Debate resumed (Order, 24 March).
Question again proposed,
(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
(2) This Resolution does not extend to the making of any amendment with respect
to value added tax so as to provide—
(a) for zero-rating or exempting a supply, acquisition or importation,
(b) for refunding an amount of tax,
(c) for any relief, other than a relief that—
(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.
I welcome this opportunity to begin the second full day of the Budget debate, because it gives us the opportunity to bring to the House’s attention all the things that were in the Budget but not actually mentioned in the Chancellor’s Budget speech. The debate will give us all a chance to reflect on what the rest of the country thought about the Budget—which is: not a lot. The fact that only three Labour Back Benchers have turned up to support the Government’s final Budget suggests that the parliamentary Labour party does not think much of it either—[Interruption.]—or, indeed, the Chancellor of the Exchequer; He normally turns up, but there we go. He did not turn up for his “Today” programme interview either, so, after an empty Budget, we got an empty chair. Anyway, it is a pleasure to be debating these matters with the Secretary of State for Work and Pensions, the right hon. Member for Pontefract and Castleford (Yvette Cooper), because one thing is certainly clear: depending on the result of the election, either she will be living in No. 11 Downing street or I will, so it is good for us to have this early debate.
It normally takes 24 hours for people to see through these Labour Budgets, but this one disintegrated within about 24 minutes. Even before the Chancellor sat down, it was clear that he had completely failed to rise to the challenge of the times we face and the expectations of his high office. We know that the country faces a storm of economic problems. One in five young people cannot find work. Our recovery is one of the weakest in the G20, and our banking system cannot finance that recovery at the moment. Family incomes are being squeezed, and we have the largest budget deficit of any country in the developed world. Our credit rating is under threat, confidence is lacking, manufacturing is shrinking, exports are falling and business investment has collapsed. Everything cries out for urgent action, for energy, for vision, for leadership and for new ideas to get our economy moving.
But what did we get yesterday from this exhausted, discredited Government? Absolutely nothing at all. An empty Budget. An exercise in politics, not an example of governing. The only ideas of any substance in this Budget are Conservative ideas. Taking first-time buyers out of stamp duty? Now, I knew I had heard that before, and when I did my research, it turned out that I had announced it at the Conservative party conference three years ago. It was roundly condemned by Labour Ministers at the time—[Interruption.] Well, we have the Treasury Minister here, and he told Parliament that the Government did not believe that our proposal on stamp duty
“would be an effective use of public money”.––[Official Report, Finance Public Bill Committee, 21 May 2009; c. 108.]
Does he hold to that view, or has he changed his mind?
I am glad that the hon. Gentleman has followed closely my comments in the Committee on that Finance Bill. He will be aware that I made those comments in the context of the fact that we had a stamp duty exemption set at £175,000, and that his proposal was neither costed nor funded. If he reads the 15-minute speech that I made at the time, rather than giving the House a selective and distorted quote, perhaps he will understand the situation a bit better.
It is absolutely clear that the Minister said that taking first-time buyers out of stamp duty was not an effective use of public money. He talks about costing. This is quite a lesson for us, as the election approaches. The Labour party and the Treasury officials costed our policy at £300 million, and that is the figure that the Chancellor of the Exchequer announced at the beginning of January. They said that our policy would cost £300 million. It was part of the attack on our platform. Yesterday, however, when they put it into the Budget, that same policy cost £230 million. So the Treasury has costed exactly the same policy at £70 million less in the Red Book. That is typical of their complete nonsense.
I will tell the House about something else that was not in the Budget. The first-time buyers’ exemption is for only two years. It is a temporary exemption, but the increase in stamp duty to 5 per cent. at the top rate is a permanent increase. That is something else that was not mentioned—[Interruption.] The Treasury Ministers themselves do not know what is going on; they are checking up.
Look, we set out a proposal for a levy on non-domiciles that was also copied immediately after I had given that conference speech. We also set out plans for inheritance tax which were copied by the Chancellor of the Exchequer at the time. As for the increase in stamp duty to 5 per cent., there are going to be lots of Labour tax rises that we will have to deal with if we become the Government. Our priority will be to avoid the tax rises on the many rather than the tax rises on the few. Our No. 1 priority will be to avoid the national insurance rise that the Labour Government have pencilled in for millions of hard-working people across this country.
So that was one idea that the Government took from us. Then, yesterday, the Chancellor said that he was taxing the drinks that caused the binge drinking problems. That also struck a chord with me, because the Conservatives had announced that at our conference last autumn. It seemed, then, to have been adopted by the Government, but, when we look at the small print, we see that they have not exactly copied our idea. They have used it as a cloak for a huge duty rise on all cider drinkers, instead of just on the super-strength white ciders that are linked to problem drinking. That will hit the industry hard and it is something that we oppose.
Then there were the 20,000 new student places. When my right hon. and learned Friend the shadow Secretary of State for Business, Innovation and Skills announced that proposal at the Conservative conference, it was attacked. The Minister responsible for universities said that it was elitist, and it was denounced by the Labour party. Now, of course, we are hearing about it in the Budget. But again, there is a catch. The Chancellor said yesterday that the Government would provide funds to
“create 20,000 more university places...starting in September this year.”—[Official Report, 24 March 2010; Vol. 508, c. 262.]
We all thought, “Well, that’s good of him to have found the money.” Then we looked at the detail, and it turns out that only 10,000 full-time undergraduate degree places are being created, not 20,000. When we looked on the website of the Department for Business, Innovation and Skills—this is not in any Treasury document—we found that the funding for those three-year courses is for one year only. So they are going to fund the students’ first year, but not their second or third years. The funding for those years has to be found by the universities themselves.
There were lots of other things that we proposed and the Government adopted, such as the green investment bank. We do not mind this pathetic Government, in their dying days, adopting our policies, but let me say this: we will never again listen to their lectures about how we do not have anything to offer the country, when the only things that they have to offer the country are the things that they have taken directly from us. Stealing Conservative policies is not going to hide the fact that the Labour party has nothing of its own to say to the British people any more.
That is the extraordinary thing about this Budget. It is more interesting—if that is the right word—for what it does not say than for what it does, and that is what I want to focus on. What was not in the Budget, but should have been? Let us start with the things that were not in the Budget speech itself. How on earth did the Chancellor think he could get away with freezing the personal tax allowances of 30 million working people, and not mention it at that Dispatch Box yesterday? One would have thought that, having watched all those Budget speeches from his predecessor, the Prime Minister, in which the stealth taxes were not mentioned and the spending was double-counted, and having seen the damage that that did to the reputation of the Treasury, he would have learned the lesson. Apparently not. Did he really think that no one would turn to page 123 of the Red Book and see what he was doing? When the allowances were frozen last autumn, retail price inflation was negative. That was the excuse that the Chancellor used for freezing the allowances. Today, retail price inflation is 3.7 per cent., yet he is going to freeze the allowances from April. That is, in effect, a tax rise for 30 million working people, and it was not even mentioned in the Budget.
The hon. Gentleman will know that allowances and benefits have been uprated by autumn inflation figures since the late 1970s. Does he now believe that that decades-old policy of uprating should be ditched?
I did my research. Only once in the 13 years of this Government did the Labour Chancellor uprate in line with inflation; on all other occasions, it was above inflation. The only Budget in which Labour froze allowances before was in 2003. It is perfectly within the Chancellor’s power to take account of inflation at the time. As I say, this is effectively a tax rise on 30 million working people, which is one of the reasons why the Budget has gone down so badly.
Let me ask the question again. The normal uprating with respect to the retail prices index is linked to the autumn inflation figures, and it has been for many decades. Does the hon. Gentleman believe that that policy, which is built into legislation and has been in existence for many years, should be ditched?
I am sure the right hon. Lady understands the mechanics here. The law requires writing into the Red Book the uprating in line with inflation, but it is perfectly within the Chancellor’s power to go beyond that, as Labour Chancellors have in all but two Budgets delivered since 1997. One would have thought that the Chancellor of the Exchequer would have had the courage to announce what he was doing at the Dispatch Box yesterday so that people did not have to wake up this morning to find out what was really in the Budget.
Does my hon. Friend accept that it is not simply working people who will be affected by that policy because many pensioners will see the benefits of their state pension increase completely wiped out by this underhand measure by the Chancellor?
My hon. Friend is absolutely right. Income tax applies to pensioners and pensioner income, and it is also a stealth tax on them. Also barely mentioned in the Budget, of course, are the other £19 billion of tax rises previously announced, often in the pre-Budget report books rather than speeches, that are coming down the track. That was one of the great missing parts of the Budget speech—the extraordinary tax rises pencilled in, but not discussed by the Chancellor.
In addition, there are the tax measures on small businesses. The Chancellor said yesterday that he was going to provide
“extra support to small businesses through the tax system”.—[Official Report, 24 March 2010; Vol. 508, c. 259.]
Who could complain about that? What he did not tell us was that the extra support is more than cancelled out by the other tax rises on small businesses that are in the pipeline. He told us that he was cutting business rates, but the Red Book reveals that he is expecting to raise an additional £1 billion in revenue from business rates next year.
The Chancellor made a great fuss of doubling the small business investment allowance. The Treasury cost it at £100 million, and the Chancellor paraded it as something that he was doing for small businesses. He did not mention the fact that he is increasing the small companies tax rate at a cost to small businesses of £420 million—four times the amount that he is giving with one hand is being taken back with the other. No wonder that the response of the Federation of Small Businesses was that the Budget
“will not help job creation”.
If the small businesses of this country do not think that a Budget is going to create jobs at this point in the economic cycle when the recovery is so weak, that tells us everything about how this Budget has failed.
The Chancellor also made great play of his lending agreements. He did not mention the fact that the banks missed their lending targets. He told us at the last Budget that they were binding, but he did not repeat what the Public Accounts Committee told us last month—that despite all the Government promises from the Dispatch Box over the last two years,
“The Treasury has only limited sanctions available to it to encourage RBS and Lloyds Banking Group to meet what are described as legally binding lending commitments.”
Worse than that, the Chancellor employed a trick that would make the Prime Minister proud, because he gave the impression that the new lending targets were higher than the previous ones when, in fact, they are lower. The old targets were expressed as a net figure of total extra lending, while the targets for new lending are a gross figure. He compared a net figure with a gross figure, which means that lending to businesses could actually fall, yet the Government would still have met their target. What a totally transparent and cynical manoeuvre by the Chancellor.
Of course, all these things that were never mentioned in the Chancellor’s speech pale into insignificance alongside the missing centrepiece of the Budget—a credible plan to deal with the deficit. Yes, the Chancellor confirmed that we have the worst deficit in the G7. Yes, he announced that we have the second-worst deficit in the OECD after Ireland. Did he convince anyone, however, that he was serious about dealing with the Budget deficit problem, serious about protecting our country’s credit rating, serious about avoiding the rise in gilts that mean higher interest rates in a recovery, and serious about confronting the truth that this Government have ended up borrowing one pound for every four that they spend, and that having entered office on a pledge to cut the bills of social failure, they now head for the exit door with Britain spending more on debt interest payments than it does on our entire education system? No, he did not.
The Government seem to believe that if they say often enough that they have a credible plan, somehow fiction will become reality. But the definition of a credible plan is that someone out there believes them and thinks that it is credible. Let us look at what investors said after the Chancellor sat down yesterday. Standard Chartered called it
“a do nothing Budget that had shades of Nero about it”.
Citibank said there were
“no proper medium-term public spending plans”
“credible plan to return to fiscal sustainability”.
The same rating agency that yesterday downgraded Portugal—whose deficit is half ours, by the way—came out immediately to warn that the plan was “too slow”. It is clear that the only thing holding together Britain’s reputation in the international community is the prospect of a Conservative Government who can sort this mess out.
Is my hon. Friend aware that he is making a most powerful case for adopting the advice of our noble Friend Lord Bell, who suggested the revival of the 1979 election slogan: “The captain of the Titanic is offering tickets for a second voyage”?
I also quite like “Labour isn’t working”, which applied then and applies now.
Like some giant fiscal doughnut, yesterday’s Budget had a gaping hole in the middle of it where there should have been a proper comprehensive spending review. In table A1 in the Red Book—a table of Budget measures—there are great blank spaces where a spending review normally sits. The Government simply cannot tell us what they are planning to do in 2011-12, despite all the information and all the resources available to them. Is there anything more risible than the Government’s explanations as to why they cannot provide the spending review? They tell us that it would impossible to do it in March because of the uncertain state of the economy, but that we can apparently have it in October—yet this has nothing to do with the fact that there is going to be an election in May. They really are taking the public for complete fools.
It is not a case of not being able to give the figures; it is a case of not being willing to give them.
My right hon. and learned Friend is absolutely right about that. It is an absolutely cynical manoeuvre.
There is something that Government could do today. The document I have with me was leaked to us. These are the internal Treasury fiscal tables. They tell everyone—all taxpayers—about the departmental spending envelopes for the coming years; they tell what the Treasury expects to spend on debt interest, welfare bills and the like. This is the document that revealed that this Labour Government plan a 9 per cent. cut in Departments. It was leaked to us, as it happens, after the last Budget. This document could be published today in the interests of open information as we approach the election. I will ask the permanent secretary to publish it in the interest of good debate ahead of the election, so that we have at least some basic truths about what the Government’s lack of a spending review means for Departments in future.
Of course, yesterday the Government tried to put up a smokescreen around efficiency savings. Three hours after the Budget was delivered—this must be pretty unprecedented in that it happened after the Chancellor sat down—a series of written statements were produced from different Government Departments saying that they were going to deliver efficiencies. I have with me the one from the Department headed by the Secretary of State for Work and Pensions. We find that £550 million of efficiency savings are set out, expressed and explained in three sentences. It is a half-page press release with some notes to editors underneath. Ministers such as the right hon. Lady went on television and said, “I have found my cuts.” The most vocal exponent, in fact, was the Children’s Secretary, the right hon. Lady’s husband, who said, “I have got £500 million-worth of cuts that I have been told to find by the Chancellor. I have found £300 million, and I am working on the other £200 million.”
What Ministers do not say is that they have absolutely no idea of their budgets for 2011-12, on which these efficiency savings are supposed to be based. They can produce as many efficiency reports as they like, but—quite apart from the fact that the National Audit Office found that barely a quarter of the savings promised before the last general election can be traced today—that is not a credible way to approach the current problem.
This is what was said by the officials who were contacted by the media last night. When telephoned by a journalist, an official at the Department for Environment, Food and Rural Affairs said:
“All quite deliberately vague. We haven’t got any detail on where those savings will be gathered. We haven’t got a breakdown of the detail: it doesn’t exist.”
Another official said:
“We certainly don’t have a list as of today. It’s a figure that we have agreed with Her Majesty’s Treasury, as part of Building Britain’s Future or whatever the slogan is that’s on our press release.”
Another official was asked by a journalist about the £10 million corporate services reform programme. This was his reply:
“Corporate services. Christ! Let me see if I can find out”
what that is. So there we have it: the largest budget deficit in our peacetime history, and they are turning to God to help them to sort it out.
One thing that the Government could do—I shall ask the right hon. Lady to confirm that they can do it—is publish the fiscal tables that we know exist. The Government claim that they want open and transparent debate about spending ahead of the election, so why do they not publish those tables? What are they trying to hide? If they published the tables, we could have a more serious debate about what the Government are actually planning to do. As I have said, that would help to focus people’s attention on the central fact about the Budget: that the Government have not produced a credible plan to deal with the deficit.
That is why, in the end, there has to be a change of Government. Our economy faces the most serious risks. For the first time in our country’s history, we face a credit downgrade; for the first time in our country’s history, we have a budget deficit that is larger than any other in the developed world. The challenge for a Government faced with those facts is to produce the plan that will put the economy back on track, and they have failed to do so.
My hon. Friend is making an excellent speech. Does he agree that there is another gap in what the Government have been saying? According to figures from the Office for National Statistics, if public sector pensions and other matters related to the financial sector are included, the true amount of debt is as much as £3.1 trillion. Making up for that will involve some very big decisions with which the Government are clearly incapable of dealing.
My hon. Friend is absolutely right. A key part of our proposals is the creation of an office for budget responsibility—an independent office—[Laughter.] Ministers may laugh, but that is something that has been recommended by almost every independent observer of the British economy. It is something, by the way, that the shadow Chancellor in 1995—the hon. Member for Dunfermline, East, as he was then—promised to create if he ever became Chancellor. It would hold the Government to account for the promises that they make. It would also ensure that on Budget day we have proper, independent sets of forecasts, so that we can have a proper debate about the true state of the public finances. We would not get what we were given yesterday: the use of a growth forecast that exists only in the Treasury. It is not the same as the one used by the Bank of England, and it is certainly not the same as the one used by the independent forecasters who are currently examining the British economy.
Incidentally, if the Budget had used the independent forecasters’ estimate of growth next year rather than the Treasury’s estimate, £10 million would have been added to the borrowing requirement. That is why we need an independent set of forecasts and an independent body to hold us—both parties—to the fiscal promises that we make and, as suggested by my hon. Friend the Member for Stone (Mr. Cash), to produce a proper set of national accounts.
Rather than this fiction, we should have a set of accounts telling us what the liabilities are for the banking assets that we hold, what the liabilities are for public sector pensions, what the liabilities are for the private finance initiative deals done by the Government over the past 13 years, and what the liabilities are for Network Rail. We should have a proper set of national accounts on the basis of which this Parliament and this country could discuss the country’s future. That does not exist under the current Government, but I can tell the House that it will exist under the next.
This is what is so sad about this Budget. It presented the Government with an opportunity finally to rise to the challenge. After all, what did the Chancellor have to lose? It is obvious that he will not be in office after the election even if Labour wins it. The forces of hell have been unleashed against him—forces of hell not too distant from the family life of the right hon. Lady. It is absolutely clear that if Labour were elected, the Prime Minister would choose a new Chancellor: the right hon. Member for Normanton (Ed Balls). The current Chancellor therefore had a unique opportunity to do what he thought was right for the country rather than what he thought was politically convenient for his party, but he completely failed to meet that challenge.
We need a new Government to fix the broken economy, to deal with the budget deficit that threatens the recovery, to boost enterprise and small businesses, to get Britain working and to build an economy that works for everyone; and the sooner that Government are elected, the better.
Was that it? [Hon. Members: “Oh, come on!”] Was that it? In those 26 minutes there was plenty of sneering and plenty of posturing, but I did not hear about a single policy to get the economy growing, or a single serious policy to bring the deficit down once the economy is growing. There were no plans to help the unemployed, and no plans to support business—and this from the man who wants to be Chancellor of the Exchequer in less than two months’ time? It would be funny if it were not so terrifying.
What I would say to the right hon. Lady—supported as she is by the hordes of Midian behind her—is that, in less than half an hour, my hon. Friend the Member for Tatton (Mr. Osborne) demolished the vacuous nonsense which would do such pernicious harm to the country and which was presented to us in an hour yesterday.
I am afraid he did not. What he made clear was quite how shallow the approach of the Conservatives really is to the very serious problems that have faced the economy as a result of the global recession. The challenge now is to build the recovery. Our Department is investing a great deal to back young Britain—in helping young people into jobs and finding them work experience—but running the economy is no job for an apprentice. The hon. Member for Tatton (Mr. Osborne) should take that seriously.
In fact, our debt as a proportion of GDP is still lower than that of many of our European competitors. Moreover, we have presented a serious set of proposals to bring borrowing down once the economy is growing and also, critically, to support the economy and support growth now.
The Conservatives have got it wrong on the recession at every turn—wrong on Northern Rock, wrong on the banks, wrong on help for the economy, wrong on supporting the unemployed. As for their policy of cuts this year, that would send the recovery on to the rocks at just the time when it matters most. Conservative Members simply do not seem to understand the seriousness of the challenges we face, and the importance of helping those people who need our support in order to get into jobs and pursue a prosperous economic future.
We have just come through the toughest world recession for many generations, and without Government action we would have seen millions of people lose their savings when the banks crashed, hundreds of thousands more people lose their jobs and struggle to find work, thousands more businesses go bust and thousands more people lose their homes. Yet despite the world recession being so much deeper than in the ’80s and ’90s, the level of business failures has been half that of the ’90s, unemployment has been half that of the ’80s and ’90s, and the rate of repossessions has been half the rate it would have been if the ’90s experience had been repeated. That is because of the action this Government took, but which the Conservatives opposed. Time and again they wanted to repeat their approach of the ’80s and ’90s, when the Government turned their back and shrugged their shoulders, and left people to face long-term unemployment, and business failure too.
Will the right hon. Lady concede that House of Commons research shows that 19.6 per cent. of young people are now unemployed, and that if we add in the jobseekers and those who are genuinely unemployed but who are not included in the figures the Government give, the number of unemployed is well over 4 million? Does she deny that?
The hon. Gentleman is referring to the International Labour Organisation youth unemployment survey, and, in fact, its figures include significant numbers of full-time students who are also looking for work. We believe that youth unemployment is a serious issue, which is why we have set out proposals to help young people get back into work, but the hon. Gentleman’s party refused to fund and support those proposals, so they refused to help any of these young people get back into jobs.
The Conservative party has not changed. Once again it wanted to turn its back, but this Labour Government would not turn our back. We know that unemployment is never a price worth paying, and we will not stop the help now because we know we are not yet out of the woods. It is important to support the recovery, and not to put it at risk. In the ’80s and ’90s, unemployment rose for years after the recession finished. We are not prepared to let that happen. That is why this Budget is a Budget for growth, for jobs and for recovery, with more help for the unemployed to get back to work, such as by extending the future jobs fund and the youth guarantee. Those measures are helping thousands of young people into jobs, including 170,000 mainly youth jobs through the future jobs fund, which the Conservative party wants to abolish.
I have met some of the many young people across this country who are now beginning their jobs and getting some great career starts: a young man who has started work in theatre lighting in Wakefield; a young woman in Bedford who is working in a sports charity; a young woman in London who is training to be a housing officer; and a young man in York who told me that the work he is doing with Groundwork has inspired him to go into horticulture. [Interruption.] Thousands of young people have now started jobs through the future jobs fund. [Interruption.] Conservative Members can shout all they like, but their party wants to pull the plug on that funding and abolish the future jobs fund, and thereby tell more than 100,000 young people across the country to give up on their dreams and their chance of getting work. Conservative Members want to turn their backs on them. How dare they deny those young people a start in their career by not backing that funding and the support it gives young people to get back into jobs?
I thank the right hon. Lady for giving way, and I will tell her what I say to the people in my constituency. The picture she is painting suggests it is all okay out there, but in the real world in my constituency and across the country thousands of young people, and older people, are without jobs, and thousands of small businesses, to which people have dedicated their lives, have gone under. What I am telling them, and what I tell this House now, is that that is the fault of this Labour Government. The right hon. Lady is speaking as though she had not been in government for 13 years, but people out there in the real world know it is the fault of the Labour Government, and she must stop pretending.
Well, the hon. Lady can muster as much righteous indignation as she likes, but she should tell her constituents that she wants to cut the help for those young people to get into jobs and for those businesses by enabling them to pay their tax over a longer period. That is her party’s policy. Faced with the biggest global recession for many generations, with the collapse in global trade, and with banks in every country in the world near collapse, what does the hon. Lady’s party want to do? It wants to cut the funding and support for people and businesses in her constituency, and for young people seeking jobs. I hope she is honest enough to tell her constituents how her party would pull the rug out from underneath them just when they are trying to get back on their feet, and just when they are trying to build the recovery. The youth claimant count has now fallen for four months running, yet in the 1980s it increased for four years after the recession finished.
May I just seek some clarity from the right hon. Lady? She has just talked about the Conservatives cutting the help for young people and people trying to get into work. Will she therefore explain figure 10 of the Budget policy decisions on page 120 of the Red Book, which states that “Reprioritised spending from DWP” is a cut of £475 million?
Let me tell the hon. Gentleman what is happening. As a result of the unemployment figure being about 500,000 lower than we expected this time last year—which is a result of our policies and our investment that his party opposed—fewer people are reaching long-term unemployment and fewer people are needing support from the flexible new deal, and because of that we are able to extend, not cut, the future jobs fund and increase the number of places under it. We are able to do that because we have got more people back to work. The Conservative party has opposed every single penny of this, which shows their complete lack of support for the unemployed. That is why their stance is so disingenuous.
