John Redwood: We must work together and do more for less to make our cash go further

Each year, the amount spent, after allowing for inflation, has gone up. Whenever we have had a Conservative government, Labour has campaigned endlessly about cuts, and left the impression that total spending was falling when it was rising.

Today, we have all three main political parties talking about deep cuts. Yet, if you read the Budget forecasts for public spending, they show that in every year in the period 2009 to 2015 public spending will go up in cash terms. Current spending will go up by 90bn over the period, and current and capital spending combined will go up by 70bn. There will be a substantial cut in capital spend. The capital cuts were the ones Labour incorporated into their Budget plans just before losing office.

The figures are:

Current public spending – 2009-10: 600bn

2010-11: 637bn

2011-12: 651bn

2012-13: 664bn

2012-14: 679bn

2014-15: 693bn

Labour's case is that these increases in public spending require deep and damaging real cuts. That will only be true if wages and costs in the public sector shoot up by more than 15 per cent over the time period, or if debt interest surges and eclipses everything else.

If the Bank of England gets inflation down to two per cent and keeps it there as it is meant to do, there will be small real increases in public spending over the five years on these numbers. They go on to say that they want to slow down the path of deficit reduction. In other words, they don't think we are borrowing enough. They would like more of our tax money to be spent on debt interest.

Labour's case has been made easier by the parade of unacceptable cuts, in newspapers and on television, by lobby groups and some insiders who want to protect their favourite programmes or their own jobs. Recent exchanges about the defence budget have reinforced the idea that there could be serious cuts in things that matter. If there are, it means the public sector is poor at managing its money. Any company that knew it would have a 15 per cent increase in revenue over the next few years would not be planning to close down major activities or services which the public liked.

With tight but rising numbers like these, the emphasis has to be on keeping all public sector costs down so the extra money goes further and does not just get absorbed into rising wages and prices. To control debt interest, the Government does need to reassure markets by showing it is bringing the borrowing under control. It can also avoid a big surge in debt payments by selling more assets to pay for some of the shortfall.

It is difficult to argue sensibly that the pace of deficit reduction is too rapid. On the Budget figures, the Government will borrow an additional 10.1 per cent of national income this year, a further 7.5 per cent in 2011-12, and an additional 5.5 per cent in 2012-13. These are huge figures. Our total Government debt (measured on the Treaty basis in the Red Book) rises from 79 per cent of GDP in 2012-11, to 84 per cent in 2011-12 and to 86 per cent in 2012-13.

Labour's plans to have a larger deficit for longer would make these bad figures even worse, run the risk of losing confidence in UK Government debt which would increase interest rates, and would absorb even more of our tax revenue in paying debt interest.

The coalition said it would cut the deficit by relying on lower spending for 80 per cent of the deficit reduction and higher taxes for 20 per cent. However, in the first three years of the programme, higher taxes do more of the work.

So why then is there talk of cuts at all? The first reason is the Government inherited wildly optimistic plans for increased spending, which have to be cut to produce a credible budget.

The second is Whitehall's reluctance to accept they can keep costs down and do more for less in core areas. The third is the sensible wish to cut out things that are less desirable or unwanted, from ID cards through regional government to a host of quangos.

The main reason is the continuing absurd political debate we have continuously in the UK about cuts, with parades of inappropriate, worrying or plain wrong cuts in spending in substitute for good public sector management. It was always thus. The figures are more reassuring than the language.

The coalition should start to change the way it presents all this. It has left some Britons worrying needlessly about their public services, and it is allowing bad public sector managers to get away with frightening people about the impact of revenue numbers which any business would regard as acceptable and capable of decent management.

I see no need for cuts in any public service that matters on these figures. I also expect that when we get to the last two

years of the period the Government will increase its spending plans still more, as an election draws near.

The Government needs to draw its public sector employees into its thinking. It needs to say to all important parts of the public sector, we value your work. There will be more pound notes for you to spend in the years ahead, but not as big an increase as you would like. It means we all need to work together, to work smarter, to do things better. We are determined that public service will not be damaged. It is time we did more for less, and made the extra money go further.

John Redwood is a senior Conservative MP and was a Cabinet Minister under John Major. He is chairman of the Conservative Economic Affairs Committee.