I beg to move,
That this House
has considered the matter of the Comprehensive Spending Review.
It is eight days since my right hon. Friend the Chancellor set out the conclusions of the Government's spending review-this coalition's plan to bring the country back from the brink. We had to act to tackle the deficit: it was the only option to secure our country's future. It is the only option to build a strong platform for future growth and prosperity, and we will see it through.
In charting the course for the next four years, we have made choices. We have chosen to invest in growth, jobs and the future of the economy. We have chosen to protect the most vulnerable and extend the ladder of opportunity. We have chosen to cut the costs of central Government to free up the front line. These are our priorities-growth, fairness, reform. They are the right priorities.
I am going to get to end of this section, and I will give way then.
These are some of the most difficult decisions that any modern Government have had to make, with every number on every page representing someone's job or a service someone relies on. They are decisions that I know will affect everyone. So today I will set out why we had to act, the principles guiding our choices, and why fairness is at the heart of this spending review.
There is an important debate to be had. The Opposition have a chance to contribute to this discussion, but the price of being taken seriously is a credible and detailed plan. They need to recognise that we cannot go on in the way that they did; they need to say which cuts they support and which they oppose, and what they would do instead. Without that, it is opposition for opposition's sake, and the country will not take them seriously.
So today's debate also offers a challenge for Labour Members. I will be listening carefully to what they have to say, and I hope that the British public will receive a long-overdue apology for the mess that one party caused and which two parties have come together to clean up.
I thank the right hon. Gentleman for giving way-at last. He says that in order to be taken seriously, we need a plan. In order for him to be taken seriously, he needs to be truthful with people. I do not understand how he can claim that fairness is a principle of this comprehensive spending review when women have been hit twice as hard as men.
I do not accept that analysis, and I will come to that point later. The hon. Lady should be aware that her party's plans were for £44 billion-worth of cuts, which would have had an impact on people too. Many of the things that we have done, such as uprating the state pension in line with earnings and protecting the national health service, which her party would not have done, support women.
The right hon. Gentleman is perpetuating the myth that there is no alternative, but he just said that the previous Government had a strategy in place for paying off the deficit, so there is an alternative. An alternative was also put forward in 1945. He can take whichever direction he likes, but he cannot keep claiming that the decisions he is making are the only alternative, because others have been put forward.
The figures assume 8% inflation over the period, but if, in the first couple of years, we have a complete pay freeze in the public sector and we buy things more cheaply, as is the plan, does not that mean that cash rises can translate into real rises in the programmes that are going up in cash terms?
The right hon. Gentleman is certainly right to say that at the end of the spending review public spending will be higher in cash terms than it is at the moment. In real terms, it will go back to the level of about 2008-09, and in terms of a share of gross domestic product to about the level of 2006-07. People need to be realistic about the scale of what is being proposed. The big gainer from the huge deficit that Labour left us with was the department of debt interest, and unfortunately it is the cost of debt interest that we have to meet.
The right hon. Gentleman has put great emphasis on the debt that he inherited and the need for the Opposition to be responsible. Given that the greater part of that debt was incurred in bailing out the banks and supporting manufacturing industry, could he be responsible and tell us what he would have cut in that position?
I am going to press on; I will give way again in a moment.
The House and the British people will never forget the financial position of this country when we came into office, with £1 borrowed for every £4 spent-the largest deficit in our peacetime history. Debt interest payments alone stood at £43 billion a year-that is £120 million a day.
I will press on, and give way in a moment.
Thanks to Labour's profligacy, there really was no money left. The country knew it, our business leaders knew it, and, as we discovered, the Labour Chief Secretary knew it too. By May, the alarm bells were ringing-the danger was real. Whether one wants an expansive social policy, a smaller state, or more or less public spending, it must be underpinned by proper control of the public finances. If that control is lost, the policies that have been built, whatever they are, will inevitably crumble.
The Chief Secretary said that to be taken seriously one needs to have a credible and detailed plan. He then went on to say that the Government have laid out their plans in detail, so perhaps he can give us some of that detail. Which Revenue offices will shut? Where will the Department for Work and Pensions closures be? Among the 35,000 Ministry of Defence civilians, where will the jobs be lost? Will he give us the detail in the same way as when the spending plans in the 2004 and 2007 CSRs were announced?
There is a great deal of detail in the spending review document, as the hon. Gentleman knows because he has had a chance to study it, and of course Departments will set out more detail in due course. He would have a bit more credibility on the subject of controlling the public finances if his colleagues in the European Parliament had not just voted for the 6% rise in the European Union budgets.
My hon. Friend makes a very important point. The NAO has indeed criticised the effectiveness of the previous Government's so-called efficiency programme. Many of those criticisms are well founded, and we will proceed on a very different basis. To give an example, the single indicator that they set out for local authorities to report on their own efficiencies had 66 pages of guidance for them to follow, thereby creating a huge industry in local authorities just to meet the reporting requirements.
The right hon. Gentleman has been talking about detail, and there is one detail that I am interested in. There was a leak from the Ministry of Justice demonstrating that it has set aside £230 million to pay for the redundancies that it has announced in its front-line staff. Can he tell the House, because he must have this figure, how much he has set aside to pay the redundancy bills for the job cuts that he has announced?
I welcome the hon. Lady to her place. I think that it is the first time we have had an exchange over the Dispatch Box, and I congratulate her on her appointment. Departments will set out their work force plans in due course. They are working on those things, and there are many things that they can do to avoid excessive redundancies. [ Interruption. ] I am not going to go into individual departmental figures.
Rising interest rates choke the finances of those who borrow, and rising inflation bites on those on fixed incomes. It was Mr Brown who once observed:
"Public finances must be sustainable over the long term. If they are not, the poor...will suffer most."-[ Hansard, 2 July 1997; Vol. 297, c. 303-304.]
For once, I agree with Gordon. Those who say that there is a choice between fiscal discipline and supporting growth could not be further from the truth. The choice is between a sound platform to support growth and a lack of control that would undermine it. In reality, it is no choice at all.
I am going to press on with this section of my speech, and then I will give way in a moment.
In June's emergency Budget, we set out the road map to recovery and took the country out of the danger zone. The independent Office for Budget Responsibility examined our plans in June and forecast the economy growing and unemployment falling in every year. It also assessed that we were on course to eliminate the structural current deficit and see debt fall by the end of this Parliament, one year ahead of our mandate. The recovery will be choppy, but we are confident that our plan will see us through.
Does the Chief Secretary accept that he is introducing a benefit system based on punishment? Does he agree that anyone out of work for more than a year will now lose 10% of their housing benefit? That is punishment. What advice would he give to my constituent in Brighton who has gone for 465 jobs over the past 10 months without success?
I do not accept that. We have to control the welfare bill, which has risen dramatically over the past few years. I will come to that later in my speech.
It is inevitable, of course, that individual Departments will have to set out the costs of redundancies, and it is right that they should do so in due course. However, will my right hon. Friend set out how much extra interest the Government would have to pay, and therefore how much more public spending would have to be cut in future, if we did not start to make such economies now?
My hon. Friend asks a very good question. Over the course of the spending review period, our plans will save £5 billion in debt interest, which the Labour party was very happy to pay.
I thank the right hon. Gentleman. We know that he will know the answer to this question. He has set out a plan that will lead directly to 490,000 people losing their jobs in the public sector. We know that the Ministry of Justice has already made an allowance of £230 million to cover the cost of redundancies. He must have a figure for the rest of Whitehall put together, and he should now give it to us.
The hon. Lady is the shadow Chief Secretary, and we read in a memo directed to the Leader of the Opposition that the Opposition had a plan for £44 billion of cuts, but she has not set out a single piece of detail on that. As I said, Departments will set out their work force plans in due course.
The previous Government's plan was not a serious plan to deal with the deficit and support growth. It was not a fair approach. It would have led to more, not fewer, cuts in the end, because of higher debt and higher interest payments-more interest on the debt, and more interest on the interest. Compared with the plans that we inherited, we will save £5 billion in debt interest payments over the course of this Parliament.
The emergency Budget set out our plan to balance the books, and now we have shown how we will find £81 billion of savings by 2014-15. Let me put that in some context. Even at the end of that period, public spending as a share of gross domestic product will be 41%.
I will give way at the end of this section of my speech.
That 41% figure is about the same level as in 2006-07, and the same level in real terms as in 2008. It is higher than in any year of Tony Blair's Government. Perhaps that is why he supports our strategy. That is not to say that cuts will be easy-of course they will not-but it nails the myth that we are an ideological Government, hell-bent on shrinking the state out of recognition.
I think that that is a classic statement of deficit denial. The hon. Lady has to recognise that we are spending £150 billion more than we raise in tax-the largest budget deficit in the European Union and the largest in our country's history.
I will not give way again, I am going to press on.
The Chancellor's statement set out the level of departmental spending for the next four years. I will not repeat every decision now, but of course I am happy to take interventions. [Hon. Members: "You're not!"] I have taken a great deal of interventions, and I will take a few more later. Instead, I want to focus on our priorities: growth, fairness and reform.
I am very grateful to the Chief Secretary for finally seeing me up at the back here. One of the words that he mentioned was growth. How can we have growth when 1 million people are being put on the dole?
How could I miss the hon. Gentleman? I will explain the answer to his question as I make progress in my speech. He will just have to listen carefully.
Our priorities-growth, fairness and reform-guide every choice that we make. We are a pro-growth Government, focusing our capital resources on key infrastructure projects in transport and green energy.
I will not give way at the moment.
We are a Government with fairness at our core, and a reforming Government who leave no stone unturned in the search for waste, while devolving power and funding away from Whitehall. In answer to Gordon Banks, I will address our priorities in turn, and the first is growth.
It is growth that will deliver additional jobs in the economy across England, Scotland, Wales and Northern Ireland. I have said that our plan as a whole will deliver macro-economic stability, which is crucial to restore growth and increase confidence to invest. We are not standing on the sidelines waiting for growth to happen. We have prioritised spending on the areas that can deliver the best return to growth. Over the spending review period, capital spending will be slightly higher than the previous Government planned, with significant investment in transport capital across the country and more cash being spent on transport over the next four years than in the past four. We will maintain in cash terms resource spending on science, and a new green investment bank will lead the way in the economy of the future. Today we published our local growth White Paper, which includes a regional growth fund of £1.4 billion over three years and announces new local enterprise partnerships. Those actions and many others are major parts of our strategy to secure and support sustainable economic growth.
The right hon. Gentleman's speech so far has shown that he is sticking to the outlandish predictions of growth levels that he has made, and of unemployment falling year on year as a result. Will he reassure the House and the country that if they prove wrong, he will change course, and quickly?
Does my right hon. Friend agree that the biggest risk to our economy is the record deficit of 10% of GDP, the highest in the G20? Had we not taken action, that would have posed a big risk and we would have lost more than 490,000 jobs. Opposition Members should think about the jobs that we would have lost had the Government not taken decisive action.
I am grateful. The Chief Secretary has pointed to the forecasts made by the OBR. He will know that between 1994 and 2008, the private sector created 100,000 jobs a year. In that period, growth was 2.8%. The OBR projects growth of 2.4%. How, then, is it possible that 1 million jobs can be created in the forthcoming period?
In fact the OBR forecast more private sector jobs than the hon. Lady suggests. She will know that in the past two quarters several hundred thousand jobs have been created in the private sector. I will explain later in my speech the measures that we are taking to support the private sector.
Not for a moment. I am going to press on with my speech. I know that many hon. Members wish to contribute, and the Back-Bench time limit is already at six minutes, so I will make some progress, if I may.
Our second priority is fairness, and let me say what I think that means. Fairness means that across the entire deficit reduction plan, those with the broadest shoulders should bear the greatest share of the burden.
Fairness means that even in tough times, we focus our resources on extending the ladder of opportunity through early years provision and schools, and it means that we look carefully at whether we are doing right by those who receive welfare and the working families whose taxes pay for it. Those are our tests and we have met them in full. First, we have published distributional analyses that clearly demonstrate that those on the highest incomes will contribute more towards the consolidation. [ Interruption. ] That is not just in cash terms, but-
Order. The right hon. Gentleman is giving way, but will hon. Members please take their seats when he does not?
Thank you, Mr Deputy Speaker.
As I was saying, we have published distributional analyses that clearly demonstrate that those on the highest incomes will contribute more towards the consolidation, not just in cash terms but as a proportion of their income and consumption of public services.
I am grateful to the Chief Secretary for giving way. So far, he seems bereft of answers to any of the questions put to him. Does he agree with the Institute for Fiscal Studies' analysis that the June Budget and last week's spending review can be fair only if the Government include all the measures that I introduced in my Budget prior to the election?
I think that the phrase "no answers" applies to Opposition Front Benchers on dealing with the deficit.
The measures included in our analyses include measures for which we will introduce legislation, such as the measures on national insurance. Those measures are part of our plan and it is perfectly appropriate that they should be included.
I am going to press on and answer this point. I shall give way in a moment.
The right hon. Gentleman talked about our analyses counting measures proposed but not yet introduced by the previous Government. I have to tell him that the measures are as much a part of our plan as any others we have introduced. We took the decision to proceed with them. However, I am glad to say that some of the measures proposed by the previous Government did not make it into our final analysis. We rejected the jobs tax- [ Interruption. ] They do not like it! We rejected cuts to the overall NHS budget and we rejected the idea of burdening future generations with debt. They were wrong and they were stopped.
Our progressive approach also places responsibility on the banks to make their fair contribution. We will continue to press banks to do more and to bring forward reforms to improve our financial system. That is why we introduced the bank levy. The previous Government stalled on that, saying that we would need international agreement first, but we went ahead with it. As the banks need to follow the spirit and not just the letter of the law, we have engaged in a concerted effort to get the leading banks to sign up to the code of practice on taxation by the end of November. We must ensure that everyone, no matter how rich, pays the taxes they owe. That is why we have agreed a new £900 million package for HMRC. That investment will fund a clampdown, bringing in £7 billion a year by the end of the Parliament.
No, I will not confirm that. We have made many spending choices to invest additional resources in families with children-a pupil premium in the schools system and an entitlement to 15 hours of free nursery care for two-year-olds in addition to the 15-hour entitlement for three and four-year-olds that we introduced.
Our clampdown on tax avoidance will bring in £7 billion a year by the end of the Parliament, because there is no place for tax cheats in our society-neither is there a place for people who cheat the benefit system. My right hon. Friend the Secretary of State for Work and Pensions has introduced new plans to tackle benefit fraud.
I shall give way at the end of the section on welfare because I know it is of interest to many hon. Members, but let me explain our position.
The welfare budget accounts for nearly £1 in every £3 spent by the Government. The cost of the welfare system has increased by 45% in the past decade. In some cases, those increases were necessary-it is right that the Government should help those who need it most-but in many cases the previous Administration's over-complicated bureaucracy trapped people in a system in which it does not pay to work. Worse still, many were simply dumped on benefits by previous Administrations and left there. That is not fair on them or the taxpayer. No one can deny that reform is essential, but the question is how the right balance should be struck.
Our approach is to move to a universal credit system over the course of two Parliaments to do away with the complexity of the current system so that it always pays to work. We will introduce a new work programme to provide personalised support to those who need the greatest help with getting back into employment, with private and third-sector providers being paid for the additional benefit savings they secure. We will fund significant above-indexation increases for the child tax credit to ensure that the spending review has no measurable impact on child poverty over the next two years. Through the welfare reforms in the spending review, we will find £7 billion of net savings on top of those identified in the Budget. Some £2.5 billion comes from removing child benefit from households with a higher-rate taxpayer. That is the largest welfare measure in the spending review and the most progressive, but it is the one that the Opposition have most vocally opposed.
I thank the right hon. Gentleman for giving way on that point. There are press reports out on the wires that a source in Her Majesty's Treasury is saying that the child benefit cut is "unenforceable" and will be dropped. The press report says that it is
"panic stations in the Treasury."
Is that true?
I think it is panic stations on the Opposition Front Bench if they do not have a single answer to a single question about the action that they would take to reduce the deficit. The story that the measure is unenforceable is nonsense; it will be introduced as planned. The savings were signed off by the Office for Budget Responsibility, which considered the compliance risk involved as well. Higher-rate taxpayers are of course required to disclose all relevant information.
The Minister's whole plan is based on two things: achieving, first, the biggest rate of export since 1974 and, secondly, a rise in business investment that has been matched only once in our history. Achieving both those things in the same year would be unprecedented, but the Government want to achieve both every year for three years on the trot. I know that the Chancellor and the Prime Minister do not live in the same world as the rest of us, but where did they dream that up-fantasy island?
I had planned to give way a few more times, but that intervention took so long that there will not be time to take any more for a while. The spending review is based on one simple principle: cleaning up the mess left behind by the Government of whom the hon. Gentleman was part.
We are making other welfare reforms too. We will cap household welfare payments at the average earnings of working households and we will reform housing benefit so that support better reflects the housing choices that working families have to make. That must be right. The welfare system should provide an effective safety net, but it should not pay workless families far more than most working families earn. That is where benefit traps and dependency start. Our reforms mark an historic shift from dependency to independence. Our measures are tough but fair.
The cap that we propose, which will be debated in due course, is nearly £21,000-worth a year of housing benefit. That is more than equivalent to what most working families have to spend on their housing costs.
Yes; many people on housing benefit are in work. The point of our reform is to say that the fairness should be between people on out-of-work housing benefit gaining the maximum amount, which we will cap at £400 a week, so that that amount is equivalent to what people in work could receive in housing benefit.
I want to press on, so I shall not give way.
