Public Expenditure (Hansard, 6 March 1997)

The Deputy Prime Minister (Mr. Michael Heseltine)
No serious commentator can doubt the Government's commitment to containing the levels of public expenditure, while a glance at the Labour Benches shows clearly the total absence of any Opposition interest in the subject. In 1975–76, public expenditure absorbed more than 47 per cent. of our gross domestic product, which included massive subsidies to the nationalised industries. That figure was broadly in line with other European economies, and it went hand in hand with high levels of taxation. We had punitive levels of direct taxation—a basic rate of 34p in the pound, rising to 98p for high earners—and, as one would expect, a level of inflation significantly worse than that of our principal international competitors. The average for the period 1974 to 1979 of 15.5 per cent. sounds like an incredible figure today.
The Government's consistent prime objective has been to lower the level of public expenditure and to provide incentives through the tax system to encourage a faster-growing economy. In the next financial year, we are set to meet our target of reducing public expenditure below 40 per cent. of GDP. On the continent, the figures remain conspicuously higher: 49 per cent. in Germany, 52 per cent. in Italy, and 53 per cent. in France. That contrast has led to a quite different performance in this country from that of earlier decades.
In the 1960s and 1970s, we outpaced only Switzerland and New Zealand of the 25 Organisation for Economic Co-operation and Development countries in the growth of GDP per head. Since 1979, the United Kingdom has grown at a faster rate than Switzerland, France, Canada, the United States and another eight OECD countries. Since 1992, we have enjoyed the longest, strongest and steadiest recovery of any major European economy. Furthermore, according to the OECD, this country is set to be the fastest-growing major European economy not only in the year just ended, but in the next two years as well.
The other hallmark of that period is that, while the Conservatives in government have battled determinedly to achieve those successes, every significant reform that has led to such a desirable product has been resisted by the Labour party. Labour resisted our tax cuts, trade union reform, and each and every privatisation of the loss-making, or, indeed profit-making, nationalised industries. It resisted every change until we have proved that it works.
One can judge the quality of Tory initiatives by the vociferousness of Labour's opposition. If we get a bad headline in the Daily Mirror, that means that we are on a right track. If we get a yah-boo reaction from a Labour spokesman, that initiative becomes tomorrow's policy. Best of all, if we get downright opposition from the right hon. Member for Sedgefield (Mr. Blair) to an initiative, it is halfway to being in the Labour party's manifesto.
1048 If I needed any final commendation of the brilliant initiative announced yesterday by my right hon. Friend the Secretary of State for Social Security, it was Labour's knee-jerk reaction to it. We proposed to reduce public expenditure by £40 billion a year. We showed how we could increase significantly the funding available for investment, and as a product of that, offer an old-age pension of £175 a week, in a major, far-sighted reform of state pension funding. What do we get? New Labour, old Labour—every variety of Labour—on the airwaves searching for fat cats under the bed. It was a classic and typical response, and the louder they shouted, the more convinced I became.
Contrast our initiative with Labour's exploded initiative for pension reform. The leader of the Labour party lands in Singapore to proclaim that he has found the ultimate stakeholder pension scheme—whizz-bang, all-singing, all-dancing, and, above all else, run by the state. There is a small snag: the rate of return since 1980 on the state-run Singapore compulsory scheme is 2 per cent. above inflation. The rate of return on the British pension funds over the same period is almost 10 per cent. above inflation—collapse of stakeholder pension proposals.
Since the previous election, bruised by the humiliation of one electoral reverse after another, the Labour party has sought to recreate its popular support on the basis of expenditure pledges. So far, by our calculation, there have been £30 billion-worth of them. Not one has been renounced by the Labour party. Hardly any have ever been clearly shown as being funded in any coherent way, with the exception of one or two to which I shall come.
Nobody listening to what Labour has had to say should have the slightest doubt—those are not small commitments lightly given, or Conservative central office trying to misinterpret the words—that those are categoric, black and white statements.
The Leader of the Opposition said: We will give Britain a publicly owned, publicly accountable British Rail. There is no hesitancy, no doubt, no qualification there.
We calculate the cost of restoring the railways to public ownership at £920 million a year. What figure do Labour provide? Or does it now admit that the privatisation of the railways is proving as successful and as irreversible as all the other privatisation measures?

Mr. John Prescott (Kingston upon Hull, East)
It is costing twice as much.

The Deputy Prime Minister
If it is costing twice as much, why does not the right hon. Member for Kingston upon Hull, East (Mr. Prescott) stand and say that the Labour party will halve the cost, and tell us how it is going to do that? The fact is that it has no idea of how to run a railway, or, indeed, a whelk stall.
The right hon. Gentleman has a very clear commitment on a statutory national minimum wage, which we can explore. He told us that—again, this is black and white, no qualification—there should be, and there will be, a statutory national minimum wage. The right hon. Gentleman nods his head.

Mr. Prescott
Absolutely.

The Deputy Prime Minister
Right, well let us therefore parade in evidence the right hon. Gentleman's 1049 election address of 1992. Very helpfully, he did something that is rare for the Labour party and costed the minimum wage. He argued for a statutory minimum wage of about £3.40 an hour. He will not deny that. It was in his election address. If there is any doubt—[Interruption.] I had only a little time to do a back-of-the-envelope calculation today, but I have calculated that £3.40 an hour in 1992 would be £4.26 an hour now. Is that the figure, or was £3.40 in 1992 too high and therefore £3.40 today would be adequate, even allowing for inflation? Or is there another figure? Is there any figure? We saw the energetic nodding of the right hon. Gentleman's head—I think that even he knows that when he nods his head it means that he is agreeing with what I am saying—[Interruption.]

Mr. Prescott
That was extremely funny.

The Deputy Prime Minister
It was extremely funny.
The problem is that the right hon. Gentleman has given a whole new meaning to the saying, "Economics first and foremost, stupid". The annual cost of a minimum wage of £4.26 an hour is £3,700 million. I do not say that that is the figure that Labour has in mind, but it must have some figure in mind, so why cannot it tell us what it is?
The shadow Secretary of State for Education and Employment has been helpful again. He said: We will offer teachers of long standing a sabbatical period out of school at public expense. He was quite categoric. Labour must have done some calculations. How many teachers? That is not difficult to work out. How long a period? Anybody can get a slide rule. What is the cost? We think that it is £1,300 million a year.
Then the shadow Chancellor told us that, under Labour, the tax and benefits system and the benefit tapers must be addressed. The cost of reducing the tapers would be £1,800 million a year. Let me show hon. Members how that massive confidence trick is pulled.
About a fortnight ago when I was on television with the right hon. Member for Kingston upon Hull, East, he was asked: "Should anyone, regardless of age, have access to free eyesight and dental tests as a matter of routine?" It was a perfectly reasonable question, and a matter of high politics. I have no complaint about that. He replied: "Yes, I think it should be a right." Anyone listening to that might have thought that yes meant yes, and that if it was to be a right, a Government of which he was deputy leader—and now, as I read in The Sunday Times Secretary of State for the Environment —would give it legal backing.
I hardly said a word on that particular point, but I was amazed a day or two later to read, "Three more Tory lies". I had not said anything. It was the right hon. Gentleman who said that it would be a right. The article said: Lie one. Labour will spend £216 million on free eye and dental tests. John Prescott gave no such spending commitment. The Tories have deliberately misquoted him. This proposal is not in our early manifesto. New Labour, new life for Britain.
We never said that it was. He just said it a fortnight ago, conveniently in the middle of the Wirral, South by-election.

