Before I call the Chancellor of the Exchequer, it may be convenient to remind hon. Members that copies of the Budget resolutions will be available to them in the Vote Office at the end of the Chancellor’s speech. It may be also appropriate to remind Members that it is not the norm to intervene either on the Chancellor of the Exchequer or on the Leader of the Opposition.

Last year’s emergency Budget was about rescuing the nation’s finances and paying for the mistakes of the past. Today’s Budget is about reforming the nation’s economy, so that we have enduring growth and jobs in the future; and it is about doing what we can to help families with the cost of living and the high price of oil.

We understand how difficult it is for so many people across our country right now. That we are able now to set off on the route from rescue to reform, and from reform to recovery, is because of the difficult decisions we have already taken.

Those decisions have brought economic stability, and without stability there can be no sustainable growth and no new jobs. Without stability, Governments have to keep coming back to their citizens for more—more taxes and more spending cuts. In Britain, we do not have to do that today.

We have inherited a record budget deficit, but we have set out a credible, comprehensive plan to deal with it. We have had to undertake difficult measures, but we have already asked the British people for what is needed, and today we do not need to ask for more.

So this is not a tax-raising Budget. But nor can we afford a giveaway. Taken together, the measures I will announce today are fiscally neutral across the period. This is a Budget built on sound money; a Budget that encourages enterprise; that supports exports, manufacturing and investment; that is based on robust independent figures: a Budget for making things, not for making things up. Britain has a plan, and we are sticking to it.

In recent months, many other countries have seen their ratings downgraded and their borrowing costs soar. Our country’s fiscal plans have been strongly endorsed by the International Monetary Fund, by the European Commission, by the OECD, and by every reputable business body in Britain. For anyone who questions whether this matters in the real world, to real businesses and families, they should consider this. Market interest rates in Greece are at 12.5%, in Ireland they are close to 10%, and in Portugal and Spain they are 7% and 5%. Today our country’s market interest rates have fallen to 3.6%. We have a higher deficit than Portugal, Greece and Spain, but we have virtually the same interest rates as Germany. This is our powerful monetary stimulus to our recovering economy. Stability, credibility, lower interest rates—that is what we have achieved.

But stability is not enough. So today, in addition to the Red Book, we are publishing “The Plan for Growth”. For this Budget confronts the hard truth that has been ignored for too long. Britain has lost ground in the world’s economy and needs to catch up. In the last decade, other nations have reduced their business tax rates, removed barriers to enterprise, improved education systems, reformed welfare systems and increased exports. Sadly, the reverse has happened in Britain. We gambled on a debt-fuelled model of growth that failed. With the state now accounting for almost half of all income, we simply cannot afford to go on like this. Britain has to earn its way in the modern world.

I turn to the forecasts. Last November, I told the House that the recovery was going to be more challenging than recoveries from recessions in recent decades. That is inevitable when we have had the sharpest fall in output since the 1930s, the highest budget deficit in our peacetime, and the largest banking crisis in our entire history. But I said that thanks to the course we have set, the independent forecast was for our economy to grow in each of the next five years, for unemployment to peak this year and then fall, and for employment to rise through this Parliament. That remains the case in the independent forecast we published today.

Those forecasts have been drawn up by the Office for Budget Responsibility. This important change has transformed the way Budgets are put together. So instead of Chancellors fixing the figures to fit the Budget, they now have to fix the Budget to fit the figures. Yesterday, the legislation to put the Office for Budget Responsibility on a permanent, statutory and independent footing received Royal Assent. I am sure that the whole House will want to thank Robert Chote, Steve Nickell, Graham Parker and their whole staff for the very professional job they are doing.

Let me start with their growth forecasts. It has been known for Chancellors in recent years to rattle these off at great speed in the hope that no one will keep up or notice. I will not do that. Although average quarterly growth this year is set to be higher than was previously forecast, the annual forecast for 2011 has been revised to 1.7%. This the OBR attributes specifically to the weaker-than-expected final quarter of last year, the rise in world commodity prices, and the higher-than-expected inflation in the UK. However, the OBR points out that the effect, in its words,

“creates scope for slightly stronger growth in later years”

than previously forecast. So while it expects real GDP growth of 2.5% next year, it forecasts it will then rise to 2.9% in 2013; to 2.9% in 2014; followed by 2.8% in 2015.

