Value for Taxpayers' Money

– in the House of Commons at 12:31 pm on 19th January 2005.

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Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury 12:32 pm, 19th January 2005

I beg to move,

That this House
notes that the Government has increased taxes 66 times and has failed to give value for taxpayers' money;
is concerned that independent commentators believe that taxes will have to be increased under the Government's spending plans;
and calls for a change of direction away from the path of more waste and higher taxes to a path of value for money and lower taxes.

The debate gives us a timely opportunity to discuss the Government's failure to give taxpayers value for money, a timely opportunity to discuss the tax increases that almost every independent expert now believes to be inevitable if Labour is re-elected, and of course a timely opportunity to discuss how we should be putting spending on a more sustainable basis, enabling us to cut taxes imposed on hard-working families.

I welcome the presence of the Chief Secretary to the Treasury, because he has been the invisible man this week. As I have toured the television and radio studios, I have kept bumping into the Secretary of State for Transport, who has taken on the role of the Government's chief spokesman on spending. Obviously the purdah that applies to the Chancellor of the Exchequer in the context of election campaigning has been applied to the entire Treasury team, and they are all being kept under lock and key. I am glad to see, however, that the Chief Secretary has been let out on day release for this important debate.

There is a danger that debates of this kind may become somewhat partisan, and we would not want that to happen, so let me begin by trying to establish cross-party consensus. I shall do that by agreeing entirely with what the Financial Secretary to the Treasury said recently:

"we're going to have an election . . . when people will say 'we've paid a lot of taxes but what has really been achieved with all that money?' . . . Too often a lot of money has been spent but very little seems to have been achieved".

I agree. I am happy to work on the basis of that consensus: I want to establish that at the outset.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I will certainly give way to the hon. Gentleman. Does he agree with the Financial Secretary that a lot of money has been spent but very little seems to have been achieved?

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

Does the hon. Gentleman not think that jobs are the most important thing, and it is in that regard that we get the best value for money in terms of tax? My right hon. Friend the Chief Secretary and his colleagues have done more than anyone else to get people back into employment.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I am absolutely delighted that I gave way to the hon. Gentleman, who agrees with the Financial Secretary that a lot of money has been spent but very little seems to have been achieved. We have established a consensus. On employment, I should point out that there are now more than 1.1 million people who are not in work, training, or education—more than in 1997.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I am happy to give way to the hon. Gentleman; perhaps he agrees with the Financial Secretary.

Photo of Adrian Bailey Adrian Bailey Labour/Co-operative, West Bromwich West

What assessment has the hon. Gentleman made of the value for money of the poll tax, which was introduced by the Tory Government?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I was at school when the poll tax was introduced, and at university when it was abolished. I shall concentrate instead on what the current Government are doing, given the legion examples of waste under them, on which we can have a good three-hour debate.

I was building on the consensus established by the Financial Secretary and John Robertson. We agree with the Financial Secretary that people have paid a lot in taxes. There have been 66 tax increases—

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I will do so in a second, but so that the hon. Gentleman is aware of the Government's tax record, which the Financial Secretary has helpfully outlined, I should point out that as a result of the 66 tax increases and this so-called progressive Labour Government, the tax burden now falls hardest on the poorest in society. There are taxes on pensions, petrol, mortgages, marriage, employers, employees and the self-employed, amounting to £5,000 per family. The hon. Gentleman is a member of the Treasury Select Committee. Does he agree with the assessment of the International Monetary Fund, the Organisation for Economic Co-operation and Development and the Institute for Fiscal Studies that taxes will go up if Labour wins the election?

Photo of James Plaskitt James Plaskitt Labour, Warwick and Leamington

I want to deal with 66 tax rises that the hon. Gentleman likes to cite—a figure at which he has arrived, I think, by working through the Red Book and itemising all the lines that give a tax increase. He is right: there are 66 tax increases, but will he confirm that according to the same accounting methodology, there are also 232 tax cuts?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

Any tax reductions introduced by this Government have been more than outweighed by the massive increase in taxation, which amounts to £5,000 per family. But I am glad that this consensus is growing and that the hon. Gentleman accepts that there have been 66 tax increases. It is very useful, as we approach a general election, to have a Labour member of the Treasury Select Committee agreeing with us.

Photo of Mr Peter Pike Mr Peter Pike Labour, Burnley

There is one important tax cut that the hon. Gentleman has not mentioned: the cut in VAT on fuel. The current Leader of the Opposition was a member of the Conservative Government, who intended to increase VAT on fuel to 17.5 per cent. ultimately. They never implemented the second stage of that increase because they were defeated by the Labour party, which on entering government immediately reduced VAT on fuel to the minimum level of 5 per cent. That reduction has benefited every taxpayer in this country.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

The hon. Gentleman did not mention fuel duties, which have rocketed under this Government. Indeed, because of their very nature, and because of the pledges concerning the basic and top rates of income tax that the Prime Minister made during previous election campaigns, many of the stealth taxes have been imposed through duties. Such taxes fall hardest on the poorest in society, which is why the Office for National Statistics points out that the greatest tax burden is now paid by the poorest quintile.

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

For the record, I agree with the Financial Secretary that a lot of money has been spent and wasted, but does my hon. Friend agree that this is not really a new error? The Government agree with that assessment, which is why they commissioned the Gershon report, and why the Chancellor announced at the Dispatch Box that he wanted to sack 80,000 civil servants. Should we not welcome the fact that the Government have belatedly recognised that they have spent all this money and wasted it?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

My hon. Friend is absolutely right: the Government do recognise that fact, but sadly, they are not doing what they said they would do. I am sure that my hon. Friend is an assiduous reader of The Guardian, so he will have seen the article on page 14 of today's edition, entitled "Axing Whitehall jobs is smoke and mirrors". It begins:

"Gordon Brown's plan to make savings by axing 84,000 jobs in Whitehall and relocating another 20,000 staff is largely an illusion".

That is because the Chancellor has not implemented his proposals. We accept the Gershon recommendations, but the difference between us and the Government is that we would implement them.

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

Did the hon. Gentleman also read the front-page story in The Guardian today about the Maypole nursing home in my Hall Green constituency? Twenty-eight elderly people died there in the space of 12 months in what can best be described as unusual circumstances. I understand that the Conservative strategy on value for money would do away with strategic health authorities and the Commission for Social Care Inspection. We would not know about the situation at the Maypole nursing home were it not for the diligent work by those bodies, so could he tell us what plans he has to replace them with other organisations?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I do not know the exact details of the case, although I have read about the nursing home in the hon. Gentleman's constituency, and heard about it on the radio this morning. If the hon. Gentleman seriously believes that a strategic health authority would do wonders for the patients of that home, I am afraid he is under a delusion. Strategic health authorities are a hugely bureaucratic waste of money. They do nothing to put money into front-line services, and when taxpayers in our constituencies pay their taxes to fund the NHS they do not expect it to end up in the hands of bureaucrats. The public, I suspect, do not even know that strategic health authorities exist.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I have already given way to the hon. Gentleman, and if he will allow me to proceed, I shall certainly do so again later.

Returning to the consensus that I am trying to establish, as well as saying that taxes had gone up a great deal the Financial Secretary said that a lot of money had been spent. That is true, as Government spending has increased by 60 per cent. from £320 billion to £520 billion. The proportion of gross domestic product spent by the Government has increased from 37 per cent. to 42 per cent. I very much agree with the Financial Secretary that

"a lot of money has been spent but very little seems to have been achieved".

Those remarks were endorsed by the hon. Member for Glasgow, Anniesland earlier. I salute his candour, and I also salute the candour of the Labour members of the Select Committee on Education and Skills, which produced a report this month on public expenditure in education. I recommend it to hon. Members, as it makes interesting reading. In the first paragraph of conclusions it says:

"The Chancellor's budget book for 2004 claimed a direct relationship between the increased investment in education since 1997 and improvement in GCSE results in particular. Our evidence showed that with lower levels of investment GCSE results had improved to at least the same extent in earlier periods in the 1990s. The Government needs to take great care in making claims about the effectiveness of increased investment in education in increasing levels of achievement which the evidence cannot be proved to support. Links between expenditure and outcome remain difficult to establish."

Photo of Julie Kirkbride Julie Kirkbride Conservative, Bromsgrove

To add to the very good case that my hon. Friend is making, I can tell him that my own constituency in Worcestershire receives one of the lowest Government grants for education and schools, yet achieves some of the highest results, which merely proves what the Education and Skills Committee has finally and commendably put on the record.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I congratulate the schools in my hon. Friend's constituency. I agree that it is good that the Education and Skills Committee is telling us the truth, as is the Organisation for Economic Co-operation and Development.

Photo of Henry Bellingham Henry Bellingham Shadow Minister (Business, Innovation and Skills), Shadow Minister

Is my hon. Friend aware that my local education authority, too, is doing extremely well and getting good results? A number of small schools in Norfolk want to use their own capital funds for doing minor building works, but Government rules prevent them from doing so, and they have to use the county council property services, which cost far more. Could my hon. Friend could look into that?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

Under our right to choose, almost all the money in the education system will be directed through parents, so there will be no need for the huge bureaucratic layer of local education authorities in their current form to decide such things. Money will go where parents want it to go and where pupils go, which will dramatically improve standards in our schools still further.

The OECD—I am still trying to tell the House what it said—is an august organisation; the Chancellor often quotes it with approval at the Dispatch Box. The OECD said recently that the UK education system had fallen from fourth to 11th place in the world for science, from seventh to 11th for reading and from eighth to 18th for maths. On the extra spending in the NHS, the OECD said that growth in the volume of health care output had slowed down, compared with the first half of the 1990s. The OECD, the Education and Skills Committee and the Financial Secretary are all right when they say that a lot of money has been spent but little has been achieved.

What is the reason for that failure? It is that the extra money has not been accompanied by reform. The Government have stumbled around in the dark, not knowing what to do with the public services. They have been through several phases. When they first arrived in Whitehall after the 1997 election, they immediately abolished the previous Government's public service reforms. Out went GP fundholding, trust hospitals and grant-maintained schools. The Government actually believed their own election propaganda—that simply getting rid of those things would improve public services.

Photo of Kali Mountford Kali Mountford PPS (Mr Des Browne, Minister of State), Home Office

On public expenditure reform, when the hon. Gentleman's party was in government why did it not make the successful changes that Labour has made? I refer to planned expenditure in education. In my own area, heads of schools and colleges tell me that being able to plan ahead and have properly planned expenditure has not only allowed them to increase general expenditure on the education of their pupils, but has vastly improved standards and allowed them to make capital investment. That situation has come about thanks to important reform. Why did not his party do that?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I think that I have just had a glimpse of the speech that the hon. Lady is planning to give later. Perhaps she should have listened more carefully to what I was saying; I do not deny that the Government have increased the money going into education, but the point I was trying to make is that the money they have spent has not delivered the increased performance that they told us it would. In fact, when people look at the education system they see precious little evidence that it has delivered improved results, and that is borne out by the OECD and the Education and Skills Committee. That is because, as I was saying, we have been through these phases.

First, the Government got rid of the public service reforms introduced by the Conservative Government. That did not work so they were frustrated, and in the late 1990s they decided to centralise everything and run it from Whitehall. It was like a tractor factory in the Urals; in came targets, task forces, 10-year plans and that kind of stuff. They called it modernisation. Things still did not improve, so the Government now declare that targets are dead and centralisation was a mistake. Decentralisation has become the Government's new buzzword—at least for the Prime Minister and the Chancellor of the Duchy of Lancaster, if not for the Chancellor of the Exchequer.

In have come foundation hospitals, funding flows and earned autonomy for schools, which all—on paper at least—look suspiciously like the trust hospitals, GP fundholding and GM schools that the Government abolished in the first place. So after seven years of new Labour, they are back to square one, except of course that this lot cannot really let go.

The experience of foundation hospitals showed that they are not actually prepared to hand over control to the professionals. The earned autonomy promised to successful schools in the Government's flagship Education Act 2002 has never been given to a single school. In other words, we sat through all the debates on that flagship Act, which was part of Labour's main manifesto at the last general election, yet not one school has achieved the earned autonomy that we had all those debates about.

Photo of Bernard Jenkin Bernard Jenkin Shadow Secretary of State (The Regions)

On the question of earned autonomy, does it occur to my hon. Friend, as it does to me, what a falsehood that phrase actually is? The concept of earned autonomy merely corroborates the omniscience of the centre and the sovereignty of the Secretary of State over everything that happens in every school and every hospital.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

My hon. Friend is absolutely right. The very concept of earned autonomy is that it is something handed down from on high as a reward rather than being integral to the system. Schools should have autonomy, parents should be able to send their children to the schools they want, and the money should follow each child. That is the way in which an education system should be run.

Of course, the Government's instincts are to interfere and meddle, and the vast bureaucracy that they have created—the 300,000 extra bureaucrats in countless new quangos, agencies, units and so on—have a vested interest in keeping power out of the hands of the users of public services: the patients and the parents. Sir John Stevens, the Metropolitan Police Commissioner, said recently:

"I have never seen so much inspection and monitoring . . . It is getting in the way of our business".

If people want an explanation of why they do not see police officers on the street and why there are now more than 1 million violent crimes a year, they should perhaps listen to the Metropolitan Police Commissioner.

Of course, the failure to reform means a failure to deliver. Public sector productivity has fallen for the past three years of published figures. The European Central Bank recently published a paper that found that if the UK public sector were as productive and efficient as others in the developed world, outputs would be 25 per cent. higher. Instead of reform and delivery, we have had waste on a huge scale. Of the 88,000 people employed to work in the education system in one year, just 14,000 are teachers and teaching assistants. The number of tax inspectors is rising twice as fast as the number of new doctors and nurses. There are more officials in the Department for Environment, Food and Rural Affairs than there are dairy farmers.

We have seen two examples in the newspapers today—two reports from the National Audit Office. The NAO has again qualified the accounts of the Department for Work and Pensions because it says that benefit and fraud mistakes are costing taxpayers £3 billion a year. The report on the NHS IT system for patient choice—a multi-billion pound system that was supposed to make 200,000 bookings last year—shows that it only made 63 bookings last year.

It is not just the big ticket items that tell the story of waste under the Government; sometimes the small examples can be just as illuminating: the £1,000 chairs in the Ministry of Defence and the Cabinet Office taxi bill, which has gone up 1,000 per cent. under the Government. The Secretary of State for Trade and Industry said recently that

"when we talked about delivery, that may have been something of a mistake".

One can see why when one looks at her own backyard. According to recent written answers, the Department of Trade and Industry has in the past few years spent £23 million on office refurbishment, £7.9 million on furniture, £30 million on overseas trips, £10 million on first-class travel and £120,000 on flowers. At least with the four-fifths reduction in the number of DTI civil servants, there will be less need for pot plants.

Rarely in the history of politics have a Government spent so much and achieved so little. That has an economic consequence, and hon. Members do not have to take my word for it.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I am happy to give way, but perhaps the hon. Gentleman will tell me—he is versed in these economic matters—whether he agrees with the International Monetary Fund, the OECD and so on that taxes will go up if Labour wins.

Photo of Adrian Bailey Adrian Bailey Labour/Co-operative, West Bromwich West

Perhaps the hon. Gentleman will answer my question. I understand that he was at school for a large proportion of this time, but previous Conservative Governments received a largesse of £87 billion from North sea oil and gas tax revenues, slashed public expenditure and raised taxes. What sort of example and what sort of credibility do the Conservatives have in arguing for value for money on that basis?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I was taught at school that Conservative Governments took the sick man of Europe and transformed the country into the most successful economy in the world.