Our third principle is reform, which manifests itself in three ways. The first is bearing down on back-office costs. Each main Government Department has found at least 33% in administrative savings: we will share services, cut down on waste and abolish quangos. The second is a massive devolution of power from the centre, reflecting our commitment to freedom and responsibility. Apart from with schools and public health, we will end the ring-fencing of all Government grants to local authorities from April next year. We will reduce 90 separate core revenue grants to councils to fewer than 10. Under the previous Administration, the comparable number of grants increased by more than 500%. Our new tax increment financing borrowing powers will allow councils to fund key projects, and we have today announced that we will consider options to enable local authorities to retain locally raised business rates. We are putting the local and government back into local government.
Finally, reform means recognising that the old ways of doing things simply were not working, even in times of plenty.
The House has waited in vain for a straight answer to a straight question. I know the right hon. Gentleman would like to take credit for the sun shining, and indeed for the imprint on the Turin shroud, but will he give a straight answer to the straight question asked by my right hon. Friend Mr Darling, the former Chancellor of the Exchequer? Is it true or untrue that the growth in the first three quarters of 2010 is a direct result of the measures taken by the previous Government to build Britain out of recession?
The last quarter of growth-Opposition Members were hoping that things would be worse than they are, which is a pretty poor foundation for any sort of economic policy-took place since the Budget. [ Interruption. ] Of course the previous Chancellor deserves credit for that much of his work in office- [ Interruption. ]
Order. A lot of Members want to speak in this debate, and this disorderliness is doing us no good.
No, I will not give way.
The old ways of doing things were not working even in times of plenty, so we will revamp the failing system of social housing. The number of socially rented properties fell under the previous Government in total, with an increasing proportion of workless households finding themselves trapped in dependency. The terms of existing tenants and their rent levels remain unchanged under our proposals. Some new tenants will be offered intermediate rents nearer to market rent.
I am not going to give way because many hon. Members wish to speak.
Together with capital investment, those measures will create a more flexible and responsive model, enabling the Government to deliver up to 150,000 new affordable homes over the next four years.
No, I am not going to give way.
There will be reform, too, in the justice system. A prison population that is rising out of control is not right, let alone affordable. The guilty must be punished, but rehabilitation must be the priority.
There are major reforms in other policy areas. Across all that we do, reform is the keystone to delivering better for less.
I thank the Government for their work in rescuing savers in the Presbyterian Mutual Society in Northern Ireland; they are very grateful. The Government have built on the work of the previous one, but they have brought a solution to fruition. However, may I remind him of the agreement-the settlement-that was made at the time of devolution for Northern Ireland? Will he look at that again to ensure that the challenges unique to Northern Ireland are faced with confidence?
I am grateful for the right hon. Gentleman's intervention-my hon. Friend the Financial Secretary, who did a great deal of work on that issue, will have heard his compliments. I believe that we will introduce a growth paper on Northern Ireland soon, and the right hon. Gentleman's points on that are very important. I know that questions have been asked, for example, on capital spending between June 2005 and 2018. We believe that we are on track to meet those commitments, which were made some years ago.
I am not going to give way.
The spending review will have an impact on the public sector workforce. I should like to say that the ideas, effort and commitment shown by the public sector workforce are essential to helping people to get the best from the services they provide, and we should thank them. The reforms that we are making will make the public services a more rewarding place to work-more power, more trust, more independence-but there will be an impact on employment. The best estimate remains that of the Office for Budget Responsibility, to which hon. Members have referred, which forecast in June a reduction of 490,000 employees over the next four years.
Natural turnover will play a big part, but individual employers will make their own decisions on redundancies. Each such decision will be difficult, which we recognise, so we have introduced pay restraint to protect jobs. We will monitor plans closely to try to avoid localised hotspots, and deploy our regional growth fund to support such areas.
The Chief Secretary is proposing to make many public sector workers redundant. Given that, why is it considered fair for others to have money in tax avoidance trusts based overseas? Considering the strategies he is introducing, will he give a commitment that no Minister in the Government has or will have money based in overseas trusts designed to avoid paying their fair share of British tax?
Does the right hon. Gentleman accept that the localised hotspots he mentioned, where the cumulative impact of his measures will take the most drastic and tragic effect, include Wales, the north-east and other areas that either rely heavily on public sector workers as a proportion of the work force or where the benefits reforms will have a significant impact? Does he also accept that he will be judged in 12 or 36 months or five years of this Parliament on whether the north-east, Wales and elsewhere are disproportionately and tragically affected by the cumulative impact of the measures he is ramming through?
Of course I accept that people will judge the Government's performance on the basis he suggests. I fully understand that, which is why I am spelling out the measures we are taking to ensure that those areas that are most affected are supported through the regional growth fund. His point is important and serious, but I observe only that the previous Government created the mess of the Budget deficit. We have to clean up the problems facing our economy. The worst thing possible for Wales or other parts of the country would be to leave the deficit untackled, which would lead to lower growth, higher interest rates and less employment.
I will not give way again to the hon. Gentleman; I shall press on.
Also in June, the OBR forecast total jobs in the economy over the next four years, which Opposition Members seem to have missed. It implies 1.6 million additional private sector jobs over the period. We will do all that we can to help those leaving the public sector to take advantage of those opportunities, and we must remember at all times that the gravest threat to jobs in our economy would be a failure to deal with the deficit. Deficit denial is the single biggest danger to employment in this country today.
Throughout the review, I have been clear on one thing: our decisions need to improve life chances. Fairness is not just the net sum of cash transfers. That is important, but there is more. Fairness is about opportunity and the chance for a better future, especially for the next generation. We know about the attainment gap between children from different backgrounds, which starts at an early age.
In these difficult times, perhaps no one would have noticed had we quietly turned a blind eye, but fairness demands more, so we have chosen to invest. That is why we have introduced a new pledge for 15 hours' child care for disadvantaged two-year-olds, matching the 15-hour commitment for all three and four-year-olds that was previously introduced by this coalition Government. Cash spending on Sure Start services will be maintained, with a renewed focus on life chances. Although this has meant a greater challenge for other Departments, I am proud that the schools budget will not only match but outstrip inflation in each of the next four years. When we factor in reduced pressure from pay restraint and back-office savings, that amounts to a very significant boost to the classroom. A new £2.5 billion pupil premium will target additional resources on those with the most to gain.
We will be relentless in our focus on social mobility, and in extending the ladder of opportunity. Fairness runs through the heart of this spending review.
I do not accept that analysis. Of course, it will be for individual police forces in due course to make their own decisions- [ Interruption ] -but given the potential for police forces to become more efficient, we think that there is no reason why those savings should have any impact at all on the presence of police on the front line in communities.
On the policy to give two-year-olds 15 hours of education based on free school meal eligibility, what mechanism will be used and how much will it cost to ensure that that happens, given that there is no information about two-year-olds receiving free school meals? I have asked Ministers that question twice, but I still have not had an answer.
That is a very good question. I imagine that the hon. Gentleman intended to preface his question by saying that he welcomed the commitment to additional nursery education for the poorest two-year-olds. There are many mechanisms available, for example within the Sure Start system, that can target those pupils, and the Secretary of State for Education will no doubt make announcements in due course.
I now intend to finish my speech with no further interruptions.
I am often asked about a plan B. Plan A is to deal with the deficit so that we can support growth and invest in fairness. But we all know that the recovery will be choppy, so plan B is to deal with the deficit so that we can support growth and invest in fairness. But we know that the road will be difficult, so plan C is to deal with the deficit so that we can support growth and invest in fairness. Nothing is more important to our future prosperity.
One party made this mess. Two parties are working together to clear it up. We will hold firm. Where we have faced tough choices we have asked, "What are the fair choices? What are the choices that support growth? How can we achieve more with less?" We have made the right choices for the right reasons. We have given our answers: now let us hear the Opposition's.
Last week's comprehensive spending review statement has taken a huge and risky gamble with the jobs and future prosperity of millions of people in this country. This wholly unnecessary risk has been taken because this Conservative-led Government is in ideological thrall to the discredited economic mantra that shrinking the state is always the right answer. They do not state it as provocatively as Mrs Thatcher once did in the 1980s, but they believe it just as firmly. The Orange Book Liberal Democrats, led by the Deputy Prime Minister with the Chief Secretary in tow, believe it too.
Of course, the deficit has to be brought down-[Hon. Members: "Ah!"] We said that before the election and we set out a plan to do so. We also said it at the election and we have said it since. The difference between us is how the deficit is brought down. My right hon. Friend the shadow Chancellor has made it clear that we favour a different balance between spending cuts and tax rises that brings the deficit down but also protects the recovery and boosts growth. None of us should forget the backdrop to this spending review, which is families up and down the country worried about their jobs and homes. That is why the cheers and mass waving of Order Papers on the Government Benches as the Chancellor announced the largest job cuts for generations demonstrate just how out of touch they are. At that very moment at the end of his speech, the masks slipped and we saw what really motivates them. As these cuts begin to bite, the British public will not forget.
Given that between 250,000 and 500,000 people leave the public service every year voluntarily, for retirement or other reasons, will the hon. Lady now withdraw her statement that half a million people will lose their jobs under this Government? It can be done by natural wastage.
That is not my statement: it is a statement by the Office for Budget Responsibility. It is also the figure that was revealed accidentally the day before the Chancellor's statement by the Chief Secretary when he was filmed in the back of his car with open documents. It is not my figure. Mr Redwood should remember that the Ministry of Justice is already planning 14,000 redundancies, as we know from a leak, and has set aside-
No, I shall finish answering the question. The hon. Gentleman can sit down and be patient, and we will see whether I give way to him a little later.
The Ministry of Justice is already planning cuts of 14,000 in front-line staffing. It has also set aside £230 million to pay for the costs of those redundancies. I asked the Chief Secretary what the figure was for the rest of Whitehall. He will know what that figure is, because he will have signed it off. Twice I asked him for that figure, and twice he avoided the question. It does him no credit if, knowing what that figure is, he comes to this House for a debate on the comprehensive spending review but avoids the question of the costs to the public purse of the redundancies that will be directly caused by the statement made by the Chancellor last week. He knows that figure and he should stand up now and give it to the House. Silence is sometimes far more revealing than an answer.
The hon. Lady referred to the number of job losses mentioned in the comprehensive spending review. Can she tell us how many job losses were involved in her alternative plans?
The key point about our approach to the difficulties in the world economy was that we spent and invested money to keep people in work. We know that the cost of every 100,000 people on the dole is half a billion pounds. The difference between us and the Government is that we were keeping people in work whereas they are taking people out of work. We know from PricewaterhouseCoopers that half a million jobs in the private sector that are directly connected to public sector contracts will also be lost as a result of the Chancellor's statement last week.
Yes, according to the OBR. We saw the undisguised glee of Members opposite as they celebrated the hardship and misery that the Chancellor proposes to inflict on so many people in our society. These are not just numbers; they are police constables, care workers, teaching assistants and dinner ladies. In the private sector, they work in small businesses which rely on public sector contracts at a time when order books are empty. All those people are being asked by this Conservative-led Government to shoulder the burden of a crisis made in the banks and the dealing rooms.
Well, the hon. Gentleman could take a look at the March Budget, which was presented to the House before the general election, and the Red Book that was published subsequently. We went into the election with far more detail about what we would do had we been re-elected than either party opposite. And at least we did not flip-flop immediately afterwards so that we could get into government.
These are not just numbers; they are the people being asked by this Conservative-led Government to shoulder the burden of a crisis that was made in the banks. It is not those who caused the crisis who will now suffer as a result of the Chancellor's reckless gamble with jobs and growth. It is the 490,000 ordinary men and women serving in the public sector whose jobs will go, and it is the 500,000 jobs in the private sector that PricewaterhouseCoopers has calculated will also be lost as a direct result of the spending review. Redundancies on the scale now threatened are not inevitable, but are the result of the Government's choice to cut further and faster.
Does the hon. Lady agree that it is a basic principle that spending money we do not have does not create long-term jobs? It creates nothing but debt, which has to be paid back. That is what the Government are doing now. That is what we need to do.
Perhaps the hon. Gentleman will agree that in an advanced economy with a social security system, if there is a recession, deficits will rise. That is why the deficit rose. What he suggests, if taken to its logical extreme, means that he would not be in favour of paying unemployment benefit to those made unemployed. They tried that in the 1930s and it did not work.
We entered the crisis with the second-lowest deficit in the G7. We were affected by the credit crunch because we have a very large financial services sector, which is why both sides in the House are talking about how we can rebalance our economy. We are too exposed to the kind of risks that crystallised when the credit crunch struck. [Interruption.] The Chancellor, from a sedentary position, asks whose fault that was. If we are going to be sensible and have a proper, nuanced, balanced and grown-up debate on this issue, all of us-as members of political parties that are, or have been, in government and in charge of running the country over the past few years-need to take our fair share of responsibility for how the banking sector came to dominate too much. Both sides of the House have to learn those lessons. I hope that we all will.
Does the hon. Lady agree that it has been down to this Government to introduce the bank levy of £2.5 billion, and that the Labour party, when in government, failed to do so? Why did they fail to do so?
We introduced the bonus tax, which the Conservative party opposed and which raised £3.5 billion. We have said that we need to consider how to ensure that the banks shoulder their fair share of the burden in ensuring that the deficit is reduced in a sensible way.
Does my hon. Friend agree that it is depressing to see the huge ranks of men opposite talking about cuts that will affect- [Interruption.] Yet again, there are very few Conservative women. The one or two ladies opposite waving and shaking their papers at me do not help. The majority of Conservative Members, as always, are men, but the majority of people to be affected by the cuts will be women. It is women who will lose their child benefit and the tax credits that help them get into work, and it is women, largely, who work in the public sector and rely on its excellent flexible working conditions. Is it women who will find it harder to get into work, thanks to the Government's policies?
I do not suppose it is their fault they are men. I can blame them for some things, but not that. My hon. Friend makes a perfectly fair point though. It is clear that 65% of those who work in public services are women, that 75% of those who work in local government are women and that there are even higher levels working in the health service and social care. Clearly, they are on the front line, and the Government have a legal duty, which it is not clear that they have fulfilled, to take reasonable account of that fact.
Has the hon. Lady met people trapped on benefits, many of whom, incidentally, are women? The failure to address the perverse incentives operating in our benefits system was utterly spineless and ignored the real misery affecting those who live trapped in our benefits system.
The hon. Lady's intervention was extremely helpful. Of course I have. We have all done a great deal of work on social security reform, and I hope she will be the first to acknowledge some of the progress we made, particularly in helping lone parents into work. Tax credits and all the support we gave on child care were among the measures that were crucial in ensuring that we managed to increase significantly the number of lone parents in work when we were in office. I hope she will be the first to recognise our success in those areas. She should take a close look at the increasing rates of marginal tax that came about because of some of the changes, particularly for lone parents, and the savings made in tax credits, and she should also have a word with her party's Front-Bench team about their priorities for cuts, given that they are taking away benefits that particularly help women go out to work.
In softening up the country for this age of austerity, Ministers have been anxious to establish some myths, the first of which is that the deficit was a Labour spending choice. We heard a lot of that today from the Chief Secretary to the Treasury. The second myth is that the cuts announced are unavoidable. We need to start with some facts. When the credit crunch struck in 2008, Britain had the second-lowest debt in the G7. We had low interest rates, low inflation and low unemployment. There is nothing reckless about that. Now, however, the Conservative party and the Liberal Democrats are trying to rewrite history.
Public spending did not cause this deficit-the global financial crisis caused it. A large deficit is what we get when the largest financial crisis since the war hits. When companies' profits are hit, tax revenues fall.
I said no.
When families have to work shorter hours, they pay less tax. We took a conscious decision to spend money to keep people in their jobs and homes, and I am proud that we did that. As a result of our action, unemployment was half what it had been in previous recessions and repossession levels were also half what they were in the Tory recession of the 1990s. Some of this help has been cut away in the CSR and, as a result, it is more likely that more people will lose their homes, as unemployment and the cuts begin to bite.
I am very grateful to the hon. Lady for plucking up the courage to give way. She said that Britain went into the crisis with the second lowest deficit in the world, but she has now revised that to point out that, actually, it was the second lowest debt in the world. Does not the fact that she and her colleagues muddle up the debt and the deficit show just why we are in this mess?
Whatever happened to old-fashioned courtesy? The hon. Gentleman should ask himself why I do not want to give way to him when he is so generous and lovely to me when I do.
Money spent on infrastructure investment kept the construction sector going. As we saw from the GDP figures on Wednesday, that is still having a positive effect. The deficit was unavoidable. It was vital to support people and businesses through tough times, but let us be clear about Labour's spending before the crisis hit. Far from being too high, it was, as the Prime Minister said-I am quoting him directly-"really quite tough", while the Chancellor was urging us to spend more.
The second myth is that the scale of the cuts is unavoidable. As my right hon. Friend the shadow Chancellor has pointed out, Government propaganda has got it precisely the wrong way round. The fact is that the deficit was unavoidable; it is the June Budget and the Chancellor's spending review that are a political choice. They are not only avoidable, they are downright dangerous. That is why there was no mention of these supposedly unavoidable cuts in the manifestos of either of the parties now in government when they went to the country. That is why they have no mandate for the cuts policy that they have embarked on since the general election.
Since the election, we have seen the contortions of the Deputy Prime Minister, along with his accomplice in what we now have to call the "quad", to justify his volte-face. First he told us that he took a call from the Governor of the Bank of England as he stepped into the ministerial Jag, but the Governor begged to differ. Then the Deputy Prime Minister said that Britain was about to become Greece. That is about as close to a myth as you can get, Mr Deputy Speaker. The Government have made their choice, and we on the Opposition Benches will hold them responsible for the social and economic consequences of those choices.
Has my hon. Friend noticed the tendency of those on the Government Benches, and in particular the Chief Secretary and the Chancellor, when referring to the history of the economy this year, to say that we were on the brink of bankruptcy as a country? Did she, like me, notice Lord Turnbull's appearance before the Treasury Committee this morning, when he clearly said that this country was not on the brink of bankruptcy and that there was no risk of a sovereign debt crisis?