The European Commission has also this month published its growth forecasts. These show that the UK is forecast to grow more strongly in the coming year than Spain, Italy, France, the average for the eurozone and the average for the European Union.

All countries have to steer a course between two central risks: the risk of a European sovereign debt crisis on the one hand, and, on the other, the risk that comes from rising global commodity prices. Food prices around the world have increased by nearly 50% since the beginning of last year. Oil has risen by 35% in just five months. That is why the OBR expects inflation to remain between 4% and 5% for most of this year, before dropping to 2.5% next year and then to 2% in two years’ time.

I have today written to the Governor of the Bank of England to confirm that the inflation target for the Monetary Policy Committee will remain at 2%, as measured by the consumer prices index. I can also confirm that the asset purchase facility set up by my predecessor will remain in place.

One cause of current instability is the conflict inside Libya. The whole House will praise the courage and professionalism of our armed forces, who are trying to bring that conflict to an end and save lives. I can confirm that the additional cost of military operations will be met entirely from the Treasury reserve.

The House will also know that last week I authorised for the UK to take part in a co-ordinated G7 currency intervention in support of the Japanese yen. Our hearts go out to the Japanese people, and this is one way in which Britain can help. It is still too early to say what lasting impacts the earthquake and tsunami will have on the world economy. But this is an opportunity for me to report that we had already decided to rebuild the UK’s foreign currency reserves, which are at an historically low level. We will purchase a range of high-quality assets, although unfortunately, with the price of gold now at a record high, we will not be able to replenish the gold reserves sold at a record low.

I turn now to the fiscal forecasts for our debt and deficit. Borrowing to fund the deficit this year is now set to come in below target at £146 billion. It will then fall to £122 billion next year, then £101 billion the year after, then £70 billion in 2013-14, then £46 billion, and then £29 billion by 2015-16. Inflation has had its impact, but crucially, the OBR assesses that next year’s structural deficit remains the same as forecast last November. In other words, the size of the task of repairing Britain’s finances is unchanged. Our national debt, as a share of our national income, is forecast to be 60% this year, before peaking at 71%, and then starting to fall, reaching 69% by the end of the period.

This leads me to one of the central tasks of the OBR: that of assessing the Government’s performance against their stated Budget goals in an open and independent way, so that we avoid repeating the disastrous experience of the so-called golden rule. Our fiscal mandate is to achieve a cyclically adjusted current balance by the end of the rolling five-year forecast period, which is currently 2015-16. We have supplemented that with a fixed target for debt, so that debt should be falling as a proportion of GDP by the year 2015-16 as well. I can report to the House that the OBR confirms that on its central forecast we will meet both these objectives—a balanced structural current budget and falling national debt—by the end of the Parliament. Indeed, the forecast remains that we will meet both these objectives one year earlier.

I said at the start that stability and fiscal responsibility were not enough. Our country has to compete if we are going to create growth and jobs. Britain has fallen behind many others in the world in the last decade. We have dropped from fourth to 12th place in the world global competitiveness league, and growth in our country has become so unbalanced. Consider this staggering truth: during the boom years before the bust, private sector employment actually fell in a region as important as the west midlands.

So today’s Budget is an urgent call for action for Britain. Private sector growth must take the place of Government deficits. Prosperity must be shared across all parts of the UK. Yes, we want the City of London to remain the world’s leading centre for financial services, but we should resolve that the rest of the country becomes a world leader in advanced manufacturing, life sciences, creative industries, business services, green energy and so much more. This is our vision for growth. Difficult decisions and major reforms are needed to make it happen, but the alternative is to accept Britain’s economic decline and a continuing fall in living standards for our population, and that is not an alternative anyone in this House should be prepared to accept.

This Budget sets for Britain these four economic ambitions: that Britain should have the most competitive tax system in the G20; be the best place in Europe to start, finance and grow a business; be a more balanced economy, by encouraging exports and investment; and have a more educated work force who are the most flexible in Europe. Let me now set out the measures that will achieve these ambitions.

