one area and another, which we need to look at. We need to ensure that prosperity is spread equally and fairly across the whole economy, through all sectors and regions and to all people.

I cannot imagine that Mr. Laws would agree with the Conservatives' strategy for improvement. I am sorry to embarrass Mr. Howard again, but that strategy includes a 20 per cent. cut across the board. That simply does not cut it with me. At one point, I even heard a Conservative Member argue that that 20 per cent. cut would be implemented only on Government services. Well, we have been there before, and I have been there before in this speech. Would a cut in public services that related only to bureaucrats—these supposedly sinister creatures of the night—imply that their jobs were not worth while? Are the Conservatives seriously saying that civil servants do not do a good job? As an ex-civil servant, I do not think that that is the case.

I simply do not believe that the proposed 20 per cent. cut would be aimed only at those bureaucrats. It would have to be aimed at the people who keep the whole system running. It would have to be aimed at the local education authorities. [Hon. Members: "Why?"] I am simply considering bureaucrats here, so as to be helpful. Let us consider the managers of our primary care trusts. Now, there is a reform and a half that the right hon. and learned Gentleman never even dreamt of. If we are looking at reform, and at spending money wisely, we could do no worse than to point to that. With a 20 per cent. cut, the primary care trusts would not have the money to spend on their managers—the people who keep their drug budgets down and who invest wisely in their patients' future.

Photo of Paul Farrelly Paul Farrelly Labour, Newcastle-under-Lyme

My hon. Friend has obviously read her John Maynard Keynes. Does she agree that under the Chancellor's handling of the economy we have been prudent in squirreling away capital receipts for a rainy day—the proceeds of the mobile phone auctions, for example—whereas the Conservatives not only squandered those receipts, but counted them, using dubious accounting, as negative expenditure?

Photo of Kali Mountford Kali Mountford Labour, Colne Valley

My hon. Friend is right. When we have sunshine we squirrel money away, and when we have a rainy day it is there to spend. We are now seeing expenditure in the form of largesse of which Conservative Members would never have dreamed. Moreover, going by what we have heard today, they would not have approved of it and certainly do not aspire to it. Conservative Members do not want to invest in public sector services. Clearly, they do not believe in Keynesian economics, but even if they did I expect that they would get it wrong.

I congratulate the Chancellor on getting this country through some stormy waters in difficult times. That is something of which to be proud, not to denigrate, as Conservative Members continually do.

Photo of David Cameron David Cameron Conservative, Witney 3:30 pm, 12th February 2003

I draw the House's attention to my entry in the Register of Members' Interests.

I am pleased to take part in the debate and to follow Kali Mountford. She spoke with great passion and at some length, but I enjoyed listening to her. It has been a controversial and heated debate; I fear that my contribution may be slightly less so. I intend to be constructive by trying to solve a genuine mystery—where has all the money gone? In our experiences in our constituencies, we have all seen a large amount of Government money being spent, yet, although there have been some improvements, performance in many public services has remained flat or, in some cases, has gone down. My right hon. and learned Friend the shadow Chancellor gave the most telling figure of the debate—in the past two years, there has been a 22 per cent. increase in health spending, but a mere 1.6 per cent. increase in activity.

Photo of Andy Burnham Andy Burnham Labour, Leigh

On that figure concerning NHS productivity, does the hon. Gentleman accept that the biggest problem that the NHS faced in 1997 was a lack of capacity in buildings and in human resources, and that making those investments does not necessarily lead to an increase in patient outcomes? Will he address that specific point? Conservative Members have mentioned it at least four or five times, but it is facile rubbish.

Photo of David Cameron David Cameron Conservative, Witney

I shall come to that. A particular problem in the health service, especially in the south of England, concerns the number of nurses. That is the key factor, and it has to be got right.

