House of Commons
Monday 29 March 2010
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
The work at Shoeburyness is directly linked to saving the lives of service personnel on operations in Afghanistan, providing, among other things, essential pre-deployment training in the safe and controlled disposal of improvised explosive devices and similar ordnance. In 2009, I received three representations, with a further two so far this year, from people claiming that their properties had been damaged by noise and vibrations caused by activities at MOD Shoeburyness.
Everyone accepts that our armed forces need to train at Shoeburyness. However, many of the explosions are caused not by our armed forces’ training, but by commercial waste disposal from which big corporate interests profit. Will the Minister give an undertaking for full transparency, so that local people are made aware of which explosions are being caused in the interests of our armed forces and which in the interests of crony capitalists?
I know that the hon. Gentleman is not a great supporter of our defence industries in this country, but let me tell him that the amount of ordnance exploded at Shoeburyness that is not related to training—this is, the disposal of ordnance that is out of date or that the MOD needs to get rid of in a controlled way—comes to 5 per cent. That is done in partnership with QinetiQ, a world-beating company that we should be proud of. As for trying to hamper us and put more in the way of our training, I am sorry, but that would be a misuse of the MOD’s time.
My apologies: I think the problem is deafness rather than sleep.
As General McChrystal has said, the situation in Afghanistan is serious, but it is no longer deteriorating, and the international effort will make real progress this year. Already Afghan forces and ISAF—the international security assistance force—have successfully delivered improved security to the population of central Helmand through Operation Moshtarak. Working closely with our Afghan allies, the international community’s next step will be to strengthen governance and security in Kandahar city.
Security in Helmand province has for years been the responsibility of British forces, many of whom have lost their lives in the process. What effect does the Secretary of State think it would have on our forces in Helmand if they were to be told, as has been suggested in The Sunday Telegraph, that they are shortly to be replaced by United States marines?
There has been a substantial increase in forces going into Helmand. Some of those have been ours—we have increased our forces in Afghanistan by about 1,200 in a year—but the biggest single inflow has been from the United States of America. We have been very happy to work alongside US forces, and they now operate in the south of Helmand province—we very recently handed over Musa Qala to them. What we are involved in is a coalition effort: we have to work alongside our coalition partners, and that does not mean just the United States of America. In Helmand we have Danes and Estonians working in our area of operation alongside our forces, as well as those of the Afghans of course, so I do not think that there is a problem among our armed forces in recognising the need to work with others.
Concern has been expressed about the impact of Taliban and al-Qaeda training camps in the North West Frontier province of Pakistan. Can my right hon. Friend say what assessment has been made of those camps, how effective they are, and to what extent the Americans now have a controlling impact on them, so that they cannot undermine the work being done by NATO and UK troops in Afghanistan?
The overwhelming improvement that we have seen on the Pakistan side of the border over the past year or so has come about as a result of the efforts of the Pakistani Government and the Pakistani armed forces. Those forces have suffered great losses in some of the operations that they have conducted against insurgents in the FATA—the federally administered tribal area—and Waziristan. Those forces are bearing down on the insurgency on their side of the border, and we should recognise that and congratulate them. Of course we work with the Pakistani Government, as do the American Government and American forces.
But in his carefully crafted answer, the Secretary of State declined to deal with the point that was raised a moment or two ago. Is there a proposal that British forces should be withdrawn from Helmand? Yes or no?
Look, let me say to the right hon. and learned Gentleman that, as a result of the huge inflow of forces into the south of Afghanistan, there are a number of proposals as to how we approach the issue of command and control, and how we divide up our forces in order to ensure that all can be successful and that there is no gap in the security that we are providing. Those discussions are ongoing—
So the answer is yes.
There may be people within the coalition, as the right hon. and learned Gentleman has read in The Sunday Telegraph, who believe that it would be a good thing for us to remove ourselves from Helmand to Kandahar. I would have to be persuaded—and I would take some persuading—that that was a good thing. We have developed a level of understanding of the situation in Helmand province over a period of time which should not be thrown away lightly. We have invested a great deal in terms of money and infrastructure, as well as of losses. This is something that we would have to be very concerned about before we would agree to doing it. However, we should not set our face against things as some kind of knee-jerk reaction; we should be prepared to discuss these issues with our coalition partners.
If we are to make proper progress down the Order Paper, as I always seek to do, we need to make progress a little more quickly.
On 19 April, during the likely general election campaign, the Government are likely to face a court case relating to the ability of UK forces to hand prisoners over to Afghan authorities. The case, brought by peace campaigners, could have major implications for our commanders in Afghanistan as a result of international and European human rights law. It is bad enough that our troops have to deal with warfare; now they have to worry about “lawfare” as well. Will the Government place before the House, before the Dissolution of Parliament, consolidated Ministry of Defence guidelines on the detention of personnel in Afghanistan, so that Parliament and the British people can make a judgment about the Government’s position ahead of the court case, which many will regard with outrage?
We do detain people in Afghanistan. Detention is an important part of the operations that we undertake there. Our forces are threatened by people in that country, and detention is therefore necessary. We also hand people over to the Afghans, and we have a clear memorandum of understanding about when and how we do that and about the safeguards that we seek to put in place. I will do as the hon. Gentleman asks and place in the Library a copy of our policy on detention—I had intended to do that anyway. I will do it as soon as possible; if not today, then tomorrow.
Defence-Related Employment (Tyneside)
There are many companies on Tyneside and in the related travel-to-work area doing important work for defence, and we are extremely grateful to them for the skills and dedication of their employees. Good examples include A & P, which is building sections for our two carriers on the Tyne. I have visited it twice, and on the last occasion was privileged to cut the first steel. I also visited Astrum in County Durham the other day; it is producing tracks for our armoured vehicles. I have visited BAE Land Systems, which has produced the Challenger, the Warrior and the Panther and is now working on the Terrier. BAE Systems is also opening a new ammunition factory in Washington, Sunderland.
The workers at BAE Systems’ armoured fighting vehicle factory on Newcastle’s Scotswood road have loyally backed up the efforts of our armed forces in Iraq and Afghanistan, but they now face job losses, and the run-down and possible closure of the plant, because of the loss of the specialist vehicle order. Was this because Tyneside was politically outgunned by Wales and Scotland, or because the management at the plant were incompetent? Will the Minister come to Tyneside to explain how this decision was made, and what the way forward for the workers will be?
Order. The hon. Gentleman allowed himself three questions. We do not begrudge him that, but one answer will do.
It was neither of those two things. The contract award was made on value for money, which was a function of performance, reliability and cost. I understand my hon. Friend’s disappointment about the decision, but we have to make such decisions on the basis of value for money. I would certainly be happy to accept his invitation to come to Newcastle and to meet the management and the work force again.
Improvised Explosive Devices
All our deployed personnel in Afghanistan are equipped for the tasks that they are asked to undertake. This includes a range of protected vehicles, including the Mastiff and the Ridgback, which offer world-leading protection against improvised explosive devices. Comprehensive training is provided prior to deployment and on arrival, and a very large part of that training concentrates on IED avoidance and recognition.
In pausing to remember the bravest of the brave who have made the ultimate sacrifice in dealing with IEDs, will the Minister tell us how many people on active deployment in Afghanistan are trained to find IEDs, whether there is a shortage of such personnel, and how many have left the service prematurely on return from duty?
No, I cannot and will not give that detailed information because if I do that publicly, I give it not only to the hon. Lady and our media, but to our enemies in the form of the Taliban. What I can say is that nothing has been given a higher priority in our efforts in Afghanistan than countering improvised explosive devices. That is why we established a 200-strong force last April and why, as recently as December, we committed and reprioritised £150 million towards tackling the lethal threat we face from the Taliban in respect of IEDs.
Service Veterans (Mental Health)
Initial results from the six NHS mental health pilot schemes are encouraging, with evidence that veterans feel able to access and use the services with confidence. The evaluation of these pilots will be complete later this year, with a view to all NHS mental health services rolling out special provision for veterans during 2011-12. Additionally, the medical assessment programme at St. Thomas’ hospital in London continues to prove an important resource to veterans with mental health problems.
I thank the Minister for that reply. What assessment has the Minister made of the number of veterans in prison, the number of them homeless and the number that, sadly, commit suicide? What more can be done for those groups of people?
We have completed studies on those three groups. On homelessness, we conducted a study with York university on the figures in London that showed 4 per cent. homelessness among the veteran population. As for the prison population, we have just completed a review of our data along with those of the Ministry of Justice, which showed that the prison population of veterans is about 4 per cent. We are subjecting those findings to more scrutiny to find out exactly what more can be done in mainstream services in prisons to support veterans.
A year ago, the Minister was good enough to meet Piers Bishop of Resolution, which has done groundbreaking work on mental health issues among our armed forces. Does Resolution still have a part to play on this issue, to which I know the Minister has given a great deal of personal attention?
We are always looking to work not only with the NHS but with third sector providers. Two or three weeks ago, together with the Department of Health, I was pleased to sign a partnership agreement with Combat Stress, which is now going to embed its mental health professionals in NHS trusts to act as champions for the mental health of veterans. We will consider any proposals on their merits.
The mental health pilots to which the Minister referred—I have visited one of them—are most welcome, but even if they were rolled out in a definitive programme, it would still mean that the majority of cases of combat stress would be undiscovered and untreated. The Minister is probably not aware that the medical examinations people are given when they leave the armed forces have not been updated for many years and they certainly do not reflect the level of service-related mental illness generated since 2003. Why has he allowed this obvious missed opportunity to endure, and will he partially redeem himself by offering to support our proposal to screen veterans for service-related mental illness both at the point of discharge and at intervals thereafter?
I am sad that the hon. Gentleman does not pay more close attention to what I am doing in my portfolio. A few weeks ago, I announced a new initiative whereby the medical records of those discharged will be transferred more seamlessly to the NHS. We also now have an agreement with the NHS whereby older veterans can have the fact that they served in the armed forces flagged up on their GPs’ records. We continue to support the work and research of the defence study conducted at King’s College, which is about to produce a report that will show the true effects of service not just on those who are serving now but on those who served many years ago.
Defence Spending (Commitments)
In our planning rounds, we ensure that our plans deliver defence capability, that they are sound and that resources are allocated in line with defence priorities. I announced the main elements of the 2010 planning round on 15 December 2009. This included a package to spend £900 million more over three years on enhancements to support operations of the kind that we conduct in Afghanistan, on top of operational costs paid for by the reserve. In taking this decision, however, we had to prioritise rigorously and recognise that tough choices were required better to match the defence programme to the available resources.
Given that the Treasury claims to scrutinise every capital project and reserves the right to intervene in such projects, may I ask who was responsible for the £1.4 billion cut in the helicopter programme? Was it the former Secretary of State for Defence, or was it the former Chancellor of the Exchequer?
I think the hon. Gentleman is referring to decisions made in 2002-03 or 2003-04. He must accept that those decisions were made by the Ministry of Defence, not by the Treasury, and also that the position then was very different from the position now. We had 400 troops in Afghanistan at that time, and they were in the relatively benign area of the north, not in Helmand province.
When my right hon. Friend speaks of defence procurement, is he bearing in mind our defence industrial strategy? Can he promise the House that, as far as possible, we will always secure supply in this country in order to maintain our skills base and the sovereignty that we require?
I cannot go as far as that. The aim of our defence industrial strategy is to ensure that elements of defence supply are secured in this country when we consider that to be important to the maintaining of our sovereign capability, and to ensure that we are able to continue to produce those elements. What I will not do is sacrifice, on a wider basis, capability and value for money when to do so is not appropriate, and is not justified by a clear need for that sovereignty.
On 17 March, the Prime Minister said that UK defence spending had fallen in real terms on one or two occasions. I think that “once or twice” was the term that he used. According to everyone else, it has certainly fallen twice, and has possibly fallen three or four times. Was what the Prime Minister said about its having fallen “once” true?
Defence spending has risen substantially during the present Government’s time in office. It has risen in real terms by 10 per cent.—just short of £1 billion a year, on average—which contrasts markedly with the massive reductions that took place during the last two years of Conservative government.
In the light of the agreement between Russia and the United States last weekend as part of the strategic arms reduction treaty, would this not be an appropriate time at which to reconsider the strategy of replacing the Trident nuclear missile system, which would both contribute to nuclear disarmament and save us all a great deal of money?
My hon. Friend and I disagree in one fundamental respect. I believe in multilateral nuclear disarmament: I think that we should make every possible effort to bring about the reduction and, hopefully, the eventual elimination of nuclear arsenals throughout the world. I do not, however, believe in unilateral nuclear disarmament, and I do not believe that if we did as my hon. Friend suggests, we would add greatly to efforts to reduce nuclear armaments at this time.
Last week the Chancellor committed more than £4 billion from the Treasury reserve for operations in Afghanistan. Given the increasing number of urgent operational requirements driving equipment spending to its highest level yet, what discussions has the Ministry had with the Treasury about eventual recovery of UOR funding, and what effect will that have on the longer-term defence budget?
We have not had to repay moneys granted to us for urgent operational requirements. [Interruption.] We have not had to do that in any year. The full costs of operations—not just urgent operational requirements—are paid from Treasury reserves which are in addition to our budget.
Does the Secretary of State agree that there is a contradiction between the arguments of those who say that not enough money is being spent on defence while also saying that the break clauses in the contract for the aircraft carriers must be examined? [Hon. Members: “Ah!”] I note that my view is supported by Opposition Members.
May I also ask whether the Secretary of State has received any communications from either of the main Opposition parties stating whether they will support the Government’s proposal to proceed with the next stage of the Type 26 shipping order, and whether he thinks that the placing of that order was excellent, very excellent, or simply magnificent?
It is clear that there are dilemmas in the Conservative ranks, and that they run wider than just the carriers and naval capability. Conservative Members say on the one hand that we are behaving in a profligate manner and signing contracts unreasonably, and, on the other, say that we are underfunding defence. They cannot have their cake and eat it; they must come clean about their policies and proposals.
Order. May I very gently say to the Secretary of State that we must, of course, stick to the subject of Government policy?
On 15 March the Secretary of State told the House that £5 billion was earmarked for Afghanistan next year, but on Budget day the Chancellor said that there was £4 billion from next year’s reserve to fund operations in Afghanistan. Why the difference?
There is £5 billion potentially from the reserve next year.
Service Personnel (Welfare)
The Ministry of Defence has robust welfare provision that is kept under continual review to ensure that it remains fit for purpose. We have a responsibility to our service personnel, their families and veterans, and we take it very seriously. Recent improvements include the provision of extra facilities in Afghanistan to help service personnel keep in touch with their families, the creation of the Army recovery capability, and the review of the armed forces compensation scheme. We also published the service Command Paper on the nation’s commitment to the armed forces, their families and veterans.
At a recent surgery I held at RAF Benson there was a stream of criticisms of the MOD and MODern Housing Solutions, ranging from a family with a small child being left without hot water, serious gas leaks to walls running with mould. Given that in a written answer to me on 25 March the Minister admitted that there is not even a breakdown of complaints by location to better manage such problems, is this not symptomatic of the shameful disdain with which the Government treat the issue of service housing?
I am sorry, but I am not going to take any lessons from the Conservatives about investment in armed forces housing. At RAF Benson, 99 per cent. of the accommodation is either in grade 1 or grade 2 standard condition, which means that it either exceeds or meets the Government’s decent homes standard. In respect of MHS, I have put in place people who act as equivalents to estate managers, who do a very good job of dealing with individual problems. If the hon. Gentleman has a particular problem relating to the work of Defence Estates at Benson, or that of MHS, he should get in touch with me.
The Public Accounts Committee report, “Treating Injury and Illness Arising on Military Operations”, concluded that although the MOD’s care of the seriously injured had to date been highly effective, there were concerns about whether it could cope with a significant increase in the number of casualties. What steps will the Minister take to formalise the current voluntary arrangements with the NHS to handle overflow military patients, and how might he ensure that there is a suitable environment for military personnel in civilian hospitals?
As the hon. Gentleman rightly says, the care our servicemen and women are getting at Selly Oak and Headley Court is second to none, and may I put on record our thanks to the dedicated staff that do that job? The NHS and Defence Medical Services put in place robust handling arrangements to deal with our surge of last summer, and we also put in place similar arrangements this year, although, thankfully, they were not needed. In April, health services will move to the new hospital at Selly Oak in April, which will have a state-of-the-art, military-dedicated ward for our servicemen and women who are injured on operations.
(Woodspring): On leave back home during their deployment in Afghanistan, a growing number of service personnel have been refused entry to pubs and clubs because some local authorities refuse to accept military identity cards, which have date-of-birth details, as proof as age. It is scandalous that our troops can die in Helmand but be refused a pint in their local. The Government have known about this problem for some time, so why has nothing been done? Will they now, in their last days, do something about it?
That is an issue for local authorities, but may I say that a number of public houses and businesses not only welcome our servicemen and women, but give them discounts and support the production of the military ID card? I would like the hon. Gentleman to let me know of any specific examples that he may have of where people have been turned away, because I agree that this is not an acceptable way to treat these brave servicemen and women.
We keep the security threat posed by Iran under continual review. Iran possesses conventional military capability that is both defensive and offensive in nature. We also remain concerned about Iran’s intentions with regard to its nuclear programme. Iran should be under no illusion that without progress in addressing the international community’s concerns tougher sanctions will be imposed.
I thank the Minister for that answer. Does he believe that the Iranian Government are serious in their undertaking in respect of uranium enrichment abroad or does he believe that they are just playing for time?
A substantive offer of engagement has been made by the international community, which has been led, in particular, by the President of the United States. I regret that Iran has failed yet to embrace that offer of engagement. Iran needs to be in doubt that this is a matter of serious and real concern for the international community and that if there is not movement and engagement on the part of Iran, there will be—we will argue for and achieve this—much tougher sanctions.
Do the Government agree with the statement made at the weekend by the NATO Secretary-General, Mr. Anders Fogh Rasmussen, that Europe now needs to develop a missile shield system to protect against a future Iranian missile—one with or without nuclear warheads?
There is a strong case for the missile shield, which is why the Government have supported the technology; the threat that the Secretary-General outlined, and to which my right hon. Friend refers, is one of the reasons for that.
With Iran undertaking a major submarine-building programme, which military experts say could cause havoc in the Gulf, and Russia continuing its incursions into United Kingdom waters, why have the Government decided this week to scrap the Nimrod long-range maritime patrol aircraft? Who will provide the long-range search and rescue capability so lost from this week and who will protect our ships—at home and in the Gulf—now rendered vulnerable by Labour’s cavalier approach to the defence of these islands?
On long-range search and rescue, the introduction of the MRA4 means that there will be substantially more capable aircraft than the MR2 in the RAF’s fleet. In the period of transition until the MRA4 enters service we intend to use other assets, as available, in a long-range search and rescue role. The reason we take the decisions that we do is because we are responsible for these budgets and for prioritising Afghanistan as our main effort. As we have repeatedly made clear, the Conservative party is not committed to spending one penny more on defence than this Government are—in fact, the reverse is true because the Conservatives are not even prepared to commit to next year’s spending. Until they do so, their words are simply hollow.
Afghanistan (Poppy Cultivation)
The UK is supporting alternative livelihoods programmes in Afghanistan, which provide practical advice and support to farmers, to enable them to move away from poppy cultivation. In Helmand, we are supporting Governor Mangal’s counter-narcotics plan, which distributes wheat seed, fertiliser, saplings and seeds for summer crops, and the establishment of an agricultural school. Pomegranates are one option available to Afghan farmers.
I thank the Minister for that response. I think there is agreement across the House that the solution will not just be a military one; it must be political and economic. On that basis, will his Department try to support the British charity POM354, which believes that the growing of pomegranates is more profitable for Afghan farmers than the growing of either wheat or opium poppies?
I know that the hon. Gentleman has taken a real interest in this issue and I agree with him that there cannot be an exclusively military solution in Afghanistan—there has to be a political one, too.
In respect of the particular proposal to which he is referring, James Brett, the founder of the charity POM354, met my hon. Friend the Under-Secretary of State for International Development. At that meeting, it was recommended that Mr. Brett should produce a detailed business plan that will not only help to maximise the programme’s chances of success but help conversations with potential donors. I reiterate that advice and DFID officials are willing to provide advice on such a plan.
I welcome the proposals to support the growing of pomegranates, wheat, raisins and alternative crops that have been proposed by Afghan farmers over many years, but does the Minister understand that for them the key issue is not what they will be encouraged to grow but who will be a secure buyer of what they grow? Has the Minister any plans to step in and at least recognise that the starting point for what they grow at the moment is the poppy crop and that we ought to be looking at ways in which that can legitimately be used for the production of diamorphine?
I genuinely disagree with my hon. Friend. I think that if we followed the path that he is advocating, in circumstances in which it is not possible to provide security across the board, we would simply be creating a second market for poppy cultivation. That is why—across government, with our international partners and supporting the Afghan Government—we must create an environment in which it is possible for alternative crops to be produced. I genuinely do not believe that the course set out by my hon. Friend would help us to achieve that.
I would be delighted to visit Kyle of Lochalsh and the Raasay ranges. As the right hon. Gentleman will know, the proposals put forward by QinetiQ to rationalise those ranges have now been withdrawn. If in the future those proposals are resubmitted or if other proposals are made, I shall certainly visit the ranges before taking any decisions—as I did, as the right hon. Gentleman will recall, in the case of the Hebrides ranges last year.
I thank the Minister for that characteristically courteous reply and for his earlier letter to me on the matter, which will cause a good deal of reassurance locally. I hope that when a new report comes forward, if any does—it is rumoured that that might happen in the autumn, and perhaps he could give us an indication on that point—any such visit would involve all relevant community groups and Highlands and Islands Enterprise.
I cannot give the right hon. Gentleman any indication of any timing or, indeed, predict any particular proposals that might come forward in the next few months, but I repeat my offer.
Defence Spending (Commitments)
For some reason that I do not fully understand, the hon. Gentleman has asked exactly the same question as the hon. Member for Lichfield (Michael Fabricant) and I refer him to the answer to that question.
It is an important question. The Secretary of State will know that in 1998, 1999, 2002 and 2007 the defence budget fell in real terms. As for the following years, in Kosovo, our boys had to go out and buy mobile phones because the radios did not work; in Iraq, the boots melted and their equipment and clothing were not right for those conditions, so they had to go and buy their own clothing; and in Afghanistan, there have not been enough helicopters, there have not been the right personnel vehicles and there have not been enough spares, so they have had to cannibalise equipment all over the world, causing chaos. Does not the Secretary of State accept that it is time, first, to admit that this system of logistics and procurement has been hopeless and secondly, to apologise for putting lives at risk?
It is a travesty that the hon. Gentleman should so describe the situation that is faced by this country’s very capable armed forces—one of the most capable armed forces in the world. I would say to him that we spend above average on defence, that there has been a substantial continuing increase in spending on defence and that we, in marked contrast to the party that he supports, guarantee that there will be an increase next year. I do not know what he intends to do about that, if he holds the views that he does.
Two contenders for the light protected patrol vehicle requirement are being assessed as part of the concept vehicle evaluation trial. It is expected that the trial will be completed in April.
In evaluating the two contenders for the new light protected patrol vehicle that will replace the Snatch Land Rover and, I hope, the Pinzgauer Vector, will the Minister ensure that, as well as having in-built blast deflection, it will retain the most valued attribute of the Snatch—enabling soldiers to exit quickly from the rear of the vehicle to defend and counter-attack with maximum cover?
I assure the hon. Lady that the tests to which the two contenders are being subjected are very thorough. They certainly involve blast protection and blast deflection and, indeed, rapid exit from and entry to the vehicle. She has put her finger on two absolutely vital points in the characteristic way that she does when she talks about military equipment.
UK forces continue to work hand in hand with Afghan national security forces to build and maintain security in Helmand province. Progress on Operation Moshtarak grows, with insurgents being displaced from key district centres. Stabilisation activity continues apace, and increasing freedom of movement on key routes is aiding economic development. As I announced on 11 March, security responsibility for Musa Qala is transferring to US forces. This enables the redeployment of UK troops to the heavily populated areas of central Helmand, where the majority of UK troops are operating.
The population of Helmand is overwhelmingly—indeed, almost exclusively—Pashtun, but the Afghan army, with which we want ultimately to replace British forces, is overwhelmingly made up of the Tajik minority. Is that a problem?
It is one that President Karzai and his Ministers are seeking to address. Training has been stepped up quite considerably in terms of numbers, but he has to do everything, both in the police service and in the army, to get a representation of the whole country.
Resource Accounting System
The total Ministry of Defence near cash budget was £26.8 billion in 2002-03 and £27.9 billion in 2003-04—an increase of more than £1 billion. Those are the only directly comparable figures, because the MOD did not have a non-cash Treasury departmental expenditure limit in 2002-03.
Does the Secretary of State agree that it is always a case of lies, damn lies and statistics, and that it is a matter of great regret that, since the Prime Minister lost his way on defence statistics, it has done nobody any good that we cannot trust the Government on their defence statistics? Does the Secretary of State agree that we really have to stop that, and that we have to have a perfectly straightforward, simple way, on which everyone can agree, of deciding exactly how much a Department is spending?
I do agree, but I do not believe that it helps when issues are blown out of all proportion, sometimes deliberately, to disguise the overall situation. I do not believe that the hon. Gentleman, knowing him as I do, would sit there and deny that there has been a substantial increase in the defence budget throughout the life of the Labour Government. He knows that to be true, and I do not think that he should try to suggest that the case is otherwise.
BAE Systems (Samlesbury)
I have no plans to visit BAE Systems in Samlesbury; the Minister with responsibility for defence equipment and support, the Under-Secretary of State for Defence, my hon. Friend the Member for Grantham and Stamford (Mr. Davies), did so on 24 February 2010.
I am glad to hear that. I am sure that while the Minister was there, he would have seen more than 5,000 people working in one of the top-class work forces of the world. Given that BAE Systems in Samlesbury works as a magnet for more than 6,500 other jobs in small and medium-sized enterprises, does the Secretary of State agree that when we are procuring, we ought to procure from the very best, which happens to be in the United Kingdom?
Often that is so, and the north-west region, never mind the hon. Gentleman’s constituency, plays an important part in our defence capability. We need to ensure that we maintain such capability in vital areas. If we are going to provide capability for our armed forces in the long term, we cannot afford to take short-term and short-sighted decisions. Sometimes we need to ensure that industrial capability remains in place, and that is what the defence industrial strategy is designed to do—I hope that the hon. Gentleman supports it.
Defence Spending (Commitments)
Aha! Another hon. Member appears to have asked exactly the same question as the hon. Member for Lichfield (Michael Fabricant).
The Secretary of State might be aware that Lord Guthrie has recently observed that, because of the Prime Minister’s attitude when he was Chancellor of the Exchequer, the military wanted to do many things but was unable properly to fund the 1998 strategic defence review, which the Cabinet had approved. Does the Secretary of State think that Lord Guthrie’s comments are fair criticism?
No, I do not, and I refer to the substance of the answer by my right hon. Friend the Prime Minister at the Chilcot inquiry—no one has been able to say otherwise. Every request that was made in regard to urgent operational requirements was met, and in every spending round while my right hon. Friend was Chancellor of the Exchequer, there was a real-terms increase in the defence budget. When those things are taken together, they add up to almost £1 billion a year.
If our troops had as much armour on their vehicles as the Secretary of State has in his defence of indefensible statistics, they would be very safe indeed. However, even if we include the money from the Treasury reserve, is it not a fact that, as a proportion of gross domestic product, defence expenditure has declined over the lifetime of this Government?
This is the last question that Opposition Front Benchers will be asking of Defence Ministers, so may I point out that, during this sitting, there have been twice as many Conservative Members present as Government Members, with a solitary three Lib Dems? Does not that show how the different parties rate the importance of defence?
I say to the hon. Gentleman quite genuinely that I am not dead certain about whether, after taking the urgent operational requirements into account, the fact that he cites is correct. The only thing that I would say to him is that, because of a Labour Government, the time that he mentions has been a period of unprecedented growth in GDP. [Interruption.]
Order. Even though the hon. Member for New Forest, East (Dr. Lewis) seems to have wound the House up, it now needs to calm down.
My Department’s responsibilities are to ensure that our country is properly defended now and in the future, and that our service personnel have the right equipment and training to allow them to succeed in the military tasks in which they are engaged, either at home or abroad.
Pursuant to the question asked by my hon. Friend the Member for Clwyd, West (Mr. Jones), what will the arrangements be to report changes in deployments in Helmand, now that the Secretary of State has confirmed that such deployments are in flux and under discussion?