The hon. Gentleman should understand that we are spending about £2 billion in additional funding for the unemployed as a result of—[Interruption.] This year, in 2009-10, we are spending about £2 billion in additional funding. In 2010-11, we will increase that: we will spend more than the £2 billion in additional funding. We were initially allocated up to £3 billion, but we will not need to spend all of that £3 billion in 2010-11 because unemployment is lower, so we will be able to spend more in 2011-12. That still amounts to an increase in investment next year compared with this year, at a time when Conservative Members want to cut the funding. They want to cut it, whereas we want to increase it next year compared with this, and the truth is that they would not have spent any of it anyway. They would not have spent a single penny of it, because they oppose every penny of that extra £5 billion, as it was part of the fiscal stimulus and extra discretionary support for the economy, but it has helped us to save money by getting unemployment down.
I entirely agree with what my right hon. Friend is saying, and I urge her to ignore the economic illiteracy on the Opposition Benches. Is it not simply the case that savage cuts in public spending now would drive up unemployment and drive us into a depression? Is that really what the Conservatives want?
My hon. Friend is right; that is what is at stake here. This is what is at risk: a serious cut in spending could lead to a double-dip recession and the kind of stagnation that Japan experienced many years ago. My party is determined to avoid such problems.
This is not just about the action to help the unemployed; it is about the support for businesses. It is about helping businesses to extend their time to pay; about cutting business rates for a year for small business; and about our increases in tax breaks for business. Astonishingly, the Conservatives want to abolish those: so much for helping private business to invest and grow. The Conservatives actually want to penalise the businesses that are investing most: so much for helping to rebalance the economy. The Conservatives want to hit manufacturing and yet create another windfall for the banks by cutting the capital allowances for the banks.
What we should be doing is following the proposals that the Government have set out by providing the support for the high-tech infrastructure of the future, including digital, high-speed rail and offshore wind, introducing the stamp duty cuts for first-time buyers funded from the most expensive homes, and keeping up public spending and public investment while the recovery strengthens. The Conservatives say that we cannot afford to do this—the truth is that we cannot afford not to do it. That is because the changes that we have made and the investment that we have already put in to help people back to work has already paid off: unemployment is already about 500,000 lower than was expected this time last year, and that has saved about £15 billion over the next five years. Getting the economy growing and getting unemployment falling saves money, saves livelihoods and saves people’s futures.
What did the hon. Member for Tatton want? He wanted the cuts that put at risk the recovery and that risk a double-dip recession. He wants to cut public spending, just as the Conservatives did in the ’80s and ’90s recessions, both during the recessions and in the early periods of recovery. That is why unemployment kept rising in the ’80s and ’90s for months and years after the recessions finished. We are talking about cuts that would cost us more for years to come.
We are coming out of the deepest world recession for very many generations, and of course it has hit employment. However, the level of employment is still higher than it was in 1997 and we have seen the first falls in unemployment much earlier than was the case in previous recessions. I hope that the hon. Gentleman will welcome the 440 future jobs fund jobs in his region, but I am sorry if he wants his party to cut them back and to cut that support for young people.
We must ensure that we bring borrowing down in future, once the economy is growing. That is why this Budget sets out a clear plan to cut the deficit, by more than halving it over four years and cutting the structural deficit by two thirds over the course of the Parliament. No other Government in the world have set out such a detailed plan.
I wish to continue my right hon. Friend’s theme. I am old enough to remember the 1979 election when the Conservatives came into office. They immediately pushed the VAT rate up from 8 to 15 per cent., raised interest rates, created 3 million unemployed and destroyed a fifth of our manufacturing industry. That is what the people face if they vote for the Conservative party next time.
That is correct. My hon. Friend is right to say that it was not simply about the recession itself, but about the damage that the Conservatives did for many years afterwards in the way they responded to the recession by turning their backs on people at that time.
I am not going to give way for a little while, as I need to make some progress in order to let other Members respond.
Our proposals will cut the deficit in three ways: through growth; through tax; and through tighter spending. The Conservatives curiously appear to be opposed to all three of those. First, we know that they are backing less growth and that they want less tax. They are silent on where they will find any spending squeeze, and they still want to cut borrowing further and faster. They talk about credibility, yet if they went into the jobcentre with sums like that we would send them on a basic numeracy course; their figures simply do not stack up. Their approach would put growth at risk by cutting support when the economy needs it most.
Secondly, the Conservatives oppose many of the tax measures that we need. The Government have set out plans for £19 billion in tax increases in order to bring the deficit down. That is a tough thing to do and it is a responsible thing to do to bring the deficit down, but yesterday the Conservative leader attacked every one of those tax increases. The Conservatives have not proposed a single tax measure to bring the deficit down, so perhaps they could tell us now whether they support or oppose the tax action that we are taking and whether or not they are prepared to put forward tax measures, which are difficult, in order to ensure that borrowing is brought back down.
The hon. Member for Tatton talks about a bank tax, but he knows that that is completely undeliverable in a single country and he has not talked about any possible measures that will make a real difference in helping to bring the deficit down. The Conservatives need to tell us whether they support the national insurance increase, whether they support the new top rate of tax and whether they support the cut in tax relief on top pensions. There is silence from the Conservative Members, yet they will not say what they would do instead.
As for the claims made by the hon. Member for Tatton about personal allowances, either he does not understand how upratings work or he has been deliberately misleading and disingenuous—or perhaps he just wants to spend an extra £2 billion out of the blue. On any of those counts, he is not fit to be Chancellor. Personal allowances and benefits have been uprated with the autumn inflation figures since the late ’70s. Changes in prices after that are picked up in the following year’s ratings. In some years, by the time spring is reached inflation has decreased since the autumn measure, as it did substantially last year. If Conservative Members are saying that allowances should be uprated by more this year, I presume they also think that allowances should have been cut last year—they were not.
Let us consider what has happened over the past two years. Some 22 million basic-rate taxpayers are paying £145 less in real terms, on average, compared with the situation in April 2008. If Conservative Members suddenly want to ditch the decades-old way in which allowances have been calculated, they should tell people how they are prepared to pay the one-off £2 billion cost of changing the system this year. Once again, they say that they want borrowing to be lower, but they also somehow want magic money to pay for tax cuts too. They never face up to the serious consequences of these decisions; all we get is the political posturing, never the serious decision making.
Thirdly, despite the Conservatives’ rhetoric, they will not sign up to any spending squeezes. They say that they want to cut further and faster, but they will not tell us any serious measures to bring spending down. They complain that we should set out more detail for 2013, but they will not even say what they will do in 2010. They say that they will make cuts in 2010, yet the next financial year is just 11 days away.
The hon. Member for Tatton says that he does not have enough information to set out his proposals for 2010-11, but we set out our spending plans for 2010-11 in 2007. How long does he need? How much information does he need in order to be able to tell us where he wants to find cuts in next year’s money? Next year’s money is part of the existing comprehensive spending review. We set out those plans many years ago, yet his party still cannot work out what it wants to do with next year’s money—with just 11 days to go, the Conservatives still cannot work it out. They cannot work it out because they are not prepared to be serious and because they are probably hiding something. To be fair to the hon. Member for Tatton, I think he is probably quite good at cutting numbers—after all, under his election campaign leadership he has certainly cut his party’s lead dramatically—but he will not tell us what he wants to cut in public spending, because he will not face up to the real decisions that Chancellors need to make in practice.
What have the Conservatives said they will do? They have said that they will increase the state pension age for the over-50s—that would not save them any money for years, but it would force people in their 50s to rip up their retirement plans and it would cost men in their 50s about £8,000. The Conservatives have said that they will cut the child tax credit and the child trust fund from families on more than £30,000 or more than £15,000 a year. That came just a few weeks after their leader promised
“the most family-friendly manifesto that any party has produced in British political history.”
This is family friendly? We always knew that the Conservatives had a narrow view of “family”, but this shows that they have a pretty sinister view of friendly too. I say to the Conservatives and the Liberal Democrats that they should rethink this. The Labour party set out yesterday—[Interruption.]
This party is increasing child tax credit—in this Budget for one and two-year-olds—because we think that parents need more help and more choice when their children are young. We want to increase help for pensioners and families who need it in this Budget, even at a difficult time. We want to increase the child tax credit, but the Conservatives want to cut it and to bring back the married man’s allowance instead. We want to help all parents of toddlers. We want to help the married mum, but we also want to help the widowed mum, the single mum, the divorced mum, the dads and the grandparents if they are looking after the children too. We want to help mums who go out to work part time or full time, not just those who stay at home, because we know that families come in all shapes and sizes, and that a toddler can run one ragged whatever form their family takes. That is why we will support all families and will not discriminate against the families that the Conservative party simply does not like.
We want to give more help to those on the lowest incomes, whereas the Conservatives want to give the most help to the married men on the highest pay. We support the child trust fund, because we think that kids should have the chance of some family savings and assets being put by on their behalf, and we want to help families to do that. The only thing that the Conservative party wants to offer to families who want to build up assets for their kids is a cut in inheritance tax on millionaires’ estates. I should point out to the shadow Chancellor that, contrary to his own experience, there are not many families in Britain who are due to inherit a millionaire’s estate.
The country faces a big choice—a serious plan for growth and deficit reduction from the Chancellor who has steered Britain through the banking crisis and the worst global recession for generations, or a set of political gimmicks from the student politicians who would put our country’s future at risk. The Labour party will not put our country’s future at risk, and I commend the Budget to the House.
I apologise to you, Madam Deputy Speaker, and to the hon. Member for Tatton (Mr. Osborne) for missing the first part of what he said. I had to attend an engagement that had been arranged many months ago. However, I have had what he said reported to me, and I heard his position on the radio this morning—I do not think that it has changed from this morning to now.
Yesterday was an opportunity for a new spring awakening of awareness in the Government regarding the crisis that the country faces. I do not think there is a single person in Britain who does not realise the severity of the economic crisis that we are now in.
It is clear that the British public want a fairer tax system, but yesterday’s Budget did not deliver it. They also wanted a clear plan to reduce the phenomenal deficit that we now have, and I do not think that they bought the suggestion that the growth figures are about to be between 3 and 3.5 per cent. as was suggested by the Chancellor yesterday. They believe that they are far less than that. The Budget was the last opportunity of the current Chancellor, and possibly the Government, to address the severe condition that Britain is in, and the British public were looking for honesty and, above all, reality in how the Government would deal with the biggest problem that confronts us. That is why most people came away from yesterday feeling that the big questions had not been answered by the Government.
One big question is this: how are we going to find the money to pay the debts that Britain has built up under 13 years of Labour rule? The economy is in a deep and profound crisis, but nobody has been surprised by that. There has also been the deep social crisis of an unequal society that was made unequal under the last Tory Government and that was sustained as unequal under Labour Governments. The tax system that could have become fairer under Labour still places a hugely unfair burden on some of the people who work the hardest in constituencies such as mine—traditional working constituencies in inner London—and constituencies up and down the land. After 13 years, the Labour Government have left this country more unfair and more in debt than it has ever been, and neither of those major challenges has been addressed.
The hon. Gentleman will hear, as he heard yesterday from our leader, my right hon. Friend the Member for Sheffield, Hallam (Mr. Clegg), and from my hon. Friend the Member for Twickenham (Dr. Cable) and others about our consistent policies, which have been enunciated for weeks and months. We have made clear our position on tax, the deficit and public expenditure.
The hon. Gentleman knows, as I do, that on each day of the Budget debate, the case will be put for each party. The difference between our party and his is that we can answer some of the questions about where money should come from and where savings will be made. Having listened to the hon. Member for Tatton this morning and this afternoon—[Interruption.] I told hon. Members that I listened to the hon. Member for Tatton this morning and that I listened to a significant part of what he said this afternoon and had the rest reported to me, so I know that the Conservatives still have no answers to the big questions. All he said was, “You’ll have to wait and see”. A party that aspires to government, because it is currently the major Opposition party, can do no better, a matter of weeks before the general election, than say, “You’ll have to wait and see where we’ll find the expenditure cuts that this country needs.” That is neither an honest nor a straightforward way of addressing the electorate. If it cannot do that in the Budget debate, a matter of weeks before the general election, the British public will realise that the Tories either have something to hide or that they do not have the policies they need to deal with the current economic crisis.
This morning, the hon. Member for Tatton said that this country needed a party with the “energy”, “leadership” and “ideas” to deal with our economic crisis. Those ideas were not heard from him this morning, but they have been heard consistently from my right hon. and hon. Friends. We are consistent in our view that fair taxation and a realistic policy to deal significantly and immediately with the deficit are the beginning of the sort of economic policy that we need.
The hon. Gentleman has said that his party anticipated the crisis, but if I remember correctly, his party was as wedded to neo-liberalism, globalisation, a free world market and deregulated banking as the other parties were, although I must add that I was not. He talks about taxation. His party had a proposal to increase taxes on the rich, but then withdrew it. I found that very disappointing.
I shall deal with taxation in a second. It certainly is not true to say that we have not consistently said that we need continuing public investment that is both responsible and targeted, and that gives us the sort of green, sustainable, long-term growth that this country needs now and has needed for the past 13 years.
On the need for a fair tax policy, the Liberal Democrats continue to argue what we have consistently argued. What the Chancellor should have done yesterday for all those at the bottom end of the income scale—all those with an income of below £10,000 a year—is to relieve them of income tax altogether. We have also argued that that should be financed out of the incomes of the very well-off. Yes, that is a redistributive policy; yes, it is about giving money to the poor and paying for it out of the pockets of the rich. We heard yesterday that the Chancellor had adopted a bit of the mansion tax policy, having heard that idea from us, and a bit of a stamp duty policy from somewhere else. We have argued that people with homes that are worth more than £2 million should make an additional contribution. That is not a secret. We have argued for that and we believe in it. We also believe that those who have the broadest backs and the largest finances should make a contribution. Interestingly, I think that the public want us to concentrate on giving jobs to the builders and people in the construction industry who can get Britain back to work and not give the sort of advantages that the Tory party gave for years to the bankers and people who invest overseas and offshore, rather than investing in Britain and putting their money where the jobs ought to be.
Both our leader and my hon. Friend the Member for Twickenham, whom the public respect hugely for telling the truth in recent months, are clear that there need to be some savage cuts. I shall set out now what sort of things can be cut, and I shall do so in much more significant, clear and precise terms than did either yesterday’s press releases from the Treasury or today’s comments from the hon. Member for Tatton, who did not indicate in which areas there would be the specific reductions that the public know have to happen.
We are very clear that there are large-spend items that ought to go, such as the like-for-like replacement of the Trident missile system, the identity card programme with all its costly infrastructure and the child trust fund, which we think was an extravagant, gratuitous and unnecessary way of giving money at a time that it is not needed to people who do not need it. We are clear that we need to have smaller government, a smaller Parliament with fewer MPs and a smaller number of Government Departments—several could be amalgamated. We are clear that there should be reductions in the increase in the salaries of those in the public sector at the top end of the income scale by limiting everybody across the income scale to the same increase.
We have identified about £15 billion of cuts, significantly more than were identified yesterday by the Chancellor and significantly more than have been identified so far by either the Conservative shadow Chancellor or anybody else on his Front Bench. We are not hiding that. We are also clear that immediately after the general election there will have to be a further Budget and that it will have to be an emergency Budget that deals with the crisis properly, unlike yesterday’s which did not, and that there will have to be a way of trying to bring the country together to own collectively the serious changes in the way in which we spend our money that need to be addressed.
That is why my right hon. and hon. Friends have argued for a council for financial stability involving all the major parties, the Financial Services Authority and the Bank of England. That will ensure that we have that debate out in the open. The difference between our policy and that of the hon. Member for Tatton is that we are open about what we believe will have to go immediately, about what we believe that the process should be immediately after the election and about the fact that we will get public consensus for the very difficult economic decisions that have to be taken only if the public is consulted and engaged with. It should not be done in secret, behind closed doors, leading to proposals only being produced before the electorate after the election should his party to be elected to form the next Government.
Will the hon. Gentleman clarify one particular point? He has listed a number of cuts proposed by his party, which I think they calculate as constituting £15 billion. Does he consider the cuts that he has listed to be savage cuts, or is it the additional cuts on top of that that he considers will be savage, to use his word?
We can all use different adjectives, but £15 billion is a significant cut in the current spend. If we decide, for example, not to have the Eurofighter programme or the like-to-like replacement of Trident, they will be significant and, in the two sectors to which they relate, savage cuts. However, we are clear that we will not cut things that will adversely affect the poor. We are not going to cut the sorts of investment that we need to get the economy going again. We have measured and balanced both the necessary cuts and the investment that we believe can be made, too. The manifesto that the public will see in the next few weeks will set out not only the expenditure savings that we expect to make—£15 billion first, with other expenditure cuts to be discussed later—but what we intend to spend more on, which is how we believe that we can get the productivity and the real sustainable growth that this country needs.
Let me finish on the question of the deficit and the immediate response, because out there in the real world people know that that has to be faced up to. We will have a £400 pay rise cap for all public sector workers and a banking levy—a new tax, to deal with the Secretary of State’s question about what new taxes we will introduce. We are clear that there needs to be a banking levy so that banks can pay for the financial support they have been receiving. We will scale back the homebuy schemes, reform—and therefore cut back on—the spend on prisons and cut back on the burdensome regulation of local authorities. We have a list of savings that is in the public domain—it is not secret and we have not tried to hide it at all.
We then have to ensure that we have a fair tax system so that people are incentivised to work and employers are incentivised to take people on. There were some areas of policy that the Government addressed yesterday that half addressed the question but did not adequately address it. For example, small businesses— referred to by the hon. Member for Epping Forest (Mrs. Laing), who is no longer in her place—that have been having a hard time want changes in the business rates system. They want automatic rate relief rather than having to make claims. However, our view is that we need a different sort of business rates system based on the development value of the land and that gives local authorities the flexibility to give a less draconian rates bill to a small business than they give to a big business. We need to encourage the self-employed and the small businesses that employ most of the workers in the United Kingdom to blossom and flourish. That would make a difference and be a more sensible approach.
We are also clear that we need policies that reduce the burden on individuals in their homes. That is why we have said that if we take people earning under £10,000 out of income tax altogether, that does not just help people who are of working age—it helps the pensioner who has a small income from their private pension, too. We calculate that just over 3.5 million people would benefit and that people would get an average £700 back in their pay packet or bank account every year. That is significant. Those are the sorts of changes that we should have heard but, as the Secretary of State knows, freezing personal allowances will mean that some of the poorest people will be in a more difficult economic position in the days ahead, when they need to be in a better position.
The Government adopted one other policy from us as well as the mansion tax half-policy, and that was the green infrastructure bank. We welcome that. We believe that if we are to have the sustainable growth that Britain needs, we need new systems for raising the money and for spending that money, and a green infrastructure bank is a good thing.
We believe that there ought to be much more support for regional banking as well as a decision to separate the banks into local banks, which lend to individuals and businesses, and the banks that want to play the international casinos, which should not be able to be supported by the public at all. We believe that there ought to be local stock exchanges in the regions of England, providing the ability to invest locally. In the Secretary of State’s part of the country and elsewhere, there is a great desire to be economically prosperous as well as great ingenuity and great skill, ability and enterprise. We want Yorkshire and the Humber, the east and west midlands and the south-west, for example, to be able to invest in themselves so that they can prosper.
Of course, some things are national schemes, such as high-speed rail schemes. That will need national investment, and we support it. We support changing the tax regime so that we tax aeroplanes according to the flights they make, not the passengers they carry. That would mean that there would be an incentive for people to move from planes to trains, which is a good thing. It is good for the environment, good for the economy and good for the Exchequer, too.
We also believe that the Government need to invest in a whole new form of green growth as regards the energy sector. There is fantastic potential. One needs simply to go to the east coast of Scotland and talk to people in the oil and gas industries about the remaining work they can do in the North sea, or to talk to the people in the ports down the east coast—in Newcastle and Hull, in the Thames estuary or up on the east coast of Scotland—about the potential to build offshore wind turbines in the ports and to export them offshore to be the new wind farms of the future. We have fantastic potential in this country, but there need to be incentives for those things rather than disincentives.
The Government could and should have signalled immediate action for growth in the economy in the year ahead as well as a long-term strategy. We believe that immediately after the general election, there could be investment in tens of thousands of green jobs by bringing the 250,000 homes that are empty back into use—that would probably produce 50,000 jobs. I saw a glass and glazing van going past me this morning. Huge additional numbers of people would be willing to work in the building industries, renovating and repairing. There could have been an incentive for that had the value added tax rules been changed so that there would be less VAT on repair and renovation. It would be an incentive to people to restore their homes.
We believe that there could be an immediate scheme allowing people to have what we call an eco-cash back, so that they could put in some double glazing, replace their boiler or replace their inefficient, environmentally unfriendly fridge with a more environmentally friendly one. There could be schemes to get people to work in the first year of a new Government after the general election, such as one that ensured that all our schools were well insulated, saving energy on the one hand and creating jobs on the other. There is a whole programme of investment activities, which we have costed and believe could start now, that would put people in this country back to work. That could be part of our scheme—and Ministers have heard us enunciate it from these Benches—aimed at ensuring that every home in Britain that can manage it will become a warm home in the 10 years between 2012 and 2022.
Establishing a fair and sustainable economy means delivering growth that lasts. It means delivering the necessary infrastructure now, and investing responsibly in the years after the election. It also means that there must be development in the future.
We agree that it would be foolish not to continue to invest. The hon. Member for Luton, North (Kelvin Hopkins) hinted that it would be wrong to turn the tanker around suddenly, and that reducing, slashing and burning would be quite the wrong thing to do. We share that view, but there is a difference between my party and the others. We also believe that, while the green shoots may or may not be showing now, people need investment in the jobs that will produce more jobs. That is why the housing and construction industries, which will carry out the work involved in repairing homes and insulating factories, hospitals and schools, have such potential. People in our constituencies around the country say that they are ready to take on that work. With the right adjustments on the fiscal tiller, they can be incentivised to do so.
That is what my hon. Friends and I have argued for months and for years. We have said for a long time that the present economy has been unsustainable. We have overstretched ourselves and been irresponsible as a nation. We have been irresponsible economically, by spending more than we could afford. People, and bankers in particular, have been gambling with the nation’s finances. We have also been irresponsible environmentally, using the resources of tomorrow rather than investing the resources of today.
To pull ourselves back, we need targeted investment that is set out clearly, managed appropriately and held to account democratically. Often, that investment should be led locally, with local government involved in delivering the Warm Homes scheme. The regions of England and the devolved Administrations must be encouraged to develop renewable energy, and the like. We support that, and the manifesto that the House and the public will see in the next few weeks will set out that targeted investment. Our plans for taxation will be at the centre of our proposals, flanked on either side by plans for reducing the deficit and plans for targeted investment.
Unlike the Conservatives, we are clear about tax changes. We would make tax simpler, and give help to the many and not the few. Unlike them, we are clear now that we would make spending cuts, to give help to the many and not the few. We would reduce pay increases for the well-off to help the pay of the less well-off.
The people of Britain are waiting for the election, and desperately want it to happen soon. I think that they realise that the main party options across the whole of the UK give them three choices. They can have more of the same if the Labour Government are re-elected, even though the past 13 years have been only a wasted opportunity that has given us our worst ever deficit. They have a promise from the Conservatives of a completely different economic approach, although nothing has been revealed yet. From the Liberal Democrats, they have a realistic, pragmatic and costed programme that would deal with the deficit. It would do so with the consent of the public, yet continue to sustain investment where it is needed.
We need productivity and growth in this country, but that growth must be sustainable and long term. We need that for the builders, not the bankers. It must be onshore, not offshore, and in the interests of the many and not the few. My colleagues and I will be putting that case to the British public in the weeks ahead.
The speech that we just heard from the hon. Member for North Southwark and Bermondsey (Simon Hughes) was quite brilliant, and I agreed with much of what he said. However, a lot of what he proposes in respect of public building has been done under this Government. For example, there has been a great deal of investment in council houses; those in my constituency are being fitted with double glazing to make them fit for the future.
The hon. Gentleman did not explain what the leader of his party was talking about months ago when he said that savage cuts were needed in the economy. I do not think that he has changed his line, although I did not listen to everything that he had to say yesterday. I know that he is in opposition, and so has to say what his party would do in office, but the Government made clear yesterday their plans for the future. I hope that they will be able to carry them out after the election. Those plans represent a sensible approach to the problems that the recession has created.
The recession has been international, but it has hit our economy. The Government’s sensible approach is far better than the response mounted by the Conservative Governments of the day to the two recessions that we have experienced since I became a Member of this House in 1983. Those Governments did anything but try to ease the problems that existed in those periods: they did not seek to provide employment or look after the needs of the unemployed or anyone else.
