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Mr. Michael Fallon (Sevenoaks) (Con): It is a pleasure to follow the right hon. Member for Newport, East (Alan Howarth). I hope that Front Benchers noted some of his points about science and higher education, with which I agree. This afternoon's debate seems to be turning into an old Department of Education and Science reunion, although some of us have not changed our positions. I begin by declaring my business interests, as recorded in the register.
I note that the review is no longer called the "comprehensive" spending review, which is probably a wise omission because it does not give us a picture of public expenditure as a whole. As the Chairman of the Treasury Committee pointed out, the spending review has been published before departmental out-turns are available. We heard evidence this morning that that is an accident, because 14 days' notice must be given to the National Audit Office, the Office for National Statistics or somebody, so the departmental out-turns cannot be published until Monday. That is either incompetence or conspiracy, or, as I prefer to think, the spending review is a political exercise that has been rushed forward in this particular year to try to influence the results of tomorrow's by-elections.
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The review does not include the all-important Atkinson report on public sector productivity, and I do not know why the Government could not wait for its conclusions, which would have enabled all of us more accurately to examine the efficiency targets. On the targets themselves, we have been told that the measures, which are now called the efficiency technical notes, will not be published until October. Sir Peter Gershon, an admirable man, has toiled away for a year on his report, and the Government have had two years in which to prepare the spending review, so I do not understand why the efficiency technical notes are not ready to be published alongside the efficiency targets.
That point is all the more important when one considers some of the woollier targets. The Department for Culture, Media and Sport is pledging itself to save some £260 million a year by 2007–08. It has four plans to achieve that, the fourth of which is simply to
"work with its sponsored bodies, local authorities"
"to facilitate the delivery of these . . . gains."
That is not a specific plan. Such an objective should be properly measured: that is why the efficiency technical notes should have been finalised and published alongside it.
The spending review document does not include crucial information that we need about the uprating of benefits. The Government blandly commit themselves to yet another reduction in child poverty, which is a very important target, but the totals for managed expenditure given in table A1 reveal that for the second two years—2006–07 and 2007–08—there is no assumption that tax credits, including the all-important child tax credit, should be uprated by any more than inflation. In other words, there is no assumption that the child tax credit will be uprated by the level of earnings growth, as is necessary if the target is to be met. The document has serious weaknesses, and I suspect that it has been rushed forward for political purposes. I regret that it does not provide the supplementary information that we need and that it does not give the Treasury Committee sufficient time to produce a report, as we normally would have done, that might better have informed the debate.
It emerged in evidence given to the Committee this morning that the reduction in head count through the sacking of 100,000 civil servants will provide only between 10 and 15 per cent. of the proposed efficiency savings—the magical figure of £20 billion. In other words, 85 to 90 per cent. of the £20 billion has to come from everything else that is promised—better procurement, better working, lower sickness rates and so forth. In reality, better procurement often means more centralised procurement. The Government have already run into difficulties in forcing their way towards better NHS procurement because of objections from the devolved and empowered primary care trusts.
On better working, I am, like my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), sceptical about how some of the targets will be met. In the case of the Department for Education and Skills, we are told that 30 per cent. of its £4.3 billion savings—a total of £1.3 billion—will be provided by teachers and college lecturers working harder. I see nothing in Gershon or in any other document to give us any
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comfort about those savings being delivered in practice. It is noteworthy that when Sir Peter Gershon consulted the devolved units on the efficiency gains that they could deliver—contacting more than 60 police authorities, more than 100 health service trusts, and more than 100 local authorities—only 12 health service bodies and 12 local councils responded. I suspect that the Government will find it much harder to enforce such savings on the devolved public services.
The 2.5 per cent. efficiency saving is an enormous amount—I agree with the hon. Member for Twickenham (Dr. Cable) about that. The annual average productivity improvement in the economy over the past 40 years has been 2.1 per cent., yet we are suddenly told that the public sector will be 2.5 per cent. more productive. Like my right hon. and learned Friend the Member for Rushcliffe, I suspect that that is a rain dance.
I want to consider the fiscal position, to which there are three keys. Each is critical to the Government's obeying its fiscal rules and our being spared the additional tax burden that Conservative Members feared and that was realised after the last two elections.
