The Economy

– in the House of Commons at 1:25 pm on 4th December 2003.

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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 1:25 pm, 4th December 2003

I inform the House that I have selected for debate the amendment in the name of the Leader of the Opposition. Standing Order No. 33 provides that on the last day of the debate on the motion for an address to Her Majesty the House may also vote on a second amendment selected by the Speaker. I have selected the amendment in the name of the leader of the Liberal Democrat party for that purpose. The vote on that amendment will take place at the end of the debate after the amendment in the name of the Leader of the Opposition has been disposed of.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer 1:32 pm, 4th December 2003

I beg to move, as an Amendment to the Address, at end add—

'But regret that the Gracious Speech contains no measures to provide fundamental reform of public services or to reduce the level of waste in government;
condemn the absence of proposals to restore the incentive to save, which has been eroded by the vast growth in means testing;
deplore the absence of sufficient measures to avert the pensions crisis;
further regret that the Gracious Speech makes no reference to the need to establish a more transparent and coherent fiscal structure;
further condemn the absence of measures to fulfil the Government's pledge to improve the competitiveness of the British economy and the rate of productivity growth;
note that rail delays have doubled and traffic congestion has increased under this Government, and that there are no measures in the Gracious Speech adequately to address the Government's failure to tackle these problems, which are damaging competitiveness and leading to reduced choice for the travelling public;
further condemn the failure of a draft Bill to indicate what the powers of any regional assembly would be, even though proposals for local government reorganisation have been published;
and believe that the Government's proposals to restrict the right to buy will frustrate the legitimate aspirations of tenants to own their homes.'.

Within the general sphere of economic affairs, there are six Bills and two draft Bills. Before discussing them, I draw attention for almost the last time to the investment banking interests listed under my name in the Register of Members' Interests. I stand before the House a poorer but happier man.

I am glad to be able to tell hon. Members that we start with broadly positive attitudes to each of the six Bills. We are enthusiastic about the central innovation contained in the Companies Audit and Investigations and Community Enterprise Bill. The voluntary sector is the first sector: a foundation of everything we value in human society. Both the state and the market are essentially co-operative ventures; neither could be sustained without an active sense of the common good. We unreservedly welcome the evolution of new forms of association, which foster the social entrepreneurs who can transform whole neighbourhoods.

I also welcome the Bill on civil partnerships. As my right hon. and learned Friend the Leader of the Opposition said, it addresses real grievances. I am personally delighted that there will be a free vote, on this side of the House at least. I shall vote in favour of the Bill.

As far as the provisions and proposals on baby bonds, disabilities and employment relations are concerned, we will enter into constructive dialogue with the Government in Committee, although I should say that we do not regard child trust funds as an adequate substitute for a proper lifetime savings account, and we shall watch closely for any unnecessary regulatory burdens on small and medium-sized business emerging from disability and employment legislation.

The energy Bill raises significant technical, accounting and environmental issues that we shall want to scrutinise. We share the aims, although we are not wholly convinced about the methods, of the pensions Bill. The fact that this Bill is now being introduced by the Government is, as my right hon. Friend Lord Forsyth has said in the other place, faintly reminiscent of the arsonist appearing with the fire extinguisher. We have to be careful that the arsonist does not light another fire. My hon. Friend Mr. Willetts, the shadow Secretary of State for Work and Pensions, who is an acknowledged guru, will have more to say about the need for some imaginative and lateral thinking in this area. The requirement for full funding of company pension schemes before wind-up is in itself admirable. However, I am sure that the Chancellor will share our desire to avoid a situation in which this becomes a cause of reduction in the number of company schemes. These, too, are issues we shall need to discuss in Committee.

I suppose that I should congratulate the Chancellor on keeping the draft Bill for a euro referendum just that: a draft. For our part, we would have preferred to see the officials doing something more useful with their time, but I suppose that if it gives the Prime Minister an executive toy to play with on his desk, that may be a small price to pay for avoiding any misguided attempt by the Government to do anything about the euro.

Whatever the merits of these Bills, the truth is that the solution to the Government's ills and to the principal problems of the country is not more legislation; it is better administration. I give the Chancellor full credit for the vast energy that he has displayed in his unremitting, passionate and sincere attempt to improve the administration of public services through a panoply of five-year plans, 10-year plans, targets, initiatives, public service agreements, centralised funding, performance monitoring, comprehensive spending reviews, terms and conditions, audits and best value regimes.

It all began with the noblest and most proper sentiments. In 1998, the Chancellor told The Sun that

"we must ruthlessly ensure we get value for money . . . we are determined you get value for every penny we spend".

Alas, the dreams have turned to ashes. Today, the same newspaper contains evidence that the Chancellor's best value has meant no value. Comprehensive spending has meant comprehensive waste. We all remember Picketts Lock, the dome, and the Scottish Parliament building. We also remember the Passport and Records Agency fiasco, the armed forces asset management project and the renegotiation of a failed plan to link magistrates courts. [Interruption.] There is more. Members should contain themselves.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I would be delighted to give way. Will the hon. Gentleman explain whether the Select Committee on the Treasury, which he chairs, approves of the massive waste by the Government?

Photo of John McFall John McFall Chair, Treasury Committee, Chair, Treasury Committee

The right hon. Gentleman mentioned newspapers. I note that yesterday he said that he would not talk about the financial services industry. He knows that members of the Select Committee and I are concerned about these issues. I would like a commitment that he will do an instant U-turn and tell the House that he will talk about financial services. I would like to know whether he will continue to talk about his target of 35 per cent. public spending for gross domestic product. Will he continue to talk on those issues?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

As a matter of fact, there are such experts on the Opposition Front Bench on that subject that I do not intend to speak about it. The hon. Gentleman may be aware that last night I deprived him of the fun that he was intending to have on that subject.

According to IT specialists—the hon. Gentleman ought to attend to this—£1.5 billion of spending on IT contracts has been wasted. Perhaps his Committee will look into that, because it has not been a very good record for a Chancellor who promised value for money.

It is not just a matter of projects that have gone wrong. There is also the question of squandering money on an ever-expanding bureaucracy. Why have the Prime Minister's office costs gone up by over £6 million since 1997? Why do Health Ministers' offices cost 70 per cent. more since 1997? Why has the Cabinet Office declared an increase in taxi fares of 1,000 per cent? I do not like paying the congestion charge either, but is not that taking it a bit far? Why have 1,422 staff been added to the payroll of the Department of Trade and Industry, when the Chancellor himself agrees that 500 of them are redundant?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I will give way to the right hon. Gentleman. Perhaps he can explain why more than 1,400 staff have been added to the Department of Trade and Industry payroll.

Photo of Mr George Foulkes Mr George Foulkes Labour/Co-operative, Carrick, Cumnock and Doon Valley

I am here to ask questions, not answer them. I want the right hon. Gentleman to answer the question from my hon. Friend Mr. McFall that he avoided answering. The shadow Chancellor wrote in the Financial Times on—I had better get the date right—17 May 2001:

"We would like to head downwards to 35 per cent of GDP. It is 190 per cent realistic to cut spending growth this way."

Does the right hon. Gentleman still adhere to that—yes or no?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

If that was the question, I apologise for not having understood in the least what Mr. McFall was trying to say. We are absolutely clear that we would like to reduce the burden of public expenditure and the level of tax compared with GDP, because we believe that a low-tax economy is a prosperous economy. We will stick with that.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

No. I have answered the right hon. Gentleman's question.

Why have the Government spent £882,351 renaming Government Departments and providing them with new logos? Why did the Ministry of Defence spend £8 million in 2002 on newspapers and magazines?

Photo of David Wright David Wright Labour, Telford

Will the right hon. Gentleman give way?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I will in a moment.

Why did the NHS spend nearly £900,000 on the production and distribution of a magazine that was issued 10 times in a year but managed to sell only 22 copies of each edition? Why was NHS money in Wolverhampton spent on "empathy bellies", so that young men could feel what it was like to be pregnant? Why has the Department for Education and Skills spent over £650 million on truancy and unruly behaviour initiatives since 1997, yet seen truancy increase by 17 per cent?

The truth is that, as my right hon. and learned Friend Mr. Howard so brilliantly exposed last Wednesday, the Chancellor has transformed the principle of open government into the principle of the open wallet.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I will not.

I regret to say that the Chancellor has lost control over the element of public expenditure that is in principle most controllable: the cost of the Government's administration of itself.

Photo of David Wright David Wright Labour, Telford

I thank the right hon. Gentleman for giving way. He is very generous in these matters. Dozens of people across the country will be interested in what he is saying. Does he consider the new deal for young people a bureaucratic waste of money?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

The view that Conservative Members take is that there is more to be gained by floating pensioners off the ghastly array of means-tested benefits that the Chancellor has proposed by raising the basic state pension in line with earnings, than by continuing with a new deal project that has been shown to be an expensive failure.

Several hon. Members:

rose—

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I will continue, if hon. Members will forgive me.

In many ways, the House should sympathise with the Chancellor's plight, because he is now beginning to experience the truth of the proposition put forward by his own chief economic adviser and his own permanent secretary:

"It is easier to reduce revenue and increase expenditure than to do the reverse. So when things go wrong with the public finances it is difficult to put them right, particularly since it can take a long time even to recognise the problem".

In the Supply estimates of March 1997, the Conservative Government asked Parliament to approve total spending on Government running costs in the succeeding year of £14.8 billion. In his first supplementary estimates, the Chancellor raised that figure by a modest £7 million—so far, so good.

By November 1997, the Chancellor was already adding £89 million—not quite so good. In February 1998, he added a further £175 million—a total rise across the first year of the Labour Government of some £270 million—not particularly good at all. However, it was very moderate compared with what we have seen since.

In March 2001, the Chancellor raised the cost limit on central Government administrative expenditure to £16.7 billion, an increase of 19 per cent. on the previous March, and then asked Parliament to approve an additional £763 million by the end of the year that he had not thought of at the beginning of the year. By today's standards, that was still very modest. In March this year, the Supply estimates allowed for £20.6 billion of Government administrative expenses and the additions—[Interruption.] The Chief Secretary to the Treasury, who is meant to be controlling these things, is yawning because he has been utterly asleep on the job. The additions in the two rounds of supplementary estimates are now running at something like £1.4 billion each year.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Will the right hon. Gentleman give way?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I always welcome interventions from the hon. Gentleman. I will certainly give way. Would he like to explain why the Government added £1.4 billion to the supplementary estimates?

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Is it not the case that the share of GDP spent by the Conservative Government in 1995-96—the figures are from the Library—was 42.5 per cent. and now it is only 39.7 per cent? The share of tax plus borrowing, borrowing being deferred tax, has also dropped by two points. Therefore, is it not the case that, if the right hon. Gentleman wanted to reduce public expenditure to 35 per cent. of GDP by slashing public services, he would be completely incompetent at it?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I thought that I would be pleased to take the hon. Gentleman's intervention. I wonder whether he realises that if the Government had not added so much to central Government expenditure, in particular if they had not added £1.4 billion to their own costs in the middle of the year, the proportion of tax to GDP would be lower than it is at present. That is the point with which he must wrestle.

To put that in a context that the Chancellor will be familiar with, he is adding the cost of four domes to the administrative overhead of government each year on purpose, and the cost of another two domes each year by mistake.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I will not take any more interventions for the moment. If the hon. Gentleman will forgive me, I want to make progress.

I expect that, in a few minutes, the Chancellor will come to the Dispatch Box and tell the House that he has recognised the problem and now recognises the need to reduce the cost of bureaucracy, but I fear that he will find it a more difficult and a slower process than he anticipates, because he has created great engines of growth within the bureaucracy. With new regulations on business alone running at nearly 15 per working day, not to mention the array of targets, plans and initiatives, the dynamic of senior civil servants building careers out of increasing pyramids of subordinates to administer increasing pyramids of regulation is well entrenched. Once the wallet has been opened, closing it takes very considerable political will and very considerable ingenuity. I have no doubt that the Chancellor has the ingenuity. We shall see whether he has the will.

If the only effect of that open-wallet policy were to establish a bizarre combination of a culture of control and a culture of waste, it would be sad for the hard-pressed taxpayer but it might just be bearable. Unfortunately, the squandering of taxpayers' money is just a by-product of the Chancellor's largesse. The real tragedy lies in the fact that huge sums of money spent on public services, which are not being wasted, are nevertheless being systematically mis-spent.

This year, the Government are spending over £50 million of taxpayers' money every hour of every day. By 2005 under Labour, people will be working for the taxman until 9 June each year. Taxes have been increased 60 times since 1997 but, because the Chancellor has made the public services dance to the tune of bureaucracy, because the public services have huge structural deficiencies, and because the Chancellor has failed to provide real reform, the public services are failing to deliver. Since 1997, current Government spending has increased by close to 50 per cent. but public sector output has increased by only 15 per cent.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The right hon. Gentleman mentioned structural deficiencies and talked about his policy of linking the pension to earnings. He is a very intelligent man and good with numbers. He will appreciate that the main way he will pay for his earnings-link policy will be by abolishing the new deal. That costs £600 million, £600 million, £600 million and £600 million in successive years, but his earnings-link policy will get more and more expensive each year. How will he fund a rising spending commitment with a flat-rate cut?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

Unlike some of the questions from Labour Members, that is a perfectly sensible question and there is a perfectly sensible answer to it. The other half of the cost of our policy in the first Parliament will be met, paradoxically and ironically, by the reduction in means-tested benefits that will be achieved by floating pensioners off means-tested benefits. The second and subsequent Parliaments do indeed require further funding. Part of that funding will also come from floating more and more pensioners off more and more means-tested benefits, giving them dignity and an incentive to save in retirement. We will come forward with detailed proposals about how, in those second and subsequent Parliaments, the remainder of those costs will be met well in time for the election. We can have an interesting debate with the hon. Gentleman. It would be nice if I thought that we could also have an interesting debate with the Labour party, which seems determined to make more and more pensioners dependent and to give fewer and fewer people an incentive to save. It is a tragedy for this country.

Photo of John Redwood John Redwood Conservative, Wokingham

Given that the Chancellor taxed telephone companies and they crashed, and that he then taxed pension funds and they were driven to near bankruptcy, as a fellow home owner does my right hon. Friend fear that the Chancellor is now going to tax housing to the point where that is destroyed, too?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

My right hon. Friend is absolutely right in his suspicion that this is a Chancellor whose ingenuity in designing 60 additional taxes knows no bounds. There may be no limit to the number of things that he will in due course tax. However, I hope that we will see in the pre-Budget report and in the Budget that follows that even this Chancellor desists from what were mooted as plans to tax primary residences. That would be the death knell of this Government.

In the NHS, where the Chancellor has said that

"the consumer is not sovereign," there are more administrators than beds. There are still nearly 1 million people on waiting lists and 24,000 more administrators not looking after them. As a consequence, although the Government's latest figures show—[Interruption.] Mr. Harris should attend to his colleagues who mentioned this matter previously. Although the Government's figures show that NHS expenditure has risen by 37 per cent. in real terms, output has increased by just 5 per cent.

I hesitate to intrude on the private grief of the relationship between the Chancellor and the Prime Minister, but the Chancellor will be aware that the Prime Minister describes the input-output measure of productivity as "bizarre". The Prime Minister continues that it

"takes no account of improvements in waiting times."

However, a moment's pause for reflection will explain why the Chancellor, with his ruthless intellectual integrity, has not used the Prime Minister's argument. Assuming that demand from patients has not diminished, which it has not, how can waiting times in the NHS have decreased significantly across the years without the number of operations in the NHS increasing significantly across the same years? How can patients be got off the waiting list without being given operations? The only plausible explanations are that patients have been spending their life savings seeking faster operations in the private sector, or that waiting lists have somehow been manipulated, or both. In short, what is bizarre is not the productivity measure, but the admissions implicit in the Prime Minister's argument.

The Prime Minister's argument, however, suffers from another, simpler deficiency: waiting times have not been coming down. According to the Government's latest figures, the average waiting time for NHS operations has gone up from 91 to 99 days. On the Prime Minister's logic, taking account of waiting times, we can presumably say that NHS output has increased by less than 5 per cent. after 37 per cent. more funding has been put into the system.

I fear that other measures of performance in the public sector also give grounds for serious concern. Despite the fact that we have more police, more than 50 per cent. of police officers on a shift are delayed in the station and a crime is committed every five seconds. One in three children leave primary school unable to read, write and count properly. It is true that there are times when the Chancellor seems almost ready to acknowledge that central control can have adverse effects on overall efficiency, but he goes on to assert that central control is nevertheless needed to ensure consistent standards. That argument does not match the facts. The quality of local schools, hospitals and police forces varies widely from one area to the next. Hospital mortality figures show that patients are twice as likely to die in the worst-performing hospital in England as they are in the best.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

Will the right hon. Gentleman give way?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

It is very unlikely.

In the 10 best local education authorities in the country, 60 per cent. of pupils obtain five good GCSE passes, whereas in the worst 10 half as many do. It was never meant to be like that. The Prime Minister knows that. He understands that public services desperately need real reform.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

Will the right hon. Gentleman give way?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

As the hon. Gentleman is so insistent I feel some pity for him. I hope that he can make a constructive contribution—if he does, it will be the first time in my experience.

Photo of Tom Harris Tom Harris Labour, Glasgow Cathcart

I am grateful for the graciousness with which the right hon. Gentleman has given way. In the spirit of helpfulness, it would be extremely useful if I were able to respond to inquiries from my constituents, who might wonder how much a pensioner would have to take to the private health service along with the voucher that a future Conservative Government would give. For example, if a pensioner in my constituency wanted a hip replacement operation, how much of her own money would she have to take to the private health service under the voucher scheme proposed by the Conservatives?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

Blow me down—the hon. Gentleman has made a constructive contribution to the debate. He has asked a perfectly reasonable question. The problem that pensioners face today is that they cannot choose a hospital within the NHS. [Hon. Members: "Answer the question."] I will come on to answer the hon. Gentleman's question directly. The problem that the pensioner faces in the NHS as run by the Chancellor and his acolytes, is that he or she is not able to choose a hospital. That pensioner is not sovereign; the bureaucrats are.

Under our passport, that pensioner will be able to choose which NHS hospital to go to and the amount that he or she will pay for going there will be zero. The pensioner will receive treatment at NHS hospitals that is free at the point of care, as at present. Today, that pensioner may be spending his or her life savings on having an operation in the private sector, and when doing so the amount that he or she will receive from the taxpayer is zero. Under our proposals, that pensioner will get a subvention from the taxpayer broadly equal to the marginal costs that would otherwise be encountered in the NHS. That is a rational policy that the Government, under the Prime Minister, would adopt were it not for the fact that the Chancellor will not let them.

Many in the House will remember the Prime Minister telling The Big Issue in 1997 that

"the days when government shovelled out more money are just not going to happen any more", or the new year message in 2002 when the Prime Minister said that

"we must be bold on reform, opening up public services to greater diversity of supply"—

I know that Labour Members do not like listening to the Prime Minister, but bear with him for a moment—

"consumer choice and flexibility of working, ending the 'one size fits all' idea of the past."

Those are not my words; they are the Prime Minister's. Members might also remember the Prime Minister telling The Times two months ago:

"It is a special responsibility to stake out the centre ground of British politics"— the ground that the hon. Member for Glasgow, Cathcart wants to avoid. The Prime Minister talked about

"how to combine investment in our public services with genuine reform so that they become personalised services built around the individual."

Unfortunately, although the Prime Minister understands the need for real reform, he has not been able to convince the Chancellor. The result is a tragedy of wasted opportunity, epitomised by the foundation hospitals fiasco. The Prime Minister and the Secretary of State for Health genuinely wanted hospitals to be set free from controls from the centre and the bureaucracy of star ratings, targets and inspections, but the Chancellor refused to relax the Treasury grip. Not only are many of the controls maintained, but new controls and costs are added.

The Chancellor has made a colossal structural mistake. His recent utterances about reform serve only the purpose of masking that mistake; they do not remedy it. In the Queen's Speech, there should have been bold moves to turn the public services round so that they become responsive to their users rather than the bureaucracy—the very point I was making earlier. However, to do that—[Interruption.]

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

Order. I am sorry to interrupt the right hon. Gentleman. Mr. Gardiner must know to behave better than that.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I am grateful to you, Mr. Deputy Speaker, but to avoid any embarrassment on the part of the hon. Gentleman, I will give way to him.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

The right hon. Gentleman was gracious enough to say that the my hon. Friend Mr. Harris asked a sensible question. What he failed to do was provide the answer. The question was: how much money would the pensioner have to contribute? The right hon. Gentleman said what the subvention would be, but he did not say how much the pensioner would have to contribute. Will he cast his mind back and inform the House what his policy is?