Let me talk about the present, rather than the past. I should like to quote the Prime Minister's chief economic adviser—the man who gave the Prime Minister his economic advice for seven years. Derek Scott says:

"Gordon Brown's economic inheritance was better than that of any previous Chancellor in living memory. But there are limits to the length of time that public spending can increase at a faster rate than the growth in GDP without causing problems. By the time I left Downing Street, Britain was approaching or had perhaps passed that limit. The regulatory burden had been increased, the tax system had become more complicated and the tax burden was rising too."

I agree with the chief economic adviser to the Prime Minister—more cross-party consensus. Britain cannot carry on down the path of spend, waste and tax without storing up huge problems for the economy. That is what almost every independent observer of the British economy thinks, too. I have mentioned them already and I will mention them again. The IMF, the OECD, the ITEM Club, the National Institute of Economic and Social Research, the CBI, the chambers of commerce and the independent Institute for Fiscal Studies all now believe that the Government have created a structural deficit of anywhere between £8 billion and £12 billion.

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

I want to find out how far we can press the consensus that the hon. Gentleman talks about. He has just cited the Institute for Fiscal Studies. Does he agree with the following comments, which it made yesterday:

"The proposed Conservative tax cuts would offset only about a seventh of the rise in the burden as a share of national income that the Treasury has pencilled in over the next fives years"?

So given the plans announced on Monday, would the tax burden still not rise, even under his plans?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I seem to remember that the IFS said that under a Labour or Liberal Democrat Chancellor taxes would go up, and under a Conservative Chancellor taxes would go down. That is a fair assessment. Indeed, the Liberal Democrats have a list of strange taxes on pets and all sorts of other things, but their proposal for a 50 per cent. top rate of income tax would give us a higher top rate of tax than France, Italy, Spain or Belgium. Perhaps the hon. Gentleman, who has worked in the City, will explain in his speech how he thinks that Britain could compete with a higher top rate of income tax than those countries, let alone many of the English-speaking economies of the world.

Of course, it is an historic achievement to have a structural deficit after seven years of tax rises. I have to take my hat off to the Chancellor. He now faces a choice, as indeed does the country: higher taxes or spending that the country can afford. Which will it be? This week, we gave our answer. We would spend £12 billion less than the Government by the year 2007–08, and we could use that money to fill the budget deficit and to cut taxes on hard-working families. We would achieve that by making the specific savings identified by David James and his team of independent experts. I heard the Prime Minister earlier casting aspersions on David James. That is rather strange, as the Prime Minister hired him to sort out the mess of the millennium dome.

I stress that the savings that David James and his team have found in the NHS and schools—every penny saved on bureaucracy, waste and unnecessary quangos—will be reinvested in the NHS and schools. We will radically reform those services so that they are driven by the right of parents and patients to choose, rather than by the diktats of Ministers, so people will get real value for money and see real improvements in standards. The same goes for the savings found in transport, the police, defence and international development; they will be re-spent in those areas, to improve the quality of service that people receive.

Photo of Kali Mountford Kali Mountford PPS (Mr Des Browne, Minister of State), Home Office

The hon. Gentleman is extremely gracious and generous in giving way again, but is he not aware that the Gershon review is duplicating a lot of what is recommended by James? Has he not yet realised that money cannot be spent twice, so that money cannot be saved twice? What extra saving that is not a myth can he point to?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I do not think that the hon. Lady was listening to me. We accept the Gershon savings—indeed, we will be significantly better at implementing them than the present Government—but we go beyond, with the James savings. In the document that we have produced this week—I am happy to give her a copy if she has not managed to get hold of one—we have listed at least £12 billion of savings additional to those referred to by Gershon.

I know that we will fight about these decisions as we approach the general election. For example, we will get rid of the new deal, because as the NAO and many independent studies have shown, it does not work. It does not deliver value for taxpayers' money.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I have given way twice to the hon. Gentleman, and I do not think that I shall do so a third time.

Only a third of people who go through the new deal find sustained employment, and the figure is even lower for those in long-term unemployment. We propose an alternative called "Work First", which is partly based on the Australian model, although we have also looked at what happens in Wisconsin. Above all, however, we have examined what happens in the 13 employment zones that already exist in this country. We are modelling our proposals on the existing zones because they are considerably more effective at getting people into work than the new deal. We would thus save a substantial amount on the new deal and we argue—indeed, we will prove—that our plan will help people who are unemployed to find work.

The Small Business Service will go. The Prime Minister suddenly became a champion of it half an hour ago, but less than a fifth of small businesses know that the Department of Trade and Industry offers such a service, and fewer than one in 20 uses it. At a cost of £500,000, we do not think that it is giving especially good value for taxpayers' money. Some 168 quangos and public bodies will go.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I shall give way to my constituency neighbour in a second, but first let me ask him whether he can do without the Government office for London, the Commission for Integrated Transport, the Office of Public Services Reform and the Prime Minister's delivery unit.

Photo of Mike Hall Mike Hall PPS (Rt Hon John Reid, Secretary of State), Department of Health

Do the proposals to scrap quangos involve English Partnerships? If so, what will happen to the £30 million that it is giving to stabilise the town centre in Northwich? Is that value for money?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I am pretty sure that English Partnerships is not on the list of 168. [Interruption.] It is not on the list, then—I give myself no let-out clause.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

My hon. Friend helpfully reminds me that it is not on the list. We are only getting rid of things that do not perform an especially useful function. We are merging bodies that can be merged and getting rid of bodies that provide no value for taxpayers' money. It is a good list of 168 bodies, and I am sure that Mr. Hall would agree that the whole lot could go.

We will also get rid of 235 bureaucratic posts, although I accept that some of the Labour party's funders will find that controversial. [Hon. Members: "Two hundred and thirty-five?"] No, 235,000.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I am happy to be corrected by the hon. Gentleman. The correct figure is 235,000. No doubt the public service unions that back the Labour party's election campaign will kick up a big fuss about that, but we believe that the posts do not deliver real value for money. However, unlike the Government's proposals, which involve compulsory redundancies, we will set aside almost £6 billion to pay for generous voluntary redundancy programmes for civil servants in posts that will go.

Regional assemblies and all the apparatus that goes with them will also go. I do not know whether Treasury Ministers noticed that there was a recent referendum in the north-east of England. The people of this country do not want regional assemblies or regional bureaucracy, so it should go.

We have identified total savings of £12 billion in non-priority areas. The savings will not be made on paper-clips, or through the intangible efficiencies about which the Chancellor talks, but through a reduction in Government activity in areas in which the taxpayer is not getting value for money. The savings can and will be achieved by a conscious act of political will. Of the £12 billion savings, £8 billion will be set aside to fill the structural deficit and £4 billion will be used to give back to taxpayers some of their own money. I know that Labour Members will want to know which taxes on hard-working families we will cut. Let me assure them, especially those defending marginal seats, that those taxes will appear on billboards near them soon.

One of the most amusing sights of the week was the Labour party's attempt to rubbish the James report. The Secretary of State for Transport, acting in his new role as the Government's chief spokesman on spending, produced with a great flourish 10 things that did not stack up in the James report. He said that we could not possibly merge the Food Standards Agency and the Meat Hygiene Service because they were merged already. We got on the phone to the Food Standards Agency and Meat Hygiene Service and asked the names of their chief executives. One said that he was called Chris Lawson and the other said he was called Dr. John Bell. That sounds like two separate bodies to me, although I know that the Government get confused about such things, because they too have two chief executives.

The Transport Secretary said that the savings that we aimed to make in the Rural Payments Agency were incredible because they exceeded its entire administrative budget. I suggest to the Chief Secretary to the Treasury that the problem with letting the Transport Secretary do this sort of thing is that he is not up on the detail. He had obviously not read the annual report of the Department for Environment, Food and Rural Affairs, because it says clearly that the agency is spending £188 million on administration, which is a huge amount given what it does. The cost is considerably greater than that which would be expected if the agency was outsourced, and much greater than the £112 million of savings that we set out in our document. I think that the Chief Secretary to the Treasury gave a little nod there, because he agrees that the Transport Secretary is not very good at that job.

Our spending plans are credible. The Institute for Fiscal Studies says that they add up. They will mean that the country will spend what it can afford and taxpayers will get value for money. We have an answer to the black hole in the public finances. We can make credible savings and protect vital public services. We can fill the deficit and reduce taxes. What is the Government's answer? Which of the options set out by the OECD will they choose: "a slowdown in spending", or "a rise in taxation"? Not the slowdown in spending.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

Will the hon. Gentleman give way?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I am happy to give way to the hon. Gentleman, because he can let me know whether he would choose to increase taxes or reduce spending.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

For the avoidance of doubt, I shall answer a question that the hon. Gentleman asked everyone else, but chose not to ask me. I disagree with the Financial Secretary to the Treasury, if he said the words that the hon. Gentleman cited earlier.

The hon. Gentleman inserted the little phrase "protect vital public services" in his speech. As far as I am aware, those services include only the NHS and schools—not all education. Does that mean that the youth service and special educational needs will be protected?

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

The hon. Gentleman needs to read the document, which spells out the position on schools, the NHS, international development, the police, pensions, transport and children's social services. The difference between the policies on which the hon. Gentleman and I will campaign during the election is that our plans are published and say how we will fill the black hole. The Government currently give no indication that they will do that, so we will use the debate to try to tease out some answers from the Chief Secretary to the Treasury.

Photo of Bernard Jenkin Bernard Jenkin Shadow Secretary of State (The Regions)

It is extraordinary for a Labour Member to complain about special educational needs. The Labour Government are forcing the closure of special schools throughout the country, but we would keep them open.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

My hon. Friend makes a good point. The education budget—not just the schools budget—as set out in our plans will increase to 2007–08.

It is obvious from the spending review and the pre-Budget report that the Chancellor has no intention of reducing the growth in spending to a sustainable and affordable level, so he will have to increase taxes. Almost every independent commentator is expecting that, and it is what the Chancellor is secretly planning. However, I would be amazed if he did that in the Budget that he will present in a few weeks—just before the coming election. We remember that the Chancellor's only Budget that did not raise taxes was that presented—surprise, surprise—just before the last general election. After the election, he clobbered everyone with a hike in national insurance. With Labour, of course, the political cycle is more important than the economic cycle.

We can be sure that taxes will go up in the first Budget after the election if Labour wins. The £8 billion tax question for the Government, which we put to the Chief Secretary today is: which tax will it be? Will it be the 2p on the basic rate of income tax, VAT on food, capital gains tax on main homes, or that old favourite of the Chancellor, a rise in national insurance by removing the upper earnings limit and taking 10 per cent. on incomes over £33,000? According to the Treasury's ready reckoner and the figures that it has produced, all those tax measures would raise about £8 billion. That is £8 billion from hard-pressed families, who, as the Financial Secretary says, have already paid a lot of tax and seen very little in return. I am sorry that Chris Bryant broke the cross-party consensus that we had established on that point.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

Let me tell the hon. Gentleman why I have broken the consensus. In my constituency, I have seen more police officers and more community support officers, I have seen crime being cut, I have seen the schools that used to have leaking roofs and windows being repaired, and I have seen more teachers and more doctors. That is the difference that the money is making.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

I am sorry that the hon. Gentleman does not agree with his Treasury Front-Bench colleagues. If he wants to get on in the Labour party, he needs to agree more with the Government.

All the tax measures that I set out would raise about £8 billion. Does the Chief Secretary rule out 2p on the basic rate of income tax? VAT on food—yes or no? We know that the Treasury has considered capital gains tax on people's homes. Does he rule that out? What about getting rid of the upper earnings limit on national insurance? That would be a 10 per cent. tax on earnings over £33,000. I think that the most likely candidate. Perhaps the Chief Secretary will give us a yes or no. Or are there other stealth taxes that will go up instead: petrol duty, stamp duty, or the stealthy moves with income tax thresholds that we are used to?

The choice at this election could not be clearer: higher taxes and more waste under Labour, or lower taxes and value for money under the Conservatives. The question that the Chief Secretary must now answer is: which tax will go up?

Photo of Mr Paul Boateng Mr Paul Boateng Chief Secretary, HM Treasury, The Chief Secretary to the Treasury 1:12 pm, 19th January 2005

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

"believes that economic stability is the foundation for continued investment in public services;
welcomes therefore the lowest inflation since the 1960s, lowest interest rates for 40 years and the longest period of economic growth for 200 years;
further welcomes this Government's record investment in public services;
believes that it is important to ensure taxpayer value for money and therefore welcomes the fact that the Government is making efficiency savings to release resources into frontline services;
further welcomes the fact that Sir Peter Gershon has identified over £20 billion efficiency savings across the public sector and notes that he said that to go further than the efficiencies he identified would put at risk the delivery of frontline public services;
and further believes that any proposal to make cuts in public spending would not only damage frontline public services but the economy as a whole."

Britain's economic stability has been hard won. As the Prime Minister said only this afternoon, it follows decades of boom and bust, with the price for economic failure being paid by hard-working families in mass unemployment, sky-high mortgage rates and record home repossessions. Nothing must threaten the strength and stability of Britain's economy. Britain is working. We do not intend to allow the Tories to wreck it, and if this motion were to be agreed, you could bet your bottom dollar that they would.

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

I shall make a few opening remarks, and then I shall be only too happy to give way to the right hon. Gentleman.

I want to say a few words to Mr. Osborne, the shadow Chief Secretary. I am a great admirer of the hon. Gentleman. In the serried ranks of the Opposition, he is a precocious talent among all those grey locks, and I enjoy his speeches. [Interruption.] He is certainly younger than me, and he may be better looking. [Hon. Members: "No!"] Yes, I know, it is hard to believe. I have news for the shadow Chief Secretary: it is no defence for economic failure in the recent past to claim that one was in short trousers. It is not good enough to say that one was at school when Britain had double-digit inflation and, as my hon. Friends have said, when Britain had 3 million unemployed not once, but twice. It is not good enough to say that one was at school when we saw unemployment double and the numbers on incapacity benefit treble. That is the record of the hon. Gentleman's party in government, and we do not intend to allow it ever to do that again.

Photo of Francis Maude Francis Maude Conservative, Horsham

On that point, does the Chief Secretary agree with Derek Scott that the Labour Government inherited the best economic legacy that any Chancellor has ever had?

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

No, I do not. I say to the right hon. Gentleman, who must, I fear, take some responsibility for this, that when we took office his Government had been paying more to service their debts than they were spending on schools. That is something for which the Conservatives ought to apologise.

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

I give way to the hon. Gentleman, who, perhaps, is going to apologise.

Photo of Paul Goodman Paul Goodman Shadow Minister (Disabled People), Economic Affairs

Speaking of debt, my hon. Friend Mr. Osborne offered the Chief Secretary a menu of prospective Labour tax rises for him to rule out. Will he now rule out all of them? Indeed, will he rule out any of them?

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

The hon. Gentleman cannot seriously expect me to do that. It would be absurd for a Government to address the issue of tax in a speech by the Chief Secretary in an Opposition half-day debate. The hon. Gentleman is an informed observer of these matters, and he knows well that they are dealt with in a Budget speech or a manifesto. That is how they have always been dealt with, and that, I suspect, is how things will be in the future. Let us have a serious, grown-up debate about these issues.

Let us look in a little more detail at the James report. We waited a long time for it. First, we heard that it was to be published last August. Then we heard that it might be published last December. Last Monday, we had an announcement.