Here are my three reasons why I believe that money is being wasted. First, we have heard the Chancellor say many times that resources must be backed by reform. Conservative Members would all say that we agree with that, but the question is, what reform? There have been loads of changes in the health service—the primary care trusts, which are now being repackaged and reformulated, the Commission for Health Improvement, and a billion quangos—but have they been the right ones? Take the NHS in Oxfordshire, where the problem centres on nurse shortages. In the John Radcliffe hospital, which serves my constituency, there is a shortage of 400 nurses and a 14 per cent. vacancy rate. The effect of that is cancelled operations. Many constituents come to my surgery having had their operations cancelled six or seven times. There are queues in the accident and emergency department, and our trust is one of the places where patients are being kept in ambulances outside the hospital. We also have bed blocking. Older people who should go into homes in the community cannot because their care packages cannot be put together. What is the problem? A shortage of nurses. Why is there a shortage of nurses? Because in the south-east the cost of living is much higher and we cannot retain them.

Photo of Phil Hope Phil Hope Parliamentary Under-Secretary, Office of the Deputy Prime Minister

If the hon. Gentleman's criticism is that there are insufficient nurses in Oxfordshire, can he explain how a 20 per cent. cut in spending on the health service will resolve that problem?

Photo of David Cameron David Cameron Conservative, Witney

As I sat down I thought that it might be a mistake to give way to the hon. Gentleman—now I am certain. If he has been listening to the debate and it has stayed in the gap between his ears for long enough, he should know that we are not committed to a 20 per cent. cut across the board—we are looking for savings.

If the extra money cannot go into extra pay for nurses in areas that need to retain nurses, the money simply will not work. I speak from experience, because my son has been ill and I have spent two of the past 10 months in various hospitals in Oxfordshire and London. The John Radcliffe hospital in Oxford has a superb staff who do a fantastic job. Money is being invested in it. The accident and emergency department has been closed, the temporary department is much better and the new one will be even better. However, delays persist because the hospital does not have enough nurses. The number of entry points to accident and emergency does not matter; if the nurses are not there to process the patients, the problem cannot be solved.

I shall give Phil Hope another example, from a conversation with a male nurse in Great Ormond Street hospital. I was on my way to Health questions and I asked him what he would like me to ask the Secretary of State if I was called. He wanted me to ask about the appalling waste of money on agency nurses. He said, "They cost this hospital hundreds of thousands of pounds. They're far more expensive than normal nurses. It's an absolute scandal and not nearly enough has been said about it." I asked how he knew so much about the subject. He replied, "I am an agency nurse. I'm doing quite well out of it, but the amount of money being spent is scandalous."

I shall relate one more story from my experience. I had to go to the accident and emergency department at St. Mary's, Paddington—a hospital in the centre of London—with my son at about 11 pm. I waited seven hours. We were not in the children's accident and emergency department because a shortage of nurses means that it does not open at night. After sitting there for seven hours, we were offered a bed. None was free in the whole of central London; the nearest was in Guildford.

Shortage of nurses is the problem in south-east London. The extra money will not work unless we have different rates of pay in different parts of the country. [Hon. Members: "More money."] It means more money in some parts of the country. However, the key element is more freedom. We must give all hospitals, not simply 12 foundation hospitals, the freedom to respond to their needs.

In the remaining four minutes, I want to draw hon. Members' attention to another example of wasted money and no improvements. It is a microcosm of the debate. In some places, more spending does not lead to a better or even a level outcome. It can lead to a worse outcome. The NHS has experienced problems with care homes, and the new regulations have led to the closure of several. To give the Government their due, they have listened and intend to make some changes, which may have an impact.

No one, however, has paid attention to the effect of regulation on adult placements in the community. In Oxfordshire, 100 adult placement carers take vulnerable adults into their homes. They are like foster parents. They are heroes and heroines, who do a fantastic job. They are paid a modest amount of money and they keep vulnerable adults, who often have mental health problems, physical handicaps or have been in care, out of the care system. They do a great job.

