Spending Review

Part of the debate – in the House of Lords at 4:54 pm on 15th July 2002.

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Photo of Lord McIntosh of Haringey Lord McIntosh of Haringey Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) 4:54 pm, 15th July 2002

My Lords, on Friday when we had a rather short, ill attended, but high-quality debate on the Finance Bill. I was impressed by how little either opposition party had learned about the way in which Finance Bills are constructed or the way in which the 2002 Budget was constructed. Today I am reassured in the sense that both the noble Lords, Lord Saatchi and Lord Newby, in their speeches, appear to have taken account of what I said on Friday. But, so far as I can see, they have not taken any account of what the Chancellor said today. Perhaps we need another debate so that they can catch up.

In what appeared to me—I know that I am prejudiced, but you will allow that—to be an outstanding description, not only of plans for the future, of resources, and of targets, but also of achievement over the past five years, the Chancellor, every time he addressed an issue of public policy or an issue of public service, was saying not only what we shall do over the next three years, but also what we have done over the past five years.

What did noble Lords opposite believe that the Chancellor was saying about primary schools? Do they not believe that increases in literacy targets are important? What did they believe was being said about the growth in employment, the closing of the employment trap, the way in which we have, over the past five years, attained a figure of a million and a half more people in work? That could be done with a favourable economy inherited from a benign previous government; it could all be to the credit of Mr Kenneth Clarke. But that excuse has now worn thin. The noble Lord, Lord Saatchi, knows that that is not true, as does the noble Lord, Lord Newby.

They know that what is true is that there has been an increase in employment and that we have the lowest unemployment in the developed world because of the policies of this Government. The Government have made that possible through economic stability, through the minimum wage, through making work pay, through employment credits and through the encouragement of business and manufacturing industry. The Government have achieved those extraordinarily—I use the word advisedly—successful results. I heard in the speech of the noble Lord, Lord Saatchi, no recognition, and in that of the noble Lord, Lord Newby, little recognition of that catalogue of success that the Chancellor was able to give to the House of Commons this afternoon.

Every time the Chancellor talked about increased spending, he talked about improved performance. I take the example of health, although that was dealt with in more detail at the time of the Budget rather than in the Statement. The noble Lord, Lord Saatchi, says that increased expenditure on health is accounted for by higher wages. The increase has not resulted in higher wages per doctor, but there is a higher wages bill because we have more doctors, more nurses and more people working in our hospitals and because more operations are being carried out and more patients are being treated. That is the reason for higher expenditure in our National Health Service.

I wrote down in capital letters what the noble Lord, Lord Saatchi, said as it struck me as a real give-away: "Without real reform spending is not the answer". Later he said, "We will not support spending without change". What on earth did he believe the Chancellor was saying? What was the 30-minute Statement about except to say that without real reform spending is not the answer and the corollary that without a commitment to the resources necessary all talk of reform is a sham. Frankly, unless the Conservative Party makes up its mind whether it supports the expenditure that we believe necessary for our public services and unless it either supports or says what it will do if it does not support us on the spending plans, no one will listen to what it says about reform.

Dr Liam Fox has wandered around Europe. He has come to a stop in Germany. Apparently he thinks that the peculiar blend of social insurance which Germany has—and which has been working rather badly since the incorporation of East Germany—is the solution. He will come forward to us with that solution in due course.

We know—because we know the truth and it became apparent—that Dr Fox's idea was first to convince people that the health service was not working in order to convince them that there was some magical solution other than public expenditure on health.

I do not think that much has been learned by the party opposite in the past five years. The same old charges come up. The noble Lord, Lord Saatchi, talked about 11 per cent public sector inflation. Public spending has risen overall by only 2.1 per cent in real terms each year over the past five years. Higher expenditure on services is due to the low growth in social security and the huge fall each year in debt interest payments. Public sector pay, which the noble Lord believes is where all the money will go, is projected to rise by just 1.6 per cent in real terms each year. So public expenditure is not being swallowed up by pay.

The accusation, which is never quite openly made, is that somehow we are working towards a crisis in our public finances and that it will all end in grief. The noble Lord, Lord Saatchi, did not quite come out in the open with that. He knows as well as I—and as the House knows perfectly well—that our projections for the period up to 2006 show us with a credit balance. At every stage in the past five years we have said that we would have one. We have proved that to be right.

In the Red Books of the last couple of Conservative Chancellors—I shall say only the last couple in order to be kind to some of the earlier ones—the public finances projections made have proved every time to be not just over-optimistic but wildly over-optimistic. They were never achieved year on year. Ours have always been achieved.

Fundamentally, our targets are about setting clear goals for services. There is not a multiplicity of targets. Public spending agreements have gone down from 200 to 130. They let devolved management get on with the job. I believe that that is the right way. I do not believe that the comments of noble Lords opposite have even started to dent the Chancellor's determination.