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Letwin: Mr Brown's big government

Shadow Chancellor Oliver Letwin sets out how and why Gordon Brown has managed to spend vast sums of taxpayers' money without achieving commensurate improvements in public services.

"During the last two weeks, Michael Howard, Andrew Lansley and Tim Collins set out how we will give the people the Right to Choose the hospitals and schools they want to use. We believe that people, not politicians should make those decisions. We believe that giving people real choice and creating real competition is the way to drive up standards in healthcare and schooling.

Labour believes otherwise. Mr Brown will prove that when he reveals the details of his spending review.

I am very conscious of the dangers associated with economic and fiscal predictions. But there is one thing I can predict with absolute confidence.

The Chancellor's review will be a plan for:

- big spending,

- big borrowing and

- big taxes.

It is widely understood that Mr Brown's big taxes, big spending, and big borrowing have not produced the improvements in public service that people expected.

As the Energy Minister put it: "we've paid a lot of taxes, but what has been achieved with all that money?"

Today I shall answer that question. I shall set out how and why Mr Brown has managed to spend all of this money without achieving commensurate improvements in public services.

The answer in brief is that a great part of the money has been spent not on front-line services but on big government.

Before I go on, let me just say that this is not a speech about 'waste' in the traditional sense.

I could make a speech like that - about things that the government has done by mistake, and that have cost the taxpayer billions of pounds.

But this is not a speech about the things that the government has done by mistake. This is a speech about things that the government has done on purpose.

It is a speech about a culture of government - a culture of big government. My argument is that this culture of big government is inherently expensive and ineffective.

This Government has not only been wasting taxpayer's money by mistake, as all governments do. This Government has also, on purpose, developed a system of command and control, which was no doubt genuinely intended to augment our quality of life, but which has actually resulted in augmenting nothing other than the size of government itself.

Brown's big government is motivated by the desire to command and control. It is embodied in:

- heavy-handed regulations,

- a plethora of initiatives,

- tightly conditioned specific grants,

- inspectors,

- targets,

- central control of local activity,

- units, boards and panels,

- more bureaucrats and administrators,

- additional layers of government,

- complex and intrusive taxation,

- widespread dependency on the state,

- constricted choices for the consumer, and

- disempowerment of the citizen.

These aspects of Brown's big government are kaleidoscopically related to one another. The bureaucrats and administrators in the units, boards and panels devise the heavy handed regulations and set the conditions of the specific grants in order to implement the initiatives so that the compliance with targets can be monitored by the inspectors in the ever growing layers of government that control the local activity, administer the complex taxes, organise the systems of dependency, constrain the choices of the consumer and end by disempowering the citizen.

I shall start with heavy-handed regulation.

The bald statistics are that business regulation has grown enormously under Brown's big government - 15 new regulations per working day since 1997 , and £30 billion of extra cost imposed upon business according to the British Chamber of Commerce .

All this regulation, combined with the Chancellor's 66 stealth tax increases has made life significantly more complicated for British business. This is beginning to have large scale economic effects.

We have fallen from 4th to 15th in the international competitiveness league . Our productivity growth rate has fallen by a third . In other words, the foundations of our economy are being eroded by over-regulation and over-taxation. That, in turn will have a long term effect on the ability of British business to pay the taxes that support the public services.

These points about regulation killing the goose that lays the golden eggs are now well understood by people in business.

But I am not sure that other people have yet taken in quite what the mania for regulation means in practical terms or how it is related to the size and cost of government.

Let me illustrate these points with a particular example - drawn from the public sector.

During 2003, 2,280 pages of regulatory paperwork were sent to maintained schools by DfES, Ofsted and the Qualifications and Curriculum Authority. This represents 12 pages of paperwork landing on head teacher's desks each day of the school year . To organise a school trip, a head teacher must now consult 204 pages of regulations and guidance .

Under new regulations just issued by the Qualifications and Curriculum Authority, a teacher responsible for a class of 30 five year-olds is expected to write a report on their pupils' attitudes and achievements which exceeds the length of Paradise Lost and is getting on for the length of the Iliad.