I listened to what the Leader of the Opposition said yesterday in response to the Budget. I know that that is a most difficult thing to do, but he said absolutely nothing about what a Conservative Government would do in response to the recession from which I hope we are emerging now. We must not dip back into recession, but the right hon. Gentleman said nothing whatsoever in that regard.
I listened to the shadow Chancellor, both on Radio 4 this morning and at the start of the debate this afternoon, and he said nothing either. My right hon. Friend the Secretary of State for Work and Pensions asked him what the Opposition mean when they talk about making cuts in 2010-11. All she got was absolute silence.
At the moment, the budgets are in place for our public sector. There are plans for more new schools in my constituency, on top of the ones that we have just had. There are three in the village that I live in, but the major Opposition have said nothing at all in that regard. If they were to be sitting on this side of the Chamber in a few weeks, what would happen to the 2011 Budget? What would happen to the money for the Building Schools for the Future programme? That has not been mentioned yet in this debate.
Would I get the new schools in my village? The primary school that I went to in the 1950s has been completely rebuilt. It was near to my home, which has been taken down, but we have a new primary school now and it has had the best report from Ofsted that it has ever had. It is a school that, in its building, environment and so on, is fit for education in the 21st century. It replaced one that was built in 1914 to educate people in what was then a mining community.
The three schools that I am talking about are in the same village. The former comprehensive school—or community school, as it is called—is an academy school now and is going to be completely rebuilt. At the moment, it uses the old secondary modern school building that I went to in the 1950s, and the grammar school that was just next door. I think that both were built in the 1920s, and the buildings are not fit for education in the 21st century. I am not talking about the education provided by the schools, as all of them have improved in that regard. I believe that the buildings themselves are not fit for people to work in, never mind for people to sit in and get educated.
The Opposition are silent about what they would do, saying only that they would bring in cuts in 2010-11. Public sector infrastructure replacement has changed my constituency and helped to change the education of young people there far beyond what I imagined could happen under any Government. The Opposition have made it clear that they would do things differently and look at public sector cuts in the next financial year, but I believe that that leaves them open to the charge that the changes seen in my area—and the same things can be seen in most of my communities—would be in danger.
I listened to my right hon. Friend the Secretary of State for Work and Pensions, and I listened to the Chancellor as well. I wholly support what they are doing on behalf of my constituents and the communities that I represent. They have been hammered by, and blamed for, recessions in the past. They have been made to pay for them far more severely than has been the case in the past two years.
The right hon. Gentleman and I came to the House in the same year. I will not deny that there has been fantastic investment in schools, in the health service, and in the decent homes programme to improve public sector housing, but does he not agree that everybody has a duty to tell the electorate exactly where the cuts will be? That includes his party, the Conservative party—as he rightly says, it has been silent—and our party. That way, people will know which budgets will go down. They should also be told what expenditure will be, so that they know which budgets will go up. We need to give both sets of information to the electorate. His party has not yet done that fully; the Tory party has hardly started to do it at all.
I agree on the latter point. As my right hon. Friend the Secretary of State mentioned—everybody knows this—there will be cuts in expenditure other than that on front-line services, which I want my Government to defend.
This afternoon, I want to go back a little bit further and say what the Government have done over the past decade in my constituency. There have not just been new schools. I want to talk about manufacturing. The Opposition Front Benchers, both yesterday and today, just discounted what the Government have done in the real world and the real economy in the past 10 years.
I am sorry to draw my right hon. Friend into a bit of a parochial matter relating to my constituency, but he makes an excellent point about Building Schools for the Future. My right hon. Friend the Secretary of State for Children, Schools and Families offered Redbridge council Building Schools for the Future money a year up front, in this financial year. However, the council said that it was not in a position to do the work, and that it would do it next financial year. Is there not a great risk that, if the Conservatives come in and look to make cuts, the people of Redbridge might not get their Building Schools for the Future money in the next financial year?
That is precisely the case that I am making. I have grandchildren at the academy that I talked about. Just a quarter of a mile away, I have grandchildren in the infant school, which was built in the ’30s. The infant and junior schools are coming down completely. They will merge and will have new school premises. There will be a new school for the academy, too. It is quite a large community or comprehensive school, in terms of numbers. There will be a new school for those with special needs on the same site, too. That is potentially under threat. The Opposition Front Benchers, who tell us every day that they will form the next Government, say nothing at all about those issues, which are on everybody’s doorstep. If the issue affects my hon. Friend’s constituency and mine, it must affect many of the constituencies of Opposition Members. We are not the only ones who should be asking what the Opposition would do in government; Opposition Members ought to do so, too.
I listened to the Budget speech yesterday, and to the Leader of the Opposition’s vacuous statement that followed it. That statement derided what the Government have been doing in the real world. I mentioned manufacturing, but perhaps I could give one more example before I go on to what I want to talk about. I should like to talk about the prime thing that the Government have done. I assume that it would not happen in future, if there was a change of government, but the Opposition cannot put the clock back on what we have done. I want to talk about coalfield regeneration.
My right hon. Friend the Secretary of State’s constituency would have been quite similar to mine, 15 or 20 years ago. In my constituency, under the Conservative Government, we lost coal mining jobs—and related service jobs, too. It was often said that there were two or three such jobs lost for every coal mining job lost. I lost 4,000 coal mining jobs in a very short period. My local unemployment levels were twice the national average, even when the coal mines were open. They are nowhere near twice the national average now. There is now a much fairer share of employment and unemployment, in this country and this economy, than there was traditionally.
Let me give a good example of what was done by a Government who did not care, and who drove the pit closure programme, even though we burn as much coal as we ever did. It just comes from abroad now, and not from our coal mines, although I have one coal mine left in my constituency. Dinnington colliery closed in 1991. The bulldozers went in and took it down, but nothing happened on that site until a Labour Government were elected. It took them a few years, too; they were working elsewhere. A Labour Government took £14 million on to that site. They cleaned it up and put some roads in it. They invited the private sector—they did not wheel in the public sector—to build things on that site and to create some jobs there.
Today, the Dinnington colliery site boasts Formula 1 racing. This year, Manor Motorsport, as it was, joined up with Virgin Racing. That colliery site was brought to life by this Government. On the same site, Johnston Press built a £62 million digital printing press. It prints daily and weekly newspapers, magazines and everything else. If it had been left up to the Conservative Government, nothing would have happened on that site. There were no plans to do anything. There are now hundreds of jobs on that site, some very high-tech. It has a diverse economy, which is great. When a coal mine is closed, it hits the economy and the people very hard.
All that work was done and encouraged by organisations funded by the Government, such as Yorkshire Forward, the regional development agency. We are told that the Opposition will remove RDAs; they do not think that RDAs have a role to play in our economy. They ought to look at what has happened in the real world, beyond these green Benches, in communities such as mine, which were effectively left for dead generations ago.
I want to pick up on what the Chancellor of the Exchequer said yesterday about us as a manufacturing nation. Everybody keeps knocking this country down as a manufacturing nation. It is not manufacturing as it used to—that is true. Manufacturing activity is lower now than it ever was, but this country is still the sixth biggest manufacturing country in the world. It has some great strengths in manufacturing. I know from my work in Parliament that pharmaceutical manufacturing has great strength, and it earns a lot of money for us.
Let me tell hon. Members what has been happening on one of the old colliery sites in my constituency in the past 12 years. There is the advanced manufacturing park on the Waverley site. It is based where the old Orgreave coke and chemical works are, and where, before that, the Orgreave colliery site was. Obviously, the colliery was closed after the miners’ strike. It had a symbolic role in that strike; many thousands of people were on strike there for 12 months, as people will be aware. It eventually closed, and as a consequence, it became an open-cast mine.
At the initiative of the Government, through the regional development agency and the coal owners, now UK Coal, it has been changed dramatically into something that really shows the way forward. It was, as I say, a joint venture between public and private sector organisations, and its aim is to create an internationally recognised centre for engineering, innovation, research and manufacturing excellence. The advanced manufacturing park’s goal is to capitalise on the advanced engineering and manufacturing expertise that has amassed in south Yorkshire, and further to strengthen that capability so that the area’s companies can remain globally competitive in the 21st century. When I hear Members on the Opposition Benches deriding this Government and saying that they have done nothing, it makes me really angry. They should come and look at constituencies such as mine, which were left in a mess by the Conservative Government.
The advanced manufacturing park is a hub, and it has some of the world’s leading materials and structures research and development organisations. It enables manufacturers of all sizes from all sectors to take advantage of advanced technologies and new market opportunities so that they are better able to create local jobs and export the best of the region’s manufacturing, design, technology skills and innovation throughout the world. It boasts a highly skilled and knowledgeable work force of more than 300, including more than 100 graduate engineers and PhDs, from countries such as the USA, China, Germany, Israel and Mexico.
The wide range of high-quality property available at the park includes small offices, workshop and lab space, through medium-sized, hybrid and light industrial units, to larger custom-built design and build options. That provides growing companies at every stage of their development with the opportunity to locate their operations at the UK’s recognised centre of excellence for advanced manufacturing, and to benefit from their proximity to industry innovators and international brands. It regularly demonstrates exactly how Yorkshire’s advanced manufacturers have a world-class reputation for innovation and excellence.
The site was visited recently by an organisation that supports UK and German companies that want to trade and invest overseas, and my right hon. Friend the Secretary of State will be more familiar with it than me. The Government’s UK Trade and Investment organisation helps UK companies to win export business globally and overseas businesses seeking to invest in the UK. It markets this country’s strengths as a world-class source of products, services and partnerships, and as a business location. The director of UKTI in Germany, Mr. Malcolm Scott, recently visited the advanced manufacturing park, which is the only one of its kind, and is attracting millions of pounds of investment to south Yorkshire.
According to UKTI, Britain is Europe’s No. 1 destination for inward investment, and Yorkshire comes high on the list of preferred locations. Rotherham is one of only 16 places in the world, and the first in England, to be recognised as a world leader in welcoming inward investment. It holds the soft landing zone accolade, awarded by the USA’s National Business Incubation Association, for its support for businesses to arrive, survive and succeed in the town. That is international recognition of our great sense.
Mr. Scott, during his visit, saw for himself why the park has a global reputation for engineering, innovation, research and manufacturing excellence, and why it is attracting interest from around the world. Last year the Government announced that Rolls-Royce had chosen that site as the location for its new £25 million nuclear advanced manufacturing research centre. When that opens, it will sit alongside other world-leading materials and structures R and D organisations, including the university of Sheffield’s advanced manufacturing and research centre, which is a joint venture with Boeing, the TWI technology centre and Castings Technology International.
At that site, Boeing and the university of Sheffield are undertaking leading-edge projects on the Boeing 787 Dreamliner. That is what is happening in the real world and in our economy. Mr. Scott also saw 17 high- tech companies, including Fripp Design and Research, a product design, research and business consultancy, and many others. The Boeing-university of Sheffield joint venture is a £100 million project that leads the world in that area of R and D.
Without Government intervention, none of that would have happened. We would not have had Boeing in south Yorkshire—at the leading-edge of aerospace technology; and we would not have had Rolls-Royce coming in to build on that site a manufacturing plant that is estimated to be the size of four football pitches. That is the reality of what this Government have been doing in communities such as mine, which past Governments left to rot. When I listen to people talking on the radio or in this House, I deeply resent the fact that they do not have the decency to say that massive mistakes were made in the past in constituencies such as mine, and that this Government have been putting them right.
We may have borrowed a lot more money in the past few years, but that may have some connection not only with what has happened on that site in my constituency, but with the new schools that it is getting. The issue is not just about bad debt; it is about the future. I accept entirely that the debt has to be managed, but this is about the future of our people, our communities and our children, and we ought to recognise what this Government have done.
That 100-acre advanced manufacturing park is on the site of the old Orgreave works, and neighbouring local authorities have also given planning permission for a massive development of office space on the site. Alongside yesterday’s Budget, the Chancellor also announced the publication of a report called, “Relocation: transforming where and how government works”. He said that the Government were looking at finding savings by relocating civil servants from expensive London offices to elsewhere in the country, and that as a first step 15,000 posts would be relocated in the next five years. Planning permission for the offices on that site is now, I think, at the Government office for the region, or it may be on its way down to a Minister’s desk, and that development fits ideally with a programme of relocating civil servants outside London.
I read yesterday’s report, whose author is Ian R. Smith. He commented on why every Government over many years have wanted to relocate civil servants to different parts of the country, and on some of the difficulties that there have been. However, he gave three reasons why civil servants should be located in London and elsewhere. First, Ministers need their ministerial back-up teams, and civil servants from their Departments obviously need to be in London, close to Ministers, this House and the other place, because that is how the system works.
Secondly, Mr. Smith mentions other areas just outside central London, which is an expensive place, as he explains. They include the London gateway and Stratford, where more could be done, and where the Government are undertaking great regeneration work. Again, however, the Opposition do not seem to recognise that. Thirdly, he says that after that second scenario we ought to be more serious about relocating people to different parts of the UK, including Wales, Scotland, Northern Ireland and the different regions.
So, I am not going to miss this opportunity to plug the planning application to which I referred, and which has gone through the local authorities, because it would enable not just a set of civil servants to relocate to Yorkshire, but public sector bodies to cluster, share accommodation and facilities and provide shared services. The developers, Helical Governetz, say:
“The ‘hub’ although perfect for government relocations will also be an excellent solution for the regional civil service seeking co-location and the wider public sector—particularly local government”.
They go on to mention the NHS and everything else.
That site could deliver the government of the future, be that local government, regional government—although we are a long way from an elected regional chamber, and long may that remain—or central Government. They could be delivered out there, in that area, and that new form of government should be delivered throughout the United Kingdom; it should not be centrally based, as it currently is. I thought that I would include that plug. I do not expect that much will be said about this in the wind-ups. However, I hope that we will look to ensure that where there are sites with planning permission we can get engagement by Government, particularly Regional Ministers, to ensure that this process goes ahead.
I am now going to sit down after what has been rather a long speech. I felt that given that we are very close to a general election that will decide who sits in Government, I ought to have my say on behalf of my constituents and many thousands of other people in constituencies such as mine that were laid to waste in the last two recessions; indeed, recessions were created to lay them to waste. It would be wrong of me not to get up and say to this House that when we go to the ballot box in a few weeks’ time we should not forget the lessons of history, because some things look just the same to me.
I am delighted to follow the right hon. Member for Rother Valley (Mr. Barron), who spoke with great passion about his constituency; as he knows, there is no better time to do that than just before a general election. I listened with care to what he said. He and I have quite a lot in common. He supported the mining industry, and when my colleague, Lord Heseltine, who was then in this House, sought to close virtually all the pits, I was one of a group of about 25 Conservative Members of Parliament who strongly supported the retention of our mining industry. I wish that we had kept more pits open than remain open today.
Hold on: I know what my hon. Friend is going to say. He, too, was one of those 25 Conservative Members of Parliament, and I commend him for the support that he gave to the coal industry, along with myself and others on the Government side of the House, as it was then. Perhaps the right hon. Member for Rother Valley will not particularly commend me for saying this, but the Union of Democratic Mineworkers undertook a service to this country that the people of this country should never forget. I knew Mr. Roy Lynk and Mr. Greatrex, and others, well, and they did a great service to this country.
The right hon. Gentleman is involved in another matter with which I was involved: he is Chairman of the Select Committee on Health. I had the honour of chairing that Committee for a length of time, and it was a challenge. Although I was ultimately removed from the chairmanship—in fact, that is not quite correct; I was not reappointed to the Committee in the new Parliament of 1992—I believe that the role that I played on that Committee was totally appropriate and closed the gap between this House and the medical profession and those who work in health care outside this House. I commend the right hon. Gentleman on the lead that he, too, has given.
Let me, though, give the right hon. Gentleman one piece of advice. He talked about the amount of investment that was being made in his constituency; I express the hope that that investment goes ahead. However, I remind him, and Ministers on the Treasury Bench, that that may not ultimately be in the hands of the present Government, if they retain office after the next election, or, for that matter, my own party, if we attain office. At the end of the day, this country’s ability to borrow money will rest with the financial markets, because if the financial markets lose confidence in this country and its ability to run its economy in a sound and secure way, our triple A credit rating could be downgraded. If that happens, our ability to borrow money will become more difficult and the interest rates that we have to pay will rise, which means that taxation will rise and the impact on the economy will be very great.
The hon. Member for North Southwark and Bermondsey (Simon Hughes) talked about not proceeding with certain expensive defence projects, although he did not say how the Liberal Democrat party would guarantee the defence and security of our country. I have to say to him that the first priority of any Government of this country is the defence of the realm.
The hon. Gentleman knows that he has a lot of respect in this House. He is right about the first priority of a Government. We are clear that in the defence review that we all know will happen after the next election we must guarantee the funding to ensure that troops on the front line, whether they are from the Royal Navy, the Army, the Air Force or the Royal Marines, whom I was with last night, have what they need to do the job flexibly, responsibly and effectively. However, some things may not be affordable and, in our book, a like-for-like replacement for Trident is one of them.
The hon. Gentleman makes his position and that of his party very clear. He will accept, however, that the present Government and my party disagree with him on this. We believe that a replacement for Trident is essential to the future security and defence of our country. That means, of course, that there are agreements across the Dispatch Box between Her Majesty’s Opposition and the Government of the day.
I have been in this House for quite a long time, with almost 39 years of uninterrupted service, and I have always believed that the nuclear deterrent is an essential part of the security of the world, and that we are part of that. We have contributed to the security of the world, and I believe that we should continue to do so.
I should like to make one further comment about the right hon. Member for Rother Valley. He and I have another thing in common, because he is committed to manufacturing industry. Ever since I came into this House in 1971, I have championed manufacturing industry, and I will go out of this House championing manufacturing industry. To me, it is essential. If we want a stable economy in this country, we cannot entirely rely on financial services or the service industries. The manufacturing base gives us that sound stability on which economic progress is founded.
I absolutely share the hon. Gentleman’s view. I am really encouraged that there appears, at last, to be a realisation that playing the international financial markets has not given us the long-term economic security that we need. Whether from his great county of Cheshire or the inner-city docklands that I represent, people are desperate for the engineering, science and research skills of British people to be used. They are ready to do the jobs—give them a bit of encouragement and they will make and sell the best in the world.
Let me mention another matter that, again, involves the right hon. Member for Rother Valley, who spoke with such passion about many of our famous manufacturing companies. Let us take steel as an example. Where is steel now? Who owns steel in this country? It is owned by an Indian company, Tata. When there is a recession, what is Tata likely to do? It is likely to make closures, as it is doing in the case of a smelting processing plant in Redcar in the north-east. It is a tragedy that we have allowed the core of our manufacturing base to be eroded and taken over by overseas interests, which will, when all is said and done, return to their own countries many of the profits that they make in the plants that they own in this country. Tata also owns Jaguar Land Rover. Those products made our country famous and are acquired and respected throughout the world. Why has the United Kingdom allowed the foundation of its manufacturing base to be purchased by overseas interests and, in some instances, taken abroad?
I share entirely the hon. Gentleman’s concerns about foreign ownership of our manufacturing. Not only did profits go overseas, but factories have been closed down and production taken overseas. Is not that one of the effects of privatisation? Some of the industries that the hon. Gentleman mentioned were publicly owned and would never have been bought by overseas companies had they remained so. I suggest that some be brought back into public ownership to protect them for the long-term future.
The hon. Gentleman is a traditional Labour party member, and I respect him. He is utterly consistent—I, too, have been utterly consistent. I say to him in a very friendly way that there will be people in both our parties who say that we have been consistent, but consistently wrong. I do not believe that that is case. There is some justification for his view about public ownership, although I do not share it. I believe that companies have sold out and been taken over because of the structure of our tax system and for other reasons that relate to running large companies in this country. I would like many more companies to remain in the ownership of people who live in this country. The hon. Gentleman and I share that view.
Let me now consider the Budget. Although welcome growth is returning to world economies, even though it is a mere 0.4 per cent. in the United Kingdom, that must not be seen as the end of the crisis or the recession. Some might say that the Government’s action to date has merely postponed the inevitable trouble that lies ahead because of the UK economy’s underlying structural problems.
The banking crisis was a symptom of the problem, not necessarily the cause. Since the UK’s departure from the exchange rate mechanism, our record of gross domestic product growth has consistently exceeded that of the rest of the European Union countries. The UK was renowned for its open markets, low regulation and relatively benign tax regime. Although markets here remained open, regulation and taxation increased markedly in the past decade, as did public expenditure and leverage. The result? The UK’s growth was increasingly driven by unsustainable factors, which, if not reversed, will undermine our long-term potential for recovery. While the UK’s economic advantages were eroded, growth was based on several one-off factors, and the underlying economy became unbalanced. As many of us know, it was biased towards property, finance and the public sector, all fuelled by high and increasing debt.
The composition of the UK economy has evolved rapidly. Back in 1978, 26 per cent. of the population worked in the manufacturing sector. Today, that figure is just 8.9 per cent. In the same period, the proportion working in banking and finance rose from 10.5 to 20.1 per cent. As most of us know, the rise in public sector employment has also been significant, especially in the past decade, with more than 1 million public sector jobs created, taking the total in this country to 6.1 million. That trend has continued, even during the recent severe economic downturn, partially explaining the fact that unemployment has not risen as sharply as expected in the crisis. The Secretary of State for Work and Pensions highlighted that in her opening speech.
During my 39 years as a Member of Parliament, I have never forgotten that Macclesfield’s economic success has historically been based on manufacturing industries, including textiles, pharmaceuticals, which the right hon. Member for Rother Valley mentioned, aerospace and paper and board. I have put the question to the Prime Minister, as I put it now to those on the Treasury Bench: does the Treasury agree that manufacturing industry is one of the only sources of non-inflationary, sustainable economic growth? Does it also agree that if it is to be competitive and succeed in future, it needs more regulation, particularly from the EU, and more taxation like it needs a hole in the head? I hope that Ministers agree and will refer to that when winding up the debate.
As a nation, we ignore at our peril the value of our manufacturing industries to the stability and future success of our economy. I repeat that manufacturing is the only source of sustainable, non-inflationary economic growth. As the right hon. Gentleman said, some of the problems that we have encountered recently are due to our forgetting that; we have not appreciated the value of manufacturing to our economy. The UK’s manufacturing base is now relatively small, and although it should benefit from sterling’s depreciation, it is sadly no longer significant enough to drive domestic GDP growth, at least in the short term.
The fall in the value of the pound, making UK goods cheaper abroad, might have been expected to boost sales overseas. The sharp fall in the value of the pound in the past year should be doing more to help exporters. Sterling’s slide has also contributed to the rapid rise in fuel and oil prices, which add inevitably to industry’s costs. The Government should drop the proposed 3p per litre rise in fuel, even though that will now be spread over some nine months. It is a heavy cost to industry as well as to the domestic driver.
On the face of it, a 6 per cent. drop in exports in January from December should be worrying—I believe that it is. If British companies are producing fewer goods and services than expected for overseas markets, that will hardly help the overall growth picture for the first quarter of this year. It is possible that the severe weather in January and February held up traffic from factories to ports, and therefore had an effect on exports.
I am happy to give credit where it is due, so I am pleased to say that some employer surveys suggest that there has been a modest rise in optimism among exporters. I hope that that is the reality and that it continues. UK manufacturers may have taken advantage of a weaker sterling to increase their profit margins rather than to increase sales. There is no doubt that the sharpest fall in the value of sterling since the war happened at a bad time for exporters to take proper advantage, and it is perhaps unsurprising that they tried to extract every last penny out of the demand that remained for their products and manufactured goods. However—and this is a worrying statistic—the trade gap in physical goods widened to £7.99 billion, well above the £7 billion that economists had forecast.
I am listening very intently to my hon. Friend. When I was younger, the balance of trade payments statistic was always put up—it was on the news and we were well aware of it—but in recent years it seems to have disappeared from our screens. Can he tell me why that is?
My hon. Friend is indeed a good friend—he is the official Opposition’s pairing Whip, so I need to be on good terms with him—but I cannot give him a reply to that question, because I do not know the answer. Although I am from time to time a provocative and controversial MP, I am prepared to tell the truth and to admit when I do not know the answer.