Several hon. Members:


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

I will not give way at the moment.

What we have not yet had, and I ask for some reassurance on this point now, is sight of the full James report. [Interruption.] I am not talking about this less than salubrious ring-binder. It is not clear who made this folder, but it seems to consist of a number of slides. It seems to be a PowerPoint presentation. All we are asking for is something that goes beyond a PowerPoint presentation and resembles, in its weight, strength of analysis, depth and accuracy, the "Independent Review of Public Sector Efficiency" by Sir Peter Gershon, but so far we have not had that. I ask my Conservative opposite number when he will publish the James report—not this PowerPoint presentation but an actual report, with the detailed workings and analysis that underpin it.

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

I shall give way to Mr. Cameron, who, I understand, speaks with some authority in the Conservative party. Perhaps he can tell us when the report will actually be published.

Photo of David Cameron David Cameron Conservative, Witney

The James report has been published in full. Perhaps the Chief Secretary will answer this question: will he confirm that, according to the Government's Red Book, the tax burden in 2008–09 will be the highest for 20 years? Is that true or not?


As of this moment, The James Report's URL links to the Tory homepage. The James report home page, buried within the Tory site...

Submitted by Robert Munro Continue reading

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

Once again—[Hon. Members: "Yes or no?"] Hold on. Once again, I reiterate my request for the publication of the James report; then, we can have a serious discussion. The Opposition cannot pretend that a PowerPoint presentation equals a report. Will we see a report? Will we see its workings and its analysis?

Photo of David Borrow David Borrow PPS (Dr Kim Howells, Minister of State), Department for Education and Skills

Let me take my right hon. Friend back 20 years, when taxation under the then Conservative Government was relatively high. Does he agree that that high taxation coincided with high unemployment? In contrast to that Government, the present Government can afford to spend money on public services, because there are so many people in work and so few claiming benefit.

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

My hon. Friend is absolutely right. The new deal and Jobcentre Plus have proved to be essential in reducing unemployment and keeping it low. The new deal has helped 1 million people into jobs and every day Jobcentre Plus carries out 36,000 work-focused interviews and helps 4,800 people into jobs. No right hon. or hon. Member has not at some time appreciated the role in their constituency of the new deal and Jobcentre Plus. For Conservatives to produce a PowerPoint presentation that offers a 40 per cent. cut in the budget of Jobcentre Plus and to scrap the new deal altogether shows theirs to be a party that would imperil our hard-won economic stability and our success in creating jobs.

Several hon. Members:


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

I intend to advance my argument a little further before giving way again; then, I shall give way to Mr. Dorrell, a former Secretary of State for Health, followed by my hon. Friend Mr. Bailey.

The country would pay a heavy price if the Conservatives put the James report into effect. That price would be paid by hard-working, decent families throughout the land. We make no apology for comparing their record in government with ours. When they last held office, our national debt doubled. Was that value for money? Borrowing hit £50 billion. Was that value for money? Interest rates soared as high as 15 per cent. and millions of families struggled under negative equity. Unemployment was shockingly high, reaching 3 million not once, but twice. All that is the Conservatives' record in government, and whether or not the hon. Member for Tatton was at school during that period, we do intend to allow him or anyone else to forget it.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

Will the Chief Secretary now address himself to the question asked by my hon. Friend Mr. Cameron? Is it not correct to say that the Red Book commits the Government to tax plans that will ensure that by 2008–09 the tax take will be the highest proportion of national income for 20 years? Is it not therefore unavoidably true that the Government are committed to raising tax?

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

I shall not go down that road—[Interruption.]—and let me tell hon. Members why. The right hon. Gentleman has been a Treasury Minister and he knows precisely the status of the Red Book. He knows that no Chief Secretary or Financial Secretary, which I recollect he was when we first exchanged views on economic matters, would give undertakings or make comments on tax of the sort that he has sought from me.

Photo of Francis Maude Francis Maude Conservative, Horsham

Will the right hon. Gentleman give way?

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

No, I shall not, because I have given way to both right hon. Gentlemen, for whom I have the utmost respect. Let me instead draw the House's attention to figures from the OECD—an organisation for which I too have some respect. They are figures to which the hon. Member for Tatton failed to refer in the course of his speech. They demonstrate that in 2002 total UK tax revenue was 35.8 per cent. of GDP, compared with an European Union average of 36.9 per cent. In 11 EU countries, including France, Germany and Italy, total tax revenue as a percentage of GDP was higher than in the UK. For Conservative Members to portray the UK as an over-taxed, high-tax economy flies in the face of the truth.

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

I shall finish my point before the hon. Gentleman gets up on his feet or, indeed, on a high horse—he has that glint in his eye that suggests that he will be awfully self-righteous. However, he misquoted my hon. Friend the Financial Secretary, who will make that clear himself later, so let me direct the hon. Gentleman's attention to something that certainly is not a misquote—the right hon. Gentleman in question has never denied it—from The Sunday Mirror, no less, of 31 October 2004. It reads:

"Businesses are reluctant to locate to places where tax rates are too high, regulatory controls are too intrusive and political instability threatens business stability. Places like the UK, the USA, Hong Kong and Singapore attract because their tax rates for business are low."

That was said by Mr. Redwood, who, I believe, sits on the Opposition Front Bench and speaks on regulatory matters. That is the clearest possible endorsement from the right hon. Gentleman of the present Government and their economic policies. We will never allow that economic stability or this country's political stability to be threatened.

Now, as I promised, I give way to my hon. Friend the Member for West Bromwich, West.

Photo of Adrian Bailey Adrian Bailey Labour/Co-operative, West Bromwich West

This is a question that I would have preferred to ask Mr. Osborne, but he declined to take it; perhaps my right hon. Friend can shed some light on it. At different times I have heard Opposition spokespersons say that they would use the money from scrapping the new deal, first, to fund their huge pension commitment and, secondly, to cut taxes. Do the Treasury calculations indicate which of those, if either, it could be used for?

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

No briefing that I have from Treasury officials throws any light on Opposition thinking, nor would I ask Treasury officials to divine what the Opposition propose. However, I have reflected on the lack of credibility of the Opposition proposal to spend more while reducing what they call a structural deficit, and simultaneously promising tax cuts. That is incredible, as a number of informed commentators have pointed out.

Photo of Edward Leigh Edward Leigh Chair, Public Accounts Committee, Chair, Public Accounts Committee

Both parties claim that they can do that by attacking waste. The Chief Secretary asked for some heavyweight analysis. His hon. Friend the Financial Secretary is a member of the Public Accounts Committee. Will he read the scores of reports published during this Parliament that outlined how we can attack waste in the public service, and check his Treasury minutes to see whether every recommendation that we made to deal with waste has been implemented? In the real world we could surely work together to save substantial amounts of public money.

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

Having sat, as my hon. Friend sits, as Financial Secretary on the hon. Gentleman's Committee, may I take the opportunity to pay tribute to the work of the Public Accounts Committee? We in the Treasury and all colleagues across Government take its deliberations seriously, even when not every one of its recommendations is adopted. The Committee does an important job and it would be unwise of any Government to ignore its findings.

Photo of Chris Bryant Chris Bryant Labour, Rhondda

Does my right hon. Friend agree that one form of waste that we should tackle is not financial, but the personal wasted opportunities represented by the many millions of people who are on incapacity benefit and would like to get into work if they were given the chance? Does he agree that the pathways to work programme that we are advancing, despite being an expensive element of the Budget, is well worth while and is a proper investment for the future?

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

Not entirely surprisingly, I wholeheartedly agree with my hon. Friend. The comprehensive spending review and successive Budgets and pre-Budget reports have recognised the value of the programme.

Delivering value for the taxpayer depends first and foremost on the economic health and stability of the nation. Our record on that is strong, and we intend to do nothing that would imperil it. That is why I make the comparison that I do with the record of the Conservatives when they had stewardship of the economy.

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

I will not give way at the moment.

Our Government's policies are delivering the longest sustained economic growth for 200 years. That is the product not of chance or good fortune, but of the tough decisions for the long term that we have taken since we took office in 1997. The first of those decisions, which the Opposition never had the political courage to implement, was the independence of the Bank of England and our fiscal rules. The Conservatives opposed both. I understand that they have recanted on the former and now support the independence of the Bank of England, while having the bare-faced cheek to lecture us about decisions taken in the phase of the political, as opposed to the economic, cycle, as my hon. Friend Helen Southworth pointed out sotto voce when the hon. Member for Tatton made that bizarre assertion.

The hon. Gentleman will no doubt tell us that he has always supported the independence of the Bank of England. I fancy that examination of his record shows no such thing. Will he stick to our fiscal rules? I suspect that another general election defeat will be necessary to bring the Opposition round to that conversion.

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

I give way, as long as the hon. Gentleman promises, cub's honour, to answer my question, rather than going off on some frolic of his own, which I fear he is about to do, from the look in his eye.

Photo of George Osborne George Osborne Shadow Chief Secretary to the Treasury

We have made it clear—I am surprised the Chief Secretary did not notice—that we adopt the Government's fiscal rules, but we propose a fiscal projections committee that would be independent of the Treasury. That is supported by the Governor of the Bank of England and the National Audit Office, and I suspect it has some sympathy among Treasury civil servants. I recommend it to the right hon. Gentleman, and I recommended it to the Financial Secretary when we debated it in Committee.

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

I am grateful to the hon. Gentleman. He throws light on at least one aspect of Conservative party policy and I welcome his conversion to our fiscal rules. That makes it more difficult for him to promise increased public spending while promising to address what he describes as the structural deficit and to make tax cuts. We will no doubt explore that further in the course of the debate.

On the basis of that solid platform of macro-economic stability we are able to deliver historic levels of investment in public services. It has enabled us to focus new resources on priority areas that matter most to honest hard-working families—hospitals and schools—and across our public services. On health, spending will increase to £92 billion in 2007–08, compared with £33 billion in the last year of the Conservative Government. That additional spending has already delivered 77,000 more nurses and 19,000 more doctors.

On education, with which the hon. Gentleman dealt at some length, albeit with too little accuracy, spending will be £12 billion higher in 2007–08 than in 2004–05. We have already delivered 28,500 more teachers since 1997. I shall address in detail some of the assertions made by the hon. Gentleman when he suggested that that was not money well spent and questioned the productivity of our education policies.

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

Before I come to health—where the right hon. Gentleman, the former Secretary of State for Health, may be able to throw some light on our deliberations—let us consider what has been achieved in education. Between 1997 and 2004, the percentage of 11-year-olds achieving expected standards in literacy and numeracy rose from 63 per cent. to 78 per cent. in English and from 62 per cent. to 74 per cent. in maths. That fell slightly short of what were stretching and demanding targets of 85 per cent. and 75 per cent. respectively, but it is an improvement on the time when the Conservatives had the stewardship of the education system—a dramatic improvement, as one of my hon. Friends says. The proportion of 16-year-olds achieving five or more GCSEs rose from 45.1 per cent. in 1997 to 53.7 per cent. in the last year for which we have figures. Conservative Members should not decry that; we should be thanking teachers, parents, local education authorities and the Government for that. It is the partnership between all of those that has resulted in real improvement in the life chances and opportunities available to our young people. All of that would be put at risk were the Conservative party ever to have stewardship of the economy.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

I am grateful to the Chief Secretary for giving way again. I should like to take him back to the argument that we were having in answer to the question posed by my hon. Friend Mr. Cameron. The right hon. Gentleman gave an interesting reply when I asked him to confirm that the Government's own Red Book set out plans for an increase in the percentage of national income accounted for in tax. He said that it did not matter, because our percentage taken by tax is below the levels of other European countries. Is it therefore the Government's policy to raise the tax burden until it is in line with that of other European countries? Would it not be a more intelligent tax policy for the Government to recognise that a relatively low tax burden, compared with that of other European countries, is an important source of competitive advantage for the British economy, the safeguarding of which should be a high priority for the Government?

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

As the right hon. Gentleman knows, we have consistently argued within the European Council for tax competition rather than tax harmonisation. That is now and has always been our policy. But I am interested in his foray into tax policy, because if we are talking about tax, and the Conservative party seems anxious to do so, reference should be made, as it always is, to the dividend tax credit on pension funds. I can remember when the right hon. Gentleman was Financial Secretary, and I think that it was then, when the Tories cut rates of dividend tax credit on pension funds and advance corporation tax in 1993 from 25 per cent. to 20 per cent., that the right hon. Gentleman, to no less a journal than The Guardian, said:

"The change was made to give a cash boost to British industry in the short term, and to raise Government revenue in the medium term. Clearly to do that, the money has to come from somewhere."

That is why I urge the right hon. Gentleman to reflect a little on precisely what is proposed by his own Front-Bench spokesmen when they lay out their tax options, because I think that he will find, applying the rigour and scrutiny that he no doubt acquired when he was Financial Secretary, that the sums of his right hon. and hon. Friends simply do not add up.

Photo of Geraint Davies Geraint Davies PPS (Team PPS), Department for Constitutional Affairs

Does my right hon. Friend accept that what is important with regard to the point made by Mr. Cameron is not the share of GDP that is taxed, but the share that is taxed as borrowing, in the light of the fact that borrowing is deferred tax that has to be paid? Will he accept that the previous Conservative Government, rather than increasing tax 66 times, massively increased the amount of borrowing and therefore the future liabilities of future generations, while this Government have massively reduced borrowing and increased investment by putting into jobs 2 million people who are paying tax rather than drawing dole; and the debt payments are lower because interest rates are lower as well?

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

My hon. Friend makes an important point. The Leader of the Opposition, I think addressing last year's Conservative party conference, said:

"In 1992 we promised to cut taxes year on year. But we put them up."

That was a moment of candour from the right hon. and learned Gentleman, and that was breaking out all over the place, because at the same party conference, the shadow Chancellor said:

"The sad truth is when we were in office, we made promises on tax we couldn't keep."

The truth of the matter is that the Conservative party's sums do not add up, yet they continue to raise the promise of tax cuts. We know what value to put on those promises. This was the party, after all, that invented the poll tax, and if ever there was waste and bureaucracy it was in that tax, and this was the party that put VAT on fuel.

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

I have allowed a number of interventions on both sides and I owe it to other hon. Members who are keen to speak to continue to make my speech.

We take the issue of efficiency seriously. That is why we have set out clear plans based on detailed and rigorous evidence that will deliver at least £20 billion worth of efficiency gains by 2007–08—money that will be reinvested in the front line to support essential public services, such as schools, hospitals and the police. That is value for money—better outcomes; investment in front-line services; savings at the centre, including a gross reduction of more than 80,000 civil service posts and a relocation of 20,000 public sector posts away from London and the south-east. We are making progress in delivering those efficiency gains to free up resources to recycle them into front-line priorities. Across government, £2 billion has been saved through better procurement, deals and use of e-auctions. The Department of Health has negotiated savings on medicines that will free up some £1 billion a year for the NHS, again for use on the front line from 2005–06. The Department for Transport will deliver savings of around £140 million in 2004–05 as result of improved Highways Agency contracting and other measures. Crucially, the Ministry of Defence will deliver over £400 million in savings through improved defence logistics.

What we have not heard—it may be that we will get a clearer take on this when the James report is published, not in the form of a slide presentation in a battered folder but—[Interruption.] I hear protests that it is brand new. Well, some savings should be made there. The hon. Member for Tatton should recycle his own folders rather than lecturing us about chairs.