This level of regulatory intrusion has ricochet effects on the size of government. It requires large numbers of officials in the DfES, OFSTED and the QCA to formulate the regulation. These officials then need to consult with one another, and with their colleagues in other relevant Departments and Agencies, to attempt to ensure that what they are doing is consistent with regulations and objectives established by those colleagues. It is necessary also to consult the professionals in the schools - and, quite possibly, other allied professions. Legal advice must then be sought; and this is increasingly complex due to the possibility of interaction with devolution legislation, the Human Rights Act, the Data Protection Act, the Freedom of Information Act and, of course EU legislation.

Meanwhile, within the schools themselves, the time spent on dealing with the consultations, the monitoring, the reporting and the enforcement of the guidance requires additional administrative staff if it is not to distract intolerably from the educational and pastoral work of the teaching staff. No doubt, this is part of what accounts for what would otherwise be the positively miraculous fact that, of 88,000 additional public servants appointed in the field of education between June 2002 and June 2003, only 14,000 were teachers or classroom assistants .

What this one example illustrates is that the mania for regulation is not just an emanation of big government.

Regulation is not just an imposition on business and on front-line professionals in the public services. It is also a great cause of the growth of government, of bureaucracy, and of administration.

Bureaucracy, once unleashed, creates bureaucracy.

The result of this vicious circle is increasing cost for the taxpayer and decreasing efficiency in our public services as much as in our businesses.

But heavy-handed regulation is not the only cause, nor is it the only result of Brown's big government.

Initiatives are at least as important.

As with regulation, there is a general awareness that New Labour's big government means a large number of initiatives. But the depth and breadth of the initiative-culture that this Government has created, is not yet widely understood.

For my sins, I have been reading the Government's Departmental Reports. Let me give you some examples of what I have found:

- Paragraph 3.11 of the DTI report tells that there has been an initiative to develop seven separate Innovation and Growth Teams in seven industrial sectors. The Automotive Innovation and Growth Team, we are told, have succeeded in launching three further initiatives - the Low Carbon Vehicle Partnership, the Automotive Academy and the Supply Chains Group Programme. The Chemicals Innovation and Growth Team, not to be outdone, has got in train an initiative to look at two further initiatives - the establishment of a Chemicals Innovation Centre as well as the creation of a new 'Futures Group' to look at the future, which may well in due course feel the need to communicate with the Foresight programme detailed in paragraph 4.18, since the task of that group is "to look beyond normal planning horizons" .

- Turning to the DCMS report, we find on page 17 that this Department has been concerning itself with initiatives to improve Children's play. Following the completion of 'The Children's Play Review', funding was provided for three play organisations: "Skillsactive, jointly funded by the DfES to develop a national framework for training and qualifications in play and to provide regional training centres, The Children's Play Council for policy and research work… [and] The Children's Play Information Service, a library and web based information service to support play practitioners" .

- The DfES, meanwhile has taken initiatives to prevent children playing when they should be at school. There have been behaviour support teams and truancy sweeps across 27 LEAs , as well as a string of other initiatives - costing, between them, more than £830 million since 1997 . We shall have to hope that the DCMS initiatives to promote play are more successful than these DfES initiatives to prevent children playing truant, since there has been a 22% increase in truancy over the lifetime of this Government .

- When it comes to initiatives, the DWP is no slouch, either. On pages 32-34 of its report, it tells us about the "national New Deal marketing campaign" - perhaps the most extensive, although alas also the most ineffective advertising campaign yet launched in Britain to persuade people to accept money and other services from the taxpayer. This is accompanied by the launch of "Childcare Taster pilots", to overcome the reluctance of parents to accept Mr Brown's childcare tax credits, and the launch of a 'hearts and minds' initiative involving "Discovery Weeks designed to boost soft skills such as confidence" .