I am only too delighted to agree with the hon. Gentleman. My love of the European Union—or lack of it—is extremely well known. Indeed, I tell the House that Europe needs us much more than we need it. There is a huge trade deficit with the countries of the EU. What is more—to add one more thing to build on what the hon. Gentleman said—before we joined the EU, we had a surplus of trade with the countries that then comprised the EU, and that has been totally reversed.
The goods trade gap with non-EU countries was also wider according to the last range of figures—it increased from £3.4 billion in December to £4.8 billion—after exports to countries outside the EU dropped by 12.5 per cent. on the month and imports increased by some 1.6 per cent. What we are witnessing is the result of the fact that the UK’s growth was increasingly driven by unsustainable factors such as exorbitant public spending, which if not reversed will seriously undermine our long-term potential for recovery.
From 2000-01 to 2008-09, public expenditure increased from £364 billion to £617 billion. The current forecast from Her Majesty’s Treasury—Ministers may wish to confirm this—is for £702 billion of spending by 2010-11. Government spending as a proportion of GDP has increased from 36.8 per cent. in 2000 to 43.2 per cent. today. That very substantial public sector pump-priming spend is both undesirable and, as one or two hon. Members have said, unsustainable. Given the recession in the private sector and continuing, accelerated public spending, Government spending is likely to be 48 per cent. of GDP by the end of this financial year. Does the Minister believe that that is sustainable? Government spending is back to levels last seen in the mid-1970s. It is estimated that pump-priming increased growth, albeit unsustainably, by 1 per cent. in the past decade.
HM Treasury forecast a deficit of £175 billion for the current fiscal year—the current forecast is around £12 billion less than that—but that is almost twice as bad in percentage terms as the UK’s deficit at the height of the International Monetary Fund crisis of the mid-1970s. There are effectively three ways of tackling that deficit, which were dealt with in a way by the Secretary of State for Work and Pensions, by my hon. Friend the Member for Tatton (Mr. Osborne) and by the hon. Member for North Southwark and Bermondsey at the beginning of the debate.
One way is to allow tax receipts to erode the deficit by stimulating GDP growth. That has been the Government’s main approach, and it has resulted in a 0.4 per cent. increase in growth. The choice after that is therefore unpalatable: tax increases or spending cuts. If the UK is to rebuild long-term economic growth, there is no choice but to reduce significantly the excessive spending of the last decade, most of which was based on borrowed money.
Raising taxes would be counter-productive. The UK’s tax advantage over most of our EU competitors has already been lost, and further tax rises, as I am sure most hon. Members agree, will further erode the UK’s competitive position. Spending cuts in the short term will impact on tax revenues and Government growth assumptions, and tax increases will crowd out the private sector. Again, it was interesting that the right hon. Member for Rother Valley agreed that the site of the Orgreave coal depot has been developed by private enterprise, albeit assisted by the Government. That is what we want to see in many more parts of the country.
Throughout the 2000s, the Government’s economy was an unsustainable engine for growth and we are now suffering the consequences. In my view, we need to build a new economic model based on saving, investment and exports, instead of the debt-fuelled model of the last decade. We simply cannot go on with the same irresponsible economic policies, which have been followed not only by the present Government but by Conservative Governments in the past. Those policies have recently given us the biggest boom and the biggest bust, and they now threaten our recovery with higher debts, higher instability, higher taxes, higher interest rates and—sadly—a possible increase in unemployment.
As the right hon. Gentleman also said, we are one of the great leaders in the world in advanced manufacturing. We have some of the greatest companies in the world operating from the UK as global players with huge strengths in new technology and innovation. I refer especially to AstraZeneca in my constituency. At its peak, it employed 7,500 people in my constituency and that of the shadow Chancellor, my hon. Friend the Member for Tatton. The importance to the local economy of that one firm cannot easily be described.
When will the Government ensure that they do not place additional burdens on business, such as the increase in national insurance, fuel tax and regulations? Our manufacturing strategy should be to support all companies, and especially our large companies, in encouraging innovation so that small and medium-sized companies can be the little acorns for the future. As we know, from small acorns large oak trees ultimately grow. If the future of this country is to be built on modern manufacturing strength, when will the Government encourage industry instead of disincentivising industry and manufacturing through increased regulation and taxation—including national insurance, which is another form of taxation that is a disincentive to employment?
Why is the Ministry of Defence purchasing aircraft from the United States when an adapted Nimrod MRA4 could fulfil the role, saving several hundred excellent highly skilled jobs at BAE Systems in Woodford, which has been an important part of the UK aerospace industry? Only this week, the Secretary of State for Defence notified me that the Government have finally decided to buy the Rivet Joint, a Boeing aircraft that is 40 years old and has been lying in the desert for many years. Why buy that instead of the Nimrod which could provide jobs in Woodford for people in my constituency and others in south Manchester and north-east Cheshire?
I give the Government credit for some of the assistance that they have given to the manufacturing sector through some additional investment allowances in the Budget. That is fully justified and one way in which industry, especially manufacturing industry, can be helped. Despite receiving unprecedented and valuable bail-outs from the taxpayer, the banks et al are providing little or no meaningful assistance to hard-pressed manufacturing via increased lending.
The plight of small to medium-sized businesses is a serious one, given that the commercial banks are still—I have evidence of this in my own constituency—refusing to lend to struggling businesses, which are after all the powerhouses of the modern economy. As I have indicated, individual businesses in the Macclesfield constituency continue to find it difficult to secure the affordable credit that is so vital for their survival. So often, the difficulties that they are facing have not been of their creation. They did not, in the main, cause the credit and economic crisis that the world has experienced, and we do not want these businesses to go out of business.
The problems faced in my constituency, however, are repeated throughout the north-west. There is still widespread concern about the difficulty of arranging bank loans, despite the assurances being given by the Government. There is evidently growing competition, too, from manufacturers abroad, which are also suffering from reduced orders and overcapacity, and are now therefore flooding the market in the UK with goods at less than cost price. That is affecting manufacturers in this country producing for both home trade and export. Given that about half of UK manufacturing output is exported, surely it is important that the world economy moves forward as well. It is very important to us that we work with the rest of the world. It is important that we co-operate—and that co-operation should extend beyond the European Union—so that we can achieve growth and jobs for the future. That will benefit not just the economy of this country, but, I believe, the economies of countries overseas.
It came as bad news for the UK when its trade gap with the rest of the world widened unexpectedly in January to its largest since August 2008. Exports saw their sharpest drop in more than three years, according to the Office for National Statistics. The UK’s trade gap in goods and services widened to £3.8 billion compared with £2.6 billion in December. I put this question to those on the Treasury Bench: when will the Chancellor recognise the value of our manufacturing industries to the stability and future success of the UK’s economy? When will he reverse the crippling £16 billion in constantly changing regulations and £7 billion a year in new taxes introduced by this Government? And when will he recognise that manufacturing—I repeat this for the third time—is one of the only sources of sustainable, non-inflationary economic growth, and therefore the key to getting out of this damaging recession?
With loose monetary policy and sterling, the manufacturing sector can—and, I hope and pray, will—return to positive, year-on-year growth by the later months of this year. As for the road to recovery for the wider economy, first, the huge budget deficit—I say this both to my own party and the Government—must be tackled. The next Government will, I think, continue to ignore this problem at their peril. The incoming Government must act immediately on the deficit and stabilise long-term interest rates. No areas of the Budget should be ring-fenced. Of course there will be priorities, but priority should, inevitably, be afforded to national infrastructure and defence, both of which are of long-term strategic importance to the nation.
Sadly, no programme of responsible cuts, efficiency savings and restructuring can ignore social security and health care. I am sure that everyone here, including the right hon. Member for Rother Valley, who chairs the Health Committee, would agree that there is room for savings within the health service bureaucracy. I was personally opposed to having providers and purchasers in the health service. It was a very costly innovation, those many years ago, by the then Conservative Government, and I think that a lot of that money, which has been spent on management, could have gone on patient care and nursing.
I declare an interest as an honorary vice-president of the Royal College of Midwives, like the hon. Member for Leyton and Wanstead (Harry Cohen), who I hope will catch your eye, Mr. Deputy Speaker, in a few minutes. I believe that we need to spend more money on what I call genuine patient care—not just treatment but care. Despite the fact that I have not been involved with the Health Committee for many years, I continue to take a considerable interest in health care in this country.
As a country we urgently need to establish a medium-term plan to reduce the size of the state, which today accounts for—I say this to the hon. Member for Luton, North (Kelvin Hopkins)—almost half the UK economy. Let us not forget that progress will be dependent on growth, but no economy can successfully grow in the long term with such an over-dependence on central Government and the state. I can say with some confidence that my constituency will, I trust, play its part in that recovery.
Mr. Deputy Speaker, it has been a huge honour to serve our country, my constituents in Macclesfield and this House for almost 39 years. This is my valedictory speech; I hope that it has been constructive. I have loved being in this place. I hope that the authority of Parliament can be restored, and that the authority and independence of Back Benchers can grow—
I am very grateful indeed to the hon. Gentleman—my friend—for that very generous comment.
I wish this House success. I hope that Back Benchers will exercise increasing authority in future. I thank the Speaker, the Deputy Speakers and the staff of the House for the courtesy that they have always extended to me. I wish my successor, whoever that might be, happiness and good fortune, and I bid farewell to this House.
Order. I was overwhelmed by the climactic end to that speech, but it is certainly no disrespect to the hon. Gentleman, whose reputation as a parliamentarian is well recognised, if I mention that if everyone speaks for that long, not everyone will be called. It would therefore be helpful if hon. Members could keep an eye on the clock.
May I say what a great pleasure it is to follow the hon. Member for Macclesfield (Sir Nicholas Winterton)? I am deeply sorry that he is standing down. He is far too young and still has far too much energy. He should stay with us for many more years—I hope that I will be here too, but that is another story. Despite coming from a different segment of the political spectrum, I find myself in agreement with him on so many issues, and particularly manufacturing, on which I also speak. He is absolutely right about the importance of manufacturing to the economy. Manufacturing is too small a sector now. We need to keep what we have and expand it for the future, so that we can get a more balanced economy, with manufacturing playing a much larger part in our long-term economic health. I congratulate him on his speech and, in particular, his emphasis on manufacturing. I am sorry that he is choosing to leave us.
However, I do not always agree with the hon. Gentleman on the economy. I support the Chancellor, who was absolutely right to dismiss the Conservatives’ demands for immediately making deep public spending cuts, which would simply cause a loss of jobs and hit the pensions and pay of public sector workers, as well as public services themselves. Some public services, on which some of the most vulnerable people in our society depend, are already suffering from the squeeze. This very week I went to a seminar on care. Even now, people are not getting the care that they need or deserve, whether at home or in residential care. I am seriously concerned about that. We need to spend more on care, not less. Children’s services could also be seriously affected by the squeeze on public spending by local authorities and, perhaps, the health service. Over the past year or two, we have seen a number of serious failures in children’s services, which are not helped by squeezing spending. I want more spent on children’s services and social services generally, so that the most vulnerable can get the support and care that they need. If we were to go for serious cuts, we would be forced into serious deflation and a depression. In fact, we need to do the opposite to generate growth and employment.
Indeed, some months ago the Conservatives chose a tactic to try to embarrass the Government and to panic them into imposing cuts just before an election. That would have had a serious effect on the economy and, no doubt, led to our suffering at the polls. What has actually happened, however, is that the Conservatives have shot themselves in the foot or scored an own goal, whichever metaphor we care to use.
Indeed, it would be difficult to do both at the same time. My hon. Friend is most helpful.
People have now recognised that they would feel threatened by the Conservatives, rather than by ourselves, should they win the election. We have emphasised the importance of sustaining employment, and we have had some success in doing that, but we need to go much further and generate more employment. Generating employment is the solution not only for everyone’s quality of life but also for the deficit. The serious cause of the deficit is that our unemployment is too high. If it were to go down and we were to return to full employment, we would get much more back in tax revenues and pay out much less in benefits.
There was a quotation in The Times this morning from Anatole Kaletsky, whom I am sure everyone reads. He said:
“To respond to disappointingly low growth by raising taxes and slashing spending would be economically suicidal, setting Britain on the path to Greek-style debt deflation and almost certainly increasing the government deficit, as Mr. Darling quite rightly warned.”
He went on to quote the Leader of the Opposition’s speech yesterday:
“But Mr. Cameron declared: ‘Every family knows that when your debts mount up you need to start paying them off or things only get worse.’ For a man quite likely to be the First Lord of the Treasury in two months’ time, this pre-Keynesian economic illiteracy was troubling”.
I do not think that the right hon. Gentleman will be the First Lord of the Treasury, but Anatole Kaletsky does. I also think that that prospect would be more than troubling to most ordinary people; it would be quite frightening. The Conservatives have made a big mistake, tactically and politically, as well as threatening to derail our economic recovery.
Anatole Kaletsky also recognises—although I was there before him—that there has been a genuine shift in the Treasury’s laissez-faire philosophy towards the more interventionist industry policy advocated by our noble Friend, Lord Mandelson. I very much welcome that change of direction, and I would like to push it much further. Indeed, in the past year, the General Motors plant in Luton, which produces the excellent Vauxhall Vivaro, has been given a secure future through the intervention of the Secretary of State for Business, Innovation and Skills. He has been very helpful in providing financial support to General Motors in Britain, and the plant now has a secure future.
During that time, I have met the Secretary of State twice and put my case to him directly. I have also written to him at length on a number of occasions not only to emphasise the importance of preserving excellent manufacturing plant such as the General Motors plant in Luton but to say that manufacturing matters much more than our Government have recognised, unfortunately, until recently. I have told him that we need to rebuild manufacturing, and he has been saying all the right things about that in recent months. I like to think—perhaps I flatter myself—that some of our conversations and correspondence have helped to tip him in that direction. He is concerned about the degree of foreign ownership, for example, and about the balance of trade, and I think that he is right to be so.
Germany has almost religiously defended its manufacturing sector, and it has kept hold of its balance of trade surplus for several decades, much to its advantage. I think that we should follow Germany’s example. It is also interesting to note that, when the European Union starts to threaten Germany’s strength, it suddenly turns out not to be quite so pro-EU as we thought it was. Indeed, Angela Merkel has suggested this week that if member states cannot hack the rules of the eurozone, they should be expelled from it. Is this the beginning of the end for the eurozone, I wonder?
Perhaps we could get back to much more sensible economic arrangements in which countries manage their own economies and choose their own fiscal and monetary policies and their own exchange rates according to their needs. That would be a much more sensible way of proceeding, rather than ramming together weak and strong economies and hoping that the weak ones will suddenly take on the strength of the strong ones. That does not happen. The best example, of course, is Argentina, which signed up to a fixed rate with respect to the dollar and for 10 years wrecked its economy as the middle classes took all their money out, leaving a wrecked economy behind. Eventually, the country recreated its national currency, separated from the dollar, massively devalued and has spent a long time trying to rebuild the damage done by that stupid mistake. I think the euro has the same problem.
That is almost an aside, but we were sensible to keep outside the euro. I have many times asked Conservative Members to congratulate the Prime Minister on his very sensible decision to keep us out, which has been advantageous. I am sure that they appreciate it, although they will not give him as much fulsome praise as I do—not publicly, anyway.
Clearly, there is a deficit, but focusing on the deficit now is not what we should be doing. We should be focusing on economic growth, as that is what will bring down the deficit. The deficit has two components. The first is cyclical. If we have rapid economic growth, unemployment comes down and that cyclical problem disappears. A structural deficit perhaps remains, if we accept this analysis. In the longer term, when the economy is stronger, we can address that structural deficit. It might mean cutting public spending for some people, but for me it means raising taxes, income or revenues to close the gap.
How do we cut the substantial tax gap? Estimates from a group led by the Public and Commercial Services Union, the Tax Justice Network, War on Want and others suggest that there is tax gap—the gap between what the Treasury should receive and what it actually receives—of £120 billion a year, which is a staggering amount of money. The TUC estimates suggest that tax avoidance costs us £25 billion a year, while tax evasion costs us £70 billion a year. The debts owed to Her Majesty’s Revenue and Customs, which does not have the resources to collect them, amount to £28 billion.
I attended a meeting in the Palace of Westminster about two weeks ago in which PCS members working in HMRC said that if they had more officers, they could collect more tax. Some 12 years ago, I paid a visit to my local VAT inspectorate office. I must say that I was very impressed as it was doing a good job, but there were not enough people employed there to do the job properly. I was told that every new tax inspector collected five times their own salary in taxes. It seemed to me that it would be logical to have more tax inspectors to collect a lot more tax. When I wrote to the Treasury at that time, I received a fatuous reply, saying that it was trying to reduce costs by cutting staff, but doing that means reducing income by far more than the cost of the staff.
I urge my Front-Bench colleagues even now to think seriously about employing more tax inspectors, perhaps paying them a bit better and raising their morale so that they do a good job and collect more of that £120 billion that we are not collecting at the moment. Even if we collected only a quarter or a fifth of that amount, all our problems would almost disappear overnight and we would have more to spend on the things that I think we should be spending on—free long-term care, much higher state pensions, more investment in transport infrastructure and so forth. We still have serious problems with public transport. London is one of the poorest of the major cities in the world when it comes to public transport, as revealed quite recently when measured internationally.
There is a lot more we could do with this amount of money. Most of this uncollected money is owned by relatively rich people and companies, but they do not spend much of it. Those who have studied economics at a modest level will remember the propensity to consume. Poor people, pensioners and families tend to spend all their money, so it goes straight back into the economy as soon as they get it, which generates demand. Rich people—even Members of Parliament—may not spend all theirs. Very rich people put it in the Cayman Islands or even Belize. When they put it in other places, it does not help our economy. These people have a low propensity to consume. The more we give to the less well-off, the more we generate for the economy.
A marginal propensity to consume, as my hon. Friend rightly says. A simple redistribution, without changing overall levels of income from rich to poor, helps the economy. I urge my right hon. and hon. Friends to bear that in mind if they want to ensure that the recovery continues on its strong course.
I should like to see higher revenues for the Treasury—perhaps through an increase in taxes, preferably one that would change the balance between the contributions of the rich and those of the poor—along with a much larger state pension and free long-term care. I also think that we need to build many more council houses. Other people call them affordable or social houses, but I call them council houses. I want councils to be given the job of building houses as they built them in the past—quality houses. Almost all the ones in my constituency have been sold. After the war, when we had a broken-backed economy, we were able to build decent council houses with gardens for working people. Why have they become unaffordable all of a sudden now that we are a much richer country?
I believe that I represent more council tenants than any other English Member. One of the reasons for the problem is that Governments of both colours have never allowed all the money that has been paid to remain with councils to be spent, and has never allowed the money that came from the right to buy to be given back to them. Does the hon. Gentleman agree that we will solve the problem only if we allow councils to build houses, continue to own them and keep the money to spend, so that the generation of council properties can be maintained?
I entirely agree. It was the Housing Finance Act 1972 that set us in this direction. I opposed it at the time, as a councillor.
We also need green energy projects. We must invest much more in alternative forms of energy which do not pollute or create greenhouse gases. We will experience a serious crisis within a few years; we are approaching peak oil.
As for savings, the hon. Member for North Southwark and Bermondsey (Simon Hughes) mentioned Trident. I simply do not believe that we need Trident: as I said earlier, I think that it is being retained for reasons of political machismo. Savings could also be made by abolishing ID cards. However, I do not want to go on about savings too much, because I do not think that we should be looking to them for extra cash. I think that we should try to collect a little more of the tax that is owed to the Treasury every year. We should try to collect some of that £120 billion.
It has been suggested that if we do not address our deficit, the returns on long-term gilts could rise, because those from whom we borrow will be worried about our future economy. If we had a strong economy, the return on gilts would fall, because people would feel more confident. If we flatten our economy by cutting, increasing unemployment and driving ourselves back into a recession or even a depression, people will be much more worried about the economy than they will be if we spend now, when we need to. If we ensure that the economy is strong, the return on gilts and long-term interest rates will fall. That is what is happening in Germany. When Angela Merkel returned to power she embarked on a targeted reflationary strategy, which is why German long-term interest rates are lower than ours. I think that we should follow the German example in this respect, although not in all respects. The Germans have got certain things right, such as manufacturing.
Cutting unemployment is the key to success. We want reflation, not deflation. As for reducing the deficit, we will do that in the longer term. The process will be largely automatic, but if we need to address a structural deficit we can do so by collecting more taxes—by means of tax changes, but closing the tax gap would be my priority.
I think that we have the potential to build a strong economy for the future. I think we have finally recognised that the era of neo-liberalism—the era of globalisation and laissez-faire capitalism—has failed. It has brought us to the brink of catastrophe. I am sad to say that Members on all three Front Benches have supported that strategy for many years. I remember saying in my maiden speech that I had come here to oppose neo-liberalism, and I do not regret saying it. I think I was right then, 13 years ago, and I think I am right now. In a sense, the fact that we have looked over a chasm has proved my point. Countries must return to more managed economies. I do not mean strategically controlled, publicly owned economies, but I think that countries should choose their own interest rates, fiscal policies and exchange rates, and intervene when it is necessary to ensure that their economies work, retain their strength and, indeed, become stronger. When we have achieved that, we can co-ordinate reflation between the countries of the world, and we can all grow together and become stronger together. That is the way forward, not the lunacy of the last 30 years.
First, I remind the House of the interests recorded in the register.
I hope that the hon. Member for Luton, North (Kelvin Hopkins) will forgive me if I do not attempt to explain to him why he might be wrong to think that neo-liberalism is on its last legs. It might be worth reminding him as well that it is still the policy of his Government in principle to join the euro. I agree with his point about tax collection, however. The Treasury Committee recently looked at the state of Her Majesty’s Revenue and Customs, and morale there is not good; I certainly agree with the hon. Gentleman on that. Whichever party wins the election in May will need to take a fresh look at HMRC; an awful lot of tax is not being collected, and when the Committee last looked at it, we found a rather dispirited and poorly led service that requires urgent attention.
Yesterday, we saw a very rare sight: a pre-election Chancellor who could not give an election Budget. The public finances are in such a sorry state that he could not have afforded a giveaway Budget even if he had wanted one. He called it all workmanlike, but I call it impotent: it was impotent on the public finances, and impotent on the real economy.
Like my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton), I am seriously concerned about the economy’s future growth prospects. The Chancellor continues to forecast growth of more than 3 per cent. for next year, but the latest independent forecasts—from the first fortnight in March, and gathered together and published by the Treasury—show an average growth forecast for next year of just 2 per cent. I therefore think the Chancellor is being optimistic. Manufacturing output is still falling, business investment has halved, and exports have fallen by 12 per cent. over the last three months, which is one of the sharpest falls on record—my hon. Friend the Member for Macclesfield gave the export figures for just last month, I think. I am not sure whether we will have a hung Parliament, but we have certainly got a hung economy; it is half in, half out of recession.
I see that in my constituency: the high street continues to struggle, small businesses cannot get the credit they need, and a third of those registered as unemployed in the Sevenoaks constituency are under 25 years of age. After all the initiatives on youth unemployment and all the extra investment in education and training, that is a shocking figure, and it is worth adding that it has increased by 14 per cent. over the last 12 months. I am therefore seriously concerned about the prospects for economic growth.
Turning to the public finances, only a Labour Chancellor could describe a deficit of £167 billion as some kind of improvement on his original forecast. This Government cannot escape responsibility for their appalling record in managing the public finances. They have not balanced a Budget for nine years, and seven of them were years of growth—indeed, they were years of continuous growth—when there was an explosion in the value of receipts: income tax receipts from the financial sector, stamp duty receipts from the housing sector, increased employment yielding yet more tax, and increased corporation tax coming in from a booming economy. Yet for nine long years they have failed to balance the Budget. As we all know, the deficit now stands at some 12 per cent. of GDP, but the structural deficit—which, with respect, I think the hon. Member for Luton, North was a little cavalier about—is 8 per cent. of our GDP and will not be magicked away simply by growth.
Tackling that deficit will require firm action on the spending side and, almost inevitably, on the tax side too. That is why this Government have pencilled in some £19 billion of tax increases. Those are now in the pipeline, although the Government have skilfully ensured that most of them will not really kick in until April 2011. The structural deficit is some £70 billion to £80 billion. Some £19 billion is coming in from tax increases and some contribution is no doubt coming from growth, but what the Government have not told the House is the detail on the £30 billion or £40 billion that simply has to come from reductions in public spending.
The hon. Gentleman is well respected for his position on the Treasury Committee. He may be about to do this, given his analysis that additional receipts will not solve the problem and that significant spending reductions will have to take place, but will he now say where he thinks a Conservative Government should find those? We have not heard that from his Front-Bench team.
