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Preparing Britain's Economy for the Future

It is a pleasure to speak in this afternoon's debate. It would be fair to say that it is not particularly well attended, but I thank those hon. Members who have taken part, particularly my hon. Friend the Member for Bournemouth, East (Mr. Ellwood). He is a passionate advocate for the cause of tourism in this country, and I thank him for mentioning the glorious village of Aldbury in my constituency, which he knows well. I also want to thank my hon. Friend the Member for Banbury (Tony Baldry) for his excellent speech on the public finances, and that is the issue on which I want to focus. When we consider the future of Britain's economy, the central fact is that we have run out of money. We are borrowing record amounts. For every £4 spent by the Government, £1 is borrowed. We are borrowing more in the next two years than in aggregate over the country's entire history, with debt likely to double—if it does not grow by even more. The 40 per cent. sustainable investment target—that is, the target that debt should not be more than 40 per cent. of GDP—is well and truly broken and is not likely to be met until 2032. We are borrowing more than any other country in the world. The central question for the Government is whether they have a coherent plan to get us out of this mess. We know that the Government have optimistic growth forecasts, particularly from 2011 onwards. We know that there will be unspecified fiscal tightening after 2014 of £45 billion. We know that spending restraint will be delayed until after the general election, but we also know from the Government's figures that cuts are already planned in public spending between 2011 and 2014. That is the topical issue of the day, but the Prime Minister is characterising the facts in a somewhat different way. Only yesterday, he said that we never hear any figures from the Conservatives. Let me attempt to address that in the short time that I have available this afternoon. In Prime Minister's questions last week, on 10 June, the Prime Minister listed cash spending in the years beginning 2010-11: £702 billion, £717 billion, £738 billion and £758 billion. He claimed that that showed more spending from Labour. However, if we take out inflation we have the following numbers: £702 billion, £699 billion, £701 billion and £701 billion. If we take out debt interest and benefits—I am using the numbers prepared by the Institute for Fiscal Studies, which give us the real departmental spending—the numbers are £391 billion, £382 billion, £373 billion and £362 billion. That is a cut of 2.3 per cent. per year or 7 per cent. over three years. If health is protected, as we intend it to be, the percentage would go up for the remaining Departments to a fall of 3.3 per cent. a year, or 10 per cent. over three years. Let us be clear: these are the Government's own numbers. The Prime Minister had another crack at defending his position yesterday. He read out the numbers for current spending: £629 billion, £633 billion, £638 billion and £642 billion. However, if we deduct debt interest and benefits the departmental spending will fall from £344 billion to £341 billion, to £337 billion and to £332 billion. That is a cut of 1 per cent. per annum or 3 per cent. over three years according to the Prime Minister's own chosen measure of current spending. Let us look at capital spending. The hon. Member for Twickenham (Dr. Cable) was quite right to highlight that matter. Again, the Prime Minister stated yesterday:""Capital expenditure will grow until the year of the Olympics. After that, it will be less".—[Official Report, 17 June 2009; Vol. 494, c. 295.]" The facts are very straightforward. Page 226 of the Red Book lists net investment in table C4. The figure for this year, 2009-10, is £44 billion, which then falls to £36 billion, £29 billion, £26 billion and finally £22 billion in 2013-14. There are two points to make about that. First, that is clearly a significant cut and it is a year-on-year cut. There is nothing about an increase until the year of the Olympics, 2012; there is a cut every year. Secondly, why highlight the year of the Olympics as if everything is explained by capital expenditure on the Olympics and as if that is no longer a relevant factor after 2012? Average capital expenditure on the Olympics is just over £1 billion a year, and that is clearly barely relevant to a reduction of £22 billion in capital spending. What have Cabinet Ministers said, notwithstanding those facts? The Secretary of State for Wales told the BBC's "Question Time" last week that""up until 2014 there will be real term increases in Government spending Departments."" The Secretary of State for Health told Channel 4 news on 11 June:""I am also committing to you, in the way that the Prime Minister has, that we will continue to maintain growth in health spending in the following period"." The Secretary of State for Children, Schools and Families—a noted economist—told Radio 5 Live:""I think we can see the spending on schools and hospitals rising in real terms after 2011"." The facts are very clear. I have outlined the numbers and the facts to the House this afternoon. The Prime Minister has put his Ministers in an impossible position in the launch of his election campaign—assuming, of course, that he makes it to the election—by stating that it will be about Labour investment versus Conservative cuts. Never before has a campaign unravelled quite so comprehensively even before the election has been called. Columnists and observers from The Guardian and from every news organisation have lined up to describe the Government's position as silly, infantile and dishonest. It is difficult for me to characterise the nature of the Prime Minister's position within the confines of the conventions of this House, but the Prime Minister must think that the British people are stupid if he thinks they will believe his claim that it will be Labour investment versus Conservative cuts. The facts point in a very different direction. Not one single respected commentator or observer supports the Prime Minister's line that the Government will be spending more on departmental expenditure. I think we should spare a thought for Ministers of honesty and integrity, such as the Economic Secretary, who are forced to go out to defend the Government's position. I want to ask him two questions, and I hope that he has a chance to answer them. Does he accept that the Government's budget projections involve real-term cuts in departmental expenditure from 2011 onwards, whether we look at total spending or current spending? Secondly, does he accept that capital spending will fall in each of the next four years and will not, as the Prime Minister told the House yesterday, rise until the year of the Olympics? It is clear that the numbers point in one direction. The country's money has run out. The public finances are in a mess and, whoever is in power after the next election, there will need to be real-term spending cuts. If the numbers and the facts do not suit the rhetoric, what will the Government do? I warn them that if they attempt to adjust the numbers or if bogus growth figures suddenly appear in the comprehensive spending review, that will do nothing for their reputation. It is time for some honesty; it is time for a grown-up debate. The Prime Minister has descended into self-parody and we need a change.