First, on taxation, here’s the truth: Britain used to have the third lowest corporate tax rate in Europe. It now has the sixth highest. At the same time, our tax code has become so complex that it recently overtook India’s to become the longest in the world. From Adam Smith to Nigel Lawson, people have set out the principles of good taxation, and this Government declare these principles again for the modern age. Our taxes should be efficient and support growth. They should be certain and predictable. They should be simple to understand and easy to comply with, and our tax system should be fair, reward work, support aspiration and ask the most from those who can most afford the most.

In July last year, we set up the Office of Tax Simplification to provide independent advice on how to reduce the complexity of the existing system. I want to thank Michael Jack and John Whiting for the work that they have done. Following their recommendations, I can announce today that this Budget abolishes no fewer than 43 complex reliefs. This includes the millennium gift aid system, which we will not need for another 989 years. However, I have decided not to follow their advice to abolish the community investment tax relief, and instead I encourage people to take it up. But this Budget, at a stroke, removes over 100 pages from our tax code and begins the work of simplification.

In the last Budget, I announced that from next month welfare payments and public service pensions would be uprated in line with the consumer prices index. I said at the time that we should also consider uprating the tax system in the same way, so from April 2012 the default indexation assumption for direct taxes will move to CPI. There will be protection through this Parliament for those eligible for age-related, married couple and blind person’s allowances, and for employers’ national insurance contributions. The increase in the personal tax allowance already announced will vastly exceed anything lost through employee NICs uprating, and that is even before any further increases in that allowance. This will bring coherence to the tax and benefit system, and we look to moving indirect taxes on to the same basis when the fiscal position allows.

But there is one further step that we want to undertake that will dramatically simplify the tax system. For decades, we have operated income tax and national insurance as two fundamentally different taxes and forced businesses large and small to operate two completely different systems of administration, with two different periods and bases of charge. The resulting anomalies are legion, and it imposes totally unnecessary costs and complexity on employers and costs the taxpayer in the extra burden that it places on Her Majesty’s Revenue and Customs. So I am announcing today that the Government will consult on merging the operation of national insurance and income tax.

I am not proposing that we extend national insurance to pensioners, or to other forms of income, or that we abolish the contributory principle. Our purpose is not to increase taxes; it is to simplify them, and this huge task will therefore require a great deal of consultation and take a number of years to complete, but it is time we took this historic step to simplify dramatically our tax system and make it fit for the modern age.

Making our tax system more competitive is another challenge for the times we live in. Again, let us face facts. Other countries are quite deliberately making their tax systems more competitive and attracting multinational companies away from the United Kingdom. We could stand there and do nothing, but increasing the living standards of every hard-pressed family in the country depends on keeping companies, and the jobs, the investment and the tax revenues that come with them, here in the United Kingdom. So we will go ahead with the highly competitive tax rate on profits derived from patents in industries like pharmaceuticals; we will fundamentally reform the complex rules for controlled foreign companies and make them more territorial; and we will introduce new rules that effectively apply an ultra-competitive 5.75% rate on overseas financing income. This will give us a far more attractive system than France, America or Germany. I want Britain to be the place international businesses go to, not the place that they leave.

But today I want to do even more, so I can announce that from April this year, corporation tax will be reduced not just by the 1% I previously announced, but by 2%, and it will continue to fall by 1% in each of the following three years, taking our corporate tax rate right down to 23%—16 % lower than America, 11% lower than France and 7% lower than Germany—the lowest corporation tax in the G7. Let it be heard clearly around the world, from Shanghai to Seattle and from Stuttgart to Sao Paolo: Britain is open for business.

To ensure that this is not a net tax cut for banks, I am adjusting the bank levy rate next year to offset its effect. In each and every year of this Parliament, our permanent bank levy raises more in any one year than the last Parliament’s bank taxes.

The most competitive tax system in the G20 is the first of our economic ambitions. The second is that Britain becomes the best place in Europe to start, finance and grow a business. Again, let us face facts: we are not that today. In the last decade, countries such as Germany, Denmark, Finland and the Netherlands have all overtaken us in the international rankings of competitiveness. That is not surprising when the total cost of regulation imposed on business since 1998 is almost £90 billion a year.