I was just coming to that, but I do not want to let the Government wholly off the hook on their record. I said that they had wasted the good years, so let us consider the summary: unit labour costs in this country are back to pre-exchange rate mechanism levels; public sector productivity has actually fallen over the past 10 years; and so unreformed are our public services that only half our school leavers get five good GCSEs.
The Government are now borrowing so much that even on current bond yields it is cheaper for the Italians to service their borrowing than it is for us to service ours; our Chancellor and Prime Minister are running our public finances worse than Signor Berlusconi is running his. This should have been a Budget that set out in more detail plans to tackle the deficit. The key difference between the Conservatives and the Government is that we know that we cannot sit on our hands for another 12 months. That is also a key difference between us and the Liberal Democrats. To be fair to them, they have spelt out some cuts, but they are saying that none of those cuts should take any effect until April 2011. I simply do not understand that argument.
If we think that identity cards, for example, are the wrong way forward and will not better protect us against terrorism, how would a new Government in May or June making an immediate start and getting rid of those jeopardise the economic recovery? If we think that government should be smarter, and that we should freeze recruitment in Whitehall and cut back on consultancy and some of the unnecessary public bodies, how will that suddenly tip us back into recession? There are savings and economies that need to be implemented now, and the Government need to get going. I shall explain how.
Statements by my colleagues have made it clear that although further decisions have to be made to take effect in 2011, some things, such as the scrapping of the ID cards system, can and should take place in the coming financial year. So, I hope that the hon. Gentleman will not misrepresent the fact that we are clear that some savings need to be made in the year that is just about to start.
I am grateful for that clarification, because we were perhaps under the illusion that the Liberal approach was savagery, but not yet; we now find that the savagery is going to start in 2010-11. We cannot sit on our hands for a whole 12 months. Many of these economies and savings will not jeopardise the recovery and hurl the country back into recession.
How does all this need to be done? As the Governor of the Bank of England has been saying time and time again, there needs to be a credible plan that will capture the confidence of the markets, and that needs to be spelt out. Secondly, the bulk of the savings have to come in the first Parliament. Spreading these reductions over six, eight or nine years is too leisurely. The bulk of the deficit has to be tackled in the first Parliament.
Thirdly, the bulk of this deficit reduction surely has to come—this is where I obviously disagree with the hon. Member for Luton, North—from spending reductions, rather than yet more tax increases. Tax increases are already in the pipeline. There are to be tax increases on national insurance contributions, which will affect anybody earning more than £20,000 a year and all the businesses that employ them. Employers’ contributions are going up from next April—that is in the pipeline. In addition, we have now discovered, from the small print of the Budget, that everyone is going to pay more in income tax straight away, this April, because of the failure to index the allowances, so the bulk of the reduction has to come from the spending side rather than the tax side.
Fourthly, the process has to be open and honest and must have public consensus behind it. I agree with the hon. Member for North Southwark and Bermondsey (Simon Hughes) on that point. That is why it cannot be done through the chaotic press releases from various Whitehall Departments that my hon. Friend the Member for Tatton (Mr. Osborne) read out this morning—the continuous sleight of hand over various spurious efficiencies. It has to be done openly and honestly. That is why I welcome my hon. Friend’s proposal for an office for budget responsibility. There is nothing new about such an office, as a similar office signally improved and helped the Government of Canada to make the reductions that they had to make because there was an independent juror who could properly vet the Government’s proposals and help them to judge whether those proposals were fairly balanced.
As well as restoring public finances, the Budget should have been used to fire up the economy. We have to recapture the missing 5 or 6 per cent. of our gross domestic product that was lost during the financial crisis. As in any Budget there are some measures that I welcome—there are measures to help businesses, even small businesses—but I note that an awful lot of the measures seem to set up organisations to be run by Lord Mandelson, including various investment banks and panels. I think that we must first reduce the cost of employment. Businesses in my constituency, particularly small businesses, are now tax credit administrators. They have to look at student finance and check people’s immigration status, so they are virtually working for the Government. There is a perverse incentive on small businesses almost to do everything possible not to take on an extra body. We have to look at the cost of employment. That means looking again at the increase that is threatened on everyone from April 2011. If my right hon. and hon. Friends on the Front Bench are right in proposing to exempt all new businesses from national insurance payments for the first 10 employees whom they take on, why should not that also be right for all small businesses? Of course, we need to reduce those costs.
We must also do more to help exporters. Like my hon. Friend the Member for Macclesfield, I am seriously concerned about the deterioration of our export position. The Government could do more on that, as public finances allow. They should consider withholding tax, as it is difficult for companies that do not have large trading operations in this country to have profits to offset against the profits they earn overseas. We ought to consider the balance, in relation to withholding tax, to see how we can better help exporters.
Finally, we need to do more about early-years funding. The private equity industry in this country, with which I am connected, has been much maligned, but has performed a very good service in helping medium-sized businesses, such as family businesses, to proceed to the next level. What we have not been so good at is providing start-up, or risk, capital. That is done so much better in the United States. I think that we need to look again, as public finances allow, at the eligibility and thresholds of venture capital trusts, which are a minor part of business incentives and simply do not encourage the kind of investing and risk-taking culture that new businesses need if they are to start up and get the capital backing that they need.
Those issues are not opposites. It is essential both to rebuild public finances and to re-energise our economy if we are to rebuild the confidence that we need among businesses and in the markets, but the Budget will not do that. Hon. Members might remember sitting mock exams in March, when they were at school, in preparation for the real thing in the summer. Yesterday’s Budget was a mock Budget, and the Government failed it. In the end, I suspect that whoever wins the coming election will have to introduce a real Budget later in the summer.
It is a pleasure to follow the hon. Member for Sevenoaks (Mr. Fallon), whose case is always coherent, even if I do not agree with his solutions. I do not agree with his assessment of yesterday’s Budget, either. I think that it was a steady-as-you-go Budget designed not to choke off the recovery. I saw that the front-page headline of the Daily Mail today called this a Budget of envy and spite—I do not know what world those people live in! I think that it was a result of the extra 1 per cent. of stamp duty on the sale of homes with a value of more than £1 million, which just shows the agenda of the chief journalists and political editors of papers such as the Daily Mail. We know where they are coming from and people should not be taken in by their hyperbole.
The Budget was designed not to choke off the recovery, but the Tory alternative of heavy cuts would do just that and be grossly unfair. It was not public service workers, ordinary working men and women or even the middle class who brought about the crisis and the near economic collapse; it was the reckless bankers and speculators and those like the Tories who wanted virtually no regulation or control of the banks at all. However, those without the blame are being asked to pick up the bill, and it is a heavy one. The heavy cuts that the Tories are looking to impose on them are unfair.
I still think that we need substantial banking reform. It must never happen again—that must be the watchword —and the structural change is not in place. Let me quote President Obama in a speech on 21 January this year:
“For while the financial system is far stronger today than it was one year ago, it is still operating under the same rules that led to its near-collapse…These are rules that allowed firms to act contrary to the interests of customers, to conceal their exposure to debt through complex financial dealings, to benefit from taxpayer-insured deposits, while making speculative investments; and to take on risks so vast that they pose threats to the entire system.”
He went on to say:
“Never again will the American taxpayer be held hostage by a bank that is too big to fail.”
We should be saying the same for the UK taxpayer, too.
On the “too big to fail” argument, President Obama said that he had made it the policy in the United States that there would be no further consolidation of the financial system. I think that that should be our Government’s policy too, and, in addition, we should require the break-up, division or sell-off of any financial institution that, if it failed, could inflict major damage on our economy. No bank, hedge fund or any other financial institution should be in a position where it has to be protected by a taxpayers’ bail-out, probably involving a huge amount of money, because if it fails—probably by its own recklessness—it wrecks the economy. That position of blackmail has to end.
That brings me on to the situation with hedge funds. If they fail, they risk the interests of taxpayers, too. In his speech, President Obama referred to the hedge funds and said:
“If financial firms want to trade for profit, that’s something they’re free to do. Indeed, doing so responsibly is a good thing for the markets and the economy. But these firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people.”
He emphasised that again when he said:
“Banks will no longer be allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit unrelated to serving their customers.”
That is the key point. We should adopt that as a policy and ensure that none of our banks is allowed to run hedge funds.
Hedge funds are completely private. There should be no public finance support or tax subsidy for them whatsoever. They can have their deals with the banks, but their owners should have no special ownership privileges, based on the fact that they are too big to fail. If the banks decided to take over Manchester United FC or Liverpool FC because the hedge funds could not meet their debt, then that is what they should do. My early-day motion 1185 of 23 March 2009 spells out that position.
The Chancellor has been wrong to elevate the hedge funds to a privileged position in our economy. In a number of speeches, he has called them “systematically important” but, as I have said, the hedge funds are private and generally unregulated and should not have such status. Basically, hedge funds are the corner shops of the banking and finance industries in this country. Corner shops are important, but we would not dream of saying that they were systematically important to the economy. The Chancellor has got it wrong.
I do not agree that the hedge funds should be considered systematically important, and we are out of step with the US in that regard. We are also out of step with the European Commission, which issued a draft directive on alternative investment fund management in response to the revelation that the alternative investment finance sector managed some £1,900 billion in assets at the end of 2008. The directive is aimed at trying to regulate those hedge funds, but it was blocked by the UK Government. I am disappointed about that.
Angela Merkel has been quoted as telling the Bundestag:
“I work well with Gordon Brown, but his one-off tax on bankers’ bonuses is only half as good an idea as the hedge fund rules we are considering and which Great Britain ought to approve. That is what we must fight for and I am expecting some support.”
I agree with Angela Merkel on that. Another report stated:
“The key issue holding up a compromise deal was disagreement over the conditions on which funds and fund managers based outside the EU—including London-based managers running offshore funds—should be allowed to market to professional investors within the 27-country bloc.”
Clearly, our Government are trying to protect offshore hedge fund interests, and I do not think that they should. It was right in yesterday’s Budget to apply those agreements to Dominica, Grenada, Belize and all the other offshore places, but we need Europe-wide regulation rather than individual agreements. We need to get back in line with Europe on that.
The Government argue that action should be taken through the G20, but that is a weak argument. The G20 should be involved in regulating the hedge funds, but we should establish that regulation with the strength of EU agreement. It feels as though the Government’s position is one of delay, deferral and procrastination, in order to defend the hedge fund sector. I do not agree with that.
In mentioning the importance of accountability and transparency for investment funds, I have the opportunity to refer to a Bill that I had proposed to bring to the House; I will not have a chance to do so, because I am standing down at the election. Let me read it into the record, because it is an example of where we should be going on the issue of greater transparency. I call it the investment funds, endowment and pensions funds transparency Bill. It says that
“every Company, Business or Authority responsible for an investment, endowment or pension fund shall publish annually, and have available for any investor or beneficiary of that fund who requests to see it, a full list of investments in that fund over the last year of the Annual Report period, together with a list of changed investments over that year with an explanation of why each was changed. Any investment transferred to, or from, a fund in which any Director, manager or major shareholder in the business has a stake must be separately listed and the Director, manager or major shareholder’s interest specifically explained.”
That would stop directors, managers and major shareholders ripping off investors in those funds. That is the sort of transparency that we should provide. I am sad that I will not get to introduce that Bill, but I am pleased that I have been able to refer to it and put it on the record.
My second point on transparency is about non-executive directors on boards of banks. I raised the issue of transparency and accountability at a meeting of the parliamentary Labour party, and the Chancellor mentioned that we would look at getting other people on the boards of banks to uphold the public interest. However, the Government have backed away from that. I am sad about that, because if those organisations are systematically important, as the Chancellor says, there should be a person directly on the boards of banks and hedge funds with a mandate to represent the public interest, keep control and whistleblow when dangerous speculation is going on. I hope that a future Government will come back to that idea. I have concentrated on those measures because they are a lot to have left out of the Budget, but they are still vital if we are to run a coherent economy.
The deficit is the pre-eminent issue, and will be in the election, too, so the issue clearly must be addressed. I am proud of my role in tackling the deficit. I was the first in the parliamentary Labour party to call on the Chancellor and the Prime Minister to adopt a Keynesian policy. They listened and did so, and it has saved thousands of jobs. We would be in much greater deficit, and in a much greater crisis, if the Government had not followed that policy, and I pay tribute to the Chancellor and the Prime Minister for doing what they did. Of course, the deficit has to be tackled, but over a period, reasonably, and without putting the economy and recovery at risk.
Here are some of my suggestions. First, we must recover every single penny handed out to the banks, plus interest. I was pleased that the Chancellor included that point in his speech; I pay tribute to him for that. We have not heard the same commitment from the Tory party. I suspect that that is because the Tories want to sell off the state interest in the banks—other financial institutions as well, but banks in particular—as soon as the profits start to flow again. That money would not come back; the taxpayer would be sold short.
Absolutely. The only reason why the banking sector is in existence is because of taxpayers’ investment; it would have gone completely flat otherwise. If we are to solve the deficit problem, those profits, instead of going into the big bonuses of bankers, should come back to the taxpayer.
My second suggestion for a tax boost is the Robin Hood tax, and I pay tribute to the Prime Minister for promoting it. I have an e-mail from Jonathan Tench of Oxfam, who says that the bank levy
“is an important step in the right direction”,
but that it
“does not match the scale of resources required to tackle the deficit in the UK or provide enough resources to tackle global poverty and climate change.”
“A Robin Hood tax, set at an average rate of 0.05 per cent. would raise up to $400 billion annually, resulting in tens of billions of pounds in revenue for the UK. In order to meet the scale of the financial challenges the UK and global economy faces, a financial transaction tax is by far the best option on the table.”
I agree, and we should press very hard for that Robin Hood tax.
I agree also with my hon. Friend the Member for Luton, North (Kelvin Hopkins) about eating severely into tax avoidance, which costs us dear. He gave some amazing figures, and in a recent TUC report, tax consultant Richard Murphy looked at the amount that is lost to the UK taxpayer by the use of tax havens in Jersey, Switzerland, Isle of Man and Guernsey. The report stated that
“the TUC estimates that the total tax loss last year from UK residents (without non-domicile status) holding assets to avoid and evade tax is at least £4 billion,”
and that money should clearly be returned to this country.
We must then deal with our skewed subsidies. I shall cite the TUC again, because it has provided some terrific information that the House should take into account. It points out:
“Taxpayers are paying £2.50 for subsidising the pensions of the richest 1 per cent. of the population for every pound spent on paying pensions to retired public servants such as nurses, teachers and civil servants”.
That is the point that I am making: there are savings to be made. The TUC report states:
“Tax relief is heavily skewed towards the better off. Treasury figures reveal that 60 per cent. of tax relief goes to higher rate taxpayers, including nearly £10 billion a year…to the top 1 per cent. of earners, those on more than £150,000 a year.”
On those skewed subsidies, the TUC also said that the Government could
“raise £10 billion a year by capping the amount of tax relief that can be claimed by those earning more than £100,000 a year at £5,000”.
Indeed, the TUC’s analysis shows that
“just 3.1 per cent. of the taxpayer population receive 31 per cent. of all tax relief, averaging £18,750 a year”.
It compared that with people earning just below £100,000—between £70,000 and £100,000. They receive on average £4,500 in tax allowances, so it would not be unreasonable to cap tax relief at £5,000 for people earning more than £100,000. As I have said, it could save the taxpayer £10 billion a year. I see no reason why we should not do that well ahead of public service cuts, which would hammer the poorest people in our community.
We can make other savings, too. First, next year we will spend another £5 billion on the war. I do not think that that is worth it; the British people do not want it. I pay tribute to the soldiers, who are tremendously brave—indeed, some have lost their lives, and that is a great tragedy for their relatives and friends—but it is a futile war for all sorts of reasons. We should not be engaged in it; we should have been discussing with the moderate Taliban how they can govern their country with the existing Government. Given our current situation, we cannot afford to spend £5 billion a year on that war. We have to settle it, and any future Government must settle it immediately.
Secondly, there are the costs of nuclear weapons. I agree with the Liberals about Trident, but they are mealy-mouthed, because they keep using the phrase “like for like”. They are not really about scrapping nuclear weapons and making those savings. In fact, if they got into government—I suspect that this applies to the Tories as well—they would abandon the Trident replacement and put nuclear weapons on aeroplanes instead. That would be incredibly dangerous for the world situation, and it would not save that much money either.
Then there is the issue of expanding nuclear power. That is an immensely expensive road to go down, and our Government are encouraging it all around the world as well. Only this week, there was a headline in The Daily Telegraph about the risk to this country from a dirty bomb. I do not think that that has been properly taken into account in the argument about nuclear power. In any case, the nuclear industry cannot be expanded without massive public subsidies. That is not appropriate in our financial situation, notwithstanding the fact that we have an energy crisis, which is best dealt with by expanding the renewables sector, as well as making important energy savings.
We also need to look more closely at the oil industry, which has made huge profits and benefited from a deal at the beginning of each Parliament. When oil and petrol prices went up, the industry made huge profits that were not handed back to the British taxpayer.
A future Government will have to return to the issue of privatisation and private finance initiative contracts. We are paying in excess of what they are worth: London Underground is a great example of that. In future—in the health sector, for example— we will increasingly be paying large amounts in exchange for nothing at all. That is wrong, and it needs to be revisited by Government.
Those are some suggestions on cutting the deficit that should come ahead of public spending cuts. My hon. Friend the Member for Luton, North is right: there is still a great need to spend Government money to do things out there. I draw attention to just one of those areas—child poverty. We have made a commitment—indeed, we have passed an Act—that says that we want to abolish child poverty by 2020, but that will not happen unless the Government back up their commitment with further spending.
This Government have done a great job with Sure Start and the child tax credit. Those things would be at risk under the Conservatives. Indeed, we know that if the Conservatives got into a coalition with the Liberals, the child trust fund would also be at risk, because the hon. Member for North Southwark and Bermondsey (Simon Hughes) made it clear that that is Liberal policy. Those things are vital to help young people to have a future and get out of poverty.
The Government need to do more about the level of benefits, including jobseeker’s allowance. The TUC says:
“Increasing JSA by as little as £10 a week would make a real difference to millions of families.”
That would help to bring people at that level out of poverty. The other big factor in tackling tackle child poverty is equal pay—that could make a huge difference. We have closed the gap, but far too slowly. A future Labour Government must do more on equal pay. As an employer themselves, they should be driving down the road of equal pay and forcing employers to do so.
Whatever the issues in the election, in future Parliament will have to return to the issue of equality. We do not want a party, such as the Conservative party, to be elected as a Government who would actually laud inequality and enhance it further.
It is a pleasure to follow the hon. Member for Leyton and Wanstead (Harry Cohen), who made what I guess was a valedictory speech, like that of my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton). The House will miss them.
I am not quite ready for the concept of the hon. Member for Leyton and Wanstead as one of Parliament’s saviours through advising the Prime Minister and the Chancellor, along with President Obama, the Chancellor of Germany and others. However, I am prepared to see him as Robin Hood.
First, I declare my interest as a director of the family retail store in which I am also a shareholder. The details are in the Register of Members’ Financial Interests. Normally, I try not to speak in the Budget debate because I know that interests outside this place always attract the attention of the media and Labour Members. However, having been involved in retail since 1979 and even before that, I must speak now because I want to tell the House what it is like out there on the high street.
We have had history lessons from various hon. Members. I shall be brief, but I want to say that my business has existed since 1888. Even in my time, the cycle—the way things come around—is one of the things one learns. Budgets always used to come at Easter time, as they still do, and I remember as a child sitting in a car on a windswept sea front, often in Wales, on our Easter holiday, with my father listening to the Budget on the car radio. My father was a wonderful man, but I knew that after any Budget, particularly a Labour Budget, it would be wise not to go near him for about 12 hours —possibly 24 hours after a Labour Budget—because Governments never seem to understand businesses. They talk about them, but they never really understand.
We have been talking about history—the hon. Member for Leyton and Wanstead gave a vignette from a past era. I can remember hearing about the selective employment tax and asking my father what it was. He explained it to me. Younger Members may not realise that the Labour Government imposed a tax which meant that every business was taxed on the number of people it employed. We all understand today that that was not an incentive for job creation. I still believe that Governments, particularly Labour Governments, do not understand what is going on.
Other hon. Members referred to the balance of payments and the fact that it does not seem to be mentioned in the media nowadays. We seem to have gone past all that, perhaps because of globalisation.
The Budget will disappoint people in business. Business, not Government, creates jobs. Government can try to devise schemes—as has been said, many schemes involve creating jobs for people who like to be on schemes, not real jobs in real businesses. I am thinking of people I know very well—my employees. Some of them have been with us for many years, and we have members of same family working for us. They are hard-working, loyal people, but they cannot necessarily get the benefits of those on low incomes. They are not well off, and measures in the Budget, such as freezing allowances and the provision on national insurance will make them worse off. They are struggling to keep their families going and enjoy a reasonable quality of life. There are masses of such people around the country, and they are forgotten. Those hard-working people are just above the thresholds for help from the Government or from various schemes. I want to speak about them because I have every sympathy for them, and I wish that economic conditions were better so that I could pay them what they deserve. The hon. Member for Leyton and Wanstead talks about socialism. When I started examining the business, I learned socialism is a great idea which simply does not work in practice. In a previous recession, we decided that we would take a pay cut. Every member of staff and I took a percentage cut. However, that was not actually fair, because someone who worked flipping hard and had a family to bring up took exactly the same cut as someone who might well be described—frankly—as a passenger. That is why I decided that that model does not work. I wish it would, but humanity is not designed for socialism.
I appreciate the hon. Gentleman’s homily and I do not disagree with some aspects of it, but does he acknowledge that in certain circumstances, such as those we recently experienced, capitalism does not work either? If it had not been for quasi-socialists coming in and saving the capitalist system—to put it kindly for my colleagues on the Front Bench—it would have collapsed by now?
Excesses of any ideology are bad and wrong. I am a pragmatist, and I think we should just get on with the way we live our lives, and not adhere strictly to such ideologies, so the hon. Gentleman is right in one way.
My hon. Friend the Member for Sevenoaks (Mr. Fallon) made a wonderful speech—it was short and to the point—and we should take a great deal of encouragement from, and listen to, his expertise. I think people want us to recognise the problem that we are facing and to say how we are going to sort it out. I put this question to those on the Treasury Bench: can they look me in the face and say they would have delivered the same Budget if an election were not looming? That is the honesty that I would like. If there were another two years of this Parliament to run—God help us—they would not have delivered that Budget. We would not have been told, “We’ll come back to the problem in a couple of months.” That is the disservice that they have done not only to the country or businesses but to every person in the country.
I received a letter today from Mr. Robert Fowler, managing director of Maygray in my constituency. His business rates bill has obviously just arrived, and he wanted me to know that there has been
“a 70 per cent increase over the life of this government and a 12 per cent increase over the last year”
in his rates. That is the reality that businesses face. We in this House can all pontificate and talk about the wonderful schemes, but the reality for most people is far different. I am afraid to say that many in this House have no idea about business—I would say that many have no idea of the real world, but that would be unfair, because we all return home to the real world every night—and that knowledge of what makes business work is an increasingly rare commodity here. Mr. Fowler asked me what I would do if the bank manager came to me and asked what I was going to do about my overdraft. If I followed the Chancellor’s advice, I would say, “I’ll write you a cheque. Will that sort it out?” It would be as simple as that.
Last Friday, I visited Hale Hamilton Valves, a business in my constituency. I have travelled past its premises nearly all my life, which are known mostly in my area for the wonderful magnolia that comes out at this time of year—everybody recognises it. The business, which makes valves and things for submarines, is wonderful. The people at that firm told me about the difficulty they had in getting people in as apprentices, because that sort of work is not recognised. For all that we welcome the university places—although, as my hon. Friend the Member for Tatton (Mr. Osborne) said, funding for those is for only one year, which seems slightly pointless—the Government could do something just by increasing the status of engineers and technical qualifications.
We have heard about the banks today. Many people have complained to me that they are not getting the finance that they need, despite the taxpayers’ money that has been put into the banks, but my business has been lucky. I pay tribute to bankers—not to those who were the architects of the problems but to the ordinary people working in banks. Like people in this House, people who work in banks have received a great deal of abuse. I have heard about that from various friends and acquaintances and from my bank manager, who says that he does not want to go down to the local pub because he will get all the banking jokes—and we can all recognise some similarity with our own position. I would like to thank people who work in banks, who have been very supportive but whose own jobs are under threat because of the actions of some.
