Yesterday was another bad day on the markets for the Euro. The European Central Bank withdrew longer term facilities from European banks, and triggered fears in the markets. The currency slid further.

The ill judged Euro experiment is doing considerable damage to Euroland economies. The southern states need to cut their wages substantially to compete with Germany and the Northern countries. They are being forced to cut public spending, whilst lacking the tools to generate a strong enough private sector led recovery to compensate. Shorn of the ability to devalue to sort out their relative cost base, the actions they have to take are deflationary. Unemployment is already very high.

When Germany adds her own belt tightening and the ECB seeks to take away liquidity it adds up to a bad prospect. The Eurozone needs more growth, but faces more obstacles to growth. Meanwhile the European politicians think it all needs another large dose of financial regulation to put it right!

The idea that saving the economy requires draconian acts of deprivation is partly true, and it would be wrong for me to pretend that we don’t have some tough times ahead. However, pressure on society is in the elong run satisfactory, as it inevitably leads to a generation of wealth. The solutions produced to our problems stay with us even through the good times at the end. The Space Race brought calculators to our classrooms, non stick frying pans to our kitchens and Velcro to our shoes. Today, enterprising minds are busily creating alternatives to fossil fuel power. Last Wednesday I rode around on an electric bike made by Batribike – a company based in my constituency. I really quite enjoyed myself. It was quiet, easy to drive (I am not a motorcyclist), and I dismounted with the satisfaction of having spared myself the usual 60p per litre on petrol and a great deal of physical exertion. I couldn’t help but wonder if man had taken one small step towards having his cake and eating it. That aside, a large demographic shift in the number of people who use electric vehicles might curb our alarming reliance on the Middle East for fossil fuels.

The Batribike is a good example of the fact that Pressure spawns innovation and it is very pleasing that such an industry is growing up in the constituency. It is good that people are turning their hands to producing new solutions to underlying problems in society. The current climate, I am sure, will bring a terrific number of ideas to our society as people struggle to keep standards consistent in increasingly stormy waters.

We now know what Labour thought the answer was to this problem. Over the thirteen years of left of centre government the maximum tax take was in 2007-8, when taxes took 36.4% of all our incomes or GDP. This compared with the Conservative high of 38.2% in 1982-3 when the then Conservative government was tackling the large inherited debt from the previous Labour government, and with the 31.8% low the Conservatives got it down to at a later date. Labour inherited 34% and always charged more than that in their thirteen years.

This is why the new government is right to say we have to cut spending. Spending is running near to 50% of GDP. It needs to be realistic in relation to possible tax levels which are more than 10% of GDP lower. Why should we think suddenly the UK economy can sustain taxes of more than 40% of GDP when no previous government in the last 40 years has thought that possible? Who would stay to pay them? Who would carry on working hard and risking and investing more in such a climate? It’s a very competitive world economy, and our main economic competitors already have income taxes and capital taxes well below ours.

The result of Mr Budd’s likely revisions to our forecasts today will be to raise the deficit by lowering the forecasts of future tax revenue from slower growth. If slow growth is our problem – as I believe it is – the correct response is to cut the tax rates on saving, investing, working and creating jobs, not to increase them. Just as the England football team needs strikers to score more goals as well as a goalkeeper to make more saves, so the UK economy needs a bigger tax base as well as less public spending. We need better Treasury control of the spending, and a better private sector performance to bring the money in.

“In the last year, Labour Ministers authorised officials to spend £134,503 on buying 28 luxury sofas at the cost of £4,120 each. The designer sofas were produced by Parisian designers, Ronan and Erwan Bouroullec, and bizarrely were purchased as part of an efficiency drive.

In an echo of Ed Ball’s ‘contemplation suite’ in the Department for Children, Schools and Families, these sofas were billed as helping create a “truly peaceful oasis” in Whitehall for council tax officials.

The 28 shocking-red ‘Alcove Highback’ sofas were placed across the Department for Communities and Local Government in Eland House, near Victoria. In total, £2.8 million was spent on new furniture as part of an efficiency initiative called ‘SpaceFlex’ to make the department “more practical” and save money.” Read in full at ConservativeHome.

By John Hayes MP Minister of State for Further Education, Skills and Lifelong Learning delivered at the QEII Conference Centre, London, June 10^th 2010

What I have to say sits comfortably between the points that Francis Maude has already made on public service reform and what David Freud will say later about welfare.

Further and higher education are public services, quite as essential in their own way to maintaining our way of life as the NHS or the police force.

Like other parts of the public sector, the previous government borrowed and spent billions on post-compulsory education. But much of this was wasted. Spending has risen far quicker than performance. And all too often, extra money has been spent not on improving the quality of teaching and learning, but on driving the system from the centre.

This is not the fault of the sector or those who implemented public policy, it’s the fault of the politicians who pushed these policies through parliament.

