Comprehensive Spending Review

Debate between Baroness Hollis of Heigham and Lord Bilimoria

Wednesday 20th October 2010 Lords Chamber

[Baroness Hollis of Heigham]

My Lords—

[Lord Bilimoria]

My Lords, the Minister has confirmed that public expenditure will go up in actual terms. Historically, 40 per cent was deemed to be the sensible level of public spending expressed as a percentage of GDP and a sensible balance between the private sector and the public sector. Is the Government’s aim to get back to that 40 per cent figure on a regular basis? In this environment, one would need to do that anyway regardless of the budget deficit. In that sense, I welcome the reductions in the welfare budget, which were badly overdue. Although spending on the National Health Service has been ring-fenced, the efficiency savings there are also very welcome and I think that the whole public would agree with them. However, in the coalition Government’s spirit of the transparency, the Chief Secretary revealed to us yesterday that 500,000 jobs would be lost in the public sector, a figure that the Minister has confirmed today. How confident are the Government of those jobs being replaced in the private sector? How confident are they that they have done enough to stimulate growth in the private sector, particularly against a backdrop of increased capital gains tax and higher rates of tax in every area? How difficult will it be?

[Lord Sassoon]

My Lords, I am grateful to the noble Lord, Lord Bilimoria, for drawing our attention to the important question of the balance between the public and the private sectors, which had got completely out of kilter under the previous Government. I repeat that this is not just an exercise in cutting back expenditure, necessary and unavoidable though that is; it also entails a critical rebalancing of the public and the private parts of the economy. What we have announced today will take the public sector part of the economy back towards that 40 per cent figure. In answer to the question about the absorption of the inevitable job losses in the public sector, I draw the noble Lord’s attention to the fact that, in the past quarter alone, the private sector generated 178,000 new jobs. That was in one quarter, so we should be confident, when the Office for Budget Responsibility believes that overall employment in the economy will rise year by year, that that indeed will be the case and that the inevitable reduction in public sector jobs will be more than absorbed.