I want to keep the House as informed as I can about any developments but, fundamentally, these are military decisions. We have to try to ensure that we have the appropriate force density in the British area of operations, as we should in the American area, so that our troops and theirs have a good chance of success. I think that we now have the troop levels in Helmand province with which we can make real progress, and we have seen real progress under Operation Moshtarak. General Carter, who is in charge of not only Helmand province but the whole of the south, is of course always looking at how he deploys the forces available to him.
Yes, I do; my right hon. Friend puts it extremely well.
I have asked the chief executive of the DSDA, in conjunction and in consultation with his work force and the trade unions, to produce a five-year plan. I originally expected that at the end of March; I have been assured that it is coming by the middle of April. I will take decisions in the light of that.
May I welcome the signing of the terms of business agreement with Babcock Marine last week, which confirms Devonport as the lead dockyard for warship maintenance? Given that role, will my hon. Friend the Minister confirm that the sooner the carriers start to be assembled the better, not just for Devonport, so that it can receive further streams of warship maintenance work, but for the royal naval capability that it represents?
I can assure my hon. Friend that under a Labour Government, the carrier programme is going full steam ahead. We are already working in five yards; work will start soon in the sixth and final yard in Birkenhead. We have made something like £1.2 billion-worth of subcontracts. The only thing that would endanger the carrier programme is the Tories, with the Notting Hill set at their head, who do not care at all about defence or anything about it, taking over the government of this country after the election.
I just remind the hon. Gentleman that the mark 3 programme Chinooks were ordered under a Conservative Government. That was a disastrous procurement, and it took an awfully long time to sort it out. We are trying to make absolutely certain that we do not repeat the appalling mistakes of what is probably the worst ever defence procurement.
I agree totally with what my hon. Friend says about Thales, and that goes for all our major defence suppliers, on which we depend as a nation for our defence capability; we are extremely grateful for their efforts. As a matter of fact, I am visiting Thales on Wednesday.
I agree with that assessment. We are in regular discussion with partners in the Gulf states, and I think that there is a strong degree of consensus. We need fundamentally to understand that if Iran were able to go ahead and develop nuclear capability, it would inevitably invite a response from other countries in the region, and the last thing we need in the middle east is a nuclear arms race.
As we approach the general election, what provisions is the Ministry of Defence making to allow every single serviceman to have a vote that will be cast and counted?
We have had an ongoing campaign to ensure that people register for service votes, and the figure is now at 67 per cent. We have also put in arrangements to ensure that, where possible, postal voters’ ballots are returned as speedily as possible. But overall, and for the longer term, I have had discussions with the Electoral Commission about possibly trialling e-voting.
I already have, and any such comments were unintended. On the vote that took place last May, the Government have now put in place very robust procedures in Kathmandu to ensure that those Gurkhas who wish to settle here can do so free of charge—without being charged in any way. However, I would like to put on the record my wholehearted condemnation of those middlemen and unscrupulous operators who are charging Gurkhas. If the hon. Gentleman, like me, had visited Aldershot last week, as I know the hon. Member for Aldershot (Mr. Howarth) did, in order to see Gurkhas—many of them more than 60 years old—who have come here with expectations that, frankly, will never be realised, he would be rightly angry. I certainly am on that point.
May I ask the Secretary of State about an Unprinted Paper deposited in the Library by Group 4 Securicor, which calls it a “concept paper”? The firm invites the Government to outsource comprehensively the
“Training Support and Regular Army Assistance Table”
and the function that armed forces carry out in lieu of fire services when there is a pandemic—a term that is used in the paper—or industrial action. Will he repudiate that paper, say that it is a non-runner and confirm that this Labour Government will simply not entertain what it outlines? It would be a bridge too far.
I have not read the paper, and I am not aware of the detail. I know that my hon. Friend has asked me a couple of questions, and, if he wants me to, I shall happily meet him so that he can expand on his concerns.
That is part of a review within the Ministry of Defence to ensure that, in terms of our travel, we get best value for money. For example, last week I travelled second class on two occasions. Clearly, there are reasons, such as security, why others have to travel first class, but we are looking throughout the Department at how we can get the best value for money not only out of rail travel—[Interruption.] Hon. Members say “Ministers”, but I have travelled with easyJet on a number of occasions to ensure cost-effectiveness. The important point is that we ensure that we get value for money out of every defence pound that we put forward. I am sure that the hon. Gentleman would not object to that.
Will the Secretary of State tell us when his Department plans to come to the House to seek spending authority for the replacement of the nuclear missiles in the Trident missile fleet, and how much has already been spent on preparatory work for the creation of a new missile system?
I know that my hon. Friend follows that issue closely, and he will therefore know that there has been some delay in our ability to reach a maingate proposition. That will now, I think, take place around about the end of the year.
Last Friday at RAF Kinloss, the Nimrod MR2 fleet was retired, and we pay tribute to all the personnel and families associated with the mighty hunter. But, given the importance of search and rescue top cover, will the Ministry of Defence provide some detailed assurances, stating that there will be no capability gap until the introduction of the MRA4?
I reiterate to the hon. Gentleman what I said earlier: the MRA4 will bring a substantial enhancement of capability, and in the transition period until the MRA4 enters service we intend to, and will, use other assets, as available, in the long-range search and rescue effort.
Army, air and sea cadets deliver an excellent service within many of our communities in the UK. Is it not time that the House acknowledged this and that the team from the MOD initiated a debate so that we can all celebrate everything that they deliver to our communities?
I congratulate the cadet force on its 150th year. I thank my hon. Friend for her involvement in her local cadet force. Cadet forces are a force for good in local communities. I also put on record our thanks to the thousands of adult volunteers who make the cadet experience possible. If she suggested a debate in the House, I would be very pleased to celebrate the fantastic job that cadet forces do.
As the hon. Gentleman will know, I have announced a review into the health needs of nuclear test veterans. There is ongoing litigation. We have had talks between the two sides to see whether a settlement can be reached. Unfortunately, that has not been possible. However, I am determined to ensure that I continue to work with nuclear test veterans’ groups to ensure that the support that we can give to nuclear test veterans for their health needs, and generally, continues.
When I asked the Library about defence spending from 1997 to 2003, I was told that it had gone up by 17 per cent. in real terms—an extra £7 billion. Is not the responsibility for how that money is allocated really with our commanding officers and senior MOD bureaucrats rather than being something to be blamed on the Chancellor of the Exchequer at the time, whoever he was?
As I have said, and as we have repeated a number of times over the past hour but received no effective response, the defence budget has gone up by almost £1 billion on average per year—a substantial real-terms increase under the Labour Government, in marked contrast to what happened in the last couple of years of the Conservative Government who preceded us.
I thank the hon. Gentleman for his support for Defence Medical Services and the move to his constituency. Plans are ongoing. The budget as regards accommodation is in place for this year, and the plans should come to fruition at the end of this year to ensure that we have not only support for our injured servicemen and women but world-class defence medical services.
With permission, Mr. Speaker, I would like to make a statement on the European Council held in Brussels last Thursday and Friday.
First, I am sure that the whole House will join me in paying tribute to Lance Corporal of Horse Jonathan Woodgate from the Household Cavalry Regiment and Rifleman Daniel Holkham from 3rd Battalion the Rifles. They lost their lives fighting in Afghanistan. We owe them the greatest debt of gratitude for their courage and their service.
Their sacrifice reminds us that terrorism is an ever-present danger which requires vigilance and the willingness to take tough action in all areas where terrorist groups operate. So I know also that the thoughts of the House—and indeed our country—are with the Russian people today after this morning’s terrorist attack on the Moscow transport network. I have written to President Medvedev this morning to send our condolences to the victims and their families. I pay tribute to the Russian emergency services and the people of Moscow as they have responded to this appalling attack.
The focus of the European Council last Thursday and Friday was on actions needed to secure growth for the future and on Europe’s determination to bring new impetus and momentum to the international negotiations on climate change. Last week’s Budget set out our proposals for the next stage of economic recovery. It made it clear that the risks to recovery remain real and that we must avoid a premature withdrawal of stimulus measures, instead seeing through our commitment to halving the deficit over four years without choking off the recovery itself. The European Council agreed that
“The economic situation is improving, but the recovery is still fragile”.
It concluded that while deficit reduction plans must go ahead, measures to reduce the stimulus should be taken only once recovery is secured. That is the position that we, like our European partners, will continue to follow.
In our Budget, we also set out the actions that we must now take to secure jobs and growth by investing in the key growth sectors for the future. The Council’s conclusions agreed that Europe needs
“to deliver more growth and jobs”
to boost European competitiveness and productivity. Before the financial crisis, the imbalances within Europe were at an all-time high. The Council agreed that
“The EU needs to focus on the pressing challenges of competitiveness and balance of payments developments”.
It also agreed to develop a new strategy to deliver higher levels of long-term growth and recognised that the key elements of increasing productivity and growth include action on employment, on research and development, on reducing greenhouse gases to boost low-carbon industries and on education and social inclusion. The European Council will now, once a year through a leaders’ annual economic summit, assess the progress achieved at both national and European level in delivering those objectives.
The Council also discussed the economic situation in Greece. Agreement has now been reached by the euro area member states on a set of guidelines for Greece, and I am encouraged by the statement from the eurozone leaders that the eurozone will meet its responsibilities. There was no request for the United Kingdom to make any contribution to that programme, and none of the arrangements agreed by the European Council will see any powers being ceded from Britain to the European Union.
One year on from the G20 summit in London, we also discussed Europe’s plans for the next G20 summit, which is to be held in Toronto. The Council agreed that “rapid progress” is now required on strengthening financial regulation and supervision within both the EU and the G20, while we also need to ensure a level playing field for financial centres worldwide. In particular, we agreed that progress is needed on the issues of capital requirements, systemic institutions, financial instruments for crisis management, transparency on derivative markets and the implementation of internationally agreed principles for bonuses in the financial services sector. The Council agreed to make rapid progress on those issues, concluding work on the new European supervisory framework in time for the European systemic risk board and the three European supervisory authorities to begin work in early 2011.
We must also agree in Toronto a co-ordinated approach to levies on the banks to deliver a fairer balance of risk and reward in the financial system. That is something that I have been advocating for some months, and the Council agreed that as part of the G20’s work:
“The Commission will shortly present a report on possible innovative sources of financing such as a global levy on financial transactions…The Council and the Commission will report back on these issues to the June 2010 European Council, ahead of the Toronto summit.”
The Council also discussed climate change, ahead of the first meeting of the advisory group on climate change financing, established by the United Nations Secretary-General, which I am co-chairing with Prime Minister Meles of Ethiopia. Our pledge on climate change finance is a vital first test of the commitment of the developed countries to meeting the promises made in Copenhagen. The Council concluded that Europe would rapidly and unconditionally implement its commitment to providing €2.4 billion annually for fast-track financing for developing countries, and to that end the EU
“will initiate consultations on practical ways”
to implement that in specific areas. There will be a presentation on those commitments at the Bonn summit. The Council confirmed that Europe’s objective remains a
“global and comprehensive legal agreement”
and that Europe will “strengthen its outreach” to other countries to galvanise negotiations in the coming months.
The euro area’s economic growth is predicted to be just 0.7 per cent. this year and next, recovering to 1.5 per cent. in later years. By contrast, world growth is projected to be 3.5 per cent, so we need stronger European growth to help deliver stronger growth and new jobs here in Britain. Europe is the world’s largest trading bloc and also the world’s largest internal market. It offers 500 million consumers for British companies. With 3 million UK jobs linked to the EU, and still more than half our exports going to the EU, Britain’s livelihood is inextricably linked to the success of the European economy. Distancing ourselves from Europe makes no sense and would hold back our economy, our companies and people in work. It is by working with, not against, our European partners to deliver jobs and growth for Europe that we will help to deliver jobs and growth for Britain. I commend this statement to the House.
I join the Prime Minister in paying tribute to Rifleman Daniel Holkham and Lance Corporal of Horse Jonathan Woodgate, who have been killed in Afghanistan in the past few days. When one thinks of what Jonathan Woodgate had already been through, it is a reminder of what an exceptionally brave young man he was. It also reminds us that what we ask of our servicemen and women today is exceptional; we need to refresh and renew the military covenant in every way that we can.
I also agree with the Prime Minister that we should send a clear message of sympathy and solidarity to the Russian people after the appalling outrage on the Russian metro. We are tragically familiar with such an event in this country, too.
I want to ask about three issues that were discussed at the summit—the EU economy, financial regulation and climate change. First, on climate change, the summit rightly said that we must redouble our efforts to achieve the global deal that we all want and push ahead with practical action to cut emissions. The UK has the lowest contribution from renewable energy of any major EU country—just 6.8 per cent. of our electricity and, in total, 2.5 per cent. of our energy comes from renewable sources. Why has so little progress been made?
Secondly, on financial regulation, President Obama spoke about a tax on wholesale funding, but, as the Prime Minister has said, the summit conclusions referred to a transaction tax. Would not a tax on wholesale funding rather than a transaction tax be more likely to help keep business here in Britain?
The summit conclusions mention the need for greater economic co-ordination. There was some controversy about whether we will end up with any new treaty changes. Should not the Prime Minister make three things clear today? First, any talk of “economic government” in Europe is wrong. If he agrees, can he explain why the phrase remains in the French version of the eurozone statement? Secondly, should we not rule out any new treaty change that increases EU control over our economic policies? Thirdly, should we not change the law in the UK so that any treaty that proposed handing over new areas of power from Britain to Brussels would automatically be subject to a referendum, as is the case in Ireland?
It is good to see the Prime Minister smiling so nicely, as he does on all our posters—it is good to see him in that sort of positive mood. There are plenty more where they came from. [Interruption.] If he will not put himself on posters, we have just got to do it for him.
On economic policy, does the Prime Minister agree with the Europe 2020 strategy document, which says that
“sound public finances are critical for restoring the conditions for sustainable growth and jobs”?
Given that, will he comment on the serious news today that Standard & Poor’s has stated yet again that the outlook for Britain’s triple-A credit rating remains “negative” and that
“additional spending measures will likely be required”
to tackle the debt burden?
Europe’s leaders talked about a bail-out for Greece, and Portugal’s credit rating is being downgraded. However, is not Britain borrowing more this year as a share of our economy than either Greece or Portugal? Did not the same agency that downgraded Portugal’s credit rating say last week that Britain’s finances are “vulnerable”?
The European Commission says that “a number of countries” may have to start tackling their deficits this year. Given that Britain and Ireland have the worst budget deficits in the OECD, to which countries does the Prime Minister think it was referring?
On unemployment, business closures and the decline of manufacturing, the UK clearly has some real problems. Why, therefore, does he propose to raise taxes on small businesses and hike national insurance on everyone earning more than £20,000 and on every single new job in this country?
The Chancellor admitted in the Budget that there was £11 billion of waste in Government spending, but he proposes to do nothing about it until 2011. Why is not he tackling the waste this year rather than putting up national insurance for hard-working people next year? Have not the Prime Minister and his Chancellor created one of those great dividing lines that they like so much? Labour stands for waste and taxes, and the Conservative party stands for efficiency and aspiration. As the Prime Minister contemplates his national insurance increase on employees and employers, what on earth makes him think that the way to rescue an economy from the longest and deepest recession on record is a tax on jobs that hits every single business in the country? [Interruption.] He says that he wants to talk about Europe—I am talking about our economy in Europe and our failure in Europe.
The Prime Minister used to go to European meetings to lecture others about their economic policies; now the reverse happens. He thought boom and bust had been abolished and that he could borrow with impunity; he never prepared for a rainy day. Were not those catastrophic misjudgments? Will not the British people be paying for those misjudgments for another generation? Is not his latest misjudgement to sit back and let the waste, the taxes and the debt pile up even more? Is it not the case that we need a Government who will get on with tackling the waste, stopping the tax rises and securing growth for the future?
First, let me share with the right hon. Gentleman our sympathies, as I mentioned earlier, for those families whose loved ones have died in Afghanistan, and our sympathies for the Russian people as they face a terrorist incident of very substantial proportions today.
Let me also agree with the right hon. Gentleman that climate change is an important issue that Europe and the rest of the world must continue to address, that we must move forward on the Copenhagen summit, and that we must get a worldwide framework for a climate change agreement. He asks that renewables should be at a higher level in this country, and I agree with him that we should have higher investment in renewables. That is why we are making plans for public investment in renewables at the same time as the Conservatives oppose them. If I may say so, that is why we are asking councils to approve wind farms, while just about every Conservative council is trying to hold back that policy.
The right hon. Gentleman mentioned the issue of a levy on financial transactions, which is something that we have been proposing for some time. Originally, the Conservatives opposed it; then they said they would support if it was at a multilateral level; then they said they would support it even if it was not done multilaterally; and then they retreated into saying that they would support it if it was multilateral. That is about a policy a day, but it is the same policy that is being reinterpreted every day. That is the reason that people have very little trust in Conservative economic policy.
I come now to the European Council discussions on the economy. I just have to say this: why does the Conservative party want to attack the European Union all the time? Three million jobs depend on our European membership, more than 50 per cent. of our trade depends on Europe, and 750,000 companies depend on Europe, so why does the right hon. Gentleman want to go to the European Council—if ever he were elected—to say that he wants to renegotiate our treaties in respect of membership of the European Union? Why does he want to repatriate the social chapter and employment legislation to Britain? Why does he threaten that he is going to have a sovereignty Act for this Parliament to suggest that the law affecting the European Union could somehow be modified and amended by doing so? Why does he resist the European advice that we should work together so that we do not put the recovery at risk?
The announcement by the Conservative party today was first to withdraw £7.5 billion from the economy this year—[Interruption.] The right hon. Gentleman says that it is good to hear that, but he also wants to withdraw the support that is necessary for the economy to have a sustained recovery. The first thing that the Conservatives have done today is make it more difficult for us to retain the jobs, businesses and industrial infrastructure that are necessary, despite the fact that every bit of advice that we are getting—and that he is getting—is that we must maintain the investment necessary for recovery.
The Conservatives must explain why, at a time when people are worried about the recovery, they wish to withdraw support for the recovery. The second thing that they have got to explain is their panic measure today on national insurance—[Interruption.]
Order. I gently say to the Prime Minister that I know he will want to focus his reply very specifically on the European Council—[Interruption.] Order. The shadow deputy Chief Whip has got something wrong with his head and I am worried about him. He does not have to keep shaking it. The Prime Minister will talk about the Council and, of course, the policies of the Government.
The policy of the Government is to make sure that we have a sustained economic recovery; the Conservative party policy, I am afraid, would put that recovery at risk. Then the Conservatives are going to spend nearly £30 billion on tax cuts in the next five years, which puts front-line public services at risk. People will understand that these panic measures by the Conservatives will not help a recovery, that they will mean public spending cuts and that they will put sustained investment in our economy at risk.
We are the party that believes in Europe: it is the party opposed to Europe. We can see that if the Conservative party had ever been willing to change, it would have changed on Europe. It has not changed on Europe, and it has not changed on anything else.
I wish to add my own expressions of sympathy and condolence to the family and friends of Rifleman Daniel Holkham, from 3rd Battalion the Rifles, and Lance Corporal of Horse Jonathan Woodgate, from the Household Cavalry Regiment, both of whom tragically lost their lives in Afghanistan this week.
I also wish to join the Prime Minister in expressing our condolences to the families and friends of the dozens of victims injured and killed in Moscow. Londoners especially, given the horrors of 7/7, will feel a strong bond of sympathy for the families of commuters affected in Moscow.
I thank the Prime Minister for his report from the European Council. It will most probably be his last European Union summit. I imagine that he will be feeling some relief about that, given that in a few short years he has gone from lecturing his colleagues in Europe on how not to run an economy to teaching them how not to run an economy by example. At last week’s summit, the Prime Minister called in some of the few favours he has left from his colleagues in Europe to delay a decision on the alternative investment fund managers directive. Instead of defensively trying to stave off damage to the City, why did he not take the chance to show real leadership on the reform of our banking system? Real leadership is breaking up the banks. Real leadership is imposing an additional levy on their profits until that is done. Real leadership is getting banks lending to small, viable companies that are going to the wall.
Will the Prime Minister report on any conversations that he had with President Barroso, the President of the European Commission, as this summit was after all their first meeting since the Commission issued its damning verdict on the Prime Minister’s handling of Britain’s huge budget deficit? No doubt the European Commission will today be equally dismayed by the shiny promises of tax cuts from the shadow Chancellor, who is not in his place—he must be preparing for the mauling that he will get on television tonight. He has no idea how he will pay for those tax cuts. Labour and the Conservatives seem to be competing to come up with the most ludicrous fantasy announcement paid for with bags of gold found through efficiency savings. I am not sure who is winning, but I am certain that no one is falling for it.
On the bail-out for the Greek Government, as the Prime Minister knows, instability in the eurozone can and will rapidly turn to instability across the European Union, which will affect us too. Given that, I found the lack of details about the potential Greek bail-out a little concerning. Yes, Greece has not yet formally asked for help, but we have a deal on the table that is meant to calm the markets’ nerves but gives us very little in the way of detail. The Prime Minister is frowning, but can he tell me what will be the exact role of the IMF in this deal? How will the burden be broken up between the other eurozone countries? What is the maximum level of support likely to be given to Greece in the event that it asks for help and, crucially, what conditions will be put on Greece in return for this support?
I will tell the right hon. Gentleman the facts. There is a limit on the amount of support that the IMF can give. It is limited by its constitution and how it has always done things. That is a matter that we will discuss with both the IMF and the eurozone at the right time. It is limited by the regulations that it has.
On the right hon. Gentleman’s other points, in the Budget last week we reached agreement with the banks about £92 billion of additional lending in the next year. We also reached an agreement—and said in the Budget—that proper supervision of that would be needed, so that the public and small businesses could be assured that the money was being paid to them. So we are setting up a small business mediator who will act on behalf of small businesses to try to resolve the issues that have left them without the funds that they need—[Interruption.] An Opposition Member says that that is ridiculous, but we have to protect small businesses to ensure that they can grow. As far as the banks are concerned, we are taking the necessary action.
As far as directives are concerned, we did not accept the compromise proposed by the European Finance Ministers. We will therefore renegotiate that over the next period of time, because we are determined both to have proper regulation of those industries and, at the same, to allow companies to have access to the full range of countries in the internal market, and that is what we are doing.
As for ludicrous policies, the right hon. Gentleman would win the race any day.
I prefer the Prime Minister’s posters with a smile to the Leader of the Opposition’s airbrushed images. There were reports in the press over the weekend that Angela Merkel is calling for economic government, which would require treaty changes. If that were to be the case, can I press the Prime Minister to make a commitment that that would also involve a referendum in this country?
We made it clear a few months ago—this was a decision that we asked the European Union to make—that there would be no further constitutional or institutional change of that sort over the next 10 years. We made it absolutely clear that the European Union should not be contemplating further constitutional or institutional change in the way that is suggested. As for improving the way the European Union works, there is a case for that improvement to be made, and we will join those forces at work in this taskforce to ensure better and improved governing of the European Union.
Does the Prime Minister agree with the French Finance Minister Christine Lagarde that the eurozone has no hope of achieving sustainable recovery while the huge problem persists of a massive German trade surplus and persistently low consumer demand in Germany, and will he express those sentiments to the German Chancellor when he meets her?
I am grateful to the right hon. Gentleman for his comments, which are, in essence, supportive of our economic policy. I am grateful for that, first, because in the European Council conclusions we say that we have to look at the issues that have arisen from the severe imbalances in the European Union. Secondly, it is clear from what he says that he supports the maintenance of a stimulus and the public support necessary for the economy to have sustained recovery. In that, he is at odds with those on the Conservative Front Bench, who want to take £7.5 billion out of the economy, which would mean lost jobs, lost businesses and lost economic progress.
Did the Prime Minister have the opportunity, either in the meeting or at the margins of the meeting, to have any discussion with his colleagues about the issues of international terrorism to which he has referred? In particular, was there any discussion about the prospects for European Union involvement to try to reactivate the negotiations in the middle east or about the situation in Iran?
I have talked about this on a bilateral basis with President Sarkozy and with Chancellor Merkel, and, outside the European Union, with President Obama. As far as the middle east peace process is concerned, we want the proximity discussions to move forward, and we want George Mitchell, the American mediator, to have all the necessary power to move them forward. As for the discussions in relation to Iran, Iran has not been prepared to accept the offer made by the major countries to help it get civil nuclear power without having nuclear weapons, which are a danger to the region and the world. We are contemplating what we must do next, and I believe that there will be pressure for a United Nations resolution.
Will the Prime Minister bear in mind that following the ratification of the Lisbon treaty, despite his breaking of the pledge that there would first be a referendum on the subject, he assured us, as a sop, that there would not be another European treaty for at least 10 years, a pledge that he has repeated this afternoon? So how does it come about that we are now asked to contemplate the establishment of a super finance ministry for Europe, which would certainly require another treaty and would certainly lead to Berlin being able to dictate British tax policies?
That is not the proposal.
Does the Prime Minister recall any conversation at all by the other countries in respect of joining the euro? Because I have a good idea for a poster, which the Tories will never produce: “Gordon Brown kept us out of the euro. Five conditions. Superb leadership.” I think it would be a good idea for us to do that.
That was a difficult decision, but it was the right decision. In other areas, such as the financial crisis, we have also made the right decision, even when the Tories have proposed the wrong one.
The Prime Minister’s opening remarks on the casualties in Afghanistan and on the terrorist attack in Moscow will receive widespread support. At the European Council, did he raise the issue of the terrorist threat to Europe and the poor performance in Afghanistan by most of our European allies?
This was a meeting to discuss two specific things: the economy and climate change. Of course, in the bilateral meetings that I had with President Sarkozy, Chancellor Merkel and others—and with the President of the European Council, Mr. Van Rompuy, and with the presidency, in the form of the Spanish Prime Minister—the issue of terrorism was uppermost in our minds. We have to persuade some of our allies that we need to increase the police presence in Afghanistan, and that we have to increase the number of police trainers to raise the number of effective, trained police there. I believe that President Sarkozy has been meeting President Obama to talk about exactly these issues. We have increased the number of trainers that we have made available for policing in Afghanistan, and we are looking forward to other countries doing the same.
Does my right hon. Friend agree that any reasonable person—and any reasonable political party that is interested in more than just appeasing its anti-European factions—would recognise that a serious response to the recession requires common effective action at European level? Will he tell me whether the continuing problem of the higher unemployment among young people than among the population at large was discussed at the Council, and whether specific measures for tackling it were considered by our various European partners?
There are more than 20 million people unemployed in Europe, and the attention of the European Council was on what we can do to raise growth in Europe so that we can get unemployment down. The way to do that at the moment is to ensure that we maintain the support for our economy, and that support is maintained for the European, American and other economies, until the recovery is fully secured. I am working with 27 countries in total—26 and us—and they all agree that we should maintain the support that is necessary for the economy. I can think of only one party competing for government in the whole of Europe that is against that, and that is the Conservative party.
We associate ourselves with the Prime Minister’s comments about the loss of service personnel and the deaths in Moscow. We should also like to mark the funeral today of Billy Wolfe. Billy led the Scottish National party with distinction through the 1970s, and we pay tribute to his efforts to banish weapons of mass destruction from Scotland.
The Prime Minister must have discussed economic best practice among EU and non-EU member states at the European Council over the weekend. Will he explain how it has been possible for Norway to have a sovereign wealth fund that is significantly larger than the UK deficit?
I join the hon. Gentleman is his tribute to William Wolfe. I have to say to him, however, that when people talk about non-EU countries, they often refer to what was sometimes called the arc of prosperity, and the SNP often talks about the parallels between Ireland, Iceland and Scotland. That arc of prosperity collapsed a few months ago.
May I disagree with the Prime Minister when he says:
“Distancing ourselves from Europe makes no sense”?
Surely it does make sense to distance ourselves from politicians who support the Waffen SS, who are climate change deniers or who have odd views on what happened to the Jews in world war two. Surely it makes sense to distance ourselves in particular from homophobic Members of the European Parliament. Listening to the Leader of the Opposition reduced to absolute speechlessness while trying to defend them last week was a collector’s item.
I think that the British people would be shocked if they heard what Conservative Members of the European Parliament were doing in that Parliament. Only a few days ago, a number of Conservative MEPs voted against proposals to support the automatic exchange of information needed to crack down on those seeking to hide their money from the tax authorities. So here in Westminster they are saying that they want openness and transparency, but in Europe they are voting for the very tax havens that we know Lord Ashcroft has been very much a part of.
In the context of future changes to the governance of the European Union, of which the Prime Minister has just spoken, will he tell us whether he told his colleagues at the Euro Council that any proposal to transfer significant power from the United Kingdom to the European Union would have to be the subject of a referendum in the United Kingdom? If he did not tell his Euro colleagues that in the Council, will he please tell the House that now?
