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Budget Resolutions and Economic Situation

It is a great pleasure to speak in this debate. It is rather like the ones that follow a general election, when one has to speak after maiden speeches and say, "What a marvellous prospect my hon. Friend for Daventry will certainly be in the years to come in this Parliament, given that he has made such a brilliant speech!" We have had some wonderful speeches—from the right hon. Members for Banff and Buchan (Mr. Salmond) and for Oldham, West and Royton (Mr. Meacher), and from the hon. Member for Wolverhampton, North-East (Mr. Purchase). We have had a lot of old Labour speeches: perhaps they are as much unreconstructed old Labour as much as I am unreconstructed old Tory. We have a lot in common. The right hon. Member for Banff and Buchan made a most marvellous speech. We love him so much because we know that he really loves this place: for all that he is a so-called nationalist, he is very sad to be leaving, and that is why we hold him in such respect. We also had a marvellous speech from my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who totally confused us by trying to work out what a billion seconds add up to. We got there in the end, but he was making the very important point that language has been so corrupted that no one—not the public, nor us—can visualise what a billion or a trillion is. That is why it is becoming increasingly difficult for us to put pressure on Governments to control public spending. However, it is worth saying that the deficit is so huge that the Government will have to borrow more in 2009-10 and 2010-11—£166 billion and £163 billion, respectively—than the entire income tax take last year. As my right hon. Friend said, that will raise the debt to £1.46 trillion. What is £1.46 trillion? What is a billion? This is how I describe a billion to my constituents. Look at those mansions in the constituency of the Liberal party's spokesman, the hon. Member for Twickenham (Dr. Cable). He calls them mansions, but many of them are ordinary family houses worth £1 million, so 1,000 of those make a billion. That is how we have to visualise those figures to try to get home to the public the appalling difficulties that we are in. Once again, the Chief Secretary, unfortunately, is not with us, although I hope he will respond to all these points, because that is what Parliament is for. It is not about making set-piece speeches; it is about responding to the debate. My appeal to the House and to those on all three Front Benches is that we should be honest. The fact is that in the next Budget, after the general election, for all classes of taxpayer—from those at the very bottom to those in the middle and those at the top—the real burden of taxation will increase. It is better to say that now. We will not be able to get that money off just the rich. True, the Government have increased taxation on higher income tax payers by £7 billion—they will do so by 2012-13—but the Treasury believes that the yield from the 50 per cent. rate, for instance, will be just £2.4 billion, because high earners will adjust their behaviour in ways that mean that they avoid incurring all the increased liabilities. We know that, so let us not delude ourselves that the rich will pay. We will all pay, from the bottom to the top. The next point that I want to make about honesty is that all Departments of Sate will have to take cuts. That includes the Department of Health. That is the honest truth. Health spending has doubled in the past 10 years. We employ 1.6 million people in the NHS, which is, I think, the second largest employer in the world, but there has been a catastrophic decline in NHS productivity. I am sure that my hon. Friends, because they are honourable people, will meet their pledge to increase resources in real terms every year if they are lucky enough to form the next Government, but of course the famous Baroness Thatcher—the great right winger, so often referred to in the debate—did exactly the same. However, if health spending is increased by 0.5 per cent. in real terms, that will ensure a cut in health outcomes because of the ageing population and the increasing number of more and more expensive drugs. Let us be honest with the people: everyone will end up paying more tax and they will all see cuts in Departments, including health, international development, education and transport. If health and international development, but particularly health and the benefits system, are absolved from cuts, that will ensure massive cuts in other Departments. My Committee has already alluded to the black hole in the Ministry of Defence budget. Even if we assume the 2.7 per cent. increase in defence spending, which by the way will not happen because whoever forms the next Government will probably freeze the defence budget, there is a £6 billion black hole. If we start to make real cuts, that could rise to £80 billion. Let us be honest about it: there will be real cuts and real tax increases. There will also be these famous efficiency savings. I