- Even the Agencies whose tasks might be thought to be purely in the domain of grim-faced regulation have joined in the fun of launching initiatives. Paragraphs 5.10-5.14 in the Food Standards Agency's report tells us that "ten grants were awarded to local authorities to develop local hygiene promotion initiatives" with a further "£70,000 for such initiatives in Scotland", that "a glossy four-page newsletter - 'Eat Safe Now' - has been produced and circulated", that a "Decent Food for All Initiative" has been launched in the "Armagh and Dungannon Health Action Zone", and (rather blissfully) that "formal evaluation" of the FSA's "Christmas turkey television advertisement…showed awareness and enjoyment of the advertisement", possibly due to the fact that it was associated in Northern Ireland with a "cartoon" which "was an alternative version of the Christmas carol God Rest Ye Merry Gentlemen and was designed to highlight FSANI's new Eat Safe Award Scheme" .

These examples - a very small selection of the multitude of initiatives proudly announced in just one year's crop of Departmental and Agency reports and press releases - serve as a remarkable testimony to the culture of Brown's big government. And the point to note, here, is that they tell us the story of that culture precisely because they are proudly announced by these Departments and Agencies.

These are not the hidden waste that Mr Brown now says he recognises and wishes to eliminate. These initiatives are things that Whitehall today is proud of - sufficiently proud, indeed, to select them for inclusion in annual reports and press releases.

The culture of Brown's big government is not just a culture of regulation. It is a culture of initiatives and of self advertisement through initiatives.

One of the things this big government does is to be seen to be doing things. Almost as a by-product, some of these things may be useful; others may be wholly Dome-like and unproductive. No matter, as long as they serve the purpose of showing government to be active.

And, of course, in one sense they tell a truthful tale - because behind every initiative there is action: bureaucrats and administrators meeting, planning, contracting, consulting, monitoring, evaluating, adjusting and reporting.

A fraction, and not in all probability a wholly negligible fraction, of the additional £34,000 per minute that we have paid in tax for each minute of Mr Brown's Chancellorship has been spent on paying the Government for the activity of being seen to be active - without any discernible positive effect on the key public services.

But Brown's big government is not just a regulator and a taker of initiatives.

It is also engaged in the central control of local activity - and this function it performs through three main mechanisms:

- tightly conditioned specific grants,

- armies of inspectors, and

- arrays of targets.

One classic example of big government's attitude to the control by the centre of local activity is the case of local policing.

In most other countries. local policing is - in one way or another - controlled locally. American [and French] municipalities both expect to run their own policing. Not so in Britain under this big government.

The Police Reform Act brings together many of the 350 new policing regulations that the Government has introduced over the past few years . Under the Act, a new National Policing Plan introduces 50 "actions and priorities" (i.e. targets) that are monitored by a new team of inspectors located in the new Standards Unit at the Home Office. The target driven, inspector-monitored plan is backed by tightly controlled specific grants to those police forces that take up government sponsored initiatives - thereby illustrating rather beautifully and rather completely the whole syndrome in one case-study .

The reaction of the Association of Chief Police Officers to this central control of local policing via central plans from the Home Office is instructive.

They say:

"At a time when the Service is being encouraged to reduce bureaucracy, we are concerned that each force is required to produce an increasing number of plans - Local Policing Plans, the Efficiency Plans, the Best Value Plan, the Human Resources Plan and now the new Narrowing the Justice Gap Plan. There is a real danger of increasing bureaucracy; senior police officers will become expert planners but at what cost to delivery? The six different plans contain a plethora of targets, and these are in addition to the local Crime and Disorder strategies, which have already been agreed with partners" .

It would, however, be quite wrong to imagine that these tendencies are exhibited only in relation to local policing.

It is well known that targets have been widely applied by Brown's big government in an effort by the centre to control local activity. Even the New Statesman has acknowledged that:

"under this government, they [targets] have grown like weeds" (16 Feb. 2004) .

It is less widely understood what this means in practice.

A recent government report found that schools had 207 externally set targets (not including the 307 separate criteria found in LEA education delivery plans) .

There are 98 best value performance indicators for top tier local authorities, in addition to a further 12 user-satisfaction-specific indicators .

The NHS plan contains about 200 targets, with further health targets contained in Public Service Agreements and National Service Frameworks - leading the cabinet Office to conclude rather touchingly that amongst the local, front-line service providers in the NHS "many organisations do face excessive externally set targets" .

