Plenty of scope for savings in Labour’s wasteful £618 billion budget – by Edward Leigh

portrait-edwardleigh1.jpgLady Luck has not smiled on this Chancellor since the previous incumbent moved next door. We all know that.

The Chancellor has now presented himself as the steadfast helmsman steering us through the global economic storm, but I contend that in some key respects the Government’s own navigation has contributed to the gathering gloom.

The Chancellor said that his Budget is responsible and that it matches increased spending with vital reforms. We all share that concern for reform and I welcome the examples of change that I have seen in my role as Chairman of the Public Accounts Committee. I always try to give credit where it is due. However, I have also witnessed too many examples of waste and inefficiency to share the Chancellor’s supreme confidence in the certainty of savings that he promised us.

Health

Spending on health has doubled and there are many more doctors and nurses, as we were reminded, but the statistics in the Budget speech do not reveal the full picture. There was no acknowledgement that productivity in the health service has fallen in recent years. The latest completed figures of the Office for National Statistics show an average 2 per cent. decrease in NHS productivity between 2001 and 2005, which is worrying.

Let me be clear: those who work in the NHS deserve to be paid a decent wage. We know that our lives and those of our constituents depend on them. They are not to blame for the inconsistency in outcomes. After all, the worst work on their behalf is often done with the best of intentions. For example, our Committee will shortly take evidence on the recent National Audit Office report on the new GP contract. There is the small matter that it cost £1.76 billion more than the Government expected, and that a 2.5 per cent decrease in primary care productivity accompanied the first two years of the contract. Of course, the Government had predicated the entire reform on a productivity rise. The contract for NHS consultants was a similar story, and the predicted productivity rises have yet to happen. The cost of out-of-hours care was, again, higher than forecast, and delivery struggled to fulfil expectations. That is constantly repeated in public service delivery.

In terms of what a future Conservative government might do about this – with reference to the controversy surrounding the shadow Chief Secretary to the Treasury’s recent Sunday Telegraph interview, in which he appeared, on the face of it, to rule out any tax cuts for the foreseeable future – it should be noted that there was also a less-reported acknowledgement by him, both that the tax burden on families was too high and that there were unnecessary programmes of spending. I welcome the shadow Chief Secretary’s announcement. He also implied that there was waste and incompetence. Otherwise, why should he speak of ‘delivering an efficiency programme’?

Let me say quite categorically that nobody in the Tory Party – even among the unreconstructed Thatcherites among us – is demanding a commitment to a figure on tax cuts. But whilst I agree that to announce a figure at this stage would be foolish, by the same token, I do not consider it entirely sensible to commit ourselves not to cut taxes for a period.

There is something of a hairshirt tendency among Tories at the moment, as if we thought people might be impressed by our self-flagellation. I know the latest polls are encouraging, but I am not convinced this is the right approach in the long-term.

Potential for tax cuts

After all, it has always been my view that out of a budget of £618 billion there are enormous opportunities for the next Conservative Government to deliver serious savings leading to tax cuts within the lifetime of the parliament.

So I am glad to see that we are moving gradually as a Party in the right direction. David Cameron’s recent statement that a Tory government could cut tax towards the end of its first term ‘when it is prudent and practical to do so’ is a welcome addition to the Shadow Chief Secretary’s statements. As was his saying that Labour ministers wake up in the morning and think ‘what can I spend money on today?’ while Conservative ministers ‘will wake up and think how can I do things in a way that saves money?’

I hope it will also be encouraging to the voters we wish to attract. We must never forget the middle-classes and the aspiring working-classes, who are struggling to pay their household bills, their council taxes and their mortgages. They are the Government’s milch-cow. But their udder is running dry. We Tories must, to extend the metaphor, give them some fresh pasture to look towards.

Budget scrutiny

We have the best system in the world of post facto audit but one of the least effective Budget scrutiny systems. I shall deal with that in a little more detail below.