Until now, county council social services departments regulated the carers. The departments interviewed them for 40 hours and inspected them every year. That system worked well. In Oxford, 100 adult placement carers look after approximately 250 people. The Government, armed with all the new money, set up the National Care Standards Commission and introduced the Care Standards Act 2000. As well as care homes, the commission has to regulate adult placement carers.

First, the carers must read a document that is approximately an inch thick and pay for the privilege of registering. They subsequently have to read a 75-page document entitled, "Care homes for younger adults in adult placements". I remind hon. Members that we are considering people who look after vulnerable adults in a loving family atmosphere in their homes, not care homes. The carers must also read the regulations, which comprise 27 pages. They have to plough though 142 pages simply to be regulated.

It is unsurprising that several of the 100 carers who take in vulnerable adults are giving up the ghost. A letter from Oxfordshire county council states:

"At the time I last wrote to you on this subject, an adult placement carer had resigned from the scheme and many more were expressing unhappiness about the changes arising from the introduction of the Care Standards Act 2000. I am afraid that the tally has risen further and 13 carers have now either withdrawn from the scheme altogether, or have reduced the categories of care they are willing to provide in order to avoid the implications of registration and inspection by the National Care Standards Commission."

Photo of David Cameron David Cameron Conservative, Witney

I shall give way to the hon. Gentleman who used to work for The Observer.

Photo of Paul Farrelly Paul Farrelly Labour, Newcastle-under-Lyme

Before we explore every nook and cranny of Witney, let me take the hon. Gentleman back to his initial question. He asked where all the money had gone. Given the public debt that we inherited in 1997 and the state of the public infrastructure, will he explain what happened to the windfall from privatisation and North sea oil under previous Conservative Administrations?

Photo of David Cameron David Cameron Conservative, Witney

The hon. Gentleman would probably have done better to stay at The Observer.

An easy answer is available to the Government. They need only tell those running adult placement schemes, "You do not have to be regulated by the National Care Standards Commission; the arrangement works perfectly well when managed by social services departments". If the Government do not do that, they will find that in this and other areas all their extra spending will be devoted to extra bureaucracy, extra publications, extra documents, extra inspections—and no extra services. Indeed, in some instances, such as the one I have given, services will actually get worse. 3.40 pm

Photo of Liam Fox Liam Fox Shadow Secretary of State for Health

It is clear from the debate that some things are beyond dispute. That the Government have taxed more and that the Government have spent more cannot be disputed by anyone with any objective sense. The question is this: why have the Government failed to deliver? Today the Opposition have first tried to reveal areas in which the Government have failed to deliver, and then suggested reasons for that failure.

The debate began with a forensic dissection by my right hon. and learned Friend Mr. Howard, the shadow Chancellor, of the Government's failures to handle the economy. He mentioned the unpredicted deterioration in the public finances, the disastrous state of our manufacturing sector, the fear that grips the business community in regard to our economic prospects, and the long-term suffering that older people will endure as a result of the Chancellor's pension theft. Robert Maxwell's pension theft was a national scandal; the Chancellor has made it a part of central Government policy.

My right hon. Friend Mr. Redwood told us that more regulation, higher taxes, more bureaucrats and greater waste led to a weaker economy and poorer public services. He depicted the Chancellor as the destroyer of pensions. He spoke of the Chancellor's failure to build on the success of the Conservatives' telecommunications revolution, and dismissed the disastrous sale of gold that has cost the British taxpayer more than £750 million. It did my heart good to listen to my right hon. Friend. Far too many Conservatives readily accept criticism of failures in office; too few are willing to accept responsibility for our many achievements.

My hon. Friend Mr. Mitchell rightly spoke of the golden inheritance received by new Labour. Never had a Government come to office, he said, at a time of more favourable economic trends. As he also said, despite that—and despite two overwhelmingly good parliamentary majorities—the Government have achieved very little during their time in office.