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I know from previous debates that the hon. Gentleman is intelligent, so I assume that he is merely being purposefully obtuse. My argument was perfectly clear. Currently, pensioners have a choice. They can receive free treatment in the NHS, or they can pay a large sum to receive treatment in the private sector. Under our proposals, pensioners will be able to receive free treatment in the NHS at no additional cost—zero cost. If pensioners wish, however, they will be able to receive treatment in the private sector at less cost to them than at present. The upshot is that, one way, pensioners do not gain or lose financially, and the other way, they gain financially. The point of the system is to create competition, contestability and efficiency. The Government are so signally failing to produce those things that they are managing to put 37 per cent. extra into the system to get 5 per cent. extra out. That is the characteristic of the colossal structural mistake that the Chancellor has made. As I have said, his recent utterances serve only the purpose of masking that mistake.

There should have been bold moves to turn the public services round, but to do that the Chancellor would have to admit that the consumer has to be king, and he will not do that. In this Queen's Speech, there should have been effective proposals to rein in the tendency of Whitehall to regulate, plan and control, and to put a brake on the engine that drives the expansion of the burgeoning bureaucracy. However, to do that the Chancellor would have to admit that the culture of the open wallet and of total control have established themselves in Whitehall under this Government, and he will not do that.

The Queen's Speech should have begun with an acknowledgment that the Government have taxed, spent, wasted and failed. It should have acknowledged that a fundamental change of direction is needed, but it is utterly unimaginable that the Chancellor would admit to any such thing, and without repentance there is no redemption. The challenge for the Government is to combine prosperity with real and fundamental reform of the public services, to offer value for money, to make public services accountable and attuned to local needs and to offer people real choice over their hospitals and schools and the kind of policing that they want. For six years the Prime Minister has promised such things, but he has been constrained by his Chancellor. The people of Britain should not have to wait for a general election in order to overcome those constraints and fulfil those ambitions, but I fear that that is exactly what they will have to do.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer 2:00 pm, 4th December 2003

In welcoming the shadow Chancellor to his new post in this Queen's Speech debate, I should point out that he has made three astonishing admissions already. First, he has admitted that he would abolish the new deal because he considers it an expensive failure, a point to which I shall return. Secondly, he has admitted that he would reduce public spending to 35 per cent. of national income. That is an £80 billion cut in public expenditure, which would be the equivalent of wiping out most of the health service. Thirdly, he has admitted that under his proposals, the pensioner who has an operation in the private sector would have to pay several thousand pounds. [Interruption.] If I may, I shall give the right hon. Gentleman the figures. The cost would be £5,000 for a hip joint operation, £7,000 for a knee joint operation and £9,000 for a heart bypass. That is health care based on ability to pay, rather than on need.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

In a minute.

I turn to the most remarkable aspect of this afternoon's debate. This is the debate on the economy—and industry. The right hon. Gentleman is not just the new shadow Chancellor; he also has the title of shadow Secretary of State for Economic Affairs. Yet not one mention has been made of the fact that we have had the lowest inflation rates for 40 years, the lowest interest rates for 40 years, the longest period of economic growth for 50 years, and more people in employment than at any time in our history. All this has happened under a Labour Government.

The right hon. Gentleman fails to mention the economy because if we were to compare our record with his, he would have to admit that while he was an economic adviser in No. 10, under a Conservative Government interest rates went to 15 per cent., inflation rose to 10 per cent., 2 million jobs were lost, 1.5 million people had negative equity as a result of their policies, and taxes had to be raised 22 times simply to pay for their additional borrowing of £80 billion, contrary to every promise that they made during the 1992 general election. Perhaps most significant of all, if he talked about taxation he would have to admit to his one claim to fame: he claims to be one of the authors—indeed, one of the inspirers—of the poll tax. When we have these debates on taxation, perhaps he will explain to us why he said that the poll tax had to be abandoned not because it was wrong or unfair, but because it was

"grotesquely mis-implemented because it should have been phased in over a long period of time."

That is the qualification that the right hon. Gentleman brings when he speaks on financial and tax issues.

Photo of Andrew Turner Andrew Turner Vice-Chair, Conservative Party

Now will the right hon. Gentleman give way?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am very happy to give way. And perhaps the hon. Gentleman will explain how he will tell his constituents of the effect that an £80 billion cut in public expenditure would have on his hospitals and schools, and how many doctors, nurses and teachers would lose their jobs.

Photo of Andrew Turner Andrew Turner Vice-Chair, Conservative Party

If that were our policy, we would of course have to explain it. The Chancellor needs to explain why the people in my constituency, for example, who live in modest bungalows and terraced houses are paying for private operations that they cannot get on the NHS, at the prices that he quoted and above, and why the number of such people has multiplied threefold since his party came to power.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I know precisely why there would not be more operations in the national health service if the hon. Gentleman's party were to implement a policy of cutting public expenditure. He says that if it were his party's policy to reduce public spending to 35 per cent. he might defend it, but what is its policy? The shadow Chancellor said in an interview:

"There has to be a third guiding rule which has to do, over time, with reducing rather than increasing the tax take, or . . . not allowing it to climb".

When he was shadow Chief Secretary, he said:

"We would like to head downwards to 35 per cent of GDP. It is 190 per cent realistic to cut spending growth this way."

And in case anybody thinks that the right hon. Gentleman has been misinterpreted, and that this matter should not form part of a debate on Conservative and Labour policies, I should point out that he had to write to the Financial Times after that interview, saying:

"The story as written in the Financial Times is a perfectly accurate representation of comments made by me to the FT."

In other words, his policy is to reduce public expenditure to 35 per cent. of GDP, which constitutes an £80 billion cut. I am now very happy to give way, as I said I would, to Mr. Djanogly.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

I thank the Chancellor for giving way. He mentions the low interest rate economy, but fails to mention that it has resulted in business not investing in the way he said it would. He also fails to mention that 300,000 jobs in manufacturing have gone. Perhaps he would care to explain the implications of his policies in that regard.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

The hon. Gentleman attempts to talk down the British economy, but in the past few years it is the only economy that has avoided recession. America, Japan, Germany and France have been in recession, but Britain has continued to grow. Business investment has of course been affected in every part of the world, but in the United Kingdom such investment, as a share of national income, has risen under a Labour Government, partly as a result of our cuts in corporation tax and our changes in investment allowances.

Several hon. Members:

rose—

Photo of John Redwood John Redwood Conservative, Wokingham

Will the right hon. Gentleman give way?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I should be happy to give way to the right hon. Gentleman, who does speak on trade and industry matters, unlike the shadow Secretary of State for Economic Affairs. Perhaps he will explain what good it would do the national health service and other parts of our public services if we were to cut public expenditure to 35 per cent. of GDP.

Photo of John Redwood John Redwood Conservative, Wokingham

There is no intention to cut public spending. Will the right hon. Gentleman confirm what Labour Back Benchers have been saying, which is that under his regime, there is a small reduction in the proportion of GDP going towards public spending? Does that show that he has been cutting public spending, or that the economy has been growing?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

We were right to spend on the national health service; we were right to spend on education; we were right to spend on, and invest in, the transport infrastructure; and we were right to spend on more policing. It is therefore right that public expenditure as a share of national income has risen since 1997, and it is right that we invest in these vital services.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall give way in a minute to Mr. Dorrell, who is someone who says that he wishes to invest in the national health service. The question, however, that Conservative Members must answer is whether they are going to enter the next election promising that they will cut public expenditure to 35 per cent. of GDP—an £80 billion cut in public expenditure. They would then have to explain in every constituency in this country how many hospitals and schools would be affected, and how many teachers and nurses would be made redundant. I now give way to the former Health Secretary, who will perhaps defend the national health service from the Conservative Benches.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

I am grateful to the Chancellor for giving way. He lists a number of things that he thinks he was right to have done. When he first announced his planned borrowing for the current financial year in the 2001 Budget, he said that he planned to borrow £10 billion. The City now believes that he will actually need to borrow £40 billion. Is that change in his plans right, or did it happen by accident?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

It is right for Governments to borrow at a time of a world downturn. The right hon. Gentleman will know that the American deficit is in the order of 6 per cent., and that the German and French deficits are in the order of 4 per cent. [Interruption.] The American deficit is approximately 5 to 6 per cent.—far higher than ours will be or could be.

So that the right hon. Gentleman is in no doubt, let me point out that spending on the war in Afghanistan and on the war on terror—both international and domestic—is approaching £2 billion so far. That was the right thing to do, even though that expenditure was incurred after the 2001 Budget. The House will also know that I set aside £3 billion to fund the cost of military operations in Iraq. I have made clear my resolve to ensure that our armed forces and security services are properly supported for whatever lies ahead. In addition, we have spent £250 million on reconstruction in Iraq, with a further £300 million having been committed. The total spent and committed so far for the war on terror and our operations in Iraq and Afghanistan is about £5.5 billion. I shall publish further updates on those figures, and further information, next week in the pre-Budget report—and I will be able to tell the House not only that we meet our fiscal rules, but that we will never get the economy into the situation that prevailed when the right hon. Gentleman was in the Cabinet, when public borrowing rose to £80 billion.

Photo of Peter Tapsell Peter Tapsell Conservative, Louth and Horncastle

On the subject of public borrowing, does the Chancellor accept that if he had not sold our gold reserves at $260 an ounce before the price went up to $400, he would have rather less to borrow?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I do not accept that at all. The problem was that the reserves should have been rebalanced years before we were in government. It should have been done under the Conservative Government, because to have properly balanced reserves—particularly, if I may say so, given the rise of the euro in recent months—is to the advantage of the British Exchequer and the British economy.

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

Order. We can have only one hon. Member on his feet at a time—and when that is me, all other hon. Members must resume their seats.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

There is never a debate when the Conservatives' enthusiasm for their European position does not shine through.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall give way to the hon. Gentleman, but then I will have to make some progress, because we need to talk about the economy, especially as the shadow Chancellor failed to do so.

Photo of Richard Ottaway Richard Ottaway Conservative, Croydon South

May I turn the Chancellor's mind to the subject of productivity? He will know that in the five years to 1997, productivity was running at more than 2.5 per cent., whereas in the five years since 1997, it has been running at 1.5 per cent., in stark contrast to productivity in the United States, which is 3 per cent. Is that a result of the growth of the public sector or the growth in bureaucracy and red tape for business?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Productivity is rising above 2 per cent., and manufacturing productivity is in the order of 5 per cent. The only years in which productivity fell were under the Conservative Government—1980 and 1989—and the only years in which manufacturing productivity fell were 1980, 1995 and 1996. Our record on productivity is far better than the record of a Conservative Government who, at the same time as failing to raise productivity dramatically, lost the British economy millions of jobs. We are creating jobs.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall give way to the Chairman of the Treasury Select Committee, because I believe we can have a debate about the economy.

Photo of John McFall John McFall Chair, Treasury Committee, Chair, Treasury Committee

May I remind my right hon. Friend that he was imprecise with regard to the comments made by the shadow Chancellor, who is on record as saying that he was one of the 20 people who created the poll tax? May I have a message from the Chancellor about what I can tell my pensioners when I meet them as I walk down Dumbarton high street on a Saturday, about what the future would be like for them if public spending were 35 per cent. of GDP?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I was coming to the debate on the public services, and I think that people will realise that with that policy, it would be impossible to have 80,000 more nurses and 25,000 more doctors, or 90,000 more classroom assistants and 25,000 more teachers, or to build 120 hospital developments, repair 20,000 schools and double the amount of national health service equipment with the most advanced technology. Hon. Members would have to explain to their constituents that instead of hospitals being opened, hospitals would have to be closed, and that instead of nurses being hired, nurses would have to be sacked.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

It is time to make progress in what I have to say about the Government's policies, and how they compare with Opposition policies.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall not give way any more now.

There are 200,000 more jobs in the United Kingdom than there were a year ago. In the most recent quarter alone nearly 50,000 new jobs have been created. There are now almost 1.7 million more people in work since 1997, and since the beginning of 2001, 3 million jobs have been lost in America, 1.5 million in Japan and 1.5 million in Germany. It is to the credit of this Government's policies that half a million jobs have been created, not lost, in Britain during that period.

The shadow Chancellor should take an interest in this matter, because in his constituency the unemployment rate is 0.8 per cent. as a result of a Labour Government.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am not giving way at the moment.

The new Conservative leader, and now the shadow Chancellor too, have said that the new deal is an expensive failure. They have said that they would abolish it immediately. They would abolish the new deal for the under-25s, for the long-term unemployed and for lone parents; the only new deal that they would retain is the new deal for the over-50s—perhaps because they may have to use it themselves after the next election.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall give way in a minute, but not now; I am making progress on the new deal.

The new deal has proved—[Interruption.] I know that there are Conservative Members who know that the new deal has worked in their constituencies, that it gives people a better chance of getting jobs, and that the new deal for single parents saves the Government money rather than costing money, because it helps more people get to work.

The Chairman of the Public Accounts Committee, who is a Conservative, has praised the new deal for young people—so why are the Conservatives so determined to abolish the new deal? Why are the ideology and dogma of the Conservative party now so extreme that their policy at the next election will be to abolish the new deal? May I suggest that they have learned nothing and forgotten nothing from the experience of the early 1990s, when at the very moment when unemployment was rising, the former shadow Chancellor, who is now the leader of the Conservative party, and was then the Employment Secretary, abolished the enterprise allowance scheme, the jobstart scheme, the jobshare programme and the employment rehabilitation service for disabled people? At every point when there is a choice to make, Conservatives are prepared to see people unemployed rather than help them get work. That is a major dividing line between our parties now, as we move towards an election.

Photo of Angela Eagle Angela Eagle Labour, Wallasey

I congratulate my right hon. Friend on the success of the new deal, which has virtually wiped out youth unemployment in my constituency. Has he any idea of what I can tell my constituents when they hear the shadow Chancellor refer to it as an expensive waste of time, even though in Wallasey it is giving new hope and opportunities to many of my constituents?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Even if only a few people in our constituencies had got jobs as a result of the new deal, it would still have been worth while, because it is a social investment as well as an economic investment—but the fact is that 2 million people are in or have been through the new deal, hundreds of thousands have got jobs as a result, and the new deal has done better in the regions where the highest unemployment had been the greatest cause of social problems.

I cannot understand how a Conservative party leader can say that he is moving his party to the centre while repeating exactly the mistakes of the past, when the Conservatives made people unemployed and pulled away any help for them when they became redundant.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I shall give way to the deputy Liberal economic affairs spokesman now.

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

I am grateful to the Chancellor for giving way so graciously.

On the key issue of public service reform, the right hon. Gentleman will be aware that there has been much speculation about whether there are divisions between the Prime Minister and himself on top-up tuition fees. So that we can be in no doubt, will he tell us specifically whether he supports variable top-up fees?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Yes, and if the hon. Gentleman would read my speeches and do his research, he would know that that is exactly the position. The difficulty, however, is that the Conservative proposition would mean not only that there would be no opportunities for unemployed people, because there would be no new deal, but that if the Conservatives took up the policy that they propose on tuition fees, 100,000 students who are already at university would not be there, and in total 250,000 students would be denied university places. How can the Conservative party claim to be a party of the centre, when it is pursuing extreme policies that would deny opportunities to thousands of people in constituencies throughout the country?

Mr. Laws is supposed to be doing a study of the costings of Liberal party policy, so he may find it interesting to note that even after his proposed tax rise, there would still be a £14 billion gap in his spending plans. Perhaps he should listen to the cautionary words of the former Liberal Treasury spokesman, who said that it was not possible to make any more spending commitments because the commitments that the party had already made had virtually burst the bank. In every part of the country, the Liberals will be exposed for what they are—people who make promises that everybody knows they can never deliver. Now, if I give way to the hon. Member for Huntingdon, who has been waiting to enter the debate for some time, perhaps he can tell me precisely what the Conservative economic policy is.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon

The Chancellor has spent some time explaining how so many jobs have been created through his various policies. What he has failed to say that is business is not creating the jobs, because people are being sacked here and jobs are being created in India. The public sector, the Chancellor and his Government are creating the jobs. If people were digging roads in the public sector in the 1930s, they are now sitting in town halls and Whitehall. How is the Chancellor going to help business to create jobs?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I would say that the hon. Gentleman is ranting about the matter. In the last six and a half years, 1.7 million jobs have been created in the economy. No other economy has such a record. Conservative Members are trying to suggest that every one of those 1.7 million jobs is somehow pen-pushing in the public sector. However, the vast majority of those jobs are in the private sector and the vast majority of jobs in the public sector are the thousands of nurses, teachers, classroom assistants, policemen and women—and it is about time the Opposition recognised that if this country is to have a health service that it can be proud of, they will have to vote for the extra moneys necessary to invest in it. That is why the 1p rise in national insurance should be supported.

I was demonstrating that the Conservative party is pledged to abolish the new deal, while we wish to expand it, build on it and employ training pilots so that people can get the skills that they need. The Lambert report is published this morning, and help for university spin-off companies will be available so that new jobs in high-technology industries can be created. We shall reform the Employment Service so that it can do a better job of helping people who are hard to employ. None of that would be possible if we denied the Employment Service and the new deal the necessary moneys to help people get back to work and get the requisite skills, which is supposed to be the Conservative policy.

Another Government policy is investing in the public services, and I have to tell Conservative Members that if we were to reduce public spending to 35 per cent. of gross domestic product, we would have to make many people in public services redundant. Furthermore, there is no doubt that over the past few years, what has kept the British economy moving is the symmetrical inflation target and the monetary policy pursued by the Bank of England. The credibility that has emerged from the Bank of England's work has led interest rates to be actively pushed down to the point at which it was necessary to keep the world economy and the British economy moving forward. It was also necessary to have fiscal policy to support monetary policy during that period. That is why a programme of cuts in public expenditure would have been the wrong thing for the British economy.

Conservative Members do not want to engage in the issue of what is the right economic policy, and particularly the right macro-economic policy, for Britain. It is good that this country did not have to suffer from their policies over recent years. They refused to make the Bank of England independent. They never supported our symmetrical inflation target until it was too late. They refused to provide the fiscal boost that was appropriate for the economy and they would have abolished the new deal. Pursuing Conservative policies over recent years would doubtless have led to a repetition of the same boom-bust, stop-go policies of the past. Conservative policies would have put Britain into recession.

Photo of Helen Jones Helen Jones Labour, Warrington North

As well as noting the dismissive attitude of Conservative Members to our position on public sector workers—they seem to dismiss them as not having real jobs—has my right hon. Friend made an estimate of the effect on the wider economy of making public sector employees redundant? Public sector workers would no longer pay taxes or contribute through buying goods and services.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

My hon. Friend is right that public servants make a contribution not just to public services, but to the economy as a whole. She is also absolutely right that Conservative policy is to devalue the work of public servants. I see that the shadow Chief Secretary has just joined the debate. Let me quote what he said in an article in The Sunday Times on 10 March 2002:

"The whole mentality in the public sector is to do as little as you can".

I would be happy to give way if Mr. Flight would like to correct his statement. However, it seems to me that when we reach the next general election and we are explaining policies on the public services, if the hon. Gentleman makes such accusations against good public servants, including nurses, doctors, teachers and classroom assistants, and tells them that their mentality is to do as little as they can, we shall genuinely know the feelings of the Conservative party towards the public services of this country.

The shadow Chancellor was good enough to admit that his policy was to provide vouchers to help people move into private health care services, but he refused to tell us how much money people would have to put up to enable them to receive the benefits of such treatment. I have here a pamphlet written several years ago by the shadow Chancellor and Mr. Redwood. It is a manifesto not just for vouchers in the NHS, but for charges all round within the NHS. It is a manifesto for private health insurance to be taken up, perhaps compulsorily, by many people, and for breaking up the NHS as we know it. I believe that the whole country will be looking to the shadow Chancellor as he formulates his plans for the future to see whether the Conservative party policy is not just for vouchers, but for charges, cuts, privatisation and the break-up of the NHS. That is undoubtedly the aim of the Conservative party.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am sorry, but I have already given way many times.