Mr. Prescott
rose—

The Deputy Prime Minister
Of course.

Mr. Prescott
The Deputy Prime Minister will recall that, in that debate, I was asked by a person in the 1050 audience whether I believe, as he rightly reported, that eye and dental tests should be free in the health service. Those were not the exact words, but that was the intention of the question. I said that that should be the aim of a national health service—[Interruption.] The Deputy Prime Minister can check the record if he likes.
I said that it should be the aim of a health service that was introduced by a Labour Government who gave those pledges and commitments in 1945. That was what we brought to this country and that should be our aim. I was then asked whether that was a commitment and I made it clear that it was not a commitment, but an aim. When the Government sought to reduce the rate of taxation to 20p, they said that it was an aim, not a commitment. What is the difference?

The Deputy Prime Minister
We have achieved that for a large number of people. The right hon. Gentleman does not even know that we have reduced the rate of income tax to 20p for a large number of people. The shadow Chief Secretary is looking closely at his papers. It is embarrassing for the Opposition when the deputy leader of the Labour party does not even know the minimum rate of taxation. It is no wonder that they keep him under wraps for most of the time. However, the right hon. Gentleman has been extremely helpful and we must take his comments extremely seriously—[Interruption.] My hon. Friends must be fair to the right hon. Gentleman.
It is important that we should not mislead or misquote anyone or omit anything from the record. Helpfully, I have the quotation from the BBC programme "Close Up North" on 20 February 1997. The words are here and I shall put them on the record. The right hon. Gentleman said: Yes. I think it should be a right. When he was told: You've got to find the money to finance it", he said: I agree, and we have to deal with that particular argument. If you had been listening, Mr. Deputy Speaker, as an elderly person—[Interruption.] I was making no reflection on you, Mr. Deputy Speaker; I was trying to recall the person who asked the right hon. Gentleman that question. If I recall, it was an elderly person who was concerned to find out whether there would be free eye tests under a future Labour Government. If I had asked that question, I would feel that I had been conned by the right hon. Gentleman.
It is a technique. Whatever cuts or adjustments we have made, the Opposition have criticised them. They have made pledge after pledge, amounting to £30 billion, but they never answer the question: where will the money come from?
The Opposition have made one or two interesting commitments. They pledged that income tax rates would not rise under Labour, but that did not fully convince a sceptic electorate, so they made a new pledge that the Government's public expenditure plans would remain in place for the next two years. The fact that they consistently voted against them has been swept to one side. They are now committed to the levels of departmental expenditure set out in the Red Book, with the exception of the deputy leader of the Labour party who does not know the basic rates of tax, but has probably been briefed by the shadow Chief Secretary.
1051 The position is quite incredible. As my right hon. and learned Friend the Chancellor of the Exchequer pointed out, there is a £12 billion black hole in Labour's expenditure plans. If the Opposition retain our figures, they will have to carry out the reforms that we have factored in and allowed for in preparing the Red Book figures. Their reaction last month to our proposed privatisation of London Underground suggests that new Labour's late conversion to Tory policies still does not embrace privatisation, despite the evidence of the past 15 years. Will the deputy leader of the Labour party confirm that a Labour Government would proceed with the privatisation of the national air traffic service and the sale of other assets that would raise £1.5 billion in proceeds that are included in the Red Book figures?

Mr. Tam Dalyell (Linlithgow)
Before we step off the underground, can we be told who will pay for all the repairs that are desperately needed to the crumbling tunnels of the underground?

The Deputy Prime Minister
That is a simple question to answer. The whole point of privatising the underground is to raise the funds to pay for the necessary renovations. If the underground is crumbling, how does the Labour party propose to pay for renovating it? That is the question and there can be no answer unless a Labour Government would proceed with our plans to privatise the underground and use the funds in large measure to carry out urgent repairs and improve standards, as we are determined to do.
Of course the Opposition would have to go further. Last November, they opposed our reforms of the social security system. That is a perfectly legitimate option. The shadow Secretary of State for Social Security condemned the Budget changes to bring the structure of benefits for lone parents into line with that for two-parent families. The hon. Member for Peckham (Ms Harman) spoke eloquently and I have no complaint about her explanation as to why the Labour party opposed a change that would produce revenues that are factored into the Red Book figures. She said: This move will increase the poverty suffered by children in Britain today and will do nothing to help get lone mothers who want to work, off benefit and into work. That is a clear statement of the hon. Lady's position on the policies included in the Red Book.
My right hon. Friend the Secretary of State for Social Security has generously asked the hon. Lady many times to clarify her position. He wrote to her and her reply had only one point of major interest: it completely avoided the question. However, the proposal would raise £60 million.
Labour has also opposed our proposals in respect of the private finance initiative in the national health service. The hon. Member for Peckham, keeping at it, voiced new Labour's approach to all the modernisation and described it as The latest scheme for privatising the NHS, more accurately called the privatisation initiative. 1052 She appeared to show a sad misunderstanding of the PFI and Labour support for it. The right hon. Member for Kingston upon Hull, East has claimed that he invented the whole idea some years ago.

Mr. Prescott
It is in Cabinet papers. The right hon. Gentleman discussed it and gave it the name "the Prescott option".