It is quite extraordinary that we have a Chancellor who is prepared to make such alarmist statements from the Treasury. He does it for political, not economic, reasons, and it is a disgrace that he continues to do it.
Will the hon. Lady take this opportunity to pay tribute to British business, which has created hundreds of thousands of jobs since this Government started taking the tough decisions that she flunked?
I am certainly more than happy to pay tribute to British business, but I do not connect the first part of the hon. Gentleman's question with the second.
Last week two more myths were added to the Chancellor's own special edition of Grimm's fairy tales. He now claims that the measures in the spending review are fair, and even that the scale of the cuts would have been greater under Labour. Let us start with fairness. Last Wednesday, the Chancellor told us that fairness was
"one of the guiding principles of this spending review".-[ Hansard, 20 October 2010; Vol. 516, c. 955.]
Not for the first time, this spin lasted barely 24 hours, before the Institute for Fiscal Studies comprehensively rejected it, proving that, far from the poorest being protected, it is the poorest who will bear the brunt of the cuts. It is families with children who will pay the most. We should not be surprised at that, because the Institute for Fiscal Studies was scathing of the Treasury's analysis of who loses what.
How is it fair that in the time that the hon. Lady has been on her feet at the Dispatch Box, we as a country have spent almost £2 million servicing the interest on the debt that has been created? That is £5 million an hour and £120 million a day. What plans do the Opposition have to bring that under control?
I have talked about the importance of getting the deficit down, but the hon. Gentleman is falling for the idea that the coalition have perpetrated that it is somehow not viable to have a bill that needs to be paid. People who have mortgages have to pay them off over time, and they have to pay interest on them. However, it is not sensible for anyone to deal with their mortgage by paying it off so early that they cannot afford to feed their kids in the meantime.
I am most grateful to the hon. Lady, although I am afraid that I will not be lovely and fluffy, or whatever it was she said she wished my hon. Friend Matthew Hancock was. Is she aware that on
I would not expect the hon. Gentleman to be fluffy-that is not a word that I would ever have associated with him-but it is still good to see him back, and I genuinely welcome his return. It needs to be pointed out that that letter was organised by Lord Wolfson in the House of Lords, via Conservative central office. It is also interesting to note that some of the signatories of the letter have some kind of vested interest. First, quite a few are Conservatives. Secondly, BT, for example, has cut 20,000 jobs in the past year, which is not exactly helping us to replace public sector jobs with private sector jobs. Others are responsible for outsourcing and stand to make direct gains from the shrinking of the state. The hon. Gentleman can believe that guff if he wants; we do not.
The IFS has been scathing about the Treasury's analysis on the fairness front, and on who loses what. It has noted that the Treasury analysis conveniently stops in 2012-13, thereby excluding £12 billion of the announced savings-by which I mean cuts to social security. For those who remain in any doubt, let me quote directly from the IFS:
"The tax and benefit changes are regressive rather than progressive across most of the income distribution."
The Government's immediate response to that report by the IFS was to try to shoot the messenger. The Deputy Prime Minister launched into an attack on the IFS that bordered on the hysterical. He described its analysis as "distorted" and "complete nonsense". He neglected to mention the fact that before the election he had regularly lauded the IFS when the results of its analysis suited him. On
"really delighted at the Institute of Fiscal Studies" for its view of Liberal Democratic proposals. Now that he is in government, he does not seem to like the IFS for pointing out an inconvenient truth.
A flip-flop here, a U-turn there-it is all in a day's work for the Liberal Democrats as they shoehorn themselves into their new and ill-fitting Tory ideology. It is now abundantly clear that, for the Deputy Prime Minister, the slight awkwardness of signing up to one of the most unfair decisions for generations will not get in his way, even if he occasionally has to struggle with his conscience on "Desert Island Discs". I know that he has argued for a different, more convenient definition of fairness, but let me tell him that there are some things that are not fair, however we define them.
I thank my hon. Friend for the sterling work she is doing here today. We have discussed the fact that this is not about fairness, and that women and children will be hit by these measures. Does she recognise this quote from Richard Hawkes, the chief executive of Scope? He says:
"Despite the continuing rhetoric that spending cuts will be fair, the Chancellor's announcements today are anything but. This will hit disabled people and their families particularly hard."
Does she believe him, or does she believe Gideon?
I think we know who to believe. There is a great deal of real worry out there about the effects of the draconian cuts in public expenditure that have been announced in the spending review.
I will tell the Deputy Prime Minister and anyone else on the Government Benches what they cannot hide about fairness. There is nothing fair about cutting 10% from housing benefit for those who are out of work for more than 12 months when there are already five people chasing every job vacancy-and that is before the Government add another million to the dole queue. There is nothing fair about expecting children to play a bigger part than the banks in getting the deficit down. There is nothing fair about failing to carry out a legally required equality assessment that would have shown that the Budget had a disproportionate impact on women, who often do the lowest paid jobs in the public sector. When it comes to the cuts under this Government, it really is women and children first. Let us have no more of these ludicrous claims of fairness from the Government.
As for the idea that the Government are cutting less than we had planned to do, there is something distasteful in a Chancellor who is prepared to skew his spending decisions, cutting an extra £7 billion from the social security budget, just to get a cheap one-liner at the end of his speech. There is nothing so cynical as a Chancellor who begins his speech by claiming that Britain has been saved from the brink of bankruptcy by his savage cuts, only to conclude it by claiming that Labour would have cut even more. He knows that he cannot have it both ways, and he knows that he has cut £30 billion more from public expenditure than we planned to do. He knows that, in doing this, he has totally failed in his pledge to protect the most essential front-line services. It is now clear that his promises are unravelling, and that there will be a major impact on our schools, our hospitals and the police.
Schools up and down the country are facing cuts in funding, thanks to a budget settlement that takes no account of rising pupil numbers; and before the Liberal Democrats start getting excited about the pupil premium, I am sorry to have to tell them that the Education Secretary has now admitted that it is simply a con. In June, the Prime Minister pledged:
"We will take money from outside the education budget to ensure that the pupil premium is well funded".-[ Hansard, 2 June 2010; Vol. 510, c. 432.]
But at the weekend, the Education Secretary finally came clean and admitted:
"Some of it comes from within the Department for Education budget, yes."
It is not new funding after all; it is just money being moved around within the Department to disguise budget cuts.
The IFS calculates that 60% of primary school pupils and 87% of secondary school pupils will see a real-terms funding cut to their schools as a result of the new funding formula. We knew that the Liberal Democrats supported recycling, but we did not realise that this was what they meant. We were also repeatedly told that health spending was to be protected, yet £1 billion has been raided from the NHS to make up for some of the shortfall caused by the huge cuts in local government spending. With this settlement, the Prime Minister's promise of real-terms increases in health spending will not be met.
There has been no commitment to front-line policing either. The Police Federation tells us that as many as 20,000 police will be sacked. The thin blue line has become a casualty of the thick red pen. For schools, the NHS and the police, there will be no protection for front-line services.
No. I have given way to the hon. Gentleman before.
No priority is to be given to the services that we rely on, day to day. That is the choice that the Government have made. Let us have a serious debate about the differences between us, and let us have no more nonsense from the Government about the four myths on which their entire defence of the scale of their cuts is based. Let us hear no more nonsense about the deficit being the result of the decision of one party or the fault of spending on our public services, rather than the inevitable result of a global economic crisis and the greed and recklessness of the banks.
The right hon. Lady has said that she is opposed to the welfare cuts that we have proposed, opposed to the pupil premium, opposed to the savings in the Ministry of Justice and opposed to the savings in the Home Office. Can she name one single saving that she would propose to help to tackle the deficit?
I have not said that I am opposed to all the changes in the social security budget. My right hon. Friend the shadow Chancellor supported some of the changes in welfare spending. Indeed, it was we who developed them: the Government are putting our changes into effect. Let us hear no more of this nonsense about the scale of the Government's cuts being unavoidable, rather than the result of a decision that they made on the balance between taxes and public spending cuts.
If the Chief Secretary had answered my questions, I might answer his. [Hon. Members: "Incredible!"] What I find incredible is the fact that the right hon. Gentleman has the figures for redundancies and the costs of redundancies across Whitehall in his books. We know what the Ministry of Justice figure is, but he knows what the overall figure is, and he refuses to give it to the House. That is a disgrace.
Let us hear no more nonsense about how the spending cuts that the Government have announced were, as a result of some magical accounting trick, less than those that we planned when we were in government. The truth is that this country faced the gravest of economic challenges. The truth is that our party, in government, rose to meet that challenge, and averted a catastrophe for our country by making tough decisions to protect jobs and homes in our economy. The truth is that whatever party was in government, it would now be making decisions to pay down the deficit. Any party, including ours, would be having to make tough decisions.
It is also true that there is a clear choice in relation to what to cut, and the balance between cuts and measures to bring in revenue. My right hon. Friend the shadow Chancellor has set out the different approach that we would be taking, which would protect not only front-line services but jobs, growth and the recovery. The Government, for ideological reasons alone, have used the deficit as a fig leaf for an assault on our public services of a kind that they had previously only dreamt of. They can talk of fairness as much as they like; they can spread myths as much as they like; but we are not fooled, and, more important, the British public will not be fooled either.
The spending review document sets out the Government's choices. Those choices were freely made. What the Government have presented is their vision of a future for our country. What we have seen is not the big society but the blueprint for a smaller, meaner and nastier society, and we reject it.
Order. Speeches are limited to six minutes, and a vast number of Members wish to speak. We need restraint on the part of all Members, and if they can cut their speeches to less than six minutes, we may get near to the end of the list.
Six minutes is not a long time in which to respond to such high-octane exchanges. I do not intend to add to the highly partisan exchanges that we have just heard, but given that the Treasury Committee is currently undertaking an inquiry into the CSR-the largest that has ever been undertaken-I want to make a few observations about what is in the document. I shall see how far I can get.
I am not sure that everyone will like my first observation. Indeed, I am not sure that anyone will like it. But the truth is that beneath all the political noise there is quite a wide range of cross-party agreement about the need for sharp action to tackle the deficit. At least two thirds of the correction to the deficit, or perhaps more, would have taken place whoever had won the election. That is clear from table 1.1 of the Red Book.
My second observation is that there is also a substantial consensus about overall economic strategy in the United Kingdom. That is in complete contrast to the position in the 1980s, when there were rival economic strategies. There is a consensus not just on deficit reduction, but on the need in principle to reform welfare, the need to sort out the banking system and to bring more competitiveness to it, and the need for some industrial support for biosciences and for some energy production, for example.
The third observation is that these cuts are not unprecedentedly large, as Lord Turnbull, who gave evidence to us this morning, said. The plans to cut public expenditure in the period ahead will keep it broadly steady in real terms for five years. Spending was kept broadly steady in real terms between 1984 and 1990.
I wonder whether that is right, because I have looked at the numbers and it would be appear that, over the period of the CSR, we will see the share of national income accounted for by public spending fall by about 6%, to 41%. That is exactly the same fall as was achieved during the first, and the start of the second, Thatcher Administrations.
Yes, and public expenditure will be back broadly speaking to the level under the last Labour Government prior to the financial crisis.
My fourth observation is that the major parties were right to conclude that large cuts in public spending were going to be necessary to stabilise the public finances. One way of looking at this, which Lord Turnbull alluded to this morning, is to work out how much tax has been forgone as a result of the output lost during the recession. If one does that calculation, one sees that, broadly speaking, around £80 billion of tax has been forgone. The total GDP loss is around £200 billion, of which about 40% would have flowed into tax. That suggests that cuts in spending of about £80 billion are probably required.
My fifth observation is that the scope for cuts is probably better now than it was in the 1980s. That retrenchment took place not, as this one is going to, after the longest period of continuous growth for a very long time in British history, but after the doleful years of the 1970s, when there was no growth at all, which made spending cuts difficult. In addition, absolute levels of income are much higher now than they were then, meaning that absolute levels of pain will also be reduced if these cuts are targeted effectively.
My sixth observation is that some, but certainly not all, of these cuts are the result of careful longer-term planning. For example, quite a lot of thought seems to have gone into welfare reform and education. This has been planned for some years and it probably draws on quite a lot of work that was already done in Whitehall for whoever won the election.
However, if I look at defence, I find it difficult to believe that much long-term planning has been done. It is extraordinary. We are going to build two aircraft carriers which for a decade will not carry any aircraft. I am reminded of an episode of "Yes Minister" in which Jim Hacker discovers that a hospital does not have any patients. In fact it is worse than "Yes Minister", because Sir Humphrey pointed out in that episode, which I looked up, that some patients were about to be brought in. However, one of the carriers is even going to be mothballed. We would not start from here. I hope that the Public Accounts Committee will look vigorously at how the UK-and I see the Chairman nodding her head-came to sign those contracts for the carriers without any exit clauses. I also hope that we get to the bottom of whether there was scope for renegotiation of the contracts, which after all were taken out between a monopoly supplier and a monopoly demander. That should have created some scope for renegotiation.
My seventh observation is that some of the ring-fencing of public expenditure-we have quite a bit of ring-fencing-will be difficult to justify in the years ahead. I refer particularly to aid. To increase the aid budget by 37% in real terms while the justice budget is cut by a quarter in real terms takes quite a bit of justifying.
My final observation is very much a personal one: that the level of public expenditure matters irrespective of the deficit, and that it is too high. Even if there were no deficit, my own view is that having public expenditure as a proportion of GDP standing at 50% is not good for this country. It reduces choice and freedom for millions of individuals and it burdens enterprise with unacceptable levels of taxation. That is perhaps why for a large proportion of Labour's period in office they held it at about 40%, and why the Government now intend to bring it back towards that level-the level at which Labour had it in 2008.
I am very pleased to have an opportunity to contribute to this debate, as I believe that these economic issues will be the most important issues facing this Parliament. I want to talk in particular about the effects of the spending review on London and inner-city communities-the type of community that I have lived in all my life and sought to represent over the past two decades. I also want to talk specifically about the effects of the spending review on the private sector, as they are not sufficiently debated or understood, and on the public sector, and about the particular effects on housing and housing need in London, because I think the spending review and the mix of proposals on housing benefit and cutting expenditure on public sector housing will hit London harder than any other part of the country, with consequences that I do not think the Government have calculated.
It is not sufficiently understood that more than 1 million jobs in the private sector are directly dependent on public sector contracts with private sector organisations. That is the case in construction, for example, but there are also many jobs in social care and looking after young children that are basically delivered by private sector organisations. Also, when we make these cuts and people lose their jobs, demand will be taken out of the economy, so many retail and service companies in London will suffer. These cuts will have a ripple effect in the private sector in London. The Government and their supporters in the Lib Dem party may be laughing now, but they will be laughing on the other side of their faces when the effects on the private sector become clear.
The coalition Government talk about the public sector as if it is all about men in bowler hats who can easily be switched into meaningful jobs in sectors such as banking. In Hackney and the inner city generally the majority of public sector jobs are women's jobs, however, and the majority of those women are heads of households, and far from doing peripheral or frippery jobs, they work in the heart of communities as teaching assistants or care assistants or in the voluntary sector, which will suffer because of the cuts in local government spending. These jobs are at the heart of communities. How hypocritical it is of the coalition Government to talk about the big society and then attack ordinary women working in the heart of their communities across a range of important occupations.
I have listened to what coalition Ministers have had to say, but having lived in and represented Hackney for more than 20 years, I can tell them that there are no private sector jobs for women in Hackney who will be made unemployed to step into. That is because of the structure of employment in Hackney and the inner city. Yes, we can count up the number of vacancies and the number of people who might be made unemployed, but there is a mismatch between the types of people that this coalition are going to fling into unemployment and the actual opportunities available to them, such as they are, in the City and the private sector in London generally.
We have to judge these matters on the basis not of political banter, to and fro and Punch and Judy, but of the effect on real people's-real women's-lives. The consequences for communities such as Hackney in the next financial year will be very serious indeed. The people in those communities will not have been impressed to see Ministers on the Treasury Bench laughing and congratulating themselves when the statement was read out. What were they congratulating themselves on-thousands of people losing their jobs and thousands more losing their homes?
That brings me on to housing. Members will be aware that since the 19th century one of the core activities of local government in London has been building housing-affordable, quality housing for rent. If hon. Members are not aware of that, I can take them to estates built in Hackney more than a century ago. Of course politicians then, even Tory politicians, recognised that decent housing was at the core of social stability and public health concerns. But what are we getting from this coalition? We are getting cuts in public sector housing expenditure, which, as I said, affect the traditional role of local government; cuts in people's housing benefit after a year; and, above all, a cap in housing benefit.
I put it to the Government that the majority of people claiming housing benefit are not shiftless people, but working people and those looking after disabled people. These are not people who are simply unemployed. It has been argued that we have to cut housing benefit because, horror of horror, poor people are living alongside rich people in desirable areas of the city.
My hon. Friend is reflecting on the inequities of the changes to housing benefit. Does she agree that the Government's focus on the cap is a red herring, because it is relevant to very few housing benefit recipients, and that the really important thing is the 10% cut that will hit housing benefit recipients in the second year?
I quite agree, and I am grateful to my hon. Friend for raising that issue. I have a sentence or so more to say about the cap. We have been told by the Prime Minister of the horror of poor people living alongside rich people in boroughs such as Islington and Westminster. Let me tell the Government that I can take them to the heart of the Prime Minister's Notting Hill and show them poor but entirely respectable West Indian couples living alongside merchant bankers who have bought their houses for millions of pounds. London has always been a city where rich and poor live side by side; it has never had the perfumed stockades of the upper east side of New York or the kind of social segregation seen in American cities. This type of cleansing of poor people from what are deemed to be areas that are too good for them to live in is quite unconscionable. As my hon. Friends have said, this is not just about the cap on housing benefit, although that will also have a serious effect on ordinary people in London and may well see the end of some Lib Dem MPs now sitting on the Benches opposite us; it is also about the cuts in housing benefit after a year.