The Queen's Speech debate has already revealed much about the modern Conservative party. The Conservatives want to abolish the new deal, to cut public expenditure to 35 per cent. of national income—an £80 billion cut in public services—and to force a voucher system on the NHS, which would mean that health care would for many people be based on ability to pay rather than on need.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I gladly give way to the shadow Chancellor so that he can explain his plans.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I am delighted that the Chancellor has given way. I tried to explain it earlier, but perhaps he was attending to his notes. It would be helpful if the Chancellor focused on one issue. Under our scheme every patient who seeks a hospital place in the NHS will receive that place free—as at present—but they will have choice. The Chancellor hopes to deny them that choice and he wants to prevent the Prime Minister from providing it. Will the Chancellor explain why he is so opposed to the choices of patients?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

There is, and should be, choice for patients. Patient choice is being extended. However, the right hon. Gentleman's proposals—we welcome any debates on the subject in the House, because they will expose the Conservative party—would remove funds from the NHS and run down capacity that should be built up in the NHS. It achieves that in two ways. There is a deadweight cost for subsidising private health insurance through tax relief, which is at least £1 billion, and there is the additional cost of the vouchers themselves. Those deadweight costs, which apply before anyone who does not use private care benefits, amount to another £1 billion. How can the Conservatives say that the health service is safe in their hands when their fundamental proposal is to take several billion pounds out of the NHS and put it into private care? They do not want to build up capacity in the NHS even though we know that the average cost per operation in the NHS is only half that in the private sector. It is therefore more cost-effective to invest in the NHS.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I happily give way so that the right hon. Gentleman can explain the full contents of his pamphlet for the privatisation of the health service.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I was hoping that the Chancellor would tell us—it would help enormously in respect of the debate that he mentioned—whether he accepts that there is some sort of problem on some scale or other about putting 37 per cent. more into something and getting only 5 per cent. out. If there were a problem of that sort, could it be a reason for engaging in some sort of fundamental reform?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am grateful to the right hon. Gentleman, but let me read out what has happened in the NHS over recent years. When we came to power, 11.5 million out-patients were treated, by comparison with 13 million now. In elective surgery, 4.4 million patients compares with 5.3 million now. The 11.6 million consultant episodes then contrasts with 12.8 million now. Ambulance services dealt with 3.5 million people when we came to power, as opposed to 4.9 million now. There were 473,000 magnetic resonance imaging scans, but 786,000 now. With ultra-sound scans, 4.8 million compares with 6.6 million. The 166,000 cataract operations have become—[Interruption.] Conservative Members do not like it, but it is the truth about what is happening in the NHS. Prescriptions of statin have increased from 4 million to 19 million. If the right hon. Gentleman is trying to suggest that that is not an improvement both in the capacity and the productivity of the national health service, he is making a terrible mistake and is indicting nurses, doctors and good public servants for what they do.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

I am happy to give way, but perhaps the right hon. Gentleman will now explain his proposals for privatisation of the health service.

Photo of Oliver Letwin Oliver Letwin Shadow Chancellor of the Exchequer

I am grateful to the Chancellor for giving way again. Of course I understand the therapeutic effects of reading out lists of that kind for his hon. Friends, but I beg him to enter serious debate about a matter that he says is serious, and we agree with him. Is there not a problem about putting that amount of money in and getting so little out? What is his proposal for curing that problem, if not to introduce choice, competition and contestability? He is in favour of those principles in the rest of the economy and society, so why does he think that they will not produce results in the national health service?

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Let us talk about productivity between the different sectors. The cost of cataract removal under BUPA is £2,275; the NHS cost is £1,000. A hip replacement costs £8,000 under BUPA, but £4,500 under the NHS. The BUPA cost for a knee replacement is £9,650; the NHS cost is £4,800. A heart bypass costs £13,050 under BUPA; the NHS cost is £6,000. Let the right hon. Gentleman tell me which is more productive. Furthermore, administrative costs in BUPA and the private sector are three times the percentage of income compared with the NHS.

Perhaps the shadow Chancellor can explain another avenue that is being tentatively explored by the Conservatives: charging. In principle, that could be extended to the point of universality. Can he explain that?

Hon. Members:

Answer.

Photo of Gordon Brown Gordon Brown The Chancellor of the Exchequer

Mr. Deputy Speaker, we know where the Conservatives stand. They would abolish the new deal, cut public spending to 35 per cent., privatise much of the national health service and introduce a system of vouchers and private health insurance that would deprive the NHS of billions. That is the vision of Britain that the Conservative party offers the country. That is why people want a Labour vision of stability, employment, growth, investment in public services and a commitment to a national health service free at the point of need. I commend our position to the House.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury) 2:32 pm, 4th December 2003

We have not heard much debate on the Queen's Speech, but there have been extensive exchanges about the achievements and failures of the British economy and its management. I am happy to join that debate, but in any intelligent discussion of British economic performance we must recognise from the outset that there have been achievements as well as failures and I acknowledge some of those achievements.

We have had steady growth. There has been low inflation—as there has been in the rest of the industrial world—falling unemployment and rising employment, and a framework has been established for stable monetary policy. All those things are positive. However, just as it is dangerous to ignore the achievements, it is also dangerous to exaggerate them. The following comments were made in the recent past about the performance of the British economy:

"the British economy is stronger than at any time since the war."—[Hansard, 15 March 1988; Vol. 129, c. 993.]

"In Britain today we have more people in work than ever before in our history; they are better motivated than ever before, and their living standards have improved beyond recognition."—[Hansard, 14 March 1989; Vol. 149, c. 294.]

Those comments were made not by the present Chancellor, but by Mr. Nigel Lawson shortly before he presided over the collapse of the 1980s boom. Like the present Chancellor, Nigel Lawson was an intelligent and eloquent man, but he is now generally regarded as a failure because he ignored the build-up of consumer credit and the asset bubble in the housing market that subsequently burst—conditions that are almost identical to those that currently prevail.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

Before the hon. Gentleman goes on with his impression of Private Frazer from "Dad's Army" and tells us that we are all doomed, will he say whether he recognises that one of the Government's great economic achievements is the national minimum wage? Does he support that?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I was the Liberal Democrat spokesman for trade and industry when the national minimum wage legislation went through. I supported it then and have done so constantly; indeed, I have argued that the minimum wage for younger workers was deficient—

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

You were in the Labour party then.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I was not in the Labour party. I was the Liberal Democrat spokesman and I supported the national minimum wage and I continue to do so.

A feature of Nigel Lawson's period as Chancellor was that—

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

Order. May I point out to the hon. Gentleman that it is usual to refer to a Member of the other place as the noble Lord rather than his former name?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

When the noble Lord was a Member of this place he made one significant achievement: he progressed reform of the tax system and greatly simplified it—something that the present Chancellor has done much to reverse. Indeed, I sense that in many ways the Chancellor's management style at the micro level bears a strong resemblance to the management style being practised at Stamford Bridge under its present manager, Signor Ranieri, who is affectionately referred to as "Tinkerman". The problem with tinkering, whether with economic policy or football, is that it works well at satisfactory periods, but when problems arise all the distortions and waste associated with tinkering come to light.

Before I discuss the Government's record I want to say a few words to the Conservative spokesman. A week ago, the right hon. Gentleman gave an interview to a newspaper about his ambitions for his new office. In his characteristically charming way, he said:

"I am extremely determined not to turn into a creep".

I am sure that there is no danger of that. I think he was trying to make the point that he wanted to establish a track record for honesty and openness, so will he comment on a statement published by the Financial Times on Monday, following the interview that the Conservative leader gave about economic policy on "Breakfast with Frost"? The press statement said:

"Michael Howard has insisted that there is no conflict between improving public services and cutting taxes, and claimed that the Conservatives' reform plans have received the blessing of the Financial Times . . . The Financial Times has not given such an endorsement. None of the Tories' plans identified significant net savings that would allow for tax cuts".

Given the shadow Chancellor's comments on his tax policy today, I hope that he will quickly either apologise to the Financial Times or give us some serious clarification of that statement.

I now turn to the Government's record. I want to address two central weaknesses: the first relates to the Budget and the second to imbalances in the private household sector.

Next week, we shall hear the pre-Budget report and there will be an opportunity for detailed comment. The Liberal Democrats supported the increased resources that the Government have put into public services, especially the NHS, and we supported the tax measures that were necessary to deliver them. We continue to support those measures. We acknowledge that in many cases there has not been an output—the awful word that is applied to the public services—and that the money has often gone into raising wages and salaries for public service employees in health and education. Of course that is right, because it is necessary to attract and retain staff.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

On output, given that the number of scans is increasing and that there has been an increase in the number of early interventions made on patients, does the hon. Gentleman accept that it is not correct to measure output simply in terms of the operations that then need to be done? In fact, an operation is not needed if an early intervention has cured the patient. That is a shift in balance, so to use that measure of output is flawed.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

That rather technical point would best be pursued on another occasion. To the extent to which I followed it, however, it seemed eminently sensible.

Photo of Dr Brian Mawhinney Dr Brian Mawhinney Conservative, North West Cambridgeshire

It would be churlish not to recognise that the Government have put more money into the health service in recent years than most hon. Members can remember. Funding has risen by 10 per cent. over the past four years and has produced an increase of 1.25 per cent. in finished consultant episodes, the technical benchmark. I was Minister of State in the Department of Health in the early 1990s. We increased the health budget by between 5 per cent. and 6 per cent. a year, roughly half what we have experienced under this Government, but finished consultant episodes rose by about 5 per cent. a year. In other words, productivity was about eight times what it is now. Will the hon. Gentleman explain why he thinks productivity has fallen so dramatically, even though funding has risen so significantly?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

The simple answer is that there are too few staff. One of the more shocking statistics to emerge over the past few days is that, in the past financial year, the Government spent £1.2 billion on health service agency fees, with a premium of 20 per cent. However, the question that the right hon. Gentleman must answer is why that shortage existed in the first place. To their credit, although the Government have spent £5 billion on health service agency fees, they inherited a depleted staff. That is the benchmark against which we must operate.

The key point is that a great deal of public expenditure is misdirected. The example that emerged this morning was that the NHS is paying hundreds of millions of pounds in excessive charges to drug companies as a result of lax procurement policies. Precisely the same problem exists in the Ministry of Defence. We learned last week that the Government are paying hundreds of millions of pounds in excessive commercial rents for property because senior civil servants refuse to accept redeployment to provincial cities, where they would be able to work much more cheaply and efficiently.

The Queen's Speech contained a perfect example of proposed legislation—the Bill on identity cards—that will result in an enormous waste of public resources. I do not want to rehearse all the civil liberties arguments, but a sophisticated ID card system will require expenditure in the order of £3 billion.

Photo of Mr George Foulkes Mr George Foulkes Labour/Co-operative, Carrick, Cumnock and Doon Valley

The hon. Gentleman is in danger of getting carried away with his own oratory, but it is easy for him to nitpick the proposals put forward by the Government, and even by the Tories. Is not it about time that he spelled out the proposals of the Liberal Democrat party? They deserve some scrutiny, as the money—let alone the compulsory cod liver oil—that his party proposes to give away to pensioners and students amounts to a £14 billion black hole. Is not it about time that he spelled out his party's policies, so that they can be subject to some real scrutiny?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I think that I am picking rather bigger creatures than nits. I would be happy to have a debate on the relative merits of higher or lower top-rate marginal tax, or of council tax as opposed to local income tax. Those are interesting matters, but it would help if Labour Members got away from the utterly puerile line of argument that we have heard in recent weeks from the Prime Minister. The imaginary figures that he has plucked out of the air are on the same intellectual level as the claims by the leader of the Tory party that the Prime Minister is, somehow or other, a leading light in the Campaign for Nuclear Disarmament. That level of political debate drags down the reputation of all hon. Members. We need to have a proper and serious debate about economic policy.

I was introducing the matter of the very large costs associated with ID cards. Those costs are not simply financial. All hon. Members have dealt with the immigration and nationality directorate, and know that the Home Office is probably the most incompetent of all Government Departments. Implementing the ID card scheme will require a most sophisticated programme, and the Home Office will have to handle the matter. It has already failed in the delivery of IT systems that are less sophisticated than what will be required for the ID card scheme.

Especially perverse is the introduction of a programme that is very costly and sophisticated at precisely the same time that the NHS is embarking on what it calls the biggest IT project on the planet. The Treasury should have been a little more observant, perhaps. The two projects will compete for the same systems engineers, and make the same demands on a vastly overstretched IT supply industry. Costs will be massively inflated as a result: the capacity is not there, and there is a total absence of anything remotely like planning.

I know that the word "planning" may be regarded as dangerously left-wing in No. 10 Downing street, but it is required in the public sector. A great deal of money is being wasted in its absence.

To respond directly to Mr. Foulkes, I can tell him that my party is concerned with specific ways in which Government expenditure can be cut to finance priority public spending. The leader of my party said at our summer conference that we shall find £5 billion in cuts, and I am happy to endorse that.

In case we are accused of being imprecise, I shall give a concrete example of that. For three or four years, I have shadowed the Department of Trade and Industry. That Department employs large numbers of civil servants, who spend large amounts of money. Increasingly, I came to share the view of most of the Department's clients that it is little more than a regulation factory. As a sideline, it runs various industrial assistance schemes whose benefits are entirely swallowed in overheads. Large areas of its functions could be dispensed with, with no great loss to the public or diminution in public service.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I see that the Conservative spokesman is nodding. I should be interested to hear whether he supports my proposal to abolish the Department of Trade and Industry.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Is the hon. Gentleman serious when he suggests that improving productivity in the NHS through investment in IT should be delayed for a few years because there are not enough consultants? Is that Liberal Democrat policy, given that we have heard today that US productivity is at its highest for 20 years because of the dividends accruing from investment in IT? What sort of proposal is that?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I was saying exactly the opposite. It is, of course, absolutely necessary that the NHS has an efficient IT system. That system must be successful, or the NHS will not function in the future. We fully support that. I was asking why we should not scrap the ID card proposal, and all the IT nonsense associated with it.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

I was talking about the health service.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I am not sure that we can detain the House while one hon. Member catches up.

I revert to the other major problem, which is that there are imbalances in the economy. Those imbalances were obvious in the 1980s, and are now reappearing. The Chancellor's great claim—which has been vindicated so far, and for which he deserves credit—is that the old economy of boom and bust has gone. However, it has reappeared in a new form. There is a massive boom in credit and debt expansion, and in the housing market.

So far, that boom has proved to be sustainable, but the indicators are extremely worrying. That is not my judgment alone. The Governor of the Bank of England gave a warning six weeks ago, which he then partially retracted, and the Treasury's Mr. Ed Balls has also warned of the dangers that exist. The debt-to-personal-income ratio is three times what it was 20 years ago and, even with extremely low interest rates, the debt service ratio for households is now over 12 per cent., compared with 9 per cent. when the Government took office. House prices in relation to incomes are way beyond equilibrium levels, and will therefore fall. That is not my judgment, which is not important; it is the technical judgment of the Monetary Policy Committee.

A very dangerously unstable position has developed, based on excessive and irresponsible lending by the banking system.

Something is seriously wrong when a reputable bank, like the Royal Bank of Scotland, can send out a gold card with a £10,000 credit limit to a dog called Monty. The irony of the situation is that if Monty had wanted to invest £10,000 for his old age in the kennels, he would have had to bring in a financial adviser who would have spent an hour checking that the product was not being mis-sold. There is absolutely no restraint on excessive credit expansion. Indeed, in supermarkets like Homebase many of us are pursued by people with clipboards asking, "Will you take £5,000 worth of credit from our credit card company?" Is this a sensible, sustainable way to maintain the economy? Both sides would probably answer, "There is not a great deal we can do about it because we have a market economy".

Rightly, we have a liberalised credit market and of course one cannot order banks and credit companies to do this or that. Nevertheless, surely the Chancellor should acknowledge publicly that there is a serious problem. He could start to take various steps. He should be talking to the Bank of England and the Financial Services Authority about whether it is possible, as already happens at an international level with the International Monetary Fund and the World Bank, to define what is sustainable private debt, to set out some objectives for the banks in terms of prudent loan-to-value ratios or income multiples and to name and shame banks that go beyond that level.

The Government should be taking further measures. I cannot understand, and I suspect some Labour Members cannot either, why there is no consumer credit legislation in the Queen's Speech. It was in the Labour party manifesto. It has been promised for years to the Consumers Association and to the National Association of Citizens Advice Bureaux. Mr. Lazarowicz and other Labour Members have done admirable work establishing the severity of the debt problem among low-income families. We were promised legislation to deal with loan sharking and comparable behaviour, but it is not there. Nothing has happened.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

I think that the in some ways perhaps justifiably maligned Department of Trade and Industry is bringing out a White Paper on the subject next week. I imagine that that would be the precursor for legislation later, either in this Session or the next.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

I sincerely hope that that is correct. The Department told me two years ago that it was bringing out a White Paper. It is taking a long time to write, but I hope that the hon. Gentleman is right and that this rectifies the problem.

I remember three years ago debating with Treasury Ministers about the situation in the banking system. The Chancellor of the Exchequer produced an excellent report under a Mr. Cruickshank. Among other things it highlighted the fact that in the banking system there is a network monopoly, from which considerable excess charges have been earned and eventually passed on to households and business customers. There is a similar monopoly arrangement within the credit card system. The Government promised that they would introduce a pay-com system to deal with the problem. Nothing has happened. There is no legislation and nothing about it in the Queen's Speech. Where is it? Is the Chancellor afraid of the banks? Is he afraid to tackle them?

In conclusion, I shall cover other items in the Queen's Speech. Like Mr. Letwin, I welcome the community enterprises Bill. As I understand it, it is designed to take forward the concept of mutuality and mutual ownership. Over the past two years there have been excellent private Member's Bills on the subject and I hope that this will take the matter further. Given that the Government have talked so much about new forms of ownership and mutuality, why are we still so underdeveloped, in relation even to bastions of shareholder capitalism like the United States, in developing credit unions? I suspect that much of that is due to the conservatism of the Treasury, but we shall see the legislation when it comes.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

Does the hon. Gentleman agree that given the Government's alleged support for mutuality, it is strange that the FSA is now proposing to introduce rules for the distribution of surplus mutual funds, which would mean the end of mutuality?

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

That is an extremely valuable point. Indeed, it was the Treasury's reluctance to safeguard those funds over the years that has inhibited mutuality so much. That was a helpful intervention, which I hope that Ministers have noted.

As I understand it, we will be invited to support legislation to cement the understanding reached between the Confederation of British Industry and the Trades Union Congress on worker consultation. That would be desirable. In future it would not be possible to fire workers over the radio. Where is the legislation on corporate killing? It, too, was promised in the Labour party manifesto. It has been openly and strongly advocated by non-political bodies, such as the Law Society. The situation is hopelessly unsatisfactory: either companies that are guilty of gross negligence are charged trivial fines or some arbitrarily chosen individual is charged with manslaughter. The law is a complete mess and wholly unsatisfactory. Why is it that the Home Office, in its obsession with asylum seekers, has overlooked a piece of legislation which all parties agree is absolutely essential to safeguard the safety of workers?

We shall probably support the Government on the referendum Bill in relation to Europe. Why now? The reason is that the Government have made it clear that they do not intend to act on it in this Parliament. It is an important initiative. It is important to sustain some of the confidence—[Interruption.] The Chancellor has indicated that he has to leave and I accept his apologies. We need some explanation of what is happening. A few years ago the Chancellor set up a Committee on which I sit—an all-party group chaired by Mr. Sheerman—and we regularly interview members of the business community. They have made it clear to us that the groups of experts that they established to prepare the way for entry and to do the euro preparations are now being stood down because of uncertainty over the Government's intention in relation to monetary union. We want some reassurance from the Government that this process is not now hopelessly and terminally derailed.

The final piece of legislation on which I wish to comment relates to tuition fees. It is the centrepiece of the Queen's Speech and has been debated at length in relation to its educational and political aspects. I should like to say a few words about the economic aspects. It has always struck me as odd that the Government keep asserting that students do not pay for their higher education. They already pay for it partly in maintenance. There is a simple idea in economics called opportunity cost. When an 18-year-old decides to go to college to study for a degree they sacrifice a full-time income. If an A-level student decides not to work as a clerk in a bank for three years, they are making a decision to sacrifice probably £50,000 worth of income over three years. In addition to the debts that they accrue from maintenance expenditure and will accrue from tuition fees, they sacrifice £50,000 worth of income. The investment of a cumulative total of about £80,000 by working-class and middle-income families is a major commitment. Most of the commitment is made on the assumption that when the student graduates they will enjoy the graduate premium—they will earn extra income. We already know, and knew even before the fee system came in, that many graduates do not have a premium; they have a negative premium. All arts students have a negative premium on their university education. Women who enter education courses have a negative premium. They make up the base of the future primary school teaching staff. The Government are talking about superimposing yet another deterrent to people entering the university system.

Photo of Mr George Foulkes Mr George Foulkes Labour/Co-operative, Carrick, Cumnock and Doon Valley

I could argue with the hon. Gentleman about a whole range of the strange things that he has just said, but perhaps he can enlighten the House about why his colleagues—not just those in the Scottish Parliament, but members of the Scottish Executive—supported something for students in Scotland that is similar to the scheme that the Government are introducing; it is almost exactly the same in principle.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

My Scottish colleagues behind me tell me that that is not even remotely correct. Of course, I know that our colleagues in Scotland were instrumental in the getting rid of up-front fees, which the Government intended to introduce.

In conclusion, I simply want to develop the point by saying that, of course, there is some common ground between Liberal Democrats and the Government, in recognising that universities need additional funding. Of course, they do. The Conservatives have been silent on that point.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

May I help the hon. Gentleman, since his Scottish colleagues did not seem to tell him? There are indeed back-end fees in Scotland, but they are not variable between universities.

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury)

The Government now wish to introduce variable fees, so the hon. Gentleman's intervention is helpful.

We take the view that there is choice: either universities can attract additional funding through user fees, or such things can be paid for through progressive taxation. That is essentially the choice that has to be made. If someone goes to, let us say, Oxbridge, gets a first-class degree, goes into commercial law and has a very large graduate premium as a result, it is right that they should pay on their marginal income over £100,000 through their lifetime earnings back to the state the benefits that they have received from their education and that they should pay more than someone who goes into a modestly paid job as a scientific researcher or a teacher, reflecting their ability to pay. That is an admirably equitable way to deal with the problem. It is both equitable and financially sensible because, of course, it raises additional resources.

