Tony Baldry makes speech at Bodicote House
The text of the speech is below:
This last week has been dominated by a fair amount of rhetoric from the TUC Conference.
Unfortunately rhetoric cannot overcome reality.
The inescapable reality is that our public finances are in desperate straits. When Labour came to Government the national debt was around £350 billion.
That national debt had almost doubled even before the difficulties of 2007 when most governments were using the surpluses they had accrued during the good years to pay down debt.
Officially the size of the UK’s public debt is £903 billion but in reality the legacy for our children and grandchildren is nearer £3.8 trillion if one takes into account the heavy burden of off-balance sheet liabilities such as:
- Future payments for the State old age pension – £1.1 trillion to £1.4 trillion
- Unfunded public sector pensions for teachers, NHS staff and civil servants – £770 billion to £1.2 trillion
- Payments under the private financial initiative for contracts – £200 billion
- Contingent viabilities (e.g. bank deposit guarantees) – £500 million
- Nuclear power plant decommissioning – £45 billion
- Impact of financial sector interventions – £1 trillion to £1.5 trillion.
So I think this suggests the realistic total liability of the public sector could be as much as £3.8 trillion – that is 38 followed by 11 noughts.
It is not surprising that for so long the Labour Party and the Trade Unions, who largely fund the Labour Party, have been in denial about the public sector deficit and the reality is that in the last years of the Labour Government, the Labour Party simply couldn’t decide whether or not to admit that large spending cuts were coming.
At least by the General Election the Labour Party had got itself into a position where they acknowledged that if they had been returned to Government they would have had to have halved the deficit over four years.
As the Institute for Fiscal Studies demonstrates this would mean public spending cuts for each government department under Labour in the region of 20 per cent.
In reality not very far off the 25 per cent the Chancellor of the Exchequer realistically is looking at for savings from government departments at present.
The sad fact is that Labour’s legacy to Britain was to leave the country with the largest deficit in our peacetime history.
If we don’t tackle this deficit then within five years we will be paying out £70 billion in debt interest every year – more money than we spend on educating our children, policing our streets or defending the country.
So when we have Trade Union leaders demanding that not a penny is cut from public spending and that not a job is lost from the public sector it is quite clear that they have completely lost any connection whatsoever with reality. No one pretends that the responsibility that has been handed to the Coalition Government is a serious one.
It is how to cut the deficit and how to get Britain’s public finances back into good order whilst at the same time doing everything possible to protect the vulnerable from the cuts.
We need to ensure that money spent by the State benefits people who need the help the most.
However I think it is also fair to point out that the Coalition has put forward policies that benefit everyone.
The deficit reduction strategy will help keep interest rates low.
If the international financial community did not have confidence that we were tackling the deficit you could bet your life that there would be a serious run on the pound and interest rates and thus also mortgage interest rates would increase.
Moreover it is worth pointing out that the first Budget cut income tax for everyone on less than £44,000 a year. I will say that again. The first Budget actually cut income tax for everyone on less than £44,000 a year.
The plan to raise the income tax threshold to £10,000 of course lifted a substantial number of people out of tax altogether. Good news.
But that is only half the story. The total cost of this change will be just over £17 billion and £16 billion of that will go to those who earn over £10,000 a year.
You will still benefit from this change if you earn £40,000 a year as your amount of tax free income is increased. Even if you take into account the freeze in allowance for higher rate taxpayers you still benefit from the change if you earn up to £40,000 a year which includes a very large number of people.
As I say reducing the deficit will allow fiscal policy to stay lose longer and interest rates to be lower for longer.
Lower interest rates will help both small businesses who need to expand and the economy of North Oxfordshire is increasingly an economy of small and medium sized businesses, and will also help homeowners to pay their mortgages.
At the same time the plan to give Britain the lowest level of corporation tax of any major western economy will bring more well paid private sector jobs to Britain and I don’t think that anyone doubts that we have to move increasingly from an economy which is based on the public sector to a private sector led recovery.
Let us be clear – we are not going to be able to tax ourselves out of the present difficulties. All that that does is make life harder for everyone and in particular makes life harder for those who are seeking to create jobs.
We are certainly not going to be able to spend our way out of the present difficulties. We are seriously, seriously overspent as it is.
The only way in which Britain is going to sort out its present economic difficulties is by cutting public spending and that is going to mean making some very difficult choices.
However, there are I think some other points that need to be made. Firstly it will do us no harm to get away from the notion that more public spending necessarily means of itself better public spending or better outcomes.
There will undoubtedly be benefits to be derived from our having to challenge every penny of spending that is made – after all this is not our money, it is not the government’s money, it’s not local councils money, this is taxpayers’ money.
There is no particular merit or virtue in having to increase taxes or council taxes and taking money away from people which otherwise they could chose to spend as they would wish.
Already almost unnoticed and comparatively painlessly both central and local government by changing procurement policies, by altering the way in which contracts are entered into are saving millions upon millions of pounds.
Secondly the need to tackle the debt also gives us the opportunity to look at structures of government including the structures of local government. For my part I think that it is very good news that South Northants District Council and councillors and Cherwell District Council and councillors are in discussions about greater collaboration, working together more but most importantly seeing in what ways by sharing people it is possible to reduce overall costs.
The sharing of resources doesn’t mean and shouldn’t mean that either Cherwell or South Northants should lose their individual identity or that local councillors in any way should lose their political control. What this is about is seeking to ensure that by avoiding the duplication of functions or tasks it is possible to save money and if it is possible to save money in these ways then that is really good news because it means that Cherwell District Council will be at less risk of having to save money otherwise by risking reducing frontline services.
Lastly a word about the idea of The Big Society. This idea is nothing new. From the first day that I joined the Conservative Party I did so because I believed that we all have a responsibility to ourselves, our families and to the communities in which we find ourselves.
I was brought up in a family and attended a school where it was an integral part of our everyday lives that everyone so far as was possible volunteered to help others. And it is vitally important that we continue to encourage and harness the energies of volunteers.
The conundrum as I see it is as follows. Local government is the creation of statute.
Oxfordshire County Council, Cherwell District Council, Banbury Town Council, Bloxham Parish Council have no powers other than those given directly by Parliament either as statutory duties i.e. a local authority “shall” or as statutory permissive powers i.e. a local authority “may”.
It is wholly understandable that when public spending is tight and when local authorities’ financial resources are stretched that local government will focus on the statutory obligations i.e. those that Acts of Parliament have the words “shall” in them and think carefully about those areas of activity that relate to the “may”. However it is very largely in the areas of permissive powers that local government has been able to support and enhance the activity of voluntary groups within the community and collectively both within central government and local government we are going to have to work out how simultaneously we manage to tackle the deficit whilst at the same time continuing to support and encourage volunteering and voluntary action.
That is something we are also going to need to work on at Westminster.
Indeed, as the Prime Minister made very clear in PMQs last week, what he would say to every council in the country is “that we all know – and Opposition Members know – that we have to make spending reductions. The Opposition were committed to £44 billion of spending reductions at the last election, and we should say to every single council in the country, “When it comes to looking at and trimming your budgets, don’t do the easy thing, which is to cut money to the voluntary bodies and organisations working in our communities. Look at your core costs. Look at how you can do more for less. Look at the value for money you get from working with the voluntary sector.” That is the message that I would take to local authorities, and everyone should try to work in that direction.”
The plain fact is that we have to face up to the realities that the nation faces.
We are all in this together. We are all in it together as communities. We are all in this together as elected representatives.
What is going to be tested over the coming months is the resilience of the British people but I have never doubted the capacity of the resilience of our fellow country men and women to deal with difficult situations.