The Deputy Prime Minister
I am giving the right hon. Gentleman some credit. He should be proud of it.
What emerged from the hon. Lady's approach is that, deep down, Labour has a gut detestation of anything that involves a relationship with the private sector. She also drew attention to another cost in Labour's plans. According to the Red Book estimates for the Department of Health, nearly £500 million over the next two financial years involves PFI. If Labour is in favour of it I understand that, but if it regards it as some hideous Tory innovation, how would a future Labour Government be able to accept our public expenditure figures?
The Opposition do not speak with one voice on the subject. The hon. Lady might have done well to speak to the hon. Member for Sheffield, Brightside (Mr. Blunkett). As one would expect, he received high praise from the shadow Chief Secretary, who described his ideas as follows: An imaginative use of the public-private partnership has been suggested by David Blunkett to tackle the £3.25 billion school repair backlog. Let us consider what happens when imagination gets hold of public finances. The hon. Member for Brightside envisaged local authority schools borrowing from the private sector—from the banks—to increase capital spending on schools. The problem is that such borrowing by local education authority schools would count as public expenditure. If it continued for 10 years, it would add another £320 million a year to the costs not accounted for in the Red Book.
Labour's policies are littered with such mistakes. Let me use the example of local authority receipts for house building and the extension of student loans. Labour has set out plans for student loans, but its proposals would make sure that the loans were included within the definition of public expenditure. That would lead to an increase in expenditure of £950 million a year.
Perhaps the biggest and bravest of all the announcements is that which centres on the phased release of local authorities' capital receipts. If the capital receipts that are there were released over five years, they would amount to about £2.6 billion a year. I will not inflict my views on the House; I will give the views of The Economist, which said: This is a piece of creative accounting which lets Labour pretend that allowing councils to spend money they have raised selling homes will cost nothing. In fact, if they spent this money, councils would no longer have it to cut debt, and would have to borrow more on the market.
That is a wholly independent and accurate assessment of the position.
The first problem with the proposal is that it actually adds to public expenditure. That is only the start, however. Where are these capital receipts? They are all in the wrong places. Inner cities would not benefit very much. Thirty-six councils have no capital receipts to 1053 release. Although it could be argued that there is plenty of need in Birmingham, there is not a penny to be released there. There is bad news for the hon. Member for Blackburn (Mr. Straw), and the cupboard is bare in Hackney, Newham and Southwark.
There are, of course, receipts to come in some areas—the prosperous suburbs. That is very convenient for the Labour party, but not, of course, for new Labour. This is old Labour: this is Herbert Morrison. This is called building out into the Tory marginal constituencies. Releasing receipts where the receipts actually are serves a new political purpose—not a social purpose, or an economic purpose. On the assumption that it costs £40,000 to build a council house, Crawley will have 2,200 new council houses, Newbury 1,600, Bromley 1,500, Surrey 1,300, and Malvern Hills and West Dorset 1,000 each. The policy and the targets are wrong.
That leads me to the new panacea. Labour calls it a windfall tax. Perhaps we have been a bit slow: it is not a windfall tax at all, but a tax on jobs, savings and pensioners. I cannot say how much it will be, because Labour will not tell us, and will not tell us which company will be taxed and when. Whenever the tax comes, however, it will affect pensioners, savings, jobs and investment. There is no such thing as a cost-free tax, plucked out of the air without doing any damage.
The fact is that Labour is blithely uninterested in the effect of this latest tax on gas, electricity and water prices, jobs, consumers, pensioners and shareholders. What a dramatic contrast that is with the policies that we introduced so painfully in order to achieve the dramatic results that the country is now enjoying. Today, we have the conditions that are right for businesses to thrive, for investment and for the creation of real jobs. The figures are as eloquent as one could possibly ask. There are 1 million more small businesses than there were in 1979, and we have the lion's share of all the inward investment coming into Europe. There has been a remarkable and continuing fall in the claimant count of unemployed people over the past four years. We have viable businesses, proper jobs and the best outlook for the country for a generation. What is the Labour party offering?
Let us look at what Labour is offering in a bit more detail. It is offering three new policies. There is a programme for the young unemployed, of which the main elements are a job subsidy for the long-term unemployed and the abolition of the 16-hour rule. I confess at once: we all know that it is perfectly possible to pay employers to offer temporary jobs to the unemployed. That is what used to happen in the 1970s. In the nationalised industries, subsidy after subsidy was paid to loss-making companies such as British Leyland and British Steel to keep them afloat, and to enable them to employ more people than the market justified. That was madness then, and it would be madness to revert to it now. Paying billions of pounds in subsidies to employers to take people off benefit for a couple of years, parcelling them up into some new parallel, artificial economy, is retrograde, and would destroy British competitiveness.
Such action is also foolish. What happens when the money runs out? Money has been taken from the utilities and—let us assume that Labour's case is right—new employment for those affected has been created for a short time. The money, however, is supposed to be a one-off—a windfall. What happens when those who have taken it 1054 must face the fact that they have used it? The cycle begins all over again. Where will the new subsidies come from? From the employers, who then say, "We can no longer afford to employ the people whom you have been subsidising"? Will there be another one-off levy on some other sector of the economy that happens to be doing well, or happens to have offended against the ideology of the Labour party? All the young people will be back where they started—back on the dole.
Let us be clear. Labour's policies start by reducing overall demand in the economy. Labour will take money from the utilities, take money by means of the minimum wage, take money from the social chapter, and use it in part to subsidise 250,000 young people. There will be higher taxes, no extra demand, but 250,000 more young people in jobs. What will happen to those whose jobs the young people take, who are displaced because subsidised labour are available to do the work more cheaply for the employer than those currently employed in the companies that would take the young people on? There is no answer to that question. There will be no higher demand in the economy, just a switch from people who are now employed at market rates to a group who are temporarily employed at subsidised rates.
It is not good enough for the state to shovel people en masse into employment, and simply hope that it will be all right on the night. It does not work. We have proved that time and again, and I cannot say how strongly our experience justifies our indignation at Labour's policy. We have been more successful in rebuilding our urban areas in the renaissance of the great towns and cities of this country, and drawing jobs, opportunities and wealth back into those areas, than any other Government in modern times. That can be done only by changing the climate, so that it is attractive to those who can afford to invest—those who can make the choice, and live, build or buy their homes and create jobs in such areas. That is the way in which it must be done, and we have shown throughout urban England and the rest of the United Kingdom how successful it has been.
We shall build on all that. We are already doing so, with the single regeneration budget, city challenge and a range of partnerships between the public and private sectors, which have never been seen in this country during this century. That is a remarkable tribute to the Government's policies. What is Labour going to do? It is not just about some cosy gesture to try to buy a quarter of a million votes from young people; it is much worse than that. Labour's policies for the urban areas—the stress areas—are all about destroying the climate of opportunity: the job-creating opportunities on which those areas depend. Let us take the destruction of the grammar schools. We all saw what happened.

Mr. Prescott
You closed 400.

The Deputy Prime Minister
Is the right hon. Gentleman saying that he will keep the grammar schools open? Is he saying that?
If anyone wants to know why we have a vicious circle of decline in the most stressed areas of the country, it is because the Labour party's social engineering persuaded any parent who could exercise choice to leave those areas and move to the leafy suburbs where the comprehensives were just as socially polarised as the old grammar schools 1055 and secondary modern schools were. Hon. Members should not ask me whether that is right or wrong; they should ask the leader of the Labour party, who did exactly the same. He could afford to choose. He did not care about the rancid Labour local authority that he had left behind, with some of the worst levels of performance in factor after factor. He turned his back on it, just like hundreds of thousands of middle-class families have done, leaving stress and a vicious circle of decline. The Tories came riding to the rescue of those declining areas with policies designed—

Mr. Andrew Miller (Ellesmere Port and Neston)
This is a hustings speech.