I have some good news. The London borough of Hillingdon, where I have lived all my life, was almost bankrupt, but the Conservative administration has turned it round. It can be done, and Conservatives can do it. With all sincerity and from the bottom of my heart, I pray that this is the last Labour Budget that I have to endure for a long time. This Prime Minister, both as Prime Minister and as Chancellor, will—if we have any more of this wretched Government—have achieved what two world wars, the great depression and many other things that my company has faced over the century could not, because we cannot continue in this environment any more. It is no good saying that people are exaggerating: businesses are on their knees because of this Government. We wanted a Budget, but we got a fudge-it.
It is a pleasure to follow the hon. Member for Uxbridge (Mr. Randall). Like me, he came to the House as a result of a by-election. I believe that his was towards the beginning of a Parliament, while mine was towards the end of this Parliament.
This is my first Budget debate and I wish to pay tribute to those right hon. and hon. Members for whom this will be their last Budget debate. I thank my hon. Friend the Member for Leyton and Wanstead (Harry Cohen), my hon. Friend the Economic Secretary to the Treasury, who will speak later and the hon. Member for Macclesfield (Sir Nicholas Winterton), who made an exceptional speech. He had an alternative economic policy and a strategy for jobs and manufacturing—indeed everything that was missing from the speech by the shadow Chancellor. To coin a phrase used by the Leader of the Opposition, the shadow Chancellor today was an analogue shadow Chancellor for a digital debate.
I also wish to thank my right hon. Friend the Member for West Dunbartonshire (John McFall), who spoke in the debate yesterday. It was a pleasure to listen to his valedictory speech. His work as a Minister and as a two-term Chair of the Treasury Committee has made a huge difference on issues such the regulation of credit and the banking sector and, on this side of the House, we will miss his contributions greatly.
This is a good Budget for Glasgow, Scotland and the UK. It prepares us for the new jobs upon which our future economic prosperity will depend; it sets the country on a path of fiscal consolidation that will not be damaging to growth, employment or our social fabric; it protects vital investment in the front-line public services on which we rely; and in its fiscal measures it reflects a greater sense of fairness.
A few weeks ago, I had the opportunity to read a book by the Nobel prize-winning economist, Joseph Stiglitz, entitled “Freefall”. The book argues that economic growth in both the United States and Europe remains anaemic, and given forecasts for private sector growth, and in the absence of continued Government support, there is the risk of continued stagnation. He emphasises that growth is too weak in the private sector to return unemployment to normal levels soon.
When Professor Stiglitz visited London recently, he said that the debate was really about the economics of Keynesianism against the economics of Hooverism, and there is further support for his arguments in the recent OECD economic outlook report published on 27 February. It states:
“In the major advanced G-20 economies there will be a need for continued policy stimulus until private demand gathers sustainable momentum, as the recovery will remain sluggish and fragile”.
“Fiscal policies need to remain supportive of economic activity in the near term, and the fiscal stimulus planned for 2010 should be implemented fully. The fiscal impulse should start to be withdrawn in 2011.”
“Unwinding stimulus too early could jeopardise progress in securing economic recovery”.
I agree strongly with that approach.
Let us look at what has been done in the 18 months since things went badly wrong for the economy in 2008: the Centre for Economic and Business Research has stated that quantitative easing has added about 2 to 3 per cent. to gross domestic product; the automatic stabilisers that have been introduced have given, and will give, a fiscal boost of 4 per cent. in the next tax year; and it is estimated that the fiscal stimulus in the 2008 pre-Budget report prevented GDP from falling by 0.5 per cent. in 2008-09. Furthermore, today, at its lunch-time seminar, the Institute for Fiscal Studies downgraded the structural deficit and said that it is now £67 billion rather than £73 billion. I support the Government’s efforts to get the deficit down to 5.9 per cent. of GDP by 2014-15. Doing it that way is right and does not sacrifice jobs. Let us also consider the record of all the G7 nations: the UK has the most ambitious deficit reduction strategy. It is more ambitious than that of Germany, Canada, the United States, Japan, France and Italy.
One of the key reasons why I stood for office was to tackle unemployment, and I am pleased that in the UK, at 7.8 per cent, unemployment is 2 per cent. lower than in the eurozone and 2 per cent. lower than in the United States. However, my constituency has suffered from an increase in unemployment in the past 12 months—it has risen by 901—so the measures on extending the jobs guarantee for 18 to 24-year-olds until 2012 are particularly important. Two weeks ago, I met about 20 young people in the Royal Strathclyde Blindcraft Industries factory in Springburn in my constituency. They had all come off the unemployment register thanks to future jobs fund investment, they were all learning a new set of skills in manufacturing and construction, and they had all had their lives turned around. They will be a great asset to Glasgow’s economic future.
Tomorrow I am hosting a jobs summit in my constituency, bringing together businesses, trade unions, CBI Scotland, the local chamber of commerce and public sector employers, as well as voluntary and third sector employers, because the challenge that we face in diversifying our economy is one that neither the private sector nor the Government can face alone. Rather, this must happen through the public and private sectors working together. That is why the role of the new green investment bank in driving future growth and employment in environmentally sustainable industries, with a £2 billion investment, is so crucial. I know that in Scotland, with offshore wind and investment in the digital and creative industries, the scheme will create thousands of new jobs. The Government therefore have a role in recalibrating our economy; they cannot simply stand aside and set a fiscal framework. A decent society needs an active, but not an overpowering state.
If we maintain the current course, I hope that the UK will be able to match the levels of investment in research and development that countries such as South Korea, Germany and Sweden reached in previous decades; because it is through high-level manufacturing, the creative industries and low-carbon technology that we can permanently replace some of the output that was lost in the recession. My right hon. Friends the Prime Minister and the Secretary of State for Scotland recently visited the Allied Vehicles plant in my constituency, which is involved in manufacturing zero-carbon vehicles powered by electricity. I welcome the fact that the Budget increases capital allowances for forward-looking companies such as Allied Vehicles, which employs 350 people in an area of economic deprivation in Glasgow, North-East.
I also welcome yesterday’s publication of a document by the Treasury on progressing towards the 2020 target of abolishing child poverty, which puts the role of work and making work pay at centre stage. There are 500,000 children in this country who are out of poverty because of the policies followed by this Government, while around 9,500 families in my constituency benefit from child tax credit. The increase of £4 a week in child tax credit for families with a one or two-year-old child will help around 65,000 families in Scotland. Across the UK in 2007 and 2008, there were 700,000 children in low-income families where only one adult was in work, while 43 per cent. of children were in families described as “working poor”. There is therefore much to be done, through increasing employment opportunities of the kind that will help families with child care responsibilities and ensuring that people are demonstrably better off in employment than on benefits. A rising minimum wage over the next five years would greatly assist in that too.
This is a Budget that I hope will have the support of my colleagues on the Labour Benches on Tuesday, and I hope that all of us will argue for the support of the country for it in the coming months.
I was delighted to listen to the speech by my hon. Friend the Member for Tatton (Mr. Osborne), who opposed the duty on cider. That is exceptionally important, because cider has been a success story and has a tremendous history of growth in recent years.
Herefordshire is the country’s cider-making heartland. The United Kingdom produces around 130 million gallons of cider a year, and half of that comes from Herefordshire. One billion pints of cider are sold every year. There are tremendous environmental benefits to cider production: 2 million new apple trees have been planted since the mid-1990s, with 9,500 acres of cider orchards in Herefordshire. Forty-five per cent. of the apples grown in this country are used for making cider. There are more than 1,000 people directly employed in cider making and 5,000 indirectly employed. There is a wider value to the rural economy.
As my hon. Friend knows, I am a great supporter of cider, and I have noticed from some of the bottles in this place that the Wildlife Trusts are working in conjunction with cider makers because of that advantage to the environment, which I hope will not be lost with the increase in tax.
I am grateful to my hon. Friend for that intervention, and I congratulate him on the excellent speech that he made earlier. He is right to point out the benefits of orcharding, as it is called, and to say that the habitats that can be created in cider orchards are enormously environmentally helpful, positive and creative. Some wonderful and very rare animals and, particularly, beetles can only be found living on apple trees. And where would we be without mistletoe at Christmas time? Most of that comes from Herefordshire and Worcestershire. It is not possible to grow orchards quickly; they take years to mature. They can also take a variety of forms, including bush orchards and standard orchards. I hope that this savage increase in duty—10 per cent. above inflation, making a total of 13 per cent., which represents a disproportionate attack on the industry—will not have the undesirable effect that my hon. Friend has mentioned.
I want to talk about the fragility of the cider market. Hon. Members will remember the golden days of cider being triggered by the Magners television campaign, which encouraged people to add ice to cider. That resulted in a tremendous lift across all the different brands, but the industry is still fragile, as is its growth. Many of the new producers are hobbyists, or small producers who are expanding, and they need to be supported, not forced to bear the brunt of the Government’s tax plans.
It is a great shame that the Government have chosen to penalise this industry. Duty on cider has increased by 20 per cent. in the past two years, and it is now being increased by a further 10 per cent. over and above inflation, making a total of 13 per cent. The lower increase in duty on beer will always adversely affect cider sales, as there is a substitution effect. That is not the case, however, when it comes to making cider.
People think that the way in which cider is made involves taking the apples and crushing them to press the juice out, then fermenting the juice, preferably in oak barrels, until it is fully fermented. It is then aged, bottled and sold. The process is very different, however, for the own-label white cider sold in supermarkets. The alcohol is created from sugar-type syrups, and the alcoholic liquor is then mixed with apple juice, apple flavouring or apple concentrate. It can then be sold as cider. It is that highly alcoholic, low-cost drink that is causing some of the antisocial behaviour problems that bother us all, and it is a great shame that it carries the name “cider”. The fruit juice content is the key difference between the two.
I hope that whoever forms the next Government will stop attacking people who make cider out of apple juice in the traditional way, and focus instead on the problem drinks. My local policeman told me that he had seen young people in supermarkets turning bottles round to read the label, to ensure that they were getting the most units for their money. For them, it was not about what it tasted like; it was about what it did to them. That is not the sort of cider that I am talking about, and it is not the sort of cider that Herefordshire makes. The white cider known as Frosty Jack’s is not produced there.
The Government should focus their attention on dealing with the antisocial behaviour issues and stopping young people—and, perhaps, older people—drinking white cider and getting into a terrible state.
And who moved to Herefordshire himself at the age of 18.
The hon. Gentleman will know that there is broad support not only across the House but among people with a Herefordian connection as well as those in the west country and elsewhere for his views on the importance of not giving cider a bad name unjustifiably, and of not treating a fragile and valuable industry unfairly. The cider industry has clearly been picked out in isolation from all the alcohol producers in this country. We will all want to persuade the incoming Government that the proposed change should not be sustained, and I hope that it will be able to be reversed in the near future.
I agree with the hon. Gentleman, and I was encouraged by the comments of my hon. Friend the Member for Tatton when he said exactly what the hon. Gentleman would have wanted to hear—namely that this across-the-board attack on the cider industry is not supported on this side of the House. My next-door parliamentary neighbour, the hon. Member for Hereford (Mr. Keetch), also speaks strongly for the cider industry, so it is a shame that he is not in his place today. He will be leaving the House at the next election, so I hope he will use this particularly vicious attack on our constituents as an opportunity to speak in this debate before next Tuesday.
I would like to talk about something that happened last week. The Minister for Housing, the right hon. Member for Wentworth (John Healey), who I believe is the Government’s pubs Minister, announced on 18 March 12 action points designed to support struggling pubs. Only a few days later, however, we see his Government attacking the key product that pubs are supposed to sell. It defies belief. We are losing five pubs a day. These duties will have an impact on the sale of cider.
I received an e-mail this morning from a publican in my constituency who runs the Crown inn at Woolhope, which prides itself on being one of the homes of Herefordshire cider and perry, stocking 18 types of cider all produced within 15 miles. This is locally produced cider being sold in a local pub to local people. That is the sort of model of sustainability that supports rural economies. It is something that the Government say should be encouraged, yet as soon as they get the opportunity, they torpedo all those good intentions with this savage increase in duty. That puts at risk the cider producers and apple growers, as well as the cider industry’s strong and worthy efforts to improve not only environmental sustainability and local pubs, but higher standards of responsible drinking.
At the start of his statement yesterday, the Chancellor of the Exchequer said:
“At the heart of our decisions is a belief that Government should not stand aside, but should help people and business to achieve their ambitions.”
What hollow words! This Budget and the cider duty increases do not correspond with those comments. The Chancellor also explained why this was being done:
“A long-standing anomaly has meant that cider has been under-taxed in comparison with other alcoholic drinks.”—[Official Report, 24 March 2010; Vol. 508, c. 249-256.]
This, unhappily, ignores the far higher costs involved in producing cider and the considerable environmental benefits generated by the cider industry. It is a tragedy that the Chancellor has gone down this route.
There is another message here, too, for those in the beer industry. I hope that the House will remember that large numbers of hop growers also live in my constituency and do a tremendous job at a time when there is a great deal of pressure from the brewers to use less and less hops and to choose hops with higher alpha acids. The industry—whether it be brewers or cider makers—decided to fight among themselves about duty and as soon as the Government saw division, they nipped into the gap and increased the duty not just, aggressively, on cider, but on beer, which is a great shame.
Let me touch on binge drinking, too, as the high-strength, low-fruit-content ciders are deeply associated with this problem. The overwhelming majority of ciders are not beverages used by binge drinkers and the country’s unique, traditional and responsible cider makers should not be punished for this behaviour. I think that if these cider makers lived in Labour marginal seats, the difference in the Budget might have been considerable. I hope that the Government will reconsider. I hope that, in the years to come, they will realise that attacking a British industry run by British producers for British consumers in British pubs is a very silly and sad mistake to have made.
Let me touch an another aspect of the Budget that I noticed—the proposal for a green bank to deal with green issues. At a time when bankers are, let us face it, not popular, it is extraordinary that the Government are acquiring yet another bank. They have bought RBS and Lloyds, they have taken on a nationalised Northern Rock, and now they want another bank. I believe that Post Bank, which was promoted yesterday, will be the Government’s fourth. I am very happy to see green businesses supported—I am a passionate environmentalist myself—but I do not understand why the Government want to own more and more banking businesses.
If the Government really wanted to promote environmental issues, they could start by cutting red tape and ensuring that industries that are exceptionally environmentally friendly, such as cider making, are protected. They could deal with the microgeneration certification scheme, which is affecting green energy suppliers. They could also help farmers to produce more on-farm renewable and low-carbon energy. There are 2,500 on-farm anaerobic digesters in Germany, and only about 30 in England.
One of my constituents tells me that he wants an anaerobic digester on his dairy farm and has invested in one, but he needs help from Advantage West Midlands. It wants to help, but it is bogged down in red tape. Regulations and red tape from DEFRA cost about £530 million, and prevent farmers from expanding into the low-carbon energy sector. After a decade of Labour, barely 2 per cent. of the energy used in the United Kingdom comes from renewable sources. That is a record that the Government will leave behind. They should be supporting jobs and the rural economy by making it easier for businesses to invest.
Labour’s claims to support green technologies are inconsistent. The rate of duty on liquefied petroleum gas, a fuel that the Government should be encouraging more people to use because it is cleaner, has spiralled upwards in recent years. In 2005, it stood at 9p per kilogram. It has already trebled to 28p, and will rise further to 30.53p on 1 April, to 31.95p in October and to 33.04p on 1 January next year. Over six years it will have risen by 367 per cent. That is really not the best way in which to promote clean alternatives. The Government are sending a mixed message on green jobs: in March last year the Prime Minister promised to create 400,000 of them, but by the time of the Labour party conference the figure had fallen to 250,000.
The real problem for businesses is the ability to borrow. The Government have increased the target for the amounts that banks should be lending to business, but the lending is not happening. During the current economic downturn 27,000 businesses have gone under, and lending is a problem for businesses in my constituency. Last year I arranged a meeting between banks and businesses, at which it was made clear that there was a problem. The banks themselves say that they would like to lend—especially to farming businesses, because the collateral in the land value is good—but they cannot take the risk unless a business has a long track record. The reason, they say, is that other banks will not lend the money to them. Liquidity is a real problem at present, and the Government will not solve it merely by creating new banks.
Broadband is another example of rural communities being badly left behind. Towns and villages in my constituency that are not connected are suffering. Only 58 per cent. of households in the rural west midlands have fixed broadband connections. According to the Commission for Rural Communities, 42 per cent. of rural England can currently only access speeds of 2 megabits per second or below. I have written to Ministers, whose answers show that the Government have no idea of the percentage of business and residential properties in Herefordshire without access to the 2 megabits per second envisaged in Digital Britain. I met representatives of BT the other day to discuss the issue, and they were keen to help, but BT is a business too. It has shareholders, and faces challenges of its own. I am extremely worried that the Government’s policy will not work.
Lingen currently has no broadband provider. A company called QiComm used to provide it, but can no longer do so because the service is not commercially viable. Members of the community joined forces to get a service up and running themselves, with the support of the local council. There are 36 users, whose broadband service will be operational from 1 April. That demonstrates what can be done when users get together. However, if they are to pay tax on their phone bills, they will be paying for something that they used not to have but went out and acquired for themselves. I do not think that the Government’s 50p tax on fixed-line telephones will deliver the changes that we would all like to see.
The Government have spent hundreds of millions of pounds on bailing out the banks. Businesses will want to know why that hard-earned taxpayers’ money is not filtering through the system and reaching them. We heard plenty about the car industry in the Budget statement, but I have not forgotten what happened in the west midlands before the last general election. The Longbridge plant was failing, and vast quantities of taxpayers’ money were poured in. That was before the Phoenix four story broke. I therefore have grave reservations about what the Government have promised in the Budget. I am particularly sad about what they are going to do to the cider industry—a fantastic industry that was doing so well, and which has been dealt nothing short of a body blow by this attack on it by the Labour Government.
There are now clear dividing lines. The Government have demonstrated that they have no regard for the rural communities. The best description of the Budget that I have heard is that it is a Polo mint Budget: it looks all right around the edges, but there is the gaping hole in the middle of £19 billion in tax that needs to be raised. We heard nothing about that. It was a Budget designed for an election campaign, which, like the Budget, will fail.
When I first entered this House five years ago, I do not think I was a very nice or pleasant person. The wonderful thing about Parliament, however, is that it knocks off, and smoothes, the edges, and I think I am a much nicer person now. I hope that the Secretary of State for Work and Pensions will return after the general election a nicer person. There have been some great contributions to this afternoon’s debate, but listening to her speech was a bit like sucking on a lemon, chewing cotton wool and listening to someone dragging their fingernails down a blackboard all at the same time; it really did set one’s teeth on edge. I think she should work on becoming a nicer person in the Chamber, because she is very nice outside it, and I think she will wear niceness very well inside it when she returns—as I am sure she will—after the general election.
This country faces some enormous challenges; we would be fools if we did not accept that. Borrowing this year is set to be £167 billion, and next year it will be a very similar sum. Our national debt is £1.3 trillion, and if we include off-balance-sheet liabilities it could be twice as much. These are therefore very uncertain and worrying times for our constituents and the businesses and organisations that serve them.
In uncertain times we, as political leaders in this country, need to bring as much certainty and clarity to what we do as possible, because the following is an example of what happens when we have uncertainty. Let me say, however, that I hope Labour Members will see that I am not making a political point.
Today, I received a letter from the chief executive of Hertford regional college. I shall read out only the highlights:
“We are currently anticipating up to 70 redundancies of management, administrative and support staff, which is likely to be followed soon by 10-15 lecturer posts. The main reasons for our problem are…The legacy of the fiasco over the Learning and Skills Council’s mismanaged capital development programme for colleges, which meant we were unable to finish the Ware campus. This has left us with no reserves, debts of £12 million and the cost of having to maintain, mothball or demolish surplus buildings at Ware for which we have no need.”
“Like many college Principals I accept the need for FE to bear its fair share of the coming squeeze on public sector spending. However, it’s frustrating having to navigate such an over-complicated, fragmented and spasmodic funding and policy environment.”
We did not give this college, or other colleges around the country, clarity. We said one thing and we then changed our minds, and we have put them in great difficulty. I therefore hope that after the next general election all politicians will, as far as is possible, try to stand by what they say and what they promise. I know that that is very difficult to do, but we really must try, because that is one of the best ways we can help both public and private sector organisations navigate what will be a very difficult few years.
We must also demonstrate high levels of fairness. There will be a war for public money, and a variety of well-funded pressure groups and organisations will bombard us with correspondence pleading that their area of interest is more deserving than others. I believe that the right hon. Member for Rother Valley (Mr. Barron) was the Chair of the Select Committee on Health for some time.
The right hon. Gentleman is the Chair of the Health Committee. I can tell him that I am concerned that disease areas—admittedly deserving ones—that have well-funded lobbyists may crowd out those disease areas that perhaps do not have such a loud voice. I am chair of the all-party group on mental health and I know that for decades mental health has been underfunded and last in the queue. Things certainly have improved under this Government and it would be churlish of me to suggest otherwise, so here is my plea on behalf of mental health services. I am not going to ask for more money, because that would be unrealistic. However, perhaps we could keep what we have got, because we are doing good work with it, helping many millions of people who otherwise would not have been helped. I hope that after the general election, when the special interests come knocking, we will be fair and will listen to those voices that perhaps are not raised as loudly but are equally as deserving.
Of course, we also have a responsibility, as Members of Parliament, in this difficult time. We must have robust and searching debate. Many enormous decisions will need to be taken, but I hope that we will resist the temptation to get too partisan, too vitriolic and too personal. I freely admit that I was not a particularly nice person five years ago. [Hon. Members: “Oh, you were.”] My colleagues are being very generous. I thought it was the done thing to stand here and make puerile comments to score points against the Government. I did enjoy doing that, but it did not get me very far—I am still here on the Back Benches—and it certainly did not advance the causes of my constituents and their businesses. We need to set a very good example in the next Parliament, because people will be looking to us to do the right thing for them, to make the hard decisions and not only to stand by those decisions, but give them the proper scrutiny and attention that they deserve.
I was asked to speak briefly because others wish to get in, but I should say that I am hugely optimistic about the future of this country. As I have said, I think we will have a very difficult few years ahead of us. The media like to talk this up as a near-apocalyptic five years, but I know that this country has, in the medium to long term, an enormously bright future ahead of it. I know that we are going to get through these dark times because we are all going to pull together and we are all going to do the right thing. We may not like it and it may be difficult for a period of time, but it would be ridiculous if politicians could not set out an optimistic vision for what will happen afterwards. No matter what side of the House we sit on, we all want to see our constituents become more prosperous, we all want to see them have great and better opportunities to advance their lives and achieve their aspirations, and we all want to see young people, of whatever age, have the very best education and the very best opportunity to pursue worthwhile careers, be they in the private or public sector. I know that we face great challenges, but I also believe that we have an extremely bright future ahead of us and it would be silly to suggest otherwise.
I wish to say one last thing as this Parliament draws to a close. I have had a cracking time representing my constituency of Broxbourne; we have had a lot of good times and we have had a few bad times, but it has been a fabulous five years. I have also had the honour of serving with some simply wonderful Members of Parliament from both sides of the House, who are real heroes of their communities. In the next week we will say goodbye to a number of them and in six weeks’ time we will say hello to perhaps another 300 colleagues, but this is a great Parliament to work in. Despite what has happened over the past five years, it is full of the most honourable people and it has been an absolute privilege to call them colleagues.
My hon. Friend the Member for Broxbourne (Mr. Walker) modestly said that when he came here he was not a very nice person, but I do not agree with that at all. He has always been a very nice person and, more importantly, he has enormous integrity. I want to get that straight, because when he goes into this election, he can hold his head high for the simple reason that, from the Back Benches, he has been absolutely true to what he believes in. As I have said several times in the past month or so, we not only need radical reform in this Parliament but we need our Back Benchers to have backbone. That has been part of the problem.
Many of the complaints that have been made about the manner in which the system works, through the Whips and so on, do not take sufficient regard of the way that some of us have acted from time to time, for a variety of reasons, despite our general agreement with the policies, principles and attitudes of our parties. That applies across the House and in all parties, and I pay tribute to the hon. Member for Luton, North (Kelvin Hopkins) for standing out as a man of integrity. This is what makes a Parliament. We should not just get up and parrot whatever other people want to give us, by way of a broadsheet. We must get up and say what we really think, because our first duty is to our country, our second duty is to our constituents and our third duty is to our party’s policies and programmes. Those sentiments are not mine but Winston Churchill’s, and I believe them absolutely. I will do my best to continue in that manner after the next election if my electorate are good enough to return me to the House.