As my hon. Friend Mr. Cameron pointed out, the shortage of nurses, the huge vacancy rates, the cancelled operations and the level of bed blocking are indicative of a mismatch between supply and demand in relation to NHS staff, especially nursing staff. That in itself points to the need for substantial reform. As my hon. Friend said, flexible pay arrangements are needed, but there are other ways of attracting nursing staff. We need to think about shift flexibility, the physical security of staff—all staff, that is, not just nurses—training and supervision, and professional freedom and self-respect. In the case of the nursing profession, that means not using surgically trained or gynaecology nurses in general medical wards, but affording them the respect that they are entitled to expect given their expertise.

One of the most enlightening speeches was made by Matthew Taylor. As usual, he had his finger on the pulse of public sector failure. He said, "We found out today that thousands of old people are waiting for discharge in our hospitals." He must be one of the last people in Britain to discover that; only Liberal Democrats could be surprised by it.

What really galled me about the hon. Gentleman's performance, however, was this. It is clear that the Liberal Democrats will tell one group that taxes are too high, and will tell others that they should be raised. They will tell one group that spending needs to increase, and as the Chancellor said, they will write to another group saying that it does not need to increase at all. They tell one group that they are the party of the inner city; they tell another that they are the party of the country. They are pro-war; they are anti-war. They are for free nursing care, but they will raise the cost of nursing care when they are in charge of local government. The fact that the once great Liberal party has descended into the second-rate charlatan collective that the Liberal Democrats are today is indeed a national tragedy.

My hon. Friends have drawn attention to Labour's failures on a number of fronts—education, for instance. Kali Mountford talked a great deal about literacy and numeracy, but according to the 2002 survey one child in four now leaves school unable to read, write or count properly. These pupils are leaving primary school after six years of her Government's being in office, so talk of incremental change is complete nonsense. In GCSEs, the gap between children in inner cities and elsewhere is actually growing, according to a departmental survey of December 2002. Only 39 per cent. of children are getting grade C or above in maths, English and science.

On law and order, the Prime Minister said that

"crime figures are the measure of whether this Government is succeeding or failing".

In the year to September 2002, overall crime was up by 2 per cent. Robberies were up by 13 per cent., domestic burglaries by 5 per cent., retail crime by 6 per cent., and drug offences by 12 per cent. In the past year, crimes involving the use of firearms were up by 35 per cent., and those involving the use of handguns by 46 per cent. The number of robberies involving the use of firearms increased by one third in the past year, and such robberies are at their highest level for more than a decade. Crimes involving the use of firearms are up by 80 per cent. since Labour came to power in 1997. How can there be any doubt about their failure to deliver on public services?

Transport is a complete shambles. So far, the Government's answer to making the trains run on time is to cut the number of trains running. Well, that is an act of genius. The London underground is a complete debacle. The Government do not know whether to build more roads or to have fewer of them, and they cannot seem to make up their mind whether to build more airports, or to have fewer of them. Today, they have tried very hard to distance themselves from the soon-to-be-hated congestion charge, which is a direct result of their Transport Act 2000.

We need to look not only at the failure to reform, but at the reason behind it, which is to be found in the contradictions within the Government themselves. As I have pointed out, the Prime Minister said:

"Choice mechanisms enhance equity by exerting pressure on low quality or incompetent providers. Competitive pressures and incentives drive up quality, efficiency and responsiveness in the public sector."

How far can that possibly be from the Chancellor's view, as expressed in his speech to the Social Market Foundation? In it, he said:

"In health not only is the consumer not sovereign but a free market in health care will not produce the most efficient price for its services or a fair deal for its consumer."

These views are not compatible, but at least the clear difference that has emerged in the war of No. 10 succession—in the axis of acrimony—is far better than the confused position of the Secretary of State for Health. He began by saying that he would

"come down like a ton of bricks on anyone who has anything to do with the private sector".