I have already mentioned the agreement made a few months ago that there would be no further institutional or constitutional change in the European Union for the next 10 years. Any colleagues in the EU know precisely what the British position is. Unlike the Conservative party, however, I am prepared for Britain to be part of a taskforce to look at how we can improve the management of the EU; only people who are blinded by Euroscepticism would oppose any form of co-operation in Europe.
Will my right hon. Friend give a cast-iron guarantee that he will reject the policies of Conservative Euro MPs who tour America denouncing our national health service?
Those people who said that the national health service was a 60-year-old nightmare were completely wrong. The NHS has been for many millions of people a 60-year-long liberation from ill health and disease. I think the Conservative leader should be ashamed of some of the people he supports in the European Parliament.
Does the Prime Minister accept that the Greek and the Portuguese crisis demonstrates that the European Union is in systemic failure? Does he also accept that by collaborating with the proposals for economic government, which he has done under the surface and directly in agreeing to the statement, he is in fact betraying the British people? As President Barroso said, it is time for Europe to talk the truth.
Every time the hon. Gentleman speaks on Europe, we hear that he wishes to see the European Union fail, and every time he talks about Europe, it is as if he has a visceral hatred of everything European. I am sorry that his views are shared so widely within the Conservative party.
“Pink and smooth like a baby’s bottom” or “A bit rough and grumpy”. Which poster would the other European leaders prefer?
The non-airbrushed one.
Since this Government came to power, the burden on British businesses from EU regulation has risen from £6 billion to almost £6.5 billion a year. Is the Prime Minister proud of that record? Is it something he took the trouble to discuss with his European colleagues at a time when many British businesses are struggling and suffocating due to over-regulation?
Of course we want to cut down on unnecessary regulation. We have made proposals in the EU, as we have in Britain, to do so. I would have thought that the hon. Gentleman would start his question by acknowledging that there are 750,000 companies trading with the rest of the European Union, that 3 million jobs depend on our membership of it and that we should support our exporters by co-operating in the EU. It is only the Conservative party that seems to think that having a permanent conflict with the EU is in Britain’s interests. That is not in Britain’s interest; co-operation is.
The Prime Minister mentioned his pledge on climate change. Why, then, has the UK so abjectly failed to meet its obligations under the landfill directive and failed to follow the lead of many other EU countries in developing energy from waste projects?
The landfill levy has been strengthened over these last few years. It is our desire to make sure that we do everything in our power to use our waste effectively. Unfortunately, the hon. Gentleman, again, is so blinded against the European Union that he cannot acknowledge that the way to move forward is through greater co-operation with the EU on climate change issues, that we should be pressing to reopen negotiations that failed in some respects at Copenhagen, that the Bonn summit is the way to do so and that we should support Chancellor Merkel in doing that. We need co-operation on the environment if we are going to move forward in Britain, Europe or the rest of the world. It is global and European co-operation that we need, rather than conflict between us in Europe.
Last year, the British taxpayer paid £3 billion to the European Union. Next year, the British taxpayer will pay £6.6 billion to the EU. Is it not strange, at a time when the Government are planning public expenditure cuts, that an additional £3.6 billion is paid to the EU? Does the Prime Minister agree that we cannot go on like this and that it is time for change?
It is very interesting that every single question from the Conservative Back Benches has repeated the anti-European position of the Conservative leader. Is it not amazing that not one person has stood up and said, “I support the European Union”? Although the Conservatives have a Back Bencher who did so, he is not even bothering to stand again at the next election. The Conservative party is fundamentally Eurosceptic and anti-European Union.
Did the Prime Minister discuss referendums at the summit so that British people could vote on the Lisbon treaty, which all three main parties promised them they would be able to do? Or does he think that the British people have simply got it wrong?
We secured all our negotiating objectives, and made sure that the constitutional treaty—as it was talked about—did not become a constitutional treaty in the end. As for the Conservative party, I accept that it gave an iron-cast guarantee that there would be a referendum on the European Union, but, like the Conservatives’ iron-cast guarantees on so many other things, it fell away.
Lance Corporal of Horse Jonathan Woodgate served in the Household Cavalry in Windsor. I add my condolences in respect of Lance Corporal of Horse Woodgate and those who have gone before. We must never underestimate their contribution to our security.
It seems to me that—whether in a European Union or in a world context—the Prime Minister has certainly led our country, but has led us into being the first into recession and the last out of it. Does he accept any responsibility whatever for the decisions that he made?
We have talked about this many, many times in the House of Commons. We had a global banking crisis, and we had to deal with it. If we had taken the advice of the Leader of the Opposition, we would still be in recession. On every big decision, he and his shadow Chancellor got it wrong, wrong and wrong again.
Points of Order
On a point of order, Mr. Speaker. Nearly two weeks ago, at Prime Minister’s Question Time, the Prime Minister assured me that he would look into whether a No. 10 staffer had taken part in a conference call discussing the suitability of Stephen Purcell in July 2008. Asked about that yesterday on the BBC’s “Politics Show”, the Prime Minister said that he would investigate the matter, which seems to suggest that he had not looked into it at all.
Given your recent ruling on the reasonable length of time that Ministers have in which to reply to Members, Mr. Speaker, could you guide me on how the Prime Minister can be encouraged to do what he says he is going to do?
The hon. Gentleman has put his views, and indeed his dissatisfaction, fairly and squarely on the record. As he knows, however, and as the House is aware, responsibility for the content of answers is not a matter for the Chair.
On a point of order, Mr. Speaker. All directory enquiry services, including 118118, are giving my office number instead of the House of Commons switchboard number to people who ask for the telephone number of the House of Commons. Since 18 January this year, we have been fielding your calls and everyone else’s calls. The various directory enquiry services will not change that number unless PICT—the Parliamentary Information and Communications Technology department—tells them to do so. PICT has been on the case for several months, and has still not done that. Can you help, Mr. Speaker? It may be funny—I admit that it is amusing—but it is not good for the public image of this place if members of the public are passed from pillar to post, notwithstanding the charm and efficiency of my office staff.
I am very grateful to the hon. Gentleman, who is obviously extremely perturbed about this important matter. It is, however, something that he should follow up with the director of PICT, and I have a feeling—just a hunch—that she will be hearing from him very soon.
Second Home Ownership (Regulation)
Motion for leave to bring in a Bill (Standing Order No. 23)
I beg to move,
That leave be given to bring in a Bill to give planning authorities the power to require change of use planning permission before existing or new homes can become second homes; to require the Secretary of State to examine the options for using this power to limit the change of use of full-time homes to part-time occupation; to allow local councils to levy business rates on second homes; to provide for small business rate relief not to apply to second home owners; and for connected purposes.
It has been my honour to represent the people of North Cornwall, and I have consistently raised the proliferation of second-home ownership and its effect on rural communities. The problem is not limited to my constituents, of course; it affects many rural areas throughout the country. My hon. Friend the Member for Westmorland and Lonsdale (Tim Farron) has referred to it, and Members on both sides of the House are aware of it.
As my constituency includes the long stretch of coastline running from Crantock up to Morwenstow, it has a huge tourist industry, and we welcome the many visitors who come every year to enjoy the coastal scenery, as well as those who travel inland to see our wonderful towns and village communities across Bodmin moor. That large influx of visitors supports the local economy and brings many new perspectives, but increasing numbers of them want to grab a piece of the area that they can keep, and keep returning to, by buying a second home.
In 2008, a parliamentary answer to my hon. Friend the Member for Westmorland and Lonsdale included figures for second-home ownership broken down by local authority area. At that time, about one in 10 homes in the area covered by the former North Cornwall district council was a second home, but the real figure, arrived at if properties that have incorrectly been registered as holiday lets are taken into account, is probably much higher. In some areas, however, second homes meet other demands. That is particularly the case in urban settings, so I am especially concerned about the situation in rural areas, where homes that were previously residential are taken into holiday use and are ultimately left empty for much of the year.
To find out why that is a problem, I encourage Members of all parties to come and talk to my constituents. They might want to stay in a hotel or at a campsite and enjoy the Cornish countryside, and thereby support the local tourist economy, but while they do so they might also discuss with local residents how this issue affects them. In many communities, it has inflated house prices, and the consequent decrease in the local population has led to declining school rolls and, ultimately, to the closure of small schools. It has also led to the closure of post offices because of declining business. It can pose challenges in the recruitment of retained firefighters, too, as those who protect their area by providing such crucial services are forced to move away from the communities where their families have historically lived—to move further inland, perhaps, or into the towns.
High house prices force local people out. Sometimes they are forced out of Cornwall entirely, or at least to areas further from the coast. They are often forced to travel further to work, therefore, and they are also forced on to the affordable housing waiting list—but, in common with other parts of the country, we already have a long waiting list.
The Government have often sought to turn this issue into one that is purely about the need to build new affordable housing. That is a crucial issue, and I support the aim. My party has long supported community land trusts, and we now have them functioning in Cornwall. We have also supported many other ways of adding to the supply of affordable housing. The second home problem is a separate issue, however, and it is getting worse.
Some have said to me that fewer people are investing in second homes in the current economic climate. Unfortunately, however, that is not the case. In an article recently posted on the propertycommunity.com website, Mr. Liam Bailey, head of residential research at Knight Frank, said that complaints from locals in second-home hot spots had been a long-standing issue and that the “uplift” in local pricing “can be dramatic.” He gave examples, saying that prices in one community in Cornwall were 131 per cent. higher than the local average. He also highlighted communities such as Rock and Trebetherick in my constituency and Bamburgh in Northumberland, where, he said, there were
“second home price uplifts of between 90 per cent. and 100 per cent.”
The article also states:
“The number of second homes in England rose by 2.6 per cent. in 2009”.
It added that that followed a small
“fall of 0.4 per cent. in 2008”
and that this
“rise, which equated to 6,212 additional second homes, pushed the total to an all time record of 245,384”.
Mr. Bailey further believes that that growth in demand will continue:
“Early indications this year suggest that supply in the main second home hotspots is still 20 per cent. below the long term average.”
So the pressure on prices will remain. It was reported this month in the Western Morning News that another estate agent, Savills, has said that the revival of big City bonuses and poor returns from other investments were continuing to drive the trend, that 43 per cent. of prime stock bought in Cornwall over the past four years was for use as a second home and that prices in Cornwall were just 8.5 per cent. off their highest watermark in 2007.
We face a particular problem in North Cornwall, where the increase in house prices from 1999 to 2009 was 230 per cent., which compares with an average increase in rural Great Britain of 118 per cent. over that period, so the problem is continuing to get worse. Some people have said that that means that a lot of those properties will always be out of the reach of local people. Although that may be true, those properties fall within a housing a market and any influence at the top of a local area’s housing market has a knock-on effect all the way down the chain, hauling up prices and making properties more unaffordable.
What can we do about this problem? The use of taxation is an option that has been suggested, but I am concerned about the basis on which some sort of punitive tax regime could be introduced. Use classes orders, such as those proposed in the Bill, have been proposed consistently by my party over a number of years as a means to tackle this problem. We are not the only ones to have done so; the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) has proposed a similar change.
I referred to this matter in my maiden speech in 2005. I was thus delighted to give evidence to Elinor Goodman’s Affordable Rural Housing Commission and to read its report when it was issued in May 2006. The report recommended using the planning system to deal with second home proliferation. The Government picked up on a number of the report’s conclusions and although they moved to action those, they ran away from tackling the issue of second homes.
In 2008, I served on the Public Bill Committee considering what became the Planning Act 2008 and tabled an amendment that would have allowed local authorities to suggest that the Secretary of State employ use classes orders, which were needed to tackle local problems. That may have had relevance in other areas, because the Department has picked up on the issue of studentification and has come back with possible change of use requirements in respect of houses in multiple occupation. The Department has looked at that approach, but just not in respect of second homes.
More recently, my hon. Friend the Member for Truro and St. Austell (Matthew Taylor) was invited by the Prime Minister to undertake an inquiry on the state of the rural economy. My hon. Friend took evidence from a wide cross-section of people and organisations, and produced an excellent and well-evidenced report, “Living Working Countryside”, which was published in July 2008. Yet again, the Government agreed to act on a number of key recommendations but, lo and behold, they refused to tackle the second home issue. My hon. Friend’s report had again proposed that the planning system ought to be used as a means of tackling it, and he suggested piloting such an approach in the national parks. The Government response was cruelly dismissive towards people in local communities, stating that the Government were
“not persuaded that the ‘problem’, such as it is, could be tackled effectively through the planning system.”
In other words, the Government were not persuaded that the planning system was a route by which the problem could be tackled, despite having said that it was possibly a route by which other issues, such as studentification, could be addressed.
I and other hon. Members have repeatedly raised this issue, which is crucial to local communities such as those in North Cornwall. We need action to be taken to resolve the problem, and it seems to me, as it has seemed to those who have undertaken detailed study of it, that the planning system is the way that the problem could be solved. The Government could at least take that on board and explore ways in which such an approach could be applied. I hope that the Bill, if it progresses, will make a contribution towards tackling this problem, which is crucial to rural communities around the country.
Question put and agreed to.
That Dan Rogerson, Julia Goldsworthy, Andrew George, Mr. David Heath, Mr. Elfyn Llwyd and Mr. David Drew present the Bill.
Dan Rogerson accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 23 April, and to be printed (Bill 98).
Ways and Means
Budget Resolutions and Economic Situation
amendment of The Law
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.
This country has faced the deepest recession in living memory and the Budget outlines how we will secure the recovery and the future in a way that is sustainable and fair. The Budget is a new growth plan for the future. At its heart is a £2.5 billion one-off growth package to help small business, promote innovation and invest in national infrastructure and key skills. It is a Budget to secure the recovery, tackle borrowing and invest in our industrial future. It continues targeted support for businesses and families where and when it is needed and it sets out how we will stick to our plan to halve the deficit within four years.
When the global recession hit, we faced a choice as a Government: to stand aside and leave the economy to the markets or to step in and protect people from the worst effects. The Opposition could have joined us, but they did not. They turned their backs on people up and down the country. Their do-nothing approach would have left communities to fend for themselves. They were wrong then and they are wrong today, and they would put the recovery at risk.
There are signs of desperation from the Opposition. Two months ago, they said that not doing more on the deficit was “moral cowardliness.” We then heard from them about spending promises on the married man’s allowance, tax give-aways for the richest estates, selling off the banks at a discount rate rather than getting taxpayers’ money back, and last week they implied that there would be billons extra to increase personal allowances. Today, it is national insurance contributions. They are promising the impossible: tax cuts, deficit cuts and spending commitments all at the same time. It is an incompetent economic plan that would put the recovery at risk.
My right hon. Friend the Chancellor made the tough decision to put an extra penny on national insurance, but that will come into effect only in April 2011, after the recovery is secured, and 60 per cent. of the revenue from our fair tax increases comes from the wealthiest 5 per cent.
We took action during the recession. We stepped in because we believe that it is Government’s responsibility to help people during difficult times. That is why we have helped businesses, allowing them to spread more than £5 billion of tax over a more affordable period through the time-to-pay service. It is why extra job advisers and other measures are in place, so that unemployment is running at 500,000 less than that expected by independent forecasters last year. It is why we put in place help for people struggling with their mortgages, through which 330,000 families received help or advice over the past year.
Government action has helped people get through the recession, and businesses and families have been prepared to tighten their belts and take tough decisions. A strong competitive global economy for the future cannot rely on only one area or business model, but should rely on a diverse economy where everyone can play their part and has the opportunities they want. The Budget outlines how the Government will build that new recovery.
The Opposition do not have a growth strategy. We know that the shadow Business Secretary said a few days ago that the words “industrial strategy” send a shiver down his spine. Renewing our infrastructure is a vital part of the recovery. A strong country and a strong economy need a strong and modern infrastructure. Our transport, water, waste, communications and energy infrastructure needs to be built for recovery and to pave the way for a low-carbon economy. We need to invest in that modern infrastructure.
We can renew regional economies, renew and reinvent the manufacturing base, and build new competitive strengths in technologies, services and creative industries by investing in the skills, research and technologies that support them. The Government have already invested heavily in infrastructure, with more than £150 billion invested in transport networks over the past decade, and we have now set out plans for a new high-speed rail network. The “Strategy for national infrastructure”, which was published last week, gives an overview of the current state of the UK’s infrastructure. It identifies the challenges and opportunities, and sets out the areas for action. We will create a green investment bank to invest in low-carbon infrastructure, particularly in transport and energy, and we will invest an additional £250 million in making further progress on the managed motorways programme and other transport projects.
The Government have always sought to ensure that all parts of the country benefit from economic growth. Their action and investment have helped to narrow the gap between the most deprived neighbourhoods and the national average on health, crime, education and worklessness. Ten years of public investment and the creation of the regional development agencies have paid huge dividends—restoring our universities and science base to world status and closing a lot of the backlog in investment in Britain’s transport system and infrastructure. There has been huge investment in apprenticeships and skills, and we are a far stronger country because of that, as we work to secure the recovery.
Supporting strong regions and regional recovery is not the policy of the Opposition, however, who are committed to scrapping the RDAs. That would threaten regional economic recovery, put at risk the strategic investment in jobs that the RDAs are helping to create, and bring uncertainty when every business group says that we need to build confidence. Every area of the country should share in the increased prosperity that will come with recovery, so Regional Ministers will have a bigger role in promoting growth to make sure that their areas benefit. They will be supported by a regional growth fund that is to be established by the RDAs to promote investment and support growth. Strong city regions will have more autonomy and freedom to promote growth, and accelerated development zones will be piloted to support projects that deliver key infrastructure and commercial development in our cities.
The Budget will ensure that there are opportunities for all as we recover from recession, and no one will be left behind. We will support low-income households by increasing the national minimum wage to £5.93, and we will increase support for families. We will extend the young person’s guarantee beyond March 2011 to ensure that young people continue to be guaranteed training, work experience or a future jobs fund job if they cannot find work within six months. Everyone should have the opportunity to work and to thrive in their job, and no one should be left to a life on benefits. Today, my right hon. Friend the Secretary of State for Work and Pensions has published a Command Paper that sets out how we will guarantee help for people who do not find employment after two years and how we will introduce more individual and personalised help to people who are looking for a job.
In the recession of the 1990s, repossessions soared and the building industry took years to recover. Last year, we committed more than £2 billion to building an additional 20,000 new affordable homes for rent and low-cost sale and 20,000 homes on privately developed sites. The Opposition opposed the measures that will create and protect 45,000 jobs and 3,000 apprenticeships. When we made it a condition that apprenticeships should be created when public money is used to build new housing, the shadow Minister for Housing said it was “ridiculous” and “counter-productive”. Housing investment of £7.5 billion, over two years, will fund the building of up to 112,000 affordable homes to rent and buy and about 15,000 private sector homes. It will also support an estimated 160,000 jobs directly in the construction and related industries and will create 3,000 apprenticeships, as I have said.
My right hon. Friend will be aware that when the Select Committee on Communities and Local Government had a one-off sitting on housing and the credit crunch, all the witnesses from the house building and housing association sectors clearly welcomed what the Government were doing and said that it was not enough. Can he think of anyone from the house building sector who thinks that the Government should cut back their support for construction?
My hon. Friend, who chairs that Select Committee, makes an important point. I am not aware of a single voice in the housing industry who believes that investment in housing should have been cut last year. It is fair, however, to point out that, in January 2009, the right hon. Member for Witney (Mr. Cameron), the Leader of the Opposition, called for a cut of more than £1 billion in my Department’s budget, nearly all of which—about £800 million—would have fallen on the housing programme. If the official Opposition’s policies had been followed, far from building more houses, as we have done, there would have been fewer houses.
It would be interesting to find out whether any hon. Member believes that the country would be stronger today if those thousands of homes had not been started and if the thousands of people employed to build them had been out of work. I cannot see a single Member in the Chamber who thinks that the country would have been better off if we had not invested in those houses, yet the Conservative party’s policy was that those houses should not have been built, that people should not have been employed and that apprenticeships should not have been created. All the rolling of eyes in the world cannot get away from the fact that that was, and remains, Conservative party policy. I am pleased that we have created jobs and that we are building homes for families in the future, and that has helped this country to get through the recession.
Looking to the future, the need for new affordable housing has only been intensified by the recession, so we will need to ensure—we set out how we will do this in the Budget—that local authorities allocate the land needed to support recovery in house building. That is in stark contrast to the approach of the hon. Member for Meriden (Mrs. Spelman), who wrote to local authorities to urge them to resist plans to allocate land for housing, although that has been widely condemned by everyone associated with housing and the construction industry. Withdrawing the fiscal stimulus early, as the Conservatives propose, would cut house building by perhaps half, because 40 to 45 per cent. of all recent new-starts have depended on public investment.
We need to take further measures to boost the housing market. We are introducing a two-year stamp duty holiday for first-time buyers for homes costing up to £250,000, which will help nine out of 10 first-time buyers. However, to pay for that, we will introduce an additional 5 per cent. stamp duty rate for homes costing more than £1 million—that is a fair approach. By reforming the council house finance system, we will let councils fund and run their own local housing stock. Some 10 per cent. extra will be released for maintenance so that homes do not fall below the decent homes standard again, and capacity will be provided to build 10,000 new council homes a year by 2014-15.
The Government believe that cutting the deficit does not mean damaging the front-line services on which people rely. The Budget continued our commitment to making £11 billion of savings a year by 2012-13 through greater efficiency and streamlining government, which includes £8 billion of savings set out in the operational efficiency programme. Local government can deliver savings of £2.1 billion towards that total in areas including greater collaborative procurement, increased back-office efficiency and the greater use of shared services. Up to £100 million can be saved by reducing energy usage in local authorities. My Department will identify savings of £200 million to be delivered in 2012-13, including through operational efficiency, work to reform our arm’s length bodies, and a new approach to the regional tier of government.
Our public services must be as efficient, responsive and citizen-focused as possible. Through Total Place we are establishing the most radical changes in the delivery of public services for many years. We have high expectations of our public services. We want higher quality services that are more tailored to individual needs but more cost-effective, but not the bleak vision of the Conservative party’s proposals for Ryanair councils under which people pay once in council tax and again in top-up charges for a decent service.
The right hon. Gentleman spoke about efficiency savings. I quite see that savings can be made through greater efficiency, but why do we have to wait two years to start making those savings?
The answer, of course, is that action to produce efficiency savings is already well under way. In the current spending review—we are about to enter its third year—there is £35 billion-worth of efficiency savings. More than £5 billion of that will come from the local government sector, for which I am responsible. The programme of making efficiency savings is well established and will continue to develop; next year, we will continue to increase the savings that we make. Clearly, some savings take more time than that to be put in place. The development of greater shared services cannot be done on day one; these things have to be planned. That is why the Government have in place a credible programme of efficiency savings that we are delivering now, in this spending review, and we have set out further operational efficiency savings in the Budget. I think that the right hon. and learned Gentleman will give the Government credit for the consistency with which we have approached the drive for efficiency savings across local government and other public services.
Total Place has demonstrated the great value that can be gained for citizens and taxpayers by putting the customer at the heart of service design, and by working together to improve the outcomes of services and eliminate waste and duplication. In the Budget report, we set out a reduction in targets and in ring-fencing, and further reforms to the inspection system. That will be for all local government, but we have also set out two ways forward for local areas, local government and other public services. First, there is the single offer, where we encourage local authorities and other public services to have a pooled budget and to look at the redesign of services right across their local areas. Secondly, there are areas where local government and other partners may want to take a different approach to, for example, the provision of services for children, offenders or elderly people; again, they will have greater freedom to deliver and design services locally. Those approaches will produce radical changes in service delivery. They will produce better services for people, and they will offer greater possibilities for efficiency savings.
As we grow through recovery, the Budget sets out the Government’s support for business. For expenditure incurred from April 2010, we will double the threshold for the annual investment allowance to £100,000 a year from £50,000. On capital gains tax, we will extend the entrepreneur’s relief from the first £1 million to the first £2 million of gains made over a lifetime. We will work with industry on modifications to the enterprise investment scheme and venture capital trusts.
The Opposition are intent on scrapping capital allowances, but that would cripple the chances of advanced manufacturing developing here in Britain. It is no wonder that the Engineering Employers Federation has said that the move would be “a disaster”, and today warned that it would mean businesses having
“to think twice about investing in the UK.”
We have supported small and medium-sized enterprises throughout the downturn, and will do more to support them in recovery. UK Finance for Growth will oversee more than £4 billion of SME finance products created by the Government to support small and medium enterprises. That includes the growth capital fund, for which £200 million of cornerstone investment has been raised so far from the private sector and Government. There will be a generous temporary increase to the level of small business rate relief. We expect more than 500,000 businesses in England to benefit, many by well over £1,000, and approximately 345,000 businesses will pay no rates. The Opposition have proposed postponing the business rates revaluation, which would increase business rates for 60 per cent. of businesses in this country from April.
The Budget pledged to reduce the barriers to public procurement for SMEs. If the whole public sector increased the amount of procurement that went to smaller businesses through the supply chain by 15 per cent., it would mean up to an extra £15 billion of business.
Of course, Britain is home to strong businesses and investment, and is a leading centre for research and innovation. The Government will support innovation in the UK even when finances are tight. The pre-Budget report announced that we would reduce the rate of corporation tax on income from patents to ensure that the UK remains an attractive place for innovative industries. We will invest up to £25 million in the university enterprise capital fund to provide crucial early-stage funding for promoting university innovations. The Budget confirmed £30 million of investment for an institute of web science, a joint venture that is to be based at Southampton and Oxford universities, ensuring that the UK remains at the forefront of internet development.
The future economy depends on the students of today, and we are taking a long-term view of growth by investing in skills in the Budget. A £270 million modernisation fund will enable universities to identify and deliver efficiencies over the next four years and fund 20,000 extra undergraduate places on courses starting in 2010-11. The Budget also provides updates on wide-ranging improvements to enterprise education, including £15 million to extend it to further education colleges and primary schools.
The future economy must be a low-carbon economy. Taking action on climate change will generate new business opportunities and highly skilled jobs in the sectors of the future, and modernising the UK’s energy infrastructure will be the key to laying the foundations for sustainable growth. The green investment bank will support new energy projects, with an initial focus on offshore wind electricity generation, and we will help millions of people save money and energy by developing pay-as-you-save financing arrangements.
That is a positive programme for our country, but the Opposition—with their opposition to industrial activism, regional development agencies and regional investment, and their plans to abolish allowances, reduce reliefs and penalise firms that want to make serious investment in the low-carbon industries currently developing here in the UK—do not share it.
The Budget that my right hon. Friend the Chancellor introduced last week is realistic and optimistic. It is realistic about the challenges ahead, which is why it sets out a clear plan to more than halve the deficit over four years; and it is optimistic about Britain’s strengths, which have seen us through recession and will build a better economy through infrastructure and growth in recovery. That is why we will not heed the calls from the Opposition to cut now and risk recovery; to cut now and risk a double-dip recession; or to cut public spending, just as they did in the 1980s and ’90s, when the recession was still under way, so that unemployment kept rising for months and years after the recession finished. We will not heed their calls to undermine business confidence and threaten jobs. That is the Conservative way, which failed the country before and would do so again.
I have outlined the Government’s plans for growth, and for supporting new jobs, businesses, families and the economy. We must secure the recovery, not put it at risk; we must support new industries and future jobs; we must protect front-line services, not cut them; and we must stand up for the many, not the few. I commend this Budget to the House.
I am delighted to have this opportunity to debate the Budget. It is just a shame that the Secretary of State did not start with a moment of contrition and regret, noting that this country is more deeply in recession than its competitors, and that his Government have only themselves to blame for that. It would have been nice if he had opened with a slight reflex to all those who have suffered as a consequence.
The important thing—absolutely—is growth, so the extent to which we successfully deliver growth throughout the country will define our ability to compete with other countries, which emerged from the recession stronger and earlier than we did. In turn, that success or otherwise will define the job opportunities for our children and the public services for our families. With almost half of all jobless people aged 18 to 25, my goodness we have a responsibility to provide that growth for the new generation.
The Budget should have been the blueprint for securing growth and getting our country moving again; it should have been the chance to demonstrate that our country was open for business again, but it was neither: it ducked national debt and sidestepped stimulating growth. It was a missed opportunity, and one for which the country will not thank Ministers.
Let us start with the business community.
Will the hon. Lady give way?
In due course. If the hon. Gentleman does not mind, I shall develop the argument about the business community.
The Secretary of State, as I am sure the hon. Gentleman heard, said that he had helped business, but all the Chancellor had to offer struggling business was a temporary increase in the small business rate relief. That year-long measure will be a tiny grain of comfort to small businesses, which have seen business rates soar as a result of the botched revaluation. The fact is that the burden of business rates is rising, not falling. It has driven many businesses to the wall, and when the new bills are issued, it will sound the death knell for many more.