That goes not only for universities and colleges, but also for the education quangos that sprouted like mushrooms over the last decade.

On Monday, the Prime Minister said that the consequences for the public sector of the financial crisis that this government inherited will be “painful”. I don’t want to make light of the fact that further and higher will inevitably bear their share of that pain. But even if the credit crunch had not happened and our economy today was booming, there would still be compelling reasons for this government to seek greater efficiency in further and higher education, informed by a sober analysis of what has worked and of what hasn’t.

As I’ve no doubt David Freud will tell you shortly, welfare, too, is in urgent need of reform. And there are parallels between the difficulties that beset the benefits system and those we are striving to address in further and higher education.

Some people call the benefits system a safety-net. And that’s also how post-compulsory education has often been treated in recent years.

Now, safety-nets have their place in extremis. But, personally, I think that most people would find a springboard far more useful.

As Winston Churchill remarked, “We are for the ladder, let all try their best to climb” and a net, “below which none shall fall”.

The last government made much of more people going into our universities rather than straight into a job or vocational training. But what about all those who were encouraged to aspire to the benefits that higher education brings, only to have their hopes dashed because there was no university place available for them?

We’ve also heard plenty in recent years about the numbers of adults whose training in the workplace was funded by the government. But we heard rather less about the fact that two-thirds of them got absolutely no benefit in terms of higher pay or career progression as a result.

What price lifelong learning for people who’ve been let down like that, especially those whose previous experiences of learning had been far from positive?

Educating adults – educating anyone – therefore has to be about giving the reality of opportunity, not just the illusion. Educating adults has to be a driver of social, economic and personal improvement, not a means of keeping the unemployment statistics artificially low.

All that implies that, notwithstanding the current state of the public finances, the government has a large agenda for change to deliver in further and higher education.

As further education and skills are concerned, our plans are built around three basic principles.

First, we must replace the bureaucratic, target-driven, top-down regime to which colleges, employers and learners alike have become used with a genuine devolution of power within the system. I see the Government’s primary role as being to create a framework which helps individual people and their employers to get at the learning they want or need. An indispensable part of achieving that goal is removing the barriers that get in the way of learning providers’ efforts to respond to what their customers are asking for.

For example, there are better ways of measuring the outcomes that trainers achieve than simply counting the number of qualifications gained. The emphasis must be put on progression, whether that’s to higher skills or to other forms of lifelong learning, including informal learning. Bureaucracy which creates artificial distinctions between further and higher education, between different types of institutions or programmes, or between formal and informal learning stifles the creativity that is the essence of a responsive skills system.

Second, we must eliminate waste and inefficiency wherever they are found by taking a robust attitude to value for money. That means, for example, refocusing the Train to Gain programme. The National Audit Office found that about £250 million a year from this programme was being spent on things that employers would otherwise have funded themselves. That can’t be allowed to continue.

But I want to make clear that what must continue is training in the workplace and public support for employers who want to offer it. That, too, is an assessment based on value for money. Vocational qualifications delivered in the workplace provide better wage returns on average than qualifications delivered in colleges, while apprenticeships offer the highest returns of all.

I’d like to remind you that the £200 million cut in the Train to Gain budget that George Osborne announced on 24 May was not money lost to further education. Neither was it a vote of no-confidence in workplace training. Quite the opposite, in fact, because the money deducted from Train to Gain is being reinvested to create 50,000 new apprenticeship places and to offer £50 million in new capital grants to colleges left in the lurch by last year’s funding fiasco.

Third, I believe that education should be about people, not just numbers. It must hold out the promise of good things for those who seek “to know wisdom and instruction; to perceive the words of understanding; To receive the instruction of wisdom, justice, and judgment, and equity”. Not my words, of course, but Solomon’s, from the Book of Proverbs.

And indeed, we must never forget that the individual learner must be placed at the heart of the whole learning process.

People should be helped to identify learning opportunities, whether at work or in college, that will lead them towards a better job or a more fulfilling life.

People should not just be left floundering without education, employment or training. No one deserves to be broken on the wheel that revolves from a dead-end job to unemployment and back again.

Last week at the Cass Business School, the Secretary of State Vince Cable described the Department for Business, Innovation and Skills as a “department for growth”. The contribution of post-compulsory education to that mission is essential. I don’t just mean its contribution to economic growth, driven by the higher productivity that better work-related skills bring. I also mean its capacity to spark the personal growth and the growth of a more developed sense of community that all learning brings.

The need to find efficiencies is no reason to counsel despair in further education or elsewhere. As Cardinal Newman put it, “Let us act on what we have, since we have not what we wish.”

The government’s plans for further education and skills are far more ambitious and progressive than a diet of cuts and more cuts. Our proposals are not just to inform learners, engage employers and get off the backs of providers, but to give them the power to ensure that the system works in their best interests will be the most radical reform that skills has seen in at least a generation.