Now, not only does he use the private finance initiative at every opportunity; he also wants to establish foundation hospitals, with the freedom to borrow and to set pay and conditions. As a concordat with the private sector, he is using private hospitals for NHS patients, and he wants to put private management into failing NHS hospitals. That is rather striking when one compares it with what he said in this House on 26 June 2001:

"by and large, we thankfully have one monopoly provider and that is the NHS. As long as a Labour Government are in power, that will remain the position."—[Hansard, 26 June 2001; Vol. 370, c. 500.]

Little wonder that we cannot get proper reform, and that there is no impetus for real change in the public sector, when there is such a division of ideology and philosophy on the Government Front Bench. The Cabinet fight like ferrets in a sack. They cannot sit on the same platform, and now it is more a question of who is likely to succeed the Prime Minister, rather than what is best for the country. We are all victims of the proxy war in the battle for No. 10.

We have heard several times today about the statistics that are most damning in respect of the national health service. Despite a 21.5 per cent. increase in real-terms funding in the past two years, the level of finished consultant episodes has increased by only 1.5 per cent., and the number of patients admitted to our hospitals actually went down last year by 0.5 per cent. It takes quite a lot of doing to spend that amount of money and get fewer patients into hospitals.

No one doubts the need for greater capacity or the Government's genuine commitment to achieving it. However, before any Government spend the tax that they are taking away from hard-working people, they have a duty to ensure that it is wisely spent. The NHS remains too centralised, too politicised, and too bureaucratised, and there is too much waste. The NHS is a victim of the target culture, and there is too little choice. There is an incipient crisis in general practice, for which vacancies have risen by 70 per cent. in the past year. Indeed, the number of applicants for each place has fallen by 50 per cent. in that time.

The Chancellor has had a good political run, but his own share price is falling. No. 10 and No. 11 may be very close to each other geographically, but the distance politically can be very great indeed. The Government need to remember that they have no money but taxpayers' money. Anyone can spend more money—spending it well is much more difficult. The Labour Government believe that the state can make better choices than individual citizens. We believe that citizens make better choices than the state. Labour believes that the state is the best manager for public services. We believe that the state is an inappropriate and poor manager for public services.

The Labour Government believe that Whitehall knows best; they believe in standardisation, centralisation, taxation, taxation, taxation and taxation. We believe in personal choice. We believe in diversity. We believe in innovation. We believe in excellence. We believe in trusting individual citizens. Enough is enough.

3.50 pm

Photo of Mr Paul Boateng Mr Paul Boateng Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

This has been a good debate, with excellent speeches from my hon. Friends the Members for Corby (Phil Hope), for Gedling (Vernon Coaker) and for Colne Valley (Kali Mountford). My hon. Friends Mr. Hendrick and for Central Fife (Mr. MacDougall) were desperate to contribute, but there was not enough time.

How different my hon. Friends were from Opposition Members! They called the debate to talk about the economy and public services, but they failed to call in their Back Benchers. At 2.36 pm, during the speech of Mr. Redwood, I, too, did some counting. We all remember his speech and the 10 catastrophic failures. I counted seven: three behind him and four directly in front of him on the Opposition Front Bench. The reality is that Conservative Members failed to come to the House this afternoon because they are either indifferent or ashamed. They are ashamed of their party's record when it was in government: 3 million unemployed, interest rates at 10 per cent. and inflation at almost 10 per cent.

We do not need to look only at the Conservatives' record in government; let us consider their record when they were—as they are now and as they will remain—in opposition. They opposed the independence of the Bank of England; they opposed the new deal; and they opposed the minimum wage, yet they have the nerve to take us to task on our economic competence and the stewardship of my right hon. Friend the Chancellor.

The Conservatives want to talk about public services. Let us talk about public services. What is their position? What is their record on the NHS? They opposed the NHS at its inception and they oppose its principles today—the very principles that we are pledged to stand up for. Those principles are stability, enterprise and fairness and they characterise the Labour Government's stewardship of the economy and of our public services—[Hon. Members: "Enterprise?"] Yes, enterprise. We are supporting enterprise at a time when the world economy is uncertain. We supported enterprise when world trade growth fell by 12 percentage points in 2001 and when 20 of the world's largest economies were either in recession or just coming out of recession. We are doing so at a time when there are real risks and uncertainty, yet at this time and in this country we have GDP growth. At this time and in this country, we have the macro-economic stability that truly gives businesses what they want: the certainty that they have a Government who are on their side.