What I say to the House is that we can sit here this afternoon scoring points and doing the Punch and Judy stuff, but real people in our constituencies, whose circumstances are not understood by those on the Treasury Bench, will suffer as a result of this ill-thought-out, ill-paced and wholly ideological spending review. The credit crunch and the deficit have been the occasion of this spending review, not the reason for it.
At the end of the period, in 2014-15, the Government plan to spend £92 billion a year more, on current spending, on services than Labour did in its last year-that is a large 15% increase in the amount of cash. We need to ask ourselves why it is that every year public spending increases, yet the Government are proposing some extremely difficult or, in some cases, undesirable choices to be made in subsequent years to try to live within that rather big figure. I suggest to the Government that there are three areas that they could work on, and that their doing so would be in all our interests in this House, because if they could manage them better, they might not need to make so many of those difficult choices in the later years and would still be able to live within their totals and get the deficit down.
The first reason why there is a squeeze on some programmes that many Members do not want to see squeezed is the big rise in money allocated to pay for inflation; the plans assume quite a lot of public sector inflation over the five years. If the Government can do better at buying in goods and services-they are a very big purchaser and they say they are going to do so-they might reduce the average price of bought-in things. Instead of having positive inflation, they would have negative inflation on that part of the programme. If they can do a good deal with their employees, reassure them and get them to accept the kind of measures on pay that are being suggested-I believe that they are talking about a two-year pay freeze, for example-that will take a lot of extra inflation out of the system, because the biggest single item in these budgets is of course pay. Again, the more that we in the public sector can share the pain by moderate means, such as accepting pay restraint, the less we will have to take the difficult choices in later years that are built into the programme.
The next thing is staff numbers. A lot has been made so far in what passes for a debate in this House about having 490,000 fewer jobs in the public sector by the end of the period. These are not 490,000 redundancies. Given the large rate of resignations and retirements in the public sector to which the Chancellor has referred, I hope that most can be taken care of by eliminating posts after people have resigned or left.
I am most grateful to the right hon. Gentleman for giving way. Of course, in a very small-minded way, what he says is right. If those jobs are cut, where does he think that young people will get the new jobs that they need?
In the private sector, which is already generating tens of thousands of jobs every month. That is what we need to do. I am not saying that there should be a complete staff freeze. For example, if 480,000 a year are leaving, which was the Chancellor's figure in the Budget, 250,000 people could be hired while still achieving half the reduction in the first year. I think that the Chancellor might have been a bit optimistic, but he referred to an 8% rate. If the percentage was half as great, the reduction could still be made in the first two years. There could be reductions of 250,000 without a single redundancy.
I urge my right hon. and hon. Friends not to pursue the redundancy route wherever possible. It is expensive, unpleasant and disruptive. I do not want to see lots of people retiring early from the administrative services on big pensions, and I do not want to see redundancy payments made with people coming back into the public sector at a later date, leaving us to wonder why all the cost and disruption has been incurred.
The next big area that puts pressure on the increased money is debt interest. I entirely agree with the Government, and with Opposition Members who knew this when they were in government, that we have to bring the deficit down before it kills the whole budget. If we allow the deficit to keep on rising, as the Opposition originally proposed, debt interest will take more and more of the increased spending and we will have to make unpleasant cuts to the things that matter. How can we reduce that debt interest burden more quickly? If we can get more cash into the public sector, starting today-we do not need to wait to start the programme next year, as is implied in the figures-we will reduce the increase in the debt day by day. If we sell more assets, we will not have to raise so much money in the debt markets, which will keep the debt down.
It is very good news that the Government's programme has restored a lot of confidence in the markets, so that the rate at which they now have to borrow is now lower. That will obviously make a contribution to getting the debt interest rate programme down.
I have to say to the Government that I do not think that we can afford to give £80 billion to foreign countries over the CSR period. If we add the overseas aid programme to the European Union programme, the total is £80 billion over the period. I do not want to take any money away from the poorest countries or from humanitarian aid. Those are good things and I fully support the Government's intention to carry on with them, but I do not think that there is any need to subsidise China, India or Russia-nuclear weapons powers with, in the case of China, $2.5 trillion in the bank. It is a bit odd to give China a grant when we then have to borrow the money from China to pay the grant to China. That cannot make any sense.
I believe that the Government are now going to remove the aid to the richer and more successful countries. Cannot we pocket that for a couple of years and then become more generous when we have the deficit under control? May we please get the European amounts down? They are the most unforgivable ones; poor people in Britain are paying tax to offer grants to rich countries in Europe, and that is not acceptable in the current conditions.
The more that these pressures-the grants abroad, debt interest, costs, inflation and staff numbers-can be abated, the more we will have money available to do better things with the growing programmes. It is good news that nine of the Departments have level or rising cash throughout the period, but it is bad news that one or two other Departments will find that the shoe pinches a lot. That is why I think that we need to make more rapid progress in controlling costs and staff numbers, particularly in administration, and in dealing with the debt interest programmes, so that we have a bit more free to ease those areas that will be very tight in future years.
I do not for one moment believe the figures from 2013 to 2015 anyway, because I think that they will subject to subsequent revision because of the pressure of events. As inflation changes, we will need to revise them. As the state of the economy changes, we will need to revise them one way or the other. Let us hope it will outperform and we will have a bit more scope.
As an election draws near, politicians tend to want to spend more, so we should discount the 2013-15 figures and concentrate on what is happening now. Will the Government please bring forward as many of the reductions as possible to this year, and not wait until next year? The more we save now, the less we borrow and the more the pressure is reduced on subsequent years' programmes.
I shall focus specifically on child benefit, and start by sincerely congratulating the coalition Government. In 1945 the coalition Government, which involved Liberals, Conservatives and Labour, introduced family allowances-a coalition Government who got something right. It was in the mid to late 1970s that child tax allowances were amalgamated with the family allowance scheme to form child benefit.
Unfortunately, there is now a need to restate the case for family support and for child benefit. I want to explain why it is such an important scheme to maintain as a universal scheme. First, there is the societal interest in bringing up our children. No one spoke more clearly about that than Eleanor Rathbone when in 1940 she said that
"children are not simply a private luxury. They are an asset to the community, and the community can no longer afford to leave the provision for their welfare solely to the accident of individual income."
That was Eleanor Rathbone, the heroine of family support, back in 1940.
A second reason for child benefit is what we might call horizontal equity. The welfare state is not simply about poverty. In terms of child benefit, it is about the fact that whatever people's income level, if they have children, they are taking on financial responsibilities over and above those who are childless or the single. Horizontal equity is important, as we are finding out now.
Thirdly, there is the sheer cost of bringing up a child. No longer is a child someone who becomes independent at 14, 15 or 16, when they leave school and get a job. Once upon a time children might have been an economic asset on the land. Today our children, with higher and further education, are dependent on their families for longer and longer.
People have had a go at estimating the costs of a child. The most recent estimate that I have seen is from the Liverpool Victoria Friendly Society, which said that the costs of a child could be as high as £200,000. We can add on to that other indirect costs when the mother, staying at home, loses her place on the career ladder, loses salary, loses income and loses pension rights. Our children are very expensive, as many of us who are parents know. It may be that for these economic reasons, the birth rate in societies such as the UK is below replacement level. These are significant issues.
The fourth reason is extremely important. The family allowance-now child benefit-was essentially an income for mothers. That is what Eleanor Rathbone was arguing for. Despite modern times, and despite the rise of the dual worker family and the rise of women's rights, my guess would be that it is still mothers in most of our families who are responsible for juggling family budgets at different income levels. It is mums who make the judgment about whether the clothes and the shoes can be afforded, how to fund the school trips and the treats for children- [Interruption.] That obviously struck a chord with someone. If my hon. Friend Helen Goodman could also laugh at any jokes I make, that would be helpful.
The income for mothers is particularly important for mothers who, often pejoratively, are referred to as the stay-at-home mums-those who make the judgment that for the first few years, they want to look after their own children. Choice is so important. I think that in future we will see more parents wanting to spend time with their children, especially when they are young. That is why the family allowance and the child benefit have been so important, and that is why, following the modern coalition Government's announcement, we have seen so much concern from those mothers in so-called higher income families about the loss of their income. That is very important.
A fifth reason is that child benefit, alongside other benefits, is part of the universalist spine that is so crucial to a modern welfare state. Alongside free education, a free national health service, pensions and national insurance benefits, child benefit is universalism, and I believe that universalism is a major force for cohesion in our society. It is a "We're all in this together" social policy, which we start to erode with perilous implications. Child benefit is simple, easily understood and easily administered.
Will my right hon. Friend also acknowledge that one of the good things about child benefit is that its take-up is so high? Take-up is one of the problems that we have with many benefits that are paid out.
I agree, of course, because child benefit is easily understood, simple and a universal benefit. I am very happy to agree with my parliamentary neighbour.
Child benefit is now being undermined, which is why it is so important to restate the basics in favour of family benefits. We are seeing something that will attack the very principle of women's entitlement. It will essentially punish mothers if their husbands earn above the higher tax threshold; the mums will suffer because of the father's income. As an aside, let us not assume that in the 21st century income is shared by all families; there are still families where the father keeps more than he gives to the mother and the children. That is not just about poverty, either; it happens at other income levels, too.
The measure is also a snub to those mothers who, as I said earlier, choose to stay at home to look after their own children. We need more choices-about whether people go to work and use child care or stay at home to look after their own children. What message are we sending out to those mothers who want to care for their children in that way?
The measure also introduces, as we know, the unfairness between the dual-earner family on £80,000, who keep the child benefit, and the family with one earner above the threshold, who lose it. The measure is a recipe for complexity, and it will disincentivise those who are just below the tax threshold to earn more money in the future.
This is a measure that needs to be rethought. It undermines family support, and it undermines our children. So much for the party of the family.
I begin by reminding the House of the background against which we debate this comprehensive spending review. We were borrowing £1 for every £4 that we spent, and that simply could not go on, whatever Government of whatever combination of parties had taken office after the general election in May.
There were more than 20 public meetings in Bristol West during the election, and at every single one I made it clear to my potential constituents that, if my party took part in a coalition after the election, as seemed likely from the polls at the time, we would have to make difficult decisions and would not shirk from doing so.
Did the hon. Gentleman make it clear at those same meetings what he was going to do on tuition fees after the election? Did he make it clear that the pledge that he was signing was not the worth the paper it was written on?
I thank the hon. Gentleman for his point. Yes, I certainly did address many student audiences during the election in Bristol West, and I made it quite clear that in an ideal world, and in ideal financial circumstances, the Liberal Democrats would have wished to abolish tuition fees from the outset. Financial circumstances did not allow us to do so, however, and that is why we had a phased plan. I spoke at the launch of the National Union of Students pledge on working with the Government for a fairer system of student finance, and I am still working with the Government and the NUS to produce such a fair system. If the Government come forward with a fair system, I will support them; if they do not, I will not.
We know that Labour planned to make billions of pounds' worth of cuts whatever happened after the election; it has been confirmed in many memoirs. But Labour Members have since been in deficit denial. They have been in denial about the need to tackle the deficit itself, and, as today's debate has shown, they have not been able to give us a single Government measure that they would support, or to put forward an alternative themselves. The coalition Government are taking the necessary steps to restore order and stability to our public finances. That will restore confidence among British businesses and confidence among countries abroad that Britain is serious about tackling its desperate situation. Confidence and low interest rates are the bedrock for ensuring that our businesses can grow.
Will the hon. Gentleman acknowledge that there is not a difference in views on the need to deal with the deficit per se but that the issue is rather the speed and the depth with which we do that? Labour Members think that we need to go for a different time scale of deficit reduction as compared with his party-or at least his party post-May of this year. Will he at least acknowledge that there is a view on deficit reduction among Labour Members, but that it may not be the same as his party's?
The hon. Gentleman is a thoughtful man who now sits on the Treasury Committee. Perhaps he thinks that this is a serious issue that needs to be tackled, but many of his hon. Friends seem to be in deficit denial. We have not heard thus far in the debate-although there are many hours to go-a single idea from the Opposition on how they would tackle the deficit, whether it is over four years or five years, which is a point of debate.
I am running out of time, so I will not be able to.
The Chief Secretary announced that the comprehensive spending review was designed to achieve three things. The first of those was growth, and today's statement by the Business Secretary certainly builds on that. I welcome the £1.4 billion for the regional growth fund and the local enterprise partnerships that have been set up to replace the regional development agencies. In Bristol, the South West Regional Development Agency will not be missed, and I look forward to working with our local enterprise partnership for Bristol and the west of England. I welcome the fact that the science budget has been protected in cash terms, and the fact that £250 million extra is being put into apprenticeships-something that I spoke about repeatedly in the last Parliament, when I led for my party on these issues.
I also welcome the moves towards a low-carbon economy to ensure that we have stable and sustainable growth in future, with the green investment bank and the first investment in carbon capture and storage, which the previous Government pulled out of.
I welcome, too, the transport schemes that have been announced so far this week, but I look forward to confirmation next week, when we have the announcements on rail, that the electrification of the great western main line from Paddington to Bristol and to south Wales should go ahead in order to support growth and stability in Swindon, Bristol, the west of England and south Wales.
The second theme of the CSR is reform to the welfare system, which is absolutely essential. The need for that was recognised by the last Labour Government, but now Lord Freud is a Minister in the coalition Government and Lord Hutton is advising the coalition Government on how to achieve what the previous Government recognised but failed to tackle. It is a key principle that work should always pay: it should be clear to everybody that if one is in work one should be better off. However, the welfare system is a social contract between all of us, and, in addition, taxpayers must think it is fair for them to pay for it.
The cuts in housing benefit are an example of difficult decisions that have been made. However, I have to say to the hon. Lady-we represent similar constituencies, mine in Bristol and hers in central London-that £400 a week in housing benefit is not a miserly amount for someone to fund their accommodation.
Not again. I do not think that the coalition Government will be making people homeless on the scale that the hyperbole coming from the Opposition Benches suggests.
The third theme of the CSR is the need for fairness. In the last Parliament, I spoke many times about the importance of achieving social mobility. We know from the studies of those born in 1958 and those born in 1970 that social mobility has stagnated. There are many complicated reasons for that, not all of which can be laid at the door of the previous Government. I am sure that their intentions were good in many circumstances, but sadly after 13 years social mobility was still stuck and Britain was still the second least socially mobile country in the world after the United States. That is why I particularly welcome the fairness premium of £7.2 billion over the comprehensive spending review period that was confirmed in the review, and the £2.5 billion pupil premium, which is from additional funding from outside schools' budgets and is being introduced to help the poorest children from around our country. I grew up being entitled to free school meals and know what it is like to make the journey from poverty to a career through work and effort. Many children need support from their schoolteachers and mentoring from other people to bring about that transformation. I am a liberal interventionist and make no apology for that. It is important that that support continues through to further and higher education, so I welcome the £150 million higher education scholarship as a basis of support for young people who access higher education for the first time.
This Government inherited a desperate situation. We have the worst deficit of all the major economies in the world, at 11% of our national income. It is not entirely the fault of the banks. The structural deficit was high before the bank bail-out and continued to increase after it, and the Labour Government spent recklessly in their last days. The current Government are acting to reduce the deficit, introduce reform, encourage growth and, most importantly, encourage fairness in our society and achieve it through social mobility.
I was particularly keen to speak in today's debate because, the day after the Chancellor delivered his statement in the Chamber, his draconian cuts greeted with cheering and waving from the Government Benches, the Prime Minister and Deputy Prime Minister headed off to a primary school in my constituency. I am not quite sure why they were there, and it seemed as though they did not know why either, but of course the kids at Welbeck primary greeted them with great delight. Prince Charles came up to the Meadows recently, so people are getting used to visitors from London.
If only. I thank my hon. Friend.
What did I hear in the media coverage of the visit? I heard about the Prime Minister's amazement that he had found a lad who liked broccoli. I did not hear the Prime Minister or Deputy Prime Minister telling the kids about the huge gamble that the Government are taking with their future. They are performing a huge economic experiment. They have a theory that if we cut public spending, lose 490,000 public sector jobs and, as PricewaterhouseCoopers tells us, lose another 500,000 private sector jobs that depend on the public sector, the rest of the private sector will somehow fill the gap. They do not seem to hear the warnings of economists who disagree. Listening to Ministers last week, one would have thought that the PricewaterhouseCoopers figures had about the same credence as Mystic Meg. The Government do not want to hear about the effect of their cuts, because they want to make them.
Has my hon. Friend found any evidence that the coalition Government have thought out how confidence will be created to stimulate the public sector, given that millions of people across the country are worrying that their household might be one of the million that will be hit by a job cut, and fearing that cuts to housing benefit will mean that they are left with very few pennies to spare after their mortgage payments or rent?
I thank my hon. Friend for that interjection. In fact, the latest figures for both consumer and business confidence are going through the floor.
Never mind the extra 1 million who will be out of work, the extra £700 million that we will have to spend on jobseeker's allowance or the loss of tax revenues; the Government's attitude is, "Cut deep and keep your fingers crossed." But did the Prime Minister say that when he was in Nottingham? Did he tell those children about his gamble? Of course not, just like he did not tell them that their families, many of whom are in the poorest 10%, would be hit harder than anyone else. He did not mention that for all the talk of fairness, families with children will have to pay more than twice as much as the banks towards reducing the deficit. He did not mention that although his friend the Chancellor talked about continuing the decent homes programme, the funds have actually been cut.
I am sure that the hon. Lady and all hon. Members present agree that future jobs are vital. Will she therefore join me in welcoming last quarter's figures, which show the greatest increase in new jobs for more than 20 years?
I am absolutely delighted that new jobs are being created. My concern is that when the cuts start to feed through that will no longer be the case.