I do not take issue with the rosy portrait of reform that the Budget statement presented for the sake of blind opposition. There is no point in that. We all believe in reform and I welcome, for example, the proposal that long-term recipients of incapacity benefit should attend assessments of their fitness to work. That is good, but MPs listening to the Chancellor would be forgiven for thinking that his £30 billion of savings a year are already in the bank. They are not. We have prepared numerous reports on the existing efficiency programme. The record on reform to date shows that savings are easy to predict but harder to achieve in practice. The shadow Chief Secretary knows that well as he prepares for government.

There are many wise men and women in the House today, but another, John Locke, wrote that

“an unerring mark of the love of truth is not entertaining any proposition with greater assurance than the proofs it is built upon will warrant”.

To put it another way, experience tells us that the Budget is counting on chickens with a poor record of hatching. As a giver of candid advice, I therefore say to those on the Treasury Bench, as many of us have many times, that public faith in public services will not withstand public failures to deliver genuine reform, which is what we need and want.

The price of failure to deliver productivity gains and efficiency savings will be paid in higher taxes and higher borrowing. That price is paid by us all, but, as I said in last year’s debate, the burden is felt most by those who can least afford to bear it-the poorest and most vulnerable members of society.

I believe that there is a strong moral case for lower taxation, especially for those least able to pay. Some MPs agree and others have yet to see the light. However, I believe that few MPs would dissent from the equally strong moral case for removing inefficiency and waste from public services. That is the case that we fought to further in our Committee.

To give them credit, those on the Treasury Bench accept more than 90 per cent. of our recommendations, and hundreds of millions of pounds are consequently saved. That is an example of what parliamentarians can achieve when we work together, especially when we are supported by the National Audit Office. However, our scrutiny of public spending happens only after the event. We can encourage those who come next to imitate the good and avoid the bad, but we cannot head the problem off at the pass. That is true of many issues.

Non-doms

Today, the non-doms issue was mentioned. Evidence on that is mixed. I have heard anecdotal evidence to suggest that many middle-income earners are leaving the country. I welcome the concessions in the Budget statement but I believe that pre-Budget scrutiny would help resolve such issues. Nonetheless, according to London First, which lobbies on behalf of London businesses, even if only 5 per cent of non-doms – who contribute £4bn a year – quit the country, the Treasury’s revenue gain from this will be erased.

It must have seemed a good idea at the time. What better way of pleasing the Labour backbenches and the tabloid-reading public at large than to attack the wicked super-rich, and super-rich foreigners to boot? ‘They come over here, they buy up our football clubs’…and so on.

But of course, as with all such Labour assaults on the ‘Kenco’ classes – the ‘really rich’, – to borrow a coffee advertisement’s strapline – can always quite legally dodge such clumsy blows. Their accountants, of course, have been doing very nicely already out of this government’s unprecedented complication of the tax system. And these most mobile of the world’s wealth-creators will find it easier than any other group of people to up sticks and flit abroad faster than you can say ‘private jet’.

Not many people’s hearts bleed for hedge-funds or their managers, but the consequence of driving even a small percentage of them out of the City would be graver than most people realise. It is perfectly possible that a sizeable hedge fund pays up to £100m in tax. So if you drive out just a handful, the £600m the Treasury hopes to raise would be wiped out.

Car taxes

We have debated the taxation of family cars. The public are only just waking up to the fact that their small family cars, not the large gas guzzlers, will be taxed.

The Chancellor said that it was because of such measures that he could afford to increase child benefit. For those too poor to own a car, this might be helpful. But some of them are the very people his Government has made yet more dependent on its distribution of tax credits. One should not forget that such ‘credits’ are originally the earnings of those same taxpayers, which the Government recycles back to them.

Education

Many of the cars that have fallen into the Chancellor’s wide and finely-meshed tax-net are used, of course, to get children to school. But what do their drivers and passengers find when they get there? The budget makes little mention of education. But it has long been my belief that we should enable parents to hand over the cost of state education to the schools of their choice. Now, of course, the very concept of school choice has been abolished in favour of a lottery system. But what we should do is the very thing the Government hates to do: trust the professionals, not the bureaucrats. Particularly when it comes to church schools, they take umbrage, understandably, at being accused by the Secretary of State for Children, Schools and Families, as I must now call him, of covertly selecting middle-class children over the detested issue of the proletariat.