Photo of John Redwood John Redwood Conservative, Wokingham

Will the right hon. Gentleman give way?

Photo of Mr Paul Boateng Mr Paul Boateng Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

No. Dr. Fox did not give way during his summing up, so I shall not do so during mine.

Macro-economic stability is not enough on its own; we have to do more. This Government are doing more to bridge the productivity gap. It is this Government who are targeting reforms at improving the productivity of British business. It was this Government who introduced independent competition authorities. It was this Government who ensured that we had a simplified VAT system. It was this Government who introduced the research and development tax credit. It was this Government who extended to all companies better education and improved work force training. We are entitled to be proud of that.

In November, in the pre-Budget report, we introduced policies that will combine enterprise with fairness. Yes, we believe in enterprise; we are the party of enterprise. In deprived areas, classrooms or boardrooms, the message is the same: "Yes, we can do better, but the Government are there to help and the Government are on your side".

Let us recall the Conservative record on public services. Under the Conservatives, crime doubled; the hospital building programme ground to a halt; eyesight testing charges were introduced; and education funding was cut by £80 per pupil in real terms in their last three Budgets—and they presided over a massive backlog in transport investment.

Conservative Members ask what has happened to the money and what has been going on in the NHS. There has been a 4.9 per cent. increase in elective admissions; a 3.2 per cent increase in outpatient consultation; an 11 per cent increase in patients admitted to hospital since 1997–98; waiting times are coming down; more people are benefiting from new drugs; and more patients are being treated closer to home. That is what we are doing for the NHS. If Conservative Members had their way, all that would come to an end.

Of the extra £5 billion in 2001–02, 40 per cent. was used to pay for additional staff, drugs, supplies, increased activity and the quality of activity; and 14 per cent. was invested in building capacity for the future, which the Conservatives never did. They simply tore down the present. We are delivering; they failed to deliver. In all the contributions by Conservative Members this afternoon, we heard not one constructive suggestion on how they would do better.

Equally important, we have not heard one suggestion either about how a Conservative Government would pay, which is why the hon. Member for Woodspring wound up. The Opposition did not dare let Mr. Flight speak. He had to fight his way to the Dispatch Box by way of an intervention. They would not let him speak because of what he had told not only selected groups of journalists but the readers of any newspaper whose journalists were prepared to interview him.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. We must hear the conclusion of this debate in reasonable silence.

Photo of Mr Paul Boateng Mr Paul Boateng Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Will the shadow Chancellor disown the comments of the phantom Chief Secretary? Will he publish the memorandum? If not and he will not let us see the figures, we cannot believe a word he says.

Photo of Michael Howard Michael Howard Shadow Chancellor of the Exchequer

Has it occurred to the Chief Secretary that this debate is about the Government's failure over the economy and public services? Does he not realise that whereas my hon. Friend the shadow Health Secretary and I are happy to share this debate, the hon. Gentleman cannot get the Secretary of State for Health and the Chancellor of the Exchequer in the same room—except when they meet to squabble in Cabinet?

Photo of Mr Paul Boateng Mr Paul Boateng Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Will the right hon. and learned Gentleman answer the question? Will he respond to the challenge? This is what the phantom Chief Secretary said: "Oh yes, we are certainly looking at savings." The Leader of the Opposition said, "We are looking at savings." That is exactly what was said by the hon. Member for Arundel and South Downs.

Photo of David Maclean David Maclean Shadow Chief Whip (Commons), Opposition Chief Whip (Commons)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 141, Noes 363.

Division number 88 Economy and Public Services

Aye: 141 MPs

No: 363 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 310, Noes 186.