The Deputy Prime Minister
These are the hustings—let us have no illusion about it. As I have said before, "You have heard nothing yet."

Mrs. Ann Taylor (Dewsbury)
Turn round.

The Deputy Prime Minister
If the hon. Lady wants it full frontal, she is very welcome.
What is the way out for the Labour party? It has said that there will be no increase in direct tax rates. It has said that it will stick to the Red Book, but it is so screwed to the floorboards by that commitment that it cannot meet its genuine ambitions. The shadow Chancellor has therefore come up with the oldest trick in the world. He is going to audit the books. There has never been a new, amateur chairman for the most browbeaten company who did not say when taking over the job of the outgoing chairman, "I am going to open the books and have an audit." Five minutes later, he sucks his teeth and says, "Oh, I never knew how bad it is. I can't believe it is that bad. They never told me. They never warned me."
The fact is that the books are open. We have not had to change our policies once we have set the public expenditure figure. Year after year, the only reason for changing policies is if one wants to cut something or raise more taxes. The excuse will be to try to blame the outgoing Government. That is as stark a threat as any that could be conceived. We stick to our policies and our Red Book forecasts, and there is no need for a new Budget at any time in the next 12 months.
The right hon. Member for Kingston upon Hull, East is sometimes helpful, but he should try a little harder. He has said: Labour would be absolutely stupid"— Has the House got that?— to give any indication of what tax rates might be. If I were out there trying to win power in a general election campaign and I intended to cut the rates and put taxes down, it would not be stupid to tell people. It would be sensible to let them in on the secret and share the good news. It would be stupid to tell them only if the tax rates were going to go up.
The right hon. Gentleman carried on being helpful, when he said: We are not prepared to make any statements about the matter of allowances and taxes, and it is quite proper for us to do so. 1056 It may be proper for him, but unfortunately it seems improper for his colleagues. The right hon. Member for Dunfermline, East (Mr. Brown) told us that there would be no increase in income tax rates. When the hon. Member for Oldham, West (Mr. Meacher) heard that, he was most helpful and he said of the shadow Chancellor: He was careful to exclude other forms of tax".

Mr. Nicholas Winterton (Macclesfield)
National insurance.

The Deputy Prime Minister
I have not come to that one yet. The hon. Member for Oldham, West continued: There is capital gains tax, inheritance tax and all the allowances and the share option schemes. So it isn't quite as bleak as it seems. Labour's deputy Chief Whip has been extremely helpful. He said: Gordon has made the position completely clear on the rates. We understand that. The rates are apparently going to be fixed, but the deputy Chief Whip did not want anyone to get too depressed. He continued: There are something like 200 different allowances and he is not going to go through them all, setting them before coming into Government. He has got to have some room for manoeuvre. That is what he said.

Mr. D. N. Campbell-Savours (Workington)
Will the right hon. Gentleman give way on that point?

The Deputy Prime Minister
I will not give way, because I have only one more point to make. The country has been clearly warned by the Government and it has been warned by independent commentators, but last night, Lord Barnett added his voice and his experience, as a former Chief Secretary in a Labour Government. He has been through it. He has lived through the experience and he knows what the Labour party is all about. When he warns the country that he does not believe that another Labour Government could stick to the tax levels and achieve their policies, I tell the country, "Listen, before it is too late."

Mr. John Prescott (Kingston upon Hull, East)
The Deputy Prime Minister made it clear what this debate and the series of Adjournment debates initiated by the Government are about. They are the hustings and the preparation for a general election. Presumably, that is why he spent so little time talking about the Government's record and so much on the Opposition's case. We will enter the debate, because public expenditure is important.
We thank the Government for the third Opposition debate that they have initiated, following the debates on the windfall levy—which the Deputy Prime Minister mentioned—and on constitutional reform. We are debating public expenditure now, and I understand that we shall have a debate on pensions next week. All those critically important issues will be at the heart of the political debate up to the general election. Therefore, it is right and proper to have those debates in the House.
While it is good practice to have the debates and rehearse our election arguments, I am not sure that it is a good practice for the Deputy Prime Minister, in view of 1057 the Government's record. Given their record on taxation, it was a bit much for the Deputy Prime Minister to talk about cons in relation to the Opposition's proposals. The Prime Minister and the then Chancellor said in 1992 that they did not want to see VAT increased or to increase the overall burden of taxation. I will not give the exact quotations, but I have them here.
Those commitments were given at the time of the election in 1992, and if anyone was conned, the electorate were conned by the Government's statements on taxation. We have seen 22 increases in taxation and an increase in VAT, even though the Government promised the electorate that that would not happen. They lied to the electorate, and the verdict given in the Wirral is a clear indication of how people feel about believing what Ministers say.

Mr. William Cash (Stafford)
The right hon. Gentleman knows perfectly well that one of the reasons why taxation increased, including VAT on gas and fuel, was the mistake—which has now been openly admitted—over the exchange rate mechanism. Will he and the Labour party now state that they will never enter the exchange rate mechanism, which brought such terrible tragedy to the British nation?