The first key is that tax revenues have to come in. There is already evidence that they are not coming in as the Treasury forecast that they should. Secondly, the Government must deliver the asset sales that they promised. The document mentions a total of £30 billion of asset sales, yet I cannot find a single list of what will be sold to deliver them by 2010. As we found in Government, asset sales get harder as one goes on. One sells the land and privatises the industries but the search for the £4 billion, £5 billion or £6 billion of asset sales that one needs every year gets increasingly harder. It should therefore perhaps be no surprise that the Government have not even listed where the asset sales will be made. They are unlisted, unquantified and will become much harder to achieve. As I said earlier, if efficiency savings—the third key—are not achieved in full, we shall be in trouble.
The Government will be in trouble because the one certainty is not asset sales, tax revenues or efficiency savings, but spending. The spending is guaranteed and will now begin to flow, whether or not efficiency savings are realised, asset sales are pocketed and tax revenues come in. If the three keys are not achieved, taxes and borrowing will have to increase all over again.
As my hon. Friend the Member for Arundel and South Downs (Mr. Flight) said, we have the largest state sector in the Anglo-Saxon world. We have a public sector that is larger than Scotland and we have slipped down the competitiveness league. It is a stark fact that if British GDP per head were measured against that in each of the American states, we would come 45th. Only four American states have a lower GDP per head than ours.
We have had seven years of rising administrative spending. The Chief Secretary tried to bluster his way out of the figures, and I commend the table in this morning's Financial Times to him. It clearly shows that administrative spending has increased from 4 per cent. to 4.5 per cent. The right hon. Gentleman promised to
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reduce it to 3.7 per cent. but the table shows how the Government have always promised to reduce it and always failed.
There has been a lack of genuine, radical reform in our public services and a massive increase of more than 500,000 jobs in the public sector. That is real Labour. They start by spending and hiring more and more public servants and end so desperate to find savings that, suddenly and without warning, they send out 100,000 redundancy notices to their civil servants. Those 100,000 civil servants will see through the Government when they are put out of work. When the rest of the country sees through the Government, they will be put out of work, too.
5.44 pm
John McDonnell (Hayes and Harlington) (Lab): I preface my remarks with the traditional statement of fealty or loyalty to the Chancellor and all his works. From the Budgets that he has introduced since 1997, my constituency has gained for the under-fives a Sure Start centre, a neighbourhood nursery and an early excellence centre. We have gained three schools—a primary school and two secondary schools—although I have to say that one was a private finance initiative that was imposed on us. I met the head of that school this morning, and we are not sure whether Jarvis will go bust over the summer so we are slightly anxious about that. My constituency has gained two medical centres, one of which I opened last week, and a mental health unit. We are also bidding for a new hospital. There is now neighbourhood policing in some of our wards, and it is developing throughout the others.
That represents a programme of traditional Labour policies of investment in the community, of which I am proud. Especially welcome this week was our commitment to the development of international aid to a level that this country has not seen before and for which the United Nations has been calling for a number of years.
However, the Budget statement and the spending review statement were tarnished by the treatment of the Government's own staff. They are the very people who deliver all those services and policies in my constituency and across the country, and we have treated them badly. We have used some of the worst employment practices of the worst employers. In the Budget, without any consultation, discussion or negotiation with the trade unions, the Chancellor announced 40,000 job cuts. In the spending review, it was announced—again without consultation—that there would be 100,000. Is it 100,000, 84,000 or 96,000? I am not sure. Certainly, it is now acknowledged that there will be compulsory redundancies. We need clarification on the precise numbers. The Scots have already revolted, and Jack McConnell has said that the 20,000 job cuts will not be imposed on Scotland by an English decision. What does local government have to say about the individual impositions of job cuts that will be made, council by council?
I have always found the staff who work for the Government throughout the civil and public service to
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be committed, dedicated and hard working. They are generally overstretched, and often over-stressed. I believe that we have the best civil service in the world—certainly in terms of probity, efficiency and dedication to the work that it does. I accept, however, that any organisation—whether a government or private sector body—will periodically need to examine how its staff deliver the objectives of that body. That is healthy and worth while, although reorganisation can sometimes become a displacement activity for real performance.