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

Not at the moment. I just want to finish the point about waste and the Conservative party's policy on it, because the hon. Member for Tatton uttered a calumny against the Ministry of Defence, suggesting that money had been spent on chairs that cost £1,000. That is typical of the Conservative party and its approach to waste. If the hon. Member for Tatton can show me a chair that cost the Ministry of Defence £1,000—

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

I will do more than attempt to eat it. A number of Conservative Front Benchers have been obliged to face up to the fact that they may have to eat their hats or humble pie—they are more likely to eat hats than they are to eat humble pie. If the hon. Gentleman can identify the chair in the real world, rather than in the fevered imagination of those in Conservative party central office, on the day many years hence—20 or 30 years' time—when he eventually achieves ministerial office, I will buy him a chair for that office. [Interruption.] That is the extent of my offer. [Interruption.] Give, give, give—that is what I am noted for. There is no such chair; it does not exist.

I shall go into detail about the chair, because Conservative Members keep raising the matter. Interestingly, a number of public sector organisations use the Herman Miller aeron chair. The standard fee paid by the public sector for that chair is apparently £320. There is no such thing as a £1,000 chair in the MOD. If we are to have a serious debate about waste, Conservative Members could at least do us the service of debating serious matters rather than debating a £1,000 chair. In a moment of candour, the hon. Member for Tatton, who is full of candour, would admit that there is no such thing as a £1,000 chair.

I shall give way to Mr. Turner, who will, I hope, make a serious point about waste.

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

The Chief Secretary may be surprised, but the figures that he presented earlier on the improvement in GCSE results, which are quoted in the Select Committee report, were achieved at the expense of a 31.6 per cent. increase in public expenditure. Over an equivalent five-year period from 1990 to 1995, a greater improvement in results was achieved with an 11.4 per cent. increase in Government expenditure. I know that the Gershon report proposes reductions of £4.2 billion in Government expenditure on education, of which only £1.2 billion will be found in the Department for Education and Skills. Will the remainder of that money come from the front line, including schools and universities?

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

That is a serious and interesting point. How can one find adequate measures of productivity in a field such as education? The Atkinson review was conducted to help us in that matter. The hon. Gentleman takes an interest in such matters and knows that it is absurd to suggest that more teachers somehow reduce the productivity of the education system. I am sure that he agrees that that does not make sense. We must work out how to measure productivity in education more accurately.

I am sure that the hon. Gentleman also agrees that local education authorities could undoubtedly make savings through better purchasing and better logistics. Education authorities and schools can make such savings, and we must have a serious debate about how such savings may be identified. I am glad that the hon. Gentleman welcomes Sir Peter Gershon's approach.

That is a more serious point than the assertion by the hon. Member for Tatton that savings that might be obtained by abolishing regional chambers. To suggest that one can scrap regional planning for jobs, housing and transport without paying a price is disingenuous, and it is not a serious point. However, he does not have to take my word for it, which he can dismiss as partisan by suggesting, "He would say that, wouldn't he?" This morning, I attended the central local partnership group, and he should talk to some of his Conservative colleagues in local government.

The hon. Member for Tatton dismissed regional assemblies, which is surprising given the good work that they do, but he does not have to take my word for it. He drew the attention of the Treasury team to the vote in the north-east, of which we are well aware, and I shall draw his attention to the words of Councillor Sue Sida-Lockett, who is clearly well known—and much loved, I am sure—in Conservative circles:

"Despite the north-east vote, there will still be a requirement for effective regional planning functions, provision of democratic mandate for the regions and effective scrutiny of other regional bodies—a role in which the assembly and other voluntary chambers have shown themselves to be extremely competent."

That is an endorsement from no less a person than Councillor Sue Sida-Lockett, who, I fear, is about to be rubbished or undermined in some way by Mr. Francois—I hope that he does neither of those two things.

Photo of Mark Francois Mark Francois Shadow Economic Secretary (Treasury)

I will do neither of those two things, actually. Is the Chief Secretary aware that the East of England regional assembly, which that lady chairs, produced a regional planning plan in November 2004 to build 428,000 houses in the east of England? One month later, the same regional assembly effectively abrogated its own plan because of the lack of transport infrastructure provided by the Government. If that is successful regional planning, do we really need it?

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

The hon. Gentleman must take up that point with Councillor Sida-Lockett, and I am sure that he is in a position to do so.

We have not heard a serious response from the Conservative party on the implications for housing if the £1 billion of cuts recommended by the James report were implemented. The hon. Member for Tatton knows that such cuts would mean the scrapping of the sustainable communities plan and that many thousands of first-time buyers would be deprived of the opportunity of owning their own homes. Our efficiency savings at the centre are recycled to front-line services, as opposed to the reckless cuts in public services, of which I have given a number of examples this afternoon, proposed by the Conservative party.

It would be disastrous if the Conservative party were to have its way: our economy would return to boom and bust because the sums do not add up and our infrastructure would be neglected across the board, including areas such as transport, skills and health. When the Conservative party last had stewardship of the economy, it failed to invest in those areas. The contrast is between investment and cuts. We maintain stability and ensure that we keep to our fiscal rules, and stability means that we can invest in the skills of all our people. We are building a platform from which there can be record levels of growth, and maintaining the lowest interest rates for 40 years and the longest period of economic growth for 200 years. It is that combination of low inflation, low unemployment and rising living standards that this party and this Government are determined to uphold.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Does my right hon. Friend agree that one significant cut in waste by this Government is that of the waste of many people's lives when they are unemployed? The proportion of gross domestic product that is spent on unemployment benefits and interest on the national debt has been cut from the 1997 figure of 4.5 per cent. to the current 2.6 per cent. That represents a considerable increase in efficiency. The latest Organisation for Economic Co-operation and Development figures, which were not quoted by the hon. Member for Tatton for obvious reasons, show that in the United Kingdom we have the highest gross national income per capita in the European Union, apart from Luxembourg.

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

My hon. Friend is right to draw the House's attention to those facts. Labour Members will not take any lessons about waste from the party that doubled unemployment, which hit 3 million not once but twice. There is no greater waste, not only in terms of borrowing to fund benefits, which happened under the last Conservative Government, but of the wasted potential and lives that unemployment represents. That is of great concern to us, but it has never been so to the Conservatives. That is apparent from their cavalier approach to the budget of the Department of Trade and Industry and from what the hon. Member for Tatton said about the Small Business Service, which will be noted by the Federation of Small Businesses as it has been noted by the CBI. That is the same cavalier attitude that led to 1,000 businesses going bust every week between 1992 and 1996.

We must not forget, and we do not intend to allow the people of this country to forget, the true waste that characterised the Conservatives when they had stewardship of the economy. Our record speaks for itself—economic stability, strong support for the front line, efficient public services, and true value for money. That contrasts well with the flaky facts and empty promises of the Conservatives. For that reason, I urge my right hon. and hon. Friends to go into the Lobby with us tonight to vote against the motion and for my right hon. Friend's amendment.

Photo of David Laws David Laws Shadow Chief Secretary to the Treasury 2:03 pm, 19th January 2005

As ever, I enjoyed the Chief Secretary's speech, although it could perhaps have done with a few judicious cuts of its own. I hope that that chair in the Ministry of Defence is never found, because if it is, he will owe Mr. Osborne more than a pint.

I welcome the fact that the Conservatives have given us not only an opportunity to debate the Government's strategy on public services and delivering value for money, but an early opportunity to discuss some of the material released in the James report earlier this week.

The Chief Secretary is usually a fair, calm and dispassionate man, as I am sure that he himself would acknowledge, and he was a little unfair to criticise the Conservatives on the extent of the information that they have published so far. I remind him of the caution that his own Treasury team and the Chancellor of the Exchequer showed before 1997, when nowhere near as much information was provided. Indeed, Mr. Clarke, who does not always support his Front Benchers on all matters, is quoted today as saying that

"the Conservatives unveiled the most detailed proposals for tax and spending ever produced by an opposition party."

Certainly, they are considerably more detailed than those set out by the Conservatives before they got into power in 1979 or the Labour party before it got into power in 1997. There seems to be an inverse relationship between the amount of information that parties publish when they are in opposition and their proximity to power. If my theory is right, and if the comment by the right hon. and learned Member for Rushcliffe is accurate, the Conservatives may be very far away from getting back into power—perhaps as far away as at any time in their recent history.

Photo of David Borrow David Borrow PPS (Dr Kim Howells, Minister of State), Department for Education and Skills

The hon. Gentleman suggests that the amount of detail in the Conservatives' proposals reveals their distance from power. Does he think that the same applies to his own party, whose proposals are truly incredible?

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

I think that we are getting closer to power and the Conservatives are getting further away from it, so the relative movement is extremely favourable.

I am sure, Mr. Deputy Speaker, that you want me to turn to the motion and its assessment of the problems that the country faces and possible solutions. It refers to

"the path of more waste and higher taxes".

Every party, including mine, has had its own review of public expenditure. It is important that we have this debate and that all parties engage in it, because it is inconceivable that an organisation with a budget the size of the Government's, with £550 billion of public expenditure, will not have various areas where savings can be made. However, it is pity that neither the motion nor the speech by the hon. Member for Tatton made more acknowledgement of the need for an increase in public expenditure not after 1997, but after 1999 when the Conservative spending plans came to an end. What is missing in all the discussion of waste and higher taxes is any acknowledgement of the important role of public expenditure in improving our infrastructure and securing improvements in public services, where there were major inherited problems following the 18 years of Conservative Government.

I understand that today the Conservatives signed up to the Government's commitments in respect of overseas development assistance. That is very welcome, and it reminds us that public expenditure is not simply a matter of waste and taxation but of achieving very important objectives. However, I remind the hon. Member for Tatton that when the Conservatives were in power, as opposed to matching commitments in opposition, real expenditure on overseas development assistance to Africa fell by about one third between 1992–93 and the end of that Parliament. I hope that the Conservatives have reviewed their approach to issues such as public sector investment and overseas development expenditure, but that is not evident in the motion or from the remarks of the hon. Member for Tatton.

I want to turn to issues relating to value for money and explore them in the context of the James report, which is extremely helpful and detailed. We should all be concerned about securing value for money. It is clear that the public's appetite for additional increases in taxation is limited, as people want to see delivery in exchange for the additional taxes that they have paid. We have many concerns about the Government's performance in that respect, not least because of their excessive control over public expenditure and centralised control of targets, which is often extremely wasteful. We should prefer a considerably greater devolution of power. We share some of the concerns expressed by the hon. Member for Tatton about productivity in the public sector and the fact that it is falling behind that of other countries in relation to the private and public sectors, although it is important to bear it in mind that many of the additional investments in public expenditure since 1999 have been in areas where one would not expect any evident improvement in productivity.

I shall give an example from my constituency, where the ceiling of a hospital fell down six months ago. The hospital was built before the second world war, which predates the national health service, and sticking plaster was—almost literally—applied over the past couple of decades to keep the building together. That solution failed to the extent that the hospital has almost fallen down, but it will be rebuilt. That will not necessarily appear in the productivity data on public expenditure but it is nevertheless a worthwhile investment.

The hon. Member for Tatton put taxation centre stage in his speech. The motion states that there have been 66 tax rises since Labour came to power. That is not a helpful way in which to consider taxation because, as was said earlier, one needs to examine the net balance between tax increases and tax cuts. In addition, as the motion states, there is a need to consider the rate of change of taxation. The motion calls for

"a change of direction away from the path of . . . higher taxes".

Mr. Dorrell, who is not in his place, raised that issue a couple of times and invited the Chief Secretary to comment on the fact that the Government's public expenditure and taxation documents suggest that the tax burden will increase in the next few years. However, the right hon. Gentleman did not appear to realise that his intervention constituted something of a boomerang for his Front Bench, which is signed up to the same plans, minus a small, moderate reduction in taxation of £4 billion.

This morning, the Institute for Fiscal Studies said that the proposed Conservative tax cuts would offset only about one seventh of the increase in the tax burden as a share of national income that the Treasury has pencilled in for the next five years. In other words, the Red Book shows that the tax burden will rise from 36.2 per cent. of national income in 2004–05 to 38.4 per cent. in 2009–10. The hon. Member for Tatton, who is normally candid in his responses, ducked my question. I asked him to acknowledge that, even after the £4 billion of tax cuts that he intends to implement, the tax burden would increase substantially. Indeed, it will rise from 36.2 per cent. to 38 per cent. of GDP. The tax burden under Conservative plans for the next Parliament will therefore increase by 1.8 per cent. If I am wrong, I would be happy for the hon. Gentleman to intervene. However, I take his silence to show that the Conservative party is signed up in its expenditure and taxation plans to an increase in the tax burden in the next Parliament.

Photo of Francis Maude Francis Maude Conservative, Horsham

By how much would the tax burden rise if Liberal Democrat plans were effected?

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

The right hon. Gentleman knows that we set out clearly our plans for the abolition of the council tax, which is a most unfair tax, and its replacement with local income tax. Our only taxation proposal is for the 50 per cent. upper rate of tax, which would abolish tuition fees and reduce the burden of council tax. However, that does not answer the question that I posed to the hon. Member for Tatton. I take Conservative Members' silence as an acknowledgement of what they would perhaps prefer not to admit: if the Conservative party won the election, the tax burden would increase by almost 2 per cent. of GDP under its current plans.

Photo of Francis Maude Francis Maude Conservative, Horsham

The hon. Gentleman is an intelligent and fair man. He asks my hon. Friend Mr. Osborne to answer a specific question about the Conservative party's plans. Surely he must acknowledge that, if he wants an answer, he must answer the same question about Liberal Democrat plans.

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

My party does not make the same claim as the Conservative party to reduce taxes. The Conservative party is trying to give the impression that if it came to power in the general election that will be held in a couple of months, the tax burden would reduce. The truth about Conservative expenditure and tax plans is that the tax burden would increase considerably, and that is why Conservative Front Benchers do not want to intervene on me.

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

The hon. Gentleman said that the Liberal Democrats proposed a 50 per cent. top rate of tax. He may know that his party leader said 51 per cent. the other day. I do not know whether that is mission creep. When we combine their top rate of tax of 50 per cent. or 51 per cent. and local income tax, what will be the tax burden on the average hard-working family?

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

The hon. Gentleman will be delighted to know that, under our proposals to abolish council tax and replace it with local income tax, 70 per cent. of households will be better off or no worse off. He should talk to those of his constituents who are retired or on a low income and who often pay 10 per cent. of their income in council tax—a grossly unfair tax that his party should be ashamed not only to retain but to have increased by 80 per cent. since 1997.

I should like to consider some of the public expenditure issues that have been raised in the context of the James debate because they are important. The Conservative party should be congratulated on stimulating debate by publicising all its policies on its website. The Chief Secretary was ungenerous in not giving the Conservative party some credit for the huge bulk of papers that he can have printed off if he is not good with technology. I had a chance to read through them this morning. I also welcome the fact that the Conservative party has undertaken a review of public expenditure. In any organisation, it is always possible to find some efficiency savings and to reprioritise some expenditure. However, it is also tempting for politicians who are desperate for easy and painless solutions to claim that they can find huge amounts of something called waste that can square the circle between public expenditure and tax priorities. We need to consider whether the Conservative party has successfully squared that circle.

Let us begin by examining the total savings—the £35 billion—that the James report claims to have found. It sounds immensely impressive and a large amount of money. The small print acknowledges that the Government have already said that they will make two thirds of those savings—£22 billion—and use them internally to improve public services. There is a question about whether the Government will deliver them, but the additional savings that the Conservative party says that it can make are not £35 billion but the much lower figure of £13 billion.