As with regulations and initiatives, these targets are not only a symptom, but also a cause of big government.

Each target has to be accompanied by a system for collecting data, to determine whether the target has been met. A committee is required, in order to determine the most appropriate method of collecting the data. Administrators must be hired to collect the data, and to ensure that it is properly collated and reported. A further committee must be convened to consider whether the target has been met and, if not, to draw up an appropriate report and improvement plan. Due process must be observed, by means of consultations and representations, to ensure that nobody is being unfairly criticized for failing to meet targets that they may have actually met, or which they may have been prevented from meeting by forces beyond their control. And, of course, a further set of committees is then required to formulate revisions to the targets for subsequent years, in the light of the experience of the current year. Nor should we forget the need to employ people to ensure that the presentation of any failure to meet the targets - in an appropriately glossy publication - is 'sensitively managed' (or, not to put a too fine a point on it, appropriately 'spun').

Big government begets targets as a means of exerting central control over local activity. Targets beget big government because they require to be administered. Another vicious circle of additional cost for the tax payer. Another distraction from the real job for the front-line professional.

As with targets, so with inspectors.

Manifestly, if Brown's big government wants to exert central control over local activity, it isn't enough to set targets. Big government must also inspect whether the targets have been met - and, while we are at it, whether the regulations have been obeyed and the initiatives fulfilled.

So it is no surprise that - apart from the centralised control of local policing to which I have already referred - local government is now subject to inspection by:

- the Audit Commission, measuring compliance with Best Value Performance Indicators,

- The Audit Commission again, but this time assessing Comprehensive Performance,

- District Auditors, who are independent auditors appointed by the Audit Commission to audit the financial accounts of councils,

- Inspectors from the commission for Social Care,

- Ofsted,

- The Adult Learning Inspectorate, and

- The Office of Surveillance Commissioners, which is a group of Inspectors set up to inspect the inspectors under the Regulatory and Investigatory Powers Act 2000.

These inspectors are needed because big government is trying to control local activity. But, like the other emanations of big government, they also help to make government bigger, more expensive and less effective.

The sums and the numbers are not trivial. The Audit Commission's budget alone has increased by 95% from £111 million in 1997 to £217 million in 2003, and its staff numbers have increased by 88% from 1,277 in 1997 to 2,400 in 2003 .

In 2001, the Joseph Rowntree Foundation estimated the annual direct costs of external inspections of local government to be £600 million a year. . To this, the Local Government Information Unit added an estimate of £400 million a year for the indirect costs - including compliance costs, avoidance costs, opportunity costs, displacement effects, and costs accruing from reduced innovation . To get a sense of what this means in lost time and purposeless activity, one has to know that Guildford Borough council had to submit 900 different files for its 2004 Comprehensive Performance Assessment .

Together, these estimates of direct and indirect costs give a total of £1 billion a year for the total costs to the taxpayer of the inspection regimes - many of which, in the opinion of many front-line professionals, have no discernible positive effect on the level of service actually delivered.

Worse, the inspectors undoubtedly do much to reduce service quality.

Tick-in-the-box, playing-the-game, making-it-sound-right mentalities are engendered by the requirement to satisfy the demands of the inspectorates. These are the opposite of the energy, enthusiasm, commitment, common sense and sensitivity to individual clients which are the hallmarks of truly effective public services.

And, of course, it's all connected with the proliferation of specific grants - tied to the initiatives, monitored by the inspectors, and obtained by fulfilling the targets.

In 1997, only 4.5% of local government grant-supported spending was funded through specific grants for government-determined schemes. Now, Brown's big government has nearly tripled that figure to 12.3% . After one allows for the grants that pay for activities over which local authorities have no control because they are mandated by regulation, the discretion left to councillors and front-line professionals is now becoming almost negligible. Hence, the warning from Labour's most prominent representative in Local Government, Sir Jeremy Beecham, that we are nearing "the strange death of local democracy" .

Once again, as with regulations, initiatives, targets and inspectors, specific grants don't only manifest big government and squeeze out initiative at the front line: they also create bigger government.