Mr. Prescott
The hon. Gentleman makes an interesting point, because it was the Prime Minister who said that he had no intention of devaluing or of leaving the exchange rate mechanism. The Tories were the party of non-devaluation. We were supposed to be the party of devaluation, if one listened to the Tories' rhetoric. Of course they devalued, despite all their promises, and at great cost. The cost was £15 billion, with an overall net cost of £2 billion for the taxpayer.
We have made our position clear on the single currency and the exchange rate. When the decision on the single currency has to be made, we will allow the people to make a decision. I believe that that is the Government's position, although they are divided on the issue. There are many Ministers on the Government Front Bench. The Foreign Secretary is not here, but the Secretary of State for Health is in his place. He told us that he had a confusion of thought about the matter. Clearly there are many different views in the Government and they are now paying the price with the electorate for that confusion.
Today we are debating the important subject of public expenditure. The size of public expenditure and its priorities determine security and progress in our society. Debates about those priorities are the essence of a democratic society. How we raise that money and spend it forms the basis of general elections. But the big political question is how to obtain the right balance. That is the matter to which the Deputy Prime Minister was addressing himself. He had his view of the correct balance, but the Opposition are more concerned about social justice, which is relevant to the arguments on a minimum wage. There are clear differences between us.
Eighteen years of a Tory Government have thrown the public finances into turmoil. We are not yet sure of the full extent of that turmoil and whether we are out of the woods. This year the public sector borrowing requirement is £26 billion, and the party that considers itself to be the guardian of the national debt has doubled it since 1990. Those are not my figures: they are the 1058 results of the Government's public expenditure priorities. Interest payments on that debt alone cost each taxpayer £1,100 a year.
Not only is the nature of that expenditure a matter for concern, but we have witnessed its terrible cost to our communities in the breakdown of social cohesion. We are clearly not a nation at ease with itself, although that might have been one of the declared aims in the early stages of the Government. It is a matter of fact that we have a record level of homelessness, that education and health standards have declined and that crime has doubled. [Interruption.] That is not in doubt, is it? I can understand that hon. Members do not want to believe such figures, but they are Government figures which I want to use for the purposes of this debate.
Poverty has doubled and there is mass unemployment in Britain today. [Interruption.] More than 1 million is mass unemployment, 2 million is worse and 3 million—the Government's record—is an indictment of a Government who say that they are concerned about unemployment. Mass unemployment is millions out of work, which has been the Government's record in their 18 years in office. I am astounded that, despite all their fiddling of the figures, the Government cannot accept that what we have today is still mass unemployment however it is defined.
That mass unemployment has caused massive problems in the public finances because of the cost of welfare expenditure, unemployment pay and social security payments. That is why we have difficulties in our public finances today. They are not the result of economic success, but the result of the failure to achieve the kind of economic growth and prosperity that could result in lower unemployment.
The Labour party's argument is that after 18 years there can be no excuses, no blaming a Labour Government of 1979. What we are asked to judge today is the Government's record. The responsibility lies fairly and squarely with this Tory Government.
This week we have had vivid reminders of the importance of public expenditure. What is important is not just how much is spent but how wisely and how fairly it is spent. Today we have seen in the newspapers alone issues that considerably affect public expenditure and reflect the Government's priorities.
I take as one small example Gulf war syndrome, which was clearly due to public expenditure on insecticides to protect our soldiers. [Interruption.]Yes, that was the judgment at that time, although the truth of the matter has been concealed by the Ministry of Defence. But the Government's treatment of those soldiers has been influenced more by the public expenditure consideration of the cost of compensation for the victims of Gulf war syndrome than by a judgment of what is fair. [Interruption.] Yes, that is at the heart of it.
We have debated in the House the beef scandal, about which we have heard more this afternoon. We put some of the blame for that on the Government's deregulation policy. That beef crisis alone has cost us £3.5 billion of public expenditure.
The Deputy Prime Minister also referred to local government finances. The Government's treatment of local authority finances has been deplorable. The Government have shifted the financial burden of public expenditure on to local authorities. In 1979 the 1059 Government carried 61 per cent. of that cost; today it is 52 per cent. The real effect of that on people's lives has been to force up the council tax and threaten local services. Moreover, the share-out between the councils has lacked any consideration of fairness. If the Government had given every council the same grant per head as Westminster, 94 per cent. of councils would be charging no council tax. That has more to do with party political considerations than social justice.
That is the issue, and it goes a long way to explaining why the number of councils under Tory control has gone down from 235 in 1979 to 13 now. That is the result of decisions taken by the electorate. I presume that the electorate made their judgment on the basis of the Government's role in providing their local services. So definite was their rejection of the Government at national and local level that the Tories now control only 13 councils, allowing the Liberal Democrats to claim that they are second in local authority representation.

Dr. Keith Hampson (Leeds, North-West)
Did the hon. Gentleman notice a leader in The Independent last week attacking Labour-controlled local government for spending unwisely? Is he aware that council tax payers in Leeds not only face a doubling of the rate of council tax, but the city's debt is now so huge that it costs more than £60 million—the cost of the royal yacht—each and every year in Leeds? Let us have none of that fiction from the Opposition. That is the reality of Labour in power.

Mr. Prescott
I assume that the Government would not want to put forward their record on the national debt. The Government have been responsible for a worse increase in the national debt than any local authority has in its debt. [Interruption.] That is true and I am quite prepared to defend that statement. Not every local authority is perfect. There are not many Tory-controlled local authorities about which to make judgments. One remaining one is Westminster, but I do not think that the hon. Gentleman would like me to compare Westminster's record with many other local authorities.
Some local authorities are good and some bad, and that is not necessarily a matter of their political control. Some can be efficient and some inefficient. That is the nature of it. I am not concerned with whether some are efficient and some less efficient, or whether that is related to their political control; my argument is that the Government have made it much more difficult to deliver services in the local authority areas as a result of Government changes in public expenditure to deal with the debts resulting from their policies.

The Chief Secretary to the Treasury (Mr. William Waldegrave)
I thought that I heard the right hon. Gentleman say that the Labour Government had a better record than the Conservatives on the national debt. The national debt in the Conservative Government's worst year was better than that in the Labour Government's best year. Had the level of borrowing under the Labour Government continued, the national debt would now be just about exactly twice what it currently is.

Mr. Prescott
I did not say that. [Interruption.] I did not. The point is a fair one. The Chief Secretary is talking 1060 about the debt under different periods of government. Debts are related to receipts, and in the period to which the right hon. Gentleman refers, there were considerable receipts from oil and privatisation. Had the Labour Government had such receipts, they would not have had to borrow. Therefore, as usual, the Chief Secretary tells only half the story which, as we all know, is consistent with his record.

Several hon. Members
rose—

Mr. Prescott
Let me make some more points. I have been giving way to hon. Members.

Mr. Graham Riddick (Colne Valley)
rose—

Mr. Hartley Booth (Finchley)
rose—

Mr. Prescott
Let me make some progress. [Interruption.] What has the other manager of the Tory party, the Minister without Portfolio, got to say? I will give way to him if he wants. Does he want to speak? No. Clearly, the Deputy Prime Minister is in control; that has decided it once and for all.
When the Deputy Prime Minister was talking about the pension proposals, which the House will have an opportunity to debate next week, I thought that it was a bit much when he said that the Government's projection was for savings of £40 billion by the year 2040. The Government cannot get their projections right over two or three years. How can the right hon. Gentleman come to the House and offer us a projection about public expenditure savings of £40 billion by 2040? The record is clearly against him when he makes such projections. I shall come to some of the evidence in a moment. First, let us examine the other projections that have been made by the Chancellor and the Government, because they are relevant.
I will take no lectures from Tory Governments about pensions. They are the ones who divorced pensions from earnings—[Interruption.] I am talking about the Government's record. They are the ones who broke the link with earnings. Between 1945 and 1950, Labour brought in the first universal pensions scheme of the kind that we have today. The state earnings-related pension scheme, too, was introduced by a Labour Government. We were the people who established decent pension provision within a welfare system, under a Labour Government. The record of the Conservative Government has always been to undermine the pensioners in this country. That is clear.

Several hon. Members
rose—

Mr. Prescott
I want to finish this point. When we established the Borne commission, the Government made it clear that they were critical of Labour's discussions about the problems facing the funding of pensions. We were attacked for suggesting the possibility that SERPS might be changed. The Government's accusation was that there would be no SERPS in the proposals. Yet it is the Government who have done the U-turn, and are about to ditch not only SERPS but the right to a basic state pension. The Government have always attacked the rights of pensioners, and they are continuing to do so.

