Philip Hammond MP: The Conservative path to lower taxes and high quality public services

Philip Hammond, Shadow Chief Secretary to the Treasury and MP for Runnymede and Weybridge, highlights the key themes of yesterday's 'Living within our means' speech by the Conservative leader.

David Cameron gave an important speech yesterday setting out how the Conservatives will make sure that we live within our means in Government. After a decade of reckless spending under Labour, David’s pledge to restore “good housekeeping” is a key part of constructing a positive alternative to this failing Government.

In the decades ahead there will be pressure to spend more on the essentials - whether that’s care for the older generation, equipment for our armed forces, or more prisons and police. And at the same time, we have reached the limits of acceptable taxation and borrowing.

With the rising cost of living, taxpayers can’t take any more pain; indeed they want a Government that can give them the prospect of relief. And our economy can’t take any more pain without losing jobs to lower tax competitors.

Our overall method and aim are clear: we will share the proceeds of economic growth. Sharing the proceeds of economic growth will ensure that we live within our means. Not spending everything we have. Not borrowing to spend beyond our means. But ensuring that, over time, the state grows more slowly than the economy as a whole, so spending falls as a share of national income and we can reduce taxes and borrowing.

A Government committed to sharing the proceeds of growth is, by definition, a Government committed to the reduction of taxes, or of borrowing, or both  - over the economic cycle.

So how will we deliver this commitment? By attacking the three principle causes of rising public spending at source.

First, the cost of social failure.  Family breakdown, unemployment, drug and alcohol addiction – these social problems rack up the biggest bills for government, so we need to focus our attention on addressing them.

We have already published Policy Green Papers on school reform and welfare reform, and some of our thinking on making Britain more family-friendly. And the next stage in our work on strengthening families will be published within the next few weeks. If we get these three things right – school reform, welfare reform and strengthening families – then we can make serious progress in tackling the deep social problems that have caused so much pain, and cost so much money, for so long.

Secondly, the cost of unreformed public services. Massive top-down state monopolies cost more and deliver less, so we need to improve the running of public services through more choice and competition.

So in education we will end the state monopoly and allow new schools to be set up by a wide range of expert organisations, giving parents real school choice for the first time. In the NHS we will get rid of the top-down political micromanagement and put the power in the hands of patients, who can choose the GP who they think will get the most out of the NHS on their behalf. And in prisons and probation we will empower the local managers – and pay them by results.

And thirdly, the cost of bureaucracy itself.  All bureaucracies have an inbuilt tendency to grow, so we need to call a halt to the wasteful spending and inefficiency we’ve seen under Labour. That’s not about a one-off efficiency drive; it’s about a whole new culture in government. A culture that’s careful, not casual, with public money.

Consider just a few examples of Labour’s record - £20 billion wasted on an NHS computer that still isn’t working properly, £2.3 billion spent refurbishing the offices of MOD civil servants, and nearly £2 billion of tax credits lost due to fraud and error.

These are outrageous examples of a spendaholic culture in government, and a level of waste that is evidence of an out-of-touch political elite who have forgotten whose money it is they’re spending.

So I will be working with Francis Maude and his implementation team to develop strategies right across the board: in procurement, delivery, staffing, and structures – learning from the best examples in the public and private sectors around the world.

But it’s not enough just to stand here and make promises about efficiency. I believe we need to create additional pressure on ourselves – and transparency in public spending is an absolutely vital part of this.  That’s why last year, we introduced a Bill in Parliament to force the government to list on a public, easily searchable website, every item of public spending over £25,000. Unsurprisingly, Labour blocked it – but we have promised that this will be one of the first innovations of a Conservative Government.

And we will shortly be launching an online whistleblower service, so that people who work in the public sector can tell our Implementation Team about the waste and inefficiency they would like us to tackle.

That is an outline of our strategy. It learns the lessons from Labour’s failure to control public spending. It’s based on simple Conservative principles of good housekeeping. It makes commitments that we know we can deliver.

The British electorate is no longer prepared to choose between lower taxes and high quality public services. It demands of its politicians the ability to deliver both. Our long-term economic competitiveness and the sustainability of our public services require no less. By focussing on these three priorities in Government, Conservatives will deliver where Labour has failed.