During Education and Skills questions before the debate, the Secretary of State was extremely evasive about how much money would eventually be required. We have indicated that, from our top-rate tax policy, we would allocate £2 billion to universities—a sum larger than the upper end of what the Secretary of State indicated that the Government's policies would generate. On top of that, we would find £1 billion to extend the Scottish policy of free personal care. Of the £4.5 billion that would be generated by the top-rate tax, a substantial residual would be left to help keep down local taxation.

I repeat that policy because the Government attempt to ignore what we propose. We can argue the merits of each component. We can argue about the principles of higher taxation on high-income groups—there is an economic argument for and against—but, by trying to belittle and ridicule our policy, the Government are trying to deflect the attention of Labour Members from what many of them regard as a very attractive alternative approach to that very difficult problem, and I finish on that note.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

I remind the House that the 10-minute limit on Back-Bench speeches operates from now on.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee 3:03 pm, 4th December 2003

Thank you, Mr. Deputy Speaker. I am conscious of the time limitations, so I may find it difficult to accept any intervention.

I realise that the Department of Trade and Industry's role is somewhat marginalised and that the Liberal Democrats have already suggested abolition of that Department. Energy and employment matters require some consideration—I shall come to them in a moment—but at the heart of the Government's economic strategy is the role played by the manufacturing economy. Indeed, the prerequisite of the manufacturing strategy enunciated by the Government is macro-economic stability.

It is fair to say that the cornerstone of that stability is the performance of the Monetary Policy Committee, which has a responsibility to maintain low price inflation by adjusting interest rates. The Chancellor has sought to avoid volatility in public finances. It is also fair to say that the success in meeting those objectives has enabled us to enjoy low inflation, broad tax stability, increasing employment and, most importantly, sustained economic growth, capable of funding the much needed improvement in the quality and range of public services. That has been achieved in the United Kingdom at a time when we have seen cuts, unemployment and decreasing living standards across the industrialised world, whereas we have seen continual improvements in this country.

There is a condition among Conservative Members that could be called the year-zero syndrome: there was no history before 1 May 1997. There may be one or two people who have a vague, hazy memory of a golden period in the 1980s. It is a wee bit like the Rip van Winkles of rock and roll who cannot quite remember the drug-sodden 1960s, when they were making money and entertaining people. Many Conservative Members think that there was somehow a golden age. I have to tell them that some of us have different memories. We have memories of 3 million people out of work. We remember when unemployment fell to about 2 million, but there were never very sizeable reductions in my constituency, where whole families were continually out of work for two decades. Unemployment in some communities was beyond any level of social sustainability. Thankfully, we have not experienced that over the past six years.

When we hear people talk about anxieties over debt, the housing boom and the like, many of us remember the days of negative equity, household repossessions and evictions. Those of us who have been fortunate—if that is the right expression—to have been Members of Parliament for a number of years had dreadful surgery sessions on Fridays and Saturdays, when people came, invariably too late, to complain about how they had been treated by whichever provider of financial services had assisted them in getting into the plight in which they found themselves.

Opposition Members choose to complain about the problems that we have at present. Frankly, if those are what they call problems, they ain't seen nothing. The degradation of people's life chances in the 1980s and 1990s was dreadful for those concerned, but Opposition Members talk flippantly about reducing public expenditure, denying young people and the elderly unemployed access to opportunities afforded by the new deal and the chances that people have for the first time in their lives to get off the unemployment registers.

The fact is that some on unemployment registers need not just the offer of employment, but virtually to be led out of bed in the morning. We hear about the people in advertising and banking who say, "I won't get out of my bed in the morning for £1,000 an hour as a consultant." In recent months, some of my constituents have had to be helped from their homes to get to jobs. Given the chance and the help, Sure Start and the new deal, after 18 months, 150 people were taken on by Tesco in Alloa in my constituency. They are all still in work, and they are a credit to their communities and to the people who took the chance with them.

If Conservative Members are talking about reducing public expenditure to 35 per cent. of gross domestic product, they must stop and think of the social consequences of what they would embark upon. We now see revived communities where we used to see communities where people stood on street corners and crossed the road when we got near them because they were ashamed to tell us that they were still out of work. Those people now have a self-confidence that they never had before because they are getting the chance to find work. They also have the self-confidence of knowing that the health care that they receive is improving and that their local hospital, which was inadequate and run-down, is being refurbished. They also know that the schools that their kids go to are better than they have been in decades—probably ever.

It is also the case that, when people get into employment, they are treated in a reasonable manner. That is one reason why I welcome the Employment Relations Bill, although it does not go as far as some of us would like on matters such as union recognition. The best way to reform employment relations legislation is incrementally, using the salami approach that the Tories applied in the opposite direction. We should improve the quality of workplace opportunities slice by slice, and the Bill contains much that can be recommended.

I have some praise for the Conservatives, because—in their own way—they started the liberalisation of many of the markets in the UK economy, including electricity and gas. The Energy Bill will make further progress and create a UK market in electricity and gas. It will also make the introduction of renewables easier for the transmission businesses. We still need to see the fine print on transmission charges and distribution network charges. The Committee—I hope that I am not a member, given the size of the Bill—will have scope to improve the Bill. There is also scope to enhance the contribution made by renewables, and that is important.

It is vital to make the necessary legislative provisions to assist the storage of gas and its transmission into this country, because the gas that we will depend on in the years ahead will require new pipelines and storage facilities, both offshore and onshore, regardless of our intentions for renewables and the pros and cons of the nuclear industry. The Bill will go some way to achieving that, but it should also address the nuclear decommissioning authority. It is essential that we strip out of the economics of energy the costs involved in nuclear power. Much nonsense is talked, both by nuclear enthusiasts and by the plutonophobes, about the costs of nuclear power. If the costs are reasonable, I have no objection to an expansion of that industry, but I am not prepared to throw good money after bad.

The Queen's Speech will create the correct balance between public and private contributions. It shows how we can operate a partnership in the United Kingdom and it will take us away from the dark days of low public expenditure, poor provision and divided societies. For that reason, I commend it to the House.

Photo of Dr Brian Mawhinney Dr Brian Mawhinney Conservative, North West Cambridgeshire 3:13 pm, 4th December 2003

I declare two interests. The first is on the register, because I am the chairman of a pension fund. The second is that in recent days my wife and I have been blessed by the addition of two new granddaughters to our extended family. They will both qualify under the provisions of the Child Trust Funds Bill. As a consequence, I regard the Bill with interest and broadly support what the Government seek to do. I note that parents can add to the trust funds, and it will be interesting to see the details. However, more importantly, we should ask why such a Bill is necessary.

I had a vague recollection of a Labour party document that I had read when I held a different position from the one that I occupy today. That document, published in 1996, said:

"Britain needs a savings culture which will both benefit individuals and increase investment in the country as a whole."

That is an admirable aspiration for an Opposition. The reality is that the Bill is needed, in part, because when the Government came to power the savings ratio was 10 per cent. and today it is 4.8 per cent. The Government have seriously undermined the savings culture that they aspired to achieve when they were in opposition. That is why we need such legislation.

The second factor that contributes to the undermining of the savings culture was eloquently raised by Dr. Cable. As he pointed out, Members on both sides of the House believe in the market. I believe in the market, so I am not one of those who think that Governments should intervene intrusively. I am sorry that the Chancellor is no longer in his place, because he might have remembered that, a few weeks ago, I sent him a letter sent to me by one of my constituents, which contained six half credit cards. Those cards had been sent to my constituent, unsolicited, over a period of a few months. My constituent pointed out that he earned, I think, £9,000 a year and the combined credit limit of the six cards—which he did not ask for, did not want and did not use, because he is sensible—amounted to £35,000. The hon. Member for Twickenham made the point that we have seen a dangerous escalation in debt and in personal debt. I am not an interventionist, but there may be a case for having some conversations about whether boundaries should be drawn, for the common good. I invite the Government to give further thought to that possibility.

I now wish to spend slightly more time on the pension protection Bill. The Labour manifesto in 1997 promised tax reform to promote savings, but in his first Budget, the Chancellor announced the abolition of the dividend tax credits payable to pension funds. That means that each and every year under this Government the Chancellor has taken £5 billion out of pension funds and put it into the coffers. Is it any wonder that those who are entitled to receive pensions feel aggrieved at their diminished prospects? I am trying to make a sensible contribution to the debate, so I shall not pretend that the tax change is the sole reason for the pension industry being in semi-crisis, but it is a significant one. For that reason, the Government should put up their hand to at least some of the responsibility and address the pension issue with less arrogance and fewer suggestions that it is all someone else's fault.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

Will the right hon. Gentleman give way?

Photo of Dr Brian Mawhinney Dr Brian Mawhinney Conservative, North West Cambridgeshire

No, I will not, because we have a 10-minute limit on speeches.

I want to examine the details of the pension Bill. The principle is almost certainly right. We need to address a serious issue on pensions. Given the contribution that the Government have made to the problem, it will be hard to sustain the view that they should make no contribution, even by way of guarantee, to underpinning a fund. It will be enlightening to hear Ministers explain why well run businesses that have a strong commitment to their pension funds should pick up not only a proportion of the cost of their own fund guarantees, but a proportion of the cost caused by the profligacy of other funds. It will be interesting to hear how the Government defend that proposal.

As my right hon. Friend Mr. Letwin said, this country is in grave danger of moving into a situation in which some people's pensions are adequate—and rightly so, because they have made a contribution over the years—and other people's pensions are inadequate. The legislation that the Government intend to introduce will be measured against the criteria of how it deals with that problem.

Mrs. Clark and I have received numerous letters from constituents recently about the Triplex pension fund that operates primarily in our constituencies. It will not deliver to the people who have paid into it for most or all of their working lives. Constituents have asked me whether there will be a retrospective element to the intended legislation. I try to be honest with my constituents, so I wrote back to say that I thought it highly unlikely that the Government would introduce retrospective legislation. As a former Minister, I understand why that is, but the Secretary of State needs to understand that there is increasing anger out there. There is increasing anger among the people who are being deprived of their life savings and who are being told that everything will be all right from 2005, but that the provisions of the House are such that we cannot move any faster. That argument no longer carries weight with pensioners or those who are saving for their pensions.

I hope that the Secretary of State will take these points seriously. He is already beginning to hear from the pensioners who are rebelling about the increased taxation that they now face. I have been in this place for 25 years and I find it fascinating that pensioners are leading the charge against the 70 per cent. increase in council tax that has occurred in the six years of this Government. Colleagues on this side and, I expect, colleagues on the other side of the House are starting to receive letters from pensioner constituents who have never rebelled about anything in their lives. However, those pensioners are saying that they simply will not pay any more.

I think that I welcome the legislation, but I will want to read what it says. However, I say to the Secretary of State that there is a crisis now. Spinning out of the Queen's Speech debate needs to be action this day as well as action in the future.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

On a point of order, Mr. Deputy Speaker. Can you confirm that, even though there is a 10-minute limit on speeches, injury time is available to those hon. Members who wish to take interventions?

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

Yes. I hope that the whole House now understands that that is the case. If an intervention is made, the intervention does not count against the time available to the hon. Member speaking. He is given an extra minute for that intervention. He is given an extra minute for the second intervention but, after that, no further allowances are made.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

Further to that point of order, Mr. Deputy Speaker. Can you also confirm that the debate is time-limited in that it must finish at 6 o'clock? If too many colleagues take interventions of the sort described, some Members will not get to speak at all.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

The hon. Gentleman is right. Despite the 10-minute limit, I am afraid that the clock does not stop ticking.

Photo of Mr Denzil Davies Mr Denzil Davies Labour, Llanelli 3:24 pm, 4th December 2003

The Government rightly deserve credit—perhaps they have not been given much in the debate—for the prudent, if I may use that word, way in which they have managed the British economy over the past six and a half years. They have been able to maintain a reasonable growth rate of about 2 to 2.5 per cent. combined with low inflation and low unemployment. That compares very well with most, if not all, our major competitors.

We should also realise that the Government have managed to attain such reasonable growth despite the relentless pressure on Britain and all the older capitalist countries of the west that now comes from global competition and free trade. To a great extent, that pressure comes from the far east—from China and, to a lesser extent, India. China has discovered capitalism, but perhaps the Chinese always knew about it. China is now using the instruments of global competition and free trade to boost the potential of its enormous economy and to put inexorable pressure on the capitalist economies of the west.

It is the fashionable view among many of the chattering classes—especially economic editors, jet-setting bankers and business men and the international civil servants who fly from one international convention to another—that globalisation, as it is described, is an absolute good and should never be questioned or challenged. However, the view from less exotic surroundings is not quite like that. As the House knows, in many instances globalisation disrupts and disorientates societies and causes considerable economic and social problems.

I get the impression that western Governments now increasingly shape their economic policies mainly to try to withstand the tide of globalisation and to try to maintain their economies in the face of it. Over the past few years in Britain, we have witnessed a decline in our manufacturing industry because manufacturers must reduce their costs to compete but cannot put up their prices because of the pressure on those prices. We therefore have lower levels of investment. If one cannot make a profit, there is no money to invest. The service sector thought for years that it was immune from such problems because it was not an internationally traded sector. However, as we know, that sector is coming under similar pressure, with jobs being exported to low-cost countries.

Germany and France have broken the growth and stability pact because they need to borrow more money, presumably to try to create growth. They are also being encouraged to dismantle their excellent systems of social welfare. Apparently they are being told—whether it is right or not—that they cannot compete in the modern world of global capitalism with the excellent social welfare structures that they have.

The United States has thrown out the whole economics textbook for its economy. As the Chancellor of the Exchequer informed us, it has a massive public sector deficit of 5 to 6 per cent. and a corresponding balance of payments deficit. Despite its public sector deficit, it is cutting taxes, and the chairman of the Federal Reserve has announced that he will not raise interest rates above 1 per cent. whatever happens to the economy. He is absolutely terrified about what is likely to happen.

On top of that, we must consider the devaluation of the dollar and, of course, the fact that the United States has started down the road of tariff restrictions and restrictions on imports. We know about the situation for steel and textiles and I hope that the steel restrictions will be lifted. It might give many Labour Members a warm feeling to criticise a Republican President of the United States for imposing steel tariffs but if the next President is a Democrat, his constituency—New Jersey, Michigan, parts of Indiana and Illinois, and Ohio and Pennsylvania—will demand much more protection than it has of a Republican President.

Deep down, the British establishment is perhaps not terribly interested in British manufacturing, but that is not the case for the United States. The Americans will fight to preserve their manufacturing industry. They will certainly fight to preserve their steel industry, given its strategic importance for their defence and armaments sectors. Additionally, over the past 15 to 20 years the United States has apparently encouraged what is even by its standards massive immigration, especially from south America. Some immigration has been legal and some has been illegal. That process has kept down costs and enabled the country to compete—just about—and to meet the tide of cheaper imports. It is not really competing because it has a massive balance of payments deficit, but at least it is trying to do so by using immigration.

The British economy has been unable to attract the same kind of new entrants into its labour market through immigration. However, there have been new entrants into the market in the past 20 years because women who did not previously have jobs have entered it. Many earn fairly low wages and, in a way, that contributes to keeping down costs. My right hon. Friend the Chancellor has introduced the tax credit system. As a rather old-fashioned Member who was in the House in the 1970s, I baulked a little at the idea of subsidising wages, but we live in a different world, so perhaps global pressures have caused that. The tax credit system effectively subsidises wages. The way in which it does so in the private sector means that private sector employers do not have to pay such high wages because the Government pay the difference, which keeps down costs in the global economy. If the pressure on wages increases, the gap will become greater unless the Government are able to maintain the difference through the credit. I do not know how long such subsidies can continue but I hope that they continue for a long time, even though pressures will be put on Government borrowing. The addition of such a pool of new entrants to the British labour market cannot continue because women usually take jobs immediately these days.

Economic commentators and others suggest that we should reconsider immigration as a way to keep down costs, and we have also heard about that from the Home Office. I do not know the extent of the immigration that we would need to achieve that or whether sufficient people would come here from eastern European countries after they join the European Union. I do not know whether immigration could create the low cost base that Britain needs to compete or whether we could create the growth rates to pay for such immigration. We must face those issues in the light of global competition.

Over the past two decades, globalisation has attained the status of what the ancients called the most high god—it is certainly the most high god of finance, business and economics. In the past, anyone who tried to question the divinity of that god was called nasty names and portrayed as a nihilist, an anarchist, a clapped-out Marxist or a weirdo. The high priests of the god did not show much sympathy for poorer countries that often suffered from the effects of globalisation. However, I can detect a change because it seems that western capitalist countries are beginning to suffer from the stern theology of the most high god of globalisation. As the traditional stimuli of economic growth—low interest rates, taxation, devaluation and new entrants—cease to work as stimuli, more direct action might have to be taken. I hope that we can recognise that so that we can create reasonable measures to ameliorate the damaging effects of globalisation while keeping some of its more beneficial attributes.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood 3:33 pm, 4th December 2003

I begin by declaring an interest as a director and shareholder of a manufacturing business.

I always enjoy listening to Denzil Davies, who always argues his case intelligently, but I did not agree with his starting point this afternoon. He has always tended to look at the downside of globalisation and consider how one may control its effects. I think that globalisation is a fact and that its effect on our economy and prospects is overwhelmingly positive and something that we should plan to accommodate rather than try to avoid.

Mr. O'Neill suggested that there is a danger of our assuming in such debates that history began in 1997, with the result that we make unrealistically stark comparisons between the records of two periods of government. He then proceeded to fall headlong into precisely the trap that he identified when he said that he had to acknowledge that the last Conservative Government had made a few faltering steps down the road of liberalising the economy. That is an interesting interpretation of history, which would not be borne out by historians.

I agree, however, with the hon. Gentleman's proposition that these debates are interesting to their participants and those outside this place only if we stand back from the passions of party political debate. Clearly, some aspects of the Government's economic record should be welcomed, and I do so unreservedly. Most important, establishing the independence of the Bank of England and creating a regime for the effective management of monetary policy will, whatever happens between now and the day the Government leave office, stand as a great achievement of this Chancellor, and he should be given credit for that. He should be given credit, too, for restraining the growth of public expenditure in the early years of this Labour Government. Things have changed more recently, as I shall demonstrate later.

Those two early achievements of the Government are beyond dispute. I hope that, in the same spirit, the Minister may reflect that the hon. Member for Ochil gave a rather niggardly account of the achievements of the last Conservative Government in the 1970s in liberalising an economy that was massively underperforming and creating the circumstances for which, ironically, the Chancellor now loves to claim credit. All Conservative Members enjoy his lectures about the importance of competition, contestable markets, labour market flexibility, low taxes, introducing incentives and establishing a regime for sound money. We are never quite certain whether they are addressed to his colleagues on the European Council of Ministers or to his next-door-neighbour in Downing street, but whichever it is they are very welcome. Imitation is often regarded as the sincerest form of flattery, and when I hear the Chancellor talk about the importance of a liberal economy he calls to mind the sometimes rather portentous lectures that Lord Lawson used to deliver. Sometimes, the two styles and two arguments are almost interchangeable. It is, of course, doubly ironic that the Chancellor loves delivering those lectures, given that he was a member of the party that, when in opposition, fought such changes every inch of the way throughout the 1980s and 1990s.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

I give way to the hon. Gentleman—I hope he agrees that I have given fairer recognition than he did to the achievements of the last Conservative Government in the direction of liberalisation.

Photo of Mr Martin O'Neill Mr Martin O'Neill Chair, Trade & Industry Committee, Chair, Trade & Industry Committee

Perhaps I did not have enough time to develop my point. The liberalisation pursued by both Governments has placed the present Government in such a position that our economy has been that much better, stronger and healthier than, say, the French and German economies, which did not go down that road. It is to the Government's credit that they have pursued it in such a way that that advantage has been achieved and maintained.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

I would respond with the proposition that that liberalisation marks us out from our European comparators. That moves me neatly to my point about the dangers that we face in relation to the trends in productivity that one of my hon. Friends identified earlier.

We all know that long-term productivity growth is one of the most fundamental economic indicators. The Chancellor acknowledges that; it is why he set up a productivity unit in the Treasury and devotes so many speeches to it. The proposition is therefore not controversial. However, the problem with the Chancellor's productivity unit is that it has not been very productive. As one of my hon. Friends said, the effect of the Chancellor's policies since 1997 has been to halve the trend in the growth rate of productivity that he inherited from the equivalent period at the end of the previous Government's tenure. The trend has turned against us at the precise moment when the American economy has experienced a new spurt in productivity growth. That is not simply a dry statistic; it reflects the results of the Government's attempts to micro-manage the economy. I agree with the comments of Dr. Cable about that.

