Amendment of the Law
Debate between Jesse Norman and John Redwood(13 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr John Redwood (Wokingham) (Con)
I remind the House that I offer industrial business advice to a Swedish, quoted international industrial group and investment advice to a British investment company.
Some Opposition Members have expressed displeasure that Government Members should have mentioned the circumstances in Greece and Portugal. The Opposition rightly remind us that we have a much bigger economy than those of Greece and Portugal and I am pleased to say that ours is also currently better managed. Those points are important because our public deficit was larger even than theirs, as a proportion of national income, when the big deficit reduction programme started. I praise my right hon. Friend the Chancellor for seeing that his single, central task, day in, day out, month in, month out, year in, year out—indeed, the five-year burden for all of us in the House—is to get that deficit down before it kills our public finances and our economy.
If anyone thinks there is no risk, I invite them to visit Greece, Portugal or Ireland and see what happens when a country ignores a deficit for the best of reasons and says, “I do want to spend a little more on a good public cause so I will borrow it to spend it.” Of course, we all have great causes on which we would like to spend more money. Borrowing is so often the easy option, but when a country gets to the point at which it is borrowing too much, it does not just destroy the general economy and place too big a burden on those who have to pay the taxes and interest charges—in the end, it brings down the public sector as well, with far bigger cuts and far less favourable choices than we have when we take matters into our own hands by planning a steady deficit reduction.
We are debating, in a relatively civilised atmosphere and in a relatively sane and sensible way, an economic position about which there are strong disagreements. However, there is no overall disagreement about the imperative to avoid big rises in bond rates and interest rates and to get on with some kind of deficit reduction. It is particularly poignant that we are having this debate on the same day that the Portuguese Parliament is meeting to discuss not its first, second or third, but fourth package of emergency, deep, damaging public spending cuts and unaffordable tax increases. Such is the plight that its economy has been driven into by reckless overspending and too much borrowing and, of course, by being in the euro area.
Jesse Norman
Does my right hon. Friend agree that to answer the question of the hon. Member for Middlesbrough (Sir Stuart Bell), who asked when the rating agencies took over, one need go no further back than 1949, 1969, and 1976 to 1979, when there were runs on the foreign exchange markets under Labour Governments?
Mr Redwood
My hon. Friend is quite right, but the Labour party could point to one or two examples under Conservative Governments, so I do not want to be drawn too far down that historical path. We can see what we need to see by looking at the modern reality. As my right hon. Friend the Chancellor said, fortunately, British bond rates—the rate that we have to pay to borrow money for public purposes—are much closer to those in Germany than those in many other countries in Europe. They are under half the level of those in troubled Portugal. The Portuguese 10-year rates went above 8% today. I stress to beleaguered Portuguese parliamentarians, who are battling over whether a general election is the answer to their problems, that if they do not take dire and immediate action, their country simply will not be able to borrow at an affordable rate of interest. They cannot go on spending the extra 10% of national income that we are spending, which is borrowed, to tide us through and get us to better-managed times.
My right hon. Friend the Chancellor, having set out a pathway for tackling the deficit, was right to turn to the question of how he can accelerate growth. The truth of the five-year deficit programme is simple: we need well-above-average growth in the last three or four years of the programme to deliver the numbers in the Red Book, which are similar to those in the Chancellor’s first edition of the Red Book last summer.
To remind the House of the scale of the task, the Government plan to spend £70 billion a year more, in cash terms, in the fifth year of the plan—2014-15—than in the last Labour year; that is not a big increase, but there will be pressures because of it. They plan to get the deficit down by increasing the tax revenue collected in the last year of the plan to an eye-watering £175 billion more than in the last Labour year. We believe that we have seen all the important tax rate rises that the Chancellor thinks are needed to do that; the rest depends on the above-average growth that is still in the official forecasts of the Office for Budget Responsibility.
Mr Redwood
If those countries come up with good ideas, we can adopt them, and if they come up with bad ideas, we would be wise to sidestep them; that is exactly the freedom that I and others have argued for passionately over many years, and that the Government wish to enjoy if all goes well.