Just think about what a specific grant means.

It means a scheme or initiative devised by someone in Whitehall.

It means a committee, somewhere in Whitehall, designing the grant rules to fit the aims of the scheme or initiative.

It means that committee consulting with people (they are now called 'stakeholders') who will or may be affected by the scheme or by the specific grant.

It means officials in the relevant Department or Agency consulting with the Treasury to ensure that the grant doesn't fall foul of Treasury rules.

It means meetings amongst the officials of each local body that is a grant-recipient, to determine whether to apply for the grant.

It means a task force of officials to prepare a bid for the grant in each of the local bodies that does apply, including - alas - in local bodies that will not get the grant because their applications are turned down.

It means a committee in central government vetting each application, clarifying the application through enquiries (occupying more time on the part of local bodies), and then adjudicating - not to mention dealing with the howls of protest from those who are not successful.

Once again, the sums paid the taxpayer to fund this process - none of which reach the front-line - are far from trivial, as just one example will serve to show. Hampshire County Council received last year a £1.2 million grant from the Department of Health in order specifically to match the payments of bed-blocking fines it has to pay the local NHS hospital as a result of a big government bed-blocking initiative. In order to manage the flow of paper work and payments, and in order to monitor the system, that County Council has had to add an extra 19 staff . The all-in-cost of the extra staffing probably accounted for something like a third of a grant.

Replicated over and over again, this phenomenon of big government's big specific grants generating bigger government and bigger costs, creates yet another vicious circle of bureaucracy begetting bureaucracy, with no corresponding benefit to the front-line professionals or to the users of public services.

The result of these vicious circles - this bio-cycle of big government enlarged by the very regulations, initiatives, targets, inspectors, and specific grants that it spawns - can be seen very clearly in the apparatus of government that New Labour has established. It can be seen, in other words, in:

- the additional Czars, units, boards and panels;

- the additional numbers of bureaucrats and administrators; and

- the additional layers of government.

As I noted a few days ago, Mr Brown has some way to go before he equals the longevity of Vasily Feodorovich Garbuzov, the Soviet finance minister who tragically died after 25 years in office without ever becoming Prime Minister. But, in another sense, and by reference to an earlier age, Mr Brown can play Russian Roulette with the best of them. Just look at all the Czars.

We have, or (in some cases) have had, the internet czar, the transport czar, the crime czar, the London schools czar, the smoking czar, the drugs czar, the university access czar, and the smuggling czar.

To be fair, we have never really had the last of these, because the initiative that gave rise to the smuggling czar appears to have disappeared before he could be appointed. Chancellor Brown himself signalled the intention to create the post during the 1999 Budget - but an internet search of the Government's portal fails to reveal any actual evidence of his existence.

Such, of course, was the fate of Czars in the revolution. And that is an apt analogy because - in the Kremlin that the Home Office has now become - the terminology is far more reminiscent of a post-revolutionary scene.

The Home Office now contains 63 units, 10 teams, 6 directorates, 5 groups and 25 other miscellaneous bodies .

Perhaps the most pre-occupied at present is the Building and Estate Management Unit, who are attempting to work out what to do about the fact that the new headquarters are insufficiently large to accommodate the additional staff who work in these units, teams, directorate and groups. This is not altogether surprising as Home Office HQ manpower has risen by 10,000 since 1997 .

These facts would be funny if they were not so serious, and so expensive.

The result of the culture of big government - the result of the regulations, initiatives, targets, inspections and specific grants that it creates and by which it is itself enlarged - is that the administration has spun out of control.

Last year, Mr Brown planned to spend £17.2 billion on administering central government. He actually spent £21.2 billion. That overspend on administration of £4 billion (equivalent to 1% of total public expenditure) was almost twice as large as the £2.5 billion average administrative overspend in the previous two years (2001/2 and 2002/3), which was in turn more than twice the £1 billion overspend in 2000/1, which was in turn twice the £500 million overspend in 1999/2000. It is not too far off the truth to say that the culture of big government has created exponential increases in overspending on administration .

