Queen's Speech

Debate between Lord Lea of Crondall and Lord Birt

Wednesday 2nd June 2010 Lords Chamber

[Lord Birt]

My Lords, I share the universal delight in the ascent of the noble Baroness, Lady Wilcox, who during the day seems to have risen almost to the status of sainthood. I only hope that her trademark cheery beam will be maintained in the white-water ride ahead.

I offer a new Government my best wishes and my great hope, given the enormous challenges that they face, that in the national interest they will succeed. There is much of the new Government’s inheritance of which we may all be proud: our social, creative and academic vitality as a nation; our tolerance; our ease with diversity; our renewed spirit of enterprise; and the improving performance of our public sector. However, 2010 will surely come to be seen as a year, alongside 1945 and 1979, when a new Government faced the aftermath of a cataclysm: in this instance, the most severe economic shock of our lifetimes.

The urgent task, as I think we almost all recognise, is the elimination over time of the deficit, our pressing need to return to a position where, across the economic cycle, we spend as a nation only what we earn and not what we can borrow. The politics of reducing that deficit will be severe and testing for the coalition. But it can be done; and it must be done. I have no doubt from my own experience of managing both in the public and the private sectors that the deficit can be eliminated with minimal material damage to critical public sector outcomes. Indeed, many private sector organisations, their very survival in question, have faced up to far bigger challenges and in shorter order. However, I do not minimise the particular challenges that the public sector will always present, not least the intensity of scrutiny and the readiness to protest of all the interests affected.

[Lord Lea of Crondall]

The noble Lord makes play of a very interesting point about the recession-related deficit—in other words, adjusted for the recession. Does he happen to know the current size of the recession-related deficit?

[Lord Birt]

Perhaps the noble Lord will allow me to move to the end of my remarks and hear my argument in full.

There will be, for there always are, some low hanging fruit for the Treasury to pocket. Government can, and no doubt will, cease doing some things that they do now, but the scalpel will prove a more useful tool than the axe. After a long and unprecedented period of increased public spending, conducting a detailed, painstaking analysis of how every part of the public sector can be more productive will be fruitful.

There will be overcapacity, poorly engineered processes and low utilisation, as well as opportunities for shared services, outsourcing and multiskilling. There will be places where labour costs at every level will be higher than in the market, where smarter procurement can bring benefits and where best practice is not universal. Moreover, no part of the public sector should be excluded from a concerted drive to promote improved productivity. There should be no sacred cows, as the noble Lord, Lord Lawson, said earlier. The Government will need a keen sense of what can be done quickly and what may take a little time. A four or five-year framework will be sensible, as the noble Lord, Lord Griffiths, observed. The new Government will discover that while Whitehall has been gradually acquiring in recent years many of the skills needed to oversee large institutions, projects and programmes, the financial skills necessary for the forensic examination of a vast cost base are not yet present in government and will need quickly to be assembled. The new Government will need to reach out into the market for some vital and not just financial skills, and it will need to invest in them if the deficit is to be cut with care. Sometimes you have to spend money to save money.

The other main challenge of the new Government is to restore the health and stability of the economy overall, about which many of your Lordships have spoken. An early and credible plan for cutting the deficit, accompanied by real political unity, will do much to put us back on the right road. But the main task here is to be certain that we have truly identified the causes of our difficulties, both at national and global level, and applied the right remedies. Here I have yet to be reassured. We are two years into the crisis, and still we hear an array of competing views on regulation from technical experts, and we have had world leaders—even in recent months—still bashing bankers rather than explaining how international institutions, nations, regulators, financial organisations, corporations and individuals could all have managed risk more prudently, averting reckless excess, and can manage risk more effectively in future. We appear far from unanimity.

There was an understandable general urge to grapple with how and why we embarked on the war in Iraq. It is not too late for a new Government to bring similar independent scrutiny to bear on the causes of, and the cures for, our current maladies, including the origins of our own structural deficit, which puts us closer to the bottom than the top of the league of virtue among comparable countries. Only on the foundation of a deep understanding and a cool appraisal of all our difficulties can a better future be built.