So in today’s plan for growth, we take action: £350 million worth of specific regulations will go, including the costly dual discrimination rules in the Equality Act 2010. Lord Young’s recommendations on health and safety laws will be implemented in full; the no-win, no-fee legal services that prey on employers will be restricted; existing regulation will be scrutinised in a public consultation process; and from April, we are going to impose a moratorium exempting all businesses employing fewer than 10 people, and all genuine start-ups, from new domestic regulation for the next three years. We will also take this fight against regulation to Brussels, where this week my right hon. Friend the Prime Minister will be recruiting other European allies to ensure that our continent does not price itself out of the world.

We are also going to tackle what every Government have identified as a chronic obstacle to economic growth in Britain, and what no Government have done anything about: the planning system. Councils are spending 13% more in real terms on planning permissions than they did five years ago, despite the fact that applications have fallen by a third. Yes, local communities should have a greater say in planning, but from today, we will expect all bodies involved in planning decisions to prioritise growth and jobs, and we will introduce a new presumption in favour of sustainable development, so that the default answer to development is yes. We will retain existing controls on green belt, but we will remove the nationally imposed targets on the use of previously developed land. We will also allow certain use class changes, introduce time limits on applications and pilot, for the first time ever, auctions of planning permission on land.

Cumbersome planning rules and bad regulation stand in the way of new jobs, and so too does the shortage of finance. Small businesses are the innocent victims of the credit crunch, and that is why we have agreed with the banks a 15% increase in the availability of credit to small businesses. But the lack of start-up capital has long been a problem in the British economy. Too often we have great ideas in Britain, but it is other countries that exploit them, so today I announce sweeping changes to improve the generosity, the simplicity and the reach of the enterprise investment scheme. From April this year, income tax relief will increase from 20% to 30%. Next year, we will double the amount that any individual can invest through EIS, increase the size of company that can qualify for investment, and raise the limit on the amount that can be invested in a company by 400%.

Next week, my right hon. Friends the Prime Minister and the Business Secretary will launch “Start-up Britain”, a new campaign by entrepreneurs for entrepreneurs, supported by many of Britain’s most successful firms, that will help people to start and grow businesses. Today we can add to that help. From 6 April this year, I am doubling the size of entrepreneur’s relief to £10 million. Let Britain be the home of enterprise in an age when people can invest all over the world.

It is time too that we ended the uncertainty around the taxation of non-domiciles. They are welcome in this country, but I have always believed that they should pay something in return for their special tax status. The last Government followed our advice and introduced a £30,000 charge for those who had lived here for seven years. I think we can ask more from those who have been here even longer, so I am increasing the charge to £50,000 for non-doms who have been in the country for 12 years. This will raise over £200 million in the coming years but, in return, and to encourage investment in our country, I am removing the tax charge when non-doms remit foreign income or capital gains to the UK for the purpose of investing in a British business, and we will introduce a statutory residence test. To end the speculation and uncertainty, and to provide stability, I confirm that I will be making no further changes to the taxation of non-domiciles in this Parliament.

In an age when business and capital and people can increasingly move anywhere, high tax rates can do real damage. That is true for high corporate tax rates, and it is true for high personal tax rates too. They crush enterprise, undermine aspiration and often undermine tax revenues as people avoid them. I am clear that the 50% tax rate would do lasting damage to our economy if it were to become permanent. That is why I regard it as a temporary measure, just as my Labour predecessor, the right hon. Member for Edinburgh South West (Mr Darling), did when he introduced it. I have said before that now would not be the right time to remove it when we are asking others in our society on much lower incomes to make sacrifices, for we are all in this together, but I think it is sensible to see how much revenue it actually raises. I have asked Her Majesty’s Revenue and Customs—[Interruption.] I have asked HMRC to find out the truth when the self-assessment forms start coming in.

Of course, taxation must be fair. It is right that the wealthiest should pay more than others, and it is especially wrong when they avoid taxes. I will have much more to say later on in this speech on tax avoidance and evasion, but there is one area that needs extra work in the coming months—the taxation of very high value property, where evasion and avoidance are widespread and some of the wealthiest are not paying their fair share. So as well as reviewing revenues from the 50p tax rate, we will also be redoubling our efforts to find ways of ensuring that owners of high value property cannot avoid paying their fair share.

