---

Budget Resolutions and Economic Situation

No, the criticism is not of the fact that there needs to be a tightening of budgets. Of course there has to be, although we have taken a view, which I have communicated publicly with the hon. Gentleman's party leader, about the emphasis on protecting the Government budget for next year. However, if cuts are to happen, it is important that they should be done openly, not under the radar. My criticism of what is happening in the FE sector, universities and science laboratories is that it is all happening by stealth. There is no discussion whatever of priorities. It is happening through civil servants and quangos. There is no acknowledgement of the fact that cuts are occurring or of how they should occur. That is my central criticism of what is happening at the moment. On timing, the hon. Gentleman well knows—we have had this communication already—that we broadly support the Government's view that it would be better not to embark on large additional cuts in the budget in the coming financial year, because the economy is fragile and that would aggravate the recession, creating even more unemployment. Arguably, it would make the fiscal deficit even worse. That is our position. Let me talk about the negatives—the worries—in the Budget. The first is the almost hopelessly optimistic assumption about the rapid return to growth in 2011. There is now a long list of independent forecasters in British industry and in the City none of whom thinks it remotely likely that growth will approach the level that the Government assume. There is one exception, Goldman Sachs. The Bank of England is also at the upper end of the range, but the overwhelming majority of independent forecasters believe that the Government are far too optimistic. The second criticism is of how the Government intend to achieve some of the cuts when they come. We had the real Budget announced in press releases after the official statement in Parliament last Wednesday, in the form of these efficiency cuts. For the rest of the day, the hon. Member for Runnymede and Weybridge (Mr. Hammond), the shadow Chief Secretary, and I had quite an amusing series of exchanges, ridiculing those cuts. Neither of us is normally noted for mirth—we are often compared to undertakers—but we found this very funny, because the efficiency cuts had obviously been cobbled together and written on the back of an envelope. They did not amount to much at all. That made me all the more surprised yesterday when I discovered that my opposite number, the shadow Chancellor, had adopted all these fictitious cuts—efficiency savings—and used them as the basis for promising to repeal the national insurance increase. These efficiency savings: if we can have them, they are great, but on the one hand to ridicule them and on the other to use them as the basis for promised tax cuts has no credibility whatever. For the record, this is the approach that we have adopted. We are by no means able to explain, any more than anyone else, the full extent to which the fiscal contraction could occur, but we have identified £15 billion gross of savings, which we think we could achieve. We specified them. They are not efficiency savings. Any efficiency savings are above that. We have allocated some of that figure, £5 billion, to job creation in the short term and other spending priorities in the longer term, including the pupil premium, which would provide additional funding for schools. We recognise that there will have to be—especially in 2011-12 and beyond—some serious spending reductions over and above what we have identified.