Although some of the children whom the Prime Minister and Deputy Prime Minister were talking to will have had improvements to their homes-new windows and doors to make them secure, or new boilers or better insulation to make them warm-their classmates will not all get the same opportunity. The Prime Minister did not tell them what will be happening to some of the schools that they will go to when they leave Welbeck primary, or to the schools that their brothers and sisters might go to. The projects to rebuild Trinity and Fernwood secondary schools in my constituency have been scrapped altogether. As for the projects to rebuild Nethergate, Farnborough and Bluecoat-a few months ago, the Secretary of State for Education said that they were unaffected, but they are now being told that there is a cut of 40% in the funding available. I am sure that if the Prime Minister had asked the kids at Welbeck they could have told him that "unaffected" means not affected. Sadly, that is another broken promise and it is not fair.
Finally, let us nail the myth that this is all Labour's fault. When he spoke in the Chamber last week, the Chancellor did not mention the word "recession" once. We have just come through the biggest economic crisis in generations-a global recession. If he does not understand why the deficit is high how can he possibly understand how to fix it? The deficit went up because we had a huge fall in output and tax receipts plummeted. Spending went up so that we could protect people's homes and jobs, protect businesses and prevent the recession from becoming a depression. Labour took the right decisions and the Conservatives would have made the wrong choice every time. They are gambling with people's jobs and homes and they have no plan for growth.
We suffered most during the recession because we had a high reliance on financial services. It was because our tax receipts were hit so badly that we needed to take action to protect people's jobs and homes. The Conservatives would have done nothing and they have no plan for growth. I am afraid that the next time the Prime Minister and the Deputy Prime Minister come to Nottingham, they might not get such a warm welcome.
The reading comes from "Proverbs", chapter 31, verses 8 and 9:
"Speak up for those who cannot speak for themselves; oppose any that go to law against them; speak out and pronounce just sentence and give judgement for the wretched and the poor."
I am grateful to Lexden Methodist church in my constituency for its notices for the week of
I am not one who says that all private is good and all public bad, or vice versa. It is important to keep a mixture of the two.
I am grateful to the hon. Gentleman for that point, but I was talking about the major, national Church leaders. There are excellent clergy at local level. Indeed, St Margaret's church in my constituency, which is in a relatively prosperous part of one of the world's richest countries, has started a food parcel system for hard-up families. The fact that the Church at community level is doing such things speaks volumes, but our national Church leaders are not. I look forward to the Archbishop of Canterbury speaking up.
Archbishop Sentamu said only the other day:
"I am not an economist, and I am not a politician, but to cut investment to vital public services, and to withdraw investment from communities, is madness."
Does the hon. Gentleman recognise that Archbishop Sentamu is sticking up for people in this country? Does he agree with those sentiments?
Earlier this morning I met the vicar of Dibley. Actually, that is not quite true. I actually met the Rev. Paul Nicholson, who is chair of Zacchaeus 2000 Trust. Before he took that position, he was the priest in the village of Turville, where "The Vicar of Dibley" was filmed. He is very concerned, as indeed I hope we all are. He points out that contrary to the Daily Mail examples, accommodation for people on benefits is expensive because there is a shortage of affordable housing, owing to the absence of any coherent housing policy for the past 30 years.
The market has failed to provide affordable housing. Property speculators and landowners have grown wealthy, but the poorest tenants face the misery of eviction through no fault of their own. Eviction for rent arrears triggers homelessness, and councils must somehow address that. However, those of us who have a local government background will know that when eviction is brought about by rent arrears, the legal term "intentional homelessness" creeps in, which is a serious problem. Those who were present at Prime Minister's questions yesterday will know that I asked him about it, and I have spoken on the matter in Westminster Hall debates.
I am grateful to Family Action, a charity that was founded in 1869 and that is now sponsored by Barclaycard. Its analysis of the welfare reforms, which is entitled "Pushed Towards Poverty: 21 welfare cuts for low-income working families", adds to the anxiety of recent times, which can only get worse. Family Action supports vulnerable and disadvantaged families throughout England, including families in which parents experience mental health problems, learning difficulties, addiction or domestic violence. Critically, it works with families within their homes to improve the parenting, ensure that the children's development milestones are met, and to help them to access work, training and volunteering. The impact of the changes in general-not just housing benefit cuts-could make it harder for many families to lift themselves out of poverty through work and, in some cases, families such as the ones with whom Family Action works risk finding that employment is no longer sustainable.
In debates such as this, it is worth quoting local examples. The one big benefit of the cancellation of the Building Schools for the Future programme is that a secondary school in my constituency that the Labour Government would have closed will not now be closed. However, alongside that, we need funding for Colchester academy, which opened last month. It was Sir Charles Lucas Arts college. The pupils have a new uniform and the school a new name, but they are still using the same dilapidated building. I therefore look to the coalition Government to deliver a new building.
Finally, I shall draw the House's attention to the possible unintended consequences and knock-on effects of halting capital schemes. The Sure Start capital grant project at Kendall school in Colchester has already had £102,000 invested, but if the grant is not now forthcoming, all that money will have been wasted. That takes into account only the financial aspects, not the provision of places for pre-school children and so on. A local building company was all set to start work, planning permission has been granted and a chain reaction of education provision is on the verge of commencing for the benefit of the school and the local community, but it needs the Sure Start money.
I also wrote to the Secretary of State for Education on
The headlines in the debate on the comprehensive spending review have concentrated mainly on justified concerns about cuts to family support, welfare and housing. However, in my contribution I wish to focus on some of the main questions about transport.
Transport is vital to most of what happens in this country. It is vital to economic development, to enabling people to get to work and to quality of life. It enables people to lead full lives and guards against social exclusion. I welcome the headlines in the settlement on transport, including the focus on some specific investments which is very welcome, but I wish to draw the House's attention to some major issues that need much fuller investigation.
The first is that of fairness in investment and regeneration-with the accompanying jobs-across the country. At the moment, transport investment in London per head is three times higher than in other regions. It is unclear whether the proposals in the settlement will change that or simply exacerbate the difference. I welcome the announcement that Crossrail will go ahead. I know how important that is in London-and it has national implications-but there is an ominous silence about the go-ahead in a proper timescale for electrification of the Liverpool-Manchester-Preston-Blackpool line. I noted the strange answer from the Secretary of State for Transport this morning, which avoided the issue completely. We have had no clarity about electrification on the Great Western line or whether the northern hub will go ahead in the way envisaged. All those projects are important for economic regeneration and have implications for the release and provision of rolling stock across the north. We need much clearer and quicker answers to those questions.
Great concern has also been expressed about the dramatic fare increases in the settlement. The increase in train fares could see the fare from Manchester to London increase from just over £65 to £88-
I am sorry, but I have very little time and other hon. Members wish to speak.
Bus fares often do not get sufficient attention, but many lower-income people depend on buses to get to work and local amenities. But there will be a severe cut in bus services' operators grant, which could mean higher bus fares and fewer bus services. The cut in that grant combined with cuts in revenue support to local authorities could mean that less money is available to enable buses to be provided where services are needed for social reasons rather than to make increased profits for the bus operating companies. We have had very little clarity about what that means.
Another important matter that has not been mentioned by Government Transport Ministers concerns the implications of a settlement on the critical issue of road safety. One of the unrecognised success stories of recent years has been the big reduction in the number of fatalities and serious injuries on our roads. Every single death and serious injury is a tragedy for the individuals and their families, but it is significant that, in the past year alone, there has been a 12% reduction in the number of people killed on our roads. The reason for that reduction is that local and central Government have combined in a number of measures to make our roads safer.
It is extremely disturbing, therefore, that we now have a cut in-an elimination of, in some cases-the specific grants to local authorities that enable them to go ahead with road safety schemes, together with a change in national direction and the abolition, I understand, and the complete axing of the previous Government's effective public education campaign on road safety. That combination of Government and local action was very important in reducing the number of road casualties. Has any thought been given to how the cuts in this spending will affect the number of deaths on our roads? That is critical.
I am also extremely concerned about the difficulties facing strategic road schemes under the new arrangements. Such schemes matter because they bring jobs and economic benefits to local areas, but the projects currently decided on through the regional allocations now have nowhere to go and, from the Transport Secretary's written statement today, it seems clear that he too has no answers. Local economic partnerships are no substitute for proper regional thinking that cuts across local authorities and provides vital economic lifelines-by giving access to ports, for example.
I commend Ministers on the spending review, because finally we have a Government who are prepared to address the big picture.
In the last four years of the previous Government, Britain dropped from third to 13th on the international rankings for economic competitiveness, partly because of rising global competition, but also because of the excessive inflation of the public sector. As a result, British productivity lags behind our major international competitors. According to EUROSTAT data, between 2000 and 2008, European Governments who spent 42% or less of GDP created 27% extra jobs. Governments who spent more than 42% had jobs growth of just 6%. In that period-before the banking crisis-Britain jumped from the high-jobs-growth camp to the low-jobs-growth camp. The amount of GDP consumed by the UK Government rose by 11% to 48%, and sure enough jobs growth was a paltry 5%. The evidence is plain: we cannot spend our way to economic growth.
There is nothing ideological about wanting to create jobs, and there is nothing socially fair about the welfare trap. I hear the calls every week from Opposition Members to soak the rich, but today the top 5% of earners in this country pay almost half the country's income tax. If that is not a fair share, fine, but where would the Opposition raise taxes, and by how much? The real risk with their strategy is that the brightest talent will flee this country, if they believe that talent and graft are punished rather than rewarded. The brain drain does nothing for social fairness. The July Budget and this deficit plan have brought Britain back from the cusp of default.
Yesterday, we saw Standard & Poor's triple A rating restored from negative to stable, and the task now is to drive economic growth and competitiveness. However, the spending review also addresses fairness at three levels. First, there is the snapshot of winners and losers that there will be in any budgetary process, and the matter of protecting the lowest-paid public sector employees from the pay freeze, the pupil premium and the triple lock on pensions. We must address the glaring unfairness in pay not only between the public and private sectors, but within the public sector. The best paramedic in this country can earn just one tenth of what the top NHS manager can earn. What does that say about our priorities? Some are bucking the trend. Sir Norman Bettison, the chief constable of West Yorkshire, described the idea that the public sector is competing with the private sector for talent as "costly and irresponsible nonsense". He proposes to address public sector pay restraint incrementally, starting with the highest paid 25%. His proposal merits close consideration.
The second dimension of fairness in the CSR relates to the intergenerational allocation of resources. According to the National Institute of Economic and Social Research, a failure to tackle the deficit would leave each member of the next generation having to pay £200,000 extra in taxes just to enjoy the same level of public services that we and previous generations have enjoyed. What is fair about leaving our children with a tax bill of £200,000 each?
I thank the hon. Lady for her intervention, but the problem is that the university budget as it was configured under the previous Government was simply unsustainable. That is but one of the many examples of where they ducked the problem of reform and we have addressed it.
I will resist the temptation, but I thank my hon. Friend for his question.
Finally, the comprehensive spending review promotes the economic growth that we need-growth driven by the private sector. That is what creates jobs and pays for public services. The July Budget restored confidence, cutting corporation tax and reversing the jobs tax. Employment was up by 178,000 in the last quarter. Economic growth in the last two quarters was the highest that it had been for 10 years. We must build on that-nothing can be taken for granted-and that is why I welcome the investment in infrastructure and science. I support the plan for tax breaks in national insurance for start-up companies in their first year. However, that measure will be confined to certain regions. Will Ministers say what assessment has been made of the net effect on tax revenue of extending that important measure across the country?
I know that time is short, and I want to allow others the time to have their say. It is right that every measure in the CSR should be robustly debated and scrutinised, but without an alternative, overarching deficit plan, criticism of those measures fails the test of credibility and relevance.
Order. Before I call the next speaker, I am going to have to reduce the time to five minutes, and even then we are really struggling, so if hon. Members can ease up on the time that they use, that would be better.
I appreciate the opportunity to make a brief contribution, which I shall limit to my constituency, and to housing benefit in particular. Lewisham is a relatively poor borough, where wages are around £26,500 per annum on average and where the mean house price in sales last year was £240,000. In common with most London boroughs, we are an area of extreme housing stress, brought about primarily by population growth and the fragmentation of households. Changes in housing benefit will have a devastating effect on people who seek to be decently housed in Lewisham.
Ministers have sought to present their cuts and their new proposals in the light of a few absolutely extortionate rents. They have spoken continuously about the cap and the fact that people should not be able to claim benefits to live in what they deem to be luxury accommodation. That is not something that affects the majority of housing benefit claimants in this country. When he sums up, will the Minister, who is not paying attention- [ Interruption ] I am glad to see that he now is paying attention. Will he tell us what proportion of all housing benefit claimants in the UK are affected by the cap? In Lewisham, fewer than one in 1,000 people will be affected. Our people are not living in luxury, but let me tell him that this change will be a tragedy for the biggest families, living in the biggest properties-often in quite squalid conditions-and they will be evicted.
The fact is that a conservative estimate made by my local authority finds that 9,050 households are affected by the generality of changes that are proposed by this Government. I further tell the Minister, to nail another myth perpetrated by this Government, that 5,000 of those are people in work.
I am advised not to allow interventions, as it will take up other Members' time.
The loss for a one-bedroom property is about £11 a week; for a three-bedroom property, £34 a week; and for a four-bedroom property, £57 a week. People cannot make up this difference from their low wages-very low in Lewisham, as I have said-and they could not make it up if they were in receipt of benefit because of unemployment. There is no way these people can make it up, so they will be evicted. What will happen then? There are 17,000 people waiting for council housing in Lewisham; there are 50 families already in bed and breakfast; there are 1,000 households in temporary accommodation. There are no alternatives for the people I am concerned about. They will not be able to rent and they will not be able to find cheaper accommodation because of the huge pressure on housing-pressure that will come from richer boroughs that try to put people out of their own area and into areas like Lewisham.
The Government argue that rents will fall. They will not. We have so many young professionals who cannot purchase property because of the prices and because they cannot get loans-and they are taking up any slack. The Government argue that this is an incentive to work-a terrible insult to those who are unemployed. When Labour were in government, unemployment fell by 50% in my constituency. We halved unemployment and the fact is that it has risen only because of the recession. People want to work and people will work.
I am absolutely sickened when I hear the Government speak about fairness. There is nothing fair about these measures-nothing fair whatever-and they are going to hurt the most vulnerable most. They are absolutely sickening. They will not drive people into work; they will not lower the prices; there is nothing fair about the housing benefit changes and nothing more punitive. This is a catastrophe in the making-a catastrophe for my people in Lewisham, for London as a whole and for this great capital city. I remember when people slept in cardboard boxes on the South Bank. This Government are planning to bring back those conditions.
In the brief time available, I would like to direct my remarks to some of the changes announced this week as they relate specifically to my Thurrock constituency.
In building a programme of spending to go forward, the Chancellor has rightly recognised the importance of infrastructure investment for creating the right conditions for businesses to grow and for the UK to become a more competitive economy. However, there are a couple of constituency issues that I would like to put to him, and I want to ask him to think about whether, as we go forward, we are really serving my constituents well-in particular, the businesses within the constituency.
Paragraph 2.25 of the spending review states that
"subject to consultation... charges on the Dartford Crossing" will be increased,
"alongside accelerating plans to improve traffic flow."
At this stage, it is not clear what those plans are. Motorists who are regular users of the crossing will witness that it is operating way beyond capacity and has regular delays. Moreover, the congestion regularly spills out on to the road network in Thurrock, so my constituents are regularly faced with misery, caused by the congestion that is caused by users of an over-used crossing.
The local economy in Thurrock is uniquely dependent on logistics. We have a thriving port at Tilbury and we are now witnessing a massive inward investment on the part of DP World, which will generate upwards of 16,000 jobs once it is on stream. That will require a fully functioning road infrastructure network for those businesses to be the success that we want them to be in creating the jobs that we need. I urge the Chancellor, when considering where the proceeds of the tolls will be directed, to show some sympathy for making greater investment in the road infrastructure in Thurrock.
It is particularly regrettable that the Secretary of State had to announce yesterday that the proposed improvements at junction 30 had also been shelved. It is regrettable because DP World, which was investing in Thurrock, would also have made a private sector investment contribution to the road improvements. I hope that we will soon get more clarity on the road infrastructure improvements that we are going to get to increase capacity at the crossing.
Having said that, and although the increase in charges at the crossing are regrettable, I quite understand why the Chancellor finds himself in this position. At this stage, he is not able to turn down a nice little earner for the Government, given the mess that the public finances are in, thanks to the Labour Government.
I want to make another suggestion. When we are looking to see where we can get the most bang for our buck in public spending, we must remember that Thurrock is in Essex, and Essex is known for its entrepreneurial spirit, if for nothing else. Everyone recognises that the road improvements-at junction 30 in particular-are essential for creating the investment that could unlock 36,000 jobs in the area. It is my contention that, for every £1 invested in Essex, we will get more bang for the taxpayers' buck. I hope that the Chancellor and the Secretary of State for Transport will bear this in mind when they consider their options for increasing spending in future.
When the comprehensive spending review was debated recently in the Northern Ireland Assembly, there was a general feeling that, against the budgetary framework outlined at the time when devolution was restored, we had been short-changed. Notwithstanding the protestations of the Secretary of State for Northern Ireland, we have been disappointed, to say the least. I note, however, the undertakings given today by the Chief Secretary to the Treasury that the Government will keep their commitments on track. The Members of Parliament for Northern Ireland will undoubtedly hold them to that.
During that debate in the Assembly, there was an air of financial realism. Perhaps for the first time in our recent history, it has become clear to everyone in Northern Ireland that we really are responsible for ourselves and for making the best use of the available resources. I hope that it might still be possible, however, to secure improvements around the edges of the published settlement, including guarantees on policing and security; access to end-year flexibility; latitude in how welfare reform is implemented in Northern Ireland, given its unique legacy; and more freedom to borrow. For this reason, I fully support the plans of the joint First Ministers in Northern Ireland to engage directly with the Prime Minister and the Chancellor.