The effects of the Chancellor's tendency to impose extra costs on the economy through regulations and to introduce huge extra resources into the public sector without demanding the extra productivity growth to which my right hon. Friend Sir Brian Mawhinney referred are feeding through into the statistics. My right hon. Friend Mr. Letwin mentioned the Chancellor's tendency to oversee increases in Government overhead expenditure without corresponding productivity growth. It is one thing to commit extra inputs to the health service, education and the process of government and to desire extra activity through regulation, but not insisting on delivering it efficiently undermines productivity growth and causes long-term problems such as the factor that the Chairman of the Treasury Committee identified.

The Chancellor's delivery of his productivity objectives has fallen way short of his rhetoric. Consequently, although he likes to contrast this country's liberal economy with economies on the continent, the gap is narrowing because, step by step, his actions make the British economy more closely resemble its European comparators at exactly the time when he is trying to persuade European countries to change their stance to make their economies resemble ours.

I want to consider a second issue, which is often perceived as separate from productivity but is closely related to it. The adverse trend in productivity in the past six years has been matched by an adverse trend in the public finances. I gave the Chancellor credit for slow growth inpublic expenditure in his early years, but Prudence has been jilted. Three years ago, when the Chancellor first looked forward to this financial year, he said that he expected to borrow £10 billion. In the City, that figure is expected to be not £10 billion but £40 billion. That misses the Chancellor's target by £30 billion because expenditure is outpacing income. That is partly because the growth of public expenditure has increased and partly because the slow-down in productivity is starting to lead to a slow-down in the growth of the British economy. The two lines are beginning to diverge. Productivity and public finances are part and parcel of the same phenomenon: if productivity grows too slowly, income starts to grow more slowly and one reaches the point when the public expenditure plans to which the Chancellor has committed himself cannot be delivered.

My case is not that the Chancellor is about to fall off a precipice or that the Government will face an unbridgeable black hole. However, the Chancellor's irresistible urge to intervene imposes costs on the economy that undermine the achievement of his productivity objectives. That is one of the key factors that undermine the Chancellor's planning of public finances. We all know that if public finances start to get out of control, everything unravels quickly. We do not need to look into a crystal ball to work that out; we can simply look at the book.I give the Chancellor credit for starting quite well, but the performance gets worse by the day.

Photo of Geoffrey Robinson Geoffrey Robinson Labour, Coventry North West 3:44 pm, 4th December 2003

I refer hon. Members to my interests, as listed in the register.

It is always a pleasure to follow Mr. Dorrell, and although I totally disagree with the last point of analysis that he offered the House, I agree that a major underlying problem for the UK economy has been relatively low productivity, and I shall say something about that at an appropriate point in my discussion of the Government's economic policy.

We also heard an interesting contribution from Sir Brian Mawhinney, who unfortunately has just left the Chamber. Speaking very constructively and in the best spirit of contributions from both sides of the House, he took us into the area of pensions policy and the forthcoming Bill. It is particularly good that we have my right hon. Friend the Secretary of State for Work and Pensions with us now. I know that if my hon. Friend Mr. Cunningham catches your eye, Mr. Deputy Speaker, he will want to say more about that than I do.

My right hon. Friend knows that in the west midlands and other parts of the country there is a considerable problem concerning Rolls-Royce. My hon. Friend and I have been to see him, and he has been very responsive and understanding. Outstanding remains one of the points made by the right hon. Member for North-West Cambridgeshire, who asked whether the legislation will be retrospective. Everyone who has had the wretched task of wrestling with Government policy on the subject knows how difficult that could be, but it may well be, in this case, that that has to be an aspect of the legislation if proper account is to be taken of those who have been so badly affected.

It seems clear to me that the Government's record is one of remarkable success, and as my right hon. Friend Denzil Davies said, sustained growth is central to that fact. We have, as he said, been successful despite not only the many deflationary pressures of globalisation but the fact that so many other countries have been in recession; and after the pits of the recession into which the last Tory Administration plunged us in 1992. Every year after that we had successive growth, which we have maintained six and a half years into a Labour Government. That is unheard of in the management of the economy since the second world war. I give the Chancellor and the Government my unqualified support and my unqualified estimation for their success.

We can express that success in a number of ways, one of the most remarkable of which is the fact that jobs have been created for 1.7 million people. That is remarkable and it, too, requires unqualified acceptance. However, there is an underlying problem of productivity. Only if we can maintain and, indeed, increase the rate of productivity growth will we stand any chance of offsetting the negative effects of globalisation. In no way can I agree with the right hon. Member for Charnwood when he speaks of the unqualified blessing that globalisation brings. No major movement in global macro-economics can be an unqualified blessing for this economy. One has only to look at the 2,500 jobs being lost in the service industry, which we always thought was recession proof and would make up for the decreasing manufacturing sector, to realise the sorts of problems that we are facing.

Over the next year we will be considering the introduction of foundation hospitals. In an earlier debate I made it clear to the House that I had my reservations about that. Many of us voted for the proposal because there was a promise from the Secretary of State for Health that he would review those hospitals acquiring foundation status to see how the measures worked in practice before the scheme was extended to the entire NHS. That is a welcome concession, and we intend to hold him to it. Certainly, in Committee, we will be looking to make sure that proper revision processes are built into the Bill.

The development and implementation of the policy on foundation hospitals was reminiscent of how we have developed and implemented policy for universities. Neither policy is totally wrong: much in both of them is good. It is rather that the issues have not been properly thought out and the problems worked out ahead of time, so we have had to do that in the House, both from these Benches and across Benches. My right hon. Friend the Secretary of State for Work and Pensions is thoughtful on these matters. I put it to him that, if the process of policy development were properly dealt with before implementation—as he knows, that is what we used to do successfully in the Treasury—we would have fewer problems than we have had over policies in recent weeks.

I assure my right hon. Friend that I would never put the Government in an embarrassing position in the House. We only have to consider the prospect of the policies proposed by the Opposition to realise what is at stake. The shadow Chancellor again confirmed that the 35 per cent. GDP target for public expenditure stands. He told us that that amounts to an £80 billion cut. If we assume that each job is worth about £40,000 with all the associated costs, that means a head count reduction and a loss of about 2 million jobs from the public sector. Two million jobs is precisely what the Tories managed to lose the last time they were in office, so perhaps it is a secret plan. They seem to have forgotten—they never learn anything, and even forget the few lessons that they could learn—that enormous costs come with 2 million unemployed. There is the soaring cost of the unemployment bill. That is how we ended up with a deficit of £80 billion the year they left office. Debts had soared as a percentage and in total terms. It is greatly to the credit of the Labour Administration that we have reduced that deficit.

I shall deal with the other aspects of Conservative policy, which were clearly confirmed today. We were told that the Tories would cancel the new deal for everyone, except perhaps the over-50s, because it has been a ridiculously expensive failure. I agree that the new deal has been expensive, but it cannot be called a failure. It dealt with and eradicated youth unemployment, and the growth in the economy underpinned that. We shall hear what more the Tories have to say about that.

It is clear that the proposals of both the Conservatives and the Liberal Democrats could not command the support of the House. For that reason, whatever our reservations about how we have developed and implemented policy, there is no question of my failing to support the Government as and when necessary.

Photo of Gerald Howarth Gerald Howarth Shadow Minister (Defence)

On a point of order, Mr. Deputy Speaker. The Armed Forces (Pensions and Compensation) Bill was presented to the House this afternoon. I understand that Bills are not always available at the time of presentation, but I seek your guidance because that Bill is not available today, so presumably you and the House have been presented with something that is not there. Apparently, it will be available tomorrow morning when the House is not sitting.

This complex legislation has far-reaching consequences for Her Majesty's armed forces. For that Bill to be presented today and, for some obscure reason, not to be available to right hon. and hon. Members, but to be available to the public tomorrow and to Members of the House on Monday, is a discourtesy to the House. Mr. Deputy Speaker, I wonder whether you can advise me on what action I may be able to take to protect the rights of Members to have sight of legislation at the first opportunity, and certainly before the rest of the public has sight of it.

Photo of Michael Lord Michael Lord Deputy Speaker (Second Deputy Chairman of Ways and Means)

As I understand it, there are precedents for such an occurrence. As the Second Reading of the Bill will not take place before Christmas, there should be adequate opportunity for hon. Members to study the content of the Bill in due course.

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan 3:54 pm, 4th December 2003

Thank you for calling me, Mr. Deputy Speaker. I was momentarily alarmed when you looked at the other side of the Chamber.

I want to speak about the consequences, through the operation of the Barnett formula, of aspects of the legislative programme for funding in Scotland. The Barnett formula is the Schleswig-Holstein question of Scottish politics. Only three people understood it. One is mad, one is dead—and I have forgotten. Certainly, Lord Barnett has forgotten—in a radio interview I did with him some months ago, he seemed to have forgotten the precepts of his own formula.

Contrary to what many hon. Members believe, the Barnett formula is an equalisation formula. It is designed to converge identifiable public spending per head in Scotland, Wales and England. It has not done so probably for two reasons. One is that the population estimates on which it was based were initially retrospective. Secondly, it does not work in periods of low growth in public spending. Barnett applies to public spending growth. If public spending growth is near zero, as it was in the 1990s, not just under the Conservative Government but in the first few years of this Labour Government, Barnett does not apply.

Both those things have gone into reverse. The current part-time Secretary of State for Scotland, when he was Chief Secretary to the Treasury, amended the population co-efficients in a way detrimental both to Scotland and to Wales. Public spending is now rising quickly. Barnett is cutting in with ferocity. There is a Barnett squeeze on Scottish public spending and indeed on public spending in Wales.

Measures within the legislative programme such as top-up fees, in the same way as the measures on foundation hospitals in the previous Session, will undoubtedly have an impact on Scottish public spending via the Barnett formula. I cite Professor Arthur Midwinter, who told the Scottish Parliament enterprise and culture committee on 2 September this year:

"Top-up fees are not classified as public money, but as fees paid by individuals. All the money would accrue directly to the universities concerned. The result is there would be no Barnett consequentials for those fees, and there would be a funding gap between the Scottish and English universities."

That is similar to the point made earlier in the year by two other respected Scottish economists, Margaret and Jim Cuthbert, who wrote to The Herald on 6 May:

"Mr. Blair's proposal to introduce foundation hospitals in England potentially has adverse financial implications for Scotland, arising through the operation of the Barnett Formula."

Legislation to be applied in England will undoubtedly have adverse consequences for Scottish public funding through the operation of the Barnett formula. It is therefore extraordinary that any Scottish MPs, never mind Scottish Labour MPs, should choose to support those measures.

There used to be an old joke in Scottish politics. How many Scottish Labour MPs does it take to change a light bulb? The answer is none because Scottish Labour MPs never change anything. That is no longer true. Scottish Labour MPs changed public policy south of the border on foundation hospitals a few weeks ago and potentially could do it again on the issue of top-up fees.

After 100 years of struggle, 100 years of the Scottish Labour party introducing enlightenment, education and socialism to the dark recesses of the south of England, after 100 years of political struggle, we have come to the pinnacle of the achievement of Scottish Labour MPs, which is to impose private finance on the English health service and potentially to impose top-up fees on English students, to the detriment not just of English public services but of public services in Scotland via the Barnett formula.

I see some worrying nods of agreement from Conservative Members. It is extraordinary that Scottish Labour MPs should vote in massive numbers for those detrimental measures, but equally extraordinary is the abstention of the sole Scottish MP in the Conservative party. That party is meant to be vigorously opposed to these measures, which will undoubtedly be detrimental to Scotland, but he has sat on his hands and refused to vote. If the Prime Minister made everyone on the Labour Back Benches a Minister and managed to mobilise the payroll vote and, by some miracle, his blandishments meant that he scraped through the top-up fees vote by one vote in the early part of next year, and if Mr. Duncan had abstained on that vote, he and the Conservative party would look even more ludicrous than they do already in attempting to claim the title of shadow Secretary of State for Scotland when they have a party of one person. I hope that Conservative Members will encourage their one Scottish representative to vote both in the Scottish and the English public interest in defence of Scottish and English public services.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

May I say on behalf of my hon. Friend Mr. Duncan that he thinks it important as a point of principle that as a Scottish Member of Parliament he should not be voting on exclusively English business?

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

Unfortunately, the hon. Member for Galloway and Upper Nithsdale probably has not read the work of the economists who have pointed out to the Scottish Committees and the Scottish Parliament the implications for Scotland and the definite knock-on effects of the measures. For many years in this House I have adopted a policy of not voting on English business and I still do that when there is no financial consequence for Scotland. The recent controversy over jury trials in England is an example. As the matter ping-ponged between the House of Lords and the House of Commons, my colleagues and I nobly abstained. An abstention on such a matter, which has no consequences for Scotland, is understandable, but it is totally inexplicable to abstain on a matter that clearly has a financial consequence for Scotland.

Photo of Kevin Brennan Kevin Brennan Labour, Cardiff West

Do I understand the hon. Gentleman's policy to be that Scottish Labour Members of Parliament should not vote on matters that affect England only, Conservative Members of Parliament from Scotland should vote on matters that affect Scotland only, and he feels free to do as he pleases when he pleases?

Photo of Alex Salmond Alex Salmond Scottish National Party, Banff and Buchan

Occasionally, I despair. I have carefully argued that the Bills that we are talking about—concerning top-up fees and foundation hospitals—affect Scotland. What I find incredible is not that Scottish Labour Members voted, but that they voted in favour of a measure that will reduce public expenditure in Scotland as a consequence of Barnett. I do not mind people voting on a matter that is of interest to Scotland, but I resent foundation hospitals going through with a majority of 17, with 44 Scottish Labour Members of Parliament voting to impose the measure on the English health service.

I want to come to the solution to the conundrum that we have been left with as a result of the activities of past Conservative Governments, who imposed the poll tax on the Scottish people, and the current Labour Government, who imposed foundation hospitals on the English people using the voting fodder of Scottish Labour MPs. Let us be fair to Scotland and England. Clearly, the way to avoid the unwanted consequence of knock-on financial effects is to give the Scottish Parliament the financial power to match its policy responsibility. If the Scottish Parliament had fiscal autonomy, it would make its own decisions about matters such as foundation hospitals and top-up fees without fearing the consequences of the decisions made by the House of Commons. Policy responsibility and financial responsibility should go together. That is the first point.

Secondly, as regards Bills that do not have a financial impact on Scotland at present, why does the House not consider extending Standing Order No. 97? As everyone is aware, that is the now little-used Standing Order by which the Speaker can certify Bills as Scottish only. For Second Reading and perhaps for Committee stage, such Bills are referred to Scottish-only Committees. It would be relatively simple to have an equivalent Standing Order relating to England to allow Bills that were genuinely English-only at that stage to be considered by the mysterious Regional Affairs Committee. That Committee sits in this House and every English Member is entitled to be a member of it—I have the current membership before me—but it has not met since this April. No doubt it could do some useful work in considering English-only legislation, if so certified under a Standing Order by the Speaker of this House. If and when the Scottish Parliament is given the powers to do the job that it is required to do for the Scottish people, all such English Bills could be so certified, and voted on by such a Committee. That is a solution that is elegant, fair to Scotland and fair to England.

Of course, none of these problems would arise if we had independence for Scotland—and independence for England. Many people tell me that England could not manage as an independent country. I reject that. I am certain that the English people are well capable of governing themselves, and can actually do without Scottish Labour MPs being used as voting fodder by this Prime Minister, in order to impose unwanted policies on the English people.

Photo of Tom Clarke Tom Clarke Labour, Coatbridge and Chryston 4:05 pm, 4th December 2003

If Mr. Salmond will forgive me, I think that he answered his own question at the end of his speech. The fact is that the Scottish people have never voted for independence, so as a Member of this United Kingdom Parliament, I hope to make the speech that I had planned to make when I sought to catch your eye, Mr. Deputy Speaker.

The sections of the Queen's Speech that have been substantially addressed by the Chancellor of the Exchequer and my colleagues—on economic stability and growth; on the need to press for a fairer trade system as part of the current round of world trade negotiations; and on the achievement of the millennium development goals, including increased aid flows and effective debt relief for developing countries committed to reform—are extremely relevant. However, it would not be possible to address those matters were it not for the huge success throughout the whole of Britain of the Chancellor's economic policies: successes in employment, inflation, mortgages and growth. Because of those successes—and because the Chancellor has had the courage to deal with the issue of resources, and to say that there are times when they should relate to reform—I hope to address several matters in the short time available.

The Chancellor has given the lead at home and abroad. When my right hon. Friend Denzil Davies and my hon. Friend Mr. Robinson referred to globalisation, they seemed to recognise, as did the Chancellor, that he has approached the economy and the demands placed on him in the knowledge that this is a rapidly changing world in which the issue of globalisation is indeed extremely relevant, and must be addressed. His policies on international development—including increased aid, debt relief and his emphasis on HIV/AIDS—are extremely important in a modern and caring world. I believe passionately that the model that he has set out could be emulated not only by G7 and G8 countries, but by developing countries as well.

As we look to the developing world, we see the influence of Britain's economic policies and of the activities of the various Government Departments. If the considerable assets that many developing countries undoubtedly possess—such as huge oil reserves, massive gas supplies, and diamonds and other mineral resources—are not used to benefit the poorest people in the poorest countries, we will have met with spectacular failure. Oil, gas and mining industries are now significant in more than 50 developing countries, but 1.5 billion people in those very countries continue to live on less than $2 a day. Twelve of the world's 25 most mineral-dependent states and six of the world's most oil-dependent states are classified by the World Bank as heavily indebted poor countries, with among the world's worst human development indicators. That calls for transparency, accountability and fairness at every level.

That transparency must involve national Governments, including ours, international companies and those involved in commerce, and international institutions such as the World Bank, the International Monetary Fund, and the United Nations. I believe that I speak for many aid agencies and non-governmental organisations when I say that we ought to be forming that strategy now.

It is not difficult to understand why. For example, Africa's oil boom comes at a time when foreign aid to that continent from industrialised countries is falling and being replaced by an emphasis by donor nations on trade as a means whereby African countries can escape poverty. The dominance of oil and mining in Africa's trade relationships, coupled with the decline in aid flows, means that it is vital that Africa makes the best use of oil and other natural resources.

The international oil companies must accept their responsibilities as well, although it has to be said that I see little evidence of the self-regulation that some of them commend to us. Northern Governments such as that of the United States and the United Kingdom are beginning to acknowledge the need to address the perils of oil development, but their actions, although welcome, are not enough.

As we address those issues, seeking to attain stability is of paramount importance. I have recently been to the Democratic Republic of Congo, and I realise that there, petroleum has become a magnet for conflict, and in some cases even civil war, imposing even more poverty where it is least welcome.

The primary responsibility for managing mineral wealth and ensuring transparency lies with the developing countries. Oil riches should benefit the many, not the few. It cannot be right that corruption, mismanagement, environmental destruction, human rights violations and conflict should go unchallenged—although there are examples of good practice, and it is right to say so. For example, the Chad-Cameroon pipeline project is the biggest international effort to date to focus an oil development project on a poverty reduction outcome. There is great confidence that by 2004, the budget anticipated for that year will show that oil revenues in Chad have more than doubled. Botswana has, by and large, put its diamonds to good use, and has sought to address the essential elements of poverty.

However, there is another side to that picture. It cannot be acceptable that in Angola there is so much wealth together with so much confidentiality, despite the challenge that BP, to its credit, has made. The rich north has its responsibilities too. Although we may increase our aid to developing countries, those sums are dwarfed by what we give to agricultural industries.

Photo of Barry Gardiner Barry Gardiner Labour, Brent North

My right hon. Friend is widely respected in the House for his knowledge of development matters. Does he agree that the Paris Club consideration of the sovereign debt of Iraq, which is deemed to amount to more than $200 billion, is vital? Does he also agree that it is important to press for the more beneficial Evian principles on debt forgiveness if that country is to pull itself out of its terrible situation? Will my right hon. Friend support the early-day motion, which calls on the other four creditor countries—France, Russia, Germany and Japan—to be more forgiving in their approach to this matter?

Photo of Tom Clarke Tom Clarke Labour, Coatbridge and Chryston

I am grateful to my hon. Friend for his intervention. He will forgive me for being a little canny on early-day motions: I like to read them before I sign them. Otherwise, he made extremely valid points, and I am sure that the House will recognise them as such.

I was making the point that, although I support the Government's policies on overseas aid, it is also appropriate to examine what is happening with the common agricultural policy, and I welcome the Government's initiatives there. It is also appropriate to point out that in comparison with the figures that I supplied earlier of $300 billion on agricultural subsidies, $600 billion is being spent on defence. It is surely right to try to set our priorities on such matters.

I believe that the British Government have given a commendable lead. The Chancellor, in particular, has led G7 and G8 talks on the debt crisis and other matters. I welcome what is happening to the common agricultural policy, which is a challenge to us all. I welcome the overhaul of the EU aid budget and our attempts to change it. I congratulate the Chancellor on his international finance facility and I wish the Government every possible success on all those matters. The Government have a record since 1997 of which we can be extremely proud.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West 4:16 pm, 4th December 2003

I shall confine my remarks to the proposed pensions Bill, which may not surprise hon. Members, and I should like to declare my interest as chairman of trustees of the parliamentary contributory pension fund and chairman of trustees of the People's Dispensary for Sick Animals pension fund and as a section 226 policyholder. I shall refer to those policies later.