Since Labour came to power the average business rate bill has risen, from £6,500 to more than £12,000. Even when that figure is adjusted to real-terms increases, it is still the case that the increase has by far and away outstripped retail prices index inflation. Measures such as ending empty property rate relief and forcing through questionable revaluations have all tightened the ratchet on struggling businesses. Is it not telling that, according to the Budget, business rate revenues are forecast to rise by £1 billion—an increase of 4.2 per cent? How can that possibly be described as helping business? The cost of the temporary increase in rate relief is a fraction of that, coming in at £210 million.
On that basis—let us be very clear—this Budget was proof positive, were it needed, that this Government’s priority is increasing tax on businesses. Just as the increase in national insurance is a tax on jobs, which we have pledged to reverse, so the business rate revaluation is a tax on growth. In just a few days’ time, the latest business rate revaluation will come into effect. It will send bills soaring through the roof because it is based on the peak of the commercial property market. It will make many businesses no longer eligible for small business rate relief.
The hon. Lady mentioned national insurance increases. As far as I understood it, the Conservatives’ policy was to concentrate on, and say they were giving greater priority to, cutting the national debt. How does that square with the fact that since the Budget the shadow Chancellor has made one major commitment, which is that if the Conservatives get into power they will not go ahead with the national insurance increase, adding £7 billion to the cost of the debt?
The hon. Gentleman will have heard the Secretary of State explain that he too, and his Government, would fund some of their priorities from efficiency savings. We recognise the damage that the increase in national insurance will do to our economy at a fragile time, and we have fully costed this proposal.
Many businesses will no longer be eligible for small business rate relief, which, incidentally, we have proposed should be made automatic. The impact on businesses, particularly small businesses such as pubs, which in the rural economy may be the only business in a village, or petrol stations, the cause of which my hon. Friend the Member for Ludlow (Mr. Dunne) has championed, will be disastrously affected, with, no doubt, many being sent to the wall.
In Northern Ireland, the revaluation was postponed because it was accepted that it would be very damaging to economic growth, so why inflict it on England? Do Ministers believe that it will not harm growth prospects in England? They certainly cannot base that belief on any impact assessment, because they have not bothered to do one.
I am sure the hon. Lady will be able to clarify this point. Sixty per cent. of businesses will see their bills fall as a result of the revaluation that she wishes to postpone. How does she propose to assist those businesses—the majority—whose rates would rise as a result of the policy that she has put forward?
The rating revaluation was based on commercial property prices in April 2008—pre-credit crunch. How can the Secretary of State possibly claim that its basis is fair or realistic in the difficult environment that we face today? Revaluations are designed to be tax-neutral, but our experience of the Government’s implementing a rating revaluation in Wales was that it was not tax-neutral. I therefore stand by the reasons why we would oppose such a flawed revaluation.
Will the hon. Lady give way?
No; I have replied to the Secretary of State’s intervention.
By retrospectively charging five years of backdated business rates for struggling port businesses, Ministers are jeopardising firms, jobs, livelihoods and the very viability of many coastal towns. Labour Members will know that to be true if they have port businesses in their area. It is a disgrace. Ministers should stop squabbling among themselves about who is to blame for the mess, and get back to the drawing board and start again. A Conservative Government will call for an immediate halt to the process and consult industry about what steps can be taken to address the matter.
I have to say that taxing jobs and businesses so that they are unable to compete is a very odd way of trying to stimulate economic growth, but is that not the logical consequence of a Government who have long favoured taxing enterprise rather than tackling waste? In few cases has the tax grab been felt more painfully than with the council tax. It was telling that the first announcement on Budget day was yet another increase in council tax, taking the average band D property up to just short of £1,500 a year.
Let us be clear about the background to the latest rise in council tax. When Labour came to power, it inherited a local tax system that worked. As the then Department of the Environment, Transport and the Regions put it in 1998,
“it is working well, has been widely accepted and is generally well understood.”
At that time, people paid £751 a year on a band D home. Now they are paying more than twice that, and it is one of the most unpopular taxes they have to pay. Since 1997 council tax has doubled, while front-line services such as bin collections have halved. Does it not stand to reason that people are furious about the extent to which Ministers have abused the council tax? All the eye-catching announcements in Whitehall have too often left council tax payers to foot the bill, one of the most recent and notorious examples being the unfunded and ostensibly uncosted personal care policy announced by the Prime Minister. It is small wonder that this year’s council tax increase went down so badly, although someone living in Scotland will benefit from yet another council tax freeze. That will mean that the average bill for a band D property in Scotland is nearly £300 less than for a similar property in England. I do not have a problem with Scotland having a council tax freeze, but what confounds me and people up and down the country is why Labour Ministers will not let people in England have the same deal.
We have pledged to provide funding so that people in England can have the same council tax freeze as people in Scotland, yet time and time again the Government rule that out. Why? The reason is set out clearly on page 193 of the Red Book. Council tax receipts are forecast to rise by £1 billion this year. That is an additional £1 billion being taken out of the pockets of hard-working families and poured into the gaping black hole of the Government’s finances.
What is even more frightening is that the £1 billion figure is just the tip of the iceberg. We know, Ministers know, and most importantly the public know, that Ministers are preparing for an intrusive council tax revaluation and rebanding exercise, which will punish people for making improvements to their homes or just enjoying a room with a view. It has already happened in Wales, where four times as many homes moved up a band as moved down one. Now, thanks to parliamentary answers that prove the point I am making, we know that the same is planned for England unless we have a change of Government. I say that with certainty as we have made clear our pledge to scrap the revaluation. The combination of our council tax freeze and aborting the revaluation could save up to £500 a year in tax on a typical family home.
I was looking forward to a zero council tax increase in Harrogate this year from the Conservative council. In fact, the increase came out above the national average. Can the hon. Lady explain to me and the rest of the House how she will pay for a zero increase in council tax across the country? I am really quite intrigued about the figures behind that.
As stated very clearly in our localism green paper, one of our three policy green papers, which I invite the hon. Gentleman to read so that he fully understands the matter, the council tax freeze is an important pledge that we have made. If a local authority pegs its council tax increase to 2.5 per cent. in the financial years April 2011 to April 2012, and April 2012 to April 2013, council grant will be increased from the centre by 2.5 per cent. so that the local authority can bring the council tax increase to zero. That is a fully funded policy.
Where will the money come from?
The hon. Gentleman obviously did not follow the significant exchanges in January, when the Government got egg all over their face for accusing the Conservatives of not being able to fund that pledge. We will fund the policy by cutting Government administration, including, but not solely, Government advertising and consultants. In January, the Treasury sheepishly admitted that its initial costings did not properly take into account the saving to the public purse from lower council tax benefit payment. As the Institute for Fiscal Studies pointed out, the attack on the Conservatives was spurious.
I will not give way; I want to make some progress.
Let us consider stamp duty. Two and a half years ago, we set out a policy to remove the obligation to pay stamp duty from nine out of 10 first-time buyers by raising the threshold to £250,000. Yet in last week’s Budget, a pale imitation of our policy was announced: it is limited to only two years. We can debate the merits of its being temporary, but how telling that the sister policy used to fund it—an increase in stamp duty at the upper end—is permanent. Once it is laid bare, the Budget gives struggling first-time buyers a guaranteed tax rise in two years, and some home owners, particularly those in London, will suffer an immediate, painful and permanent tax increase.
The continuing increases in stamp duty as a result of fiscal drag overlay the increases on page 71 of the Red Book. Combined, the policies mean that the tax burden on home owners grows heavier every day. Is that the way to stimulate growth in our economy? Is a punitive fiscal regime, which serves uncontrolled public spending, really the way to get our economy moving? Our sharp decline in the global league of competitiveness suggests not. The monolithic, state-heavy approach is denying us the dynamism and flexibility we need to compete with other economies. It is holding our country back—some parts even more than others as the gap between south and north has widened. That has happened despite £17 billion being spent on regional development agencies.
That prompts the question whether RDAs, as currently constituted, are the best, most effective and most efficient way of supporting local economies. Could we do better? We can and we must. We therefore believe that RDAs should be replaced with local enterprise partnerships through a series of important changes. Local enterprise partnerships will focus exclusively on delivering business growth and job creation. They will be accountable and take the form of genuine partnerships between local businesses, large and small, and local councils.
Let us consider the geography of local enterprise partnerships. In many parts of the country, the geography of regions is arbitrary and makes no economic sense. We need a more grown-up, flexible approach so that local economic partnerships reflect natural economic boundaries and shared interests.
What evidence has the hon. Lady got that local business wants those changes rather than the stability of a successful recipe, which has saved, for example, 2,000 jobs at Princess Yachts in my constituency?
I have got evidence by asking the business community, of course. The hon. Lady comes from the south-west. If she turns around and speaks to the hon. Member for Stroud (Mr. Drew), I think she will find he would be prepared to point out that Gloucester is nearer the Scottish border than it is to Penzance, and the scale of the south-west region is almost unmanageable. Indeed, it might interest the hon. Lady to know that when I went on a fact-finding mission to the north-east, where, I have always been led to believe, there is the strongest appetite for a regional development agency, I discovered a distinct difference of view in the business community. People in Newcastle are quite fond of their RDA, because it is located in Newcastle, but the business communities in Sunderland and the Tees valley were quick to tell me that they do not see much activity to help them.
Geography is important, and I reiterate that economic partnerships that reflect natural economic boundaries and shared interests will serve the community best. Those changes would offer an exciting opportunity to improve how we develop local growth. We have an opportunity to sharpen the tools at our disposal by giving the best support through focused, efficient and accountable enterprise partnerships. We do not have those at the moment; instead, we have a compromise, whereby RDAs are unwieldy, overburdened and unaccountable. The Government’s last-gasp affection for them owes more to political scaremongering than to any desire to find the best way to support local economies. That is the old-fashioned politics of division, and it is holding us back.
We need the economies in different parts of the country to be performing at the very top of their game. If our country is to stand any chance of catching up with our competitors, we need the engine of our national economy firing on all cylinders, and at the moment it is misfiring. Parts of the country are falling well short of their potential, and we should face up to that fact. We are seeing the impact of that on growth and aspiration.
Under this Government, 26,000 fewer new homes a year have been built than under the previous Conservative Government; home ownership is at its lowest for 20 years; the number of first-time buyers is at its lowest since records began; and the rate of new housing—both social and private—is at its lowest since world war two. That is a symptom of our planning system being broken. The system lacks democratic accountability and environmental sustainability, and it is holding back growth and fostering political alienation. Members on both sides of the House will know that from their postbags. We believe that we can do better by reforming the planning system so that it is more accountable and efficient, and far more capable of delivering the new homes that our country so desperately needs.
I am having some difficulty in following the logic of the hon. Lady’s argument. Does she accept that although house building has fallen in the recession, if it were not for Government funding there would be no investment in housing at all? That is not related in the slightest to the planning system, which has not altered as we have gone into recession. Does she accept that during that period, house building has decreased because private finance has withdrawn?
The hon. Lady fails to understand that I was talking about the entire 13-year period that her party has been in power. Even before the recession and the credit crunch, the rate of house building was below what it was when the Conservatives were last in Government, and the rate of social house building was half what it was during the last 13 years of the Conservative Administration. This might be unpalatable, but for the hon. Lady’s greater benefit I hope she will allow me to reiterate that peacetime house building is at its lowest since 1924; that there are now 26,000 fewer new homes a year than under the Conservatives, taken as an average over the time that Labour has been in office; that home ownership is at its lowest for 20 years; and that we have the lowest number of first-time buyers since 1970. There may be a variety of reasons for those things, but I suspect that they are not entirely unconnected to the fact that we have had nine different Housing Ministers in the time that her party has overseen house building in our nation.
The Conservatives believe that we can do better. To begin with, we will get rid of the arbitrary and meaningless targets that are conceived in Whitehall and forced on local communities. That top-down, one-size-fits-all approach has toxified the planning system, which has become a war zone in which communities are pitched against regional quangos, often resulting in deadlock. It has led to the green belt being torn up and urban green spaces, such as back gardens, being replaced with blocks of flats that are well beyond the pockets of the people on the housing list who so desperately need the housing.
The number-chasing culture has failed to deliver the kind of affordable homes that young families desperately need. Instead, it has yielded a glut of unsold city-centre luxury apartments and tightly packed units of accommodation that lack the car parking and outside space needed for a young family. That is why the time has come for power to be returned to local people, with the help of those they elect, so that they can define the scale, location and type of new development. It is about drawing people into the decision-making process and giving them a proper platform to be heard. That has to be a more effective way of getting the right kind of homes built in the right places, but we need to give people a stake in local growth. Too often communities feel all the pain, but none of the gain to be had from growth.
We want to change that by matching the council tax raised on new homes for six years—and recognising how we need to increase social housing, we will match it to the tune of 125 per cent. for affordable housing.
Is there a fallback position for the hon. Lady’s new policy on house building and planning? What happens if these incentives do not work and not enough houses are built to meet housing need? Would a Conservative Government retain any powers to ensure a certain number were built, whatever the results of local referendums in areas throughout the country?
I know that the hon. Gentleman is interested in local government, housing and planning, and I commend to him our recently published green paper on planning as it makes it clear that in the absence of a local plan, there will be a presumption in favour of sustainable development. I am confident that that will have the effect of getting the homes built that are so desperately needed. These substantial financial incentives, combined with national affordable housing programme grants to help to subsidise construction, and the introduction of local housing trusts, will deliver substantial amounts of affordable housing.
The objective of reforming the planning system has to be to make it fairer, faster and more efficient. That is as important for infrastructure as for any other form of development. The current Infrastructure Planning Commission does not meet those criteria, which is why we will improve the system by turning the IPC into a specialised infrastructure unit within the Planning Inspectorate. That will deliver real political accountability and ensure a smooth, efficient transition for infrastructure projects already in train. Without those changes, vital decisions that we need to enhance our country’s infrastructure risk being bogged down in legal challenges—from judicial review in the High Court to the European Court of Justice.
We also propose national policy statements—debated here—which will speed up the planning system, while reducing the scope for legal challenges. These statements will avoid planning inquiries getting bogged down on issues of policy, and focus on specific planning considerations such as scale and location. For projects with national significance, crossing many local authorities, such as High Speed 2, we would use hybrid Bills in Parliament.
These reforms are vital to driving forward the pace of growth and infrastructure throughout our country. They will speed up the planning process to avoid planning inquiries taking years, and ensure that there are proper democratic checks and balances. The changes that we are proposing are the changes that will get our economy moving again. They are the changes that will kick start growth and development. They are the changes our country needs, and the sooner the country has the opportunity to vote for that change, the sooner we can get Britain working again.
I am grateful for the opportunity to make my final speech as a Member of Parliament before the general election. I wish to concentrate on three dominant themes of the Budget statement. The first is the recession, its consequences and how we can best ensure the recovery. The second is the massive budget deficit that we have as a nation and how we can try to get to grips with it. The third is what the Budget and the political debate say about what sort of society we wish to create. A Budget is not just a bloodless exercise in accountancy; it is also about creating the type of structures and the type of society that we think will make Britain a better place.
I should like to address those three points in turn, but before I do so—if you will momentarily indulge me, Madam Deputy Speaker—I want to talk about the one issue in the Budget that has been raised by far more of my constituents than all the rest put together. That issue is the highly invidious extra taxation on cider, which many of my constituents regard as little more than a tax on being a Somerset person. I know that the fashionable metropolitan elite who rise so effortlessly through the ranks of the Labour and Conservative parties do not regard this as a particularly serious issue. I readily concede that, contrary to the stereotype, there are some people employed in Somerset who do not work in the cider industry. Nevertheless, that extra tax is a serious matter for my constituents for two reasons.
First, there is an economic case for the people who work in the industry. For instance, there is a small, family-run company in my constituency called Sheppy’s Cider, run by David and Louisa Sheppy, which employs about 10 people. It is part of the local economy, and we would not wish to see those jobs or that enterprise put at risk. However, there is also a symbolic importance, which is perhaps equivalent to the importance that people from Scotland attach to whisky or that people from Ireland attach to Guinness. Cider is an emblematic drink that signifies Somerset and other parts of the west country throughout the world. For that reason, a number of people are upset by what the Government announced in the Budget, and we urge the Government to reconsider.
We certainly agree with the hon. Gentleman’s sentiments on cider, but unfortunately for him last year the Liberal Democrats proposed a tax freeze on spirits, but not on cider. He also said that fewer of his constituents were drinking cider these days than they used to.
Well, because—[Interruption.] It is not a U-turn at all: one cannot infer from my views on spirits that I have opposite views on cider. I have just made it clear that I regard cider as an important industry—not just in the west country, but it has a particular strength in the west country—and that it is an important part of the heritage of many parts of western England. Considering that the amount of money that will be raised by the Government’s tax measure is so minute compared with the scale of our budget deficit, and given that the hurt and offence that it has caused is so disproportionately large, the Government would be well advised to reconsider.
Let me turn to the three main themes that I wish to address. I start with the recession, which ought to be—and is—of concern to us all, although I sometimes think that people in this House, and perhaps the wider public, underestimate the scale of the recession that we have just gone through. Last year—2009—was the worst peacetime year for the British economy in terms of growth since 1921. Our economy shrank by almost 5 per cent. last year, and, as part of the international downturn, this country has been in a truly precarious position. I invite the House to think of our economy as a sickly and frail patient lying in the operating theatre in a hospital. In those circumstances, my party and I believe that the Government were right to try to administer all the different treatments at their disposal to ensure that the patient survived the severe shock to its system that it had suffered.
The Government tried quantitative easing as part of their contribution. They also tried, and continue to try, extremely low interest rates—only 0.5 per cent., and they have been at that level for a sustained period. We have also had a devaluation of the pound. Far less emphasis has been given to the relative value of the pound compared with other major currencies than would have been given a generation ago, but there has been a severe devaluation of our currency. We have also had, in different forms, the fiscal stimulus, and we have debated in this House whether that stimulus has had as much of the desired impact as we would like. Nevertheless, it has contributed to trying to keep the ailing patient in some form of health. We are still in an extremely precarious position, however, and we should not assume that that we are safely out of the woods just because the economy grew by an anaemic, minute amount in the last quarter of last year. We cannot turn the life support machine off until we are absolutely certain that the patient is alive, and at the moment, we do not have that certainty.
I hope, and believe, that the economy will not dip back into recession later this year, but that remains a possibility. The growth figures in the Budget—even the ones that were revised down—are still optimistic, according to many assessments. We should therefore not assume that we are out of the woods. This is a challenge for the Conservatives, because the timing of deficit reduction is of paramount importance, and there are risks attached to cutting too soon, as well as to cutting too late.
That would normally be the case in a recession if we were talking about the cyclical part of the deficit, but what we have here is a structural deficit of 9 per cent. last year and 8 per cent. next year, if the figures are right. How long does the hon. Gentleman think we should take to eliminate that?
The hon. Gentleman is making an interesting point, and I want to engage him directly on it. The deficit is always rolled into the £167 billion figure, but it has two component parts, and different economists take different views on the size of those parts. However, there is a deficit, and the country will have to get to grips with it, either by raising taxes or by cutting expenditure. My party has a preference for cutting expenditure, but there will have to be a mix of the two. The Government have announced large numbers of tax rises, although they are being much less specific about the reductions in expenditure until after the election. They are being more explicit about the tax rises.
The other component of the deficit will, we hope, be dealt with by the economy returning to healthy growth and burning off the deficit in that way. That is why, when I caution the Conservatives, I am not just saying that there is a risk of going back into recession in relation to employment or to business failures, although those factors are obviously important. Healthy economic growth will also be crucial in making the numbers add up in our deficit reduction programme. We could have a debate about how we should best stimulate that growth, but I do not propose to go a long way down that avenue this afternoon.
We need to ensure, however, that there remains demand in the system. So far as I can see, the Conservatives seemed to acknowledge that need this morning. We can achieve demand by spending public money, or by allowing private individuals to spend more of their money by cutting their taxes, which appears to be the Conservative shadow Chancellor’s policy. There would be a risk to the recovery itself, however, if we were to try to cut the deficit quickly by taking money out of the economy, whether from the public or the private sphere.
The second subject that I want to talk about is the deficit. This country is still borrowing an additional £450 million every single day, and our budget deficit this year remains at more than 12 per cent. of gross domestic product. According to the ready reckoner, any country with a deficit of more than 10 per cent. of GDP in any financial year is in serious trouble. Well, this country has gone way beyond that point for two financial years, and our deficit this year is comparable to that of Greece, whose problems have been well documented. It would of course be fair and accurate to point out that Greece’s cumulative debt is roughly double ours, which is why we have not yet had the degree of difficulty that it has experienced. Nevertheless, our borrowing this year as a percentage of GDP is comparable to the worst cases elsewhere in Europe. We are going to have to deal with that, and that is a truth that all the parties will need to explain to the electorate. To varying degrees, I would say that none has done so sufficiently yet.
The Government have gone into great detail in the Budget about tax rises. They are talking about roughly a third of the deficit being dealt with through tax rises, and two thirds being dealt with through expenditure cuts. Where they are very specific in terms of tax rises, however, they are very vague in terms of reductions in expenditure. That probably suits the Government as we approach the election in trying to create the right dividing lines, as they would see it, between them and the Conservatives on tax, while ignoring what they see as potentially disadvantageous dividing lines between them and the Conservatives and other Opposition parties on public expenditure reductions.
Does the hon. Gentleman regret—and will he apologise for—his party’s wholehearted support for a single European currency, given that if we were in the single currency, we would simply not have the flexibility in fiscal and monetary policy that we now have to deal with these issues, including the deficit?
I had thought that the Conservative party was supposed to have stopped banging on about Europe. I do not remember having mentioned the single European currency in my speech. My view is that it is would not be right for Britain to join it now, but I would not rule it out as an article of blind faith for all time. It is not inconceivable, in my view, that there could be a time in the future when joining might be more advisable, but that point has not yet been reached.
I was talking about the deficit, about what reductions in public expenditure would be necessary and about the Government’s vagueness on that subject. It was somewhat depressing to hear the hon. Member for Meriden (Mrs. Spelman) a few moments ago. When she was asked to identify how a particular policy initiative would be paid for, she dipped yet again into this pot marked “administrative waste” and said that there was so much money available in it that it could fund unlimited goodies. I remember being present at Treasury debates a couple of years ago, when all that administration was carried out in much the same way as it is now, where I was told by the Conservative shadow Chancellor and other Conservative Members that the Conservative party would match Labour’s spending commitments in every single Department. If the party was going to match all those departmental commitments when all that money was being wasted, why did they not raise concerns at that point about the need to reprioritise that money? I am sceptical of the ability of administrative trimming to pay for the largesse that the Labour and Conservative parties claim it will pay for.
I readily acknowledge that there is a way to go, that my party has not spelled out every detail and that we need further policy development, but the reason why respected commentators readily acknowledge that the Liberal Democrats have gone further in this regard than both of the old parties is that we have been more specific and more detailed about the type of cuts in public spending that we think are necessary. So, for example, people who receive tax credits when they have salaries that would be the envy of most households will see a reduction in those credits.
For another example, we have talked about child trust funds. Just over a year ago, I remember participating in a Statutory Instrument Committee on which I was the only person willing to say that child trust funds are not affordable in the current circumstances. Both the Labour and Conservative parties supported them at that time, even though we were already living in a different budgetary context from when the policy was first introduced. We have also talked about longer-term projects such as ID cards and aspects of our defence procurement. We have gone through such strategies in much more detail than the other parties, but this is a process that all political parties will have to face sooner rather than later. There is a conspiracy of silence before the general election, and I believe that people deserve better than that in a democracy.
That brings me to the final feature of my speech. A Budget this close to a general election will, of course, inevitably be a political as well as an economic exercise. We are looking as politicians—and, I suppose, the wider public, insofar as they are following these matters in detail—at what the Budget says about the values and policy priorities of the Government of the day and those of the Opposition parties that aspire to replace that Government. When I looked at the Budget in that regard, I found it wanting.
I give some credit, however, insofar as there was something that came at least some way towards representing a vision on environmental-led growth, green jobs, environmental investment and so forth—areas that my party has been keen to bring to the fore. As I say, there were some elements of that in the Budget speech. However, two other features of my party’s policy platform to which I had hoped the Government would give more prominence were conspicuous by their absence. The first is a vision of a fairer, more equitable society in which, in particular, people on low incomes are more self-reliant, have more of their own money to spend and can forge their own way in the world with greater freedom and independence. That vision of taxation has been a central feature of our policy platform, in the form of our proposal to raise the starting point for income tax to £10,000 a year.
What surprised me more, coming from a Labour Government, was the lack of a vision of how we could do more to increase social mobility, so that people could prosper and succeed in the world without the welfare or well-being of their parents being necessarily an accurate guide to their prospects. My party has given the greatest policy priority to the so-called pupil premium, which represents a direct attempt to target more money on improving the life opportunities of people who start at a relative disadvantage. I do not claim that Labour has done nothing in that regard; many Labour politicians—indeed, politicians in all parties—take the agenda seriously. Nevertheless, I think that it could and should have been a bigger and more explicit feature of the Budget.
Will the hon. Gentleman tell me how he thinks his party’s policy of abolishing child trust funds will help to increase mobility for young people and families?
I can. All the research—I hesitated before I used that word, because it sounds as though I am contracting out my views to “experts”—all my instincts and everything that I and others have read suggest that children who start at a relative disadvantage in terms of parental income or exposure to knowledge and learning at a young age need assistance when they are three, four, five and six years old. Giving them a pot of money when they are 18 years old gives them an amount to spend, but it does not fundamentally address their relative disadvantages in terms of lifetime opportunities. If that money is to be spent, it would be better spent on targeting children from poorer and more disadvantaged backgrounds more precisely and at an earlier stage in their lives.
Let me make a final observation about the bigger picture and the vision as a whole. When I mentioned, in passing, the two old parties, I heard some noises off scoffing at that description. However, I detect a sense in the country that if people keep voting for the same two tired old parties, they cannot expect anything other than the same two tired sets of policy proposals. There is a mood for change in the country. Back in the 1950s, 98 per cent. of the people who voted in a general election voted for either the Labour party or the Conservative party. We had a very tribal society, in which people knew what side they were on and voted accordingly. At the last general election, for the first time since the second world war, the proportion of votes for the two old parties fell below 70 per cent., to 68 per cent. We live in a more fluid, more mobile, freer society nowadays.
A group of Conservatives to whom I was talking recently told me, “When it comes to this Budget, we must make certain that we win the election by persuading people that the problems are the responsibility of Gordon Brown.” I said, “I think you are right: I think many people readily accept that the Prime Minister bears a large share of the blame for Britain’s economic woes.” However, I went on to ask “Why do you assume that people who identify the Prime Minister as being culpable should regard the Conservative party as being part of the solution?”
In order to be successful, someone who runs an Indian restaurant has to do more than just persuade people that they do not like Chinese food, because there are more choices out there than ever before. That is why it was so extraordinary that the shadow Business Secretary observed that he would prefer the current Prime Minister to stay in office at the head of a majority Labour Government than the Conservatives to be the largest party in a balanced Parliament. That was an extraordinary statement for a Conservative Front Bencher to make, and, although the shadow Business Secretary has become a national treasure in many ways, it shows how out of step he is with the mood of the time, because the old type of politics, under which Labour and Conservatives swapped between themselves, is no longer a reliable guide to the future. To say that we know what will happen if neither of the two old parties can convince the people that they deserve to govern alone because we saw what happened in 1974 is just like saying we know what is going to happen in 2046. We have no idea what will happen 36 years from now.
This is the last Budget of an old era, because we will now increasingly find that we need a form of politics that addresses a wider range of public concerns than the current political parties can articulate.
I am listening carefully to the hon. Gentleman’s speech. Will he confirm that Scotland currently provides a great example of the new politics, in that the Scottish National party has formed a successful minority Government there? He might also like to dwell on the fact that in Scotland support for the Liberal Democrats has almost halved since 2005.
I have always thought it an act of supreme charity by the Liberal Democrats that the electoral system in Scotland means that the Conservative party was saved from absolute extinction there. That just goes to show that we are motivated by a benevolent desire to look after ailing parties, not just by self-interest.
The Budget symbolises the old politics, as does the debate between the two Front-Bench teams. In the coming election and the decades ahead we will find a new and more diverse type of politics that will both give people a greater range of opportunities and reflect the more varied and freer society we live in today.
Several hon. Members rose—
Order. I remind Members that Mr. Speaker has imposed a 12-minute limit on Back-Bench contributions.
In common, I think, with several other Members who will contribute today, this will possibly be my last speech in the House, after 27 years of representing Sheffield, Central, and after five years before that as a Member of the European Parliament. I was first elected to public office, as an MEP, in 1979, having left school at 15 years of age to start my engineering apprenticeship at the company that is now Forgemasters—a great company that has recently been in the news, and to which I shall return a little later.