hope that this is not my valedictory speech as a Member of Parliament—that is up to the good folk of Gainsborough—but it is certainly my valedictory speech as Chairman of the Public Accounts Committee. I think I know a little about efficiency savings. I have interviewed 1,000 civil servants over the past 10 years and chaired 420 hearings. Let us not place too much credence on efficiency savings. The Budget promised, did it not, £11 billion-worth of efficiency savings. Many of the areas highlighted by the Government chime with areas that my Committee has had to focus on, such as the overuse of expensive management consultants, wasteful use of IT, inefficient management of the Government's vast property estate, poor procurement of goods and services and the desperate need of better project management. If there is one way to keep a secret, it is, as we all know, to make a speech in the House of Commons. The next best way is to send a letter to all colleagues, because it will certainly end up in the bin like these leaflets from the Conservative and Labour parties, which we have all been putting through letterboxes. I have tried to outline in a letter to colleagues some of the lessons that can be learned. Let me say a little about these famous efficiency savings. Last December, the National Audit Office—a non-political body—reviewed the savings claims made respectively by the Department for Transport and the Home Office. It cast enormous doubt on the reported savings. In 2007, we found that there was a question mark over nearly three quarters of the claimed £13.3 billion annual efficiency savings. The philosopher's stone has been referred to in the debate. People imagine that efficiency savings are like that—that somehow we can turn iron into gold. That simply does not happen. There is wishful thinking going on here. Those claims, from either party, must be real and demonstrable. They must be delivered year after year. They cannot be just one-offs. They are not genuine efficiency savings if, as we have found in many cases, they are achieved at the expense of the quality of the service. This is an opportunity. Just as falling markets are an opportunity to promote efficiency in the private sector, so the freeze in budgets that we are now going to achieve, because we have no choice, should produce real efficiency savings. But do not assume for a minute that they can be achieved without some cut in the service provided to the public. I am delighted to see the hon. Member for Twickenham, because, like me, he has often questioned these efficiency savings. We hear so often about the sharing of back-office services, as if this was a great achievement. The PAC has heard great claims about these back-office functions. Let us look at one. The Department for Transport planned and implemented a shared corporate services project. That is the sort of language that the Treasury loves. This was carried out with stupendous incompetence. Rather than saving the taxpayer £57 million over 10 years, which, of course, all adds up to these £11 billion of efficiency savings, it will, because of the incompetence with which it was carried out, cost the taxpayer an extra £81 million, so no efficiency savings there. Perhaps one reason was that the computers spewed out instructions in German. Perhaps the thinking was that the only way to be efficient in Whitehall is to speak German. Unfortunately, most of the clerks in the Department for Transport do not speak German, so do not place too much credence there. Time is short and I could go on and on, but I will not because it will bore hon. Members and anyway I will be called to order in a couple of minutes. The Budget announced plans to realise property savings of £5 billion a year in running costs and £20 billion in disposals. If we believe that, we will believe anything. The Inland Revenue, of all people, was to save £236 million by reducing the size of its estate. We looked at the Mapeley STEPS contract. What an extraordinary contract that was. Not only was it carried out in such a way that it did not provide value for money, but the Inland Revenue was giving the contract to an offshore provider. The Inland Revenue of all people, which was supposed to raise taxes, hired as its estate provider somebody who is a taxpayer offshore. Consultancy spend, we are told, will be cut by 50 per cent., but the PAC found that central Government alone was paying out nearly £2 billion a year in consultancy fees. A further £100 million is to be saved by cutting benefit fraud. Benefits are staggeringly complex, but we have to take action. Last but not least is wiser and more effective IT spending. Apparently, if the Treasury is to be believed, the budget will be cut by £500 million. Look at the Rural Payments Agency, look at the NHS computer system. It will not happen. If we are to have real efficiency savings, we have to have an honest debate. As I said at the beginning, we have to raise taxes, balance the budget and produce real cuts in all programmes. Let us be honest with the people as we go into this general election.