The hon. Gentleman also said that the reductions could prove difficult. Believe it or not, I did not become a Member of Parliament to have teachers sacked from my schools or doctors sacked from my surgeries; I want them to be well paid and well funded, and I want sensible growth in numbers where there is extra demand. We are all of that view—it is quite misleading of the Opposition to suggest that some of us do not appreciate that and do not want that for our constituents—but it has to be affordable. It has to be within the power of the free enterprise part of the economy to pay for that out of reasonable taxation in a way that does not damage our growth; that is so important.
The Government have managed to find an extra £70 billion of cash spending for the fifth year of the plan, compared with in the start year. It is crucial that we keep public sector costs down, so that the maximum amount possible can go to improving service and quality, and, in some cases, to improving the amount of service, and the minimum goes on extra costs and extra inefficiencies. All parties will say in office that they want more efficiently run public services, but they have to will not only the end but the means. That is why the reforms on which the Government are embarking are so important. It is crucial that the Government listen, and that sensible criticisms be taken on board, but public services have to be reformed so that we can say to people in five years’ time, “You are getting more for that £70 billion. We haven’t had to cut things that really matter, because we have managed things better and have found a bit of extra money.”
Jesse Norman
Is my right hon. Friend aware of the enormous interest in the private finance initiative community in reform of the PFI? A succession of chief executives of PFI companies have asked me, “Why can we not be allowed to save money?” The reason is the enormously expensive procurement process. Not a single school has been built recently that does not have an atrium, and that is because it has been decided that schools, which have nothing to do with corporations, must have corporate atriums. Nothing could be sillier or more resistant to good Government spending.
Mr Redwood
My hon. Friend is quite right. Improving the quality and cost-effectiveness of our purchasing is crucial in Government. There are many opportunities; PFI and public-private partnerships provide some good examples, but so does general purchase. It would speed up the deficit reduction if there were a stronger moratorium on purchasing items and supplies where there are already stocks. Any company undertaking the kind of radical turnaround that the country is trying to achieve would immediately freeze all unnecessary purchases and make people run stocks down to save money.
Where I have had answers to my questions on this subject, I have found that the current rate of natural wastage of staff in core Departments is running at about 6% per annum; it was about 4% in the first eight months. Quite a number of those posts have been filled by taking on new people from outside. I urge my friends on the Front Bench to get more of a grip on that, because the easiest way of reducing the administrative overhead on the scale that they want—the least painful way for their staff, who need their morale to be up—is to not replace people who leave and not to make others redundant. We cannot afford the redundancies. If we make greater use of natural wastage, Ministers can say to their staff that it means better opportunities for promotion and a change of job. If the post vacated is not essential, it should be removed; if it is essential, we should appoint someone from inside and remove some other, less important, post. That surely is the civilised, sensible way to tackle the necessary task of cutting the administrative overhead. If the Government can cut their administrative overhead by the very large 30% that they are talking about, it takes the pressure off cuts in the areas where none of us wish to see them—in the schools and hospitals, the front-line services that matter so much.
The question that I was about to ask before the interventions was about the international context. How easy is it going to be for the Government to have the three or four years of above-average growth which are so crucial to the strategy? I must warn those on the Front Bench that I fear that the world background will get more difficult going into 2012 and 2013 than it is at present. There has been a prolonged boom in the emerging market world, and we now see China, India and Brazil lifting their interest rates to very high levels. They are desperately trying to squeeze inflation out of their system, so in a year or so we must anticipate some fall-off in demand and spending power growth rates in those big emerging market economies.
The United States economy will have a good year this year, by the looks of it, on the back of a lot of money printing, low interest rates and other matters. That comes to an end in the middle of this year, so by next year we will see a slower rate of growth in the United States of America as well. Were the situation in the middle east to get worse, and the damage from politics to spread into oilfields outside Libya, we could have another unpleasant external shock on the oil price, which would also serve to impede the growth of the world economy.
The conclusion that I take from this is that the world economy does not look as though it is going to go back into another deep recession—we are not going to have that kind of impossible situation—but the world economy is not going to provide the impetus that it is currently providing. It may not feel that great, but it is providing quite a bit of impetus at the moment. It will provide less impetus next year and beyond. That means that the Chancellor must intensify his pursuit of measures that make the UK that much more competitive and that much more successful.