Photo of David Borrow David Borrow PPS (Dr Kim Howells, Minister of State), Department for Education and Skills

The hon. Gentleman mentioned parties looking for painless ways of making savings. His party proposes abolishing the Department of Trade and Industry. Which of the Department's functions would be retained and where would they be placed in the Government structure?

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

I am delighted to give the hon. Gentleman more information about our plans for the Department of Trade and Industry. He may know that, since the Government came to power, there has been a huge increase in the Department's budget. He will also know about reports by the Public Accounts Committee and others about the way in which money has been spent and the fact that many of the industrial subsidies that the Department pays are wasteful and have low economic returns. We would especially target that. Of course, some of the Department's expenditure would remain as part of total Government expenditure, especially some parts of the longer-term science budget, which is important.

Let me deal with other parts of the James report. It includes a list of 168 public bodies that will be abolished. That is clearly set out, and I do not want to be unfair to the hon. Member for Tatton about his list. However, I note some double and triple counting, a practice for which the Conservative party criticises the Labour party. First, there is the double counting of the Gershon savings as both the Government's proposals and those of the Conservative party. Of the 168 bodies, 16—one tenth—are regional agricultural wages committees, 28 are individual health authorities, nine are Sport England regional bodies, and seven are regional industrial development boards. So, four entities account for 60 of the public bodies in question—more than a third of the total.

The Conservatives have also been very clear about their proposed reductions in jobs. They would apparently make a reduction of 235,000 public sector jobs, or "bureaucratic posts", as the James report describes them. That is quite a large reduction. Apparently, however, not one of those posts would be eliminated through compulsory redundancy. I find that difficult to believe, and I wonder whether Mr. James thought that that was a credible proposal.

I assume that most of the bureaucratic public sector jobs are going to come out of civil service staffing figures, rather than individual public services themselves. If that is the case, we are talking about a reduction of about 550,000 public sector jobs, as a base figure. It is true that, under the Conservative Government between 1992 and 1997, the head count in that category was reduced by about 90,000. It is also true that that category has increased since Labour came to power. If I am right, the implication of the Conservatives' figures is that the permanent staff head count would fall to about 410,000 from a peak 10 years ago of about 580,000. That would be almost 100,000 lower even than the head count at the end of the last Conservative period in office. That is an incredible, and potentially questionable, set of figures. It is as questionable as the idea that all those reductions could be achieved through voluntary redundancy. I notice that the Conservatives' largest spending commitment in any one year is a £5.9 billion commitment to fund voluntary redundancies. That says something about the views of the party.

Photo of Geraint Davies Geraint Davies PPS (Team PPS), Department for Constitutional Affairs

Will the Liberal spokesperson make clear what the Liberal position is on the Gershon report? Would the Liberals cut that total number of jobs, or just some of them? What would be the head count under the Liberal Democrats? Secondly, can he confirm that the introduction of a local income tax would increase the aggregate amount of tax being paid in Britain?

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

The answer to the hon. Gentleman's second question is no. The abolition of council tax and its replacement with a local income tax is an entirely neutral exercise. It would not increase the total tax burden. On the Gershon report, my hon. Friend Dr. Cable has already made it clear that we are committed to delivering those savings.

That brings me to my next point. There is triple counting and a lot of smoke and mirrors in the other parts of the James report, and similarly, when we look at the small print relating to the 235,000 reduction in jobs, we find that it includes the 80,000 reduction that the Government are already implementing, and that 91,000 of the 235,000 jobs would simply be reclassified from the public sector to the private sector. They would therefore not be cuts at all. The figure for the Conservatives' proposed job cuts on top of those implemented under Gershon would be 64,000, not 235,000.

We need to consider in a little more detail the savings that the Conservatives are proposing. There are some with which we have no problem. The Conservatives have identified cuts to be made in some of the industrial subsidies, and cuts in some parts of the Department for Environment, Food and Rural Affairs and the Office of the Deputy Prime Minister. We think that those would be entirely sensible. The Conservatives have also proposed a set of quite small changes with which we may not agree but which are defensible in their own right in terms of costing. We may not agree with their plans to scrap the regional assemblies and the supreme court, for example, but they are perfectly entitled to those policies and to put them into their costings.

The Conservatives' remaining savings proposals seem to fall into two categories. First, there are savings that are credible but frankly unattractive. Then there are savings that sound attractive but are, in reality, incredible. I shall give the House an example. The extent of the Conservatives' proposed cuts to the new deal, to the social housing budget and to Jobcentre Plus would harm some of the most vulnerable people in Britain. My hon. Friend the Member for Twickenham had an interesting exchange with Mr. Willetts on the BBC yesterday, in which he pressed the Conservative spokesman on the implications of privatising the whole of Jobcentre Plus and significantly reducing expenditure in that area. My hon. Friend asked his Conservative counterpart how the Jobcentre Plus function of giving advice on work and benefits would be continued, following privatisation and given the scale of the proposed cuts. He was told that those functions would have to be outsourced to voluntary bodies. It is extraordinary to suggest that we should simply sweep away the employment and benefit advice service for some of the poorest people in society and let the voluntary sector take care of it.

I am worried not only about the proposed cuts that would hit those on lower incomes, but about those that I doubt would deliver value for money. There is a good deal of over-regulation in much of society today, and the Government have worsened a lot of that. However, I question whether it would be sensible to abolish the whole local government inspection service and to rely on council auditors and customer satisfaction reports from people who live in a particular area as a means of finding out what is going on in a council. I find it extremely surprising that that proposal should come from the Conservatives, as they were determined to introduce more inspection and accountability in the public sector. An example of that would be their proposals relating to Ofsted, which were bitterly opposed for a while.

We are very doubtful about those Conservative proposals. The costings are perfectly legitimate but the effects would be undesirable. There is, however, a bigger hole in the James report, which we look forward to exploring further in the next few weeks. It relates to the credibility of the savings that appear attractive because they do not involve cuts in key services. I have looked at the figures for reductions in Ofsted, which are already being implemented by the Government. I have also examined the proposed reductions in the advertising and consultancy budget, and I believe that the figures used in the James report are wrong. Claims are also being made in relation to the 30-month scheme and absenteeism, and £3.2 billion of completely unspecified savings are proposed by taking out the Gershon savings from Departments that could otherwise recycle them. The proposals also claim that extraordinary savings could be made by the Treasury in the processing of Inland Revenue payments, on the basis of figures in the James report that look like a back-of-the-envelope calculation. In my view, all those proposed savings are bogus and flaky. Looking at the total of the real savings that are being claimed in the James report—£13.3 billion, not £35 billion—a crude analysis would suggest that half those savings relating to waste were bogus and undeliverable.

Of course, we do not have to rely only on the Liberal Democrats' analysis to draw that conclusion. Mr. Jackson spoke about the sceptical majority of the British public this weekend. He said:

"If you are going to cut taxes . . . there are only two ways you can go. You can either say we are going to cut taxes and we are going to do less, or you can say we are going to cut out a whole lot of waste. Cutting waste is what you say when you are not brave enough to say we are going to do less. They"— those on Conservative Front Bench

"talk about £40 billion of waste. I don't believe it. The waste thing is a fig leaf which is used to avoid talking about the practical implications of cutting taxes and spending."

The hon. Member for Wantage may no longer speak for the Conservatives, but I suspect that on this issue he speaks for the vast majority of sceptical individuals in this country who have become used to having been told by Governments and Oppositions for 100 years or more that all their problems could be solved by cutting out waste. That sceptical majority will not be convinced by the claims being made by the Conservatives.

The Conservatives claim that they will cut taxes, but when we probe further, we discover that under the next Conservative Administration—however unlikely that prospect may be—the tax burden would rise by almost 2 per cent. of gross domestic product. The Conservatives say that they will cut waste, yet most of their proposals involve double counting and incredible claims. On public spending, where Conservative proposals are attractive, they are incredible, and where they are credible, they are, to us, deeply unattractive.

Mr. James, the company doctor, was supposed to deliver a cure for Conservative electoral ills. Instead, I fear that he has turned out to be a retailer of what Mr. Gladstone would surely have referred to as quack remedies. Mr. James is supposed to have a reputation for saving beleaguered enterprises, but he appears to have failed to save the Conservative party not only from intellectual bankruptcy but from electoral defeat.

Photo of David Borrow David Borrow PPS (Dr Kim Howells, Minister of State), Department for Education and Skills 2:30 pm, 19th January 2005

Eight years ago, in the run-up to the 1997 election, I was asked on the doorstep what Labour's plans were for tax and spending. The party's promises at that time were very specific, and they were of the sort that one could fit on an A4 piece of paper. The promises were very specific and narrow because the Labour party believed that it would become the Government. It did not come out with a document containing pages and pages of detailed savings that it felt it could make when in government, because until one is in government, one is not in a position to say that savings can be made. One cannot do that until one has had a detailed look at the books.

The Labour party was right to be cautious at that time. It identified ways in which savings could be made and in which the tax burden could change. The key ingredient of that was having measures in place to reduce unemployment, principally the new deal, for which the Labour party had identified a pot of money. As a result of the new deal and continued economic growth, 2 million new jobs have been created in the past eight years. The amount of taxpayers' money that was being wasted on unemployment has plummeted. In addition, the amount of tax revenue coming into the Treasury because 2 million more people are in work has gone up. That has allowed the Labour Government, at this point in time, to begin to identify other savings, which can then be used in front-line services.

In many ways, the Gershon report's conclusion that we could make savings of £21 billion, which would involve a reduction in public sector jobs of 70,000, was challenging. Achieving that will be a huge task. I hope that my Front-Bench colleagues have their figures right and have done the necessary work, but I know that delivering that in the next term of a Labour Government will be immensely difficult and will create considerable pain. The bulk of the £21 billion savings is to come not from reductions in the number of public servants, but from better private sector procurement. From speaking to companies in my constituency, I know that they are beginning to feel the pinch when it comes to dealings and negotiations with central Government.

I therefore find it difficult to read reports this week that the Conservative party in opposition can suddenly find not £21 billion of savings, but £35 billion, and that it can pretend that that will be painless and that extra cuts in public sector jobs, whether 64,000 or 160,000, will make no real difference. It is bound to make a difference. When public sector workers in my constituency come to me with their concerns about the Government's proposed cuts and savings, I need to be assured by Ministers that if the numbers of people working for the Government will be reduced, whether in the Department for Work and Pensions or wherever, that will not mean a reduction in the service given to my constituents. It is not right that the taxpayer should pay to employ people to do unnecessary jobs. However, if people are working for the public sector doing necessary and good jobs, if we decide to get rid of those jobs we must be honest and open about the effect on services. If, as a result of investment in IT, certain jobs can be done more efficiently, that is a step forward. If certain jobs do not need to be done because we do not have large numbers of people unemployed, that is good and that money can be spent elsewhere. We need to be open and honest about all that.

What concerns my constituents most when it comes to tax and spending is whether they can afford to pay and whether they are getting decent services for the money that they pay. After eight years of a Labour Government, we have steady economic growth, the lowest interest and mortgage rates for 30 years and more, and unemployment in my constituency now at 1.2 per cent. —which is a huge contrast to the situation 10 or 15 years ago. With that economic stability, steady economic growth and low unemployment, people in my constituency can decide whether they can afford to pay a bit more tax, or whether they want to pay a bit less, in relation to the quality of public services that they receive.

I had a couple of meetings recently with the Lancashire police authority, which has been carrying out consultation exercises over the past few years, on whether the people of Lancashire would be prepared to pay above-inflation increases in council tax to the police authority if they got better services. All the indications are that if the police authority were to increase the council tax element for the police by 10 per cent. or so, and if that led to more front-line police officers, people would be willing to pay for that. If they believe that they are getting a better service, they are prepared to pay for it. If they do not think that they are getting a better service, they are reluctant to pay for it. Therefore, when we talk about investment in public services the key question that people must ask themselves is: are we getting value for money? Is it right for us to continue to pay through taxes rather than buying privately?

Over the past eight years, I have visited schools in my constituency on a regular basis. Every one of them has had major investment in staff and equipment, and virtually every one has new building projects under way. This Friday, I shall go to the opening of a £1 million-plus sports hall at Tarleton high school. The same school had a new £500,000 block built three or four years, with computer suites and so on. That is typical of the schools in my constituency. Parents in my constituency can therefore see from the schools to which their children go that extra investment in education is leading to visible improvements. There may be a question as to whether that investment has led to the sort of improvements in performance that some of us would like, but when I remember what many of those schools were like eight years ago, I defend the need for this Labour Government to put in major capital investment. If a school has inadequate buildings, with leaking roofs, bad windows and inadequate areas for sport and assembly, spending a lot of money on improving that may not automatically lead to better GCSE or key stage 2 results. In a prosperous, wealthy society, however, I would have thought that all Members would agree that it is important to spend that money, and I can certainly say to my constituents that it is money well spent.

The same applies to the health service in my area. We have had dialysis units and cancer units. The doctors' surgery across the road from my office in Leyland seems to have had extensions and improvements every few years as it has expanded and delivered extra services. A new drug and alcohol abuse centre was opened in my constituency a few months ago, which we have all been wanting for many years. Those are tangible, visible improvements in public services, and people can make a judgment on whether it is right to pay for them.

I agree with those who have said today that we may have reached more or less the limit of what most people want to pay as a proportion of the overall level of tax. As sensitive Members of Parliament

Photo of Mark Hoban Mark Hoban Shadow Minister (Education)

Will the hon. Gentleman explain how he would fill the Government's £8 billion black hole—the gap between their spending plans and their taxation?

Photo of David Borrow David Borrow PPS (Dr Kim Howells, Minister of State), Department for Education and Skills

I am sure that as the years unfold we will see whether it is a fictitious or a real black hole. During every year that I have been in the House, I seem to remember hearing Opposition Members talk of doom and gloom, saying that there would be a recession, that there would not be the expected tax revenues, that expenditure would be higher than expected and that the Chancellor would be unable to balance his books. Every year those critics have been dumbfounded by the fact that the Chancellor has been right and they have been wrong. If the Chancellor continues what he has been doing over the last few years, I have no reason to believe that he will not be able to deliver the public sector investments and improvements that I want to see, as well as ensuring that the books balance over the economic cycle.

I want to say a little about why some of the investment that the Opposition parties want to get rid of is, in fact, crucial. That applies in particular to the new deal. Members may ask why the new deal is important to a constituency like South Ribble, which has full employment. Two or three years ago, Tesco built a new store in Leyland and we were able to persuade it to become part of a new deal partnership. It recruited many of its employees from the long-term unemployed register. Using new deal money, it put them through a detailed programme to prepare them for work. People who had not worked for many years, and in some cases had not worked at all, eventually found secure, stable jobs with Tesco. Without the new deal, that would not have happened.

Employers often say to me—given that my constituency has full employment—that there are people out there without jobs, but they do not have the skills and the confidence to obtain work. Hundreds of workers in my constituency have been brought in from overseas—from eastern Europe and South Africa, for instance—and are doing excellent work, particularly in horticulture. However, I know that there are probably similar numbers in my constituency who, if we as a society were prepared to invest in them and give them confidence, skills and the work ethic, could be doing those jobs and making a productive input.

