Comprehensive Spending Review

Lord Haskel Excerpts

Monday 1st November 2010 Lords Chamber

[Lord Haskel]

My Lords, I am not going to speak about the economics of the CSR. My noble friend Lord Myners did that with devastating logic. My concern is about the process. Can the Government and the local authorities carry it through? It is easy to put numbers on a spreadsheet; it is a lot more difficult actually to deliver the proposed savings, as the Government, with the housing benefit and child benefit problems beginning to become apparent, are beginning to find out. Is this project a sound platform, as the Minister put it, or is it fantasy land, as my noble friend Lord Peston put it?

I start with Sir Philip Green’s report. I feel qualified to do this because for 30 years I was in the textile business and on the receiving end of exactly the sort of thing that Sir Philip proposes. Unfortunately, he told the Government only half the story. After you get the hard talk, most firms will then carefully send someone round to ensure that the goods or the services that have been ordered will be delivered on time and satisfactory in quality and that there will be no problems. They know that the problems of the suppliers become the customers’ problems, only magnified. Is Whitehall set up to be the kind of enlightened customer who is needed to do that? Is it more Toyota and less Topshop?

Writing in the Financial Times on 20 October, my noble friend Lord Adonis has his doubts. He says that, based on his experience as a Minister over many years, the intensive Whitehall support, as he calls it, is just not there. Last week, when debating government contracts with consultants, we were reminded that the National Audit Office said that the Government lack the information, skills and strategies to manage them.

What are the Government going to do to make sure that the budgeted savings are actually delivered? With this lack of time and skills, the Government are right on one thing; cut a service entirely rather than trim it and do it badly—do it properly or not at all. However, they are seeking to economise by encouraging the outsourcing of some of the services on the principle that the private sector does it better and cheaper than the public sector. This is sheer dogma, as my noble friend Lord Peston explained. What has produced the improvement is not privatisation but competition, and where the public sector has had to compete with the private sector, the public sector has done pretty well. We need look no further than the National Health Service. Where some NHS operations have been contracted out to the private sector, the private sector has had to be paid between 30 and 50 per cent above the tariff of the NHS hospitals. The chief economist of the King’s Fund also pointed out that the private sector takes the less complicated cases.

On Welfare to Work, independent reports state that there is no hard evidence that the independent sector does better than Jobcentre Plus. Indeed, when Pathways to Work was rolled out for people on incapacity benefit in 2008-09, the private sector providers performed worse than Jobcentre Plus, and private sector prisons are certainly not consistently at the top of the performance tables.

Instead of sacking civil servants and contracting out services or closing them, why have not the Government allowed them to compete with the private sector? If we are all in it together, surely they deserve a chance too; or is it again too much rush, too little thought, all in the name of no alternative?

The experience of the London Borough of Barnet proves my point. It had its own mini-CSR some time ago, and last week the council leader said that the savings for this year will be less than half those projected in its budget precisely because of the problems that I have outlined. Surely there is a red light flashing there. However, a decision has been made; people will be sacked and it is up to the private sector to employ them. Let us consider how realistic that hope is. I know that the Government have the support of many business leaders in this policy, but you will notice that they are careful to give their support in their private capacity. This is because when it comes to business, things are different. Again you get only half the story. My noble friend Lord Knight pointed out that, yes, they may be creating new jobs, but old jobs are being destroyed at a faster rate because of the continuous search for innovation and increased productivity. This applies to every sector. A typical British manufacturing worker today produces four and a half times as much as their equivalent did in 1980. That is why there are far fewer jobs in manufacturing even thought manufacturing output is about 70 per cent higher than it was then. This applies throughout business and industry.

The Government tell us that 176,000 vacancies are known to jobcentres, implying that these are jobs for people on the unemployment register. Last week, the noble Lord, Lord Sassoon, told us that 300,000 jobs were created in the second quarter, and the noble Lord, Lord Lamont, repeated it. Again we get only half the story. What we are not told is how many jobs ceased to exist and how many jobs were taken up by the 40,000 or 50,000 people a week who are in employment but change jobs. It is easy to cherry pick the labour market figures, but it is very difficult to give a true figure.

Like other noble Lords I ask where these extra jobs are going to come from. I welcome the plans to invest more in our infrastructure; I welcome the plans to develop Britain’s offshore wind power industry. Certainly these should create new jobs but, like the noble Lord, Lord Bilimoria, I ask whether this is enough. I welcome the new innovation centres—a Labour innovation, I might add—but do not expect quick results; it will take three or four years before they show results. The Technology Strategy Board and the knowledge transfer networks have been doing this kind of work for some years and, yes, there are several projects in the pipeline. I declare an interest as the honorary chairman of perhaps the largest knowledge transfer network. However, this is a pretty thin supply-side narrative, as my noble friend Lord Myners put it. Growth in the economy does not necessarily mean more jobs; it may mean more output, but the two do not necessarily go together.

Where is the money for these new jobs going to come from? Big business has money but is looking to cut its costs by destroying jobs while most new jobs are created by small and medium-sized enterprises—the very sector that is being starved of investment capital. Like the right reverend Prelate the Bishop of Leicester, I, too, think that there is something wrong when banks are making a fortune trading the very debt for which the rest of us are making sacrifices. Is it because quantitative easing does not get beyond the banks? Banks do not create jobs—innovation and demand do. Perhaps the quantitative easing should go straight to business and industry.

I am concerned about the Government’s ability to manage their strategy and budget. Will the promised savings be delivered? Will the private sector be able to absorb the jobless from the public sector and still remain competitive? I am concerned about where all this is leading: about the direction of travel. The Minister portrays the CSR in economic, fairness and reorganisational terms; others see it differently. I am a bit of an old leftie and I see it in terms of the Government failing in their duty to protect the public good from private interests, an issue to which several noble Lords have referred. Whatever our perspective, it is testing the limits of our tolerance. The CSR should be given more time and approached with a lot more caution and humility.