I warmly welcome the Budget, like many of us who have been championing manufacture and wealth creation for many years. We see it as a Budget that recognises the need for the economy to be rebalanced, with a greater proportion of wealth creation being achieved through manufacturing. Its measures will help us to continue to take the country along that rebalancing journey.
The Budget’s £2.5 billion one-off growth package is very important, particularly for areas such as Sheffield. There will be investment in the creative industries, digital communications, the medipark and the Advanced Manufacturing Park. That is a reflection of recent policy, particularly the new industrial strategy introduced by the Secretary of State for Business, Innovation and Skills when he returned from Europe—I think his experiences as a European Commissioner must have had an effect.
I want to remind the House, however, that Sheffield has been modernising and repositioning its economy for more than a decade. We have been modernising to meet the challenges of the globalised world of the 21st century, with our two outstanding universities, a very strong further education college, industrial and commercial sectors that want to work in partnership, and the support of Yorkshire Forward, our regional development agency. We have developed, through those very strong partnerships, centres of excellence such as the medipark, the cultural industries, digital Sheffield and our advanced manufacturing park. The Budget will strengthen all four of those major activities, and those areas will be major centres of employment and wealth creation in the future.
Let us consider just one of those, the advanced manufacturing park, which is closely linked to the university of Sheffield under the leadership of Professor Keith Ridgway. The project was set up 10 years ago to address the productivity and the competitiveness of our aerospace industry, which is a sector that has an order book of more than £40 billion and that employs well over 100,000 people, many of whom are employed in the skills sector. The park has grown to be one of the most respected advanced manufacturing parks in the world.
The recent investment by Rolls-Royce and the Government in a nuclear manufacturing park, which is to be located alongside the aerospace facilities, will enable the techniques and innovation that have been developed over the years in the aerospace industry to be transferred to the nuclear sector, thus enabling that development to be a smart partner for the nuclear build programme. This is an area of great potential for British manufacturing and technology, addressing the green agenda not just here, but internationally. Twelve nuclear power stations could be built in the UK at the cost of about £60 billion. That is estimated to be about 4 per cent. of the world’s order book. Again, that development is encouraged by the announcement in the Budget.
I said that we had been working on this project for more than a decade. In fact, it was 10 years ago that I had dinner in the House—in the Churchill Room—with Phil Condit, then chief executive of Boeing, and Professor Keith Ridgway. From that dinner came the start of a £6 million investment to be made in the intellectual property of the university of Sheffield and the vision of Keith Ridgway. I facilitated that dinner and I am proud to have been involved in that project ever since.
Today, BAE Systems, Rolls-Royce and many other companies involved in the supply chain are involved in the park, with some of the work being done on blue skies technology and research and development. As I said, the nuclear new build programme and developments in the industry have attracted a good partnership between the Government and Rolls-Royce, which has resulted in a £35 million investment in that nuclear development.
In 2008, I organised another dinner in the House, which was similar to the one that took place in the Churchill Room 10 years ago. It enabled representatives of five universities, five captains of industry—Graham Honeyman, chief executive of Forgemasters, was there—and two Secretaries of State to discuss how universities, Government and industry could work together to exploit the nuclear renaissance for the UK for many years to come.
On Sunday, The Sunday Times accused me of acting improperly in organising that dinner—the dinner that brought together universities, Government and industry to discuss how we could act collectively in the best interests of UK plc. Throughout my 27 years in the House, I have been doing just that—acting in the best interests of the UK, be it through my post as Chair of the Trade and Industry Committee, in my role for the past 14 years as trustee of the Industry and Parliament Trust or through my contacts with the trade unions, employers’ organisations and industrial groups. Those are all people who want British industry to grow and prosper. That is my record and I am proud of it. If it is wrong in the eyes of The Sunday Times, I plead guilty.
A few years ago, the House passed the Freedom of Information Act. The press were rightly at the forefront of the demand for it, but now, when the press use misleading evidence obtained through sting operations—this is evidence that could not be used in court—they believe that it is their right to keep it from those whom they accuse. My lawyers twice requested the information that appeared in The Sunday Times, but they did not receive any response. What people read in The Sunday Times was a deliberate fabrication, which was designed to mislead. I do not believe that we have a level playing field, and when the House returns it ought seriously to consider the balance between freedom of information and what the press are doing through their sting operations and not allowing those whom they accuse in the newspapers, and the nation, to challenge information that cannot even be used in the courts of this land.
Returning to the Budget, as I said, I started at Forgemasters as an engineer apprentice at the age of 15. Last week, on Friday, the MPs in Sheffield, the two vice-chancellors, the further education colleges and Yorkshire Forward met to discuss the skills agenda of the future, from our skill shortages, which could be an impediment to growth, to the quality of training needed to ensure that the aerospace and nuclear supply chains are up to scratch. We have concerns, although we warmly welcome the announcement of the promise on the skills agenda. The budget for this area should be increased, and we believe we need a clear focus on delivery. That is something we are working on as a result of that meeting, and we hope to produce some ideas about delivery, which we think is very important, and to remove some of the confusion around it. For the record, I shall continue to be involved in that when I have left Parliament.
Finally, I want to conclude on the subject of a significant investment in Sheffield Forgemasters—a 16,000 tonne forging press, which will be one of the largest forging presses, if not the largest, in the world. It has taken nearly three years to develop that plan and bring it to fruition, and I want to put on record my thanks to the Secretary of State for Business, Innovation and Skills, his Ministers and special advisers, along with Tim Stone from PricewaterhouseCoopers. They have worked very effectively to make this happen. As for Sheffield Forgemasters, it has been said that this would not have happened had it not been for the vision of people such as Graham Honeyman, Tony Pedder and Peter Birtles, but there was also strong support from the work force. Half the company is now owned by the work force and the pride in those young people, particularly the 70 apprentices who work there, has to be seen to be believed. That has put us in a unique position at the beginning of the supply chain worldwide and for the nuclear new build. That, I believe, is very important if we are to capitalise and see an industrial renaissance coming out of that nuclear renaissance, particularly in engineering and manufacturing.
That was a great day, and it was great to be involved when that £160 million investment was announced by the Secretary of State a couple of weeks ago. The very first job that I completed while serving my time as an apprentice and coming out of that was the building of a 4,000-tonne forging press, so, having represented Sheffield, Central and Forgemasters for 27 years, it will be very pleasing to see a forging press four times greater than that and the investment that is being made.
This is probably my last speech to the House, and I say with honesty that in my 31 years as an elected representative, I have never taken a single penny outside the salary that I have earned and been paid. It was only when I decided a couple of years ago to stand down and announced my retirement that a number of companies came to me and asked whether I would be a consultant and help them, probably as a non-executive director— never as a lobbyist. I was approached as someone who has been in the national institutions and who has also been an engineer. I am proud to have done that and I will continue to work for the betterment of British manufacturing, and particularly engineering, in which I believe very strongly, having had a father and a grandfather who were in the engineering industry—indeed, it runs through our DNA. It would be good to see the press talking this side of British industry up rather than talking it down.
I, too, rise to speak in the House for the last time, after 36 years. I have to admit that this is not the first time that I have left the House, but it is the first time that I will do so voluntarily.
It has been an enormous privilege to be a Member of the House. I have represented three wonderful constituencies—two in Scotland and one in England, latterly the Devizes constituency—and I am grateful to all those who elected me and who have given me the chance to serve them in the House. I have been fortunate in the various roles that I have had here, which have been challenging and enjoyable. The most rewarding has been the ability to represent the myriad interests and concerns of one’s constituents. Despite all the recent criticisms, I believe that the House is still one of the greatest democratic institutions in the world. I am proud to have been, for a time, part of it, and I will miss it.
I am grateful for the chance to participate briefly in the debate on the Budget statement. Over the past few days, I have heard the detailed arguments for and against the Budget, but as this is my last speech to the House, I hope that I may be allowed to approach it more broadly. I believe that Governments have two inalienable responsibilities: first, the defence of the realm and its citizens, and, secondly, stewardship. I want to talk about the second for a few moments.
Stewardship is a word that is used frequently, as it has been in this debate, to mean good and responsible management, but I believe that, in the context of the Budget, it should mean much more. To me, stewardship means handing over to the next generation what we in our time received from our predecessors in at least as good, if not better, condition than we received it. I want to deal with two aspects of that, the first of which is the economy.
I do not think that anyone in the House could claim that the economy is in a better state than it was at the beginning of the Parliament. We are facing almost unimaginable debt and it is still growing. Stewardship requires urgent action, of which I see little sign in the Budget. That is not a political or economic question; it is a moral imperative. Our generation—this Parliament and this Government—created the mess we are in, and our generation has the responsibility to clear it up. It is quite simply obscene to hand over to the next generation the cost of this generation’s mismanagement. We have no right to lumber them with our debts or to expect them to pay for our profligacy.
We must rectify the situation not by fudging or finessing. This is a matter not for spin doctors or opinion polls, but for cold reality and stark truth, and the truth is that that will be painful. However, we must not shirk that pain. We must start immediately by cutting out inefficiency and waste not by tinkering with it, but by tackling it root and branch. It is not enough, year after year, to come and talk about inefficiency: if it is there, it must be got rid of. We must cut out the bloated bureaucracy that we have built in this country—the over-regulation that costs so many of our companies so much. If services have to be cut as well, we must, in the end, face up to that, because services can be rebuilt, and the resolution of problems can help to do that.
If we, as stewards, need to protect anything for the next generation, it must be those things that will never come again if undermined or destroyed. I want to touch briefly on this second aspect—the environment in which we live—which has been touched on tangentially in the Budget, but which is not central enough. There is a native American saying, “We do not inherit the earth from our ancestors; we borrow it from our children.” To my mind, it is not enough to tip our cap towards wind power or green banking, as the Budget has done. We have to address the fundamentals. Both the natural and built environments in this country are under threat. If, as I fear, we begin to reduce the support for those areas to avoid pain in the here and now, we will be in danger of damaging permanently the world that we shall leave to our children.
We need to take positive action now to preserve and conserve the environment and, where we can, to improve it. We need to recognise the coming challenges from over-consumption—the growing demands for energy, water and food—and the lasting damage that they, too, could do to the environment we shall leave to our children. I see little recognition of that in the Budget. To me, stewardship needs a courage and a foresight that the Budget sadly lacks.
I conclude my career in the House by having to say that I regret the failure of stewardship in this Parliament; we have to look to a new Parliament and a fresh Government to provide it. I hope that they will see their responsibilities more clearly than this Parliament and this Government have seen theirs in these last years. I end by wishing the next Parliament well.
It is a great pleasure to follow the right hon. and learned Member for Devizes (Mr. Ancram) and, indeed, my right hon. Friend the Member for Sheffield, Central (Mr. Caborn). They are two fine Members of Parliament who have done a great job for their constituents and who command a great deal of respect on both sides of the House. The fact that they will not be here after the election will be a cause of great sadness for many who know those two fine, honourable Members well.
Let me begin my remarks by congratulating my right hon. Friend the Chancellor of the Exchequer not just on the manner in which he delivered the Budget statement, but on its content. He has had to bear a very heavy burden of responsibility in the discharge of his great office of state. He did not have long to think about how to share the proceeds of economic growth. Instead, he had to think very carefully about how our country would emerge in good shape from the deepest, most savage and severe recession of three generations. In trying to set that course, he has earned a lot of respect on both sides of the House. His instincts are sound and his judgments have been right. I think that is what history will say of him.
To borrow the medical metaphor that the hon. Member for Taunton (Mr. Browne) used, the economy is at least now in the recovery position. Bearing in mind the stewardship argument that the right hon. and learned Gentleman has just deployed, it is incumbent on us not to do anything to jeopardise the economic recovery. That is the first and most important fact, principle or statement about the Budget. The flow of economic data is finally looking a bit more cheerful: unemployment is falling, inflation is falling and borrowing is down. Growth has returned to the economy. Those are all positive signs that there is now light at the end of what has been a very dark and long tunnel.
As I have said, our big job is not to jeopardise that recovery. I therefore welcome in particular what my right hon. Friend the Chancellor said in his statement about targeting further and additional help and support at businesses and wealth creators. That is the right thing to do with any discretionary additional spend that we have, because it will be on the decisions that those businesses—mainly small businesses—make in the next few years that prospects for substantial economic growth will depend. I therefore welcome the doubling of the investment allowance and the expansion of the entrepreneurs’ relief from capital gains tax. I particularly welcome the extension of the time to pay scheme for business taxes. Many right hon. and hon. Members will know that that scheme has become an important source of credit for many businesses. I understand that it is benefiting nearly 200,000 companies. There is a danger, of which the Treasury and the Revenue will be aware, that the scheme could be abused, and we have to be alert to that danger, but it is a very important new initiative. I also welcome—I am sorry that the hon. Member for Meriden (Mrs. Spelman) did not do the same—the extension of council tax reliefs for small businesses. All those small measures together form a very useful and helpful package.
I particularly welcome the focus that was evident in the Budget statement on the new policy of industrial activism. Many right hon. and hon. Members will probably assume the foetal position when anyone talks about a new industrial strategy, and I understand the nervousness that is felt about that policy, which is redolent of a bygone time when we got basically every judgment wrong and in the process wasted a huge amount of scarce public resources. However, I do not detect a likelihood of our repeating those failures; I do not think that will be the case.
When I was Secretary of State for Business, Enterprise and Regulatory Reform, it used to irritate me enormously to hear many commentators opine on the fact that Britain was somehow a post-industrial society. No, we are not. We are the fifth-largest economy in the world and a great trading and commercial power. We should aim to retain that position, but we have no prospect whatever of doing that if we do not, and we are not aware of the need to, support businesses, particularly the small companies that have the potential to be the great employers of the future. That should be our focus. We should keep capital allowances; it is a false economy to play fast and loose with that kind of business support. We should aim to remain a great industrial society. That is what I see in the economy and in my right hon. Friend’s statement.
The new finance for growth investment corporation might also prove to be a useful development, and I note that Simon Walker says that it will be good news for British businesses. As many people will know, Simon is chief executive of the British Private Equity and Venture Capital Association.
I have to tell my Front-Bench colleagues in all honesty that it is probably just as well that I will not be here after the next election because I will take some persuading before I lend my support to the notion of the new credit adjudicator. It is hard to imagine how we could create a situation in which the banks are legally forced to lend. I do not understand that, and if we have learned one thing from the recession it is that we should all have a better appreciation of the level of risk, and we should let the banks decide what that is. I do not think that the proposal is a particularly good idea, and I hope that more work will be done on it.
I agreed with the remarks that were made about the need to cut the budget deficit. That is, by some distance, the biggest challenge faced by the House, and the new House of Commons will have the task of beginning to address it. We have started to identify the things that must change, and my right hon. Friend the Secretary of State for Communities and Local Government set out helpful measures that we could implement, such as tackling waste and inefficiency. It is probably common ground that the next comprehensive spending review will be the toughest for a generation; it will certainly need to be.
When the right hon. Member for Witney (Mr. Cameron) said that the biggest challenge facing us in the next Parliament will be reducing the deficit, he was only half right, and the bit that he got wrong is the thing that worries me most. Yes, we must reduce the deficit, but we must do so in a way that does not jeopardise the recovery, compromise the quality of public services or lead to higher unemployment. I am afraid that everything that I have heard from the Conservative party suggests that if he forms a Government, the next House of Commons will make precisely those mistakes.
Obviously, I am the first to say that we must have the right balance between levels of taxation and spending, and given the economic conditions that we have been through, it is hardly surprising that we are not in balance—we are a considerable way away. However, we have been through extraordinary times that have called for vital additional public support for the economy, especially the banking sector. That is why I am worried about the 50 per cent. higher rate of income tax. Labour Members must emphasise that that is a temporary measure, because it is unhelpful and wrong to send people the signal that the state will claw back more than half their earnings. There is an argument that the rate can be justified in the short term, but it cannot be a defensible long-term position. There are no votes in it, and no moral high ground can be occupied by adopting a taxation policy with punitive elements.
When we announced the 1 per cent. increase in national insurance a year or so ago, we rightly emphasised that it would be a temporary measure, and we must get back to that argument. It would be bad to load the increase into the long term. We should not be putting a tax on jobs, and although there is an argument for the approach in the short term, it is not sustainable and we must get beyond it.
When one looks at all the numbers flying around in relation to the Conservative proposals set out today, one detects that there has been a huge dose of double counting. The arithmetic that has been set out to justify the changes does not stack up—it would blow up in our face—and would risk increasing the deficit, not reducing it. The Conservative party has picked up the bad habits that we learned in opposition, as the joy of opposition is being able to spend the same pound several times over. Those in government only get to spend that pound once, and the Conservative numbers do not add up. We can only spend the money once and my right hon. Friend the Chancellor has, essentially, already spent it.
I want to make two points before I shut up for the last time in this place. We have all heard the arguments about efficiencies in public services, and those of us who have held ministerial office have carried out the tough job of trying to extract them from spending Departments that do not like to give up any resource. Getting the savings out is always harder than anticipated. I think that there should be more outsourcing, and there will need to be a much tougher approach on procurement and streamlining back offices. That is common ground between both Front-Bench teams, which is fine, but it will be harder than people think. That is why I conclude that the only way we can be confident that we can reduce the public deficit as quickly as possible without compromising the quality of public services is fundamentally to change the basic delivery model for some of the public services.
For example, the health service consumes more than £120 billion of public resources, but we spend a large dollop of that money completely inefficiently by providing bad pathways of care, especially for people with long-term and chronic diseases. Those people end up being treated inappropriately in the most high-cost settings and they are not provided with especially good care. We must change all that, but it will be difficult and will require strong leadership from politicians. It fills me with regret that Conservative Members will go around the country saying that we cannot change this or that part of the health service, because it has to change if we are to save money without compromising quality and to deliver better outcomes for our constituents.
My final point relates to better regulation, which was not something for which I thought that I would have ministerial responsibility. The subject has disappointed many Ministers who, like me, have struggled with the brief, such as my right hon. Friend the Minister for Business, Innovation and Skills—a fine Minister who is currently sitting on the Front Bench. We and the previous Government passed legislation in that regard, but better regulation is not about legislation. This place can pass umpteen Bills, but they will not make a ha’p’orth of difference unless the Government change the culture of how they set about imposing new burdens on business. I am a fan of regulatory budgets, and I hope that the next Government—if they are a Labour Government, I hope that my Government will do this—will, for the first time, put a real cap on the additional cost burdens that we ask businesses, and especially small businesses, to accept in our pursuit of public policy goals. There must be a limit, and 19th-century regulatory approaches cannot meet the needs of a modern 21st-century economy, so we need to do more.
This is my last speech in the House of Commons. Many people will say, “Thank God for that.” It has been a great honour to serve my constituents and I have had a fantastic time in doing so. Our constituents probably feel disappointed by all of us in this Parliament, so we owe it to them to do a job of work to rebuild their trust. This is a great country and we believe in some great things. I hope that Members of Parliament in the next House of Commons will stand up for those great values that have made Britain such a great country in the world.
Since we are having a succession of valedictories, I shall try not to be sentimental, maudlin or moralistic. We are talking about the Budget, however, so perhaps I may begin by talking about the two great elephants in the room that have not been raised: the great debate about the value of the renminbi that is taking place in the United States and China, and Germany’s role in assisting the European economy. Those two things will have more impact on growth in the United Kingdom than anything mentioned in the Budget, and we should occasionally put our decisions in the context of those wider questions.
I want to talk about public services because I note that one of the Government’s super-pledges relates to safeguarding public services. My party uses similar terminology, but my problem is that I do not know what that means. What a wonderful word “safeguard” is; it is rather like the word “appropriate” because it can mean anything. At best the word is misleading, and at worst it is probably mendacious, because no public services will be safeguarded in the sense that they will be immune from pressure over the next few years.
The crunch for local government will come not this year but in 2011-12 and 2012-13, because the comprehensive spending review takes care of the present year. However, if there is a cut in grant of something like 5 per cent., which is not an unreasonable assumption, given the pressures that we are under and the fact that local government is not one of the “safeguarded” services, serious decisions will have to be taken and there will be serious consequences. Recession drives up demand. It drives up demand for free school meals. It drives up demand from self-carers who fall back on welfare because they can no longer finance their care, and it drives up the cost of home-school transport. Those are only three areas in which recession inevitably pushes up costs.
We must also consider demographic demand—we do not need to go into the familiar argument of what an ageing population means—and the fact that recession leads to income being constrained from things such as tourism, and car parking and planning charges. Many local authorities depend heavily on those charges to maintain a relatively modest council tax, or at least to mitigate its impact. However, the council tax is not a buoyant tax. We have already heard about house building, and a low level of house building means that there is no buoyancy in the council tax. Local government will therefore face a huge problem, even with the best will in the world.
If one then looks at the longer term, however, and considers the three big factors driving costs, the situation becomes much more difficult. First, there are the consequences of what we might call the baby P issue. Whenever there is one of these ghastly episodes where a child has suffered appalling mistreatment and has died, the impact on the reactions of social services departments is bound to come through, in the sense of them playing safe and not taking risks, and that enhances demand—and rightly so; one understands that. Secondly, there is the demographic time bomb of adult care, plus the special demands of high-dependency cases, which will now impact much more severely. Thirdly, there is the old question of the waste and landfill targets; as they are winched up, the costs for local government get higher and higher.
Those are three huge, emotional, high-volume and high-cost issues. Add that to the recession and we see that local government is facing the perfect storm. We can talk until we are blue in the face about safeguarding public services, but they will not be safeguarded. Nobody can, and nobody will, safeguard them. Some services can be hit harder than others, but even then we have to be careful, because there is no point in saying, “We’re going to make a special case of the health service” if the consequence is that social services get particularly badly hit. So many of the outcomes in health depend on effective social services. They have to be treated together. If we dislocate the pair of them, what is gained on the swings will be lost on the roundabout. It is easy enough to talk about co-operation between health and social services; it is easy to talk about primary care trusts and social services working together, and there are some outstandingly good places where that has happened, such as Hertfordshire, but it is much easier to talk about it than to deliver it everywhere.
I was a Local Government Minister, and was regarded as a rather benign and tolerant one, compared with what came after. It is wonderful how, in retrospect, one gains an aura of tolerance. I hope that that continues throughout one’s career. As we are in a reflective mood, I should like to make two points about which I feel very strongly indeed. First, we must not let the whole notion of devolution slide under the pressure of the recession and the recovery. The pressure on Government is always to try to keep control—to say that other people cannot be relied on to exercise the same sort of control that the Government can. Given the volume of local government expenditure as a proportion of gross domestic product, it is understandable that that instinct seems to burn deeply in the heart of Government, but there are very good arguments against it. The main one is not ideological; it is that Britain is now the most centralised state in western Europe, and it does not work very well. It is an efficiency argument.
If one sits on the Public Accounts Committee, as I have for a number of years, one sees, week after week, a parade of catastrophically bad spending by the state. It is all very well talking about the active state, or the benign state, but it is a jolly inefficient state most of the time. We need to look hard at passing that power down to elected representatives—to representative government. We should be careful about empowering non-representative groups, because there can be tyranny on a small scale, just as there can on a big scale. Those on the receiving end do not care whether the tyrant is big or little; the fact is that the actions are tyrannical. Let us pass power down to representative government.
I hope that when my party comes to look at regional structures, it will do what I think is a very conservative thing: invite local government to bid, with a price, for the powers that we want to remove from other organisations. Groups should get together and say, “Yes, we could deliver the competences of the regional development agency,” or “We could deliver the competence in training and skills.” I never understood why the RDAs were not given the competence of training and skills, given that economic development is supposed to be at the core of their purpose. Let us trust local government to bid for those powers, to say how it will deliver them, and to say how much that will cost. We should then let it get on and do that. That is an accountable system.
My second reflection is perhaps somewhat more controversial. One of the reasons I came into politics was a feeling that my generation had inherited a country that was in rapid transformation and, in many ways, had not come to terms with it. Britain was the sick man of Europe in my youth, when I was at university. When I was 18, in 1962, Dean Acheson, the American Secretary of State, made a speech in which he said:
“Great Britain has lost an Empire and not yet found a role.”
I am leaving this House 48 years after Dean Acheson made that speech, and I believe that that dilemma for the United Kingdom remains unresolved.
We cling to an increasingly asymmetric relationship with the United States. I would not want us not to have a particular relationship with the United States, but increasingly we cannot sustain it on the basis of that old idea that something very special is at its heart. The current President has less interest in that idea than some—perhaps less than any other—of his predecessors whose roots went back to Europe.
We are perennially reluctant Europeans, yet no sane party has come up with a plan B on Europe. I look forward to seeing, from the perspective of my greenhouse, the changed reaction towards Europe of Conservative Back Benchers if they sit on the Government Benches, as opposed to the Opposition Benches, given my party leadership’s decision to have constructive engagement on Europe, and its extraordinarily elegant and, from my point of view, extremely welcome climbdown on the referendum pledge.
I know that Europe has huge problems. In a sense, its bluff is being called: how can one create an economic union without the political union that goes with it? But the ability of the Europeans to cobble something together that works is absolutely astonishing. In a sense, there is something rather British about being able to put something together on an improvised basis that manages to carry on.
We talk about punching above our weight, but a person can only punch above their weight for a certain number of rounds, and then they get flattened. I do not want us to punch above our weight. I want us to work out what our weight is and punch at it. I do not want to go a gram above our weight. We send our young soldiers to die in Iraq and Afghanistan, but we do not have the means to sustain over a long term the total support that means that we can carry through those missions with complete success. If we are honest, we ended up in Iraq, in Basra, not in a glorious episode, but in a somewhat humiliating one. When it comes to the intervention in Afghanistan, I want to be able to say that we will see things through, so that I can say that those young people did not die in vain. If we cannot sustain those operations in the long term, we should not embark on them.
I would say to an incoming Government: look hard at the UK. Look at us from the outside as well as from the inside. Turn the telescope around sometimes, and look through both ends. What can we really do? What is it reasonable to ask our citizens to sustain? What is the effective power or weight of the United Kingdom in the modern world, where we spend all our time talking about the impact of globalisation? In the end, of course things boil down to budgets and economic performance, but we need to look honestly in the mirror of our national identity and national capability. If we do that, the next Government will perhaps be able to answer the challenge that Dean Acheson set 48 years ago, which, in many ways, has governed my political life.
It is a great honour, indeed a privilege, to follow the right hon. Member for Skipton and Ripon (Mr. Curry). He represents the acceptable face of conservatism in this House, particularly on issues of local government. He has proved one of Parliament’s most effective speakers, and he will be greatly missed. Like him and colleagues who have preceded me in this debate, I, too, will be leaving at the general election. This is my 25th Budget, and my last speech in a major debate in the House of Commons.
I spoke to some of my constituents over the weekend about the Budget, and although they did not feel that it was the most exciting one they had ever seen, they accepted it as sensible and right in the circumstances. It is a Budget for the economic times in which we live. It is responsible and designed to aid the recovery.
It will also be the last Budget before the general election, and the 14th Budget of a Labour Government. There have been many memorable Budgets from this Government, including those that heralded the winter fuel allowance, family and pensioner tax credits, and free bus travel—Budgets that have helped my constituency of Tyne Bridge, and the good people who live there: unemployment has tumbled since 1997; health services have improved; new schools and colleges have been built; educational standards and opportunities have improved for our young people; and housing has been modernised, and new houses provided. Although much more needs to be done, the Government have shown what can be done, given the opportunity, and what they will do in future.
Only last Friday I attended the launch of the redevelopment of Newcastle’s west end, the scene of street riots in the early 1980s, where hundreds of new homes and community facilities will be provided thanks to a Labour Government. The redevelopment of Gateshead quays has seen an influx of new jobs and opportunities —a cultural revolution that has seen a town once described as
“a dirty back lane leading to Newcastle”
rise to become internationally renowned for sport and recreation, and its arts and cultural development. All that has taken place under a Labour council and a Labour Government. With the Government’s help, hundreds of new homes will be provided on the site of a former freight yard near Gateshead town centre, which itself is being cleared to make way for new shops and housing. Indeed, the only famous—perhaps, infamous—building left to view is the “Get Carter” car park, which still stands, but not for much longer.
That story can be repeated right across the north-east, where the decline of heavy engineering and coal mining under the previous Conservative Government is being replaced with new opportunities. There are new industries, such as that of Nissan in Sunderland, which will soon develop the first generation of mass-produced electric cars. The production of offshore wind generators will, I hope, soon be boosted by Siemens, which plans a new manufacturing facility that would provide hundreds of new jobs. There is also the potential for clean coal technology and other innovative ideas, such as solid-state lighting systems, green technologies and so on, which are emerging in the region.