Mr. Quentin Davies (Stamford and Spalding)
The right hon. Gentleman has attacked the Government for 1061 bringing to an end the link between average earnings and the old-age pension. Does he mean that a Labour Government would restore that link? If a Labour Government would have no such intention, is it not pretty shoddy and hypocritical to imply that they would?

Mr. Prescott
It is a fact of life that the Conservatives made that break—and every Conservative Member voted for it. Make no mistake, we have not made a commitment to restore the link. [HON. MEMBERS: "Oh."] No, because, as hon. Members will hear from me, we have decided our priorities for public expenditure and taxation, and the electorate can make a judgment on them.
After 18 years, there are so many things that the Government have undermined. The same point can be made about the health service, prescription charges, and charges for spectacles and teeth. The Government have constantly put a health tax on the people of this country. We could not possibly hope to reverse all the damage that they have done in 18 years. All that we can do is to present to the electorate our priorities for public expenditure and tax, as we are doing now.

Mr. Davies
rose—

Mr. Prescott
I have not finished on pensions yet.
When the Government decided to make the first attack on SERPS and allow people to contract out into private pension schemes, it cost us billions of pounds to subsidise the transfer from the public into the private sector. Nearly 3 million pension holders were denied a proper pension because the value of their pensions was reduced. The private sector—

Mr. Davies
rose—

Mr. Prescott
Wait a minute.
The private sector totally failed the pensioners, and the taxpayer paid the price for it. That is always the case with the Tories on pensions.

Mr. Davies
Why criticise the Government for breaking the link between earnings and pensions if the Labour party has no intention of restoring that link? Is that not a thoroughly deceptive way in which to conduct an election campaign?

Mr. Prescott
It is still a fact that the Conservatives broke the link. [Interruption.] We shall have a debate in the House about it next week. The Government have set down a day for a debate on the pensions system, and that is the proper time to discuss it. I simply make the point that, again, public expenditure was involved in another pension fraud by the Government—and now they propose to put even more of our pensions into the private sector, which totally failed the people who were conned into transferring from public into private pension schemes last time. What motivates the Government to propose changes in pensions? As I have tried to point out, it is certainly not a desire to protect pensioners. History is clearly against the Government, and the taxpayer always ends up paying the bill.
The Deputy Prime Minister made certain statements about what savings would be made in public expenditure—the subject of the debate—by the year 2040, but the 1062 Government's record on forecasting and on managing the public coffers is a classic case of incompetence: I do not know how else it can be described. The Government say that they can save £40 billion in 50 years' time, but let us look at their projection record over shorter periods for the borrowing requirements arising out of their public expenditure programme. In 1993 the Government said that the borrowing requirement would be £32 billion; it was actually £45 billion. In 1994 they said that it would be £25 billion; in fact it was £36 billion. In 1995 they said that it would be £19 billion; it was £32 billion. This year it was supposed to be £6 billion, but in fact it is £26 billion.
The Government's sums have been about £60 billion out over just three or four years and those mistakes amount to more than the £40 billion that the Deputy Prime Minister projected would be saved in 50 years' time. He cannot even get his sums right over four or five years, so who could believe anything that a Minister in the present Government says on the subject?
With such a bill, we can see why the national debt has doubled. In 1992 the Government misled the public about the true state of the public finances, and certainly misled them on taxes. It is no wonder that the public in general, and the electorate in Wirral in particular, have lost faith in them, as we saw in the by-election last Thursday.

Several hon. Members
rose—

Mr. Prescott
No, I want to make some progress. I have given way to several hon. Members.

Mr. Jacques Arnold (Gravesham)
rose—

Mr. Prescott
I never give way to that hon. Gentleman.

Mr. Arnold
rose—

Mr. Prescott
The hon. Gentleman will not be here much longer.
We have heard lots of talk about a successful economy. But despite all that talk, which we heard yet again from the Deputy Prime Minister today, the past 18 years have not been as successful as he claims. In the Budget debate, the Chief Secretary to the Treasury attacked what he called the European social model. The right hon. Gentleman's idea of the countries that could be considered part of that model was a bit limited. Nevertheless, I believe that the European social model in the post-war period, to its credit, was the most successful economic model that we have witnessed in any developed economy—successful in growth, in investment and in prosperity, while at the same time securing full employment and social justice. That is to the eternal credit of a European social model that was managed both by the left and by the right. It was not a socialist creation: it was managed by Governments of all political parties, and it secured full employment and social justice.

Mr. Waldegrave
The right hon. Gentleman is making a serious and correct point. When the Germans, in particular, followed the economic advice of Ludwig Erhard, which nowadays would be called Thatcherism, they did extremely well.

Mr. Prescott
The right hon. Gentleman could also look to other European social models under socialist 1063 direction, which were equally successful in the development of their economies. The point that I am making is that that model saw a role for Government that accepted responsibility both for full employment and for dealing with the problems of inflation. The creation of wealth marched alongside social justice, whether the Government were German, Swedish or Danish. Throughout Europe the model was successful.
Of course there are great difficulties for that model at the moment. [Interruption.] I am trying to make a point about that. At the heart of the argument, as with Keynes, is the amount of money that is put into the economy and into public expenditure. What might have been all right in the 1950s, 1960s and 1970s is in grave difficulties in the 1990s, with a different global economy and all sorts of other factors that are changing.
It is important for us to recognise that fact, because the restraints that affect our public expenditure are considerable when one seeks to balance inflation, employment, borrowing and public expenditure. That is the problem for all Governments today, and I concede that it has changed. However, that model was far more successful than the competitive pre-war model that gave us mass unemployment and great poverty. The deregulated model that the Government are beginning to develop carries with it mass unemployment on a scale associated with the pre-war period.
That argument will go on between us. We are debating the role of public expenditure. I have no doubt that public expenditure—the total amount of it and its quality—can affect prosperity and levels of employment and has some relationship to economic activity in the country.

Mr. Michael Stephen (Shoreham)
The right hon. Gentleman complains about the national debt. Is he aware that the entire western world is even now just recovering from the worst economic recession since 1929? I trust that even he does not seek to lay the blame for that at the door of the British Government. Yes, it has been necessary to borrow, but does the right hon. Gentleman accept that it has been possible only because we paid off most of the national debt during the early years of the Conservative Government?

Mr. Prescott
That is confusing. During three years of apparently successful growth, we have been borrowing more heavily. In the cycle of decline and expansion, a country usually borrows less when it is growing faster. Why has the debt increased at what is claimed to be a time of great growth?
All world economies are faced with considerable debt. In a global economy, there are billions flooding around. There are real problems in dealing with that kind of flexibility. Time and again—

Mr. Booth
rose—

Mr. Riddick
rose—

Mr. Prescott
No; I want to make some progress.
Time and again, we hear from the Tories that the British economy has outperformed other European models. The argument is that we have discovered the ideal 1064 model, which is far better than the European social model. I recognise that there are difficulties for which we have to make some adjustments.

