To ask Her Majesty’s Government, in light of the current economic circumstances, whether they will impose a freeze on new public sector recruitment and permit only replacements for staff who have left.

My Lords, the Government will continue to invest in key public services to support people during the economic downturn. To ensure that resources are targeted on core front-line areas and to reduce further the cost of running government, administration budgets will fall by 5 per cent per annum in real terms for each of the next three years. Public sector employers will need to take decisions over how best to deploy the resources within their budgets.

My Lords, I thank the Minister for that Answer, but I find it very disappointing and falling short of what we might have hoped for in these stressed times. The Minister will no doubt be aware that, prior to his arrival to rescue the Government, they had for 11 years been increasing public employment at the rate of 2,770 jobs per working day—a total of 573,000 more jobs today than when they came to power. As this has brought about an increased tax burden of £2 billion a year for 11 years—it now runs at £22 billion, which is exactly the same as the amount that the Government have boasted that they have saved as a result of the Gershon report—will the Minister now consider whether it is time for another cost-cutting exercise and to take forward another Gershon exercise?

My Lords, your Lordships will be aware that the Gershon exercise, which was part of the 2004 spending review, has been followed by further exercises and further commitments to secure operational efficiencies, including in particular the use of five well respected business people to provide guidance on core areas, such as Mr Grimstone of Standard Life, who is providing advice on asset management. These are quite complex areas. I felt a degree of sympathy for the noble Lord, Lord James of Blackheath, when Mr Cameron, the leader of the Conservative Party, said on 19 May that he was not sure that the approach that the noble Lord, Lord James, had adopted in his own review of public expenditure was credible.

Oh!

My Lords, the House can remain assured that we are absolutely committed to effective public expenditure, to value for money and to securing operational and efficiency improvements. However, at the same time, we are not going to slash public expenditure when it is most vitally needed to support the economy.

My Lords, in the months ahead, will the Government practise what they are advocating to the private sector in terms of their hiring policy? Will they, for example, pay graduate trainees to be interns, and what incentives will they give to the long-term unemployed to work in the public sector?

My Lords, the Government’s policy on recruitment, head-count and remuneration for public sector employees is to pay whatever is necessary to meet the predetermined requirements. In as much as labour market conditions are changing, I envisage that the Government’s own policies will reflect those changing conditions.

My Lords, underneath all those words, did the Minister mean to say, no, he will not think of a freeze or, yes, he will think of a freeze?

My Lords, the noble Lord, Lord Tebbit, asks a penetrating question. I do not think that it is quite as simple as that; in the real world, it is a matter of efficient expenditure and efficient head-count allocation to meet needs. Some parts of government services are demand driven. In this type of economy we have automatic stabilisers, which recognise that. In some parts of government there will be reductions—and I have said, in response to the noble Lord, Lord James, that there is a 5 per cent per annum commitment in real terms to reduce expenditure on administration over each of the next three years. I hope noble Lords take some comfort from the fact that we are pressing for further efficiencies.

In a straight answer to the noble Lord’s question, no, there is no head-count freeze.

My Lords, is it not the time—

This side!

My Lords, this corner must have a turn from time to time. Is this not the time to start rebuilding our manufacturing industry, which has declined by two-thirds over the past 30 years and needs rebuilding, unless we are to import everything from overseas—particularly from China and India?

My Lords, I would welcome further strengthening of the British manufacturing industry, and believe that will be one of the consequences of the actions that we have taken on fiscal stimulus, on monetary easing—and as a consequence of the fact that we now have a very competitive currency.

My Lords, is it not the case that, following recent productivity gains, manufacturing industry now provides 60 per cent of our exports?

My Lords, I defer to the noble Baroness. I do not have those statistics to hand. However, to the extent that I find that that is correct, I shall confirm it to her in writing.

My Lords, I think that we would all like to hear the answer to that, as I do not think that the noble Baroness was correct.

On efficient spending, the Minister referred to real-term cuts in administrative budgets, and the PBR referred to £5 billion per annum of efficiency gains. What does that mean as regards employment in the public sector, or do the Government believe that maintaining public sector employment is one of their responses to the recession?

My Lords, we are talking about securing sustainable efficiencies and improvement in productivity. The audit done under Gershon evidenced that that has been achieved in the past and will be continued in future.

My Lords, what are the Government doing to rein in our contributions to the EU?

My Lords, I think that we are straying from the subject of the Question. I would beg noble Lords’ indulgence not to be guilty myself of straying from the subject.