One NorthEast, our regional development agency, is at the centre of that, working with our businesses to develop the north-east’s economy. The hon. Member for Meriden (Mrs. Spelman) confirmed that a Conservative Government would abolish One NorthEast, but Conservative candidates on the ground in the north-east do not take that attitude, because they know about the RDA’s popularity and tell us that, if the region wants it to remain, it will remain. They have not said how they will decide on that, or whether they would have a referendum, but from candidates in the constituencies we hear a different story from that told by Opposition Front Benchers.
There is still a lot more to do, and all that needs to be added is the candid recognition that there is always a lot more to do. Indeed, if there is one thing that we can rely on Governments to do, it is not enough. However, economic recovery and future progress will rely on the public and private sectors working together. That is what Labour has promoted and, to a large degree, achieved: public and private sectors working in harmony and, sometimes, in partnership to provide the services and the prosperity that we all want. First, however, we have to tackle the deficit that has built up during the crisis that we have come through, and it is right that the banks, which sparked the crisis, should now do more to help the recovery by ensuring that small businesses can survive and grow. It is right also that important public services are protected, and that the public sector is not expected to pay for the mistakes of the private sector.
In the north-east, where the public sector accounts for 53 per cent. of GDP, we know only too well that threats of early and deep cuts in public spending would spell very bad news and threaten the recovery. Although it is true that much has been achieved and improved since 1997, the disparities between the north and south of our country stubbornly remain, much to the frustration of those of us who live in the north. Life in some parts of the south is becoming uncomfortable, with growing congestion and over-population; at the same time, life in parts of the north is made more difficult because the emerging industries and employment opportunities in the south are inaccessible to people, unless they move there and add to its congestion.
Attempts over the years to attract more business to the north have been frustrated by the concentration in London and the south-east of economic and political power, which is a magnet for development. One way to tackle the problem is to bring the north and south closer together by reducing the time it takes to travel between the two. The Labour Government’s proposals to develop a high-speed rail network are a welcome contribution to that process. The development of high-speed rail on the continent has shown that the cities that the high-speed network directly serves benefit financially and are advantaged in comparison with those that are not. So if high-speed rail is to contribute to efforts to tackle the north-south divide, surely the areas that are most in need and farthest from the centre of national economic and political influence should be included on the network. It is vital to the north-east of England that the proposed high-speed rail network, not just the proposed spur line, serves the region.
It is disappointing, however, that otherwise forward-thinking and relatively young Transport Ministers find it so difficult to see beyond conventional rail systems. Surely we cannot be contemplating that, by the end of the 21st century, high-speed rail will still consist of hundreds of tonnes of metal trundling along on steel rails. Our continental competitors are ahead of us in the development of high-speed rail, so instead of taking one small step to catch up, why can our Ministers not take one huge leap, boldly go where none has gone before and develop a real high-speed network that is fit for the 21st century? I refer to maglev: a train carried on magnetic levitation—a British invention, by the way—at speeds of up to 300mph. It makes a mockery of current proposals and would really put Britain ahead of the game for once. Indeed, I recommend that Ministers examine UK Ultraspeed’s response to the High Speed 2 report, which makes enlightening reading.
Other measures in the Budget are a little less headline-grabbing but important to the social life of many constituents. I note that the Prime Minister recently announced the appointment of a pubs Minister, in recognition of the demise of too many local pubs. I had to point out to the new Minister that working men’s and other private non-profit-making members’ clubs are also going through bad times, and that legislation such as the Licensing Act 2003, Gambling Act 2005 and the smoking ban, however well-meaning, have had a negative and often damaging effect. As a consequence, clubs are struggling and many have either closed or are under the threat of closure.
Those clubs are more often than not right in the centre and at the heart of our communities. They provide a venue for wedding receptions, funeral receptions, christenings, birthdays and so on, and it is disappointing that the Budget does not give any relief to such valuable community assets. Indeed, increases in duties will aggravate the problem. I am pleased that the pubs Minister has announced that clubs will be included in his deliberations, and that a new inquiry, chaired by my very good friend, the noble Lord Bilston, will look at how clubs can be helped to survive and thrive. I look forward to its conclusions; it could not have a better or more knowledgeable chairman.
As I said at the beginning of my contribution, this is probably my last speech in a major debate in this House, and I, like my right hon. Friend the Member for Sheffield, Central (Mr. Caborn), came here after serving 23 years on the shop floor in heavy engineering. My election to Parliament was a source of pride to my parents, who lived through the war years and the years of austerity. My father was a political animal. He took such a close interest in politics, particularly Labour politics, that he was nicknamed Clem, after Clem Attlee—a name that he liked so much he adopted it for the rest of his life. But he never aspired to political office. My parents were proud not just of me but of our country, where people of modest backgrounds as well as professionals and the wealthy can make it to Parliament. It is vital that we retain that characteristic in the years ahead. Too often these days, people become career politicians after leaving university, and they have little or no knowledge of the real world outside this House.
I have had the privilege of representing the heart of Tyneside—the people I grew up with. When I go, owing to boundary changes, Tyne Bridge goes also, so it is probably an appropriate time for me to leave. I hope that I have been able to make my mark, however slight, on this place, and that those who arrive after the election not only find the job as fulfilling as I have, but are able to contribute effectively and passionately on behalf of their constituents. I thank my wife and family for their support over the years. It would not have been possible without that. Finally, I wish my successor and the new Parliament well. Being an MP has been a great privilege. I thank my constituents, my party and my union for giving me that opportunity. I hope that I have lived up to it.
The hon. Member for Tyne Bridge (Mr. Clelland) has just made an eloquent plea on behalf of the north-east. I agree about the importance of people entering this place with experience of real life and real jobs; whatever that experience may be, it is important that this place is not just filled up with professional politicians. However, I want to take him up on one point—that the deficit built up over the recession. It did not: three quarters of it is entirely discretionary and entirely the result of Government spending decisions from about 2002 to 2008, when public spending ran out of control.
According to the Treasury’s own figures, which rely on pretty optimistic growth assumptions, the structural part of the deficit was 9 per cent. last year and 8 per cent. this year, and it will decline to 6 per cent., 4.5 per cent., 3.5 per cent. and 3 per cent. over the next five years. In five years’ time, if the growth assumptions in the Treasury’s forecast are right, and if it is right about what the structural part of the deficit is—the error on that could be in both directions—we will be running a deficit of £50 billion a year. That is entirely discretionary. This is money that our children are going to have to pay back. We are borrowing £3,000 a year for every man, woman and child in the country. By the end of the forecasting period in the Red Book, we are talking about a debt of £1.4 trillion. The interest on that alone will cost every man, woman and child in the country £1,100 a year. The idea that deficit financing is a responsible thing to do is simply wrong: it is stealing from the next generation.
In a recession, one expects there to be a budget deficit as a result of natural stabilisers. Taxes fall and benefits for people who are unemployed rise. However, that is only about a third of the deficit—the other two thirds is entirely discretionary. I am afraid that I am one of those people who think it needs to be eliminated an awful lot faster than the Government plan. Holding spending still will not be enough. Even if we had growth of 2.5 per cent. a year, the process would take nine to 10 years.
I ask this entirely in the spirit of genuine inquiry: does the hon. Gentleman think that this morning’s announcement on national insurance by his party’s Front Benchers would make the situation that he describes worse, or does he hope that the stimulus effect would mean that it was more than compensated for in economic growth?
The purpose of that was to try to do something to stimulate the creation of jobs in the private sector.
I am concerned about the level of gilt sales that we are indulging in. Over the next four years, according to the Red Book, the deficit will be about £570 billion. Maturities are running at about £40 billion a year. For the last year, all the gilts that the Government issued were sold to the Bank of England, so that will have to be undone over the next three or four years. On the Government’s own figures, we are looking at selling £920 billion of gilts over the next four to five years. That is not possible without a major increase in interest rates, a major fall in the currency, or both.
Another reason why it is important to eliminate the deficit a lot faster is that the private sector cannot recover with these levels of borrowing and taxation, as well as inefficiencies in the use of people in the public sector. That will lead to a lower pound, higher interest rates, and, perhaps, inflation. We have been running an incredibly loose monetary policy alongside the fiscal policy, although that is partly to do with the problems in the banks.
I got interested in politics in the 1970s because I thought we were getting into terrible trouble on the Government’s finances. I came into this place when a Conservative Government were trying to grapple with an inherited deficit of 9 per cent. of gross domestic product, and it looks as though the next Government are going to have to start from a much worse position than that. I fundamentally believe in sound public finance and sound monetary policy. We all know, from our personal life or our business life, that if one is getting into debt and things are not getting any better, the sooner one faces up to the problem and straightens it out, the sooner one’s life can get back to normal. Every business man knows this, and we all know it from our own lives. I am sure that we have all had periods when we have taken on debts that we cannot really afford and interest starts to catch up with us, which begins to mean that we cannot spend money on things we want to spend it on. The sooner one grapples with that problem and resolves it, the sooner one gets back to normal.
Part of the adjustment to this process will fall on the public sector work force, and I am afraid that it will be a very painful time. However, the Government have increased the public sector work force from 5.2 million to 6.1 million during their period in office. The pay bill is a quarter of public spending, and last year it went up by 3.8 per cent. A lot of those people are not productively employed. Let me take just three examples. In 1997, the Arts Council employed 200 people and its overhead was 5 per cent. of its budget. It now employs 765 people, and its overhead is 11 per cent. of its budget. Giving away other people’s money has always seemed to me to be one of the easiest things to be tasked with in life, let alone public life. Why the Arts Council needs four times as many people to do the job as it did in 1997 beggars belief.
In the national health service, most of the increase in numbers has been in health professionals. Of 290,000 employees, 172,000 have been health professionals, but 120,000—40 per cent.—have been management and support staff. The Office for National Statistics has just reported that productivity is falling in the NHS. That is not surprising, because one cannot throw at it the amounts of money that the Government have and get value for money from it. The NHS can make massive efficiency and productivity savings over the next few years on the basis of the very generous settlements that the Government have given it. As for schools, there have been 41,000 more teachers but 90,000 more support staff. There is a huge increase in bureaucracy from which we can make savings. These people will move into the private sector as it starts to recover when the Government get out of the mess that they are in.
That will require a little bit of boosting on the supply side. I should like to make a couple of suggestions about how the unemployment that will inevitably be created gets picked up in the private sector more quickly than it might otherwise be. If I were Chancellor, I would have, for two years, 100 per cent. capital allowances and zero capital gains tax on business investment made during that period to try to bring forward business investment that will create jobs. That would mean a very significant tax incentive. The Government have gone a little way towards it, because they have reduced capital gains tax rates a lot over the past few years, but a temporary measure like that would do what is needed.
My other plea is that when public spending is cut, as it inevitably will be, we try to protect a couple of areas of the capital budget. The Government make two contributions to the productivity of the nation: in transport and in education. Although there has been a lot of investment in some aspects of transport, the investment in roads has been appalling under this Government. Many business men say that what they would like is not all the Government’s programmes but a better road to the docks from wherever their factory happens to be. On higher and further education, raising the skills of people in the work force makes them more employable and more productive, and I would like that aspect to be protected. Other areas of capital spending will inevitably come under pressure, but they are always the easiest things to cut.
The banks have been one of the causes of the problems we have been experiencing, but, remarkably, they seem to fail completely to appreciate how unpopular they are, the problems they have caused or the need for any adjustment in how they are regulated and how they behave. They have gone back, remarkably quickly, to what seem to me to be their bad old ways. It is absolutely right for the Government, as the guarantor of retail deposits and the lender of last resort in terms of system risk, to say, “We’re never going to have this happen again.” I think Members in all parts of the House are agreed about that. We have heard all sorts of ideas: Adair Turner has talked about micro-regulation by the Financial Services Authority; David Walker has talked about the reform of bank boards and moving regulation into the Bank of England, which is probably a good idea. We have heard about counter-cyclical capital ratios, micro-prudential regulation, and watching liquidity. I am sure that all those ideas have something to contribute. However, if the new regulatory framework is to work, it will have to involve some international co-ordination; otherwise, people will just go into regulatory arbitrage, as they did before.
I would like to suggest something much more simple. The net assets and liabilities of the banking sector mirror the net assets and liabilities of the non-financial part of the economy. If bank balance sheets are growing at 10 per cent. a year but the economy is clearly not growing that fast, that tells us that there is a problem. That is mirrored, in turn, by the money supply. Throughout most of the previous decade, the economy was growing at about 3 per cent. a year and the money supply was growing at 10 per cent. That was a big red flag showing that there was a problem. One would not need to be a super-clever regulator to realise that banks were expanding their lending too fast and probably lending a lot of money to people who could not pay it back.
Ultimately, in all such banking crises, there is one problem—the banks made bad loans, and they will not get that money back. In this case, they got it so badly wrong that the taxpayer had to step in to help them out. The industry is too big—it is worth four and a half times our gross domestic product. By that I mean that the banks’ balance sheets are too big, not that the financial services industry is too big. We must remember that for every fat cat banker with a £10 million bonus, there are probably 50,000 people working in fairly ordinary jobs in call centres or offices, processing transactions, in sales and marketing, or whatever. A very large number of people are employed in an industry that is a very important one for us internationally.
I should like to make a couple of suggestions of my own. The Americans have suggested bringing back the Glass-Steagall division between investment banking and commercial banking—the casino and the utility. I find that a pretty attractive idea, although I worry, on the other side, that big companies need banks that can do a lot of things for them. If we are not to go the whole hog, I do not see why we cannot put banks into silos. The bank could run its mergers and acquisitions and corporate finance business in one silo, with a certain amount of capital committed to it but not putting deposits at risk. If it wanted to run a proprietary trading operation—frankly, I do not believe it should, because it would basically be betting against its customers—that should be in a separate silo. The only thing that the Government should guarantee is the retail deposits in a separate subsidiary of the banking group, and we should regulate very tightly what it did with that money. If a bank wanted to run its own internal hedge fund and lost money on that, it would lose a certain amount of capital, but it would not put the rest of the business at risk, as Lehman Brothers did.
We have to stop people gambling. In insurance, one cannot have a reinsurance contract without having an insurance contract in the first place—one cannot insure something in which one does not have an interest. It ought to be the same with credit default swaps and associated derivatives. There are trillions of them floating on a tiny amount of real transactions, and they ought to be restricted to the amount of the real transactions.
The big point that I wish to make is that the ethics and morality of the banking business need to change. When the closed shop of English gentlemen who ran the City for a couple of hundred years was broken up 30 years ago, we got an eat-what-you-kill philosophy from the Americans instead. It is pernicious, because it encourages an individual to take a very short-term view of what he or she does, in the interests of maximising his or her own bonus. Nobody is looking after the firm or much concerned about the customer. Bankers need to start thinking about the purpose of what they do, and they need to reintroduce strong ethics to it. They need to deal with conflicts of interest over proprietary trading, and they must put the good of the customer and the organisation that they work for much higher up their agenda.
I believe that the idea of a transaction tax on banks is terrible, as it would just get passed on to customers. However, the idea of taxing the banks’ profits a bit more might be good. The reason why they are making so much money at the moment is that they can borrow it from the Bank of England for next to nothing. The argument for a windfall tax on the banks is pretty overwhelming, and if my party is in charge of these affairs in a couple of months’ time, as I hope it will be, I hope that it will take that on board.
I came into this place when a Conservative Government were trying to sort out the terrible fiscal and monetary mess that a Labour Government had led us into, and I fear that I am leaving when the same thing is about to happen. In between, there was a period of pretty sound finance both under our party and under the current Government for their first five, six or seven years. I fundamentally and fervently believe that it is the job of the Government to run their finances soundly; otherwise, they are mortgaging the future of our children and grandchildren, which is at worst immoral and at best not very intelligent.
I came into the House 18 years ago frustrated by a Government who had sold the pass on manufacturing in favour of a dangerous flirtation with speculative and deregulated finance. So, a lot has changed in those 18 years.
We are where we are because of the mess that speculative and deregulated finance has taken the UK and global economy into. We currently hover somewhere between recession and recovery; with the good news being that unemployment is falling and the bad news being that employment is also falling. The fear is that, at the coming election, the public could be faced with a choice between the Tories, who would take Britain into a double-dip recession, and a Labour programme that could offer the prospects of jobless growth and kinder cuts. The House and the country need a bigger vision to be put on offer at the general election.
I remind the House that it was not public services that took the UK into the economic crisis; it was bankers and speculators who played around with the casino economy at the expense of the real economy. As a Parliament, we have failed to remain focused on that. Instead, we have allowed the debate to be shifted into a narrow argument about whose cuts will be the gentlest. I agree with the Treasury Committee that Parliament and the Government have missed a huge opportunity in failing to take up the prospect of breaking up the banks in the way that the hon. Member for Stratford-on-Avon (Mr. Maples) has outlined; by separating the retail, high-street functions of banks that deal with the receipt of our wages and savings from the banks that want to go into the more speculative parts of the casino economy. If they are going to gamble, let them gamble, but they cannot be underwritten by a public bail-out that has to be paid for at the expense of public services. We are asking the wrong people to pay the price of the crisis that we have been thrown into.
I happen to believe in the value of a tax on speculative transfers, which would not necessarily be a tax on high-street banking. The idea was first introduced by the economist James Tobin in 1985. The great advantage of a 0.05 per cent transactions tax is that it would not harm long-term, serious investment in any way, but it would do tax damage to those who move money around by the hour, minute, second and microsecond. We ought to take a punitive tax view of such destruction of the real economy.
The House needs to ask itself what has been achieved for the country by the £185 billion bail-out of the banks. The reality is that, in the current recession, there has been a contraction in the economy of £80 billion, £46 billion of which has been a cut in investment. It is right for us to ask ourselves whether throwing that quantum of money into bailing out the banks has done harm or good to the real economy.
Another economist, the late John Kenneth Galbraith, described this approach as the horse and sparrow philosophy. It was the thinking that if one needed to feed both a horse and a sparrow, one could simply feed as many oats as possible into the mouth of the horse. Some of it would eventually pass straight through and feed the sparrow on the ground. Galbraith simply pointed out that there were better ways of feeding sparrows. The same message needs to be passed to the Treasury and the Government today. There are better ways of feeding the sparrows who keep our manufacturing economy going than throwing money into the banks. Despite what we say in the Chamber about interest rates, if we talk to companies that are trying to get access to credit, we hear that they are currently facing charges of 14 to 15 per cent. There is nothing like a near-zero interest rate in the real economy in which they are trying to survive.
Like the Secretary of State for Communities and Local Government, I believe that the focus needs to be on jobs, and I think it needs to be on green jobs. For a moment, I got really excited about the proposal to create a green investment bank. However, page 105 of the Red Book states that
“the Government intends to create a Green Investment Bank, with a mandate to invest in low-carbon infrastructure. The Government will start by investing up to £1 billion from the sale of infrastructure-related assets and will seek to match this with at least £1 billion of private sector investment”.
That amounts to not spend-to-save but sell-to-loan, and on a scale that is pitifully unambitious.
We can look at the opportunities that were missed in the Budget. Since 1999, when the Government introduced individual savings accounts, 19 million people have put about £175 billion of their tax-free savings into ISAs. Yet we have never sought to direct what those ISAs could be used for. If we had made them conditional on green infrastructure investment, we could have had that £175 billion pot as a condition of the tax concessions we offered. We could have done exactly the same through conditions attached to pension tax relief. We could have said to the bank that we currently own, the Royal Bank of Scotland, that a defined percentage of its investments and lending had to be focused on the delivery of green infrastructure.
The reality across the international landscape is that other countries are driving their economic recovery, and job generation programmes, by taking themselves into a different space, post the crisis, from the one that they occupied before it happened. The Budget fails to follow those leads. Many years ago, my father tried to explain to me, in simple terms, that life is an economic money-go-round. One simply has to ask oneself where the money gets on, where it gets off and who walks off with it. The Budget fails to have the courage to redirect the money-go-round. It is the task of Government not to retreat from the large challenge of redirecting the money instead of arguing who should make do with less.
Let me give an example from Germany. Some time ago, I brought to the UK to meet UK Ministers a sophisticated, urbane politician called Hermann Scheer, the architect of Germany’s feed-in tariff legislation. During the ministerial discussions, he was told, “That’s all very interesting, but it’s a heck of an expensive interventionist policy to pursue.” He politely gave a cameo example to show that the exact opposite was true. He pointed out that the average German citizen spent €3,500 on annual energy costs in the home and the workplace. So the average German Lander—a county or region of about 1 million people—spent €3.5 billion each year on purchasing its energy. He said that most of the energy purchases came from external sources—third countries or multinationals. The money was thrown out of Germany’s windows to enrich others.
Scheer explained that all they did was to change the way in which they thought about the money-go-round. They realised that by simply spending €3.5 billion a year—the same sum—on themselves, they could find a way out of the recession rather than digging themselves deeper into it. That sort of fundamental rethink about the workings of the money-go-round needs to find roots in this country, this Government and this House.
Countries that pursue such a line find that they gain job security and economic security, that their Exchequer has increased tax revenues and that they get energy security. The same can apply to food policy and water security. However, it requires us to break away from the myth that interventionism is a pitfall for all Governments. I find it sad that we have inherited a fear of picking losers rather than winners. This has made us retreat behind an unstable and unconvincing belief that deregulated markets will take us out of, rather than drive us into, a crisis.
Sadly, it is certain that Conservative proposals would plunge us back into crisis and that the Labour Budget will not take us out of it. We need something more; something which will break the hold that speculative finance has on the UK economy. We need something to break the power the energy cartel has to define the short-term nature of the UK energy market and make incessant demands for corporate subsidies. We need something that intervenes to break the power of multi-commodity traders to undermine UK food security and define the basis of an unstable and unsustainable UK food policy. We need a Government who are unafraid to wrest power from the exploitative and unsustainable in favour of those who want their ecological footprint to be sustainable. Will we get that at the coming election? I suspect not.
I will not be part of the next Parliament. I am simply following my mentor, Tony Benn, who said that he was leaving Parliament to spend more time in politics. As a parting promise, I say to the House that I shall seek to be part of the social movements that ensure I am as much of a pain in the backside to this place from outside Parliament as I have tried to be inside Parliament. I hope to bring constructive discomfort to all those who stand in the way of the future that Britain needs.
Unlike the hon. Member for Nottingham, South (Alan Simpson), who has just concluded his contribution in characteristically robust and witty fashion, I will not follow the general trend of the debate by describing my speech as a valedictory address—I hope that it is not, as one who seeks re-election. Indeed, if God spares me for another 10 days or so, I can at least confidently state that this will not be my last contribution of the Parliament, because, for the first time in nearly 27 years, I have got Question 1 in Scotland Question Time immediately after the Easter recess.
Reflecting on the many and varied valedictory addresses to which the Chamber has been privileged to listen this evening, it has struck me that one’s maiden speech is heard with indulgence and some affection and good will, that one’s valedictory speech is heard with gained and earned respect and also some affection, and it is just the bit in between that can be sheer hell on the Floor of the House. We should probably all bear that in mind; it is a good corrective.
I want to contribute briefly, essentially from a constituency vantage point, and speak about one or two items in the Budget and their impact on my part of the country. In doing that, I recognise that the Budget is constrained through the financial circumstances and that its measures are liable to be frustrated because of parliamentary constraints. We all know that we will look for the real Budget—the real measures—in the comprehensive spending review and the voting decisions that are made in the next Parliament, whatever its arithmetic. The Budget has therefore been presented in that shade and is subject to recessionary and banking pressures that have been generated globally, particularly in the past 12 to 18 months.
Bashing the bankers has become as popular as bashing Members of Parliament—I say that on the day of a significant statement about the new expenses regime that will kick in for the next House of Commons. I believe that, even without the banking implosion, when this or any other country—but certainly our country, which remains an island economy, however much we are enmeshed in a welcome way in the single European market—hits tough times economically, although of course we need our banks and we need them to behave responsibly and properly, as they should have done, we essentially need to build our way out of recession. That means a viable and vibrant manufacturing base and an emphasis on construction, which can do so much to help kick-start or pick up the momentum of the economy in different parts of the country. That applies especially to a traditionally fragile economic area such as mine, which is on the periphery of the market and of the UK, as well as of the European Union, and is always destined to be—the highlands and islands of Scotland.
One need only consider current unemployment and what sector those who are unemployed were in when they last had a job to realise that the proportion in construction or construction-related activity was enormous. Of course, as the Secretary of State rightly said when he opened the debate, the spin-off benefits of new build in the housing sector and the knock-on effects are significant. I therefore hope that the changes in the Budget, for example, on stamp duty, will help the Scottish economy as much as the English economy, perhaps particularly that of the south-east of England, and give a lift to a more buoyant housing market, which will assist the movement of money and people and help release an increase in the wealth passing hands across the economy for the construction of new housing generally.
That will go a long way to help to lift unemployment in so many parts of the country, as will the more modest but much needed construction-related activity that has arisen not least because of the atrocious winter weather that we have suffered. I represent the second northernmost constituency on the mainland, and if I may say, those engaged in dealing with the severity of the snow that we faced this winter performed magnificently. That construction-related activity has arisen not only because of the recent weather, but there is a persistent problem because of underfunding, so I hope that the Scottish National party Government in Edinburgh will be constructive and responsible in their approach to the extra funding from the UK Exchequer. I hope that they will not—as is so often their wont—turn it into a political football between them and the Labour Government in London as to who can match whom for funding. The fact is that the road user and the individual citizen in Scotland, including in the highlands, is less concerned about who gives the stamp of approval for investment than about that investment getting through, so that there is a much-needed improvement in infrastructure.
My second point—I am speaking wearing my informal hat as rector of the university of Glasgow, and I am perhaps not required to declare that as an interest—is on the welcome increase in spending on higher education. Last year, Lord Mandelson made announcements about sudden, dramatic and unanticipated cuts, but he is in danger of ditching centuries upon centuries of British history with regard to the university sector. I did a TV programme with him on Budget day last week, when he simply lectured the universities on how they must cut their cloth accordingly, find savings, do what they were told and the rest of it. Even Mrs. Thatcher did not talk about the universities in quite that way. They may frequently have irritated her, but she accepted that under the workings of our unwritten constitution, at the end of the day, they are supposed to be independent institutions, despite the fact that they rightly receive public subvention. Lord Mandelson does not appear to feel constrained even to the extent that Mrs. Thatcher did in her most modest moments.
Real-terms cuts have been announced for the Scottish universities. On the back of last week’s Budget, the Scottish Funding Council announced that 20 Scottish institutions will receive a 1.2 per cent. increase in funding for 2009-10, but, as the National Union of Students Scotland and the University and College Union say, that represents a real-terms cut overall, which does not match what the SFC said on 18 March, which was that there has already been a cut of £573 million from this year’s budget. Just as we need to invest in infrastructure, we need to invest in the future. There is a common consensus across the political spectrum that education, skilled training, innovation, science and research are going to be crucial for our country in the long term. The Government are therefore pursuing a false economy in the tertiary sector.
An innovative approach to the economy is demonstrated by the interesting proposals for the green bank, which are worthy of support. That could help further to kick-start our exploration of alternative strategies for economic renewal and maintenance of the economy generally, and it pushes the boat out further, not least in the energy sector. Scotland, including the highlands and islands, has so much to offer on renewables. I hope that the beginnings represented by the green bank will help to place my part of the country even more at the forefront of cutting-edge technologies for further generations.
Something else that helps to correct the inevitable geographic imbalance of my constituency—I referred to that earlier—is the arrival of broadband. The steps that the Government are taking to extend the scope and coverage of broadband are welcome, and the Prime Minister recently said that there will be 90-plus per cent. coverage, but lo and behold, my part of the country is one of the areas that will not be covered soon. That is despite the fact that it is one of the areas of the country most in need of the opportunity that broadband and super broadband provides to help to alleviate the in-built difficulties that we face in access to markets and consumers, and to give us the ability to compete on a level playing field.
Another feature of this Budget and so many before it—Labour and Conservative—is that the playing field is grossly distorted by the way in which fuel duty is applied in this country. Although the Chancellor is phasing the increase in three instalments from this year to the next, there is still—after years of reports, investigations and pleas from across the political spectrum —no recognition of the pressing difficulties caused by fuel duty in rural areas, where public transport is all too often not available, and where the motor vehicle is not a luxury item, but an absolutely social and economic necessity. In that way, I am afraid to say, the Budget falls well short.
The Budget will be a key issue in the coming weeks in our part of the country. Some measures are welcome, but there is so much more to campaign for.