Nevertheless, it is worth focusing our minds on how we deliver new methods and increase efficiency, and that is usually done in one of two ways. The first involves external intervention. We had that in local government through rate capping, and it can also occur in the private sector when a company's share price drops and there is a need for urgent reform. Such external intervention demands a response, although the response is often to slash and burn, as has been mentioned in previous debates.
The alternative is internally generated reform, which is what I would have expected from this Government. It is a more inclusive form of change, whereby we challenge the role of organisations and involve managers and staff at every level. In particular, we involve the union representatives of those staff members to discuss the resources that are needed and how they are to be deployed and developed to achieve the organisation's objectives.
With Gershon, we seem to have an approach that epitomises the former—the external threat—but which is dressed up as the latter, that is, some form of organic efficiency response based on discussion. There is a suspicion that, instead of the development of the real objectives that we want to achieve and the resources that we need, the Gershon approach is based on the achievement of a cuts level, forcing the Departments to stack up the sacrifices to be delivered over the coming period. I found it somewhat enchanting that it was dressed up in consultancy-speak. For example, "change agents" are to be placed in every Department, and I look forward to examining the "generic reform maps" and "e-enabled channels" in more detail as we go along.
The staffing element of the proposals smacks of a political manoeuvre, in which we are involved in some kind of Dutch auction with the Conservatives on how brutal we can be towards bureaucrats, and how many staff we can cut, in a competitive game in which the numbers increase month by month. They have increased from 40,000 in the Budget statement two months ago to 100,000 in the spending review. What I find unpalatable is that we now wrap that up in the mythical division between backroom and front-line staff, whereby slashing backroom staff will in some way free up growth of front-line staff. We now have a similar concept to that of the deserving and undeserving poor: deserving front-line staff and undeserving civil servants working in the backroom.
From my experience of working in the public sector, and even in the private sector, and of engaging with those civil servants who serve my constituents, I cannot see the breakdown between deserving front-line staff
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and undeserving backroom staff. In my local jobcentre, the pension worker who meets and greets, obtains information and provides immediate advice is of course valuable, but we also require the back-up of those backroom specialists who will analyse and process the payment, address the details of that claim, and ensure that it is done efficiently. The experience of Members is not that there are too many staff at the moment delivering benefits, pensions and so on—most of us have to deal with problems in our surgeries of ensuring that sufficient staff attention is given to our constituents because of the overstretch of existing staff.
The announcements in the Budget and the spending review must be demoralising for existing staff, and must arouse fears among our constituents about service delivery. Those fears will be justified—services will be affected if we go for this scale of cuts. It is also an act of provocation to the unions. The union response, however, has been considered and has shown admirable restraint. I pay tribute to the general secretary of the Public and Commercial Services Union, Mark Serwotka, for the statements that he has made in the media about the need to achieve a rational approach by the Government, and about his willingness to negotiate and get involved in consultations. I appeal to the Government to start again that process of reform as a rational process, in which we engage the staff, their managers and their unions. This could be a real opportunity for reform and a renewed direction in the civil service, if that is what we want to achieve, but it must be done with the encouragement and participation of all the staff, particularly through their trade union structures, in which they have confidence. We have that opportunity, but it could be lost if threats of job losses and compulsory redundancies are handled in this brutal manner.
On Monday, I requested a meeting with the Chancellor to discuss with the PCS parliamentary group the implications of his announcement. His response was that we had met the Economic Secretary days before. That is slightly inaccurate—we had met a couple of months before, and it was a meeting with the Economic Secretary about the pay round in the Department for Work and Pensions and across government; it was not about staff cuts. I would welcome a meeting with the Chancellor and any other Minister to discuss this in some detail. There is a real opportunity to get back on course in a reform and renewal process that will deliver the objectives of Government and that may deliver an element of savings, too. Those will be achieved efficiently and effectively only if we take the staff with us—they will not be achieved if we announce that we are going to decimate their employment opportunities for the future.
Finally, there is failure by the Government to acknowledge that if we want staff to undertake work effectively and efficiently, we need to pay them a reasonable rate for the job. In the Department for Work and Pensions, for example, 90,000 staff earn less than £15,000 a year, and the starting rate for many of those posts is £10,000. Many of them pay themselves the benefits that they must administer, because they are on low pay. There is a chance for a fresh start for our civil service, but it will not be brought about by threats of job cuts or by underpayment in this scandalous way.
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5.54 pm
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