I start by referring to the pensions protection fund. In principle, it is probably a good idea, which should be welcomed—but the devil will, as always, be in the detail. The proposal to have a flat rate topped up by a risk-based premium is entirely appropriate. Otherwise, there would be moral hazard and people with badly funded schemes would benefit from those with well-funded schemes. The Association of Consulting Actuaries conducted a survey and found 58 per cent. support for the proposal, but 64 per cent. of respondents said that a £15 contribution per member was too high. PricewaterhouseCoopers, however, has determined that in the light of what the Government actuary proposed, the appropriate level for funding the White Paper proposals would be £50.

I do not believe that £50 per member is wholly disproportionate, as it amounts to about £1 per week for a member of any private pension scheme. I would have thought that anyone in such a scheme would feel that it was quite good value to have a guarantee for £1, and I hope that that is the mechanism that the Bill will produce. It will, of course, vary from fund to fund and the less-well-funded schemes might find that they needed to raise more than £1 a week per member. Will the Government tell us who will audit the schemes to decide what the premium should be? Will it be left to the scheme actuary or will independent checks be made on what the premium should be? I agree that a cap is necessary on income and that £40,000 to £60,000 is probably not unreasonable, provided that the cap is indexed in accordance with incomes rather than with the cost of living.

We can learn some lessons from what has happened in the United States where there has been a similar fund for many years, from which the Government have drawn much inspiration. The US scheme is similar in that it is self-financing and there is no Government guarantee, which is, I understand, our Government's position. Interestingly, there are two types of scheme in the USA: the single-employer scheme, which had a deficit of more than $3 billion by the end of 2002, and the multi-employer scheme, which had a small surplus. That may be a lesson for us. Multi-employer schemes, which the Government would need to facilitate, may be more prudentially managed than single-employer schemes, so perhaps we should look into that. We should take cognisance of the comments of Steven Kandarian, the executive director of the US scheme:

"Who will pay for the pension promises made by companies to their workers? The only choices are the company that made the promise, other companies through a system of pension insurance, or the taxpayers."

More than 50 per cent. of members of the National Association of Pension Funds support the proposals, but 50 per cent. also say that they will make defined-benefit schemes less attractive for employers. Almost 50 per cent. think that the Government should fund the whole thing and that there should be no levy on NAPF members. The association suggests a benefit limit rather than a salary cap, but asks how the schemes will be inflation-proofed, how the costs will be estimated and how the risks will be assessed. The NAPF has also asked how such schemes would deal with early retirement due to ill health and whether they would affect the priority orders that the Government are—rightly—proposing to introduce.

Most people support the schemes, but it will take time for employers to introduce them and employment contracts may need to be renegotiated, so 2005 looks a little optimistic, although the Government would have then had eight years to introduce the reforms. That seems rather a long time; there has been an awful lot of consultation and it has taken an awful lot of time.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

The hon. Gentleman is making a most informative speech. Does he share my concern that the Bill needs to include detailed provisions on the questions that he has put, so that the House can properly debate those issues? It is important that we do not have a skeletal Bill with other provisions shunted through in statutory instruments that receive no real scrutiny.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

The hon. Gentleman is well informed on these issues and I entirely agree with him. It would be wrong if the Bill were merely an enabling measure with statutory instruments to follow. As I said earlier, the devil is in the detail.

Other proposals in the Green Paper and the White Paper include a pensions cap of a £1.4 million lifetime limit. That is much too low. It would not even fund the 1989 Lawson cap on earnings. The actuarial profession almost universally disagrees with the calculations of the Government Actuary's Department, which came up with the figure of £1.4 million. The profession is convinced that the figure should be £1.8 million. I hope that the Government will look into that again; it is a question of how the actuaries do their maths and the GAD is in a minority of one on that figure. Again, time will be required for employers to renegotiate many employees' contracts, as they will be affected by the issue.

I also want to mention the effect on other tax matters. First, there is the knock-on question of retained benefits. It is wrong and unfair that a person taking a job at a pay rate lower than in his or her previous employment should suffer by having the previous higher contributions acting against the total that can be accumulated over a lifetime. Indeed, the lifetime limit means that we no longer need the retained benefits regime, and I hope that the Government will get rid of it, as part of this process.

The annual limits ought to go as well. They are a nonsense anyway, as many people have fluctuating incomes. Again, the cap means that there is no need for the annual limits. The annuity purchase also ought to go. I think that the Government are beginning to be persuaded of that, subject perhaps to a minimum level. That has been proposed in private Member's Bills by me and many other hon. Members. I hope that the Government will finally see the need to change the present structure.

If the annuity purchase requirements are eliminated, there will be a need to cater for people who will be just short of 75 years of age when the Bill comes into effect. I hope that the Government will allow an extension for them.

I hope that reform of the legislation will also cover legacy schemes and accrued rights. I think that the Government are proposing to do something on accrued rights, but a great many different legacy schemes exist, among them SERPS, graduated pensions and S2P. The White Paper refers to guaranteed minimum pensions, and I hope that the Government will sweep them all up into one regime. The Government Actuary has told me that that can be done, and that it would take about two years to do the calculations. That would alleviate much of the burden placed at present on employers, scheme trustees and civil servants.

The White Paper also refers to the legacy private schemes. Those schemes include the pre-70 scheme, the section 226 scheme, retirement annuity contracts, personal pensions, and schemes under the legislation passed in 1987 and 1989. They are all to be consolidated, but the difficulty is that they come under different tax regimes. The problem will be to come up with a system that is fair to the members of the various schemes and which will not cause huge disadvantages. I hope that the Government will look at that, as there is a severe danger of retrospective taxation.

My time is now up, so I cannot deal with the blame and compensation culture. However, I shall write to Ministers about that.

Photo of Mr Kevin Hughes Mr Kevin Hughes Labour, Doncaster North 4:27 pm, 4th December 2003

I am grateful for this opportunity to speak in the Gracious Speech debate. I congratulate my right hon. Friend the Chancellor on his excellent exposé of what would happen if the Opposition were ever to return to government. The Government's legislative programme is about fairness and the future, while the Opposition's proposals are clearly about division and a return to boom and bust.

Our programme is about facing up to the challenges of the future in a way that pursues social justice for all. It is an agenda based on the continuing economic stability and prosperity of the country. It is about reforming public services so that they are universal and personal, building a strong civic society with less poverty and less crime, and encouraging an outward-looking nation and a diverse, more tolerant country.

This Queen's Speech builds on our previous legislation. In the last year alone, we have passed some important new laws that give new powers to the police and local authorities to tackle antisocial behaviour. The Government have set down tougher sentences for repeat offenders and sex offenders, and streamlined court procedures. They have tackled organised crime and terrorism, devolved power to front-line staff in the NHS, and offered more choice to patients.

I want to welcome in particular the inclusion in the Queen's Speech of legislation that will tackle domestic violence and give more support for the victims of crime, protect children with a new children's commissioner, improve housing by tackling bad landlords in poor communities, give people more pension rights and protect pension schemes, introduce a supreme court and abolish the role of Lord Chancellor, and get rid of the 92 remaining hereditary peers. If it were left to me, I would get rid of the lot.

I welcome the proposals to introduce an identity card. It appears that the higher education Bill will be a bit of a problem for the Government. I do not have a problem with the idea of top-up fees. On balance, it is perhaps right for people to make what would be a small contribution towards their higher education. However, I take issue with the possibility of breaking a manifesto commitment. Call me old-fashioned, Mr. Deputy Speaker, but I believe that the manifesto is a contract of trust with the electorate. I would not want to go back on a commitment without first, explaining why it is felt to be necessary, and secondly, being convinced that there is no other way of delivering the policy.

The Government will also introduce an energy Bill, which will be based on the White Paper published in February this year. It is crucial for our economy and well-being that we get this right. We need a Bill that delivers security of supply by using a diverse fuel mix. However, the White Paper sets us off down the uncharted path of being a net importer of energy. We have ageing nuclear plant and no plans to replace it. I am not a great fan of the nuclear power industry, but I recognise that we would be hard pushed to keep the lights on without it. I have a sneaky feeling that the Government know that too. Why else did they pour in £650 million earlier this year to prevent it from going bust?

We had an abundance of natural gas, but we squandered it to generate electricity, instead of using it wisely for domestic purposes only. At the rate we are using it, we will be lucky if we have any left in 15 years' time—then what? The White Paper plans for us to import energy down a huge pipeline stretching across the European continent from such politically stable countries as Uzbekistan. We have an abundance of accessible coal right under our feet. It is a reliable fuel that delivers base load electricity when and where it is needed. Across the world, particularly in the USA, Governments are investing heavily in coal because they recognise its reliability and potential. In the White Paper, our Government clearly plan for the demise of our indigenous industry over the next 10 years. They seem to favour importing all energy from other countries.

Today, the Hatfield colliery in my constituency faces closure, although it sits on 80 million tonnes of good quality coal and has planning permission for an integrated gasification combined cycle power plant on the site, which can generate electricity from coal without the associated toxic emissions and can capture carbon, nitrates and hydrogen. We should ask ourselves why the US Government have invested $6 billion in developing such clean coal technology, yet the UK clean coal research and development budget totals a pitiful £25 million.

Last week, the coal investment aid scheme announced an amount of £60 million. It is only half what we expected, but I welcome it. It came just too late for Hatfield. Had it come in a seamless transition from the operating aid scheme that ended last December, I am confident that the colliery would not be facing the financial difficulties that it is this week. That is recognised and well summed-up in today's Yorkshire Post leader column, which says:

"Had the Government taken a more strategic view of the Britain's energy needs, it is likely that Hatfield Colliery would not have been forced into administration."

It adds:

"The fate of Hatfield, however, is inextricably linked with that of Britain's other remaining pits. For not only does the colliery, along with the currently mothballed Thorne pit, contain about half of the established reserves of British coal; it also offers hope for the future in the shape of a new clean-coal power-station development which could go ahead if the elusive investment became available."

The Yorkshire Post is hardly noted as a socialist paper.

Despite what the Yorkshire Post says, we have had some help from the Government. I am grateful to them for the help that they have given to us so far, but I hope that Ministers will continue to do all that they can to help me to sustain Hatfield colliery in recognition of the available coal reserves and the possibility of developing integrated gasification combined cycle technology there.

To maintain the stable economy and build for the future, we need a safe and secure energy supply. It is foolhardy to plan to import the best part of our energy requirements. The Government should backtrack from that route, which will make our nation a hostage to fortune. It is hardly fashionable to talk about coal having a future—windmills are more in vogue, even though they cannot produce the goods—but the truth is that coal has served us well for generations and, with that new technology, it can continue to serve us for many years to come.

Photo of David Taylor David Taylor Labour/Co-operative, North West Leicestershire

Does my hon. Friend agree that the type and level of investment about which he speaks would also secure mining jobs in the midlands and elsewhere? A major coalfield around Asfordby in north-east Leicestershire has 800 million tonnes of clean coal and is waiting for investment. There is a future for coal in the United Kingdom, although we are in the last-chance saloon and the lights are being switched off.

Photo of Mr Kevin Hughes Mr Kevin Hughes Labour, Doncaster North

My hon. Friend is absolutely correct. Coal has been the fuel of the past and, with the new technology, it can be the fuel of the future. In fact, it could have a bright new future. We as a Government and a country should seize this opportunity and get ahead of the game with the emerging hydrogen economy that is coming this way.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 4:37 pm, 4th December 2003

Earlier in the debate, reference was made to some of the Government's large-scale IT projects, and in the few moments available to me this afternoon, I want to refer to just two of them. At the start of the new parliamentary Session, I want to plead for an end to the Panglossian assurances that all is well with those IT projects and the implication that it is impertinent of us to suggest that things might be otherwise.

First, I wish to refer to the tax credits computer system. I was not at yesterday's sitting of the Public Accounts Committee, when it heard evidence from the head of the Inland Revenue and from EDS about the state of the tax credits computer, but now that the truth is coming out, it is clear that the assurances that we were given at the time that all this was a triumph and that everything was going swimmingly were very far from accurate.

The head of the Inland Revenue, whose position must be open to question, said that the tax credit launch had gone "spectacularly wrong"—not a phrase that we have heard Ministers use in the past six months—and that the computerised payment scheme had repeatedly crashed, forcing hundreds of thousands of people who live on the breadline to wait weeks. As all hon. Members know, hundreds of thousands of emergency payments were necessary, and there is now evidence that billions of pounds may have been overpaid, again because of problems with the system.

One of the things that I find incredible is that we can have blundering and administrative error on that scale but we barely bat an eyelid any more; we just expect it. We assume that huge Government computer projects will be a shambles. Given that up to £2 billion has been mistakenly paid, it is astonishing that Ministers have not made emergency statements to apologise to the House for the poor state of play. Instead, we get press releases from the Paymaster General and others saying that everything is a triumph. Sometimes I think that I have slipped into a parallel universe where all is well. Behind the scenes, the truth is very different.

Our constituents know that the truth is different. They have been messed around by the tax credits scheme from day one. Many have had to wait long periods and some have fallen into debt and lost serious amounts of money. They were told that they could claim compensation, but to do that they had to ring the very helpline that they could not get through on in the first place. We had a letter from the Paymaster General this week that said that 1,600 people, out of 5.75 million, had received compensation payments of a grand average of £30 each. If I had led a life of misery earlier this year caused by the tax credits system and I had to go through it all again for £30 compensation, I would not bother.

The spin from the Government is that the small number of people who received compensation must prove that there was not really a problem. However, if high enough hurdles are put in the way, people will not claim compensation. I suspect that many of us have had 1,600 complaints about the system just in our constituencies. The Government's complacency and unwillingness to be honest with hon. Members about the state of the problem are incredible. We get bland assurances that all is well, when we know from our constituency surgeries that all is not well. My plea to the Government for the coming Session is for honesty and openness when things go wrong. The new scheme is a massive undertaking. The head of the Inland Revenue even said that the system should not have been introduced as quickly as it was. We are told all the time that nothing is wrong, but that is so much at variance with the facts that we must wonder whether we live in a mature democracy and treated as mature representatives of our constituents or being patronised like children who cannot be trusted with the truth, perhaps because it is too horrible to be told.

This year has seen not one EDS computer catastrophe, but two. The same company is responsible for the Child Support Agency computer system, which was 18 months late in arriving and is still a shambles. In the six months to the end of September, 150,000 families asked the CSA to arrange maintenance but barely 5,000 had received the money by that date. What is the point of the child support system if it is not to get maintenance through to people? If 150,000 families go in at one end and only 5,000 come out, we must surely question the efficiency of the system.

The shifting of old cases on to the new system is to be delayed indefinitely, as far as we know, and that mess is costing real families real money. A family that does not receive maintenance loses out. For a family in work, every penny of maintenance that they do not get is a penny that they lose because the failure to receive maintenance has no effect on their tax credits. Although arrears build up and may be recovered later, they may not. We all know of cases in which the arrears run to tens of thousands of pounds that are never recovered. The Government may claim that things are getting better, but some of the money will be lost for ever to the children involved.

Families on benefits lose the money permanently. As I understand the situation—the Minister may be able to clarify it for me—a lone parent on income support who receives maintenance can keep £10 a week of it before losing benefit. If instead of getting £10 a week for 52 weeks she gets £520 in a lump sum, because the CSA has delayed getting the maintenance, she can still keep only £10. She has therefore lost the benefit of £510 of child maintenance disregard. Does she lose that disregard permanently because of the delay? I suspect that that is what will happen.

There is a further problem. All the families on the existing system cannot be moved over to the new system because of the computer problems. That matters because every mum on income support on the old system loses every pound that she receives in maintenance from her income support. If she moved on to the new system, she could keep £10 a week. Leaving aside the gainers and losers from the change in systems, every mum on the old system is losing £10 a week for every week of delay.

These are not abstract problems or delays that do not really matter; they involve real money for real children, and much of it is money that will never be recovered.

When a gentleman from EDS was asked in a Select Committee yesterday to talk about how much money the company was being penalised and other things, he was about to reply but was then shut up by a civil servant because the man from EDS is not supposed to tell people such things. It is all commercially confidential. We have a shambles, but we are not allowed to ask questions about it. We do not know whether taxpayers are receiving value for money because the information is all commercially confidential.

Photo of David Taylor David Taylor Labour/Co-operative, North West Leicestershire

Does the hon. Gentleman believe, as I do, that this case points up the utter inadequacies of the private finance initiative and public-private partnership schemes to which, I regret, my Government have been wedded for almost seven years? Is he shocked at the lack of penalty clauses built into the private arrangements with EDS and other companies?

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I share the hon. Gentleman's concerns. In fact, I think that the situation is so bad that the Treasury is now not doing new PFI on information technology projects. Yet here we are lumbered with a system that is so bad that we understand from a letter that we received from the Department for Work and Pensions that staff members at the CSA are using pocket calculators because they are more reliable than the new computer. All we get from the Minister responsible for the CSA are bland and Panglossian assertions—they are the only words that one can use—that all is well with the world, that the system is getting on and that we are gaining momentum. In fact, real families are losing real money.

There are penalty clauses in the EDS contract and I understand that some money is being withheld but whether permanently or temporarily I cannot be told. I have asked in the House, and I have been told that I cannot be told. I cannot be trusted with such information; it is all very hush-hush.

The House needs to know the truth about what is going on, it needs to know when things are going wrong and it needs to know about the finances. How can we, on behalf of our constituents who are suffering, hold the Government to account if we are treated like children with incomplete and inadequate information and a refusal to tell us the facts? Such situations happen over and over again and, on behalf of our constituents, I urge the Secretary of State to be honest and open with us in all circumstances so that together we can hold these companies to account and ensure that efficient systems are put in place to deliver the benefits and the maintenance that our constituents have a right to expect.

Photo of Roger Berry Roger Berry Labour, Kingswood 4:47 pm, 4th December 2003

I welcome most warmly the publication yesterday of the draft Disability Discrimination Bill. I also take the opportunity to express my equally enthusiastic support for the Government's policies on jobs and public expenditure. They have brought benefits to my constituents, as they have to everyone else in the country. However, as we have had only a passing reference to the Disability Discrimination Bill, I shall devote my 10 minutes to that measure.

I congratulate the Under-Secretary of State for Work and Pensions, my hon. Friend Maria Eagle, and my right hon. Friend the Secretary of State for Work and Pensions. Both have earned the respect of many people inside and outside the House for their efforts not only on the Bill but to secure equal opportunities for disabled people. I warmly applaud them.

The draft Bill will secure for disabled people many of the rights that were specifically excluded from the Disability Discrimination Act 1995, which was introduced by the Conservatives. Eight years since the Act reached the statute book, disabled people are still seven times more likely to be unemployed than non-disabled people. It is still the case that twice as many are likely to have no qualifications and that seven out of 10 disabled people report that they cannot go about their normal day-to-day activities because they cannot access buildings or transport. It is hardly surprising—but it should be shocking—to recall that there is now evidence that one in four disabled people offered employment decline that offer because they do not have access to the transport that will get them to work and back home again. We still face such problems, eight years after the Disability Discrimination Act was introduced.

We face the problems largely because, as is well known, the Conservative Government of the time introduced the Act only because of public outrage at the manner in which they blocked legislation in earlier years. They opposed the very principle of securing equal rights for disabled people through legislation but, because of public outrage, they were eventually forced to legislate.

I am afraid that the Tories' hearts were not in it. They did not establish a commission to enforce legislation. They excluded education and transport vehicles from the DDA. They excluded firms employing fewer than 20 people from the Act's provisions, which meant that millions of people in employment were denied any protection under it. They also excluded private clubs and drew up a list of occupations excluded from the Act's provisions, such as the police, members of the armed forces and firefighters.

I would appreciate the Secretary of State's comments on the exclusion of certain occupations because it has always struck me as distinctly odd. The DDA provides that genuine occupational requirements should be recognised. We are not saying that disabled people have the right to take jobs for which they do not have the necessary skills, qualifications or experience. We are saying that if a disabled person has the necessary skills, qualifications and experience and is the best person for the job or is entitled to training opportunities and promotions, he or she should not be denied that by virtue of being a disabled person under the Act. Given that such people must prove that discrimination exists to get protection under the Act, I do not understand why any occupation should be excluded because we are considering a universal principle. I have heard the Secretary of State talk about the matter outside the House, so I am sure that he will clarify the Government's view.

Many of the problems that I outlined have already been addressed. We now have the Disability Rights Commission. The exclusion of education from disability rights legislation was put right by the Special Educational Needs and Disability Act 2001, and the small firms exemption will disappear in October 2004. As my hon. Friends know, I wish that the exemption had not been created in the first place and believe that it should have been removed more quickly. However, small firms will not have the excuse of being able to pay no attention to legislation by October next year—praise be! Additionally, reasonable adjustments are defined in legislation. The shadow Chancellor talked about the imposition of burdens on small firms but they will be protected from unreasonable adjustments. The draft Bill will finish off most of the job of enshrining basic rights for disabled people in law.

