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Public Expenditure

Volume 455: debated on Thursday 25 January 2007

5. What assessment he has made of the effect of levels of public expenditure on the economy; and if he will make a statement. (111024)

By borrowing only to invest and maintaining net debt at a prudent level, the Government have succeeded in delivering unprecedented economic stability and the longest period of economic expansion on record, while at the same time correcting the legacy of under-investment that we inherited 10 years ago.

The comprehensive spending review will be the next opportunity to demonstrate how increased investment and public service reform can strengthen our public services and the economy. Will the Minister meet a delegation from the black country to examine proposals for spending review investment that will boost skills, improve the transport network, reclaim brownfield sites and provide more housing, all of which support the Government’s economic priorities? Can I also ask him to confirm that—

I should be delighted to meet the delegation. We will certainly not adopt the Conservative party’s proposals, which would so badly undermine investment in exactly the priorities that my hon. Friend has highlighted—skills, transport and regeneration. We will maintain investment in those areas, which are crucial to the economy’s future, in the CSR announcements later this year.

It is undoubtedly true that the very dramatic increases in public expenditure have increased the inflationary pressures in the economy as well. Since the Chancellor has twice today reminded the House that we had reservations about the independence of the Bank of England, may I remind him that we had reservations about the proposals that he tabled in the Bank of England Bill because the Bank would not be independent enough? [Interruption.] Oh yes, it is true. We proposed longer-term limits for the Monetary Policy Committee. Is it not now time to strengthen its independence, so that it can no longer be interfered with by the Chancellor?

The hon. Gentleman has given us a very interesting rewriting of history. It sounds as though what he wants is a European central bank. We have an extremely good record on inflation, which is 3 per cent. and coming down. Of course, in 1997 our economy was the most unstable of all the developed countries regarding inflation; today, it is the most stable. That is a result of the success of this Government’s policies over the last 10 years.

Increased resources to schools in Salford in the last 10 years have resulted in an improvement in GCSE results. The number of pupils achieving good results has increased from 30 per cent. 10 years ago to 50 per cent. now. Among those schools is St. George’s, which achieved a 10 per cent. increase despite serving a disadvantaged area that is in the top 3 per cent. of the most disadvantaged areas in the country. Will my right hon. Friend underline his and the Treasury’s commitment to continuing to provide that level of resources, so that our pupils and teachers can continue to make such improvements?

I very much welcome the success in my hon. Friend’s constituency, and, indeed, across the country. Of course, that is a consequence of the fact that, whereas our education spending was among the lowest in the developed world 10 years ago, today it is among the highest. That is very good news for the future of our economy, and yes, I can confirm that we will maintain that priority in the years ahead. We will not be adopting a third fiscal rule, which would reduce spending this year by £28 billion and put all that progress at risk.

Might not different levels of public spending in different parts of the economy lead to a sense of grievance? Is the Chief Secretary aware that in the same edition of The Daily Telegraph in which the Chancellor argued the case for the Union, there also appeared an article setting out that the frail and elderly in England paid three times as much for their residential care as the frail and elderly in Scotland, on top of having to pay for the personal care that comes free in Scotland? Is this right?

I am not sure whether the hon. Gentleman is calling for more spending in that area. He may well be, and if he is, he is joining his Front-Bench colleagues in that regard, who, since I have been Chief Secretary, have called for more spending for more social workers, more nurses and twice as many school nurses—at the same time as calling for a third fiscal rule that would dramatically cut spending on all those services. I hope that the hon. Gentleman will support the framework that we have put in place and the economic success that that has achieved, which has allowed us to continue to invest across the board, including in social care.

In the next spending review, will my right hon. Friend ensure that the departmental public service agreements include a full analysis of how they will meet the new gender equality duty? At the moment, we are missing out on the skills, experience and potential contribution of a substantial part of the population, as identified in the Women and Work Commission report.

My hon. Friend is absolutely right. We do need to do better in that area, and on a number of other equality issues across the economy in the future. We shall indeed address all those issues in the delivery plans that will go with the public service agreement targets.

Yesterday the Home Secretary wrote to judges asking them to jail fewer people because of prison overcrowding. Does the Chief Secretary think that the Chancellor now regrets deciding last year to freeze the Home Office’s budget in real terms over the next spending round, before he settled other Departments’ budgets? Does the Chief Secretary agree with the Home Secretary that the Home Office is not fit for purpose?

My right hon. Friend the Home Secretary simply reminded judges and magistrates of the existing position. The reality is that spending on and investment in prisons has been rising, and will rise further. More places will be provided. If the hon. Gentleman is now calling for even more spending on prisons, he needs to explain to the House how that is compatible with also calling for a third fiscal rule that would dramatically reduce spending. There is a fundamental incoherence in the policy of Opposition Front Benchers that needs to be explained.

In my constituency, Thorn Lighting is developing a new technology—which will mean more jobs—through a partnership with Durham university. Does my right hon. Friend agree that it is record spending on science under this Government that will secure the long-term future of the economy?

I very much agree with my hon. Friend. The investment that we have made in science is fundamental to our future economic success. Durham has a great record in that area, and I pay tribute to the work that she has done and the interest that she has shown in that. We need to continue that investment in order to secure our long-term economic success and to maintain the record of stability that has been so important across the economy over the past decade.