Mr. Michael Fabricant (Mid-Staffordshire)
On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker (Mr. Michael Morris)
I hope that it is a point of order for the Chair.

Mr. Fabricant
It is, Mr. Deputy Speaker. I would like some clarification. I notice that while the deputy leader of the Labour party is talking about the European social model, only half a dozen Labour Back Benchers—

Mr. Deputy Speaker
Order.

Mr. Fabricant
Are we quorate?

Mr. Deputy Speaker
Order. That has nothing to do with the Chair.

Mr. Fabricant
I thought that we might not be quorate.

Mr. Deputy Speaker
Order.

Mr. Prescott
I hope that the hon. Gentleman is not losing his hair in this debate.
I should like to deal with the argument that somehow Britain has produced an economic model that is leading the way and is better than what we see in the European economy. I took the trouble to look at some of the figures from the Organisation for Economic Co-operation and Development, Eurostat, the House of Commons Library and parliamentary answers. In the latest European prosperity league, we are ninth out of 15. Our growth rate since 1979 puts us 13th out of 15. On investment, we are 15th out of 15. On inflation—the issue on which the Government make considerable claims—the United Kingdom lies 1 1 th out of 15. On long-term interest rates, we are 11th out of 15. Our record on unemployment since 1979 puts us ninth out of 15. On those six key economic indicators, the UK remains in the bottom half, if not the relegation zone.
Those statistics do not reflect the success of the British model. The Government have failed on so many counts that they should withdraw Chris Woodhead from the schools and send the Office for Standards in Education inspectors into the Tory Cabinet to look at its competence. That is what happens in education to those at the bottom of the league.
If Conservative Members do not like those foreign figures, we can draw on the evidence of the Deputy Prime Minister's competitiveness White Paper. It shows that on purchasing power parities, we have fallen from 13th to 16th in the world prosperity league. Those are the Government's figures. That is a great boast. The Government somehow claim that in 18 years we have produced a successful British model and have the audacity to tell the rest of the world to follow it.

Mr. Riddick
Will the right hon. Gentleman give way?

Mr. Prescott
No, I must make progress. I am already behind time.
1065 Stability is important in modern economies. We all agree that the cycle of boom and bust damages the economy. We have had two deep recessions during the Government's period of office. The February edition of the Lloyds bank economic bulletin says that since 1980, the UK has the worst record for economic stability amongst the 14 largest industrial countries.
That seems to be a pretty damning indictment of a Government from a bank that is not anti-Tory. The Tories have had 18 years to put the economy on an even keel. The record is not as given to us by the Deputy Prime Minister.
The one thing that the Tories might claim to have increased is exports. The audacity of that claim is that exports have increased since they devalued the economy. The Prime Minister said: The devaluer's option would be a betrayal of our future and it is not the Government's policy.
He called it a soft option. That seemed like a pretty clear policy. Did he con people when he said that the Conservatives would not devalue? Within days of that promise, he devalued the pound. Exports went up, but so did imports, because we did not have the capacity to deal with the demand that came from devaluation. We were taken to the bottom of the trade deficit league, with the exception of Spain. Does the Chief Secretary disagree? No. Okay. However one measures them, the Tories' claims for the economy are far from proven and their policies have been expensive for the taxpayer. The devaluation cost something like £2 billion.
The Government make another great claim on unemployment. I hear Conservative Members making it, as though they can live with this country's levels of unemployment and think that that is a success. They took it to 3 million from 1 million and then brought it down to 1.5 million and claimed great success. Even on their projections, apparently we shall still have 1.6 million unemployed by the year 2000. Presumably they are not attempting to get anywhere near the record of a Labour Government if they are elected for a fifth term.

Mr. Waldegrave
Will the right hon. Gentleman remind us who said that any fool knows that if we have a minimum wage there will be a shake-out of jobs?

Mr. Prescott
I will come to the minimum wage, but I made the quote. [Interruption.] I made the quote.

The Minister without Portfolio (Dr. Brian Mawhinney)
You said it.

Mr. Prescott
Did the right hon. Gentleman not hear? "I" means me. I know that he may be getting confused, but "I" means me, John Prescott.
I should like to deal with unemployment first. I promise to come to the minimum wage. Of course we welcome people being able to get a job. If more people have been returning to work, we welcome that. Any fool would welcome that. However, it is hard to accept the Government's claims at face value. What they say is happening to the level of unemployment is hard to determine, because we cannot believe the figures. I believe that there are lies, damned lies and Tory statistics. That is true for most areas. After 32 changes to the count, no less an authority than the Royal Statistical Society has said: The claimant count cannot be trusted.
1066 Why should the public believe in figures that even Tory Ministers do not believe in?
Everybody knows that, as employment spokesman, I constantly attacked the figures and whether they could be believed. I offered to agree with the Government on putting some honesty back into the figures. Some changes were made, but even the figures now produced by the Government cannot be believed. The Minister of State, Department for Education and Employment made it clear when the most recent figures were announced that we could not believe half of them because of the special reasons that he gave. The employment figures and the level of unemployment are not as Ministers tell us. Apparently, Ministers feel moved to make it clear that we cannot believe the figures that are given. The Minister said: The nearest we can come to is that about half these figures we are giving each month are genuine.
The Minister is saying that we should not believe the unemployment figures. I rest my case.

Mr. Barry Legg (Milton Keynes, South-West)
I note that the right hon. Gentleman does not believe that the unemployment figures are accurate. What changes would a Labour Government make to unemployment statistics?

Mr. Prescott
The first would be to make them honest.

Mr. Legg
What would Labour do?

Mr. Prescott
I have made a number of proposals. The Minister is saying that the Government are having to adjust the figures to project what he thinks is the real level of unemployment. I have given Ministers a number of papers on the technical details of how to make the figures more honest. My record is clear. The fact that we cannot accept the published unemployment levels is one of the problems of getting any kind of movement towards honesty.
Tory Chancellors have often committed themselves to cutting public expenditure, so why have they failed to do it? Despite all the promises through every election, they have not done it. I would be interested to hear from the Deputy Prime Minister why they have not. Did the Tories con the electorate in every election when they said that they would cut public expenditure?

Mr. Waldegrave
rose—

Mr. Prescott
The Deputy Prime Minister can think for himself. Would he care to tell us why he did not keep that promise?

The Deputy Prime Minister
What the right hon. Gentleman is saying is not true. The level of public expenditure as a proportion of GDP is falling and it is scheduled to reach our target figure of 40 per cent. We are on target for a balanced budget by the end of the century. If there was a shadow of doubt about the validity of our figures, the Labour party would not have accepted them.

Mr. Prescott
My question is based on the Government's figures. They are the same as they were in 1979. I want to know why they promised to cut public 1067 expenditure but did not do so. I have heard that promise constantly from Tory Members, but they have not done it. I could help the Deputy Prime Minister by explaining why they have not kept their promise; they are paying out huge sums for unemployment because of the failure of their policies. It is a simple answer, but it is difficult for the Deputy Prime Minister because he keeps talking about a successful economy.