Whatever the economic weather, adult learning matters. There is much we can do, much we must do, to ensure that the beneficial power of adult learning reaches everyone, building stronger communities, stronger business and a bigger society.

Last night BBC’s Newsnight created a TV Star Chamber to examine three areas of public spending. Two of the areas they raised are large and central to the task of reducing spending. They asked a panel of 3 including myself to evaluate a 5% cut in all public sector pay, and a five year freeze on benefit levels.

I rejected both their specific proposals, but agree the two large areas of public sector pay and benefit bills need to be reduced. I have tabled some questions to get the exact figures, but roughly the state is supporting around 24 million adults – 6 million direct employees, 6 million unemployed on various benefits and 12 million pensioners receiving state pension and in some cases top up benefit. It’s too many.

The task is to get more of the unenmployed into private sector jobs, and to transfer some of the public sector employees into private sector jobs. We need to release the entrepreneurial energies of some public officials and find new ways of delivering some state supported public services which could be privately financed.

I did not favour an EU style 5% across the board pay cut. The public sector pay freeze proposed for this year amounts to a real cut, with price inflation in the UK currently running at 5.3%. I would not myself wish to expalin to low paid care assistants or public sector cleaners why they would have to face a 5% cut. I would be quite happy to see the 5% cut taken by MInisters extended to other better paid state employees, and to see pay cuts negotiated within services or departments with the employees as part of a package to cut the overall costs of their area of work. The private sector found it was possible in the depth of the private sector crash in 2008-9 to agree lower pay in return for no redundancies where the money was running out.

The government has pledged to undertake major reform of the benefits system. Again, I would not wish to explain to a severely disabled person they had to face five years of no increase in benefit. They don’t get that much to start with, and present inflation would make that cruel. I would be happy to defend welfare reform where someone who is offered a job is told their benefit will be removed whether they take the job or not. I do wish to see more positive and successful programmes to get the workshy or the ill equipped into employment. Curbing new immigration will also help with this. There should be more control over the levels of housing subsidy.

All final salary public sector pension schemes should be closed to new members, as most private sector schemes have been. There should also be a review of the terms for future accrual of additional benefits for exisiting members.

The third area Newsnight raised was the question of do we need free libraries? It was an interesting choice of service. My response was we need some free libraries, but we could do it for much less cost. Why do we have a University library, secondary school libraries, specialist public sector libraries and municipal free libraries all in the same urban or suburban area? Could there be more pooling and joint use? Why is the LEA overhead so high? Why does it cost so much to borrow each book? Can more be delivered on line? Have libraries diversified to offer too much free? What if we split the LEA library monopoly? Would librarians like to turn their lilbraries into not for profit charities or social enterprises? Could commercial organisations manage or provide the library facility for less? There must be enormous scope here for innovation and lower cost.

George Osborne has called for a debate on the limits to what the state should do. I hope he will be inundated with people’s views on all the needless interventions, meddlesome actions and over the top spending which has characterised national and some local government in recent years. It is difficult to know where to begin.

Today I propose a new approach to business. Government should stop the cash and cut the interference.

The last government in its final years went back to the 1970s, intervening , subsidising and trying to pick winners or stop losers on a grand scale. On its own underestimates it spent £120 billion on clumsy support for banks. It subsidised car manufacture. It spawned a whole host of small schemes to offer consultancy, advice and guidance and to reward certain types of technology or “new” undertakings. The result of all this was the worst recession we have lived through since the 1930s, and no evidence of a robust recovery led by the winners of the future that Labour so craved to create. Its regional policy was no more successful either. The more it spent in the poorer regions, the more they fell behind.

The new government has to sort out the dreadful banking inheritance. I argued at the time against nationalisation of the banks in difficulty. Labour stupidly replied that I wanted them to go under, refusing to see the true alternative – offering short term loans and guarantees for collateral and forcing major restructuring of banks at risk to reduce their liabilities and bring in new private sector capital. We now have to undertake that review of the nationalised banking estate, and get it into a shape which can lead to early sale of the assets and a better structure of banking in the UK.

The business consultancy, guidance and related schemes should be offered to the private market. If the work the quangos and civil servants do in these areas is valued, then let it be done in the private sector by them using private money to finance it. If it is not valued, then let’s close it down.

Let’s shut the RDAs, as we have often argued together on this site. In return for cutting cash to business, let’s cut costs for business at the same time. That means a substantial programme of deregulation using Nick Clegg’s Bill as the early legislative vehicle. I put in my letter to Mr Clegg some of the measures I would repeal which would cut business costs. Whitehall should set itself the target of cutting business costs of responding to regulation by say, £5 billion a year, which is as good as a tax cut. It would make a direct contribution to improving UK competitiveness and therefore creating more jobs. Start by scrapping the ludicrous Money laundering procedures which seem to be based on the belief that money launderers do not have utility bills and passports. Move on to the working time or anti overtime regulations.

Over to you for more ideas.