That will not be cheap. In the years ahead, the new deal programme may have to be altered to meet the needs of the future. I have no doubt, however, that if we want to make a difference to society, securing employment for people who, in many ways, are seen as being unemployable will be crucial. Breaking the cycle for people who have never worked and whose parents often do not work is one of the real challenges facing us. We have low unemployment and ours is a prosperous society, but a sizeable chunk of the population is not part of the work force and could be brought into it. Simply saying, "Here is a job, go and get it, go for an interview" will not bring them in—what is needed is investment by the community in those individuals. Working with employers and the wider community, we must give them the skills, talents, experience and confidence that are so important to getting them into work. That will have a knock-on effect on crime, disorder and all the other things about which concern is often expressed. Making people part of mainstream society is one of our key tasks.

My patch is one of the lucky, relatively privileged parts of the country—a nice area with nice houses, nice schools and very low unemployment. Even there, however, there are people who should be given the opportunity to work, having not worked for many years if they have even worked at all. That is a key part of the programme, and I think the two Opposition parties are wrong to want to get rid of that programme.

I want to make some criticisms of the Liberal Democrats' proposals, particularly their proposal to abolish the Department of Trade and Industry. I was in Toulouse yesterday to see the unveiling of the Airbus. The Prime Minister said that once the A380 was under way, in full production, there would probably be about 100,000 jobs in the UK linked to and dependent on it. Many smaller companies will be involved as well as the two main companies, Rolls-Royce and Airbus Industrie.

In proposing to abolish the DTI, the Liberal Democrats fail to recognise its importance to projects such as the Airbus. On several occasions during the eight years for which I have been in the House, I have lobbied both the DTI and the Chancellor for launch aid for the Airbus, which has been crucial to the UK's status as a major partner in the project. The idea that we can simply abolish the DTI puts our aerospace industry at risk. Moreover, the DTI provides export credit guarantees, which are crucial to the aerospace industry that employs thousands of people in my constituency in military aircraft production. Without the guarantees, exports of military aircraft from Wharton and Samlesbury in Lancashire would not be possible.

While I am having a little go at the Liberal Democrats, let me point out that I shall take great care to ensure that my constituents who work to produce the Eurofighter in Wharton and Samlesbury know that if there were a Liberal Democrat Government, one of their first acts would be to tear up the contract that was signed by the Secretary of State for Defence for the second tranche of the Eurofighter. That, too, would put thousands of people in Lancashire out of work—work on something that people like me have supported for many years.

It will be interesting to see whether the Liberal Democrat candidates in Lancashire include in their election manifestos, in a prominent position, their proposal to sack thousands of military aircraft workers in the county, or whether they will ensure that the proposal is seen only in parts of the country where military aircraft production is not an issue. The Liberal Democrats are very good at saying different things to different people, and because they are the third party their programme will never be properly scrutinised by the media. When their leader is interviewed, interviewers do not ask him for details of his party's spending and taxation programme because they know, as I do, that the Liberal Democrats will not form the next Government.

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

Is the hon. Gentleman in a position to give us a guarantee that the Government will go ahead and order all the Eurofighters?

Photo of David Borrow David Borrow PPS (Dr Kim Howells, Minister of State), Department for Education and Skills

I was at the Wharton factory before Christmas when the Secretary of State for Defence visited it, at the time when the second tranche of the contract for the Eurofighter was being signed.

Photo of David Borrow David Borrow PPS (Dr Kim Howells, Minister of State), Department for Education and Skills

The contract that I was concerned about was the second tranche of the Eurofighter. The Liberal Democrats have pledged to tear up that contract and to sack thousands of workers in Lancashire. I will ensure that the people of Lancashire are aware of that commitment.

I want to finish by briefly discussing the proposed cut in the housing budget. In areas such as mine, which have full employment and high house prices compared with other parts of the north-west, a particular economic constraint is imposed on businesses. Many employers in such areas are struggling to recruit people because there are no affordable properties for them to buy. There is a need for more social housing and for more affordable houses to buy. Such a change can come about only if the Government intervene in the market, which will require a budget of some sort. The Office of the Deputy Prime Minister has a crucial role to play and it can make a difference in areas such as mine by allowing housing associations to build new properties for rent, and by allowing local agreements to be reached on the building of more affordable properties.

At a time of economic success, it is very easy to ignore many of the ingredients of it and to think that bodies such as the DTI and issues such as housing are not very important, but they do affect the continuation of that success. I have listened with interest to the Conservatives and I am sure that my constituents will take the same view as those in the vast majority of constituencies, namely, that the Conservatives' proposals are truly incredible. They will prefer to vote, when election day comes, for a party with a proven track record of low unemployment, low inflation, low mortgage rates and good public services.

Photo of Francis Maude Francis Maude Conservative, Horsham 2:52 pm, 19th January 2005

I declare the interests that appear against my name in the register.

This is an important debate and I enjoyed the speech of the Chief Secretary to the Treasury, albeit not as much as I normally do. He is usually very flamboyant, but today he was much more restrained. I offer him this personal advice: if he carries on in that vein, there is a serious danger that at some stage he will achieve gravitas, which would do his reputation no good at all.

The Chief Secretary inadvertently gave a certain amount away when he got himself into a great state about the form in which the James report has been produced. He held it up with disdain—virtually between finger and thumb—seemingly saying, "This is only a PowerPoint presentation, a mere set of slides. Feel the width of that compared with the Gershon report! Gershon is printed on heavy quality paper and it has a shiny cover. It is altogether a superior product." In a way, that was a paradigm of new Labour. Here we are discussing waste, but for the Chief Secretary the only issue arising from a comparison of Conservative and Labour approaches to waste is the way in which the reports are produced. A glossy report full of heavyweight paper is a proper report on waste, but a PowerPoint presentation—golly!—could not possibly be the goods.

What matters is not the form in which a report is produced but what one does with it. We should consider the significance of what has happened in the months since the Gershon report was unveiled with due ceremony and all the glitz that goes with any new Labour presentation. Instead of much-vaunted cuts, public sector employment has steadily risen month after month. The report is an emblem of new Labour: lots of spin, a glossy cover and heavy quality paper, but no action behind it.

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

I am listening with interest to the right hon. Gentleman's comments about the James report. Perhaps he will help us by saying whether there is in fact a report behind the published PowerPoint presentation, or is it true that, as Professor Colin Talbot said on "Newsnight", callers to Conservative central office are told that it will not be published because

"it would give too much ammunition to our opponents"?

Photo of Francis Maude Francis Maude Conservative, Horsham

I am given to understand by my hon. Friends on the Front Bench that the James report exists in exactly that form. I commend the work that they have commissioned and done on this report, which is the most serious undertaken by an Opposition on this important subject for a very long time. The report certainly is available.

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

This is a useful opportunity to clarify whether there is a report. Is the report that is published on the website—admittedly, it is fairly extensive, running to 173 pages—the James report, or is it simply a summary of a detailed piece of work?

Photo of Francis Maude Francis Maude Conservative, Horsham

It is flattering that the hon. Gentleman should ask me that question, but I am the humblest of Back Benchers and know nothing of these matters. However, I am assured by my colleagues on the Front Bench that that is indeed the report. It is a very serious piece of work, and it will bear all manner of scrutiny.

The Gershon report's approach and the manner in which it was unveiled—but then not implemented—is a mirror-image of this Labour Government's approach to tax. In their early days, they were very keen on this issue. Mr. Borrow mentioned speaking to people on the doorstep during the 1997 election. We all remember the Prime Minister saying in clear terms that the incoming Labour Government had no plans to increase tax at all. There were no ifs, buts or qualifications: he was perfectly clear. However, they had such plans all along—they must have, because they were implemented almost immediately. As the Prime Minister had made that stark commitment, tax increases had to be introduced by stealth—hence, the first raft of stealth taxes.

The smoke and mirrors of the Gershon report and the Gershon process is the converse of that approach: it is public spending by stealth. The Government say, "Of course we are not increasing public spending overall. We are cutting out all this waste and getting rid of lots of public servants." However, each week The Guardian runs a thick supplement full of advertisements for public sector jobs. So this is all about recycling: taking waste and recycling it into the front line. However, although money is going to the front line it is not coming out of such waste, because Gershon simply is not being implemented. It is a classic example of smoke and mirrors from the Chancellor, in an effort to cover up the fact that public spending is rising sharply and unsustainably. Such spending will place an increasing burden on the economy, making it much more difficult to deliver the growth that the Government hope for and that is essential if the country is to become increasingly prosperous.

Whatever the colour of the Government of the day, it is in the nature of all Governments that public spending tends to increase. In "Yes Minister", Sir Humphrey described this as the "politician's syllogism". Something must be done and this is something; therefore, we must do it. For any politician, the "something" that comes most easily to hand is public spending. It is very easy to spend public money, and then to claim that one has done something and that the problem identified is being addressed. But simply spending money does not solve problems. The effect on public services of the very large amounts of money that this Government have spent since they took office illustrates that point. Such spending simply has not translated into anything like proportionate improvements in the quality of such services; rather, it has translated into burgeoning waste, which is why the James report is so credible. A great deal of money has been misspent, and a lot of surplus money is being wasted that could be saved.

Of course, it is easy to spend money; it is much more difficult to make it translate into improvements. I believe that, over time, the state should take and spend a smaller proportion of the nation's income. That provides not only a stronger economy, but a stronger, more cohesive society. People do not just do more for themselves and their families: they do more for each other and for their communities. It binds society together. I do not believe that this is a better country if people think that they can contract out all their social obligations to the state. We are a better people than that. We want to carry responsibilities ourselves, not only for our families but for our neighbours, our communities and our society.

The trend in the proportion of the nation's income spent by the state—up or down—changes only very gradually. I strongly support the proposition that a Conservative Government would seek to put that proportion on a downward trend. No cuts in public spending would be involved, because it would increase year on year, as it always does and always will do. The key figure is the proportion of the nation's income that is taken and spent by the state, and that has to fall if we are to have a healthy country.

The Chief Secretary gave us some statistics about where Britain stands in relation to other European nations, but the countries that have shown the most vigorous economic growth in recent years include Australia, where the state's percentage of the nation's income is in the low 30s, and Ireland, which has shown the most dynamic growth in the European Union and where the state's share of the nation's income is again in the low 30s. The US is in a similar position. In some of the world's most vigorous economies—the Asia-Pacific region shows vigorous growth, for example—the state takes a much smaller share of the nation's income than is the case in this country.

I make no apology, therefore, for believing in a smaller state. That is why I did not find the Government's proposals on university tuition fees as objectionable as some of my colleagues did. The proposals would increase people's personal responsibility. The scheme was bungled to accommodate the diehards on the Labour Benches and will not deliver what it promised, but the principle behind it is sound. The state should do a little less and people should take more responsibility for their own destinies and lives.

The Government go on about the golden rule, and the Chancellor might just about be able to claim that he has stuck to his definition of it. It is a good rule and I am glad that my right hon. and hon. Friends are committed to retaining it, but it puts no constraint on the size of the state. If Labour wins a third term and if the Chancellor remains in his post—two very big ifs—he will have to increase taxes substantially if he is to stick to the golden rule, because he has built into the public spending plans an increase that is otherwise unsustainable. If that happens, the burden that will be placed on the wealth-creating economy will be increasingly hard to bear and will act as a constraint on the very economic growth on which the Government's plans depend—not to mention the prosperity of the country.

I have heard new Labour Members and Ministers argue that what is important is the way in which public money is spent and what is delivered, not how much is spent—as so many of their colleagues seem to believe. My hon. Friend Mr. Jenkin intervened when the Chief Secretary referred to the concept of earned autonomy—the most repellent phrase in the new Labour lexicon. Apart from the fact that it is a contradiction in terms, the idea has built into it an assumption that the gentleman in Whitehall knows best. It means, "We will give you a little bit of independence, if you behave yourselves, but don't worry, because you will always be on the end of the string. And there'll be a twitch on the string if we think that you are abusing your autonomy." However, if we seriously believe that people who are elected by their local communities to run local government are better able to judge what is right for those communities than we are at the centre, we have to accept the possibility that, in some cases, autonomy will not be used well. It is not a risk-free option. If we do not allow the possibility that autonomy might be used to make mistakes, we suppress the possibility that autonomy will be used in unpredictable ways to find better, more interesting and more dynamic ways to do things. Innovation depends on that, and progress stems from it. It is certainly where progress comes from in the private sector and it should do so in the public sector, if the strings are cut and genuine, unearned autonomy is granted.

Occasionally, we see straws in the wind that hint that the Government are beginning to understand that principle. They pulled back to the centre control over hospitals, GP practices and schools—by getting rid of grant-maintained status—but they are now paying lip service to the idea of removing central controls. Practice commissioning sounds to many of us like GP fundholding, although the Government do not wholly believe in it so it will not work as well as it should. Foundation hospitals are not a bad idea, but again the proposals have been adulterated to accommodate the diehards on the Labour Benches. Foundation hospital status will not, therefore, give local managers the ability to run things themselves.

Money will be spent well, and innovation and best practice will develop and spread, only by letting go of the strings and getting rid of the risk-averse culture. Whitehall is a natural home for the risk-averse culture and it is the job of politicians to alleviate its effects. The Government have tended to accentuate it, and that is why we have had a huge increase in public spending without a proportionate increase in the quality of services.

Photo of Mark Hoban Mark Hoban Shadow Minister (Education)

My right hon. Friend makes some important points about the power that autonomy brings. Is he aware that the state sector schools that topped last week's value-added league tables were city technology colleges, the schools with the most freedom? The schools that came at the lower end of the table were community schools, which have the least freedom in the state sector. That demonstrates the power of autonomy to raise standards and ensure that money is spent effectively.

Photo of Francis Maude Francis Maude Conservative, Horsham

My hon. Friend is absolutely right. I remember that several of the secondary schools in my previous constituency sought and obtained grant-maintained status. I remember visiting one after it had become independent, and it was the same school, with the same buildings, same staff, same parents and same pupils. I asked the staff how they felt about the new regime. They said that they were all working much harder, but they were loving it because they could make decisions and make things happen. The school had a different feel about it. Members of Parliament all know that when we go into an institution we can feel very quickly whether it has a crackle of energy, enthusiasm and drive. We can tell whether an institution is alive and thriving. Independent schools and hospitals run by people who have the power to make and implement decisions and who can take opportunities are living, thriving and dynamic institutions. The position is exactly the same in the private sector.

Finally, on tax, my right hon. and hon. Friends have made the right equation, and there is relatively modest scope for tax reductions in their proposals. That is responsible, and it betokens an honest approach to the electorate that is both welcome and essential. It is a big contrast with Labour, who said that they did not have any plans to increase tax at all, yet made 66 stealth tax increases. By and large, people want to live in a society and an economy in which taxes are fairly low, but they want public services to improve. When we take office, we will have to reform public services quite radically. Structural reforms are needed, mostly to achieve the Conservative policy of much greater autonomy for the public services.

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

The right hon. Gentleman has talked about the importance of being honest about taxation and being realistic about taxation plans. In that vein, is he honest enough to admit that his party's plans still involve an increase in the tax burden in the next Parliament of almost 2 per cent.?

Photo of Francis Maude Francis Maude Conservative, Horsham

I am tempted to tell the hon. Gentleman that we will show him ours if he will shows us theirs, as he has been remarkably recalcitrant, diffident and reticent about revealing the full extent of the Liberal Democrats' tax increases. My hon. Friends are right to be restrained, as we do not know what the public finances will look like. However, there is a black hole in them and borrowing has risen to an unsustainable level, so spending must be constrained. It is undoubtedly the case that significant structural reform of the public services in the short term costs money, and does not save it. If reform is done well, in the medium to longer term the money buys more for the community and users of public services. It is therefore right to undertake reform, but in the short term it is a constraint on the ability of any Government to reduce taxes.

