THE SPEECH: `There Is Such a Thing as Society. Our Prudence Is for a Purpose'
This is an edited version of the Chancellor's speech
In the Budget I reported that, with inflation low, Britain is now enjoying the longest period of sustained economic growth on record.
Mr Speaker, in this Spending Review I can report that, with debt low, Britain can continue with historically high and rising investments in hospitals, schools and our public services - so combining the longest period of sustained economic growth for a generation with the longest sustained investment in public services for a generation.
Investment made possible because since 1997:
l Our monetary policy has met our inflation target - now 2 per cent - with stability achieved;
l Our fiscal policy has reduced the national debt from 44 per cent of national income to 34 per cent - our national debt today the lowest of our main competitors;
l Our discipline has reduced debt interest payments - which consumed, in 1997, 3.6 per cent of national income - and now cost just 2 per cent, the lowest since 1915;
l Unemployment which, in 1997, cost 1 per cent of national income, now costs a third of that, just 0.3 per cent - the lowest of our major European competitors;
l And it is because unemployment and debt interest payments now consume just 2.3 per cent of national income - half the 4.6 per cent of national income of 1997, releasing pounds 26bn for investment - that we are today able to allocate substantial extra resources to our front-line public services.
A decade ago, Mr Speaker, three quarters of all new spending went to debt and social security costs and just a quarter of new spending could go to health, education, transport, defence, and law and order.
In this spending round, three quarters of all new spending is going to these vital front-line public services.
So let me tell the House the detailed figures.
Holding strictly each year to the discipline of the total spending envelope, and fully affordable as we meet and will continue to meet all our fiscal rules, departmental spending which is pounds 279.3bn this year will rise to pounds 301.9bn next year, to pounds 321.4bn in 2006-07, and pounds 340.5bn in 2007-08.
So while overall spending in 2006-08 grows by 2.8 per cent in real terms, low debt and low unemployment mean that departmental spending - spending on front-line services - will enjoy a real- terms rise averaging over the three years of this Spending Review 4.2 per cent.
And by insisting on further reform we are able to do even more to get more money to the front line and raise public investment substantially in all our priority areas. It is to ensure new resources yield the best results that we have already introduced independent audit and inspection, strict three-year budgets, the devolution of funding direct to the front line and more flexibility and choice in delivery.
And now, following the work the Prime Minister and I instructed more than a year ago under Sir Peter Gershon and after a rigorous review of procurement, back-office services, and work practices, Departments are today publishing new plans to implement efficiency agreements with the Treasury.
Alongside Sir Peter Gershon, I want to put on record my appreciation of the work of our Civil Service and their commitment to the ethic of public service. But it is precisely because the public sector has invested pounds 6bn in new technology, modernising our ability to provide back-office and transactional services, that I can announce, with the detailed plans departments are publishing for the years to 2008, a gross reduction in civil service posts of 84,150 - to release resources from administration to invest in the front line.
And with, in addition, the devolved administrations in Scotland and Wales and the Northern Ireland Office also having announced that they are engaged in Spending Review efficiency and evaluation exercises as ambitious as those in England - with reductions also in back-office and related areas; and with the 2. …