Now, of course, Mr Brown says - and I am sure he will say this many times when he announces his spending review - that he is going to do much better in future on controlling the administrative overhead. He says, in fact, that he is going to cut the administrative overhead. This, he tells us, is going to form part of his brave new attempt to bring big government back under control.

We'll see.

The omens so far are not good.

If someone were going to be capable of bringing numbers under control, you'd think that they'd want to start by knowing in a timely and accurate way what those numbers are. But the Government admitted to me in a recent Parliamentary answer that they don't know how many people they have hired until some months after they have hired them.

This may help to explain why they have recently been hiring 511 additional civil servants a week .

It may also help to explain why - as I mentioned earlier - they managed miraculously to appoint 88,000 more staff in education of whom only 14,000 were teachers or teaching assistants.

And it may help to explain why the announcement in 2002 that 18,000 staff would be removed from DWP has resulted so far in a net increase of 3,500 staff in that Department .

I am sure that Mr Brown is puzzled by these phenomena.

But he shouldn't be.

The fact is that the culture of big government is now so firmly embedded - ministerial rhetoric and the official mind are now so filled with the language of regulations and initiatives and grants and inspectors and targets not to mention units, boards and panels - that any last-ditch attempt by the Czar of Czars in Great George Street to stem the advancing tide of bureaucracy is utterly doomed to failure.

To understand just how uncontrollable government has become as a result of big government rhetoric and the spread of big government culture, one has to look at the new layers of government that New Labour have introduced.

Before the Welsh Assembly was established, the Government's 1997 White Paper estimated that the costs would be "in the range of £15-20 million, in addition to the running costs of the Welsh Office of around £72 million a year" . That gives a mid-range total predicted cost of £89.5 million a year. The outcome in 2002/3 was almost exactly double that figure - £177 million .

The additional cost of the GLA was predicted by the Government in the White Paper to be zero . Its actual, current cost is £60 million a year .

The Scottish Parliament costs almost £100 million a year more to run than Scotland's administration in 1997 . It spends £2.5 million a year more on media and communications ; the cost of special advisers has multiplied four-fold , as has the cost of advertising ; and the Scottish parliament building is now projected to cost £431 million - just over 10 times as much as the cost estimated in 1997.

The running costs of the Government Offices for the Regions have risen by 44% since 1997 . The English Regional Development Agencies spent £76 million on administering themselves in 2003 . And the regional assemblies that Mr Prescott is now seeking to create would, if they followed London's example, cost £360 million a year .

Big government hasn't just spawned big bureaucracies to fulfil its aim; it has also spawned more governments.

Odd, wouldn't you say for central government to spend so much time squashing local activity into the shape it likes, whilst at the same time creating new layers of government. Odd, but true.

And not one penny of all this money that is being spent on new layers of government has reached front-line professionals or the users of their services.

What we have witnessed over the last seven years is the triumph of an ideology - the ideology of big government.

We have also witnessed the playing out of a farce - a farce in which the pretence at useful activity, which is contained in so much of the regulation, the initiatives, the targets, the inspectors ,the specific grants, the czars, the units, the boards, the panels, and the new layers of government, comes to substitute for the grimy, practical business of getting the money to the front line and then leaving the professionals to get on with the job.

Alas, this farce has a serious economic and social effect beyond its financial cost, beyond the waste of financial resources that it entails.

The big government that feeds on its own spawn is a sea-creature that also entraps the citizen, renders the citizen increasingly dependent, constrains the citizen's choices, disempowers the citizen.

We see this in big government's attitude towards tax.

We see it in big government's attitude to welfare.

We see it in big government's attitude to the public services.

Britain's big government is intrusive, possessive and constraining.

It works against the grain of human nature.

We all know that governments have to tax us.

Mr Brown, of course, has to tax us more than many - £130 billion a year, or £5000 per household per year more than in 1997 . That is, in considerable part, because his big government costs so much.

But my point isn't just that all this big government causes a lot of tax.

My point is that the Chancellor's whole attitude towards the tax system is itself part of his big government ideology.

He does not see tax just as a way of raising money- a evil necessity (which is the way I see it).