Division number 89 Economy and Public Services

Aye: 310 MPs

No: 186 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly agreed to.

Mr. Deputy Speaker forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House notes that as a result of this Government's economic management, even in times of global economic uncertainty when the world economy is experiencing the first simultaneous downturn for nearly thirty years and twenty of the world's biggest economies including the United States, Japan, Asia, much of Latin America and Europe have been or are in recession, the UK economy continues to grow with low levels of inflation and low interest rates; welcomes the 1.5 million extra jobs created since 1997 and resists any attempts to abolish the New Deal and the tax credits that make work pay; further welcomes the cuts in the rates of corporation tax, capital gains tax and small business corporation tax since 1997 and the introduction of the R&D tax credit; and believes that after years of neglect between 1979 and 1997 it is even more important to invest in public services and to support the Government's record extra investment in Britain's health, education and other public services combined with reform to build high quality public services for all and its resistance to any attempt at this time of global uncertainty to cut public spending.

Photo of Oliver Letwin Oliver Letwin Shadow Secretary of State (Home Office)

On a point of order, Mr. Deputy Speaker. Not three hours ago I raised a point of order with Mr. Speaker, in which I pointed out that the chairman of the Labour party had made very strong statements about the problems that gave rise to the action at Heathrow. Not very long after I raised that point of order, the chairman of the Labour party appeared on the radio again, not in this House, and made statements that appear to contradict his earlier statement. That is a very serious matter.

We are dealing with life and death. It seems appropriate that there should be clarity. Conservative Members support the actions that the Government are taking. We want to have the opportunity to ensure that, in a sober-minded fashion, the nation can hear a clear account. Have you, Mr. Deputy Speaker, received from Ministers any request to make a statement about this matter?

Photo of Andrew MacKay Andrew MacKay Conservative, Bracknell

Further to that point of order, Mr. Deputy Speaker. As you will be aware, my constituency lies directly to the west of Heathrow, under the flight path, and a large number of my constituents work either at Heathrow or for various airlines. There is immense confusion after the contradictory statements from the chairman of the Labour party. Whereas my constituents and I do not expect detailed information that might be security sensitive, I would ask you whether you have yet received any request for any clarification to be made at this very difficult time, which is what my constituents would want?

Photo of Patrick Cormack Patrick Cormack Conservative, South Staffordshire

Further to that point of order, Mr. Deputy Speaker. Mr. Speaker has on many occasions deprecated Ministers' making outside the House statements that should have been made in it. It is a folly that is compounded when contradictory statements are made. Would you be kind enough to have a word with Mr. Speaker? I realise that he cannot summon a Minister to make a statement, but could the concern that is felt both in the House and in the country, with people feeling exceptionally confused and worried, be reflected in a message to Ministers, so that before the House rises tonight we have a statement of clarification?

Several hon. Members:

rose—

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. I understand that other hon. Members will have local concerns, and the whole House obviously has deep concern over what is acknowledged on all sides to be a grave matter, but, as has already been recognised in one of the points of order, the Chair cannot dictate when a Minister of the Crown should come to the House.

I am aware that the Government gave a commitment some while ago that they would keep the House informed. I am sure that they will have heard what right hon. and hon. Members have said, and I imagine that this matter could further be pursued through the usual channels.

The straight answer is that the Chair has not received any indication as of now that there is to be any further ministerial statement in the course of this sitting day.

Photo of Eric Forth Eric Forth Conservative, Bromley and Chislehurst

Further to that point of order, Mr. Deputy Speaker. Just for clarification and to help the House, which I know you want to do, when you say that the Chair has no power, is it not the case that, procedurally, if the Speaker granted an urgent question on the matter, the Minister would be obliged to give an account of events to the House? That and perhaps other procedures are available to the House and the Speaker for us to ensure that we hear about vital matters from Ministers rather than hearing contradictory accounts on the radio or, indeed, anywhere else.