Certainly, the high proportion of children on free school meals at Catholic and other Christian schools belies the accusation. But that is typical of the Government’s attitude; they just cannot bring themselves to trust the professionals – or indeed parents. And so their policy has failed.

Now we hear that Cambridge University is scrapping the requirement for a foreign language GCSE. Is this not a desperate lowering of the bar to try to give a leg-up to children who are the victims of this Government’s education policies?

Defence: Iraq and Afghanistan

There was insufficient debate about the cost of the Iraq war and the Afghanistan operation. There is nothing more boring than listening to people saying, “I told you so”, and I voted against the war. However, it has cost the Government £5 billion and it has cost the US Government $3 trillion. Another £2 billion is set aside for what will happen in Afghanistan and Iraq.

All such issues need to be debated more often and in more detail in the House as the Budget goes through.

Improving Budget scrutiny: a proposal

I believe that opportunities to unleash the collective wisdom of the House are far too limited compared with what happens in Congress, where the President proposes, but Congress disposes. There are literally hundreds of hours of line-by-line debate on the Budget. What emerges from Congress is different from the President’s proposals. Our powers in the House are far too limited. It is true that we have the Budget debate and three days of debate on the Supply estimates. However, the Budget confirms spending plans that are set out in the comprehensive spending review, of which there is almost no systematic scrutiny. The estimates are debated only after the beginning of the year in which the spending takes place. There is therefore little opportunity to influence the Government, even if they are listening.

MPs who serve on departmental Select Committees have difficulty in consistently devoting sufficient time to spending proposals-indeed, they hardly consider them. Parliament was created hundreds of years ago primarily as a financial watchdog on the Government. It sat mainly during the whole Budget process. That power has atrophied and there is a huge scrutiny gap.

Let me suggest a modest solution. I believe that the House should establish a Select Committee on the Budget, with the normal powers of Select Committees-I ask for no more-but with the specific purpose of considering the Government’s spending plans. To allow the good sense and good faith of MPs to have the greatest influence, hearings should be held well before plans take on the formal force of estimates. After all, voting against the supply of funds is tantamount to bringing down the Government. I do not suggest that; there is no nuclear option here. We need far less than that. My proposal would not shake the foundations of the constitution, nor would it significantly inconvenience the Executive. The Government would need to produce spending reviews by the summer recess-a feat achieved in 2002 and 2004, and missed last year only because of the then Prime Minister’s extended goodbye. Annual updates would not be difficult to provide. The NAO would be willing-I know, because I have asked-to assist the House by analysing the information and providing a commentary for the Committee to consider at hearings each autumn.

I hope that the Liaison Committee will shortly have the opportunity to consider my proposal. I hope that the Government’s attitude will be welcoming. Two years ago, in the regular debate on the work of the Public Accounts Committee, which assimilates events that, sadly, too few MPs turn up for-I encourage them to do so-the then Financial Secretary to the Treasury (John Healey), recognised that the scrutiny of public spending is fundamental to our democracy. He also said that

“we need to introduce a more systematic and challenging parliamentary scrutiny of spending plans.”- [ Official Report, 18 July 2006; Vol. 449, c. 289. ]

I hope that the commitment given by the Treasury then to work with Parliament holds good today. Indeed, I know that it does, because the Treasury is doing a lot of useful work.

Establishing a Budget Select Committee would reinforce the rights and privileges of the House of Commons. It would also reflect the truth in the words of Benjamin Disraeli, that

“all power is a trust; that we are accountable for its exercise; that from the people, and for the people, all springs”.

Establishing such a Committee might even help the Chancellor in his quest for those savings from the public purse on which the success of the Budget so obviously depends.

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