He sees tax as a glorious instrument of big government, a means of improving our society and our economy.

He thinks that complicated taxes are good for the health of our nation.

The Climate Change Levy is one example. It aims to improve the environment by giving firms incentives to reduce energy use. It may have some such effect. It also has other effects. The Engineering Employers Federation has discovered 2,300 companies employing 1.3 million people on whom the Levy has imposed costs of £100 million - with inevitable effects on their competitiveness.

But like the other emanations of big government ideology, the Climate Change Levy doesn't just come from big government. It also contributes to big government.

This tax involves a highly complex rebate system for those firms that sign agreements to reduce energy consumption. These agreements have to be worked up, monitored and enforced by bureaucrats. Both industry and government have to invest time, energy and manpower in negotiation.

In other words, this exercise in imposing big government through big, complex taxation requires a bigger government to conduct it.

The same is true of Mr Brown's Aggregates Tax. This complex tax is designed to reduce the extraction of minerals and to subsidise a new Sustainability Fund that will purportedly deliver environmental benefits. Once again, tax is seen by the Chancellor as a glorious instrument of big government, bringing the citizen into line with the aims of government. And once again, additional armies of bureaucrats are required - both to administer the tax itself and to administer the new Fund.

If Mr Brown were serious about reducing the size of the various taxing bureaucracies, he would not be inventing taxes that have the inevitable effect of enlarging those bureaucracies.

The fact is that, when there is a tussle between his big government ideology and his prudence with taxpayers' funds, big government always wins the day.

It is worth noting that neither the Climate Change Levy nor the Aggregates tax do anything for front-line services. We can be sure of that, because Treasury Ministers have repeatedly assured us that both of these taxes are revenue - neutral - any income is to be wholly offset by reductions in other taxes. So these are exercises in the pure theory of big government: tax as medicinal, pure and simple.

Unfortunately, the same medicinal attitude is manifest in Brown's big government approach to welfare.

Frank Field's valiant efforts to reduce the intrusiveness and bureaucracy of the welfare system by moving away from means-tested benefits was rudely rebuffed by Brown.

Big government's approach to pensioners has been to turn more than 5 million of them into supplicants for means-tested Pension Credit, so as to control precisely who gets what.

This has bizarre and distressing social effects. The system is so complex and intrusive that 2 million eligible pensioners fail to take up the benefits, of whom two-thirds are poor enough to be in the bottom fifth of income distribution. As bad, the incentive to save for all those whose savings would be under £180,000 is virtually removed, since pensioners with savings below this level stand to lose between 40p and 85p in the £ through benefit withdrawal for each additional £1 of savings income. No wonder the savings ratio has halved.

But - as with regulations, initiatives, targets, inspectors, units, layers of government and intrusive medicinal taxes - this means testing system which is an emanation of big government does not just have effects on society and the economy. It also has effects on the size of government itself.

Means-tested benefits require armies of bureaucrats governed by brigades of supervisors and accountable to platoons of managers, to design the systems of means-testing, to interrogate the personal and financial circumstances of each applicant, to adjudicate, to hear appeals, to dispense payments, to revise payments as circumstances alter, to deal with complaints when the revisions do not match the facts, to recuperate over-payments, and so on and so forth. Doing this for anyone would be difficult. Doing it for millions of pensioners is a heroic task that, by itself, contributes significantly to the growth of big government.

Finally, I turn to the public services themselves.

This is where the tale of big government is the saddest of all.

Such spending, such hopes, such efforts - and with what results?

The constraining of choice for patients and parents. The disempowerment of the citizen. And abject failure to produce improvements commensurate with the funds injected.

Why, in the one of the richest economies on earth, do we still have one million people on NHS waiting lists?

Why, after a nearly 40% increase in funding of the NHS, have we seen in-patient activity increase by only 5% to help the people on those waiting lists?

Why can't the 17 million people with chronic conditions play a proper part in deciding on their own care?

Why, in a Britain where you can choose amongst a vast variety of offers for your holiday, your car, your TV, are 80% of appeals by parents with children in inner city schools turned down?

How can this be happening, when schooling is so much more important than holidays and cars and TVs?

