David Gauke is Financial Secretary to the Treasury and MP for South West Hertfordshire.
As George Osborne made clear yesterday, the Government remains on track to deliver a £10 billion surplus in 2019-20, with public sector net debt forecast to be lower as a percentage of GDP for every year of the scorecard period than was the case in July’s forecast. These numbers matter. The OBR is predicting that we will have had ten years of expansion by 2019-20. If a country cannot run a surplus in those circumstances, when can it?
Unlike our predecessors, we are not so imprudent to believe that boom and bust has been eliminated. We may be the fastest growing economy in the G7, but at some point there will be difficult years for the economy. Our country will be much better prepared if we use the years of economic growth to reduce debt.
As we learnt in 2008, we are more vulnerable to a banking crisis than other countries. We also no longer live in a world where we could expect inflation to eat into our debt levels. Security in our public finances means we must finish the job we started in 2010 and ignore the incessant Labour calls that we borrow more.
Lower debt interest and higher tax receipts mean that we can meet our surplus target whilst not needing to pursue some of the more difficult decisions set out in the July Budget. This means that public spending reductions are not as steep as previously set out. Compared to the last spending review periods, where overall departmental spending was reduced by two per cent per year, in this spending review period it will be 0.9 per cent
Nonetheless, this is a sustained period of public spending restraint. To implement this successfully requires not just determination to eliminate waste but also significant public sector reform. The public recognises that lower public spending does not mean a decline in the quality of public services. Polls show that the majority of the public believe that public services overall have either improved or stayed the same over the last five years. The same is true for council services specifically. Satisfaction with the NHS is at its highest level for years, a million more pupils are in good or outstanding schools and crime has dropped by a quarter since 2010.
In the last Parliament, we were able to reduce substantially the cost of government with administrative budgets falling by 40 per cent. But we need to go further. The public rightly still expects high quality services but the option of ever higher spending is no longer available to a responsible government. How do we get more for less? The Autumn Statement contains a number of answers.
The devolution revolution places more power and responsibility in the hands of local leaders enabling them to respond to local priorities. The retention of 100 per cent of business rates will ensure that local authorities have the right incentives to generate growth in their areas. Land and property sales – such as of our outdated Victorian prisons — will create space for 160,000 new homes. Police, fire and emergency services are bringing functions together to save money and increase their effectiveness. We will continue to reform and modernise the terms and conditions of the public sector workforce to ensure that they are fair, flexible and fiscally sustainable. Perhaps most excitingly, we will make further and better use of new technology to improve public services at a reduced cost.
Let me give you an example with which I have been closely. In the March Budget, the Chancellor committed to transform the tax system by introducing simple, secure and personalised digital tax accounts, removing the need for annual tax returns. This will give individuals and businesses a more convenient real-time view of their tax affairs, providing them with greater certainty about the tax they owe. Yesterday, we set out how we would re-invest £1.3bn to deliver this plan. HMRC will be transformed into one of the most digitally advanced tax administrations in the world, with digital accounts for all small businesses and individuals by the end of the Parliament. Our tax system will be easier to administer for both taxpayers and HMRC, reducing costs for businesses, individuals and HMRC. The reduction in errors will be good for the exchequer, too.
A similar approach is being taken at the Ministry of Justice. The Spending Review increases our investment in modernising and fully digitising the courts, moving from a paper-based to an online system. This will eliminate the need for over half a million pre-trial hearings in the criminal courts, and will significantly reduce the court hearing times and the time spent on basic administrative functions. Video conference centres in prisons will help reduce prisoner travel to court by 30 per cent, allowing 90,000 cases per year to be heard from prison instead of court. Other examples of investment in greater use of technology announced yesterday include greater support to protect our borders and simplifying UK trade support.
In total, the Spending Review invests £1.8bn in digital technology and transformation projects across the public sector over the next four years. To get the best from this investment, the Government Digital Service will create common cross-government platforms. For example, this multiple different payment systems will be simplified, making it easier for businesses and individuals to make payments to government.
As Conservatives, we should believe in sound public finances and that public expenditure must be constrained by what we can afford. This need not lead to a decline in the quality of public services as long as a government is willing to embrace public sector reform. Yesterday’s Autumn Statement shows that we are willing to do exactly that.