We need to extend the definition of disability for the purposes of anti-discrimination legislation. I warmly welcome the fact that the Government have set out their intention in the draft Bill for legislation to apply to all people with HIV, cancer and multiple sclerosis. The draft Bill contains a reference to the fact that regulations might provide for circumstances in which people with cancer would not be covered. Perhaps the Government want to protect people with cancer who are receiving substantial treatment and thus narrow down the group of people who would benefit. I hope that the Secretary of State will comment on that in his winding-up speech.

Current legislation protects people with conditions such as HIV, cancer and MS if their condition is such that they cannot undertake day-to-day activities. However, it does not protect people who are diagnosed with such conditions if their symptoms do not mean that their physical or mental health is affected in such a way that their day-to-day activities are impaired. However, given that it is right to protect people from discrimination because they have been diagnosed with a condition that impedes their day-to-day activity, surely it is right to outlaw discrimination against people who have been diagnosed with such a condition that is not yet affecting their day-to-day activities. How can it be right that people with HIV, cancer or MS must wait until they have significant physical impairment before they are protected by the law? There should be protection from the point of diagnosis. I think that the Government are moving toward accepting that important principle in the draft Bill, but they have not quite done so.

Clause 3 of the draft Bill provides for the extension of the DDA to cover discrimination in relation to the use of transport. I welcome that most warmly. As of today, it is still the case that if a person in a wheelchair wants to get on an accessible bus and the driver does not stop to pick them up, he is not breaking the law. It is also the case that if the bus does stop and the person in the wheelchair tries to get on, the bus driver can be abusive and push them back off again. Tragically, the Disability Rights Commission has cited examples of that type of activity. Such discrimination must be wrong, so it is welcome that the Government are taking powers through the draft Bill to address that gap in the DDA.

I hope that while the Government are dealing with transport they will finally give us a date by which rail vehicles will be required to be accessible. I occasionally pop up in Transport questions to ask about that, but I have yet to receive an answer.

I am delighted that private clubs with more than 25 members are to be included, as they are under the race relations legislation. I am sure that that will be widely supported by political parties, because it means that we will have to ensure that we do not give less favourable treatment to disabled people, and that we make the necessary reasonable adjustments for them.

I am also delighted that public authorities will have a duty to promote disability equality, as they do in relation to race equality under the race relations legislation.

In conclusion, I warmly welcome the draft Bill and hope that the Government will reiterate their commitment to legislate on the proposals during this Parliament, as they promised during the run up to the last election.

Photo of Bill Cash Bill Cash Conservative, Stone 4:56 pm, 4th December 2003

I want to refer to a matter relating to economic management that has been causing the Chancellor of the Exchequer some concern—the primacy of European law under the proposed European constitution. Having listened to some hon. Members' speeches, that matter seems to have been somewhat overlooked. For example, Mr. Robinson mentioned the last Conservative Government's disastrous policies on the exchange rate mechanism, conveniently forgetting that Labour Members were entirely behind those policies. Indeed, on the basis of the Government's current commitment to economic and monetary union, they would take us back in again.

Last month, the Chancellor expressed deep concern about the danger of the European constitution undermining the role of national Governments in economic policy making. That is a serious matter, because it has an impact not only on the debates that we will have in future if the constitution goes through, but on the effectiveness of our position in the House of Commons in representing our constituents.

To a great extent, the Government's concerns are not being backed up by a determination to retain control over our own economy. In June, the Treasury produced a paper called, "Policy frameworks in the UK and EMU"—economic and monetary union—which states:

"While individual tax and spending policies remain a matter for EU Member States, there is an EU framework to promote and maintain sound public finances and to aid coordination between the fiscal authorities."

It continues:

"The main objective for fiscal policy which Member States have agreed . . . is to safeguard sound government finances as a means to strengthen the conditions for price stability"— that, of course, is what monetary union is all about—

"and for strong sustainable growth conducive to employment creation."

It then mentions the excessive deficit procedure, to which I was somewhat opposed in the Maastricht treaty, and the stability and growth pact, which was introduced in circumstances where I felt that it would have been wiser not to do so—many of us opposed it vigorously—and which has now collapsed in ignominy.

It is worth pointing out that the same paper states:

"As already noted, the UK and EU fiscal frameworks . . . even outside EMU" operate on the basis that

"the UK is obliged to follow many of the requirements of the EU framework".

We should reflect on that because although we are outside the single currency, we are not outside the framework in which the economic and monetary union policies operate. In considering the stability and growth pact and the exchange rate mechanism, which many of my distinguished colleagues, including some on the Front Bench, and I vigorously opposed, I was reminded of Shelley's famous poem, "Ozymandias":

"Two vast and trunkless legs of stone

Stand in the desert."

It goes on to describe the pedestal:

"these words appear:

'My name is Ozymandias, King of Kings:

Look on my works, ye Mighty, and despair!'

Nothing beside remains. Round the decay

Of that colossal wreck, boundless and bare

The lone and level sands stretch far away."

That is how I would summarise the policies of the European constitution in relation to our economic affairs and management.

The draft European constitution threatens to tighten the noose of European economic management and would transform the European Community and European Union treaties into a free-standing constitution for Europe, adjudicated by what is effectively an EU supreme court. So much for the House's jurisdiction. It proposes easier censure of member states for failing to comply with EU economic policy and deficit guidelines by making such censure subject to the double majority system of qualified majority voting. It would remove the requirement of unanimity for the Council of Ministers to adopt economic measures to apply to member states. It would also confer on the Council of Ministers a mandate to lay down fresh detailed rules and definitions for the excessive deficit procedure protocol. That is all in addition to existing treaty provisions on economic policy co-ordination and so-called multilateral surveillance of member states as well as the notorious dead letter of the stability and growth pact.

We are not considering only technicalities but jobs, public services, realistic growth and public expenditure levels. The stability and growth pact was never a workable instrument but its recent killing off by France and Germany has created a new crisis. The supposed solidarity of EMU has been exposed as a sham. France and Germany originally intended the proposals to contain the profligacy of, for example, Italy. However, by breaking the pact they have undermined the rule of law and they have done so with the disgraceful connivance of the British Government.

The United Kingdom is complicit in the destruction of the stability and growth pact. With Sweden, it opposed the redrafting of article III-88(1) of the draft European constitution on the adoption of measures for the eurozone on economic policy co-ordination and excessive deficits.

Increasing functions are being created for the European Union. As I pointed out to the co-ordinating strategic planner of the Commission in the Select Committee on European Scrutiny the other day, creating more functions leads to more costs and more requirements to pay them. The European constitution must then be re-examined and it states that the Union has to provide the means to support the objectives. The money will come from taxation. The European constitution will have an upward effect on our tax system.

Let me deal with asymmetric socks—[Interruption.] Indeed, perhaps I should consider asymmetric red socks. I meant "shocks". The economists have warned about that for some time and now Ireland is experiencing rampant inflation, Germany, Italy and the Netherlands are in recession and Portugal is an economic disaster zone. The internal contradictions of EMU have their own dynamics. They create not diversity but chaos and we will be affected, whether we are in or out.

Monetary union has managed to create the worst of all possible worlds for the eurozone: regional imbalances of inflation and deflation, at first a low and now a damagingly high exchange rate, low growth, high unemployment, treaty obligations broken in every direction, bitter recriminations and a shattered illusion of moral unity. What is proposed is more of the same, whereas we need a fundamental rethink about all this, not only in the United Kingdom but in the rest of the EU.

The Union's plans for economic management are dirigiste—their approach is almost Soviet—and they are unrealistic and unworkable in a democracy because they bear no relation to what people want. But they will have massive effects on people's daily lives, and on regulation, competitiveness, productivity, the social market economy, levels of public expenditure, hospitals, schools, public services and unemployment, as I pointed out in the economic debate about Maastricht all those years ago.

There is also the other requirement under the charter concerning the length of the hours that people work, which will have a tremendous impact on our hospitals, as we saw the other day. There is also the right to strike, which even a Labour Government have not introduced. Even if the UK never joins the euro, our export markets will be affected by it, and our domestic economy remains subject to economic and monetary union.

This constitution must be rejected. There must be a far-reaching, fundamental renegotiation that addresses the reality, not the false vision of the Euro-eélite. Does the Chancellor of the Exchequer agree, and if not, why not?

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South 5:06 pm, 4th December 2003

It is rather ironical that I follow Mr. Cash, particularly considering what he has been saying about Europe and the constitution. We have to remind him that if he and the last Conservative Government had not signed up to Maastricht and the single market, perhaps some of the red tape that he has been referring to would not have appeared.

Although we have not seen the details of the pensions Bill, which my hon. Friend Mr. Robinson mentioned earlier, I certainly welcome the proposals, particularly for the setting up of a pension protection fund. Any time my hon. Friend or I asked to see the Secretary of State for Work and Pensions about the problems that we were experiencing in Coventry with the final payment schemes of companies such as Massey Ferguson and, to a certain extent, Rolls-Royce, my right hon. Friend and other Front-Bench colleagues were always prepared to see us and to meet delegations. Although it may be a little premature to say so, we seem to be going in the right direction. However, we certainly need to know more about how the fund will work and what the levies will be.

The other issue arising from occupational pensions and final payments funds is the fact that there should be more consultation, not only on the general nature of pension funds but in the particular case of an employer proposing to change a pension fund. At the moment there is no onus on employers to consult employees about any changes to the pension fund or about pension holidays. Anybody who knows anything about industry will remember that, from time to time, employers take pension holidays, and nobody can stop them. That creates considerable problems. We must remember that the previous Conservative Government did very little about such situations. In fact, they presided over one of the biggest scandals in history—the mis-selling of pensions. I do not have to go into the details of that for my colleagues; I am sure that we are all aware of that scandal.

Turning to fair trade and third-world debt, I am particularly glad that the Chancellor is saying that, by about 2006, Britain's share of help for the third world will rise to about £4.9 billion. That is a step in the right direction, but there has always been a concern in the west midlands about the problems that manufacturing experiences from time to time. I mentioned the Massey Ferguson pension scheme. Massey Ferguson has pulled up stumps and left Coventry. When any manufacturing jobs are lost, that has a knock-on effect on the small producers who supply the spare parts.

We recognise that the Government are trying to do a lot for manufacturing industry, but we must keep our eye on that area, especially in the west midlands, which has been considered the economic engine of the country.

The shadow Chancellor opened the debate with his new attack machine. I was trying to work out what we should call it. Should it be called the Pol Pot machine or the year zero machine? My hon. Friend the Member for Coventry, North-West touched on that. The Tories have created an interesting machine, but we have one of our own. I am sure my hon. Friends remember the 17 per cent. VAT on fuel under the Tories. Despite the campaigns that were waged, the Conservative Government did not listen. We had a battle in the House on a Friday morning about winter fuel payments, and I am sure that my hon. Friends remember that. Under the Tories, there were record interest rates, negative equity, the mis-selling of pensions, record unemployment, and the Horizon project, which the Opposition do not want to talk about. When I was on the Select Committee on Trade and Industry, it conducted an investigation into the Horizon project, which cost £0.5 billion and was probably responsible for some of the problems that we now have with computer systems. The Tories spent about £30 million trying to put it right.

Photo of Jim Cunningham Jim Cunningham Labour, Coventry South

My hon. Friend also took part in that inquiry. The Opposition talk about their attacking machine, but we have one as well.

I shall be a little more positive now, as I have said enough about the record of the Opposition in government. I shall take a measured look at our record. We have low inflation—we have probably had the lowest inflationary period in our history, despite what the Opposition say. That gives people confidence in the economy and a security that they have never had before. Anyone who has worked in industry has been subjected to the stop-go policies of Conservative Governments, when they could be threatened with redundancy. They know what that security means to the man and woman in the street. That is fundamental to people outside, and we should never lose sight of it.

More money is being spent on the health service and on education. More importantly, there has been an increase in the number of doctors and nurses to meet the needs of the health service. Much has been done to reduce waiting lists, but it is important to note that more people are being treated than ever before. I am sure that my hon. Friends remember the days when people were put on trolleys because they could not be given hospital beds, and when there was a record number of hospital closures. It is worth while reminding ourselves of the Tory record.

One of the most fundamental measures that the Government introduced was the minimum wage. We can all debate the level of the minimum wage, but I remember the case of a lady in Coventry who was paid £1 an hour and was not told her employment rights. We had a long battle with the job centre to get some action taken against the company involved. There was quite a bit about that in the Daily Mirror, which ran a campaign on the minimum wage.

We should again remember the Conservative Government's record. I like to jump in and out of this subject, just to remind them. What could have been worse than the poll tax? Need I say more? I was leader of Coventry city council during the poll tax years. People complain about high council tax charges, and some of them are too high, especially in Tory councils, but I can remember when Coventry city council's rate support grant was cut and its capital budget was capped. In effect, that meant that we could not carry out school or council house repairs. Therefore, although we have been in government for about six and a half years, we still have a long way to go to deal with the injustices and inequities of the Tories' 18 years in government.

I say again that I welcome a number of measures in the Queen's Speech and a number of measures that the Chancellor has introduced in the past. I look forward to seeing the detail of the Government's pensions Bill.

Photo of Mr Archie Norman Mr Archie Norman Conservative, Tunbridge Wells 5:15 pm, 4th December 2003

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

It is a great pleasure to follow Mr. Cunningham, who made an interesting speech and some important points. I was sorry that he chose to introduce, perhaps uncharacteristically, a partisan note at the end of his remarks. It is interesting to note how often Labour Members refer to the poll tax, as if that is an important point about next year's public agenda. After all, the poll tax became extinct more than a decade ago. If that is the greatest criticism that they can level at Opposition policies, it is not very much.

My right hon. Friend Mr. Dorrell said that the debate would be interesting to the outside world only if we were capable of standing back a bit from party politics, and I agree. Unfortunately, he made his remark after the Chancellor left the Chamber. The Chancellor's speech was very much the speech of a politician, of someone more interested in his interpretation of Opposition policies than in any rounded assessment of the state of the economy.

There are fundamental issues about the performance of the economy; I think that any rounded assessment would come to that conclusion. That is not necessarily a criticism of the Chancellor or of the Government's approach. The Government set out with a big project—to increase state spending on state-delivered service—in the belief that the quality of life for British people, our infrastructure, and hence our national competitiveness would improve as a result. That is a perfectly noble purpose, but the Government staked their reputation on their ability not to spend money but to deliver outcomes proportionate to the increase in spending.

That is the issue that my right hon. Friend the shadow Chancellor raised in his speech. It is not a partisan point that there are serious problems with public service productivity and public service delivery. After all, it is an issue that the Prime Minister himself has recognised. Given the major policy shift undertaken by the Government, that is the central issue that we should be debating and that the Queen's Speech should be addressing.

Photo of Mr Archie Norman Mr Archie Norman Conservative, Tunbridge Wells

I am sorry. I am so short of time that I prefer not to, if the hon. Gentleman will forgive me.

The shadow Chancellor said that the solution is not more legislation, it is better administration. He is 100 per cent. right. That goes not just for public services but for the economy as a whole. Let us remember that public spending is rising to 40 per cent. of GDP. It accounts directly for about one fifth of all employment and indirectly for even more, so it is a substantial part of the total. If we fail to deliver productivity growth in the public sector, it will be extremely difficult to improve the competitiveness of the economy overall, regardless of the state of the national infrastructure.

It is not just a question of wastage, surplus overheads, the burgeoning number of administrators in the health service or the Department of Trade and Industry. The importance of the bureaucrats and administrators is that they speak of a set of values and a style of leadership. If in the DTI, the Department of Health or the Home Office the number of administrators is growing by the day, it is hardly surprising if people on the front line are not motivated to deliver improvement in performance and to look for ways of saving money.

According the Office for National Statistics—these are not my statistics—from 1995 to 2003 there has been a 48 per cent. increase in public spending for a 15 per cent. increase in output. There is controversy about how we evaluate public sector output but, on any measure, we are looking at dire performance on productivity improvement compared with anything one would expect in the private sector. In the NHS alone, most measures suggest that for an increase of about 21 per cent. in spending over the last three years, we have had an increase in output of approximately 1 to 2 per cent. There may have been qualitative improvements beyond that, but there is a huge deficit in performance that would be unacceptable in any commercial environment.

It is no defence for the Chancellor to give a great list of achievements; after spending that amount of money, there should be achievements. The question is whether those achievements are proportionate to the money that has been spent, and whether the public sector is improving the quality of delivery at the same rate as one would expect had the same amount of money been spent in any other sphere of life. According to the ONS, we have seen negative productivity growth in the public sector in the last three years. That is a serious problem for both sides of the House and for the economy as a whole.

We are putting more and more money and employment—70,000 to 90,000 people a year—into the least productive, worst managed, most trade unionised and most sclerotic part of the economy, which spends the least on research and development of any single sector: the public sector. That is the difficulty with which we are struggling, and the Queen's Speech needs to address it.

What is the Government's agenda when faced with this central and structural problem in their policy? The answer appears to be to produce more Soviet-style proliferation of public targets and to do nothing to address the problems of public sector management. The chairman of a well respected NHS trust told me a couple of weeks ago that the problem with the Government was that they thought not that the Soviet Union was wrong, but that it did not try hard enough. [Interruption.] Those are not my words. One might think that they are exaggerated or ridiculous, but that is what leading public servants are saying about the Government. People who work for the Government—not me—believe that that is the way the Government are working.

The Centre for Policy Studies produced an excellent document recently called "Managing not to manage" and pointed out that the life expectancy of a chief executive of an NHS trust is now only 700 days. In other words, we are losing talent in the service because people are so fed up with the way they are managed and by the support they receive from the Government. A MORI survey last year said that two thirds of NHS chief executives were absolutely fed up with the number of targets that they were expected to pursue and felt that that cast doubt on their interest in continuing to serve in the national health service.

These are serious issues and the situation will get worse unless we start to support more effective management and leadership in the public service. The position of the Conservative party is not a question as to whether we should be spending more on public services. It is about how that money is spent and whether we are spending it in such a way that the delivery produces a better quality of life, better outcomes and better customer service for the people of this country.

To reinforce this point, there are aspects of the public services that are improving, and we can point to instances of remarkable improvement, restructuring and growth in productivity. One example is Ordnance Survey, an outstanding institution—potentially a world leader—that has transformed its business over the past two or three years. The British Library is another outstanding world resource by any standards, and it is now employing new technology to good effect. The Royal Mail, led by my former colleague Allan Leighton, is restructuring at a fantastic rate; that is, of course, controversial in some quarters, but it is undoubtedly delivering big productivity gains.

Importantly, it is not just that these institutions are unusual, but that they are led in every case by high quality private sector leadership and people who have come in from outside. The institutions compete, and individuals can make a choice outside their circles; the public have a choice in terms of library services, Ordnance Survey or the Royal Mail, and there is an incentive to perform. The public also have an incentive to make the right choice. And of course, these are institutions that are comparatively immune to the day-to-day interference of politics and politicians. Political interference and targeting represent an absolute corrosion of public services. They detract from the esteem of those who work within them, and diminish the attraction for capable men and women of achievement from outside to come in and provide the management that those services deserve.

The things that we should look for from the Queen's Speech in the year ahead are measures to distance the partisan political process from the delivery of public services, and to provide the capacity to attract and motivate men and women—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Gentleman's time is up.

Photo of Piara S Khabra Piara S Khabra Labour, Ealing, Southall 5:25 pm, 4th December 2003

I am pleased to have the opportunity to speak in today's debate on economic affairs, and I hope to raise a few useful and specific points with the Treasury team. Many of the proposals covered by the debate will not capture the same headlines or create the same controversy as top-up fees or Lords reform, but the issues that we are dealing with are fundamental to the health of the nation's economy, which in turn will affect our ability to invest in public services.

I am pleased to see that the United Kingdom has held up well in the troubled economic waters of the past year or two. In a report last month, the Organisation for Economic Co-operation and Development noted that

"the UK economy continues to exhibit greater resilience than most other OECD countries" and that

"inflation and unemployment are internationally low".

Despite the concerns expressed in the report about the widening public deficit, I am sure that the Chancellor will be able to show in next week's pre-Budget report that it remains fiscally on-track.

The Chancellor has done an excellent job in difficult circumstances—perhaps the best in this country's history, and better than any of his predecessors. My constituents have not forgotten the days of high inflation, high interest rates and unemployment, and of bankruptcies and the repossession of properties: the boom and bust period of the previous Conservative Government. Indeed, I have seen the devastating effect that that period had on my constituents.

A CBI statement issued last month pointed out that

"business confidence has risen in every English region and in Wales over the last six months as the global economic recovery has taken hold" and that employment is expected to rise in every region. Yet to ensure the durability of this recovery, it is important that we address certain dangers, and for that reason I am pleased to see proposals in the companies Bill to tackle corporate governance issues. The problems at the Dutch retailer Royal Ahold earlier this year—the chief executive resigned after it was discovered that profits had been overstated by $500 million in the past two years—show that Europe is not immune to scandals such as that affecting America's Enron.