The impact of the CSR settlement on Northern Ireland can be assessed in three parts. First, on current expenditure, we are facing a cut in real terms of 7% by the final year of the CSR. That is challenging, but it is not insurmountable. Secondly, in regard to capital expenditure-regardless of the smoke and mirrors put in place by the Chancellor, the Prime Minister and the Secretary of State for Northern Ireland-we have been left well short of our expectations. Thirdly, on capital investment, we faced a further downturn the other day with the suspension of the Northern Ireland aggregates levy credit scheme. I want to ask the Chancellor and his Treasury team to continue the negotiations with the European Commission to ensure that that is reinstated.
I thank the hon. Lady for her response.
The most important thing to us in Northern Ireland is the annually managed expenditure, through which our benefits are paid. What makes this iniquitous is the fact that the money does not come out of the Northern Ireland block, but directly out of the pockets and purses of benefit recipients. In Northern Ireland, that represents up to £0.5 billion being taken from some of the poorest households. The Prime Minister claims that that is fair, but what is fair about snatching the mobility allowance that is payable to people in residential care? What about the changes to child benefit? What about the changes to housing benefit? Are they fair? On the face of it, those large-scale welfare cuts have little to do with the laudable desire to help people move from benefit dependency to the dignity and self-sufficiency of gainful employment. They represent an old-fashioned onslaught on the poor.
I am a former Minister for Social Development in Northern Ireland with responsibility for benefits. Along with my successor, I have engaged in continuing discussions with the Department for Work and Pensions about welfare reform issues and the respects in which welfare reform proposals are inappropriate for Northern Ireland. I believe that we have reached a point at which we may need to redesign the social security system in Northern Ireland to make it much fairer for all, and to give ourselves greater freedom and flexibility to do things differently. I believe that that can be done without the need for an increase in the net subsidy to Northern Ireland.
We are doing a lot of thinking about how we can secure more local control of Northern Ireland's economic levers, and we expect a robust but fruitful dialogue with the Chancellor when the promised economic paper on Northern Ireland is circulated by the Government within the next few weeks. The Chancellor indicated in last week's CSR statement that both he and the Secretary of State for Northern Ireland intended to engage with all Northern Ireland Members of Parliament. As one of those Members of Parliament, and as a Northern Ireland party leader, I look forward to that discussion. There is no doubt that we need to rebalance our economy, but one thing that we must not do is throw the baby out with the bathwater and remove people from the public sector, because that will throw asunder our whole jobs and investment scenario.
Let me begin by reminding the House why the country is in its present position, and why the spending review has had to be so tough. We are in this position because the last Labour Government left the largest deficit in our peacetime history, and the largest structural deficit in Europe.
What does that mean? I will tell hon. Members what it means. This year, we will spend £43 billion on debt interest alone. That is £120 million every single day. For that money, we could build a new primary school every hour. We could triple the number of doctors in our hospitals. We could spend twice as much on education every year. I therefore do not see how it is tenable for Opposition Members to ignore the astronomical waste of money that those interest payments are leaving with us, and the unfairness of suggesting that we pass it to future generations.
Labour Members claim that they planned £48 billion of public spending cuts when they were still in government, but they forgot to tell us where those cuts would fall. Throughout the debate, I have been enlightened no further on what they would cut and how they would address the problem. I hope that, in the hours that remain, some Labour Members may come up with some ideas of their own.
The Government's comprehensive spending review sets out £1 billion less of cuts in Government Departments. The remaining plan focuses on long overdue reform of a complex and byzantine welfare system that delivers unintended effects to people throughout the country-and, of course, tax rises. The important point, however, is that the spending review is also fair. The banking levy will raise £2.5 billion a year. The last Government did not do that, and they had 13 years in which to do it. Indeed, under the last Government bankers and lawyers often paid lower taxes than those who cleaned their offices. That is something else that was left to this Government to sort out.
Does my hon. Friend agree with the leaders of 35 of the biggest companies around, including Marks & Spencer, Microsoft, Diageo and Next? They say that they believe that
"Addressing the debt problem in a decisive way will improve business and consumer confidence" and that
"The cost of delay...would result in almost £100 billion of additional national debt".
I thank the hon. Lady for her intervention. Not only do I agree with those companies; I also agree with the CBI and the International Monetary Fund, which have commended these plans as the best way both to ensure growth and to deal with the deficit.
Let me be clear. The Opposition have every right to challenge and to resist the measures that the coalition Government are implementing. That is of course the Opposition's job, but they need to come clean with the British public and tell this House and the public at large what their alternative is. They will not be taken seriously until we hear different ideas from them. Today so far we have heard special pleading on transport, child benefits, housing and myriad other topics, but we have not heard anything about the measures that they would put in place to address the significant problems that we face.
The spending review has had to be tough, and of course we and our constituents will feel it, but there are many positive policies that will help create a fairer, freer and more responsible country over the next few years. One crucial area is the fairness premium that was announced by my right hon. Friend the Deputy Prime Minister.
The fairness premium involves extending 15 hours per week of free education and care to all disadvantaged two-year-olds, and a £2.5 billion pupil premium, with extra money attached to the children who need it most. Like my hon. Friend Stephen Williams, who has left his place, when I was at school, I was eligible for free school meals, and I know what a difference extra money going to the pupils who need it most can make. The funding will not just benefit them. By driving up standards across our schools, it will benefit every child in every school. It could be used to cut class sizes, provide one-to-one tuition and catch-up classes, or used in any way the school sees fit, ensuring that every child gets the individual attention that they need and deserve.
As everyone in the House knows, performance at school is tightly linked to future outcomes. That is where fairness can start: the funding can make a difference in the early years. Giving this country's poorest children the best possible start in life is the most effective way to lift them out of poverty and to help them to achieve their full potential. The fairness premium is therefore one of the most important policies of the spending review and I hope that it will be welcomed by Members on both sides of the House.
There is no doubt that the spending review is full of difficult decisions, but these are decisions that Labour Members shirked for the 13 years that they were in government. These are decisions that two parties coming together and acting in the national interest will be taking.
Given the shortness of time, I will focus on my observations as Chair of the Public Accounts Committee, but I cannot let the moment pass without reflecting on constituency interests, particularly in relation to housing benefit. I share the views of my right hon. Friend Joan Ruddock. The housing benefit policy will simply not even meet the Government's intent. It will not cut housing rents in the private sector in London. If the Government wish to do that, I say to them: do not punish the tenants, cut the rent. The policy will not cut public spending, but it will increase homelessness in London and that will have its impact. It will not help people get into jobs. The very people who will be frozen out of London are those who come in to clean the House of Commons at 4 in the morning and who cannot come in from places such as Dover. We will have more people coming into Barking as a result of these reforms. The policy will inflame community relations in constituencies such as mine, which will simply provide more food for the extreme right, which will exploit such issues to vicious political ends.
I want to talk about issues that I have observed in the few months that I have been Chair of the Public Accounts Committee. Whatever the political intent, I am worried that the capacity of the Government machine to respond, to manage the process and to realise the intended savings is highly questionable. If the Government fail to deliver the vicious savings that they have planned, I fear that they will return for a series of further easy but highly damaging cuts to achieve the £81 billion target. Those cuts might include further slashing the benefit bill, on which the most vulnerable depend, or introducing charges into the NHS so that it ceases to be a service that is free at the point of need.
The record of the civil service in securing efficiency savings and value for money savings is poor. We recently reviewed the performance of Departments in delivering the value for money savings required in the 2007 comprehensive spending review. After two years only a third of the savings had been achieved, and of those reported only a third were sustainable value for money savings. The great tanker of Government was unable to deliver a budget imperative. I note that the Government expect to deliver a further £6 billion from savings in back-office costs, but I am sceptical about whether that will be achieved.
There is also a presumption that closures, mergers and job cuts achieve immediate savings, but in the real world these changes involve massive upfront costs. The Government's promise that in abolishing the Audit Commission they would save £50 million started to unravel before the ink was even dry on the letter to the chairman of the Audit Commission announcing its abolition. We saw in yesterday's papers that Barnet, Britain's first "Easy Council", was embarking on a programme of savings and was planning to save £3 million in the first year, yet not only is it not going to save that amount, but it is going to spend more on the programme of savings than it will save in the year itself.
Departments operate in silos and appear to have limited understanding of the extent to which cuts in one area impact on the budget of another. Let me give just one example. Her Majesty's Revenue and Customs has planned to get tougher on fraud and theft, which we all welcome, and it expects to collect a further £7 billion in taxes, but the law officers are taking a 24% cut in their budget, so the Crown Prosecution Service is far less likely to be able to prosecute complex tax cases. If the Government do not consider the effects of the cuts on a whole-system basis, I have absolutely no doubt that my Committee will see Departments passing the buck among themselves for this failure.
If the Government are driven by ideology and do not intend to pursue their policies pragmatically, we will fail to deliver value for money and we will waste public money, forcing cuts elsewhere. In this respect, I offer the example of the pathways to work programme. We demonstrated in our report that private providers perform far less well in delivering jobs and cost more, and that Jobcentre Plus is much more effective, yet the Government, driven by ideology, are determined to privatise that programme.
My Committee will keep a close eye on whether the Government meet their own objectives and do actually deliver on fairness and efficiency in the cuts they make.
I have sat through most of this debate with a sense of growing incredulity at the collective amnesia and denial of Opposition Members who, quite simply, are unprepared to face up to the reality of the fiscal disaster they have bequeathed to us to attempt to clear up. Let me just remind them of some of the figures. [Interruption.] I am pleased to see that they find this so amusing: £270,000 per minute in debt interest, £120 million a day, £43 billion per year-which is more than we spend on education. That is a disgrace.
Let me put this in historical context. In 1976, when another Labour Chancellor, Denis Healey, went cap in hand to the International Monetary Fund because this country was busted, our deficit represented about 7% of GDP. Today, it stands at 11.4%. Our house is well and truly economically out of order. This will not only affect our children, who will have to pick up the strain in repaying the debt. It has also affected our standing in the world, because this country has the worst deficit in the G20. Our deficit is worse than that of many Latin American countries; Brazil has a nominal annual deficit, as of April 2010, of a little over 3%, compared with ours of 11.4%, so we are 300% behind Brazil. It has come to something when we have to look enviously at Latin America's fiscal position.
Much has been said about how quickly the Government have determined to reduce the structural deficit over the lifetime of this Parliament, but many are on our side, including the OECD, the Bank of England and the Office for Budget Responsibility. Let us not forget that Labour's plan and proposal, as far as there is one, is to halve our structural deficit over the period of the review. That would leave us with £100 billion in additional debt and an additional £5 billion in interest to pay on it. I see Labour Members sighing, but perhaps they could tell us what they are going to cut to find that extra £5 billion or what extra taxes they are going to raise to meet that requirement.
Does my hon. Friend agree that the International Monetary Fund's statement was clear about the fact that what the Government are doing is right and proper, and will lead to growth in the long term?
My hon. Friend is entirely correct, and there is no doubt that if the Government had not taken prompt action as we did in the emergency Budget in June, we would have been that close to a Greek-style economic meltdown.
Will the hon. Gentleman explain to the House how our debt was similar to that of Greece, given that the Debt Management Office in this country has been far better and we have far better terms? The question of whether the debt is sustainable is what leads to crises, not the amount of deficit, given the size of our economy.
The answer to that is that we came that close because the credit rating agencies, such as Standard & Poor's, came that close to downgrading our triple A status. The consequence would have been that the Government, in funding their debt through their bonds and gilts, would have had trouble getting those debt requirements away, interest rates would have risen, mortgages would have gone up through the roof and the businesses on which we are counting to pull us out of the malaise that we are in would have been crippled by higher interest rates. That is the basic economics that Labour Members fail to understand-
I will not give way because I have limited time available. [Interruption.] In the great tradition of not giving way, I will not give way after taking two interventions. One very important point is that we must look to the private sector to create the jobs. It is true that the OBR has said that 490,000 jobs will be lost in the public sector, and there is no getting away from it. It is also true that PricewaterhouseCoopers has suggested that 500,000 jobs in the private sector might go as a consequence of the slimming down of the public sector. So we must look to growth from the private sector.
I am therefore very pleased that this Government have had such a firm and positive focus on private sector growth. We have removed national insurance for new business start-ups outside London and the south-east; we will bring corporation tax down, in steps, over the next four years from 28 to 24%; and we have cut red tape. We have also created the regional growth fund, which we heard about in the Business Secretary's statement earlier today. It involves some £1.4 billion, much of which is to be channelled into the very areas of the country where the private sector is weakest and the public sector has been strongest, and I welcome that as positive action.
I also welcome the fact that the Government are listening to business in a way that their predecessors never did. The Conservative party is a party that understands business; we understand how difficult it is to create the wealth that is needed to supply the public services that all in this House want.
I will not give way now, because I have very little time left.
I am also pleased that the OBR, an independent body, has stated that employment will grow in every year across this plan. I know that one swallow does not make a summer, but it is encouraging that in the last quarter-the one up to the end of September-growth was double that anticipated, at 0.8% as opposed to 0.4%. That is an encouraging sign. The Opposition should cheer at that. They should stand up for our country. They should feel good about the fact that we are improving where we are going and that we are beginning to make a difference-a difference that they never achieved.
I want to talk briefly about fairness, which is at the heart of the CSR. I want to challenge the IFS's point that somehow the CSR is regressive. It is to an extent, if one considers taxation and benefits, but if one includes the use of public services, it is not regressive. It is a progressive move.
I welcome the fact that we are going to keep 50% as the higher rate of tax, with 800,000 people coming out of taxation altogether, and child benefit being means-tested. The £2.5 billion that will be saved is exactly the amount that will go into the pupil premium to help the poorest children in our land. Those are all aspects of fairness, and we cannot build a society based on social justice on a mountain of debt. I commend the review to the House.
The one thing that I would say about the CSR is that-no matter how many times the Chancellor said it during his statement, no matter how many times the Chief Secretary said it today and no matter how loudly Mel Stride said it a moment ago-it was not fair. The cuts-£81 billion a year by 2014-15-and the tax rises were not unavoidable.
Every decision taken by the coalition was a political one, but it was the failure to understand the consequences of the decisions that astonished me. Nowhere was that more so than in the defence elements of the CSR and the strategic defence and security review that went along with it. The decision to cancel the Nimrod programme puts a huge threat over RAF Kinloss and a huge question mark over RAF Lossiemouth,
The Parliamentary Private Secretary is chuntering away about Scottish independence. It is interesting, is it not? He normally wants to deprecate countries such as Ireland and Iceland, but they still sit above the UK in the world prosperity league. I shall give him a copy of The Scotsman to look at later, before he decides on another ill-judged sedentary intervention.
The bottom line is that those defence cuts threaten to add to the 10,000 military job losses under Labour and to the £5.6 billion military underspend in Scotland under Labour. Far more importantly, they would represent a 25% reduction in the entire military footprint in Scotland. If the cuts go ahead, they will represent a 25% hollowing out of the entire economy of Moray. When Conservative Ministers say that we are all in it together, it strikes me that that is not absolutely true and that it is not absolutely fair.
The CSR was not just about the Scottish block but about other UK spending decisions, yet somehow Scotland was portrayed as doing better than most UK Departments. That is nothing but spin. The House of Commons Library makes it clear that the Department of Health, the Department for International Development, the Department of Energy and Climate Change, the Department for Work and Pensions, the Ministry of Defence, the Cabinet Office, the Treasury, the Law Officers, the Northern Ireland Office, the Department for Culture, Media and Sport, the Foreign and Commonwealth Office, Her Majesty's Revenue and Customs and the Wales Office all did better. A little more substance and a little less spin would not go amiss.
That is important because the cuts represent £1.3 billion in cash terms next year and, above all expectations, there will be an £800 million cut in capital expenditure. That directly threatens 12,000 Scottish jobs. It is dreadfully disappointing-the cuts were announced on the same day as the Scottish quarter 2 GDP figures, which showed Scottish growth up at 1.3%, above the 1.2% for the UK, and confirmed the decision to have direct capital investment to protect jobs during the recession. That makes it all the more ludicrous that the Government would seek cuts of such magnitude before recovery is secure.
Did the hon. Gentleman respond to the Government's spending challenge with his own ideas about where the savings should be made, with £44 billion as a starting point?
What I did, possibly before the hon. Gentleman was a Member of the House, was to table amendments to previous legislation to set out a much more sensible framework for a proper programme of fiscal consolidation, based on the successful New Zealand model, rather than the flawed Canadian model that his party and the Liberal party are now following.
One of the things that I find extraordinary, which the Chief Secretary could not explain earlier, was the lack of detail in the Government's plans. The Department for Transport is expected, among other things, to reduce its administrative costs by one third-£100 million a year. The Department for Business, Innovation and Skills is expected, among other things, to reduce its administrative costs by £400 million. In the Home Office, the UK Border Agency is expected to cut its support function costs by £500 million.
I am not necessarily saying that that cannot be done: what I am asking is how. Which offices will close, how many jobs will be lost, how many staff will be sacked, and where are they located? Of the 42,000 job losses in the military-the 25,000 civilian and the 17,000 uniformed -which ones are those, in which units, where are they currently based, and when will they go? Why would not or could not the Chief Secretary give us that information today? It gives the impression that the Government are making it up as they go along.
I am aware that time is short and I know that many other Members want to speak, so I have a specific question for Treasury Ministers. Page 50 of the comprehensive spending review makes it clear that
It goes on to add, unsurprisingly:
"The amount of self-financed capital expenditure is forecast to fall by 17 per cent over the four years."
This will bring in to the Government, according to the table on page 12, £1.3 billion. That will be about £120 million from Scotland.