We should continue to make the case not only that we have a stronger economy and a better, more cohesive society and stronger communities when taxes are lower. I thoroughly commend the plans that my right hon. and hon. Friends introduced earlier this week. Theirs is an honest, straightforward, well thought out approach, and it deserves the support not only of the House but of the country.

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office 3:13 pm, 19th January 2005

A child aged five when the Tories came to power—I shall call him little Jim rather than little George—would be 31 today. He would have had the misfortune to be educated in an overcrowded classroom, and there would have been insufficient attention to numeracy and literacy at his school. The building itself was probably falling apart, and there would not have been enough teachers. His father was probably one of the 3 million unemployed people thrown on to the scrapheap by the Conservatives, who not only told us that that was a price worth paying but crowed about it. When little Jim's mother was sick, she would have to wait in the queue, as there were about 500,000 people on NHS waiting lists.

Just when the family thought that things could not get much worse, they lost their house as a result of negative equity. The very foundations of their life were destroyed and, while all of that was happening, they lived in an area where crime was doubling and the number of police officers was reduced. That is young Jim's early life—a world of despair, desolation and desperation.

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

Jim was part of an ordinary, decent, hard-working family—he was not born into the lap of luxury—like many other people in the hon. Gentleman's constituency and in my own. Their lives were laid waste by the Conservatives' deliberate actions when they were in power. It is quite true that things changed for Jim in a way that he could not have envisaged after the terrible experiences of his early life. At the age of 23, he secured training and a job through the new deal and he now has another job, which is secure and much better. He and his wife have been able to take advantage of stable interest rates to buy a modest home. The combination of tax credits and the minimum wage mean that Jim and his wife can provide for their children. They can run a small car and manage a family holiday. They have been able to build a modest savings account.

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

What would Jim's plight be if he were in the position of many people in my constituency? Having received overpayments of tax credits last year, they have been deprived of the tax credits that they expected on the basis of the Inland Revenue's calculation and, moreover, they have had money taken away from them this year. They are therefore living on far less this year than they did last year because of the incompetence of the hon. Gentleman's Government and the Chancellor.

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

I suppose that when one does not like to be reminded of one's record it is tempting to take the hon. Gentleman's approach. I simply make the point that tax credits are available now. Any failure in their delivery is regrettable. We all agree that anything that makes life tougher for people should be put right, but the reality is that nothing like tax credits was available when the Tory party was in power.

Not only have things improved slightly for Jim and his wife but his child is taught in a brand new classroom, and is excelling in numeracy and literacy. He is supported by one of several new teachers who were recently recruited to his school as well as by a helpful classroom assistant. Jim's mother still suffers periodic bouts of ill health, but she is treated at a brand new health centre, which is far removed from the Dickensian workhouse that she used to attend.

Photo of Mark Hoban Mark Hoban Shadow Minister (Education)

If life is so good, can the hon. Gentleman explain why a hard-working mother in my constituency cannot find an NHS dentist to treat her children when they need dental care?

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

Like Mr. Turner, the hon. Gentleman would like to forget the record that I am describing. No one denies that there are problems with dentistry in some parts of the country, but we all know who created the original problem by cutting training opportunities for dentists.

Jim's mother receives better medical treatment. His father is now a pensioner, and benefits from free eye tests, the winter fuel allowance, a free TV licence and pension credit. That is the lesson that people like Mr. Osborne, who has conveniently forgotten the excesses of the last Tory Government, need to learn.

Photo of Lembit Öpik Lembit Öpik Shadow Secretary of State for Northern Ireland, Northern Ireland Affairs, Shadow Secretary of State for Wales, Welsh Affairs

The hon. Gentleman paints a rosy picture of a utopian society in which I wish I lived myself—but I do not. He will remember that his Government promised to solve the crisis in the NHS dental service 2001 and I can certainly back up what Mr. Hoban said. Many people cannot obtain dental provision in my area, Montgomeryshire, at all. Can Mr. McCabe tell us how he thinks this serious problem can be resolved? It is a long way from utopia for those who suffer serious dental problems as a result of the Government's failure to solve the crisis.

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

I am not a Liberal so I do not tend to have utopian fantasies. I am trying to depict a straightforward contrast between the situation during the last Conservative Government and the reality of what has happened since Labour came to power. That is all I am doing; I am simply pointing out what the life possibilities were and how they have changed. I would be the first to concede that we need to do more in the NHS across the board, and that we certainly need to do more to increase the availability of dentists. My view is that that will be best achieved by investment rather than cuts. Any programme designed to cut out the chance of increasing the number of dentists will not help the situation. That seems painfully obvious.

The reality is that nowadays we are living with the lowest inflation since the 1960s. Interest rates are at their lowest for 40 years and we are living through the longest period of economic growth that anyone can recall—[Hon. Members: "Since when?"] The figure varies, but I am told that it is at least 200 years.

What is certainly not in dispute is the fact that our public services are expanding; our schools are improving, crime is falling and employment is at record levels, yet at such a time we are told by the Opposition that they want to turn the clock back. They want to go back to cuts. They want to scrap the new deal so that they can restore unemployment to the levels we saw when the Leader of the Opposition was last in government. They want to axe key business support programmes, despite the protestations of the CBI and Stephen Alambritis of the Federation of Small Businesses. The party of BSE wants to halve the budget of the Food Standard Agency, damaging public health and doing untold damage to national and international confidence in the standards of our food. They want to abolish key NHS targets so that there will be lower standards and waiting lists will rise once more, and of course they want to cut Ofsted and LEA budgets covering things such as special educational needs, about which they say they are so concerned, as well as music classes and truancy programmes.

Photo of Mark Hoban Mark Hoban Shadow Minister (Education)

When the hon. Gentleman's constituents ask for their share of the £15 billion increase in school spending, what will he say to them?

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

My constituents will comment on the fact that Allenscroft school is about to be completely rebuilt, that Hollywood primary school has recently been refurbished and that Colmore junior school, which achieved excellent results recently, has just recruited new classroom assistants and teachers. They will tell me that the secondary schools have more resources than ever and urge me to tell the Chief Secretary and his colleagues to continue on that path.

I have not heard one commentator endorse—[Hon. Members: "Except Jim."] It may be entertaining, but we were given a very interesting lecture by little George at the outset. He wanted to forget what had happened during all the years that his party were in power, so I am equally entitled to contrast—

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

Order. The hon. Gentleman must refer to hon. Members of the House in the proper way.

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

I apologise, Mr. Deputy Speaker. No offence was intended.

I was saying that I had not heard one single commentator treat the Opposition's plans seriously. Those plans are frightening and damaging but no one really treats them seriously. Everyone knows that they are merely a fig leaf to get a failing and weakened leader through an election. What is guaranteed is that as soon as that election is over the first dramatic cut will be the leadership of the Tory party. That is what is happening at the moment and that is what we can expect.

My hon. Friend Mr. Plaskitt noted earlier that the Tory motion referred to 66 tax rises and he helpfully pointed out that the Conservatives had arrived at that number by adding together the various changes listed in the Red Book. Conveniently, they have ignored the 232 tax cuts, which can be demonstrated in exactly the same fashion: tax cuts such as corporation tax to help business, jobs and exports; the doubling of capital allowances to small and medium enterprises and tax credits to help hard-working families. All are at risk under that increasingly desperate shell of a once proud political party.

What can we really expect? The shadow Chancellor, who has established some reputation for honesty, is always willing to let the cat out of the bag. He has told us exactly what we can expect. Pain. That is the Tory message to the electorate. It is not painless and there is no point in trying to pretend that it is painless, he said. Now, we have some idea of what sort of pain is intended. This is a slash and burn exercise. The proposals are way above the 2.5 per cent. efficiency savings that Sir Peter Gershon said were possible. He warned that if we went above that we would do untold damage to the economy and our public services. It is not acceptable to come to the House with some kind of PowerPoint presentation that ignores that basic fact. If the Opposition's proposal is to make cuts that go beyond what Gershon said was possible, they have an obligation to spell out in detail what those cuts will be and where they will fall. To do anything else is deliberately to try to deceive the British people.

It seems to me that I am entitled to ask exactly what additional cuts are intended. I say that because I noticed earlier that the hon. Member for Tatton was happy to quote the Institute for Fiscal Studies when he felt that it supported his argument. In return, perhaps he would care to explain the comments of Robert Chote of the IFS who has warned that currently only a third of the Tory plans have been costed and that they will have to go much further and find much deeper cuts. I want to know where those cuts will fall.

I am conscious of the fact that the Environment Agency has been cited. It is possible to make deep cuts in the Environment Agency, and we know exactly what that would result in: more flooding of people's homes, more illegal fly-tipping, fewer prosecutions of cowboys and more risks to public health. If that could be done to one agency, which other agencies that would be dismissed as meaningless quangos would also be chopped to the bone, and which other services that currently exist to protect the British public would be taken out of action? I am entitled to ask that in such a debate. In fact, I shall go further: if the Conservatives have accounted for only a third of their cuts to date, I want to know where the other two thirds would come.

Given the Conservative party's record when in power, I suspect that the Conservatives would start to close schools and hospitals. If so, I want to know which ones in Hall Green the Conservatives intend to take out of commission. Would they cut the new classrooms at Allenscroft, Hollywood or Colmore schools? Which schools and hospitals are on the secret Tory hit list? We are entitled to know. The Conservatives cannot give a PowerPoint presentation and ignore the things that people are really concerned about.

I was astonished to hear the hon. Member for Tatton boast that he would spend £6 billion to sack 230,000 diligent public servants. Given the experience of unemployment in this country under the Tory Government, I was astonished that a shadow Minister could gloat about the fact that he plans to spend £6 billion of public money to throw 230,000 diligent civil servants on to the scrapheap—people who work in the new deal, helping others to find work and employment, and people who work in the strategic health authorities, of which the hon. Gentleman is equally dismissive.

Of course, as I pointed out earlier today, we would not know about the abuse of elderly people at the Maypole nursing home in Hall Green if it had not been for the actions of the strategic health authority's staff in uncovering that scandal. The decent civil servants who work at the Environment Agency and the people in the regional development agency who are trying to provide jobs and regeneration in some of the most run-down parts of Birmingham are the kind of people who would be thrown on the scrapheap. Of course, as we heard yesterday at Health questions, the Conservatives would also like to sack the accountants who work in the health service—the very people who are capable of tracking budgets, trying to avoid waste and ensuring value for money.

I conclude—[Interruption]—that I can agree with only one part of the motion. Opposition Members will hear an awful lot more between now and the election, so they should not panic.

Photo of Mark Francois Mark Francois Shadow Economic Secretary (Treasury)

Some of it might actually make sense.

Photo of Steve McCabe Steve McCabe PPS (Rt Hon Charles Clarke, Secretary of State), Home Office

The simple problem is that it will not make any sense to the hon. Gentleman because he does not realise what mass unemployment does to people's lives. He does not care about cuts in the health service, about the effect of crime on people or about negative equity. He thinks that those are matters of fun. I suggest that he speak to some of the people who have had to live with the trauma of those experiences, which the Conservative party inflicted on their lives.

I agree with one part of the motion: there is a need for a change of direction. It is time the Tory party abandoned its back-to-the-future vandalism and started to recognise that the British public constantly reject the Conservatives because of their false prospectus and their fantasy policies.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford 3:32 pm, 19th January 2005

The kindest thing that I can say about the contribution made by Mr. McCabe is that he was obviously gallantly and valiantly responding to a plea from his Whips to come into the Chamber to fill up some time so as to disguise the Labour party's evident embarrassment and indifference towards this very important question.

The need to monitor spending and control the Executive's spending appetite is the first role of the House. We ought to discuss that matter more often than we do. I congratulate my hon. Friend Mr. Osborne and right hon. and hon. colleagues on giving us this opportunity and on inviting Mr. James and his colleagues to produce the excellent report that we have all received. It is very easy to get it off the internet; my secretary did so this morning with no difficulty at all.

The report is an impressive piece of work, and it is particularly important that public attention should be focused on the extremely worrying growth in public expenditure over the past few years and the fact that we are now running a £40 billion-a-year deficit that must be paid for, with interest, by future taxation. That is a clear burden on future generations. This is the right moment to focus on the issue.

The report brings out absolutely astonishing, spectacular and frankly scandalous revelations. For example, I have learned that the administrative costs of the Department for Culture, Media and Sport have more than doubled since 1997, although its responsibilities have increased only trivially. It is clear that bureaucracy in that Department is out of control. I have learned that the National Endowment for Science, Technology and the ArtsNESTA—which distributes grants under those headings, has given away £7.3 million, yet its bureaucracy has cost £5.9 million. That is a scandalous waste of public money by any standards, so I am grateful that the report has brought that out.

Some aspects of the report are slightly weaker than others. I am not quite convinced about savings of £1 billion or more in defence procurement in the Ministry of Defence. Additionally, the person who was responsible for drafting the part of the report on overseas aid—I know a little about the subject because I serve on the International Development Committee—was not up to the standard of those who wrote the rest, because that section is very muddled. It says:

"the EU is widely recognised as one of the least effective aid channels, since only 52 per cent. of EU overseas development aid goes to low income countries."

It is a fundamental error to confuse giving aid to poor people with giving aid to poor countries. The largest development programme that we have is to India, and although that is a middle-income country, there is enormous poverty in Orissa, Bihar and other states, so we are right to continue to give such aid. The fact that only 52 per cent. of EU aid goes to low-income countries says nothing about the efficiency of the programme.

The James report suggests splitting the EU aid budget

"to separate aid aimed at EU Peace and Security from aid aimed at poverty reduction."

Such a split already exists because there is a separate budget under the external relations part of the own resources budget that is related primarily not to poverty reduction, but to building stability in the near abroad. The budget makes a useful contribution to building stability in the Maghreb, the Balkans and the Commonwealth of Independent States, and I think that we are committed to it. Additionally, the European development fund is administered by EuropeAid, which is a completely different bureaucracy. The split already exists, so I am mystified by the proposal.

The report talks of

"bringing back to the UK the voluntary contribution that . . . goes to the European Development Fund."

The contribution is voluntary in the sense that it has nothing to do with our contribution to the EU's budget and that not making it would be consistent with our obligations under the treaties, but it is not voluntary in that we are committed to making it under the Cotonou agreement and we would let down many poor countries if we did not do so. The section of the report is bizarre and muddled, so it must be reconsidered.

Several aspects of the report are modest and we could have been more ambitious about cutting Government expenditure in some areas. I was surprised that there were no proposals to reduce quangos in the section on the Department for Environment, Food and Rural Affairs, so I hope that we can consider doing that.

There is an open question about whether we should provide legal aid at all for non-criminal cases in this country, given that we have provision for contingency fees. Although I do not have time to go into that point now, there must be a case for restricting access to legal aid for civil cases to UK residents. We have that restriction in the national health service, but apparently not under the legal aid budget, so surely legitimate savings could be made. We know from the newspapers that scandalous abuses of civil legal aid have involved non-UK citizens.

When considering the Home Office, we should think about savings in the Prison Service. The Federal Bureau of Prisons in the United States raises more than half its costs through prison work programmes, and I have felt strongly about that matter since I was a Parliamentary Private Secretary in the Home Office under Ken Baker. The Home Office said that it would try to do something, but I encountered enormous resistance to the idea in the Prison Service. We should take the matter up.

