Fiscal Responsibility Bill

Part of the debate – in the House of Commons at 7:58 pm on 5th January 2010.

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Photo of John Redwood John Redwood Conservative, Wokingham 7:58 pm, 5th January 2010

That is a sad truth. All of us who lived through that were miserable about it, but it was good that we started to recover. The evidence shows that cutting public spending did not impede, but enabled the recovery. I remind Labour Members of Conservative Front Benchers' main claim on that point: we do not recommend spending cuts because we want to cut spending; we have come into politics because we want good public services-obviously, all politicians like to be involved with success in public services-but we believe that cuts are now essential because of the interest rate threat, which my hon. Friend the Member for Tatton correctly identified.

The reason that Governments had to make cuts-and, in some cases, provide for tax increases-to get out of previous recessions was that, if they had not controlled the deficit, the deficit would have controlled them. If we do not control the deficit, it will exact an extremely high price on the rest of the British economy in the form of much higher interest rates and rationed credit, when we need low interest rates for longer and a more plentiful supply of credit from the private sector to get the productive economy moving again.

Our problem is that we have a banking crisis and a crisis of over-borrowing. If we persist in over-borrowing in the public sector, we will not strengthen, but undermine or weaken the recovery. We will make progress more difficult, delay the necessary action and when the cuts-forced by market crisis, collapse of sterling or a bond crisis- eventually come, they will be more rapidly administered, more brutal and less well thought through. It is far better to plan and start to take action now so that the markets begin to say, "Ah, they are serious; they understand it. We can give them a bit of time because we now know that they want to get on with it."

If we constantly repeat, "Tomorrow, tomorrow-mañana, mañana", the markets will not believe a word we say, our interest rates will continue to rise, as they have done in the past year, and our currency will continue to fall, as it has done in the past year. The Economic Secretary appears to think that that is funny. He should wake up to the reality over which the Government are presiding. Interest rates should remain low-we do not want them driven higher by market movements. Our currency is being driven lower, and we need a floor in sterling before the situation gets out of control. I hope that the Treasury sees the need for that. It would be good if it could persuade the Prime Minister-the First Lord of the Treasury-that he also has some duties, and that he does not fulfil them by tarting up a few words as a Fiscal Responsibility Bill. He has the power to instruct the Government to start to tackle the problem.

Apart from the absence of Labour speakers, the interesting point about the Government is the absence of any commentary on how they might start to control the deficit by controlling public spending. Let me begin with an observation and then make an unpopular comment. A substantial reduction can be made in the number of people employed in the public services while delivering a good level and quality of public service in crucial areas. We currently do too many things badly. The Government have recruited another million public sector employees in the past 12 years and they have not always chosen well the roles into which to put those people. Often, they have complicated and made the process of public service delivery less efficient by over-recruiting in the wrong areas.

The first thing I would do to try to tackle the deficit is put a control on all new recruitment. Every year, 5 to 10 per cent. of public employees leave, find better offers, retire, go off to have children and do not want to return to work. That means that the work force can be reduced quite rapidly over four or five years without compulsory redundancies and the costs and disruption they bring. If one has a strongly enforced natural wastage policy, one can give one's existing public employees much better chances of promotion and career development because some posts will need filling. They tend to be more interesting and better posts, so people can be accelerated into them and that can create a better life for them. We need to control our costs and do more with less. The biggest cost throughout the public services is that of labour.

Of course, we need all the teachers, nurses, doctors and uniformed personnel that we have-I am not talking about those front-line jobs. However, most public employees are not in those jobs. We can introduce better processes, ensure that we do more with less and simplify the tasks. If we simplify the regulatory system, we need fewer regulators; if we simplify the tax and benefit system, we need fewer people clerking and administering those systems. That is what we need to do. Any company would do it when faced with the need for cuts on a proportionate scale that the Government face.