Will the Minister please confirm that there will be a requirement in Scotland for another £120 million of cuts, and £1.3 billion of cuts throughout the whole of the UK, in order to find the money to pay the extra £1.3 billion in interest charges because of the increase on Public Works Loan Board loans? I would be grateful for confirmation of that today.
Like many hon. Members, I have listened all afternoon to the debate. If everyone examined the matter, they would know that the comprehensive spending review was necessary. The cuts amount to taking us back to 2007 expenditure levels. I will not repeat the arguments that we have heard this afternoon denying or not denying the effects.
Not at the moment.
I shall concentrate on two points that I do not believe have been mentioned. The first is the importance of how the cuts are implemented. My fear is that, for political reasons, some public bodies and some councils have every incentive to make the cuts go right to the bottom line. I remember how, in the years of the Conservative Government from 1979 onwards, Mrs Thatcher's cuts, job reductions and so on were used politically by opposing parties.
The most important thing is that the cuts are made sensibly, and that the bloated management hierarchies of local government look at themselves and realise that this is a chance for much of the reduction in their field to come through management. Let me explain. In Hertfordshire county council- [Interruption.] Yes, Conservative, and proud to be Conservative.
In Hertfordshire county council the expected cuts, which have yet to be implemented, will be enhanced by the fact that £150 million of taxpayers' money has been saved by sensible management changes that hardly affect the front line-£150 million-yet in my local council, Watford, a council with a turnover of £18 million, we have a chief executive who is paid roughly the same as the Prime Minister, a mayor who is paid exactly the same as Members of the House, and an entourage of management levels that defy belief compared to anything in private business life.
I was very pleased to hear what the Prime Minister said yesterday about growth being so important, but I remind Opposition Members that growth is achieved not by spending money that the Government do not have and never wonder how to repay, but by businesses, ranging from the smallest to the largest, having the confidence in the economy to decide to expand, to raise money through friends and family or the stock market, to borrow money from banks that are able to lend it to them and to use every resource that they have to employ extra people. I have every confidence in this Government, and it is most important that we reward people who create jobs. Those are the people who are at a premium, and those are the people who have been stifled in the past.
There has been lots of talk about the Government making banks lend more money, and I commend the new funds that have been discussed. The new equity scheme, which the banks are putting together to provide £1.5 billion of equity for business, is a very good idea, and some of the schemes that the previous Government started and this Government are reforming and expanding are of course commendable. However, the real point is that, unless the deficit is dealt with not just in this country but elsewhere, banks will have to keep on lending money to Governments. Government debt has stifled banks here and all over the world. In the US the argument used to be, "The deficit does not matter", but it does, because banks start lending money to business in quantity when they have confidence in the future and do not have to lend to Governments. We should not forget that.
The greatest thing about the comprehensive spending review is that it deals with the problem on a one-off basis. It is not being shoved under the carpet, put off or held over until after a general election, and for that reason, above all others, the CSR is the most fundamental and best thing that the Government could have done. The problems need grasping. The world of delusion that we have lived in for the past few years-the world of expanding public expenditure, with managers appearing all over the place at a cost to the public purse that taxpayers cannot afford-is coming to an end, and I for one am delighted about that.
In the short time that is available to me, I shall deal with a couple of aspects of the CSR, particularly its impact on my own region, the north-east, and look at some of the issues of fairness, which Members on both sides have raised this afternoon.
The CSR has no credible strategy for growing our economy in order to pay down the debt. Indeed, it will make the poorest pay for the damage that those at the very top of the financial ladder inflicted on our economy. As we know, from the statements and Members' contributions that we have heard, children and families will be asked to bear a greater burden than the cavalier bankers who caused the crash in the first place.
Research by IPPR North has shown that the economy in the north grew substantially during the period of the previous Labour Government. However, the impact of the global credit crisis and economic recession has, sadly, had a disproportionately greater effect in those same areas, including my own. Caterpillar, one of our flagship private sector companies, reduced its labour force during that period by almost 50%. I am pleased to say that there are signs of recovery in that regard, however, and I am doing everything I can to assist.
The view of the IPPR in considering the decisions on jobs, welfare, capital investment and public services made by the Government in the comprehensive spending review, and how they will impact on the north-south divide, is that
"things look set to become significantly worse".
On the general outlook of the CSR strategy, it says that
"it lacks an equally rigorous and challenging strategy for economic growth".
That is the truth of the coalition's plan.
The acid test of whether the CSR works is, first, whether it is fair and, secondly, whether it will deliver economic growth. Labour Members, myself included, believe that the CSR does not provide a credible growth strategy-certainly not for my region, the north-east. The impact is compounded by a series of announcements, including the disbanding of our regional development agency, One North East, and the axing of the regional Minister; in my right hon. Friend Mr Brown, we had an excellent advocate. For the life of me, I cannot see that much money is saved by doing away with a regional Minister-it seems to be a symbolic gesture not to have such a person arguing the case for my region from the Government Benches. We have also seen the axing of the Government office for the north-east-GONE has gone.
The north-east is more reliant on the public sector than other regions, and about 46% of working women work in public sector occupations-one of the highest percentages in any region of the UK. In fact, the proportion in my constituency is even higher. The job losses arising as a direct result of the CSR will unfairly target these women.
In the very short time that I have left, I want to focus on the effects of the CSR on social housing. The National Housing Federation has recognised that it is likely that some of the poorest and most vulnerable in society will be worst affected by the CSR, and those who access services from housing associations are likely to see their personal financial situation worsen considerably. Its figures show a 60% cut-or, in real terms, a 63% cut -in cash terms in comparison with the 2008-2011 national affordable housing programme. Where will the Government find the money to plug the gap created by these cuts? They will raise the rents on the poorest in society to 80% of market value, and this will end up displacing thousands of families from our cities. The Chancellor uses the word "fairness", but it is a concept that he does not seem to grasp.
The Chancellor has criticised Labour for not being straight with the public, and he often accused us of hiding the details of Budgets, but he will not be straight with the British people. His spending review will leave more people out of work, it will stop in its track the recovery of regions such as ours in the north, it will decimate key local services for the most vulnerable, and it will force those on low incomes out of our cities.
I am a member of the Public Accounts Committee. Sadly, the Chair left the Chamber a few minutes ago, but we still have some other members here. It is the Committee's task, usually twice a week, to listen to a saga of Government mismanagement and overspending: some of the cases that we hear about are quite breathtaking, running into billions of pounds. I could give lots of examples, but those who are interested should take a look at the National Audit Office reports. It is absolutely clear from those reports that there is massive potential to save money in the operation of government.
I would like specifically to talk about the report on the previous comprehensive spending review in 2007, which required sustainable value-for-money savings of £35 billion over three years, a period which ends next April. That illustrates the phoniness of saying that everything was fine before the credit crunch. The previous Government clearly knew that spending was getting out of hand, and a year before the credit crunch they looked for £35 billion of savings. It is interesting that that is nearly half of what is proposed in the current CSR.
So how is it going, judged against the 2007 review? Some £15 billion of savings have so far been identified, but when the National Audit Office examined the matter it said that 18% of that did not represent improvements in value for money, and it rejected 44% on the basis that the Departments did not have the cost and performance information to underwrite their claims, so only 38%-£6 billion-has actually been saved. It is clear that the current spending review has to be tougher because of the failure to deliver the previous spending review. As the report that we agreed just yesterday in the Public Accounts Committee states, if Departments had been successful in making real savings of 3%, fewer painful cuts would be necessary now.
I thank my colleague from the north-east for giving way. Does he have any idea how much it will cost the taxpayer to clear up the social consequences of the Government's decisions in the north-east?
Clearly the north-east has already suffered, and no doubt there will be more cuts there. The decisions about how much it will cost will come out in the overall review, and I do not have a specific figure, but I do know that the 2007 comprehensive spending review showed a litany of management failure. There were no baselines against which to measure, so we did not even know whether savings were being made. There was no radical thinking, with few of the savings representing major departures from current thinking. That was because the Labour Government did not allow input from civil servants, so it was a top-down exercise. They did not listen to the people who were actually doing the work, and I am sure the current Government will do better than that. There was no proper reporting framework to review progress and there were no milestones-things that would be taken as read in the private sector. There was no personal accountability. We ask questions about that time after time in the PAC-did anybody lose their job as a result of some fiasco? The answer is almost always no.
In the NAO's July report, the Treasury admitted that it did not have the capability to deliver value-for-money programmes in full, and that needs to be addressed urgently. I hope that my hon. Friends on the Front Bench will learn the lessons of that report and ensure that the comprehensive spending review is driven effectively in the new environment. We need a better framework, clear personal accountability, proper baselines, clear milestones of progress and detailed monitoring. As the NAO stated, the Treasury cannot just reduce budgets and then walk away. I hope that there will be a hands-on approach and that we will deliver the savings that have been set out.
I deplore the fact that the manufacturing industry went from representing 22% of the economy to 11% under the previous Government, and that a recent BBC Experian study showed that my area was 319th of 324 in the country economically; that Hartlepool, across the river, was 314th, and Middlesbrough, next to mine, 324th. I see my fellow local MP, Tom Blenkinsop, in his place. We need take no lessons from the previous Government about economic development in the north-east.
I welcome today's announcements on the Tees valley local enterprise partnership, the regional growth fund and the green investment bank, and I look forward to a revival of the local economy under this Government.
We have heard a lot today about the impact that the CSR will have on some of the most vulnerable people in society. I support the view that it cannot be acceptable that families are expected to pay more than the banks, and that the public and private sector workers who did not cause the crisis will pay more and lose their jobs, while the banks are treated lightly.
Among the doom and gloom of last week's statement, there was a real prospect that the Chancellor would lay out a strategy for growth that would support our small businesses, which are the real drivers of the UK economy. He failed to grasp that opportunity, and I am not the only one who thinks so. Even this week, the Prime Minister and the Business Secretary have both failed to deliver a credible growth plan not just for the UK but for its small businesses.
The Federation of Small Businesses, of which I am a member, believes that a missing link in the Government's deficit programme is the need to create growth by widening the tax base, creating more businesses and incentivising small firms to grow and innovate. I agree. As the shadow Chancellor said last week:
"Without growth, the job of getting the deficit down becomes impossible."-[ Hansard, 20 October 2010; Vol. 516, c. 968.]
Even after today's statement, we are still waiting to hear a growth strategy that has any new thinking in it.
It has been well documented that the Government's approach will throw 1 million people out of work, but I want to take the Chancellor to task about part of his speech last week. He said:
"Of course, there is a very understandable concern about the reduction in the total public sector head count that will result from the measures in the spending review."-[ Hansard, 20 October 2010; Vol. 516, c. 951.]
He used the phrase "head count", but he was talking about people's lives, jobs and futures. He should have the decency not to talk about people's futures in such an insensitive way-off-hand, impersonal and using the phrase "head count".
We make a fundamental mistake by trying to separate the public and private sectors because, as we have heard, they are intrinsically linked and mutually reliant. The construction industry is significantly of the private sector but it survives with a reliance on a large state commitment to improving our infrastructure, as under the previous Labour Government, with investment in hospitals and the Building Schools for the Future programme. PricewaterhouseCoopers suggests that more than 100,000 construction workers will lose their jobs as a result of this Government's actions-that is more than 5% of the total employment in this sector and five times the loss expected in the financial services.
There are many ways to support businesses such as those in the construction industry, one of the best of which is having a well-trained and efficient work force. As my right hon. Friend the Leader of the Opposition has suggested, that could be done by offering tax cuts to employers who pay a living wage as an incentive to develop the skills of the people who work for them. Preventing our brightest students from following their chosen career path is not the best way of achieving those goals, and the cuts that will lead to reduced in-job training such as Train to Gain, which has supported more than 1 million workers in the UK, will make the job market stagnate.
My right hon. Friend the Leader of the Opposition said recently:
"There have been...too few in British politics who speak up for small business."
Well, the genie is out of the bottle now, because my right hon. Friend saw fit to give me the business brief for the Opposition. I want to take this opportunity to stress that, given my small business background, this is one voice that will support the ambitions of small businesses, support the contribution they can make to the economy and skills of the UK and support my right hon. Friend in his endeavour to stand up for small businesses in the UK.
The comprehensive spending review did nothing to stimulate funding for small businesses, nothing to provide an opportunity for small businesses to grow and nothing to allow small businesses to grow their skills base. Quite the opposite, in fact: it takes money away from small businesses. Why? Because it puts 1 million people on the dole. It prevents small businesses from growing. Why? Because it puts 1 million people on the dole. And it shrinks the skills base of small businesses. Why? Because it puts 1 million people on the dole. It is clear from the CSR that the Government do not value small businesses in the UK, but in this House in the future there will be a voice that engages with them, and it will be on the Opposition side.
Eight days have passed since the Chancellor stood at the Dispatch Box and made it clear why it was necessary to take decisions that many on both sides of the Chamber find difficult. We have heard more today from the Chief Secretary to the Treasury about the scale of the problem and why reducing our massive Budget deficit should be the country's primary concern. We simply cannot go on borrowing £1 in every £4 spent-paying £120 million every day in debt interest alone. We know that failure to take action would lead to our paying £4 billion more in debt interest alone by the next election. That money would go to foreign creditors and would help to pay for their schools and hospitals rather than being spent on ours.
We know that had Labour remained in government it would have cut spending, so the debate is about the pace of the cuts that are about to be made, not whether they should be made. That became clear to me in discussions that I held on Friday in my constituency with an organisation that gives a clue to its aims and objectives in its name-Rugby Against the Cuts. Its representatives came to see me on the premise that the Government should take no action to deal with the Budget deficit. After our discussions, however, I believe they accepted that some form of action might be necessary. The group issued a press release, which stated:
"Mark Pawsey listened as we outlined our fears, and said he would be happy to meet us again to monitor developments...at least our MP was prepared to listen...Although we did not seem to change his views, overall, the lobby was worth organizing".
Opposition Members will be unsurprised at that last sentence.
I will maintain that dialogue because it is important. We have offered an honest opinion to the electorate, which is why in the past eight days my hon. Friends have not had massive postbags criticising the measures in the spending review- [ Interruption. ] Well, many of the proposals were contained in the Conservative party manifesto, so it is no surprise that we are taking the action that we are taking. We are bringing forward the date at which the state pension will begin to rise, stopping the most well-off children receiving child tax credits and cutting spending on trust funds.
Last week, in addition to meeting that protest group I took a survey on to the streets of my constituency. In a poll, 87% of the people to whom we spoke said they thought it right and fair that the Government cut their expenditure at this time. It is clear that from the outset our objectives should be to ensure that people are better off in work. A poll in The Sunday Times on
The Government are committed to a stimulus for business. As someone who ran a business for 25 years, I have every confidence that the private sector will rise to the challenge. We are taking steps to reduce the regulatory burden on business and to provide a stimulus, never more so than through the announcement today of the new local enterprise partnership in Coventry and Warwickshire, whose size will be manageable in contrast with the cumbersome Advantage West Midlands. I believe that the LEP will set out economic priorities for the area that I represent.
The Government are acting responsibly and are in touch. The attitude across the country was for me summed up by a gentleman called George Smith, whose daughter intends to go to university next year. He was talking about the additional costs that his family would have to bear to send their daughter to university, but he could have been talking about many aspects of our public services. In The Sunday Times of
"I'm philosophical about it. Everybody and his brother is going to have to start paying more for all sorts of things. Much as we may think it's unjust and unfair, it's really a long overdue day of reckoning."
I shall address two issues: first, whether the Government have kept their commitment to protect the NHS budget, and secondly, how their proposed reforms will affect the NHS's ability to live within its budget in the next four years.
Before the election, the Government promised that the NHS budget would increase in real terms over the spending review period, and last week the Chancellor announced the headline figure that the NHS will receive 0.1% more than inflation in each of the next four years. That is the lowest four-year increase for the NHS since 1951 to 1956.
The Chancellor also announced that £1 billion from the NHS budget will be transferred to local councils to spend on social care. Social care services play a vital role in improving health and reducing NHS costs, for example by helping older people to stay mobile and independent in their own homes. However, the £1 billion going to local councils is not ring-fenced, so there is no guarantee that it will be spent on social care, especially when councils face a 28% cut in their budgets over the next four years. The spending review removed a further £5.5 billion from the NHS by taking its underspend. The NHS has accumulated £1.8 billion of capital underspend and £3.7 billion of revenue underspend-money that it would normally be allowed to keep to reinvest in patient care or to help deal with future overspends. But the spending review abolished the year-end flexibility for the first time.
Far from the Government protecting the NHS budget, the fine print of the Green Book shows that they will reduce the NHS's budget by 0.5% during the spending review period. These cuts come after a period of significant increases in NHS funding, from some 6.6% of GDP in 1997 to 8.7% in 2009-10. While those increases are substantial, NHS spending as a proportion of GDP remains below the OECD average, and pressures on the NHS budget will increase because of our ageing population, new technologies and rising expectations. Meeting those challenges while continuing to provide universal health care free at the point of use means that the NHS will need to make big improvements in productivity over the next four years. The chief executive of the NHS has said that that will be the equivalent of £20 billion of savings or some 5% of the NHS's budget in each of the next four years. The NHS has never achieved that, under any Government.
The question for coalition Members is whether the proposed reforms to the NHS will help or hinder in making those substantial productivity and efficiency savings. The Government are about to embark on major structural change to the NHS, despite promising before the election that there would be no more top-down reorganisations in the NHS. GPs will be given responsibility for commissioning £80 billion of NHS services, and PCTs and strategic health authorities will be abolished. Even when major reorganisations are well organised, they usually mean that health services stand still for a period, rather than progress. If structural change is poorly managed, patient care and finances suffer.
I fully support involving clinicians more in decisions about how services are shaped, but changes such as GP fundholding took time and significant management support to develop. The scale and pace of change that the Government are pressing ahead with pose significant risks. Major structural reforms are not cost-free, and the King's Fund estimates that these reforms will cost £3 billion over the next four years. Many patient groups and professional organisations are rightly worried that having yet another major structural reorganisation, when the NHS faces the biggest financial challenge of its life, will not be good for patient care or for finances. I ask the Government to think again.