Why, why, why?

Because of big government.

Because we don't have the right to choose.

Because Brown's big government makes the choices for us.

Big government - the same big government that regulates and controls and inspects and targets and taxes, the same big government that spawns the bodies and bureaucracies that increase its own size and its own cost - this very same big government which prevents professionals in our schools and hospitals from running their own show also deprives us of the right to choose.

Human nature strives towards excellence under the stimulus of competition.

Freedom for professionals, choice for patients and parents, the winds of competition - these are the things that work with the grain of human nature to produce excellence.

Brown's big government works against freedom, competition and choice. It works against competition.

That is why, tragically, it works against excellence in the public services.

Big government performs an astonishing double-act.

It generates a vast apparatus at great cost to the taxpayer.

And then it ensures, through this apparatus, that such funds as it has left over for the front-line are rendered largely ineffective by top-heavy systems that work against human nature.

That is the tragedy of Mr Brown.

It is also an opportunity that the Conservative Party is now seizing, on behalf of the nation.

For the very same reasons that Brown's big government yields the 'double whammy' of big taxes and failure to improve the public services, our smaller government can achieve the golden combination of lower taxes and better services.

Can it really be done?

Can a smaller government, that does less and does it better, really provide that golden combination of lower taxes and better services?

Yes it can.

One of our major retailers advertises that, in its shops, good food costs less. In just the same way, good services cost less with smaller government.

By cutting away layers of regulation, initiatives, targets, inspectors, specific grants, czars, units, boards, and panels, by removing complex and intrusive taxes, by lifting pensioners out of means-testing - by doing these things we can make government substantially smaller and cheaper.

We can radically reduce the size of the bureaucracy and cost of government, without taking a single penny away from front-line services.

That is what the James report is all about. It is a line-by-line, Department-by Department programme for a smaller, more efficient government.

If we win the next election, we will go into Government with the most developed programme for reducing the size and cost of Government that British politics has ever seen.

As a first step in that direction, Michael Howard and I announced some months ago that we would, from the first day, freeze civil service recruitment - to achieve a reduction of 100,000 in the size of the civil service over 5 years. Later today, Andrew Lansley and I will announce the next instalment: we will, as part of our Right to Choose reforms, abolish whole layers of bureaucracy in the Health Service.

These steps are only the beginning. We need to cut away layer after layer of unnecessary government activity, and layer after layer of bureaucracy. That is the purpose of the James Report: a Conservative government will take office with a more comprehensive plan for shrinking the bureaucracy than ever before in our nation's history. And by doing this, we will inject a new energy and dynamism into the private sector. An economy that is liberated by reduced regulation and lower taxes is an economy that can generate real, useful, sustainable private sector jobs, in place of unproductive and unsustainable bureaucracies.

But these changes - and the many others like them that will flow from the James Report - are only half the story.

The other half of the story is at least as important.

I will revise that. It is even more important.

That other half is the story of how our smaller, more efficient government will give this nation the improvements in public services that the nation deserves.

It is the story of how vast expenditures on the Health Service and on our schools can be put to vastly better use.

It is the story of how our public services can be transformed by

- a smaller government that doesn't try and run every school and hospital,

- a smaller government that lets the professionals be captains of their own ships,

- a smaller government that gives patients and parents the right to choose,

- a smaller government that fosters and celebrates competition as a route to excellence,

- a smaller government that works with the grain of human nature.

That is the story which Michael Howard began to tell in his landmark speech a few days ago.

It is the story which Andrew Lansley and Tim Collins have been telling over the last two weeks.

It is the story that I and others will be telling over the next few months in detailed speeches, setting out more of what we really mean by smaller government.

It is the story we will be telling all the way to the election.

At the election, we will face an electorate that feels increasingly let down by Labour's big government, big taxes and big failures to deliver improvements in our public services.

Our task between now and the next election is to explain why a smaller, government can yield the golden combination of lower taxes and better services that people rightly want.

That is our vision for Britain - a country in which people, not politicians, have control over their lives, a country in which people have the Right to Choose, a country in which big government has been cut down to size."

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