My Lords, I am very much aware of ex-Treasury Ministers speaking, but nevertheless I want strongly to reinforce the points made by the noble Lord, Lord Butler. Before I go on to my arguments, I state for the record that I wholly support the commitment and proud record of the UK on humanitarian and development aid. We are one of the world leaders. I do not agree with the noble Lord, Lord Davies, that it has to be enshrined in law to make that point, because our record and the level of spending to which we commit ourselves demonstrate that. This amendment in no way detracts from that.
I shall make four points in favour of this amendment, and I shall repeat very briefly what the noble Lord, Lord Butler, said. It all stems from my years of experience in dealing with public expenditure, in particular as Chief Secretary when the noble Lord, Lord Butler, was leading the programme in the Treasury under my noble friend Lord Lawson as Chancellor.
First, I am opposed in principle to enshrining in law and perpetuating in practice any area of government spending so that it is immune from challenge and all the processes that are gone through in the public spending round. There is always huge pressure from departments for additions to their spending programmes, as those of us who have dealt with it know only too well. Priorities change from year to year. The overall economic situation changes, new demands arise and negotiations can be particularly tough, especially when there is a need for downward pressure because of the fiscal deficit. I recall clearly, some years after I was in the Treasury, one of my ministerial colleagues said that he had come to me about a department’s budget. He said that he had had extremely good arguments and I had agreed with them, but at the end I had said, “I’m sorry. I have no more money left”. He said that there was nothing one could do about that and had to accept the argument. There are these processes but it is important to stress that, while it is right for the final package to be argued out in negotiations, in the Star Chamber if necessary, the final decision will always go to the Cabinet. No department should be immune from that process. That is why I was opposed to the Barnett formula and always have been.
Secondly, once the principle of hypothecation has been set, others will argue for the same. Defence is the primary candidate, not only because of the need to spend more on defence but because it is in exactly the same position as overseas aid. We are committed to the NATO commitment of 2% of gross domestic product. We have made exactly the same commitment in defence and not yet reached it. It is the same question of a commitment to a particular proportion. I must say, defence has a very high priority in the current environment and it is important that we should spend more on it, which I believe will result from the annual spending round.
Thirdly, the economic situation invariably changes over the years and the public expenditure programme in any one period should reflect that. We face fiscal constraints for some time ahead. The more individual programmes, such as aid or possibly defence, are exempt from this process—and we except our international obligations in legislation—the more other areas of government spending such as transport, local government, the arts and so on will suffer. It is therefore right that these final decisions should be taken in Cabinet each year.
Finally, during the spending round—this is a point that has been made and to which we will return on other amendments—all departments must currently justify their proposed programmes in detail, which includes many other things such as value for money, proper controls, challenges where they have overspent and so on. The overseas budget will now be immune from that process in the spending round. Indeed, DfID may even be tempted to rush ahead with untested programmes towards the end of the financial year to meet its target. I know that we will be debating other amendments to do with value for money, but there is no substitute for any department having to justify its proposed budget in the spending round. It is a useful and important process and no department should be immune from it. That is why I strongly support the amendment of the noble Lord, Lord Butler.