I want to talk about the truth in relation to two main matters, the first of which is the economy. The Economic Secretary to the Treasury is a sort of neighbour of mine, as he represents Dudley, South—at least, he is not far away—and I have had many exchanges with him, as well as with the Chancellor of the Exchequer and the Prime Minister, about what lies at the root of the Budget. Debt is what lies at the root of the Budget, and that will continue after the election whichever party gets into power. In an intervention on my hon. Friend the Member for Tatton (Mr. Osborne), I made a point that I have made several times in private meetings about the extent of the debt. I have pursued this issue since a debate on fiscal stability on 7 October 2008, when I began to compare the figures of the Office for National Statistics with the assertions that the Government were making about the true level of debt. I do not need to go through all the debates there have been on this, because I can say what I need to say very briefly.
The national debt, as asserted by the Government, even to date, is set to double to £1.5 trillion by 2014-15. That is £23,000 for every person in the country during the decade of weakest economic growth since the second world war, and the worst decade for the stock market since the early 1930s. That is the asserted level of debt, but the actual level of debt is truly alarming—I would call it frightening. Yesterday, I received a letter from the ONS confirming the actual amount of net debt against the background of what has been asserted. That letter is in the Library, so anyone can check it. It says that the actual net debt is more than £2.65 trillion, if we include all the hidden costs such as public sector pension liabilities, and is not the £1 trillion figure that the Government have, in my opinion, misleadingly presented. What that means for public expenditure and taxation is relevant because there is a balancing act between how much we will need to cut public expenditure and how much taxation is liable to go up. We will only be able to tell the British people the truth. If I might cite Winston Churchill yet again, he said to tell the British people the truth. If we tell the British people the truth, they will follow our lead, but I do not believe that that has been done and the consequences will be very serious for whichever party wins the next general election. I firmly believe that my party will do so, but these figures will not go away.
The Fiscal Responsibility Bill, which I described as a Bill for fiscal irresponsibility, will do absolutely nothing about those figures. I believe that that Bill has been enacted now, and it is an attempt to reduce the deficit by half within the next four or five years. I am afraid that that will not deal with the level of real debt. When one speaks to the credit agencies and the people in the bond market, as I have, and asks what criteria decide what our rating will be in the international financial markets, they do not say that they are considering the accounting principles set by the Government. By the way, it is not just the Government—I have discovered today that these figures, according to the ONS, are agreed in conjunction with EUROSTAT. In other words, these are European statistical formulas that have been adopted. I shall come on to that in a moment, because the bottom line is that the real figures are being fudged, not only here and in Greece but in every other country in Europe, if things such as public sector liabilities are not included.
The credit agencies and the bond market are not interested in the conjuring of accountants; they are interested in the bottom line. They will tell anyone that the real bottom line is the actual amount of debt, and Network Rail, the private finance initiative, nuclear decommissioning or public sector pensions cannot simply be magicked away. So when I speak about £3.1 trillion, which is a huge figure, with its consequences for public expenditure and the amount of money that people will have to be taxed, we have to be realistic; otherwise, we would not be telling the British people the truth.
Other problems arise from the speech that I heard from the Secretary of State for Work and Pensions. Already the issue of youth unemployment is a big problem that the Government have not done enough to resolve. Unemployment among 16 to 24-year-olds now runs at 19.6 per cent., and we heard only the other day about the problems regarding further education and the lack of confidence among those who know most about that matter. We heard during the debate on access to higher education that the problems for further education are recognised in that sector.
Unemployment among people at large—I am now referring to the International Labour Organisation’s definition of unemployment—in October to December 2009 stood at about 2.5 million. That is 7.8 per cent. of all those who are economically active in this country. To that I would add the claimant count for jobseeker’s allowance—that is, 1.635 million. In total, therefore, the unemployment figure that we should really be looking at is 4.1 million. We cannot ignore the reality of the figures, which are in the House of Commons Library research paper “Economic Indicators, March 2010”. Employment among 16 to 24-year olds has fallen by 7.8 per cent., which is more than for any other age group, so young people are being badly served by this Government. Another factor is that the number of public sector workers has increased by 200,000 in the past two years.
As I am sure that people realise, when they think about it, not one penny of public expenditure does not come from the—hopefully reasonable—tax paid on income from private enterprise. That is the sole source of money for public expenditure. We all want reasonable public services: I am not against that at all, but the figures that I have set out are unchallengeable facts. They come from the ONS and the House of Commons research department. I am certain that the Minister will not attempt to challenge them from the Dispatch Box, but the picture that they paint is tragic.
The Budget does nothing to resolve the problems that the Government face. The problems are so deep that they will not be resolved by the policies produced yesterday. It is tragic, but the Government have failed and that is why, above all else, we have to get rid of them.
However, it is impossible to disengage the Government’s failure from other difficulties. We know that the truth has not been told on debt, where the problems accumulated as a result of massive, irresponsible and extravagant public expenditure by the previous Chancellor, who is now the Prime Minister, when times looked good. He and his Government now face ruin for the mistakes that they made, but the difficulties go beyond what has been going on in the UK.
We had a debate on the Lisbon agenda in European Committee B only a few days ago. The hon. Member for Luton, North was also there, as was the Economic Secretary. I have attended many similar debates since that agenda was devised in 2000. Because of the European Communities Act 1972 and the slavish manner in which we fall in with most of the policies emerging from Europe, it is impossible to disentangle our policy making here from what goes on in Europe.
I think that the hon. Member for Luton, North will recognise that many of the problems also stem from the Maastricht treaty. He and I were the only two people in the House when section 5 of the European Communities (Amendment) Act 1993 was debated. We referred to article 2 and the aspirations embedded in the European treaties to produce high employment and prosperity for the people of Europe. It has all come to nothing: it is a total failure, and it has led to the rise of the far right and high unemployment. We are not immune, because we are seeing that even in this country.
Why have the British Airways people been on strike, and why are we seeing the beginnings of similar action in the railway industry as well? Those events are just indications of how the failure of the economy, connected with what is going on in Europe, is producing the tensions and uncertainty that are already undermining the people of this country.
The hon. Gentleman flatters me when he speaks of my knowledge of the EU. I assure the House that his is much greater than mine, but does he agree that what is happening in Greece and some other countries—and Germany’s insistence that they must deflate their economies—will damage the European economy? Does he also agree that if it is driven down, we could be dragged down with it unless we are very careful?
Indeed. The first moment I saw what was happening on the Greek front—it must be two months ago—I said in this Chamber that the Germans would not be able to meet the challenge that that presented, because the German people do not want to. We are talking about human nature and people, not just technical bits of accounting rules; one cannot fiddle with people. The Germans will not pay up, and if they do, there will be big trouble in Europe, because the problem will go from Greece to Spain, Portugal, Italy, Ireland and so on. The problem is inherent in the failure of the economic system of the European Union—a failure that those of us who fought the Maastricht treaty in the 1990s predicted. We were right then, and we are right now. The proof is before us. The proof of the pudding is in the eating and, my goodness, it is bitter eating.
There are serious problems, including immigration and the costs of the welfare system that arise from excessive immigration. The right hon. Member for Birkenhead (Mr. Field) and I, and many others, have got together to explain that over the years. The fact is that there are problems that can be solved only by cutting immigration. I shall not go into that in depth, but the matter is so important that it ought to be mentioned in this debate.
I mentioned the question of what the European Union is achieving, or failing to achieve, and the disaster that it is causing to the people of this country. I want to quote from a European Commission document, “Europe 2020 Strategy”:
that is, the European gross domestic product—
“fell by 4 per cent. in 2009, our industrial production dropped back to the levels of the 1990s and 23 million people—or 10 per cent. of our active population—are now unemployed. The crisis has been a huge shock for millions of citizens and it has exposed some fundamental weaknesses of our economy.”
It goes on:
“Even before the crisis, there were many areas where Europe was not progressing fast enough relative to the rest of the world: Europe’s average growth rate has been structurally lower than that of our main economic partners”.
“Europe’s employment rates—at 69 per cent. on average for those aged 20-64—are still significantly lower than in other parts of the world. Only 63 per cent. of women are in work compared to 76 per cent. of men. Only 46 per cent. of older workers (55-64) are employed compared to over 62 per cent. in the US and Japan. Moreover, on average Europeans work 10 per cent. fewer hours than their US or Japanese counterparts…Demographic ageing is accelerating.”
“The combination of a smaller working population and a higher share of retired people will place additional strains on our welfare systems.”
That does not include immigration. The European Union is taking over common immigration policy, so we will be bound into the legal framework even more than we are already. According to the European Commission, there are already 7 million illegal immigrants in Europe alone, and they are coming over here as well.
Then there is the question of over-regulation. Even the Secretary of State for Business, Innovation and Skills said, when he was a Commissioner, that 4 per cent. of GDP was taken up by over-regulation in Europe. I have not heard him say that with regard to what has been going on in this country since then. Over-regulation is a massive burden on small businesses, and the pathetic way in which small businesses are being treated was illustrated by the comments made by the Federation of Small Businesses yesterday or today.
There is a need for truth, and we are not being told the truth. The truth is emerging in the bursting of the dam. We see it in the case of Greece, in the high unemployment figures in this country, and even in the rise of the British National party. We see it in the fact that the people of this country are deeply disturbed by the way in which they have been governed over the past 13 years. The answer lies in good government, but it has to be government based on the truth. The truth that I have described, regarding levels of debt, and the fundamental weakness in our integration in the European Union when we could instead be an association of member states working effectively, cannot be denied.
Britain needs to wake up, and it will wake up during the election. When we get past that election and, I hope, have a Conservative Government with sound principles, including dealing effectively with the European Union in line with my United Kingdom Parliamentary Sovereignty Bill, which I hope will one day be enacted, it is essential that we restore to this House the power to decide what is necessary in the interests of our electors, and do not have it dictated to us by misleading statistics from the Government and misleading policies that have failed in the European Union.
It is a pleasure to contribute towards the end of this important debate about the Budget. I pay tribute to my hon. Friend the Member for Stone (Mr. Cash), who made an important point about the Government needing to wake up. This is an interesting Budget, but we needed to wake up during the statement itself, because the Chancellor’s performance was so lacklustre. My hon. Friend also paid tribute to our hon. Friend the Member for Broxbourne (Mr. Walker), who began his speech by saying that he was not a nice person. I shall not comment on that, because he is a thoroughly delightful person now and a credit to his constituents, who I hope will see the light and ensure that he is back here in his place on the other side of the election.
My hon. Friend the Member for Leominster (Bill Wiggin) made an important contribution about apples and the taxation now hitting cider. I visited his constituency and saw how important that industry is. I represent Bournemouth in the county of Dorset and I know that, likewise, the industry is important there. I am sorry that the Treasury deems it appropriate to introduce taxation or changes to legislation without discussing them or properly thinking them through with other Departments, and that is a theme to which I shall return. I am sure that if the Treasury had engaged with the Department for Culture, Media and Sport, it would be aware of how wrong it is to tax all ciders, rather than those that contribute to binge drinking.
My hon. Friend the Member for Uxbridge (Mr. Randall) made one of the most succinct points of the entire debate. If the Economic Secretary to the Treasury is listening I shall repeat what my hon. Friend said, because he pointed to the Minister and asked, if an election had not been coming up in the next two weeks, would we have seen this particular Budget? [Interruption.] I shall repeat what my hon. Friend said, because the Minister is still talking. My hon. Friend asked, if the election had not been coming up in two weeks’ time, would we have seen this particular Budget? The honest answer is absolutely not.
It has been interesting to experience this Budget debate far more closely than I have any other. The start of this ritual that we go through is a bit of a farce, partly because the Opposition and, indeed, the nation are denied the details until the debate gets going. That is a strange position to be in, considering that we, as Her Majesty’s Opposition, are here to challenge and scrutinise what is going on. We then have to play catch-up during the debate in order to work out what the Chancellor is saying.
Because of the Chancellor and the absence of substance, spark and detail, the Budget statement was a painful experience, as I have said. I think that Members from all parts struggled to stay awake. It was certainly painful for me, because, with the Chamber being crowded, I had to sit on the steps of the Gangway, so I ended up getting sore buttocks halfway through. However, that is a separate, personal issue on which I shall not dwell.
This ritual borders on the ridiculous when we are denied access to the full report, and when the Leader of the Opposition has to react to what is leaked to the papers in the lead-up to the Budget statement and what the Chancellor has just said. Those are hardly the conditions for open and fair debate about the state of the nation’s finances. It is like being given a jigsaw with some of the pieces missing and the picture on the box having been removed.
The hon. Gentleman makes an interesting and good point about the presentation of the Budget. Does he agree that the other great failure of our system is that we still have no chance to consider properly, debate routinely or vote on the Government’s expenditure plans during the course of each financial year?
The hon. Gentleman makes a further point, suggesting, as we go through this year of more openness and scrutiny, that the Leader of the House might wish to pay further attention to the Budget as part of that process.
My hon. Friend the Member for Tatton (Mr. Osborne) has made a similar point. Twenty-four hours later, we are armed with the necessary information to be able to digest exactly what has happened in this Budget statement in a way that we were unable to do during the hour of the speech itself. Having been able to take stock and read the small print, we can make a full assessment of this Budget. Considering the state of the nation’s finances and the urgency of getting public spending under control and assisting businesses that are still not getting support from the banks, there was very little to write home about. As the headline in the Financial Times, which is pretty much a neutral newspaper, put it: “Darling ducks deficit challenge”.
This Budget has really been more about election tactics—the survival of Labour rather than what is good for Britain. I can imagine the discussions that took place in the last couple of weeks, in the lead-up to this, with people saying, “How do we manage this exercise for the benefit of our party in surviving through the next election?” I am guessing that it came down to three principal tactics. First, with borrowing at £11 billion less than predicted, how can that be spun in a way to suggest that there is a successful story and fine stewardship in navigating the troubled waters of the recession? Of course, that tactic has to be employed without mentioning the fact that we were the first country in the G8 to enter recession and the last country to come out of it. It must also be spun in such a way that we are borrowing £163 billion, of which it costs £43 billion a year simply to do the borrowing. From an international credit rating perspective, that borrowing continues to be under threat.
The second tactic that I think was adopted was the idea of stealing some headline-grabbing measures from the Tories and taking credit for them in order to close off potential lines of attack during the election. That is why we saw the abolition of stamp duty for homes under £250,000, the inheritance tax threshold frozen, and more university places offered. Of course, that tactic works only when one does not mention that it was a Tory proposal to abolish stamp duty in that way, that it was the Conservatives who decided to raise the inheritance tax threshold to over £1 million, and that it was the Tories who put forward the idea of more university places. What has also now been exposed, thanks to my hon. Friend the Member for Tatton, is that the university places funding scheme is available only for one year, yet the average university course takes up to three years.
The third tactic that I think has been employed is to rally the Labour party with eye-catching headlines on measures such as tax information-sharing with that good old country, Belize. Well, of course that got a big laugh—the biggest laugh of the day—but the enormous build-up to the big hoo-hah when this announcement was made suggests that the Budget is not being taken too seriously. Why not get to the core of the issue by doing what the Conservatives have been proposing—capping the level of contributions made to party funding? That is something that the Government could have done in any one of the 13 years in which they have been in power. Instead, they decided to go for gimmicky headline-grabbing measures.
The same applies to the amount of money for repairing potholes—£100 million. Anyone who was listening to the “Today” programme this morning would be aware that repairing the roads to the necessary standards that we expect would cost £9 billion, so £100 million will not go very far, and it will probably cause arguments as to how and where it is spent, with possibly more going to Labour seats than Tory ones.
My hon. Friend makes a very powerful point. Does he agree that it is ironic that the Government are threatening to withdraw the funding for the A338 from the A31 into Bournemouth, which has been part of a Government-funded programme, and yet at the same time they are boasting about increasing expenditure on highway maintenance?
My hon. Friend and neighbour makes an absolutely valid point. That is the trouble with this Government. They see these schemes, they get put in place, and then, as we approach the election, things are moved around for electoral gain.
The tactics of yesterday were all about attempts to overshadow key aspects of the Budget. We heard nothing about allowances being frozen, despite inflation running at 3 per cent., which effectively introduces another form of stealth tax. We heard nothing about the fact that national insurance is on its way up—not necessarily the best thing to do when one is trying to find support for businesses up and down the country.
Of course, there was no mention of delaying the spending review, which is so critical from now until October. I ask the Economic Secretary: what is the difference between conducting the next three-year spending round now and doing it in October, apart from the fact that there happens to be a general election in May?
A £24 billion hole remains in the Budget, which is supposed to be filled from savings in public services. The Government have identified and even ring-fenced the money, but they have not said where it will come from. I am afraid that that will be an election issue. People will ask where Labour intends to make the cuts. Of course, we will not know until after the election, if at all. There are no details in the Budget, which is a “Don’t rock the boat” Budget. It is the bluffers’ Budget, which leaves the economy and the country guessing Labour’s true intentions.
As my hon. Friend the Member for Broxbourne said, we often come into the Chamber and experience exchanges of pleasantries or otherwise; we chew over the issues and say things to each other. Yet the opinion that actually matters as much as anyone’s is that of the investors, who examine the Budget speech and the details of the Red Book and decide whether to invest and support the Government. Hon. Members should consider the gilt markets and what happened during the Budget speech yesterday. Investors around the world started to sell Government bonds, pulling their money out of the UK. They did not like what they saw. The Economic Secretary shakes his head, but they did not like it.
I am fascinated because I did not know that what my hon. Friend described had happened. Does he agree that it happened because investors know the true bottom line on debt and they are not taken in by the accounting rules, which are governed by EUROSTAT and so on? Investors look at the bottom line, which is much worse than the Government admit.
Again, my hon. Friend makes a powerful point. The Government must listen because people deciding to shift their money outside the country is likely to threaten our credit rating. The Government need to raise £158 billion of bonds annually in the next five years. That is a tall order with such a shadow hanging over our credit rating. I do not think that it can be achieved without better leadership and drastic action by the Government. Such action seems currently to elude them.
In the few minutes that I have left, I want to consider an aspect of the economy that is close to my heart as Front-Bench spokesman on the subject—tourism and its contribution to the economy. It may seem an odd subject on which to focus, but it is the fifth largest sector in the economy. It is worth £114 billion and I understand that approximately a quarter of those in employment are somehow connected—directly or indirectly—with tourism. We do not do it justice or discuss sufficiently its contribution to the economy. The British tourism industry comprises 200,000 small and medium-sized businesses. It deserves our support, recognition and help. It is therefore not such an unusual sector to consider in a debate about the economy.
What exactly is tourism? It links our seaside towns to our city centres, our country clubs to our town squares, the Lake district to the theatre district, the Ferris wheel to the roulette wheel and the museums in Kensington to the Munros in Scotland. The unique offering of all those things makes Britain exceptional. One cannot replicate that in other countries and that is why we are the sixth most attractive place in the world to visit. That accolade is not trumpeted enough.
Tourism is also about supporting the small and medium-sized business. It is about the tax break on the furnished holiday let, the cost of the visa to enter this country, the price of air passenger duty and the scale of the red tape that faces the B and B. What can tourism do for the country? It has low barriers of entry—it is easy to get into tourism. There are favourable exchange rates, and a Deloitte & Touche report, which was produced not long ago, proved that for every pound VisitBritain spends abroad, it brings in around £25 to this country. That is not a bad investment. How many Departments can one give money to and then make more money from?
Iceland is not a place that one might think of as a tourist destination—it is certainly not a place where one would want to invest one’s money anymore—but as a result of what has happened to its finances, it is turning to tourism to mend its economy. It is trying to bring foreign exchange in by promoting and marketing itself in a way that it has not done before, and there are lessons for us to learn from that.
It may shock you to learn that the House last debated tourism legislation in 1969, Mr. Deputy Speaker, and it is high time that such legislation was debated again. The tourism deficit is the difference between the amount of money that we spend abroad and the money that is brought here by overseas visitors. In 1997, the deficit was £4 billion, but that has escalated to £18 billion today. We are losing out: not enough money or people are coming to this country from abroad and we are not attracting people from this country to stay and holiday here. We need to address that so that we can keep that money in this country.
The Department for Culture, Media and Sport budget actually increased by 60 per cent. in the past 10 years, but the tourism budget remained stagnant at £35 million. In fact, in the recent spending round by 20 per cent. What a shame, given that it is one of the few Government operations that can actually make money, as I said.
Let us look at the Budget and how it ties in with tourism. As I mentioned earlier, national insurance has not helped at all. My hon. Friend the Member for Tatton illustrated the problems with the models that are proposed in the Budget to support small and medium-sized business. Business rates will be increasing as a consequence of the Budget, as will the small companies tax rate. There will be a fourfold increase in charges on businesses. In addition, as has been mentioned, the increase in tax on cider does not tackle the underlying problem of binge drinking, nor does it provide the support that is needed for responsible pubs up and down the country. The increase is like using a hammer to break a nut. It is not targeted, and once again, there is not enough discussion between the Treasury, the DCMS and the industry, and not enough understanding of how taxation can work to influence behaviour.
To give another example, I met officials of the Tourism Alliance this week and a group representing caravan parks, which are a big part of the tourism industry. They told me that caravan parks are now required to have an alcohol licence in their flower shops, because some bunches of flowers come with a bottle of champagne, so that people can celebrate events. They need a liquor licence for that, which seems to be absolute madness—there is no sense at all. That needs looking at.
On bingo and gaming duties, we have again seen a massive hammer coming down on the industry, which does not help seaside towns in any way. One hundred and ninety arcades around the country have closed in the last year alone thanks to the lack of support from the Government. They have tweaked the number of B3 gaming machines that are allowed, which has made arcades unprofitable, which is why so many are closing. Once they are closed, the boards go up, which has a ripple effect on the problems that seaside towns face.
That brings me to the point of order that I made before the debate. I had the opportunity to grab the Minister outside the Chamber to ask him whether he was aware of the announcement made on Radio 4 today that the Government will give £5 million to support seaside towns. I have just checked, and there is still no more information on that in the Vote Office, yet the announcement was made on the radio. I plead to you, Mr. Deputy Speaker, and to the Minister that surely, if we are going to respect this House and if we are going to be allowed to debate those matters properly, we need to share information with hon. Members so that we can understand what is happening. I have no idea where this £5 million is coming from. I have a suspicion that it is actually regurgitated money, as is often the case—an old announcement conveniently re-announced—but I simply do not know. DCMS is none the wiser, and the Treasury Minister did not know anything about it, which suggests that it is a regurgitated announcement.
Furnished holiday lets are those homes that are given over to the tourism market to provide an alternative to staying in a hotel. If the tax breaks that have applied until now are removed in April, as the Government intend, 10 per cent. of the market could be lost, which would lead to the loss of 2,400 jobs and a potential reduction in tourism spend of more than £200 million. I do not think that the Treasury has looked at this carefully enough and I ask the Minister to reconsider it. We have made it clear that we are likely to shift the rules so that the occupancy rate will have to be 20 weeks a year, rather than 10. The Government are running scared of EU legislation, but I ask them to listen to the tourism industry, realise how important this issue is for people from Cornwall to Scotland and get the legislation sorted out.
There are many aspects of Conservative policy on tourism that I would be happy for the Government to copy. Thankfully, a general election is coming up so we do not have to wait much longer. Only £37 of every £100 we spend on holidays is spent in the UK, which means that £63 is spent abroad. A little effort by this Government to promote Britain to encourage us to celebrate what we have here would shift that balance and more money would stay in the UK. Corporation tax should go down, not up, and business rate relief should be automatic, not accessed only after a lot of red tape. The Budget did not contain any new tax breaks for new companies, but we have promised that every new company with fewer than 10 employees will not have to pay national insurance for the first year. The Secretary of State asked for evidence of what the Tories would do, and that policy is a great example of how we would help SMEs get the support that they need.
The Government also need to look at the issue of visas. I urge them to consider a Schengen-plus bind-on to allow those Oriental visitors who want to come here to do so. France and Germany have 500,000 visitors from China every year, but the UK gets only 100,000. That is because Chinese tourists look at the cost of the UK visa and the cost of the Schengen visa, and they turn their nose up at the British offer because it allows entry into just one country. Biometrics must have reached the point at which the two systems could work together and that would be a step towards helping the British tourism industry.
