Comprehensive Spending Review

Lord Sassoon Excerpts

Monday 1st November 2010 Lords Chamber

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, today we have had an important debate on the Government’s spending review and I thank everyone for their contributions. I add my congratulations on the three notable maiden speeches. The hour is late and I will pick up on only a few of the points raised today. I have listened carefully and I will write in response to many of the detailed points.

Two weeks ago my right honourable friend the Chancellor of the Exchequer stood in another place and set out a clear plan to deal with our debts and to put the nation’s finances back on a sustainable path. When we came to power we inherited an economy that was in turmoil, with no clear strategy for recovery, no ideas for reform and not a single penny of savings having been identified. That was at a time when we were borrowing £1 for every £4 we were spending. I do not know who runs the household budget for the party opposite, but it is not sustainable. We were, and are still, running the highest deficit in our peacetime history, the highest in Europe and the highest in the G20. We can wrap this up in all sorts of statistics and economic theory, but the simple fact is that Britain was not living within her means and the world knew it. That is why last year the IMF warned that we needed to accelerate the deficit reduction, and the World Bank, the OECD, and the Governor of the Bank of England all agreed. So in May we announced immediate reductions to in-year spending, avoiding the sovereign debt crisis that was engulfing the eurozone; in June we set out our emergency Budget, returning credibility to the nation’s finances; and this October we have had the spending review, bringing years of irresponsible borrowing to an end. We have had to tackle the deficit and it has been unavoidable, but the decisions behind the reduction in the deficit have not been unavoidable.

We have made choices and we have chosen to spend our money on the areas that matter most to Britain: the education of our children, the healthcare of our people, and the infrastructure that sustains a prosperous economy. As I mentioned at the start of today’s debate, underpinning all our decisions have been three guiding principles. The first of those principles is the need to support growth, and I am struck by the contrast today between the optimism—

[Lord Foulkes of Cumnock]

We have sat through nearly eight hours of debate to which a large number of Members have contributed. Would it not be courteous to this House if the Minister actually replied to the debate instead of repeating the speech he gave earlier?

[Lord Sassoon]

I am struck by the contrast of the optimism that we have heard today from businessmen in this House and those who are not businessmen but have clearly been talking to business people on the one hand, and the pessimism on the other hand of the academic economists and others who, even though we have had three quarters of strong growth, want to see disaster coming round every corner. I do not make any judgment about who is responsible for the growth, but I think we can agree that we have had three quarters of strong growth. Yes, the recovery will be choppy, but we have heard from my noble friend Lord Bates just how business in the north-east of England is looking forward and generating jobs for the future. We have heard similarly from my noble friend Lord Plumb about how agriculture will play its part. My noble friend Lord Allan of Hallam has explained how the use of data and technology will assist the recovery. These are the pointers that show us how the economy is going to generate sustained growth. The noble Lord, Lord Eatwell, keeps saying that nobody knows. It is the businessmen of this country who write letters to the papers, urging us on with the deficit reduction we are set on, who know how the recovery is going to be sustained for the future.

While I do not agree with the doubts of noble Lords opposite about the overall judgments made by the Government, I do agree with some of the noble Lords opposite in a lot of what they said—the noble Lords, Lord Myners and Lord Haskel, for example, on the need for better infrastructure. That is precisely why we added nearly £9 billion of expenditure on infrastructure in this spending review. I agree with them on the need for investment in innovation, which is why we are investing £220 million in innovation centres and why we are investing £1 billion in the critical new technology of carbon capture and storage. Similarly, my noble friend Lord Newby identified science and apprenticeships as critical to growth. That is why we are protecting science spending in cash terms and why we are significantly gearing up on the number of apprenticeships compared with the plans of the previous Government.

Overall on growth, I was particularly struck by the contributions of my noble friends Lord Lamont of Lerwick and Lord Stewartby. They remind us that Conservative Governments have been here before, that Conservative Governments have taken us out of recession and rebalanced the economy, and we will do it again. For example, in the early 1990s, the public sector was reduced not by 490,000 but by 690,000 employees. At the same time, in the 1992 to 1996-7 period, the private sector generated 1.7 million jobs. I have every expectation—Members opposite may not—that the private sector again will rise to the challenge.

The second principle that I set out at the beginning is that our choices should be fair. We have heard some powerful speeches today, particularly from the noble Baronesses, Lady Hollis of Heigham and Lady Campbell of Surbiton, reminding us just how difficult it is to reshape the welfare system in the radical way that we intend at a time of considerable retrenchment in the public finances. I shall take away the points that they and others have made. In particular, I note carefully the concerns of the noble Baroness, Lady Campbell, about the mobility component of disability living allowance.

The spending review focuses support on those who need it most. It shifts the focus from welfare payments to services that improve social mobility in the longer term and to work incentives. The Government have sought to protect the most vulnerable. Working-age women, for example, tend to benefit disproportionately from health spending, which we have protected, and older women also benefit from additional resources for social care.

The universal credit will clarify and increase work incentives. Work will pay and will be seen to pay, but we must not rush the universal credit. As the noble Baroness said, it will take us two Parliaments to do that, because it is a difficult project and we must get it right.

We have also heard a lot on how young people will progress from care to university—points were made in different ways by the noble Earl, Lord Listowel, and the noble Baroness, Lady Nye. The Government are concerned to make sure that young people from the most disadvantaged homes get every opportunity. We are encouraging social mobility through maintaining Sure Start and extending early-years care. From 2012-13, we will introduce for all disadvantaged two year-olds substantial school premiums. The Government are also protecting the ability of those on lower incomes to go into higher education, including through a scholarship fund of £150 million by 2014-15.