This will probably be the last speech I make in Parliament as the Member for Sheffield, Attercliffe. I do not intend to lose in the general election, but unfortunately the Electoral Commission, in its wisdom, decided to rename my seat Sheffield, South-East, which is rather disappointing. Although that is a technically accurate geographical description of the constituency, the Sheffield, Attercliffe constituency has existed since 1885—125 years—and I like the idea of continuing to use historical names. I am slightly disappointed about that, but I nevertheless hope to represent the constituency under its new name after the election.
There have been many speeches from right hon. and hon. Members who are leaving Parliament, and we wish them all well. I have enjoyed the companionship of my hon. Friend the Member for Nottingham, South (Alan Simpson), who has just left the Chamber, and I value his friendship. We have not always seen eye to eye or been on the same side of arguments, but we have certainly always been on the same side in the parliamentary football team, where we have enjoyed several games together.
I also want to comment on the contribution of the right hon. Member for Skipton and Ripon (Mr. Curry). Over the years, I have enjoyed many debates with him, both in the Chamber and in Committee. He did his best to argue the case for, and the cause of, local government when he was Local Government Minister. Many on the Government Benches have great respect for what he has achieved and how he has put his views forward, and for his great wealth of knowledge on local government, housing and planning. Unfortunately, his time as Minister was rather constrained by the yoke of Thatcherism, under which he laboured—he did not always agree with it—but we will be sorry to see him go. Before he does so, perhaps he could give a few tips on the real meaning of localism to one or two Conservative Front Benchers. I shall come to my right hon. Friend the Member for Sheffield, Central (Mr. Caborn) in a minute.
At a recent meeting of the Select Committee on Yorkshire and the Humber, regional representatives from the Federation of Small Businesses, the British Chambers of Commerce, the CBI and the Engineering Employers Federation were united in giving us two messages: first, that Yorkshire Forward, the regional development agency, is doing a good job in helping them through the recession, and that we should not get rid of it; and, secondly, that we should not start making cuts now, and that the recovery is too fragile and limited to run the risk of pushing them back into a double-dip recession. Industry and business made that argument clearly and with a united voice, and we ought to pay heed to it.
This morning, I visited a company called Birley Manufacturing. We talked briefly about the Budget, but also about the company’s interest in the Government’s long-term commitment to spending in certain areas. We often forget that public spending is not simply about jobs and service provision in the public sector; it is also important for private business. That company makes the skirts that go under high-speed trains and it has had a major programme of investment over the past few years, so it is important that it knows what the future holds for Government commitment to public investment in transport.
Sheffield is clearly having a difficult time in the recession, like the rest of the country, but we are not experiencing anything like what happened in the 1980s—the scenes of devastation and destruction, with 40,000 people losing their jobs in steel and engineering over a decade in the Lower Don valley, in my constituency and that of my right hon. Friend the Member for Sheffield, Central. Of course, there have been some redundancies, but there have also been some real success stories. My right hon. Friend mentioned Sheffield Forgemasters, which has seen a management buy-out with the workers owning a large percentage of the company. It is going from strength to strength, with 70 apprentices taken on. It is also making a multimillion pound investment in a major new forging press so that it can be a significant producer of parts for the new nuclear programme here and overseas. Some £80 million of Government assistance has been given. We should not return to old policies of supporting failure in business, but the Government should consider how we can enable successes, and Sheffield Forgemasters is a major success.
I congratulate the Secretary of State for Business, Innovation and Skills and Ministers in that Department, but I especially congratulate my right hon. Friend the Member for Sheffield, Central. He really underplayed his involvement, but if it had not been for his knowledge, understanding, commitment, drive and refusal to give up, that investment would not have been made and those jobs for the future in our advanced manufacturing sector—not only for Sheffield, but for the UK—would not have been secured.
Advanced manufacturing is the way forward for Sheffield and the UK. We should not forget that we are the sixth major manufacturing exporter in the world. When I went the other week to the advanced manufacturing park that my right hon. Friend mentioned, it was put to me very simply: “If the Chinese can produce goods with wage costs at 20 per cent. of ours, we have to be able to produce goods with a labour input of 20 per cent. of that of the Chinese.” With ceramic cutting tools, machines can do a job in less than 20 per cent. of the time they used to take with the old tools, and that is how British manufacturing will move forward. The Government have to be part of that, and the advanced manufacturing park is supported by Yorkshire Forward with the university of Sheffield, Rolls-Royce, BAE Systems and Japanese machine tool companies all working together. That is the future, so that when we start producing new nuclear plant in this country, much of it will be made here.
It is also right that we should do more to ensure that parts, equipment and machinery for the green energy revolution are made in this country. I therefore welcome the commitment to a green investment bank and the decision by Siemens—another company with a base in my constituency—to start producing wind turbines here. That is another important step forward for advanced manufacturing and future industries. Sheffield now has a diversified economy, so I also welcome the help for the computer games industry, which is partly based in the city. We should think more about new industries.
We do face a reduction in public expenditure, but I notice that the Conservatives have not undertaken to protect schools. I am pleased that this Government have done so. Since 1997, spending per pupil has gone up roughly 100 per cent. in secondary and primary schools in Sheffield. In 1997, we were spending £4 million on school buildings, but last year we spent £70 million. Does that make a difference to the pupils? Of course it does. Some 38 per cent. of pupils got five or more GCSEs at grades A to C in 1997, but 60 per cent. did so in 2009. That shows that the investment in education is working. Some 58 per cent. more young people in my constituency now go to university than did in 1997. Of course universities have to make efficiency savings like everyone else, but I caution Ministers to remember that it is vital to keep a thriving university sector, because it is universities and business working together that will create the advanced manufacturing industries of the future and ensure that we can sustain the cutting edge of efficiency and productivity that we need to survive.
Local government will go through a difficult period, but over the past few years it has achieved 2 per cent. efficiency savings, and we should give it credit for that. We need to protect hospitals and health services, but it would be folly to protect the health service while forcing major cuts in social services. We have to take a more joined-up view of those services. We must learn from the pilot programme on Total Place. Efficiency savings can be found in overlap and duplication, but let us look at the services in totality instead of as separate entities in different silos. The public do not see those services that way, and we should not do so either. That will be a challenge, but I am sure that local government will rise to it. We have to give it greater freedom and the ability to connect and share budgets and resources with other government activity in the local area.
I have a particular interest in housing, and I am pleased by the Government’s efforts to help people through the recession, including help with mortgages to reduce the number of repossessions and the start of a council house building programme again. I welcome the housing revenue account reforms, which will guarantee 10,000 new build a year in the local authority sector, and provide 10 per cent. more money for management and maintenance to try to secure the future finances of social housing. But there is still the challenge of how to increase the number of social houses built. When the recovery comes in the housing market, housing associations will be able to do more, but we have to find a way to bring more private sector financing into arm’s length management organisations and more investment in long-term private rented housing of good quality.
When it comes to cuts, it is often easy to cut long-term capital projects to protect ongoing revenue expenditure. That would be folly. The Government are right to commit to long-term investment in high speed rail and a line from Sheffield to Leeds—rather than the ridiculous suggestion of a link from Manchester across the Pennines to Leeds. Sheffield and Leeds are united in supporting the Government’s proposals. The commitment to further electrification is right, and I want the midland main line to come as soon as possible.
I also welcome developments such as tram trains. It is important to continue to invest in transport infrastructure not only because it is important for the economy directly, but because supplying the carriages, the locomotives and the infrastructure of the track should be done by British companies with a base in Britain. Those companies need certainty, not the swapping and cutting that often happens in recessions, when capital expenditure is the first to go. That causes real problems for the long-term plans of the private sector, which wants to be part of delivering those projects.
I am still not sure about the Government’s answer to binge drinking, which is to put alcohol duties up regularly. The supermarkets will still sell lager at a discounted price, and pubs will continue to struggle—although I welcome the help that the Government have offered.
This is a sensible Budget. It is not dramatic, but it is a difficult Budget given in difficult circumstances. My right hon. Friend the Chancellor is right to make support for business, skills and jobs his priority, because the long-term recovery will be based on those.
It has been a great privilege tonight to listen to a series of impressive valedictory speeches, not least from the right hon. Member for Sheffield, Central (Mr. Caborn) and the hon. Member for Sheffield, Attercliffe (Mr. Betts)—one of which was semi vale and the other complete vale. I was especially taken by the words of my right hon. and learned Friend the Member for Devizes (Mr. Ancram), who spoke of the stewardship of the economy—a concept that has deep-seated roots in this country in terms of the land, the environment, wealth, possessions, the creation of wealth and the administration of the economy. He has served his party and his country with great distinction down the years and he made a powerful and important speech that will bear further reading.
I also pay tribute to other hon. Gentlemen, including my great friend the hon. Member for Nottingham, South (Alan Simpson), who has been an original, high-minded and brave Member of the House. Other Members of Parliament to come could do well to follow his steps. I was also privileged to be in the House on Thursday night to hear the farewell speech of the hon. Member for Sunderland, South (Mr. Mullin), who made a really remarkable speech. I am proud of the fact that I have served with him in the House of Commons, including alongside him on a number of occasions, which was a great privilege. He will be very much missed in the House, and to anyone wanting a rattling good read, I highly commend his book.
This was the most assive Budget that I have heard in my 27 years in the House. I am not quite sure what it is for, except as a kind of semi colon before the general election. It seems to be an empty Budget. I do not propose to deal with it in great detail, because there is no great detail to deal with. However, I want to make one particularly important point in relation to my constituency. Before I do that, however, let me say that none of my remarks relates to the Financial Secretary, who I know is a good, straight soldier. However, he serves in a rotten Administration, and I want to say a few words about the Chancellor and the Prime Minister. I hope that they both understand—because I am not sure that they do—how angry and distressed people are in this country at the financial situation that we have been dragged into. In particular, many people are angry that the Government could have done so much more to prevent the United Kingdom from finding itself in such a parlous situation, for we have truly gone backwards.
It is to the Prime Minister that the blame for the most serious failings must attach. This is not an ad hominem attack on the Prime Minister; this is business. It was his failure to respond either to the massive inflation in house prices, despite the most earnest warnings, to personal debt spiralling out of all control, or to the grave regulatory errors in the banking system that lies at the heart of the failings of this economy. As the hon. Member for Sunderland, South said so wisely, it is difficult to see how the United Kingdom’s economy can prosper when its main industry is shopping.
As well as pillaging the pensions arrangements of many of our people, the Prime Minister decimated our reserves when he was Chancellor of the Exchequer by selling 395 tonnes of gold at an average rate of $270 an ounce. The price for gold now stands at more than $1,000 an ounce. That surely must be one of the most appalling errors of judgment of any Chancellor in the history of the office. He has misspent public money excessively and wastefully, and too often to very little effect. He was responsible for running up public debt when he should have been paying it off, yet he still has the nerve to come to the House and tell us that he has abolished the cycle of boom and bust. That is such a fantasy position that one almost wonders sometimes whether the Prime Minister is in full possession of his faculties.
The House must remember that it was the Prime Minister, as Chancellor, who took all the big decisions on pensions, and who effectively wrecked one of the best financial systems of provision in the world. He destroyed the system of savings in this country and will have effectively impoverished generations of old people—past, present and to come. However, what is so worrying—and, I think, so sad—is that the legacy that this Government will leave is that of a high-tax, essentially anti-wealth, anti-aspiration and now almost anti-hard work country that lags in almost every respect that matters.
My right hon. Friend the Leader of the Opposition and the shadow Chancellor both made highly effective speeches setting out their critique of this phony Budget, but I would like briefly to mention a matter that most profoundly affects the enterprise culture in this country, and therefore reflects the entire system of wealth creation, which pays for absolutely everything. Like many hon. Members in all parts of the House, every year I carry out a simple pre-Budget survey in my constituency among businesses and business people. There has never been a year since this Government came to power when the main complaint has not been the quite astonishing level of bureaucracy and red tape that the Chancellor and his friends, most particularly the Prime Minister, have sought to impose on enterprise and strangle it with. The truth is that the Government now stand in the way of an enterprise economy. They are, in themselves, an obstacle to progress.
Mr. Deputy Speaker, I do not know whether you saw an excellent article in The Daily Telegraph today by Alistair Cox, chief executive of Hays, the recruitment company, but he makes this important point about what part of the problem is:
“Many businesses would like to recruit more staff, either temporary or permanent, but often feel there are too many risks involved, too many barriers to make it worthwhile. Others are suffering chronic skill shortages in key roles. Some are even scaling back their ambitions because of the difficulties involved in employing people today… The only way of creating long-term, sustainable employment is to create the right economic, legislative and social framework to nurture new businesses and encourage existing ones to grow.”
In that, this Government have been a dismal and singular failure. The cost of Government regulation to business in the United Kingdom now runs at £80 billion a year. That is the equivalent of 5.7 per cent. of the United Kingdom’s entire gross domestic product. Business people in my constituency spend about 13 hours a month administering the Government’s red tape alone, while people in their work forces can sometimes spend more than 70 hours a month on administration. The truth is that the valuable concept of a low-regulation, low-tax, competitive economy, which came to fruition in the later years of Lady Thatcher’s Government, and subsequently under the Government of my right hon. Friend the former Member for Huntingdon, has been gravely eroded, as enterprise sinks further every day into a bog of regulation and higher taxes.
We are in the midst of an enduring financial crisis, not just here but across Europe, and it has exposed our many weaknesses in coming to grips and competing in a global economy. Those failings—in competitiveness, productivity, training and education—will all have to be fixed if Britain is to play a successful part in the world. With all the other difficulties that will fall to the next Government, in terms of public expenditure there will be the most vital job to be done in fixing our national competitiveness and productivity to prepare the British economy and all our people for the difficulties of the global challenges that we face. At the same time, we will have to defend free markets, free trade and global capitalism, all of which are bound to come under attack, as they do in times of great difficulty and hardship.
This has indeed been a profligate and disastrous Government for the economy of this country. The Government have lost all credibility—that, as you know Mr. Deputy Speaker, is a most vital asset for any Government—and, much as I regret to have to say it, we are now seen as again becoming what we were in the 1970s: a political and economic backwater. With that disintegration of our financial and economic influence naturally comes a dissipation of our ability to change things in the rest of the world, because however good is our military, economics represents real power.
The resolution of those matters will require iron resolve and huge courage—qualities that I know my right hon. Friend the Leader of the Opposition and the shadow Chancellor will put to good use in a new Government to fix a broken economy, deal with a budget deficit that threatens our recovery, boost enterprise and small business, get Britain moving and build an economy that really works for everyone.
It is an absolute pleasure to follow the hon. Member for Mid-Sussex (Mr. Soames) and, of course, it is not the first time that I have done so. I follow him in representing the fantastic constituency of Crawley, and I am sure that he will remember well the days when he did so. I was interested to hear him talk about the harm that the Government have apparently done to business. I remember that, when he represented Crawley during the recession of the early 1990s, companies were falling like ninepins and people were losing their jobs and homes day after day. They found that their homes were not worth half what they had been worth when they bought them. Nothing was done to help those people; no assistance was offered by the Government.
I support this measured, quiet Budget. It is taking us on a journey, with its support for business and families. It did not make huge promises that could not be met, but it understands that our communities need support. We are debating infrastructure and growth today, and they are at the heart of my constituency, whose many companies are demonstrating innovation and entrepreneurship and offering employment. It is important for those companies to know that the Government understand their needs.
It was interesting to hear the hon. Gentleman talk about red tape in the workplace. Many of the people I talk to feel that that red tape is about being safe at work, about having decent employment or about people having their disability recognised in the workplace so that they can give of their best. This is the argument about intervention versus leaving everything to market forces, and it is obvious from the debate that there are different views on that across the House. Most Labour Members believe that intervention is right, and that it was right, for example, to support the banks—although not the bankers. The right hon. and learned Member for Devizes (Mr. Ancram) was absolutely right in his assessment of those who led us into this appalling problem and who have no understanding of what they have done.
Securing the economic well-being of our communities is achieved not only by the Budget but, day in and day out, by those who are keen to see their companies grow and keen to employ people properly. Those people understand how good companies can operate in our communities. That is why I was pleased to see the proposals for the development of the green investment bank. A company in my constituency, Ceres Power, is developing a fuel cell that will reduce our reliance on carbon energy by 50 per cent. It is important to support such companies and to help them to get investment, and it would have been helpful for that company to have had the green investment bank to turn to, because its only stated aim was to produce a product that would reduce our reliance on carbon and make the planet a better place. That was therefore an excellent Budget proposal, and I hope to see the project expand and grow.
As we are focusing on investment and infrastructure, it is important to say how good it was to see the investment in the Thameslink programme reinforced. That will involve more than £5 billion of investment to improve the line between Brighton and Bedford, and all the stations in between. That is a crucial route, in that it brings work and investment to the area. It allows people to live and work in an already overcrowded area by providing a decent means of travel and reducing their reliance on road vehicles.
Those of us who serve on the all-party group on Thameslink were upset to see that the decision to appoint a preferred bidder for the rolling stock had been delayed. Speaking as one of the signatories to the early-day motion calling for that decision to be announced before the Easter recess, I hope that we will hear about that soon, although I accept that we are cutting it fine. That would demonstrate a real commitment and let us know that the programme, which is so important to us, was safe. If we are to attract business, it is vital to invest in our major infrastructure centres such as Gatwick airport. The redevelopment of the train station there is crucial to our businesses.
That brings me to the reasons why I fully support the regional development agencies, especially the South East England Development Agency, which has done an enormous amount of good in attracting business to, and keeping business in, the south-east. There is often a tremendous pull to go elsewhere, and a business that is prospering can sometimes need help to remain in the area. SEEDA has been at the forefront of providing much of that support. I do not trust or support the notion that local authorities, alone or in partnership, will be able to do that work. I foresee all sorts of difficulties if a particular local authority were to take a leading role, to the disadvantage of others. The good thing about having a regional development agency that can take a step away from the political forum is that it can think about investment in a much more strategic way, and I hope that that will continue.
Supporting our businesses by giving them time to pay their tax has been hugely welcomed, in my constituency and elsewhere. Through my role as assistant Minister for the South East, I have discovered that other businesses throughout the region have found that support extremely helpful. Small interventions can give confidence to businesses and companies, which can make all the difference to their business decisions. We should not underestimate how much such initiatives have helped.
The use of programmes such as the mortgage rescue scheme might not always entail the buying of a home, but early intervention by the local authority is crucial. Crawley borough council, for example, has demonstrated that the system has been very helpful. It has not had to hand over vast sums of money to assist people, but it has intervened with good, early advice to mortgage owners to prevent repossession. We cannot underestimate the importance of that. We have all sorts of methods for promoting help and support in our communities.
I have listened to the argument that we have no right to sell our future, as it is only on loan to us from our children. I believe, however, that every child whose parent did not lose their job because their company was given time to pay its taxes represents an investment worth making; every child whose parents did not lose their home, thanks to the intervention of this Government, represents an intervention worth applauding; and every young person who was taken on by a company through the future jobs fund and given an opportunity in the workplace will be thanking this Government for ensuring that they have a future.
Of course, such intervention requires money. In this fragile economy, when we are gently coming out of recession and back into growth, and when companies are feeling just enough confidence to acquire new equipment and take on new staff, we have no right to put any of that at risk. We in this House have no right to throw caution to the wind in order to pay back debt, and to throw those people into turmoil once again. I hope that, when my right hon. and hon. Friends are back in their places on the Front Bench after the general election, they will understand that this investment needs to continue. The confidence and sense of security that the business community needs to do its job are greatly valued. I did not get lots of surveys back saying that people were fed up with red tape. The people in our communities are begging for more help and support. They are not saying that they do not want that to continue; they are asking for more to be done for them.
After the general election, when I have left the House, I am going to be testing—I hope so, if any trust will have me—whether investment in the NHS has been as valuable as I always hoped it was over the last 13 years, providing us with a health service of which we can at last be immensely proud and one that we can be sure is becoming a world-class system. I have decided to get back my registration from my nursing career and I intend to test that system to ensure that all that the Government and Labour Members have done and fought for in the NHS has been worth while. For me, supporting our health service in a way that makes me feel proud and delighted to rejoin it will be the true reward of having been in this House for 13 years.
It is a privilege to follow the hon. Member for Crawley (Laura Moffatt). May I take this opportunity to wish her well when she leaves the House?
The last Budget statement in the life of this Parliament has been made and we have had the usual post-match analysis from politicians, pundits and experts. The general opinion seems to be that the Chancellor was playing for a draw and that the real match will be held after May, although it may be under new management—only time will tell.
With that in mind, and given the fact that we are now heading for a general election, I was not entirely surprised by the Chancellor’s statement, although in fairness to him, he seemed to resist the temptation to indulge in pre-election giveaways—not that there was, perhaps, much left to give away. Also in fairness to him, he has inherited a legacy that few of us would envy. Ruth Sutherland, writing in The Observer, said that the Chancellor’s predecessor
“presided over an increasingly unbalanced and indebted economy in which the City grew over-mighty and our industrial base shrank alarmingly”.
It is little wonder that the Budget was high in rhetoric and low in substance.
Despite the Chancellor’s efforts, I find myself surprisingly in agreement with the leader of the Liberal Democrats when he said that the Budget was more of an obituary than a manifesto. Indeed, the opening sentences of the Chancellor’s statement set the tone of vagueness and ambiguity that permeates most of his Budget. Although I understand the reasons for this, I agree with my hon. Friend the Member for East Antrim (Sammy Wilson), who is also Minister of Finance and Personnel in the Northern Ireland Executive, when he expressed concern about the lack of detail on future spending plans and how the Chancellor intends to reduce the level of public sector borrowing in the coming years.
The Chancellor tells us that we are emerging from recession, and perhaps there are signs of that, but there is a wide variety of views on that—often, it has to be said, from those who did not foresee the recession in the first place. Even if we are emerging from the recession, however, we are among the last of the developed countries to do so.
The Chancellor says that borrowing is lower than forecast, but it is still worryingly high. We have heard many figures quoted in the debate. The deficit this year is 11.8 per cent. of gross domestic product; the Government have committed themselves to reducing it by half within four years, but that is based on growth figures that are open to challenge. Even if the deficit is halved by 2014—and it is a big if—the CBI and others have said that it will be too little, too late. Cutting the deficit appears to rely on spending cuts that remain vague and on extremely optimistic projections for the economy. The frightening level of the national debt must be tackled. Whoever occupies No. 10 and No. 11 after May will have some hard decisions to make.
One of the Chancellor’s ideas on how to reduce borrowing is the encouragement of economic growth. He has rightly stressed that this is the key to genuine recovery. He has repeated the Government’s commitment to finding new ways to enable small businesses to grow, to invest in and improve our national infrastructure and to promote research, innovation and enterprise. Those are good aims.
We should all do what we can to encourage the private sector and to reduce the public sector. We can help local British companies by reducing unnecessary red tape, as we heard earlier, and bureaucratic procurement procedures. I welcome the Chancellor’s commitment to developing traditional and new infrastructure. We can help by bringing forward some capital projects for schools, hospitals and roads. That is what we have done to good effect in Northern Ireland.
I was encouraged by the fact that an extra £15 billion of Government contracts will go to SMEs. I was also encouraged by an announcement that entrepreneurs’ relief from capital gains tax will be doubled to £2 million and taxed at 10 per cent. This will be welcomed by small businesses. I was further encouraged that the investment allowance for small firms will be doubled to £100,000. If British businesses are to compete, we must be at the cutting edge in energy supplies and digital communications, for example.
I fully agree with the Chancellor’s statement that access to finance is vital for small businesses. I am encouraged that the Royal Bank of Scotland and Lloyds will provide a total of £94 million of new business loans, nearly 50 per cent. of which will go to smaller firms.
Does my hon. Friend acknowledge, however, that while the banks will talk a good talk, the percentage costs to small businesses—or, in other words, the rates imposed on them—have been exorbitant, so that if we are to see the growth that he wants, the banks need to acknowledge the seriousness of the recession and the need to finance small and medium-sized enterprises?
I totally agree with my hon. Friend. I was just going on to say that we have all heard very distressing stories from business people in our constituencies who are in complete despair because of the attitude of banks. These constituents are solid, sound people, who have done business with the banks over many years and, in some cases, over generations, yet far from offering those people help at a time of need, the banks have put obstacles in their paths. That is totally unacceptable.
Businesses also need to be encouraged to invest in innovation and skills and to increase their levels of exports. We should do everything possible to reduce the burdens on business. We need to move away from the culture of bureaucracy and red tape, as these things stifle business, especially small businesses, which are the very backbone of the British economy.
Although I broadly welcome the small business and infrastructure initiatives in the Budget, I do not think that they go far enough to persuade the markets that we are on the road to recovery and at a fast enough speed. Because of the fragile state of our finances, coupled with the impact of the recession, I fear that there is little incentive for businesses to take risks of any sort. The Small Business Forum said that just 5 per cent. of its members believe the Chancellor’s proposals will create an environment for their businesses to develop, while 87 per cent. have said that the Budget will not increase business or consumer confidence.
I am also concerned about unemployment. It is good that the recent national trend has shown a fall in numbers, but it seems likely that high levels of unemployment will be with us for some time to come. John Philpott, chief economic adviser of the Chartered Institute of Personnel and Development, has said:
“Although a fall in unemployment is clearly better than a rise, this should not be read as a sign that the UK jobs market is recovering strongly.”
I agree with that and I fear that chronic unemployment could well be one of the long-term effects of the recession. High unemployment reduces tax receipts, increases public spending, reduces consumer confidence and depresses the housing market. We must therefore target resources towards the creation and development of a well and properly qualified work force.
Schools must give realistic career advice to pupils at an early stage of their secondary education. We churn out too many graduates in fields that often provide few opportunities in the workplace. This leaves many good young people unemployed or near-unemployable. There is an urgent need for those problems to be tackled.
Let me end by quoting the words of Miles Templeman, director general of the Institute of Directors. He said:
“It’s the entrepreneurs and business leaders of the UK who will make economic recovery happen. But they need confidence—confidence in their businesses and confidence in the Government's economic policy. So it’s deeply worrying that instead of boosting confidence, the Budget appears to have had the opposite effect.”
I have read that the origin of the word “swansong” is the myth of the mute swan which, as it approached death, expressed itself with an extraordinary outpouring of noise in a very evocative way. I can only hope, for the sake of those who are left in the Chamber this evening, that comparisons between that and my speech will be somewhat limited.
At some stage in their lives, all Members will have been asked why they entered politics. It is worth recalling what was happening in this country in the 1970s, when I started working. We were beset by terrible strikes, national bankruptcy and a massive brain drain, and I decided that I never wanted to see anything like that again. Sadly, however, as we heard in the Budget statement only last week, our economic situation is dire yet again. Strikes have returned, and our international reputation has been hugely diminished. The echo from an earlier time is there for all to hear.
It is true that in the current economic crisis—although too many may have given up—unemployment has not, on the face of it, risen as fast as might have been expected, although of course it remains too high. That is largely due to the flexible arrangements introduced by past Conservative Governments. Nevertheless, 54,000 people still leave the labour market each quarter. Far too often, the reason is that they have simply become discouraged. They have given up on the belief that they will ever find jobs, and have joined the legions who are already receiving the various worklessness benefits dispensed by the Government. Who can blame them, given that over the three months to January the ranks of those who had already been out of work for more than a full year had risen by more than 60,000, to 687,000?
It is truly incredible that, on top of all that, the Government are proposing yet another tax on jobs. The proposal to force employers and employees—including those on below-average incomes—to pay even more in national insurance contributions is a real economic and social misjudgment. We clearly have a jobs crisis on our hands, and the introduction of extra barriers to the creation of jobs makes no sense whatsoever. According to a report issued last week by Policy Exchange, the Treasury’s own economic model suggests that a 2 per cent. rise in national insurance contributions could reduce GDP by a full 2 per cent. over three years. There is no point talking about job creation and then directly hitting the very businesses that could provide those jobs. That is simply crazy, and I therefore welcome the announcement made by my party this morning.
The statistics on start-ups and business failures reveal part of the reason why our trade balance is so bad despite our massive currency depreciation, and why manufacturing has shrunk so dramatically in Britain. Nothing in the Budget really addressed that, and, inevitably, the business community has universally reacted negatively to the Budget overall.
We have been in a recession on a “first in, last out” basis, according to any international comparison. Why has that happened, given that our fiscal stimulus has been smaller than those delivered in the American, French and German economies? Given that our actual budget deficit is so much larger than those of others, given that it costs so much more to insure our national debt, and given that people talk seriously about the threat to the sovereign credit rating of the United Kingdom, why would we not have been able to aid our economy as much as others even if we had chosen to do so? The reason is the Government’s irresponsible spending at a time of strong worldwide growth.