Help for small businesses, a boost for enterprise, reforms to planning, and cuts to existing regulations and a moratorium on new ones, are all part of our ambition to make Britain the best place in Europe to start, grow and finance a business.

Our third ambition is to encourage investment and exports as a route to a more balanced economy for Britain. In “The Plan for Growth” that we publish today, we set out specific measures we can take to help a wide range of businesses. In life sciences, we will radically reduce the time it takes to get approval for clinical trials; in our digital and creative industries, we will improve the intellectual property regime; and in our professional and business services—one of our unsung success stories—we will reform our burdensome money laundering regime now, promote the UK as the global centre of legal arbitration, and launch a new, trusted business visa service.

Our retail sector includes many small shopkeepers who are anxious about the impact of coming business rate rises. The last Government planned that the current rate relief holiday for small businesses should end in October this year. I do not think that that would be right, so I can announce that, at a cost to the Exchequer of £370 million, I will extend the rate holiday for small businesses for another year to October 2012.

We will also take action to help the construction industry. Stamp duty will now be levied on the mean value of the houses being purchased within a portfolio, not the bulk cost, and real estate investment trusts will be simplified to encourage home building. But average mortgage deposits are close to 30%, and this puts home ownership beyond the reach of many, many families. This is not fair.

So I can announce today that, from the proceeds of this year’s bank levy, we will fund a £250 million commitment to first-time buyers. A new shared equity scheme, First Buy, will be available for first-time buyers who want to purchase a newly built property, but who cannot afford the high deposits. This will help 10,000 families get on the housing ladder for the first time. The previous Government intended to end the temporary changes to the support for mortgage interest scheme next January. Instead, we will extend them for another year. That will reduce mortgage arrears for around 100,000 out-of-work home owners.

Manufacturing is crucial to the rebalancing of our economy. Over the last decade, the share of the economy accounted for by financial services increased by over two thirds, while manufacturing’s share fell by almost a half. Under this Government, manufacturing is now growing at a record rate, and 14,000 more jobs have been created in the sector in the last three months. To help that continue, the Government are announcing plans today to make our export promotion more entrepreneurial and create new export credits to help smaller businesses; launch Britain’s first technology and innovation centre for high-value manufacturing; and fund a further nine new university centres for innovative manufacturing.

Science is one area where Britain already has an advantage over many other countries, and it is central to our future as a place to create businesses. That is one reason why I protected the science budget from cuts last year. I can tell the House that I have been able to find—again from this year’s extra bank levy—an additional £100 million to invest in new science facilities at the Babraham research campus in Cambridge, the Norwich research park for environmental and life sciences, the International Space Innovation Centre at Harwell, and the national science and innovation campus at Daresbury.

But if Britain is really to become a home of innovation, we want research and development to take place not just in our great universities, but in our smaller businesses too. One of our greatest high-tech innovators, James Dyson, has urged me to increase the support that they get. I have listened to him, and have gone even further than he recommends. From April this year, the small companies research and development tax credit will rise to 200%, and from next year it will rise again, to 225%.

We also want to encourage manufacturers to invest in the latest machinery and technology, so I propose to double the limit on capital allowances for short-life assets from four to eight years. We will also extend the allowance for the renovation of business premises in assisted areas—which was due to expire next year—for a further five years. Supporting the private sector across the whole of the United Kingdom is central to our economic ambitions.

Savings in the Department for Transport mean that we can also afford £200 million of additional investment in our regional railways. We will go ahead with the £85 million Ordsall chord scheme, linking Manchester’s Victoria and Piccadilly stations and significantly reducing journey times between Liverpool and Leeds. We can commit—I know that hon. Members have been calling for this, as we have just been hearing—to the Swindon-to-Kemble redoubling scheme, which will complement our electrification of the Great Western main line to Wales. We can also find another £100 million to help councils repair the winter potholes on our roads.