If we are to ensure that investors can have confidence in doing business in the UK, and with UK firms, we must strengthen our system of governance, particularly the rules on accounting standards. This country already has a great deal to offer to businesses. Indeed, in a survey published in July, the Economist Intelligence Unit ranked the United Kingdom as the fourth best country in the world in which to do business. But if we are to keep that position, we need to maintain confidence in our systems. I therefore welcome the proposed companies Bill, which will tighten the regulation of auditing, increase the powers to investigate companies, and allow the Inland Revenue to pass on any information on suspect accounts that it discovers during its investigations. That is important for the growth of the economy and for people in general, and it will lend welcome clarity to require directors to state that they have not withheld any relevant information from the auditors.

None the less, I hope that the Government will consider going a little further in some areas. Five years ago we had the big six accountancy firms; now we have the big four, and the vast majority of the world's largest firms are audited by one of those. It is therefore imperative that their accounting be beyond reproach, and that investors can trust the accounts presented to the public and to shareholders to be independent. I cannot help but feel that that independence is in danger of being compromised by allowing a firm auditing a client company to provide lucrative consulting and tax advice as well. That is a point for Treasury Ministers to note.

It is too much to assume that auditing firms that receive large fees for their consulting work will not be at least a little swayed, and certainly tempted, in their less lucrative auditing roles too. Two possible solutions present themselves. One is to bar auditors from offering non-audit work. That would create a real barrier to conflict of interests, as opposed to the Chinese wall model, which seems to have been ineffective. The fact that the Government intend to require companies to publish full details of the non-audit services that they get from their auditors suggests that the potential for conflict is recognised. I feel that it would be best to remove the possibility altogether.

Another idea would be mandatory rotation of auditors, perhaps every three years. That would encourage independence, as it would reduce the possibility of auditors and clients becoming too close. The knowledge that an auditor's work would be under scrutiny by one of its rivals every few years would surely encourage a higher standard of work, which is needed both for businesses and for the economy as a whole.

Once any changes are put in place, we need to put trust in the new processes. It is true that some businesses have abused our trust, but excessive regulation will only stifle innovation and the necessary degree of risk taking that is part of a successful entrepreneurial culture. I am glad that the Queen's Speech offers us some clear guidelines without excessive regulation.

I shall now touch briefly on other welcome measures on the agenda for the coming Session. I am pleased that provision is to be made for establishing community interest companies to promote social enterprises. These new entities should bring useful and desirable economic and social benefits for the United Kingdom, especially as they will be expected to produce annual reports on their efforts to meet social objectives.

I shall now raise several other issues that are important to my constituency and me. I look forward to supporting the proposals in the pensions Bill, as my constituents have raised the issue of pensions reform with me. I have often lobbied the Chancellor on the subject, and I am sure that many of my constituents will be pleased with the plans for a pension protection fund and a pensions regulator. I also hope that the Government will continue to recognise the importance of small businesses, which are especially important in my constituency, and also vital to the economy.

I wonder whether the Treasury has made any commitment to deal with the domicile rule, which has lost the Treasury many millions of pounds in potential revenue. I am sure that the Chancellor is also aware of the high level of consumer debt, which is potentially damaging to households and families. I hope that the Government will think about ways of discouraging the sometimes murky activities that snare people into a debt trap.

Of course, for all the proposals outlined in the Queen's Speech, the devil will be in the detail. I believe that there is much potential and I hope that the House will come together on many of the issues raised in the debate today. A healthy economy is essential to the UK not for its own sake, but for what it allows us to do. It enables us to continue investing and makes it possible to meet our social obligations to the nation. These proposals should create the healthy conditions and good practices necessary—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The hon. Gentleman's time is up.

Photo of Jonathan Djanogly Jonathan Djanogly Conservative, Huntingdon 5:35 pm, 4th December 2003

Thank you, Madam Deputy Speaker. As "Tail-end Charlie", I shall have to pick on only a few issues. One issue that has not been much mentioned today, but which must be debated, is the massive impact of regulation on businesses, particularly small businesses, in our country. There are 15 new regulations coming into force every day, which, according to the estimate of the British Chambers of Commerce, amounts to a cost hike of £20 billion a year on business. When I asked businesses in my constituency about that, 90 per cent. felt that the burden had increased under the Labour Government.

The evolving picture for British manufacturing is not a pretty one. Productivity growth has halved since Labour came to power. Output was down by 4 per cent. last year—the biggest fall since 1991—and profitability has fallen to its lowest level since 1992 with 300 manufacturing jobs being lost every day. In such a dire position, we need to ask what the Government wanted to achieve. It is certainly not equality, because the divide between rich and poor is growing. Clearly, the Government believed that low interest rates would encourage investment, but while the personal debt mountain has grown to ever-higher levels, corporate investment has fallen in the last quarter to its lowest level for 20 years.

I can only imagine that Europe must figure highly in Labour's grand plan—I have the inevitable feeling that they want to dumb down to the lowest level of the social chapter—and that the Government wish to appease the unions with a European social agenda that will lead to a less competitive and, ultimately, higher unemployment economy, which is more euro-compliant. Once comfortably in the euro, the Government will be able to blame others for setting an interest rate that destroys our own economy.

Having said that, Labour has also encouraged our very own British regulations, such as the climate change levy, the aggregates tax and, most recently, the income tax hike in the form of national insurance, which is itself equivalent to a 3 per cent. rise in corporation tax but is wholly unrelated to such niceties as whether the company concerned makes a penny of profit. Worrying as the red tape and regulations are to business, the growing sentiment that I hear from businesses is that they feel increasingly isolated. While their employees' protections and rights are becoming ever more entrenched, who in the Government is standing up for business interests?

The tide continues to flow in this year's Queen's Speech with a new draft disability discrimination Bill and Employment Relations Bill chipping away time and again at our competitiveness. It is a Government of technocrats and target setters, not innovators and leaders. Whenever there is a problem, they say, "Let's have another Bill", but before we move on to the new Bills, including the proposed Bill to regulate auditors and facilitate the raiding of companies and their directors by the Department of Trade and Industry, what about the comprehensive companies Bill that they have promised for five years—the one that will reduce form filling, ease statutory capital requirements for companies and remove the inherent discrimination that small companies face in our corporate legislation? I ask the Government, in whose in-tray is that now languishing?

I recently met the British Exporters Association, which said that the relevant Minister did not seem much concerned about attending meetings with foreign parties to help companies to win contracts, though that was regularly done by other European Ministers. I return to the question whether it is worth having a Department of Trade and Industry at all. The answer is, probably not, when the Secretary of State prioritises commenting on semi-nude women sitting on cars in motor shows, attacks the ability of British managers rather than supports them, and highlights the question of ageism as a sop to pensioners who are now forced to work due to Labour having smashed their pensions.

My opinion might be different if we had a Government who cut regulation for companies and fought Treasury plans to increase corporate taxes; who stood up for British interests abroad and demanded our fair share of Iraqi contracts; who travelled the world securing inward investment and British foreign infrastructure and export deals, and who sorted out rather than pandered to the unions and their ancient work practices, as we recently saw with the Post Office strikes. Only then might I give a cheer for the Department of Trade and Industry.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions 5:39 pm, 4th December 2003

The Opposition believe in productivity and my hon. Friend Mr. Djanogly has just said in four minutes as much as most contributors to the debate said in 10 minutes. I congratulate him. I declare my interests, which appear in the Register.

I begin by considering the historical context of the Queen's Speech. The Government have been in office for six and a half years. In that period, they have passed 254 Acts of Parliament, which amount to 16,050 pages. The Government began with 600 targets, but they needed improvement and development so we now have a total of 890. There has been a 50 per cent. increase in spending on public services.

So if Utopia were achieved by legislation, targets and public spending we ought to be in it today: but we are not, and the reason for the growing discontent that is expressed on the Conservative Benches is that it is manifest that we are not. Several of my right hon. and hon. Friends, including my right hon. Friends the Members for North-West Cambridgeshire (Sir Brian Mawhinney) and for Charnwood (Mr. Dorrell) and my hon. Friend Mr. Norman, drew the House's attention to the problem that we are not producing enough, especially in the public sector where we need £4 of input for £1 of product. That is the kernel of the issue.

The problem was put very well by the Public Administration Committee, which investigated targets. Its report stated:

"we discovered that targets and results were different things."

That will be the Government's epitaph; the discovery that targets and results are different things.

Perhaps Ministers realise that there is a problem. That may be why we are having a big conversation—to find out what ought to be done—perhaps as a result of some loss of direction, some loss of confidence or some loss of momentum. For example, on the constitution, when the Prime Minister was in opposition he said that he supported Labour's commitment to replacing the House of Lords with an elected second Chamber. Yet now the big conversation consultation document asks what should be the role and functions of a second Chamber. It asks how today's House of Lords should be constituted.

Six years ago, the Government knew how they were doing on transport. Their first annual report stated, "Done" in relation to the development of an integrated transport policy. However, in the big conversation, they say that more needs to be done and that they are asking the tough questions about how to fund a world-class transport infrastructure, how best to integrate transport and whether they have got their priorities right.

The Government are losing their way. They are losing momentum and they have lost their purpose. The tragedy is that there ought to be a conversation and we know what it ought to be about. The big conversation ought to be about how we reform our public services. That is the real big conversation and I believe that it goes on among Ministers. We know what they say. We know what the Prime Minister has said. If Tony were free to put his entry on the website, this is what he would say:

"We should be far more radical about the role of the state as regulator rather than provider, opening up healthcare, for example, to a mixed economy under the NHS umbrella . . . We should also stimulate new entrants to the schools market and"—

I draw the Chancellor's attention to this point—

"be willing to experiment with new forms of co-payment in the public sector."

Perhaps the Chancellor would not agree.

Someone close to the Chancellor also made a contribution to the big conversation. This is what Ed would like to put on the website,

"We have to have the confidence to accept that there is a limit to how far you can apply market principles . . . you run grave risks with the ethic of public service . . . if you go down the road of thinking you can apply market principles to a good like health, the evidence is that you end up with inefficiency and escalating costs, two-tierism and you can do grave damage to that ethic of public service . . . I think the same is true of education."

That is what Ed would put in the big conversation.

Photo of David Willetts David Willetts Shadow Secretary of State for Work and Pensions

Perhaps, but this is how Tony chips in. He says:

"But unless we want the result to be poorer services, we need to address the balance between what the citizen pays individually or collectively."

That is the Prime Minister's contribution to the big conversation. The Chancellor comes in and warns:

"The very same reasoning which leads us to the case for public funding of health care on efficiency as well as equity grounds also leads us to the case for public provision of healthcare."

That is what the Chancellor thinks. In desperation, the Prime Minister comes back with his final throw.

"We should have the confidence to open up the debate, be honest about the challenges, lay out the real choices."

What are the No. 10 spin doctors saying, meanwhile? A senior Government official said:

"We think these are issues that should be discussed in private and not in the columns of newspapers."

That would be a big conversation, and it is the one we should be having. It is the one in which Opposition Members are taking part. It is a great pity that, when the debate gets to the heart of the nature of Britain's public services, all we hear from the Government are muffled thuds and sounds emerging from Nos. 10 and 11 Downing street. That is what has gone wrong.

Pensions provide a particular example of where the Government have failed in target setting and control. The Government set a clear target, and the Opposition—in the bipartisan spirit in which we believe—said that we were happy to endorse it. The Government target was to shift the balance of pension funding: instead of pensioners getting 60 per cent. of their income from benefits and 40 per cent. from funded savings, the proportions were to be reversed. What has happened? In practice, the trend has gone in the opposite direction. When the Government came to office, pensioners got 51 per cent. of their income in benefits, and 42 per cent. in funded pension savings. Now they get 61 per cent. in benefits, and 39 per cent. in funded pension savings. The country is heading in the wrong direction.

I remind the Chancellor of his famous promise to the Labour party conference:

"I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved—the end of the means test for our elderly people."

We would love to hear him endorse those sentiments again, at the Dispatch Box. Instead, what we have is more means testing. Help the Aged believes that the pension credit is "totally over-engineered" and that it should be much simpler and fairer. It also said that it would be

"better to boost the basic state pension to Minimum Income Guarantee level, which could still be done with modest extra costs."

That would be the right direction—reversing the spread of means testing and rewarding people for building up their funded pension savings. However, the Government are taking us in the wrong direction, which is the opposite of the one set out by the Chancellor in opposition.

The Government are to introduce legislation to set up a pension protection fund. However, we know what pensions need protection from—the Chancellor who took £5 billion a year away from them. The Government say that they are bringing in the pension protection scheme to restore confidence in pensions. They certainly need to restore that confidence. A polling question asked:

"How much do you trust the Government to keep its word and not let you down on your pension?"

The responses showed that trust scored 16 per cent., while distrust scored 81 per cent.—a net score of minus 66 per cent. That shows that the Government have a problem. I hope that their legislation will do something about that.

The trouble is that we are not clear about how the protection scheme will work, or whether it will offer any extra security, compared with existing pension schemes. It is not clear what will happen if the premiums are insufficient to bail out a large pension scheme. Of course, there is nothing in these measures for the people who have already lost their pension schemes—employees of companies such as Allied Steel and Wire. Nearly a year ago, on 17 January, I wrote to the Secretary of State promising that we would work on a cross-party basis to introduce straightforward, simple measures that would tackle the anomalies in the current rules on wind-ups, but our offer has been ignored. Those measures could be on the statute book by now. We do not need to wait any longer.

The problem with the Government's approach is that it is defensive. They are building a deeper ditch around a castle. They are not offering anybody any incentive for more funded saving. That is what we in the Conservative party believe in.

Photo of Andrew Smith Andrew Smith The Secretary of State for Work and Pensions 5:50 pm, 4th December 2003

At least until the last speech this was a good debate. We heard from 15 Back-Bench Members. I thank the right hon. Members for North-West Cambridgeshire (Sir Brian Mawhinney) and for Charnwood (Mr. Dorrell), the hon. Members for Banff and Buchan (Mr. Salmond), for Bournemouth, West (Mr. Butterfill), for Stone (Mr. Cash), for Tunbridge Wells (Mr. Norman), for Northavon (Mr. Webb) and for Huntingdon (Mr. Djanogly) for their contributions. Unlike the Conservative Front Bench, they at least were interested in debating the economy. I thank, too, my hon. Friends the Members for Ochil (Mr. O'Neill), for Coventry, North-West (Mr. Robinson), for Doncaster, North (Mr. Hughes) and for Kingswood (Mr. Berry), my right hon. Friends the Members for Llanelli (Denzil Davies) and for Coatbridge and Chryston (Mr. Clarke), and my hon. Friends the Members for Coventry, South (Mr. Cunningham) and for Ealing, Southall (Mr. Khabra) for their contributions.

The debate has ranged so widely that it is difficult to do justice in the nine remaining minutes to all the interesting arguments. I will pick out a number of points for response. First, I assure the hon. Member for Northavon, who made important points about the Child Support Agency, that a lump sum child support payment such as he described would be assigned to the time that it should have been paid and disregarded accordingly, so that in the example that he gave the full £520 would be disregarded retrospectively across the year.

The debate opened with the first speech of Mr. Letwin as shadow Chancellor and his inaugural mauling at the hands of my right hon. Friend the Chancellor of the Exchequer. I congratulate the right hon. Gentleman on his appointment. He has the endearing characteristic of saying out loud what is in his mind, so we often get a more honest account for what passes for Conservative policy from him than we do from his colleagues. From a sedentary position a few moments ago, he committed the Conservative party to reintroducing the dividend tax credit at a cost of £5 billion—[Interruption.] He wants to resile from it now. In the limited time available I was not going to go into his record as a self-proclaimed inventor of the poll tax, an enthusiast for NHS vouchers and the proposer of £20 billion of cuts in public spending. From his speech this afternoon and that of Mr. Willetts, it is clear that the Opposition have no coherent critique of this legislative programme, never mind any coherent alternative.

The Opposition spoke a lot about targets. They made it clear that they have a target to get public spending down to 35 per cent. of GDP with £80 billion of cuts, privatisation in the NHS and the abolition of the new deal. Where this Government are making tough choices for stability and progress, the Opposition Front Bench propose extreme and muddled policies that would damage schools, hospitals and universities, abolish the new deal, drive up unemployment and threaten Britain's hard-won economic stability.

The Opposition have not understood that our record on economic stability is the product of choices that we made and they opposed. They opposed the symmetrical inflation target and Bank of England independence. They rubbished tough fiscal rules and would abolish the new deal. Those tough choices and our investment in Britain's future have helped the Government to deliver the lowest unemployment rates for a generation as well as record numbers of people in jobs.

To pick up the point made by the hon. Member for Huntingdon, twice as many jobs have been created in the private sector as in the public sector, although the Government make no apology for the thousands of extra nurses, doctors and teachers that there now are. That is a sharp contrast with the period when Mr. Howard was responsible for employment policy, when unemployment rose by more than 1 million and 1,300 people were consigned to the dole queues every day.

My hon. Friend the Member for Ochil brought particular passion to the debate when he explained how our investment in the new deal has rescued lives and revived communities. By their plan to scrap that successful programme and by their response to the Queen's Speech, Opposition Members remind the country why, just as they could not be trusted in the past, they cannot now be trusted with Britain's future.

My hon. Friend the Member for Coventry, North-West and a number of other hon. Members on both sides of the House welcomed our proposed legislation on pensions. I heard with interest the comments made by the right hon. Member for North-West Cambridgeshire and the detailed remarks made by the hon. Member for Bournemouth, West. I hope that their support for the principle of the pensions Bill will be shared by those on the Conservative Front Bench. The pensions Bill will strengthen partnership in pensions, set up a pension protection fund, make it easier for companies to run schemes, extend TUPE protection and give people a better deal when they choose to defer taking their state pensions.

Conservative Front Benchers might also reflect on the fact that, whereas our pensions Bill will extend pension security and retirement choice for the future, the Conservative party's proposals would scrap the state second pension, taking additional entitlements away from 20 million low earners, disabled people and carers—most of them women. A number of Conservative Members have spoken about mass means-testing. Let us be clear that what they really object to is the money—to date, £47 a week on average—that Labour is now getting to millions of pensioners through the pension credit, for the first time rewarding saving, not penalising it.

This week, the shadow Chancellor described the Conservative pensions policy as much misunderstood. Whose fault is that, I wonder? Could it be because the earnings link that the Conservatives propose has been described as a bogus promise, as

"seductive politics, but dangerous economics",—[Hansard, 8 July 1993; Vol. 228, c. 516.]

and as

"a wild and uncosted policy"—[Hansard, 8 June 2000; Vol. 351, c. 440.]

Those are not my words, but those of the hon. Member for Havant, when others proposed the very policy that he now has to defend. As the Leader of the Opposition admitted, not only does that policy not help the poor, but whereas our plans are fiscally sustainable, their sums simply do not add up. Again, the right hon. Member for West Dorset, who is wildly gesticulating at the moment, let the cat out of the bag when he said:

"we may have to make some further painful decisions" to pay for the policy. He owes it to the country to tell us what those cuts would be.

In the limited time remaining, let me welcome the excellent speech by my hon. Friend the Member for Kingswood. I thank him for welcoming the draft Disability Discrimination Bill, and I pay tribute to all his years of campaigning and to all those in the disabled people's movement who have helped us to make such progress. The draft Bill will be subject to scrutiny, and there will be an opportunity to examine all the issues that he raised.

In conclusion, this is a legislative programme that faces the challenges of the future. Just as we have built economic stability by taking tough choices and sticking to them, so we will, with this programme, extend protection and chances in life for children, reform higher education, extend pension security and bring integrity to the asylum system. The measures advance progress, fairness and a strong economy, and I commend them to the House.

Question put, That the amendment be made:—

The House divided: Ayes 171, Noes 286.

Division number 2 The Economy

Aye: 171 MPs

No: 286 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Amendment proposed, at the end of the Question, to add:

'But humbly regret that the Gracious Speech distracts from sound policies which deal with crime and its causes; further regret the intention to introduce top-up fees for universities; further regret the lack of provision for free personal care for the elderly and disabled people and the failure to tackle the pension crisis; further regret the decision to proceed with an ill-thought through and expensive identity cards scheme; further regret that the Government has chosen to undermine further the rights of people fleeing persecution to seek asylum in this country; note that the Government has failed to put environment at the heart of its legislative agenda and address the crisis in the transport system; regret the failure to introduce single transferable vote as the voting system for the Scottish Parliament; and further regret the absence of measures to tackle the steep inequalities which continue to afflict the most disadvantaged members of society.'.—[Mr. Stunell.]

Question put forthwith, pursuant to Standing Order No. 33 (Calling of amendments at end of debate), That the amendment be made:—

The House divided: Ayes 44, Noes 277.

Division number 3 The Economy

Aye: 44 MPs

No: 277 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Main Question put:—

The House divided: Ayes 275, Noes 174.

Division number 4 The Economy

Aye: 276 MPs

No: 173 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name