Why was the British economy driven into such a weak state that it was impossible for the Government to take measures that might have helped it? The Bank of England has printed as much money as it dared. With Government spending rising to 53 per cent. of GDP and £200 billion from quantitative easing flowing into our economy, we have two new and unwelcome national records to add to a growing list, both of which reflect the rapidity with which we have descended into the present financial maelstrom. Can anyone imagine circumstances in which, in each of the next two financial years, the Chancellor will be borrowing more money than the entire income tax take, and all that borrowing will be based on highly optimistic growth assumptions and the assumption that the markets will continue to allow us to borrow at historically high levels?
All that was not enough to prevent the United Kingdom from suffering not only the worst recession in the G20, but the worst in living memory. The question that we must ask ourselves is “Why?” The true answer goes back to the year 2002, the year in which the then Chancellor of the Exchequer abandoned the prudent approach of the Administration who had preceded him and let rip. In the years that followed, the budget deficit did not fall below £30 billion annually. In the next five years, right in the middle of what the Governor of the Bank of England was calling the non-inflationary constant expansion or NICE decade, the Government borrowed £176 billion.
The total irresponsibility of consistently leaving a gaping hole in the finances of the country broadly equal to the cost of the entire police and criminal justice system, in one of the most benign economic environments of all time, is the source of our present-day anguish. But then the Chancellor of the Exchequer had abolished the economic cycle, or so he absurdly said. The interest on the stock of debt that has built up is now £42 billion, £2 billion more than the entire defence budget, at a time when we are at war. The Institute for Fiscal Studies calculates that by 2014-15 debt interest payments will climb to £73.8 billion, equal to our defence and transport budgets. The proportion of debt interest payments on total tax revenues will be 10.6 per cent. at that stage.
Under the present Government, we have seen a growth in the divide between different parts of the United Kingdom. Because of a number of funding formula changes, my constituency has experienced a string of NHS budgetary crises. The simple truth is that NHS spend in the Prime Minister’s constituency is materially higher than that in my constituency. There is no rational explanation for that, and it certainly has precious little to do with health outcomes. My constituents have a real sense that the spending differentials relating to public services have little to do with need, but plenty to do with the political colour of the area in question. Rural England has become the poor relation of this urban-obsessed Government.
The Government’s overspending has resulted in a high cost to the British economy. We have fallen from 11th to 23rd in the league of corporation tax competitiveness. We have slipped from fourth to 84th in the World Economic Forum’s global competitiveness report’s rankings for the extent of tax burdens and evasion, and from fourth to 86th in its ranking for regulatory flexibility and efficiency of social programmes. That is part of the reason 1,440 private sector workers lost their jobs each and every day last year, while the number of state employees rose by 126 day in, day out.
The problem goes back to 1998, when the Government introduced the comprehensive spending review. It had been promised by the Prime Minister, but he has since abandoned it. We must ask ourselves why he was willing to continue the practice before the two previous elections but is unwilling to do so on this occasion, as a result of which specific spending impacts remain a mystery. In fact, the Government are so scared of spelling out to the nation the extent of the crisis—so terrified of admitting the true costs of a crisis of their creation—that they are determined to forgo a spending review, and we have had no honesty on the subject.
One of the by-products of the collapse of our reputation abroad is how financial services regulation proposals have arisen in Brussels. For all its imperfections, the City of London is still the jewel in the crown of Europe, in that the range and depth of its financial expertise—and all the ancillary services—are unmatched anywhere else, yet, through neglect and sheer incompetence, this Government have had to witness the growth of EU financial services regulatory proposals that are clearly not in our interest. It is clear that one of the main reasons for that is the catastrophic failure of our tripartite regulatory system.
When the financial crisis broke, the system that was in place was like an animal immobilised in fear by oncoming headlights. I have heard many times from those from other EU countries that Britain simply has no credibility or authority to determine European regulatory architecture because our own has been such a failure, and yet, incredibly, the Government have no plans to reform it. That matches their unwillingness to reform our public sector, where there is both a decline in productivity and a total unwillingness to reform the system.
Especially when reflecting on this Budget and the events that have led up to it, I leave the House on a bittersweet note. Despite the hugely negative view of Parliament and parliamentary colleagues, I for one—I know this sentiment is widely shared—regard it as a huge privilege to have been a Member of the House of Commons and to have represented my constituents in this place. Yet just as I commenced my working life at a time of economic collapse, sadly, I leave this place now with history repeating itself. However, just as before it took a Conservative Government to pull this country back from the abyss, I confidently predict that that will be the case again, some 30 years on.
It is interesting that I am following the hon. Member for West Suffolk (Mr. Spring) because, unlike him, I do not have a rosy picture of what I inherited when I first entered this House in 1997. I had worked as a head teacher for some 20 years, mostly under a Conservative Government, and every single year there was a cut in my budget—a cut in staffing and in the resources being spent on young people. Therefore, although I agree with many of the hon. Gentleman’s comments, I certainly do not believe we should be taking lectures from somebody whose party almost brought the country to its knees before ’97.
It is a pleasure to be speaking for the last time in the House of Commons. It is a pleasure to do so not because I am leaving but because, despite all the difficulties, the last 13 years have been an absolute pleasure for me, as someone who came to the House as a 55-year-old—and who had the satisfaction of defeating Norman Lamont at the ’97 election. I leave having retained the support of the people of Harrogate and Knaresborough for the last three general elections. That support has been remarkable.
It is interesting, too, that I should be leaving Parliament with my constituency having had very little support from this Government or, indeed, previous Governments. It is a place with a huge amount of residual self-support within it, and it is an entrepreneurial community that has bucked many trends, including the current recession, and long may it continue to do so.
My greatest pleasure in my time in this House has come from chairing the Select Committee on Science and Technology for the past five years, and I want to focus on the future of UK science and engineering. Before doing so, however, I want to pay tribute to the other members of my Committee who are standing down at the election and who have served the House extraordinarily well during their time here: the hon. Members for Bolton, South-East (Dr. Iddon), for Bristol, North-West (Dr. Naysmith), for Daventry (Mr. Boswell) and for Eccles (Ian Stewart). I should also, of course, pay tribute to Dr. Ian Gibson who, sadly, stood down before the end of the Parliament.
I was in the Chamber for today’s opening speeches, and I listened to the hon. Member for Meriden (Mrs. Spelman) praising the fact that an incoming Conservative Government would reduce national insurance contributions, paying for that with efficiency savings. I found that interesting because I picked up the following quote from 19 May 2008:
“The Government ‘efficiency drive’ is one of the oldest tricks in the book. The trouble is, it’s nearly always just that – a trick. In fact it’s such a cliché, there was an episode of Yes Minister about it”.
That was written by the right hon. Member for Witney (Mr. Cameron), yet now, of course, that is his party’s policy.
It was interesting that the Chancellor said very little about science in his Budget speech. I welcome the Government’s announcement of a green investment bank, as, I think, does the whole House. I also welcome the creation of technology and innovation centres, and the £25 million of investment they will bring, although it is rather curious that it is felt we need them when we have the Technology Strategy Board, which has been doing extraordinarily good work since it was set up.
The Chancellor stated that he wants to promote research, innovation and enterprise, yet it appears that the research part of that has been rather overlooked in favour of innovation and enterprise. It is all well and good to concentrate on translating our excellent research into commercial activity, but unless we have investment in the basic research itself, we will not have the raw material to develop the economy in the long term. We must guard against the nonsensical idea that fundamental and applied research are in somehow different silos. They are not; they are part of the same continuum, and if we do not invest in both of them, we will lose out.
Despite frequent references to innovation in the Budget, there was no reference to the science and innovation investment framework which, since 2004, has been one of the Government’s most powerful measures in giving a long-term structure to science and innovation. Nor was there any reference to the Government’s target of achieving expenditure on research of 2.5 per cent. of GDP. That seems to have been lost.
In reality, therefore, despite being committed to science and innovation driving the post-recession economy, the Chancellor mentioned that only once, and, tellingly, he spoke about science in the past tense. It was not about the future: the Chancellor told the House that the Government had increased investment in British science by some 88 per cent. in real terms over the past 10 years. That is true, and they should be congratulated: this Government’s commitment to science has surpassed that of any previous Government in my lifetime. However, the reality is that that is now in the past tense.
This Budget should have been about the future, but sadly it was not. In respect of science and engineering, it appears that the job is done. The Government appear to accept that, at best, we have peaked in our efforts and that success is now to limit cuts rather than to make a case for future investment. Frankly, that is at odds with what the Government have been saying over previous years. In February last year, the Chancellor said in his Oxford Romanes lecture that
“the bottom line is that the downturn is no time to slow down our investment in science”.
Yet that is exactly what we now seem to be doing. There is to be £600 million of cuts in science, research and higher education precisely at the time we need to be investing more. Lord Mandelson said last week that we have drawn a line in the sand in respect of protecting our science spend. Sadly, if the height of this nation’s ambition is simply to draw a line and say that we are not going to increase spending in future, we will slip behind.
We should take a look at what our overseas competitors are doing in terms of investment. President Obama said:
“Science is more essential for our prosperity, our security, our health, our environment, and our quality of life than it has ever been before.”
That was not just rhetoric, because he backed it up by pledging $21 billion of investment—the largest commitment to scientific research ever seen in the States—with 5.7 per cent. of the US federal research and development budget to be spent on science by 2011. In Australia, science spending has increased by 25 per cent. In the same week as the UK’s pre-Budget report announced a £6 million cut, the French Government announced a fresh €35 billion investment in the knowledge economy and in the green economy, some €11 billion of which is to be allocated to the top French universities. Countries such as Singapore, China and India are all investing huge sums, but what did we do? The Prime Minister announced a £15 billion economic stimulus package, but £12.5 billion of it went on a 2.5 per cent. VAT cut for people to spend in the shops purely on retail. That was not an investment in the nation—one can imagine what that £12.5 billion could have done if it had been invested in our science base.
In reality, what science is delivering for this country is beyond reproach. The Royal Society produced its major report last week and it was tremendous reading. It mentioned that over the past five years university spin-outs employed 14,000 people and had a turnover of £1.1 billion and that over the past decade university bioscience departments have generated more than 200 companies. Despite what the report says, without considerable investment in our science base the UK will face decades of slow economic decline. The report that my Committee published a week or so ago on the impact of cuts on the science budget concluded that a failure to increase investment in science is inconsistent with the Government’s policy ambition of growth in the sector and undermines their previous good record.
The UK risks losing its brightest academics to countries with demonstrable guaranteed investment for the future, and we cannot allow that to happen. The Council for Science and Technology—the Prime Minister’s own think tank—said:
“The first step is for Government to continue to prioritise research funding against other competing financial pressures”.
Tonight, we have heard about lots of things being protected. The right hon. Member for Skipton and Ripon (Mr. Curry) was right to say that we cannot simply protect things for the sake of protecting them and that there must be a real long-term mission—science clearly can deliver that.
Science is not a stop-go activity: Honda and Ford can suddenly say that they will close their labs for three months because the money is not coming in, but science is not like that. We know that if we close our labs and stop investing, our brightest and best scientists will go elsewhere. Interestingly, the Royal Society’s report said that it was people who actually make the difference. These scientists are the people we need to invest in, but sadly it appears that that will not happen.
The real opportunity, in response to this Budget, was for Her Majesty’s Opposition to say what they would have done about science, but we did not hear a word from them. The hon. Member for Windsor (Adam Afriyie), who represents the Tories on science, said that there would be no extra investment until the current credit crisis was over and we had solved the current recession problems—that is 10 years down the line. If we wait 10 years for that sort of action, our science base will be lost. The Government have had a terrific record so far on investing in science and it is very sad that when the country needs them most, they have suddenly lost heart and failed to make that investment. Perhaps they will have a rethink if the Government are returned to office after the general election, but if anyone takes their place, I hope that they will put science at the heart of what they do.
This Budget bears little relation to the times in which we live and comes from a Government who have run out of time altogether. After the deepest recession in generations, Governments, financial institutions and credit rating agencies around the world are reaching a new consensus that urgent action must be taken to reduce budget deficits. Only recently, the European Commission called for more information on how the Government would go about halving the deficit from 2011. Markets are crying out for the detail of how this will be achieved, and the British people are demanding to know that their children’s futures will not be sacrificed under the burden of this Government’s debt. Yet the Budget is utterly lacking in the action needed to reduce the deficit. The Chancellor was content simply to make projections, when he should have been detailing plans, and to talk vaguely about an end point instead of precisely focusing on how we will get there.
As such, this is a Budget of half measures, damaging delays and illusionary targets. Most worryingly, no effort was made to bridge the credibility gap. The director of the Institute of Directors noted:
“The chancellor’s GDP forecasts are too optimistic and there is still no sign of a credible deficit reduction plan”.
He went on to say that
“we need to hear a lot more from the government on debt reduction.”
Roger Bootle, economic adviser to Deloitte, said:
“The Government has still put to put the flesh on the bones of its plans to cut spending”.
Although the Chancellor has revised his figures, borrowing still stands at more than 10 times its 1997 level. I recognise that unprecedented action has been taken in the form of the fiscal stimulus, but the Government have ignored the unprecedented consequences in the form of drastically higher debt. Indeed, Britain’s national debt will hit an unprecedented £1.3 trillion by 2014-15, which is more than double the level of just a year ago and amounts to more than £50,000 per household. If we do not quickly get a handle on this, our triple A credit rating will be downgraded, investors will lose confidence and the recovery will stall, if not worse. This situation will not just sort itself out, it will not just evaporate and it cannot be left for future Governments or future generations to sort it out; it is our moral duty to begin reducing the deficit now, and that requires action from the Government today.
In the absence of a plan, the main positive in the Budget is that things are not quite as bad as expected: our borrowing is £167 billion, rather than £178 billion; the interest on the debt is slightly lower than expected; and the structural debt is predicted to be 75 per cent. of GDP by 2013-14, rather than 78 per cent. But saying that the situation is “not quite as bad” is not the same as detailing how it will get better. One cannot give a Budget, let alone run an economy, on happenstance and fortunate recalculations alone.
Like the portrait of Dorian Gray, what beauty there is to this Budget is only skin deep. When we look below the surface, we see that the Chancellor utterly ducked making the tough decisions in the best interest of the country and instead chose to penalise the overwhelming majority of hard-working people. There is nothing stealthy about that. Although the Chancellor may coat it in the best intentions, it is plain that he chose tax hikes over public sector cuts. He made the wrong choice again on small businesses. When he should have cut the main rate of corporation tax, he instead chose to extend targeted tax relief for some businesses. That does very little to offset the £4.5 billion cost of the one penny rise in national insurance, which will be detrimental to all businesses. In the absence of any decisions on the deficit, the Chancellor took the wrong decisions on taxation.
Cutting the deficit and getting the economy growing are one of today’s defining issues. No doubt in the coming weeks all parties will be publishing their plans on how to reduce the deficit while promoting growth, but the Budget was the Government’s unique opportunity to reassure the markets, secure the recovery and, most importantly, to help the British people. They have comprehensively failed in every respect. Indeed, it is nonsensical to expect the same Government who caused the problem on the one hand to offer an effective solution on the other. So, we need an alternative. If we do not get a grip now on tackling the continued implications of the economic crisis, it will be superseded by a social crisis that will make the recession look like small change. We must also give people greater opportunity to invest their own money rather than restricting financial freedom through the higher taxes that the Government are so keen on imposing.
I am delighted to take part in the Budget debate. Unlike a number of other hon. Members tonight, I hope that this will not be my valedictory speech, because I am standing at the election and intend to win. I intend to win on a slightly different programme from that on which other hon. Members are putting themselves forward.
I am grateful that normal politics have returned and we are at least having a debate on aspects of the economy and economic growth that have perhaps been avoided for too long. My take on this, of course, is that the Budget falls against the background of a difficult and steep decline in our economic fortunes. The recession is here. Numerically, we might be just about climbing out the other side, but anyone who thinks that we are there and can put the flags out is, I think, completely optimistic and naive.
I go around my local firms—people are always surprised when I say this, but Stroud is a centre of manufacturing and some 25 per cent. of our jobs are in that sector, which is much more than twice the national average and means that Stroud is as close to a valley town in the north-west as it is to the traditional south-west town, so I have some knowledge of manufacturing—and I would make three quick observations. First, the recovery is fragile and any attempt to jam on the brakes in terms of public spending has an impact on not only the public sector but the private sector. The two sectors are so inextricably linked that anything that effectively crunches the public sector will have a completely deleterious effect on the private sector. That matters, because the last thing that we want for those who work in both sectors is a rapid increase in unemployment. As we learned from the 1980s and 1990s, that is not a price worth paying. More particularly, it leads to a cost that we have to pay through unemployment benefit and all the benefits that go with that. That is, I hope, a lesson that the Government have learned.
Some of us take a position that it is wrong to cut, and it is certainly wrong to cut now and to cut some of the things that, sadly, the Front Benchers seem to be too intent on cutting in a race to the bottom. I have been struck by the words of Joseph Stiglitz and our own Danny Blanchflower—I tried to persuade my Government that he would be an excellent new representative of the Bank of England, because he has seen the recession both in terms of the causation and latterly in terms of what we need to do. I am aware that, as colleagues have mentioned, we have a budget deficit and that we have to do something about it, but some of the schemes end up cutting jobs in the public sector—the jobs of those who had no fault whatsoever in the financial collapse. Why should they be made to pay the consequences? Instead, we should be considering some of those vainglorious projects that Governments from my party and from other parties have too often seen as shibboleths but should be anything but. I offer Trident, ID cards, withdrawal from Iraq and Afghanistan as a starting point, if we are going to talk about budget deficit reduction.
As much as I want to see some aspects of public spending reduced, I still think that we overdo and completely exaggerate the impact of the public debt situation. According to all the figures, Britain will remain in the middle of the Group of Seven if we carry through some of the changes that are being mooted. As I have said, I approach the matter from a completely different perspective. I think the most fascinating figures of all, which form a backcloth to all this, are those that show that until the 1970s, we spent roughly 5 per cent. per annum on gross domestic capital investment in the public sector, which went down to 0.9 per cent. in the ’80s and ’90s and which this Government have brought back up to 3.9 per cent. If we include the private finance initiatives—I have my disagreements with them—the figure is substantially higher than that. I am proud of that. We have rebuilt schools and health facilities, and we have put money into the social infrastructure of our country. Why should we destroy all that because of other people’s faults?
There is a way out of this recession. I make no apology for saying that I am an advocate of the green new deal. Let me make it very clear that that is not the Green party new deal, because many of the people who contributed to it are quite well-known Labour party people, as well as those of no party. Let me outline in the time that I have left some of the ways in which I think we can grow sensibly, sustainably and even morally out of the problems that we made for ourselves. Of course, I am talking about investment in energy efficiency and microgeneration, the creation of thousands of green jobs, a windfall tax on the profits of the oil and gas companies, developing financial incentives for green investment and reducing energy use and changes to the UK’s financial system, including a new way in which we calculate interest rates to advantage green investment in particular. We need to reconsider how we have treated financial institutions. I think that the Government are right to step in and help, if not to take over a number of the financial institutions, but I am exceedingly wary of having a Dutch auction in getting rid of them.
Last but not least, there should be much more transparency in the way in which we demand financial reporting and a clamping down on tax havens. Of course, the one great cheer that came from the Government Benches when the Budget was announced was the announcement on what is now being called the “Belize gambit”, whereby this Government, for the first time, have begun to get serious about tax evasion, tax avoidance, tax loopholes and tax havens. At face value, looking at the notion of tax information exchange agreements, we now have a sensible way forward. Sadly, there are problems with TIEAs. They are termed in a pretty amorphous way, and they are not easy to operate because it takes two to tango and although the British Government might be willing to disclose certain information, that does not necessarily mean that those with whom we might wish to tango will give us the information that we want.
I hope that my right hon. Friend the Financial Secretary to the Treasury will say something about how we are going to raise billions of pounds from those who have made little or no contribution. It is about time that they made a proper contribution, but we need to clarify how TIEAs will function in practice. That will rely on issues to do with the identity of the person under investigation or examination; what information is sought; the tax purpose for which it is sought; the grounds for believing that the information requested is held within the jurisdiction of which a request is made; and—last but not least—to the extent known, the name and address of any person believed to be in possession of the requested information. So, it is a question of knowing who has the money and for what purpose, and then making sure that they are willing to disclose the true financial picture.
We are not talking about going into foreign jurisdictions. We are talking about people who, it is claimed, are either domiciled or, to some extent, resident in this country, but who exploit tax havens far too readily and easily. There is a history of TIEAs not working terribly well, so I hope that my right hon. Friend will give me some good news about how we will operate a much more robust and rigorous attempt to drive down what many of us feel are the worst excesses of capitalism, whereby people do not pay anything like the right rate of tax in this country, even though they derive many benefits from this country. This is about fairness, justice and the reality of the world today.
If my right hon. Friend wants any help, he will be pleased to know that I am presenting a Bill tomorrow—the tax and financial transparency Bill—that I hope the Government will take up. It looks very clearly at how they could take forward the measures that I have been talking about, and I hope that he will come and listen to me present the Bill tomorrow. It contains just the sort of thing that the Government are looking to find out about. It would release billions of pounds to the Exchequer from people who should be the most liable for the problems that they cause.
To conclude, I very much hope for a proper debate not only on the Budget, but on the way in which we have got ourselves into an unholy mess, because of the way in which the financial sector has behaved. Let me give an example to show how serious the situation is. Today, when I visited a company that will remain nameless, it was made clear to me that it was in a parlous state, but that it had managed to see things through because of its ingenuity. That made me think about how interrelationships with the financial markets impact on ordinary manufacturing companies in this country. Two things had really hit that company. First, it had invested heavily in Iceland, from which it learned the awful lesson that those who pay higher rates of interest are not necessarily able, ultimately, to defend what they are doing. The second thing was the way in which foreign banks have shut down loans virtually overnight. That is why lending through British banks—
Order. I am afraid that the hon. Gentleman’s time is up.
It is a pleasure to follow the hon. Member for Stroud (Mr. Drew), and it is a slight shame that he was cut short by Mr. Speaker’s instruction, given the paucity of Members on his side of the Chamber who are willing to support the Minister in the debate.
Look at them all!
I can count only one, including the hon. Member for Stroud.
There are not many on your side either.
Thank you, Madam Deputy Speaker. I was going to say that it is a pleasure to participate in a debate in which so many of the Members who are retiring from the House have spoken. I am sure that the hon. Member for Stroud will not be voluntarily retiring. If he did so involuntarily, the House would lose one of its more regular attenders, especially of these end-of-evening sittings, which would be a disappointment.
I would like to raise a couple of macro-economic points before focusing on specific ways in which the Budget creates particular challenges for companies operating through the recession. First, however, I shall focus on the state of the economy. The hon. Member for Stroud was quite right to refer to the economic mess in which the country finds itself, but he and other Labour Members have not acknowledged that the financial services community’s role in the cause of the original economic crisis now bears little relation to the state of the public finances. The financial services crisis of two years ago that resulted in the Government having to bail out the banks is now part of this country’s economic history, but the structural deficit with which we have to deal, which will be the Government’s legacy, has little direct relationship to that crisis. Although there are clearly indirect consequences, the structural deficit has ballooned under this Government, irrespective of the bail-out that funded the resurrection of the banks nearly two years ago. Labour Members do not acknowledge that fact, but it needs to be acknowledged so that we can recognise the measures that are required to start to bring the deficit down.
Throughout their Budget projections, the Government rely on their measure of economic growth, but I would like the House to consider the plausibility of their projection. The Treasury has a track record of forecasting economic growth that any schoolboy economist would find somewhat embarrassing. It has rarely, if ever, got it right, and it has tended to veer on the side of optimism in each Budget presentation that I have heard while I have been a Member—last week’s was no exception. The Chancellor admitted that economic growth was likely to come down, but only by 0.25 per cent. The reduction was from 3.5 per cent. to somewhere between 3 and 3.5 per cent., so if we are charitable and take the average, it looks like a reduction to 3.25 per cent. However, that projection remains above all external forecasts, or the average of them, and above the forecasts for all other major industrialised economies. It is also substantially above this country’s trend growth during the Government’s tenure in charge of the economy, and above trend growth for the 31-year period of this Government and their predecessor. It is surprising that the Government base the largest component of their recovery programme on an estimated increase in this country’s activity for the next four years, and specifically for the coming year, that is significantly above their track record and what other forecasters think is likely.
I am not trying to talk down the strength of the economy and I would, of course, like the economy to grow and rebound rapidly. I merely question the validity of the Government’s forecasting methodology, which has also been questioned by the National Audit Office in its review of the figures.
Will the hon. Gentleman reflect on the fact that although our forecast in last year’s Budget for the coming financial year was criticised in much the terms that he is using today, pretty much everyone now agrees that last year’s forecast of 1 to 1.5 per cent. in the coming financial year will be right?
We will have to see, will we not? That is another forecast. I concede that the Treasury has had the benefit of a slight upgrade to the figures for the last quarter of 2009 but, looking forward, I would not like to place much confidence in what it is saying.
The situation raises questions whether the public debt will come down in the manner that the Government anticipate. We are looking at £167 billion of debt in the current year. That is a very difficult figure for ordinary people—and Members of the House—to get their minds around. It means, if my maths is correct, that the Government are borrowing £317,723 per minute of every day and every night this year. That figure is substantially greater than the average price of a home in this country, and when I give that figure on the doorsteps in my constituency, people find it quite astonishing that we could be borrowing at that level. Of course, it is completely unsustainable and that borrowing must come down.
The Government have come up with very few plans to get that debt under control. That will wait until we have had a general election. Whichever party is in power thereafter will have to take the tough decisions that are necessary if we are to get a grip on the public debt and get the economy moving once more.
The two specific points that I wish to make relate to Budget proposals where the Government have been short on detail, and which they have not described with enough frankness. The first has to do with the freezing of personal income tax allowances. In his Budget speech, the Chancellor did not make a single mention of the measure that will affect more people than any other—freezing personal allowances at £6,475. Some 30 million people will be affected by that. With inflation having hit the somewhat giddy and unedifying heights of 3.7 per cent., there is direct erosion on the value of real, take-home pay for those in work. For all those taxpayers, freezing personal allowances will have a significant impact on their disposable income, yet the measure was not mentioned by the Chancellor.
There was another matter that the Chancellor failed to mention. When referring to fuel duty increases, he said with some pleasure that he would defer the escalator for this coming year, so that the rises will be made in three, equal tranches, and said also that he was therefore reducing the increase scheduled for April to 1p per litre. What he did not disclose is that he will increase duty in April not only by the equivalent of 1p through the escalator, but by a further 1.35p through the elimination of the biofuels duty rebate. When the VAT element is included, that means that petrol prices will go up by a further 2.35 per cent. from the beginning of next week. That, of course, will affect every motorist—all those who rely on vehicles to drive themselves around. As the costs of motoring go up, there will be knock-on effects throughout the economy on the delivery of goods and on commerce. That was more sleight of hand from the Chancellor, and it was regrettable.
The reason why I focus on fuel is the fact that, as my hon. Friend the Member for Meriden (Mrs. Spelman) said, since the Government introduced the business rates revaluation, I have been campaigning actively to try to correct some of the anomalies that are clearly apparent in the revaluation methodology that the Government have used—anomalies that they have sought to blame on the assiduity of the Valuation Office Agency. In particular, I have been looking at the retail of petrol at filling stations. One third of the 9,000-odd forecourts trading in this country face an increase in their business rateable value of more than 50 per cent., and 1,500 of them are looking at their rateable values at least doubling. Many of them will face the prospect of ceasing to sell fuel when the increases come through in full, because that will be the logical thing for them to do, economically. Most of them operate with very low margins on the sale of their fuel.
The Government seem to think that because fuel stems from oil and the oil industry is making significant profits, that must flow through the vertical chain and down to the petrol pump. However, I must tell the Ministers present, as I have told other Ministers on the Treasury Bench, that such thinking betrays a lack of understanding of how that market works. As a result, the VOA itself is telling fuel station operators in my constituency that it would be in their economic interest to cease selling fuel, because if they do so the rateable value of the convenience store on their filling station site will then be calculated on the same basis as other retail premises—that is, on the square footage that they occupy, rather than on their turnover. Some operators would see a tenfold reduction in their rates bills.
That increase by the VOA is completely unjustifiable, and I urge Ministers at this very late stage—bills are being sent out with effect from 1 April—to rethink the measure and review the methodology. I also urge that on my Front-Bench colleagues, and I am hopeful that a new Government will look favourably on it. We have already heard my hon. Friend the Member for Meriden say that we intend to review the revaluation, and I hope that such a rethink will take place as a consequence of that review.
While I am on business rates revaluations, I cannot finish without bemoaning the fact that many pubs in rural constituencies face colossal increases. The Boyne Arms in my constituency is looking at an almost fivefold increase—from £4,000 to £19,000, with no change in circumstances other than that flawed revaluation methodology.