Companies do not immediately ask, "How can I cut my most important service to the public?" or, "Can I close down all my shops to show that I'm in a financial mess?" or, "Can I get rid of all the key personnel so that I can do a really bad job?" Companies ask, "Which people can I do away with so that it's least damaging to the business? To whom can I give more authority and promote, who can then do more for less? How can I win more business with fewer people?" A company has to work like that, particularly in a global marketplace. For example, every year, manufacturing companies are normally asked by their leading customers to cut their prices because of the power of global competition. They therefore have to get on with delivering more for less. They cannot do that by skimping on quality; they must also improve their quality every year, otherwise competitors will do better for less.

My unpopular point is that Members of Parliament must show that we ourselves can do what I have outlined. As I understand it, the current expenses system budgets for every Member of Parliament to have three full-time staff. I think we can do our work with two. I do not want to be unkind to current colleagues, so I believe that we should say to all new Members of Parliament that they will get an allowance for only two full-time staff. Those who are already here can carry on with three-I do not know whether you, Mr. Deputy Speaker, employ three staff, but I do not, so I know that the work can be done with fewer-but when one leaves, the Members should move on to the system of two full-time staff. That is a minimal sacrifice that we should make to show the public sector that more can be delivered for less. A Member of Parliament can do a perfectly good job with two rather than three staff, and that makes a contribution. Armed with that moral authority, we can then approach the big parts of the civil service and say, "Look, this is what we're doing; this is our contribution, and now we'd like you to do something similar. We don't want you to take out one in three-perhaps one in 10-but we need to act to make an impact on this huge deficit."

Let us consider pensions. Members of Parliament, unbeknown to the public and unbeloved by them, have already worsened the terms of our pension scheme for everybody who is here. We have to make bigger contributions and there has been some dilution of the benefits-rightly so because the costs were large and the deficit was getting out of control. We are therefore contributing to tackling the deficit. I think we need to go further, and to say to new MPs that like all private sector schemes, the MP scheme is closed to new Members. We have to work our way through our pension problem in exactly the same way that people are working their way through many private sector problems-they have realised that they are not affordable any more, and that they have to make cheaper arrangements for new staff. We are going to have to do the same in many public sector pension schemes that are far bigger and more important than the MP scheme, but it is important to do it first for that scheme, so that we lead by example and have some moral authority when we come to tackle the problem.

There are many other ways in which we could start to curb the deficit. I have no intention of repeating speeches that I have made in the House before and of naming individual programmes and areas of work that I would like to see discontinued, such as the identity card and regional government agenda and so forth, which we could simply abolish and scrap. I am pleased to say that there are many such schemes that could be scrapped, which would start to fight the deficit.

The issue of process is terribly important. The public sector in Britain must learn to do more for less. It must learn to raise quality every year and to cut the price every year, which is what organisations in the private sector must do year after year if they wish to be successful. It is not impossible. Indeed, one of the joys for any new Government is that they will inherit such an inefficient mess that the early improvements in efficiency will be relatively easy. It is far more difficult to take over a company that has been through 10 or 20 years of such processes because the obvious, low-hanging fruit will have been taken-as private sector people would say, the obvious inefficiencies will have been squeezed out. A new Government will have many inefficiencies to squeeze out. They will have to be bold and strong and do such things in a sensible time scale and in a way that does not disrupt the rights and loyalties of existing staff. I think that can be done, and it will begin to curb the deficit.

This afternoon and this evening is, I am afraid, a waste of time and money. Parliament stands ready to do something serious, and the Government deliver a nonsensical Bill to bind themselves or their successor in a way that is not binding and incurs no penalties. What we need is a Government who know how to run the public sector. We need a Government who understand that the world does not owe us a living and that it is moving on rapidly. We need a Government who understand that industry and Governments elsewhere are far more efficient and smart, and far more able to do more for less. This Government seem not to understand that.

If we do not wake up soon, we could have a currency crisis, a bond crisis and a public financing crisis. We might then have a public sector management crisis because cuts done in panic, on a big scale and too quickly, could be very damaging. If we put the processes in place now, we might start to get confidence back and we would begin to curb the deficit earlier, which is what we need to do.

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