Mr. Waldegrave
rose—

Mr. Prescott
I will not give way again. [HoN. MEMBERS: "Oh."] All right then.

Mr. Waldegrave
This is an important point and I think that the right hon. Gentleman might have misunderstood the figures. Of course the figures have a cycle, which is based on a trend. The trend was upwards until the late 1970s and it is now clearly downwards. The peak was at 47 per cent. in the 1970s, 45 per cent. in the 1980s and 43 per cent. in the 1990s. No statistician doubts that the trend is downwards.

Mr. Prescott
Targets and trends, but in reality things are no different. I believe that the Chief Secretary to the Treasury is the man who told us that he wanted to achieve a figure of 35 per cent. for public expenditure. I do not know in what year he is predicting that that will be achieved, but in 18 years the Government have made no difference to the level. We have had ups and downs, but we have had ups and down in unemployment and every other economic indicator. It is called boom and slump and that is what we have seen from the Government.
The Deputy Prime Minister has talked about a black hole in the accounts and the waste of resources. Can he tell us why we are prepared to spend £450 million to privatise the railway system when, only this week, a report showed that it has cost us billions of pounds more than we have got back in receipts? Hon. Members laughed when I mentioned the railways earlier, but the reason for the high cost is that we have doubled the level of subsidy to the private sector. The Government said that that would not happen, but it is costing the taxpayer twice as much and we are paying out more than we get back in receipts. Would not it have been better to use those millions, or in some cases billions, of pounds to invest in the railway system instead of pursuing the ideology of privatisation?
The beef tax cost us £3.5 billion and the poll tax cost us £14 billion. That was a total waste of money. Many promises were made about the poll tax, but it cost us £14 billion. A total of £1.5 billion has been spent on extra bureaucracy in the health service. Those are all examples of waste.
Let me tell the Deputy Prime Minister about the minimum wage and the effect on jobs. Since I made the statement to which he referred earlier, a great deal of work has taken place in America and here which shows that my fears about higher unemployment are not true. If hon. Members want to see that research, I will send it to them.
There is another point about the minimum wage which I would have expected to concern Tory Members. I worked in kitchens as a commis chef and it was a wages council industry. I lived on wages council payments. 1068 The Government abolished the wages councils and deregulated. Despite what the Government have said, in those deregulated industries there has been a fall in wages and it has cost far more to pay for the wage subsidy needed to achieve what the Government have determined is a proper level of income. That has cost the taxpayer £3.5 billion.
Why do Tory Members not find it offensive to have to find £3.5 billion to pay to employers who hire people at rates of £1.50 an hour, telling them to nip along to the Department of Social Security to obtain the subsidy to make up their wage? The same employer under a regulated system was paying more and the taxpayer did not have to contribute. That is the hypocrisy involved in the Tories' view of the minimum wage. If they were concerned about the taxpayer, they should ask those questions.

Mr. Fabricant
rose—

Mr. Prescott
I will not give way. I know about this because I have lived it. [Interruption.] All right, I will give way.

Mr. Fabricant
The right hon. Gentleman mentioned the model in the United States. He will be aware that the US model is a percentage of an average wage in the United States. That would be the equivalent of a minimum wage in the United Kingdom of about £2.50 per hour. Is that what the right hon. Gentleman is suggesting? What rate is he suggesting? That will determine the rate of unemployment.

Mr. Prescott
We have made it clear that the rate will be determined by the minimum wage commission that we will establish. [Interruption.] What is wrong with that? It is employers who have said that they would like to give evidence. They are concerned, as are the trade unions. We will establish a commission and when the rate is determined, we will come here and there will be a debate. We will be the Government then and you lot will be in opposition.
We see the distortion of many of Labour's plans. The Deputy Prime Minister has been talking about a Labour spending plan of £30 billion. Then, the Bill and Ben of the advertising industry announced on posters that the figure was £12 billion, but we are now back to £30 billion. I wish they would decide what the figure is. In our defence, I shall quote what was said by The Financial Times when we offered our rebuttal of the Tories' claims. It said that the charge that it is £30 billion is riddled with inconsistencies and exaggeration…with little or no grounding in fact. We believe that the Tories are wrong to make such accusations about us. We wonder why the Chief Secretary to the Treasury always seems to be at the scene of the crime when these posters and pamphlets are launched. The right hon. Gentleman sometimes has to explain his position, which can be confusing, but I prefer the explanation given recently by the Secretary of State for Health. He made the mistake of talking about the Government's position on the single currency. He said that his "thought processes were blurred". That is a new approach and it could characterise many of those in the Government.
1069 Let me make it clear that there are no hidden Labour spending plans of either £30 billion or any other figure that the Tory party chooses to claim. The real question must be about the Tory figures. The Red Book assumes that there will be £4 billion from privatisation receipts. We do not know where those receipts will come from. The only thing mentioned by the Deputy Prime Minister was air traffic control.

Mr. Waldegrave
rose—

Mr. Prescott
Wait a second. I assume that the Post Office is not to be included.

Mr. Waldegrave
rose—

Mr. Prescott
I will give way because I cannot have the right hon. Gentleman scratching his head any more.

Mr. Waldegrave
The right hon. Gentleman has obviously not read the Red Book. The first £2.5 billion comes from the second-tranche sales of Railtrack. Even if the Labour party was in office, it would get that sum. There is £1.5 billion next year of which £500 million is predicted to come from the national air traffic service. If the right hon. Gentleman was in power, would he sell NATS?

Mr. Prescott
No—[Interruption.] Wait a minute. There is no doubt that the receipts from past privatisations will be part of our Treasury. Judgments about any further revenue from privatisations will be made at the appropriate time. Is the Post Office to be part of the privatisation receipts? I assume that the answer is no.

The Deputy Prime Minister
indicated dissent.

Mr. Prescott
Okay. Is the privatisation of London Underground to be part of the receipts? There is £2 billion involved in that. Are we right to assume that the money raised in the sale of London Underground will be used for investment? That is what was said in a letter from the Secretary of State for Transport to the Prime Minister. Is that correct?

The Deputy Prime Minister
The right hon. Gentleman knows that the answers to those questions have already been provided. The London Underground receipts, and any policy consequences of the Royal Mail, are not included in the Red Book figures, but it is clear that significant figures are included—£1.5 billion—so the right hon. Gentleman must either privatise or find the money somewhere else. It is apparent from his speech that he has not the first idea which is the answer.

Mr. Prescott
It is not absolutely clear where all the receipts will come from. No doubt that will be part of the debate in the election.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
My right hon. Friend might like to know that there is some confusion on the Government Benches. I have just received an answer from the Minister for Transport in London. I asked: if he will list the total amount payable to Her Majesty's Government for the sale of Railfreight Distribution.
1070 The answer reads