This is a vital debate, and the comprehensive spending review and its delivery will define this Parliament. The spending review charts a course that tackles the record budget deficit that we have inherited, it rebalances the shape of the economy and it sets out a path that will lead to lasting, sustainable economic growth.
To achieve sustainable growth, we need to rebalance the economy. That will mean less reliance on the public sector. It is unsustainable for public spending to account for nearly 48% of GDP, which clearly crowds out investment from the private sector. That is why the Government are right to bring public spending down to nearer 40% of GDP by the end of this Parliament.
The rebalanced economy must also be less dependent on financial services. In the last decade, the banking sector was allowed to become far too dominant. We need to ensure that future economic growth is more broadly based and not as closely linked to the performance of the City. Instead, we need to encourage the growth of high value-added manufacturing and high-tech industries. AstraZeneca and its skilled work force is vital to Macclesfield's local economy, and it shows that we can still successfully make things in this country and compete in global marketplaces such as pharmaceuticals. It is good to see that the Government are creating the right economic conditions for the next generation of global competitors and providing support for the all-important small and medium-sized enterprise sector.
Rebalancing the economy also means that there will need to be a greater focus on the regions outside London and the south-east. There has been much talk about that in the Chamber today. There is no question that the north-west will benefit from the strong resurgence predicted in the private sector. Over the past decade in the north-west, the number of jobs in the public sector has grown much faster than in the private sector, and since 1999, the number of people employed in the public sector has grown by 100,000-a massive 17%. In contrast, over the same period, job creation in the private sector has broadly flatlined, only increasing by 24,000-just 1%.
Recent announcements in Macclesfield will sadly lead to job losses. The Cheshire building society is closing down its back-office operations, and more recently it has been announced that nearby BAE Woodford is to close. However, we are working hard to strengthen the local economy. It will clearly benefit from much stronger growth in the wider economy, which is why it is encouraging to see private sector job creation improving, with a 308,000 increase in the UK over the past three months. The increase in the north-west was 28,000, and for the last year, that figure comes to 40,000. That is encouraging news.
I am delighted that the Government are looking to build on those positive developments. I fully support the decision to scrap Labour's tax on jobs, because it will help businesses to save £340 million in the north-west. The Government have gone further by giving new businesses new national insurance holidays outside the south-east worth £5,000 over the next three years, which could help up to 69,000 businesses in the north-west. The regional growth fund will also help to stimulate growth and provide sustainable private sector jobs in the north-west, and the new local enterprise partnerships, such as the Cheshire and Warrington LEP in my area, will put in place private sector-led recovery plans to stimulate economic growth, not just in major metropolitan areas such as Manchester and Liverpool, but in Macclesfield, east Cheshire and right across the north-west.
Labour's opposition to the CSR shows how out of touch it is with reality. The only path it seems to offer is to ignore the deficit, to continue to borrow, to spend and to rack up yet more debt. That is a risk that we on the Government Benches are not prepared to take. We are taking the right approach to dealing with the deficit, but clearly there is more work ahead, and I think that we can draw inspiration from one of the great entrepreneurs in Macclesfield's history-Charles Roe, from the 18th century-whose memorial in Christ church carries a quote of his that reads:
"Difficulties to others were incitements to action".
We would do well to adopt that same spirit in responding to these challenging times, rather than the bleating we hear from the Labour Benches.
"panic stations in the Treasury" at finding out that the reduction in child benefit for higher earners was "unenforceable". It continued:
"At root is a problem that should have been apparent to those designing the policy, if detailed advice had been sought from civil servants before it was announced at Conservative party conference."
"Do you think it's accurate to describe the UK as being on the brink of bankruptcy?"
The response was: "No I don't." Both those bits of hot-off-the-press news-
I thought I was attending one of those rallies in North Korea, so reluctant are Labour Members to engage in debate. However, I thank the hon. Gentleman for giving way. My question is very straightforward: does he acknowledge that the deficit was a problem that had to be dealt with?
What a stupid question, although I thank the hon. Gentleman very much for the extra time that he has given me. Anybody else? No? Okay, let us move on.
What I have described shows that it is politics rather than economics that has driven the CSR. Far from fairness driving the CSR, it is a particular type of Tory ideology that has driven it. Nowhere is that more true than in housing, to which I shall confine my remarks and which some of my hon. Friends have also addressed.
The Under-Secretary of State for Communities and Local Government, Andrew Stunell apologised to the House earlier today-and rightly so-for inappropriate remarks that he made in the debate in Westminster Hall on the CSR and housing yesterday, when he said that Opposition Members had spread "lies and deceit". I am glad that he apologised-it was good of him to do that-but the irony is that he made those comments in the context of the most selective quoting from the National Housing Federation's brief. He managed to find two sentences in an excoriating brief that he thought supported the Government's case. Let me read the bits either side of the bit that he quoted:
"This is a 60% cut in cash terms in comparison with the 2008-11 programme and in real terms a 63% cut. We are extremely disappointed that the Government has chosen to impose such significant cuts in capital funding...In an attempt to fill the gap caused by these significant capital cuts the Government is proposing to allow housing associations...to set rents on new lettings at levels between the current social rent up to a maximum of 80% of market rent."
The briefing continued:
"However, we understand that any funds generated under this new 'intermediate rent'...will only be allowed to be used to build more homes at this new intermediate rent and...across the four year spending period no homes will be built for social rent using these funds...there will be no further construction of social homes until at least 2015."
That is the housing situation that we face, and for hon. Members who want to know what "intermediate rent" means, I looked at my Conservative council's planning policies, which were announced last month. I found that the term excludes anybody on under £20,000 a year, which is 40% of my constituents and most of the people in housing need, but includes those on earnings of up to £79,400 a year-people in the top 2% of earnings. It is the Government's policy that only intermediate housing will be built over the next 10 years.
Where does that leave my constituents? Where does it leave constituents such as the one whose case I was dealing with in my office this morning? That constituent is living with three teenage children in a highly damp one-bedroom flat, but has received the usual response from the local authority, which says:
"The average expected waiting time for a three bedroomed accommodation...is projected between 8-10 years. This is however only a projection but reflects the reality of...Social Housing waiting time as dictated by demand against availability."
What tenants such as my constituent are being told is, "Give up your secured or assured tenancy, and take an insecure tenancy in the private sector. Then you may get some more space." Up until now, people have not been told-they are being told now-that such accommodation is likely to be outside the borough, because of the restrictions on housing benefit. The situation now is that my constituents are being told that if they want decent accommodation, they should go into the private sector and be re-housed a significant distant outside the borough.
That is the reality of housing policy under the CSR. It is the reality for a constituent who came to see me this week, a teaching assistant taking £900 a week net and living in a shared room in a flat in Shepherd's Bush, for which she pays £650 a month. She gets some housing benefit, but she can hardly make ends meet. Next year, she will not be able to, because of the cuts in housing benefit, and she will have to leave her job and move out of the area. That is the reality for people in my constituency.
"'They were telling people in Hammersmith they were going to have their council house taken away by the Tories.'"
Well, they are, and I will tell the House why. That candidate is at least honest, because he said at the Tory party conference:
"Inner city seats are so hard to win because Labour has filled them with poor people who are desperate and dependant on the state, so they vote for a party that they think is of the state."
That is why those people are being punished. They vote Labour, and they want to live and work in the inner city, but that is not good enough for the Conservatives. That is what my constituents are facing, for ideological reasons of gerrymandering and social engineering.
I have had the pleasure of listening to speeches all afternoon. In a way, they could be summed up by saying that Labour Members believe we are all going to hell in a hand cart, whereas Government Members believe we are heading towards the sunny uplands. My own view is that we are somewhere in between, but I am a little closer to the Government side.
Tony Blair apparently said to Mr Field in 1997, "Go away and think the unthinkable on welfare reform." He promptly went away and thought the unthinkable, and a key part of it was recognition that benefits had to follow low incomes for people to get back into work and that benefits cost far too much-and the then Chancellor of the Exchequer and subsequent Prime Minister crushed it on the spot. So what is happening under the comprehensive spending review? It looks as if welfare reform is heading towards thinking the unthinkable. My understanding is that an extra £2 billion is to be included within the universal benefit, which will mean that people on low salaries can take a lot of their benefit with them. I will obviously need to check the fine detail as it gets presented over the next few months, but if that is right, it will make a profound difference to many hundreds of thousands of people.
Let me provide an example. A few years ago, I had to do something in Eastbourne. Although it is clearly the best constituency in the whole country, this was a little bit of a nightmare, which I suspect other Members might have experienced at some time in their lives. I refer to judging a beautiful baby contest. Trust me, it is a nightmare. How do we ensure that we do not win only the winning parents' votes and lose all the others of the babies that we do not choose? I recall coming across a particular lady whom I knew. She looked about 50, but was probably in her late 30s. She was holding a baby of about six months or less. Standing next to her was her daughter-probably 17 or 18, but she looked a lot older-and the grandmother, who was completely inebriated. This was at 2 o'clock in the afternoon. As I looked at that child, I have to admit that behind the veneer of the politician's smile, I felt utter fury because I knew that I could write that baby's curriculum vitae right away-it was a goner. I find that absolutely unacceptable. If the changes to welfare reform, when followed through by people coming off benefit and going into initially low-paid jobs, mean that they can take their benefits with them, it will be a rational decision to get a job.
If the hon. Gentleman is so concerned about low-paid workers, will he not concede that cuts to housing benefit will make it much more difficult for many of them to hold down their jobs? Contrary to his assertion that the policies he supports will help people to get into work, they will throw more low-paid workers out of the jobs that they are undertaking at the moment.
The reality is that when a nation has reached a place where it is acceptable and normal for rents upwards of £30,000, £35,000 or £40,000 a year to be paid by the state, something has to give. I see the challenges, but I am hopeful that the Government will come up with a greater amount of discretionary money, particularly for places like London. In principle, however, I support the narrative. We need to realise how crazy the vast majority of working people view the fact that they could never rent a £20,000-a-year flat in a million years, yet the state allows rentals for much more than that. Forgive me, but I genuinely believe that anyone supporting that lives on a different planet.
Let me make another couple of important points about this comprehensive spending review and welfare reform. Just last week, I stayed at the Premier Inn-as we all know, that very salubrious place across the river. I have stayed there about 20 times since the election. I have met about 20 to 30 members of staff, and very nice they are too, but not one of them is an indigenous black or white British person. Not one! What is going on? I spoke last week to a friend who runs a café in Eastbourne. He said, "Stephen, I keep trying to get people to work and I offer them jobs, but they keep telling me that they cannot accept them because they will lose their benefit if they work for more than 16 hours a week." What is going on? We have to forget all the backwards and forwards; I profoundly believe that we have got to change the system. It is not only inefficient, it is profoundly cruel.
As I have the Minister here, I want to flag up a number of areas of the CSR about which I have concerns. The first relates to Equitable Life. I commend the Government for their payments to Equitable Life policyholders; they came forward when the previous Government did not. However, the payment of £1.5 billion could have been higher. Considering that the second instalment of £500 million is going to be paid in the second term, I certainly believe that we should increase and expand it. We have a moral duty to do so.
My second area of concern is small businesses. I spent a few years working as a consultant with the Federation of Small Businesses in south London before I got elected to this place. Small businesses broadly support the comprehensive spending review, but they need the Government to be really active on cutting bureaucracy and setting small businesses free. I urge the Government to do that. I believe that this is a fair comprehensive spending review. It is a challenging one, and I appreciate that we shall have to see what happens over the next few years, but I commend it to the House.
Last week's comprehensive spending review delivered cuts beyond the dreams of even Margaret Thatcher that were welcomed with glee from the Tory Benches. Those cuts will really impact on our children and schools. I have been inundated with e-mails from teachers in Stockton North, and from teachers in neighbouring Stockton South who teach children from my constituency. They are incensed by the axing of the schools sports partnership. The head teacher of a special school in my constituency, Abbey Hill school and technology college, Clare Devine, wrote to me to say:
"I fully endorse the partnership's work in transforming PE and school sport, and believe that the withdrawal of funding is a betrayal of the Olympic legacy to inspire young people to take part in PE and sport."
What is that head teacher going to say to a child with the most challenging physical and other special needs who enjoys participating in sport through the partnership but can no longer do so? Perhaps the Minister will offer us some ideas.
Today, I have chosen to focus specifically on what the cuts will mean to the Cleveland fire service, which serves Teesside and Hartlepool. Last Friday, I met the chief fire officer, who outlined exactly how dangerous the cuts announced in the comprehensive spending review will be. I also met real firefighters in Billingham in my constituency, in their fire station on the edge of Europe's biggest fire risk-a huge chemical and related industrial complex. The Cleveland fire authority has already made cumulative efficiencies of £1.8 million over the past three years. The savings have been officially recognised by the Department for Communities and Local Government. This is taking place against a background of improved outcomes, including the greatest reduction in primary fires nationally.
The comprehensive spending review reduced the revenue support grant from central Government for fire and rescue authorities by 25% over the next four years. The effect on Cleveland will be significant, given that 67% of its budget comes from the revenue support grant, with the rest coming from council tax. A 25% cut in Cleveland equates to a reduction in the overall budget of almost £6 million. Our firemen and women put their lives on the line every time the bell goes. They accept their responsibilities quietly and get on with the job, yet they will now face a greater risk to their personal safety if numbers are cut and resources stretched way beyond any reasonable limit. We have already seen deaths in other parts of the country that have been blamed on cuts. Is the Minister prepared to pay with even more deaths?
The Cleveland fire service area hosts 12% of all the COMAH-control of major accident hazards-regulated sites in England and Wales, yet it is a net loser under the current funding formula, which has seen an increase of just 2% across three years. The fire service in Nottinghamshire has received an increase of 19%. On top of this, the service is now being asked to cope with the new 25% cut. The chief fire officer is not confident that cuts on this scale can be made through efficiency savings alone, and believes that the service will be compromised if personnel and equipment are reduced. Lives should not be put at risk. I am told that a fully staffed fire engine costs in the region of £800,000 a year to staff. My fear is that, with £6 million of cuts, front-line services will be badly hit. The local firefighters whom I met last week had a clear message for the Government: we have now cut right through the fat and we are down to the bone. We cannot cut any more. We simply cannot afford to remove fire engines against this risk.
I want to remind Ministers of the Flixborough disaster of
I hope that the Minister responsible for the fire service will accept my written invitation to see these challenges for himself, and will think again about the cuts to which he has agreed. I am particularly anxious for authorities such as Cleveland which have already delivered efficiency savings to be given a level of protection. There is only so much money to be saved through efficiencies, and sooner rather than later the cuts will hit front-line fire services.
It is absurd that our fire authority is being forced to consider making full-time stations part-time, and to rely on part-time firemen in an area with the highest risk in the whole of Europe. Firefighters, workers and ordinary families whose homes surround our industrial sites are being put at risk by these arbitrary cuts. I hope that the Government will think again about that risk and the way in which they are adding to it, because lives are at stake.
I congratulate the Chancellor and his team on beginning the process of righting what has been wrong for the past 13 years. After those 13 years, we find ourselves in circumstances in which, for many people, it is better to be on benefit than to be in work. I listened earlier for a word of apology for the record deficit that the Labour party had created, and for any plan it might suggest to get us out of it or even suggestions of cuts that it would make in public expenditure. We are still waiting for the answers.
I shall confine my remarks to two aspects of the CSR. The first is reform of the benefits system. We have heard much from Opposition Members, and from people outside the House, about housing benefit, which is one of the benefits that need fundamental reform. It is horrendously complicated. It is paid on a daily basis, with tapers which mean that if people obtain work they immediately lose the benefit. It has therefore become a positive disincentive to work. The principle that we are adopting as a Government is that it should always be better to work than to receive benefits. I strongly support the cap and, indeed, the gradual withdrawal of housing benefit from people who refuse to work.
We must also ensure that there are job opportunities in the private sector, and opportunities for people to be trained to take those jobs. I support the Work programme that the Government are implementing, because it will bring about a fundamental change in British society that we all want to see.
It is currently proposed that the housing benefit cap should apply to people paying £20,000 a year in rent. That is £35,000 in pre-tax income. Given the other benefits that claimants are likely to have accrued, they would have to earn a salary of about £50,000 before they would replace their lost benefit income. If that is not an incentive not to work, I do not know what is. We must change the whole philosophy of housing benefit, and the basis of its operation.
A system that taxes people with one hand and gives them benefits with the other cannot be right. It is far better to lift people out of taxation-as this Government have done-and give them more of their own money to spend as they wish than to tax them and give them benefits at the same time. We have an opportunity to simplify the whole process. I strongly support such action, and I hope that we will move rapidly to a form of universal benefits rather than the horrendously complicated arrangements that existed under the last Labour Government. I trust that they were the last ever Labour Government.
I applaud this Government for their prompt and firm action to settle the Equitable Life dispute once and for all. For 10 years the Labour Government prevented Equitable Life policyholders from receiving the compensation that was due to them, which was a disgraceful way to behave. I especially applaud what has been done to reward trapped annuitants who desperately need the money now. I urge Ministers to get on with that job as quickly as possible so that we can pay retired people who are living in relative poverty as a result of the Labour Government's actions.
The Government have accepted that the proper compensation due to all the policyholders is some £4.26 billion. The £1.5 billion goes some way towards that. Many of those policyholders are still working; they will be working for 10, 20 or possibly 25 years more. They need support and help, too. I ask that, as the economic times get better, improvements come, we create more jobs and the economy recovers, our Treasury colleagues consider putting more money into those policyholders, so that they are properly rewarded for the pain that they have gone through under the last Labour Government. That is only right and just. I trust that we will see that happen in the not-too-distant future.