The Chancellor spoke for more than an hour, after which we knew little more than we had done before. After three terms of this Government, we still do not know what they have actually done. We head towards the general election none the wiser about how Labour would cut spending in real terms, how small business would get more support or how the cuts of £24 billion would affect the public services. After a decade of Labour, we see that the boom was wasted. The Government have failed to carry out the radical reforms to public services that new Labour promised us back in 1997 with such fanfare. Those reforms promised to change lives, but our pension systems remain a mess and our health and education systems hardly reflect the doubling of the budgets that they have received.
This Budget, days away from a general election, should have provided the economic argument for Labour’s appeal for a fourth term. Instead, it shied away from the big questions. It postponed the big issues and attempted to hoodwink the British people into thinking that Labour has weathered the economic storm. It has exposed the absence of a plan or any vision for the future. Britain can do better, and thankfully the nation will decide whether this Government should have a fourth term. They may well ask what on earth was achieved in the last three terms.
It is a great pleasure to follow my constituency neighbour, my hon. Friend the Member for Bournemouth, East (Mr. Ellwood). He made some points that were extremely pertinent not just generally but to my constituency in particular, which relies heavily on the tourism industry. Obviously, many people who go and stay in Bournemouth will spend quite a lot of their time in Christchurch, and vice versa.
It is a great privilege to speak in this debate. I will begin with a similar point to the one made by my hon. Friend the Member for Tatton (Mr. Osborne) when he opened the debate this afternoon. He talked about the Government’s sleight of hand in not allowing an increase in personal allowances this year, which will affect 30 million people in employment. Is it not a surprise that the Government did not want to give that a fanfare and spell it out in the first few words of the Budget statement. I suppose that they are hoping that people will not notice until later in the year.
That brings me to the issue of personal allowances. In my view, the concept of a personal allowance is this: every person should have a starting point for tax, enabling them to keep enough money to live a normal life, without extravagances or anything like that, and to meet their basic needs, before they have to start paying taxation—before the Government say, “We need a contribution from you!” Back in 1952—you and I, Mr. Deputy Speaker, may just recall the situation then—income tax came into effect only when a person’s income reached 103 per cent. of average earnings. Today, however, when average earnings are £23,500 a year—taking the public sector average in December of £457 a week and relating it to the private sector average in December of £448 a week—the personal allowance is £6,475. In my submission, that is far too low, because nobody can live on £6,475.
That is recognised by those who support the national minimum wage. It was announced in the Budget papers that the national minimum wage will increase in the autumn. That means that somebody on the national minimum wage working 40 hours a week will receive more than £12,000. Why, if they are getting the minimum wage, should they have to pay tax on £5,500 of that money?
The hon. Gentleman anticipates my intervention slightly. Does he support the policy that we have made no secret about and which we think is central to the taxation system? That policy is to take everybody with an income of £10,000, however derived, out of the taxation system altogether. It would be paid for by the people who have very high incomes and by reducing the advantages that they get, for example, in pension relief and so on. It would be balanced and paid for elsewhere, but would benefit 3.5 million people, or more, a year.
The argument for taking a lot of people out of tax is very strong, but I do not think that the solution of trying to pay for it by further penalising those who constitute the most productive parts of the economy will do anything other than drive increasing numbers of people overseas. They will take their income and abilities overseas. I have met many people in my constituency who have done just that over the past couple of years, and I have met even more in recent days who have said that they are thinking of doing just that, unless we have a Conservative Government that will introduce common-sense policies.
I agree with my hon. Friend that the kind of grandmother’s footsteps that the Liberal Democrats and others would engage in, which would be just fiddling around with the tax regime, is not the answer. What we need are sound Conservative principles. We want competitiveness, enterprise and growth. We want small businesses to be given the opportunity to pay for whatever is reasonable in the way of public expenditure. My hon. Friend is absolutely right in all the arguments that he is putting forward.
I am grateful to my hon. Friend. It is a colloquialism, but we often talk about the direction of travel. My point is that freezing personal allowances is completely the wrong direction of travel. I hope that an incoming Conservative Government will start increasing personal allowances, giving people more money to spend, so that they can meet their basic needs. With the Government’s announcement, income tax will now start to be paid on 27 per cent. of national average earnings, which is far too low a figure.
My next, brief point is this. I have been doing a bit of bedtime reading, and I was recently looking at “The Right Approach to the Economy: Outline of an Economic Strategy for the next Conservative Government”, which was produced in 1977. Among its authors were the noble Lords Howe and Howell, and it was edited by the father of my right hon. Friend the Member for Horsham (Mr. Maude), who is playing a key role in ensuring that we are well prepared for government. It is an historic document, and, interestingly, it reminds us that we have been here before. Back in 1951, at the end of a Labour Government, we found ourselves in an enormous crisis. In 1977, when “The Right Approach to the Economy” was written, we were also in an enormous crisis, and on both occasions, the crisis was largely contributed to by a Labour Government having had runaway expenditure in previous years and having built up an enormous deficit. One of the big problems that we are now suffering from is that during the period before the global financial crisis, the Government were running a deficit of £34 billion, when we should have had a surplus. That is symptomatic of the recklessness with which they were managing the economy, and we are now reaping the whirlwind.
The tax strategy outlined in “The Right Approach to the Economy” was to have four major elements:
“Lower personal taxation to restore work incentives…An enterprise package of measures to stimulate business growth…Stronger encouragement to personal savings and capital building on the widest possible scale,”
and “Simplification of the system.” Those four recipes are as relevant today as they were in 1977. Indeed, one of the papers over the weekend referred to the fact that Finance Bills are now about 10 times the size that they used to be. The system is grossly complex. Think of how much money is wasted just in administering it, Mr. Deputy Speaker.
Briefly, my last point concerns the amount of debt interest. The pie chart on page 11 of the Red Book shows that debt interest payments stand at £43 billion. The most hated tax in my constituency is council tax. The income from council tax is only £26 billion, so if we were not paying so much debt interest, we could abolish council tax. That is the extent to which we have got ourselves into a problem of overhanging debt, produced by this Government, for which we are all paying dearly. There are obviously various other ways in which one could carve that figure up, but the big thing missing from that pie chart on Government spending by function is anything about waste. The amount of Government spending that is wasted is significant, and it should be included in a pie chart, with a figure for the billions of pounds that are wasted. That chart needs to be improved. I hope that an incoming Conservative Government will include a figure for waste, so that we can see over the course of that Government how the figure will decline.
The Government suggested, with a bit of smoke and mirrors, that they could do away with our problems by making a few economies in individual Departments, but my hon. Friend the Member for Tatton, speaking from the Front Bench, was absolutely brilliant when he quoted directly from the people on the front line in those Departments. Let us hope that we have similar frankness from those people when we get into government. Then we can have a real campaign to show exactly what an awful inheritance we are going to have.
It is a great pleasure to respond to the debate, and I should like to thank my many hon. Friends who have participated in it, starting with my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton), who made his final speech to the House today. In a long and distinguished career here, he has never been frightened of controversy or of defying his Front Bench. Not only has he not been frightened, I think that he has rather enjoyed it—
That is not for me to say, but he has been consistent in his advocacy of manufacturing, and he argued today for a rebalanced economy and greater savings. I suspect that he has been reading some of the work on the new economic model by my hon. Friend the Member for Tatton (Mr. Osborne), the shadow Chancellor—
Indeed? I am grateful for that information.
My hon. Friend the Member for Macclesfield’s industry and independence have been well respected by his constituents and by hon. Members—and by those who fall into both categories—in his long career. I do not know whether he will be pleased to discover that he became a Member of Parliament eight days before I was born. He probably will not, but I congratulate him on his long and distinguished career none the less.
I also thank my hon. Friend the Member for Sevenoaks (Mr. Fallon) for his excellent speech, in which he highlighted his concerns about youth unemployment, the budget deficit, and the need for an office for budget responsibility. He also used a telling phrase when he described the Budget as a “mock Budget”. My hon. Friend the Member for Uxbridge (Mr. Randall) provided the House with a business perspective, and with details of how businesses such as Randall’s of Uxbridge had suffered under Labour Governments through the generations. This Government have been no exception.
I should also like to thank my hon. Friend the Member for Leominster (Bill Wiggin) for highlighting the Budget’s attack on cider. He rightly said that, although the Government sometimes copy our policies, they frequently fail to get them quite right. This is just such an occasion, as they have raised the tax on all cider rather than targeting the super-strength ciders. That is most unfortunate and will cause great difficulty in his constituency—a fine constituency that I know well, and I know that you do, too, Mr. Deputy Speaker.
I also want to thank my hon. Friend the Member for Broxbourne (Mr. Walker), who started with the statement, which has been widely denied, that when he first came to this place, he was not a nice person. I knew him when he arrived here, and would just like to say that he was a very nice person. He was perhaps a little chubbier than he is now, but he was certainly very nice.
My hon. Friend the Member for Stone (Mr. Cash), following the example of my hon. Friend the Member for Macclesfield in being consistent in focusing on certain issues, highlighted over-regulation, immigration and Europe in his speech. My hon. Friend the Member for Bournemouth, East (Mr. Ellwood), who is a great advocate for the tourism industry, highlighted our party’s policy on the difficulties with furnished holiday lettings. My hon. Friend the Member for Christchurch (Mr. Chope) mentioned the fact that Labour Governments always leave the economy and the public finances in a mess.
I also want to thank the right hon. Member for Rother Valley (Mr. Barron), who spoke well about his constituency, and the hon. Member for Luton, North (Kelvin Hopkins), who, rather to everyone’s surprise, praised Lord Mandelson. The hon. Member for Leyton and Wanstead (Harry Cohen) revealed that he was a leading intellectual influence on Government policy and the return of Keynesianism. He also spoke of the need for greater transparency to prevent people from being ripped off. The hon. Member for Glasgow, North-East (Mr. Bain) spoke in his first Budget debate, and I suspect that it will not be his last.
The task for the Budget was perhaps best set by the Governor of the Bank of England, Mervyn King, in a speech in Exeter on 19 January when he said that the spring Budget provides an opportunity to
“demonstrate a strong commitment to fiscal sustainability in the longer term”.
We can take it as implicit in that that the Government had not succeeded in demonstrating a strong commitment to fiscal sustainability prior to this Budget. The fact is that the Government have failed that task.
It is not persuasive for the Government to say, “Look, we have lower borrowing than we predicted.” After all, the Institute for Fiscal Studies predicted in its green budget in January that the borrowing could be reduced to £167 billion for this year, but it went on to state that, even with the same level of growth as the Government predicted, lower tax revenues would result, so much of the gains would be lost. The IFS also pointed out that the Treasury’s forecasts for economic growth were higher than the average of independent forecasts; indeed, we know that they are even higher than the Bank of England projected. There is consequently very little room for optimism as far as growth is concerned.
We have heard a lot about tax rises. Most noticeably, we heard about the increase in national insurance contributions. It was striking when, earlier this week, a policy exchange paper showed, by running through an economic model very similar to that of the Treasury, that an increase in employers’ national insurance contributions of 2 per cent. would reduce gross domestic product by 2 per cent. and increase unemployment by 1 million. It was rightly said that the result should be viewed with caution and I am not saying that the figure is right. If it is, however, it is remarkable that the Treasury went ahead, especially if it had received such advice. The Treasury should come clean with the British people as to the advice it has received on this matter.
We heard more about higher tax on alcohol, not least on cider, and we heard about a permanent increase on stamp duty. There is also the issue of freezing personal allowances, raised by a number of hon. Members, which will cost 30 million people at least £48 a year as a consequence of the retail prices index being much higher than the rate to which the personal allowance will be raised.
The big question and the big missing element is the absence of spending plans—the absence of a comprehensive spending review that is long overdue. The Government’s excuse, of course, is that there is uncertainty about what the debt and unemployment figures will be over the months ahead, yet somehow those uncertainties are magically removed once we are the other side of a general election. At that point, it is possible to set out spending plans going through to 2013-14.
We are not given the numbers and, given what the IFS said earlier today, we know why. According to the IFS, spending on public services and administration will have to fall by a total of £48 billion in real terms by 2014-15 and in unprotected areas such as higher education, transport and housing, spending will have to be reduced by between 19.5 and 25.4 per cent. by 2014-15. If the Minister disputes those numbers, I urge him to take the opportunity to do so this afternoon.
My hon. Friend the shadow Chancellor provided us with some quotations from officials regarding spending plans. I am not going to repeat them—time does not allow me—but I can throw in some examples where both the Department for Business, Innovation and Skills and the Department for Communities and Local Government seem to be making the same claims for the same efficiencies in exactly the same terms. It looks as if there is an element of double counting as well. It is worth quoting Cathy Newman, the Channel 4 journalist who compiled this list, when she described Departments as
“hilariously candid about just how back of the envelope their plans are”.
The truth is that the Government have a dreadful record on efficiency savings. They had their own target of £35 billion of savings to be found between April 2008 and April 2011, but confirmed yesterday that they had found only £10.8 billion. As the IFS pointed out today, some savings that have been found belong to existing efficiency drives and are therefore not additional, while some, because they are in protected areas, will be recycled and will not count towards deficit reduction. Savings must be about delivering. It is a question of having to show, not tell. That is one reason for saying that the sooner we get on with delivering these efficiency savings, the better.
The fact is that this has been a thin, empty, dead-end Budget, lacking ideas and vision and giving no sense of how this Government will take the country forward. Perhaps, as we debate what Conservative Members hope will be the last Budget produced by Labour, this is a good time to look back at the first, delivered on 2 July 1997 by the then Chancellor, now Prime Minister. It is well worth reading some of the lines that appear in it:
“Public finances must be sustainable over the long term. If they are not, the poor, the elderly and those on fixed incomes who depend on public services will suffer most.”
He was indeed. We are now borrowing more than we have borrowed at any time in our peacetime history.
The then Chancellor went on to say:
“A prudent estimate of the current trend rate of growth is only 2¼ per cent., so raising the long-term growth rate of our economy is our major challenge.”
The IFS green budget and the OECD estimate that the trend growth rate is now 1¾ per cent., so there is another failure.
The then Chancellor also said that past Chancellors had
“deluded themselves into believing that growth, however unbalanced, was evidence of their success. I will not ignore the warning signs and I will not repeat past mistakes”,
but oh yes he did. He also said that one of the important elements of growth was business investment, but now, in 2010, we are seeing the largest fall in business investment since records began.
The then Chancellor said:
“Half the adult population of our country hardly saves at all.”
Under the current Government, saving rates have reached record lows. He also said:
“I want the United Kingdom to be the obvious first choice for new investment, so I have decided to cut the main rate of corporation tax.”
He went on to boast about our tax competitiveness on the basis of the corporation tax rate. In 1997, our rate was lower than the OECD average; now it is higher. In 1997, ours was the 11th lowest rate in the world; now it is the 23rd lowest. In 1997 ours was the third lowest rate in the EU 15; now it is the sixth highest, and the Prime Minister is standing in the way of our proposals to reduce corporation tax further.
The then Chancellor said that
“it is time for the welfare state to put opportunity back into people’s hands.”
He also focused on young people, saying:
“There will be no fifth option—to stay at home on full benefit.”—[Official Report, 2 July 1997; Vol. 297, c. 303-308.]
Now 923 young people aged between 16 and 24 are unemployed, and the figure is 50 per cent. higher than it was in 1997. The figure for economic inactivity is at a record high, at over 8 million.
That was not a Budget that stood the test of time. It introduced fiscal rules that have been abandoned. It boasted of dismantling the internal market in the national health service, which had to be reintroduced. It proposed individual learning accounts, which had to be abandoned after being abused by fraudsters. It proposed a university for industry; that proposal led nowhere. Nevertheless, we could at least say that that was not an empty Budget. It was packed with ideas, although most of them were bad ideas. In contrast, yesterday’s Budget showed that the Government have completely run out of ideas and run out of steam. I can, however, find one similarity between the hyperactive Chancellor and the fading Prime Minister who will go to the electorate very shortly. Both can be described in this way: fired with enthusiasm.
This is a Government who are just trying to muddle through—a Government who have run out of steam, run out of ideas and run out of courage. With this Budget, they are ending with a whimper.
It is a pleasure to respond to today’s Budget debate on behalf of the Government. I shall begin by responding to the speeches of Back-Bench Members, some of whom were making their last speech in the Chamber as they will be retiring at the forthcoming general election.
My right hon. Friend the Member for Rother Valley (Mr. Barron) made a powerful speech in which he talked about the importance of investment in schools in his community and in infrastructure. He has seen the great difference that has been made, yet in the years before Labour came to power such investment just was not there and his area was forgotten about. He rightly pointed out that Building Schools for the Future is a programme for the future, and it will continue to provide much-needed investment in our schools infrastructure. He also spoke very eloquently about the changes he has seen in the coalfield communities in and around his constituency, and I particularly noted his points about Orgreave and the advanced manufacturing plant that is now located there.
My right hon. Friend also made some valid points about the role of Government intervention both in his constituency and more generally, and I am disappointed that it appears that regional development agencies have become a political football. A rational and dispassionate analysis of the situation leads to the obvious conclusion that there are some things that can be done at the local level and others that need to be done at the Westminster and Whitehall level, but that there is also a gap, so there is a valid case for RDAs and the work they do. The Conservative party should have a serious think about its planning policy because it would put future economic growth in jeopardy by putting barriers in the way of the strategically important investments that the UK will need to make.
I want to pay tribute to the hon. Member for Macclesfield (Sir Nicholas Winterton), who is retiring after almost 39 years in this House. As has been said, he began his parliamentary career before the hon. Member for South-West Hertfordshire (Mr. Gauke) was born—and the shadow Chancellor, too. I think I must have been a secondary school pupil when the hon. Member for Macclesfield first entered this House. As always, he spoke with great passion about manufacturing industry and I, as an MP for a west midlands seat, share that passion. I do not, however, share his concerns about international ownership of companies that are major employers in the United Kingdom. In modern-day manufacturing, companies, including some of our biggest companies, have a very diverse share base. The hon. Gentleman mentioned AstraZeneca, and it is a case in point. I am sure he will have welcomed the Chancellor’s comments about not going back to the interventionism of the past, but no return to the hands-off approach of the free marketeers either. I believe an active industrial policy to support manufacturing is what is needed. That is not to say that we do not need to do more to improve the service sector, but it is inconceivable that the United Kingdom can have a strong future without a vibrant manufacturing base.
I have always respected the views held by my hon. Friends the Members for Luton, North (Kelvin Hopkins) and for Leyton and Wanstead (Harry Cohen), although I have found it very difficult to agree with them on most occasions. In fact, it is one of the ironies of this place that I have probably agreed more with Opposition Front-Bench Members than with them over the last 15 years that I have been a Member of this House. However, my hon. Friend the Member for Luton, North is absolutely right to point to the value of the new industrial activism that has been espoused by Lord Mandelson. A number of us have been arguing strongly for that for a long time. I am glad that it is now more recognised within government. My hon. Friend said that we ought to be following Germany’s example more, but if he reads the detail of the Budget and what we are saying in response to the Hauser review, he will see that we are following the model of Fraunhofer’s that has been introduced there. In fact, although our proposals on UK finance for growth and the green investment are not the same as this—one would not expect them to be—they share some similarities with the Kreditanstalt für Wiederaufbau, which Germany has had for many years.
The hon. Member for Sevenoaks (Mr. Fallon) is always worth listening to, but I still think he is on the wrong side of the argument on how we should tackle the deficit. We maintain strongly that making cuts now would put the recovery in danger, and we do not believe it is right to do that. However, he made some good points about the costs of employment, and it is right that any future Government should look at those and when the time is appropriate, and the economy can afford it, should look to reduce national insurance. The judgment we made in increasing national insurance from April 2011 was that we need to do that as part of our plans for fiscal consolidation, and we believe it is the fair thing to do. He also made important points about private equity. If he were to read page 53—I think that is the right page—of the Budget document, he would see that we wish to re-examine venture capital trusts and the eligibility limits for investments that are made. He also ought to welcome what we are doing through the growth capital fund and UK Finance for Growth too.
The hon. Member for Uxbridge (Mr. Randall) talked with the great knowledge that comes from his background in business. Like him, I have a business background, so I understand why he feels so strongly about it. I agree with the points he made about the status of engineers. I dimly remember something from my education days about selective employment tax, to which he referred. My hon. Friend the Member for Glasgow, North-East (Mr. Bain) paid full tribute to serving Members of this House. He may be a new Member, but he made a very mature contribution to his first Budget debate speech, and I know that that will augur well for his future.
The hon. Member for Leominster (Bill Wiggin) made a stout defence of the cider industry in his constituency, and it is right that he wishes to press for the interests of his constituents, whom he feels may be affected. If he looks at some of the fine detail that has been announced, he might obtain some greater assurances. He also talked about rural broadband, to which the Government are very much committed. We remain fully committed to the universal service commitment by 2012, and to the roll-out of next-generation broadband.
The hon. Member for Broxbourne (Mr. Walker) talked about the problems of his local further education college and the legacy of mismanagement by the Learning and Skills Council. I must say that that is one of the more horrifying examples of mismanagement that I have come across in my time as a Minister. Like him, and in contrast to the hon. Members for Stone (Mr. Cash) and for Bournemouth, East (Mr. Ellwood), I am hugely positive about the future of this country. It is unusual for somebody in the position of the hon. Member for Broxbourne on the Conservative Benches to be talking the country up, but it is refreshing that he wants to do so. Perhaps he has not gone further towards the Opposition Front Bench because he is too nice, not because he was too nasty—he claimed that he was—when he came into this place.
The hon. Members for Stone and for Bournemouth, East both talked about levels of debt and the UK’s credit rating. They will be very aware that all the credit rating agencies judge that the UK has the highest possible credit rating, and Moody’s has said that we have a resilient triple A sovereign rating. Right across this House there must be common agreement that it is important that the UK takes every action it needs to maintain its sovereign triple A credit rating.
The hon. Member for Bournemouth, East also talked passionately about tourism. I agree with many of the points he made about its importance, but I suspect that we disagree on some of the practical policy measures. However, tourism is an important sector for the UK economy, and it is right and proper that we should continue to stress its importance.
The hon. Member for Christchurch (Mr. Chope) talked about sleight of hand in the Government’s freezing of personal allowances. The hon. Member for Bournemouth, East, also said that this was a political Budget and that we would not have this sort of Budget if there were not a general election coming, but I do not think the Conservatives would be creating so much fuss about the indexation of personal allowances if it were not for the forthcoming general election. The idea that that is a stealth tax is completely disingenuous. Each year, personal allowances go up in line with inflation, and the uprating figure that is used is that for the previous September. As inflation was negative last September, at minus 1.4 per cent., those allowances could, in theory, have been cut, but we chose instead to freeze them, and we announced that in the pre-Budget report. In the past 12 years, personal allowances have been indexed in nine years, frozen in one year, when the personal allowance was used to help to pay for increases in health spending, and over-indexed in two years. If there were not a general election in the offing, the Conservative party would not be making anything whatever of this issue, because it is simply the normal thing to do.
I shall give way to the hon. Gentleman in a moment, because I want to refer to what he has said. In his speech on the Budget, he first called it an “empty Budget” and then accused us of pinching all the Conservatives’ ideas and putting them in it. He cannot have it both ways.
I thank the hon. Gentleman for those comments. It might seem churlish if I were now to say some of the things that I might have wanted to say about his speech. Let me simply say a few more words. He suggested that the Chancellor did not say anything about taxes, but perhaps he missed the section of the Chancellor’s speech in which he talked about the 1p increase in national insurance contributions, the 50p rate and the tax relief on pensions. The hon. Gentleman ought to welcome the fact that the Chancellor said we are not raising taxes out of “dogma or ideology”. I very much welcome that, and I hope we will be in a position to reduce top tax rates in future, because I believe that they can, if they are too high, be a disincentive to entrepreneurship and innovation.
I also want to correct the hon. Gentleman’s accusation regarding the Chancellor using net figures and gross figures in relation to bank lending. The Chancellor said that there was £38 billion of lending to small and medium-sized enterprises in the past year. The actual figure for total gross lending last year was £79 billion, and the target that was agreed with Lloyds and RBS is £94 billion for this year. That is a real increase.
This is an important Budget. I am proud that there is a strong growth element to it, and I thank the hon. Gentleman and other hon. Members for their personal thanks to me.
Ordered, That the debate be now adjourned.— (Lyn Brown.)
Debate to be resumed on Monday next.