Helping all parts of our country to succeed is also the purpose behind the new enterprise zones that we launch today. There have been reports that we would be able to fund 10 new enterprise zones. Today I confirm that instead we will fund 21 new enterprise zones. Businesses will get up to a 100% discount on rates, new superfast broadband and the potential to use enhanced capital allowances in zones where there is a strong focus on manufacturing. In return for radically reduced planning restrictions, we will let local authorities keep all business rate growth in their zones for a period of at least 25 years to spend on development priorities.

The first 10 enterprise zones will be in urban areas of highest need, but also the highest potential. They will be in Birmingham and Solihull, Leeds, Liverpool, Greater Manchester, the Tees valley, Tyneside, the Bristol area, the black country, Derbyshire and Nottinghamshire, and Sheffield. Tomorrow, my right hon. Friends the Prime Minister and the Deputy Prime Minister will announce some of the specific locations of the new enterprise zones. I can confirm that a further zone will be located in London, where I have asked the Mayor to choose a suitable site. A further 10 enterprise zones will be announced in the summer. I want local enterprise partnerships all over the country to come forward with proposals.

Responsibilities are devolved in Northern Ireland, Scotland and Wales, so we will work with the Administrations so that they, too, can enjoy the benefits of this policy. In Northern Ireland, the Treasury will publish a paper tomorrow on how we help its private sector to grow. To deal with the unique issues posed by the Irish Republic’s business tax regime, the paper will consider the case for Northern Ireland having an even lower rate of corporation tax than the rest of the UK. I look forward to engaging with all parties there on the way forward.

There is one other issue that affects a specific part of our country, and that is the very high water bills for customers in the south-west, because of the geography there, particularly for those on lower incomes. We will come forward with public money to help bring those bills down.

Let me turn now to the opportunity presented by the green energy revolution and our determination to be the greenest Government ever. We have already announced our ambitious renewable heat incentive and support for low-emission cars, and changes to the company car tax regime today will increase that support. Our green deal to reduce energy bills for homes will be introduced next year. I can confirm that we will act to incentivise and encourage its take-up. We are pioneering new carbon capture and storage technology, with £1 billion already provided. Future projects will be funded out of general spending rather than a complex new levy, but we need to take two further, bold steps if we are to make the green energy revolution a reality.

First, as I have long argued, investment in green energy will never be certain unless we bring some stability to the price of carbon. Today we become the first country in the world to introduce a carbon price floor for the power sector. The price will start at around £16 per tonne of carbon dioxide in 2013, and move to a target price of £30 per tonne in 2020. That will provide the incentive for billions of pounds of new investment in our dilapidated energy infrastructure. To ensure that customers get a fair deal, we will closely follow developments in the energy sector in the light of the Ofgem review published on Monday. At the same time, I am extending the climate change agreements to 2023 and increasing the climate change levy discount on electricity for those who sign up from 65% to 80% from April 2013. This will help our most energy-intensive industries. Green taxes will increase as a proportion of total tax revenues, as we promised.

The second bold step that we take today is the creation of the green investment bank, to support low-carbon investment where the returns are too long term or too risky for the market. We have already committed £1 billion to the bank; today I commit £2 billion more, funded from asset sales and underwritten by the Treasury. This will enable the green investment bank to start operation one year earlier than planned, in 2012. It will leverage an additional £15 billion of private sector investment in green projects over this Parliament. I can also confirm today that from 2015-16, and subject to our overall debt target being met, we will allow the green investment bank to borrow and invest in a better future.

So, a green investment bank with its resources trebled; a new carbon price floor; new capital allowances for manufacturing; new support for home builders and first-time buyers; an economy where growth happens across the country and across all sectors—that is our ambition.

That leads me to our fourth ambition: to create a more educated work force who are the most flexible in Europe. Britain’s working-age population has lower skills than the populations of America, Germany and France, and that is probably the biggest problem facing our economy in the future. That is why we are undertaking far-reaching reform of our schools and universities, and funding a pupil premium and additional early-years support for our most disadvantaged children in poverty. It is also why we commissioned Alison Wolf’s impressive report.

The Government are committed to funding new university technical colleges, which will provide 11 to 19-year-olds with vocational training that is among the best in the world. The curriculum is being developed in close co-ordination with both local universities and leading employers. I commend Ken Baker on getting the new colleges up and running in our manufacturing heartlands. To date, the Government have announced that we will fund 12 new university technical colleges. I can tell the House that we will provide funding to double that number to at least 24.