On the Department for Education and Skills, I think that we could be braver than the James report suggests and abolish local education authorities altogether. It seems to me that there is a residual function in looking after children with special needs and those who have been excluded from mainstream schools, but that concerns a very small number of people and does not require an LEA. All their regulatory, advisory and inspection functions could and should be totally closed down.

I have a final, personal contribution to make. This is worth billions, and I think we should consider it urgently. I propose the introduction to the NHS of compulsory generic prescribing. That is to say that when a doctor prescribes a pharmaceutical compound or combination of compounds, the dispensing pharmacist should where possible, if they want to be reimbursed by the NHS, dispense one that is ex-patent and available in generic form, often at a cost that is an order of magnitude lower than the branded version. We should not be using taxpayers' money to pay for packaging or brand; we should be paying simply for the clinical compound that is required.

That is my additional suggestion. I am moving forward on the excellent basis that has been established by the James report, which I hope will inform the debate that we will be having over the next few months, when the rising burden of public expenditure and taxation will be, as it should be, one of the major themes in the coming election campaign.

Photo of Mark Francois Mark Francois Shadow Economic Secretary (Treasury) 3:41 pm, 19th January 2005

It is a pleasure to sum up for the Opposition this afternoon, after what I think we can all agree has been a rather lively debate. It was opened by my hon. Friend Mr. Osborne, the shadow Chief Secretary, who provided a robust advocacy of our new value for money proposals, of which more again in a moment.

That was replied to by the Chief Secretary to the Treasury. It is a funny old thing, politics. He may recall that we first debated together back in 1997 in a secondary school in Wembley, I think, when I was the Conservative candidate in Brent, East, the seat neighbouring his. May I compliment the right hon. Gentleman on his consistency? He had a particular debating style back then, and I hope that he will not mind me saying that it has not altered much even to this day.

May I correct the right hon. Gentleman on a couple of points? With regard to the depth of our research, Gershon, which he prayed in aid, is a 60-page report, of which only some 10 pages are specifically about savings, whereas we have published all the results of our research on a website. At Prime Minister's questions earlier today, the Prime Minister quoted, in detail, from our report on the website. If there is enough detail in there to satisfy the Prime Minister, perhaps the Chief Secretary and the Financial Secretary should take it on board.

There is a great problem with the new deal. We have 1.1 million people in this country under the age of 25 who are now not in employment, education or training. The new deal has failed those young people. The acronym for that group is NEET. I have to tell the Chief Secretary that Labour's record on the matter does not seem very neat to me.

I hope that I do not misquote Mr. Laws, but he said that the James report was extremely helpful and detailed. He also said that the costings are perfectly legitimate. We welcome that acknowledgment from the Liberal Democrat spokesman of the depth of work that has gone into this process. The hon. Gentleman admonished us gently on the list of 168 quangos that we would abolish, pointing out that some are regional bodies that crop up a number of times. That is because the Government have balkanised a number of national organisations in their obsession with a regional agenda; Sport England is just one example. It is not our fault that the Government did that, and in abolishing those organisations, we obviously have to act regionally, which adds to the total.

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

Since the hon. Gentleman is trying to sum up the debate and cite all the comments that have been made, may I ask whether he agrees with Mr. Davies, who described certain parts of the James report as bizarre and muddled?

Photo of Mark Francois Mark Francois Shadow Economic Secretary (Treasury)

No, I do not agree with all of that. I shall discuss my hon. Friend's contribution in a moment, but first let me ask the hon. Gentleman whether he agrees with what I understand his hon. Friend Andrew George said on BBC Radio 5 Live in a debate at lunchtime today: "Trust us, we will put your taxes up."

Mr. Borrow spoke about reaching a threshold beyond which people in Britain simply are not prepared to pay any more tax. I have some sympathy with his argument; unfortunately, he was unable to tell us how the Labour party will then fill the Chancellor's black hole. I put to him the point made by Mr. Stephen Lewis, an economist at Monument Securities, in The Guardian of 3 December:

"It is one thing for a chancellor to miss his borrowing target because economic conditions have let him down. It is quite another when the error occurs despite the economy performing in line with his expectations. The only conclusion then to be drawn is that the public finances are out of control."

I invite the hon. Gentleman to think carefully about that.

My right hon. Friend Mr. Maude delivered a thoughtful speech, as one would expect from one of his experience in these matters. I take it that he would be in sympathy with the comment in The Sunday Times of 16 January that

"according to Labour's version of things, economic stability and success did not start until after May 1, 1997. That is wrong. Low inflation was well established before Blair was elected, and the current record run of growth began in 1992."

Mr. McCabe made an entertaining contribution in which, in effect, he rewrote Labour's election slogan to say, "After seven years and billions of pounds, things have got ever so slightly better." He treated us to the views of his notional constituent, Jim, and some of his experiences. I suggest to him that, under the Labour Government, in addition to what the hon. Gentleman told us, Jim's family have had to endure 66 tax rises, probably cannot register with an NHS dentist, and have probably been burgled twice in the past five years. Jim is now struggling to find the money to pay the tuition and top-up fees for his children, which the Labour Government promised him he would never have to find.

Perhaps on our behalf the hon. Gentleman will forward to Jim a copy of The Economist of 15 January, which contains an article intriguingly titled, "Boasters", with the subtitle, "The dubious self-congratulation on Labour's campaign posters". The article concludes:

"The economy has certainly been doing better in the past few years than it was doing earlier. But the turning point was not in 1997, when Labour took office, but in 1992, when the Conservatives adopted an inflation target."

I say to the hon. Gentleman, please pass that on to Jim with our compliments and invite him to vote Tory next time.

To my hon. Friend Mr. Davies I say only that he has a long-standing interest in certain matters and he has expressed concern, but I assure him that any savings found in the Department for International Development are to be reinvested in the Department, so the amount of money going to international aid will not decrease under our proposals. In fact, it will most assuredly increase. However, he has experience of those matters and if he would like to come and discuss them with Front Benchers, we would be delighted.

Photo of Lembit Öpik Lembit Öpik Shadow Secretary of State for Northern Ireland, Northern Ireland Affairs, Shadow Secretary of State for Wales, Welsh Affairs

I request clarification. The hon. Gentleman will be aware that the shadow Secretary of State for Wales, Mr. Wiggin, said in the most recent sitting of the Welsh Grand Committee:

"the block grant—will not be touched by any changes in funding."

When the Secretary of State challenged him by asking

"is the hon. Gentleman saying that he has a unique exemption for Wales from the shadow Chancellor's £35 billion-worth of cuts and that Wales will be completely immune to those cuts?" the hon. Gentleman replied:

"The block grant is immune."—[Official Report, Welsh Grand Committee, 7 December 2004; c. 11.]

Will Mr. Francois confirm that and say why Wales is to be excluded from the Conservatives' strategy?

Photo of Mark Francois Mark Francois Shadow Economic Secretary (Treasury)

I can most assuredly confirm that under our plans Wales will receive precisely the same amount of money that it would from the Labour Government under their plans. There is no difference. In return, may I point out to the hon. Gentleman that Gladstone, whom his Front-Bench spokesman mentioned, once wisely advised leaving money to

"fructify in the pockets of the people"?

Forty Liberal Democrat tax rises would make that impossible.

In the two minutes or so that I have left to speak, I wish to make the point that a great deal has changed in the past seven years. In 1997, all the talk was of prudence and of the Labour Government never repeating their predecessors' mistake of taxing and spending and getting into financial trouble. Now we find that most of the major economic forecasters— the Organisation for Economic Co-operation and Development, the International Monetary Fund, the Institute for Fiscal Studies and the ITEM Club— agree that the Chancellor has a burgeoning black hole in his finances, to the point where, if Labour was somehow re-elected, the consequence would be massive tax rises to try and fill it.

I conclude, as my hon. Friend the Member for Tatton started, by asking the Financial Secretary which taxes Labour would put up to fill the black hole. Would it put 2p on the basic rate of income tax, would capital gains tax be levied on principal properties, would VAT be imposed on food, or would there be a 10 per cent. increase on national insurance contributions to blow away the upper earnings limit once and for all, as many of us have suggested the Chancellor has long wanted to do?

The British people will have a clear choice at the general election. They can vote for a high-spending and high-taxing Labour Government who would almost certainly raise taxes to fill their black hole, or they can vote for a Conservative Government who have identified £35 billion of savings, of which £23 billion would be reinvested in public services, £8 billion devoted to filling the black hole, and £4 billion returned to the people in tax cuts. That is a clear choice for the people of this country. They can have tax and spend socialism with Labour, or value for money under the Conservatives. I am confident that they will choose the latter, and I commend our motion to the House.

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury 3:51 pm, 19th January 2005

In 1997 Britain's public services were in a state of crisis. For years, all the energy of Government had been focused on spending cuts. The view was being spread that the time for public provision was past and that the way of the future was cuts and privatisation. This week, we discovered that the Tories have learned nothing in the eight years since.

In 1997, everybody could see that the public services faced enormous challenges. There had been growing demands but inadequate investment, and new pressures but old answers from the Tory Government, who were unable to provide the resources to meet the new challenges. Many people believed the Tory propaganda that high-quality public services were incompatible with a successful modern economy. They thought the Tories were right that the only way forward was cuts and privatisation, that there was no alternative and that public provision was doomed to underinvestment and decline.

In the eight years since 1997, we have proved that the Tories were wrong. We have shown and the British people have seen that rising investment to rebuild our public services has gone hand in hand with the strongest economy that any of us can remember. Between 1979 and 1997, the UK was the least stable economy in the G7 except for Canada, with all the problems for the British people that were caused by boom and bust. Since 1997, we have been the most stable economy in the G7, bar none, and we have benefited from unprecedented investment in services.

As a consequences, we see better results in our schools—more children doing well at 11 and at GCSE. There have been more than 28,000 more teachers since 1997, there is more equipment in classrooms, school buildings have been repaired and refurbished, as my hon. Friend Mr. McCabe and others pointed out, and there are more resources for higher education and colleges. For the first time in their careers, many people in education are confident that they have the resources they need to deliver in the circumstances of modern Britain.

In the health service, the number of people waiting more than six months for in-patient treatment is down 78 per cent. since 1997, and the number waiting more than 12 months is virtually nil; it was 30,000 in 1997. Waiting times in accident and emergency departments are down. There are 77,000 more nurses, 19,000 more doctors and more in training than ever before.

Crime rates are down 30 per cent. since 1997, and there are 14,000 more police officers. Police numbers are at record levels, and there are already 4,500 community support officers. As a senior police officer in my constituency told me before Christmas, the Labour Government have given him and his colleagues for the first time in his career both the powers and the resources to do the job that Britain needs. That has been the value that we have delivered for taxpayers' money. Britain does not want to go back to the bad old days of cuts and underinvestment. Instead, we need to build on the historic improvements that we have seen in the period since 1997.

Photo of John Randall John Randall Opposition Whip (Commons)

On the question of value for taxpayers' money, can the Financial Secretary assure me that the Treasury will give detailed scrutiny to the unfolding financial scandal of the Paddington health campus?

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

I am certain that those who are following that development will give it the scrutiny that it needs.

The progress that we have made has been because of, not despite, the remarkably successful, prudent stewardship that the economy has benefited from since 1997—inflation down, interest rates at historic low levels, and unemployment today lower than at any time under the Tories. From the day the Tories were elected in 1979 until the day they were ejected in 1997, unemployment was never as low as it has now been for the past four years. Who wants to go back to 3 million unemployed?

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

The hon. Gentleman talks about good stewardship. How was it that the National Endowment for Science, Technology and the Arts gave away £7.3 million and incurred administrative costs of £5.9 million? Is that good stewardship?

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

I hope that I will have the opportunity to comment on what the hon. Gentleman said about the James review. He made some interesting points. He praised some parts of it and spent rather longer criticising other parts of it, describing one as bizarre. He spent some time on the James report. We have seen the PowerPoint presentation available on the Conservative party website with 174 slides, 12 of them identical referring to the James review of taxpayer value and accompanied by a rather fetching photograph of Mr. James. I hope, for the sake of the Conservative party Front-Bench spokesmen, that there is the detail behind that PowerPoint presentation that a work of that kind requires. We gathered from the Front-Bench spokesman that the Conservative party will not publish that detail, and, indeed, callers to Conservative central office on Monday were told that it would not do so because that would give too much ammunition to the party's critics, which is probably absolutely correct.

Independence for the Bank of England, the symmetric inflation target, the golden rule, the sustainable investment rule—

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

No, I will not give way again.

That framework has delivered not only unprecedented stability, but the resources for investment, long overdue and desperately needed under the Tories, delivered under Labour. We now need to build on those achievements, to maintain the investment and to reap the benefits for Britain—

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

On a point of order, Madam Deputy Speaker. Can you discover whether something is wrong with the microphone system in the Chamber? I intervened, at the Financial Secretary's invitation, to ask a question a moment ago. He took the question, but appears not to have heard it.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

That is not a point of order for the Chair.

Photo of Stephen Timms Stephen Timms The Financial Secretary to the Treasury

This has been an illuminating debate. We still do not know the detail of the Conservative party's plans; it has published only the bullet points. But we do know that the numbers do not add up and that they fail the credibility test. As yesterday's leader column in the Financial Times said:

"The tax plans unveiled by the Tories fail the credibility test."

It is worth reading a little more. It says:

"The White Queen in Lewis Carroll's Alice in Wonderland claimed she had believed as many as six impossible things before breakfast. The Conservatives are less ambitious in wanting voters to believe in only three".

One thing we do know is that even on the basis of those numbers that fail the credibility test, the Tories claim only that they will release £4 billion a year for tax cuts by 2007–08, but they have announced that there will be tax cuts in their first Budget after being elected. The money can come only from more borrowing, putting at risk exactly the remarkable stability in the economy that has been priceless for us over the past eight years.

We also know that the Tories want deep cuts. Even all those cuts that we can glean from what we have seen in the James review—scrapping the new deal, increasing unemployment by privatising and reducing funding for jobcentres, halving the Food Standards Agency, scrapping support for small businesses, scrapping NHS Direct, scrapping NHS improvement targets, even closing the National College for School Leadership, a particularly spiteful proposal—gets us less than half way to the cuts that they have announced that they will deliver by 2012. Yesterday, the Institute for Fiscal Studies rightly pointed out that the Conservative party has announced only one third of the spending cuts that it plans to make by 2012. We know where those cuts lead, because we have been there before, and they would be a disaster for Britain, which will be the verdict of the British people.

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

The House divided: Ayes 147, Noes 358.

Division number 35 Value for Taxpayers' Money

Aye: 147 MPs

No: 358 MPs

Ayes: A-Z by last name


Nos: A-Z by last name


Question accordingly negatived.

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

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


That this House believes that economic stability is the foundation for continued investment in public services; welcomes therefore the lowest inflation since the 1960s, lowest interest rates for 40 years and the longest period of economic growth for 200 years; further welcomes this Government's record investment in public services; believes that it is important to ensure taxpayer value for money and therefore welcomes the fact that the Government is making efficiency savings to release resources into frontline services; further welcomes the fact that Sir Peter Gershon has identified over £20 billion efficiency savings across the public sector and notes that he said that to go further than the efficiencies he identified would put at risk the delivery of frontline public services; and further believes that any proposal to make cuts in public spending would not only damage frontline public services but the economy as a whole.