[Baroness Farrington of Ribbleton]

My Lords, will the Minister care to fill in a little gap concerning the 16 to 19 year-olds?

[Lord Sassoon]

As I have said, we are coming forward with a £150 million fund that, by 2014, will enable those on lower incomes in that 16-to-19 age group to transfer into higher education.

[Lord Knight of Weymouth]

I have no wish to delay the House, but the Minister cannot be allowed to get away with that. The noble Baroness’s question was about 16-to-19 year-olds in schools, but he gave an answer about access to higher education, which is the next phase. The concerns expressed during this debate by the noble Baroness, Lady Nye, were about the abolition of the education maintenance allowance. What is his response?

[Lord Sassoon]

My Lords, one of the responses is that if we give children who would not otherwise have the opportunity to go to the best universities the ability to look forward to a fund that will enable them to do so, that is one way in which we will help disadvantaged children, right through the chain, from the start, through higher education and beyond. In that context, the £2.5 billion pupil premium will be another critical component.

[Baroness Farrington of Ribbleton]

Will the pupil premium be taken from funding for those young people aged 16 to 19 in schools?

[Lord Sassoon]

The pupil premium will be used to ensure that those schools that have a particular proportion of disadvantaged children will get a premium to ensure that there is an appropriate rebalancing.

[Lord Knight of Weymouth]

My Lords—

--- Later in debate ---

[Baroness Anelay of St Johns]

I do not need to protect my Minister. My Minister is here to protect the economy of this country.

[Lord Sassoon]

My Lords, I have got all night. I am very grateful to my noble friend. It is late, and we will have an opportunity to come back to these matters again. Specific funding for 16 to 19 year-old learning will be announced in the statement of priorities for the Department for Education later this year, so we will have opportunities to come back to that.

I move on briefly to one or two further points on reforms to our public services. We will leave no stone unturned in our search for waste, while we devolve power and funding away from Whitehall. I was very struck by the contributions by my noble friends Lady Browning and Lord Newby, who reminded us just how much more we can get from Government by better procurement and cutting waste. It is in those ways that we will be able to target expenditure going forward on those who need it—whether that is for 16 to 19 year-old education or those with disabilities. We have to remember at all times that the attack on waste continues to be a high priority.

Rightly, concerns have been expressed about the transitional effects of the job losses from the public sector. The Government are also very concerned about easing the transition, which is why we have announced the initiative such as the £1.4 billion regional growth fund.

I conclude today’s debate by saying that the decisions that we have taken have restored credibility to our public finances and stability to our economy. When we came to power, this coalition Government did face the worse economic inheritance in modern history. We have had to make tough choices—

[Baroness Royall of Blaisdon]

My Lords, the House will forgive me for delaying the Minister once more, but I thought that the noble Lord, Lord Shipley, and others raised incredibly important issues to do with local government funding in the forthcoming year. Would the Minister care to reflect or answer those questions?

--- Later in debate ---

[Lord Sassoon]

A lot of points were raised today, and I said at the outset that I cannot address them properly today. On local government, one critical issue is that we have removed almost 5,000 targets. Of course local government will live within lower spending settlements, as the great majority of central government departments have to do, but we are balancing that by lifting a huge burden of ring-fencing of their decision making, which will enable them, within what is of course a lower settlement, to have much more power to decide where the money goes, without the heavy hand of Whitehall bureaucracy on them.

We are investing in growth, in schools and in the health of our people. We have cut welfare, we are cutting waste, we have made sure that everyone pays their fair share—

[Lord Myners]

My Lords, the Minister is getting close to the point where he will not answer any further questions. He quite correctly said that there are some issues that he will have to go away and reflect on and reply to in writing. However, there was one contribution from the government Benches that was targeted specifically at the Minister, which alleged incompetence and lassitude on the part of the Minister, and those were the comments from the noble Lord, Lord James. They were very specific and I think the House deserves a response on the issue that the noble Lord raised. Clearly, the noble Lord has access to the solution that, with one leap, will take all the Government’s problems of financing to a better place. The Minister has clearly been remarkably bad at responding to the noble Lord and we look forward to the Minister’s explanation now.

[Lord Sassoon]

I am very grateful to the noble Lord, Lord Myners. He had great trouble keeping a straight face. I have to say that I took extremely seriously my noble friend Lord James of Blackheath’s suggestions that there were people who could help us out with our financial difficulty. The noble Lord, Lord Myners, thinks it is all a joke. I have been in detailed discussions over the past number of weeks with the noble Lord, Lord James of Blackheath, and of course we take seriously anyone who wants to invest in our economy. I know many people believe that there will be great opportunities in our infrastructure programme to invest in rebuilding our networks to underpin growth.

[Baroness Farrington of Ribbleton]

On a minor point of information, were any of the Minister’s Liberal Democrat noble friends present at any of these meetings?

[Lord Sassoon]

My Lords, if we start getting into who was present at which meetings at this hour of the night, we will never get home. I do not start counting off who is a member of which party in coalition Government meetings. That seems to be an obsession of the opposition party.

I will conclude briefly. It has been a very difficult and challenging spending round but we have made sure, as far as we possibly can, that everyone pays their fair share. We have taken the country back from what was—I am happy to say it—the brink of bankruptcy.

[Noble Lords]

Oh!

[Lord Sassoon]

My Lords, our plan will help drive growth in this country. Our plan will create the jobs of the future and it will build the more dynamic, more prosperous and more sustainable economy that Britain deserves. I beg to move.

Motion agreed.

House adjourned at 11.43 pm.