We will also deal directly with the challenge of youth unemployment that has been on a steady rise for the last seven years, and give people direct contact with the workplace. Instead of 20,000 young people benefiting from our new work experience scheme, as we planned, we will increase that number fivefold to 100,000 places over the next two years. In Austria, Germany and Switzerland, around one in four employers offer apprenticeships. In England fewer than one in 10 do. That has got to change, after 10 years of a Labour Government.

Last year, my hon. Friend the Skills Minister published a skills strategy and confirmed the largest-ever expansion in adult apprenticeships. Today, I am funding another 40,000 apprenticeships for young unemployed people. There are currently only 1,500 higher level apprenticeships across the whole of England. This Budget provides for 10,000 more. That brings a total of 250,000 more apprenticeships over the next four years as a result of this Government’s policies—a Government backing what works: real training, secure jobs and more growth.

We should not talk about those at the start of their working life without also talking about those who are coming to the end of their working lives and looking to retirement. I am very proud that it was this coalition Government who took the decision to re-link the basic state pension to earnings and guarantee its increase through a triple lock. This would simply not have been affordable, as Adair Turner’s report argued, without an increase in the state pension age. The state pension age is set to rise to 66 by 2020. I can tell the House that we will now seek, hopefully with all-party support, a new, more automatic mechanism for future increases in the state pension age based on regular, independent reviews of longevity. This is another major reform that will help Britain to live within her means.

We also need to make sure that our public service pensions are fair to those who give their working lives to help others, and fair to the taxpayers who have to fund them. Today we publish the result of our consultation on the discount rate, which shows that a more appropriate rate would be inflation plus GDP growth. This reinforces our case for increasing the employee contributions by an average of 3%. Indeed, the new discount rate could be used to justify further contribution rises. As part of the wider reforms, I am not proposing to ask for more than the 3% average.

John Hutton has now completed his final report, which looks at the pension benefit. I am sure that Members in all parts of this House will want to thank him for a very impressive piece of work—[Interruption.] Or at least in part of the House. I confirm today that the Government accept Hutton’s recommendations as a basis for consultation with public sector workers, unions and others. There should be no cherry-picking on either side. I believe that this House should also recommend similar changes to the pensions of MPs.

We should also address the state pension system, which has become unbelievably complex. If people cannot work out what they are going to get in retirement through the second state pension or how much will be clawed back by the means tests, then they cannot work out what they need to save. So the Pensions Minister, the Pensions Secretary and I have worked together to develop options including a new single-tier pension. It would be simple, it would be based on contributions, and it would be a flat rate, so people know what to expect—and it would cost no more than the current system. We currently estimate that this new single-tier state pension would be worth around £140 per week. It will not apply to current pensioners, and it will take years fully to come into effect.

As with the other major reforms that I have announced today to simplify our tax system, to improve our economic performance and to reform our public sector pensions, this Government are doing the right thing for the long term: the most competitive corporate taxes; the best place to start up and run a business; an investing, exporting, greener, manufacturing and more balanced economy; a better educated work force; a fairer pensions system. These are our ambitions for Britain, with the measures to match.

Let me now turn to personal taxes and duties, and let me start by noting that a society should not just be judged by the strength of its economy alone, but also by the compassion of its people—[Interruption.] Well, that is what I happen to think, anyway. The Culture Secretary and I have been working on a series of substantial reforms that will support giving, from the largest donations to the coins collected in the charity bucket.

First, we will dramatically simplify the administration of gift aid. Instead of asking charities to submit a written record of every donation made, we will by 2013 pay for a much easier online system. Secondly, we will encourage wealthy people in our society to give even more. The gift aid benefit limits will be increased from £500 to £2,500 so that charities and museums can say thank you properly. We will consult in the coming year on how to encourage the donations of pre-eminent works of art and historical objects to our nation in return for a tax deduction. We will introduce from April next year this major change to our inheritance tax system: if you leave 10% or more of your estate to charity, the Government will take 10% off your inheritance tax rate. Let us be clear. No beneficiaries will be better off as a result of this policy—just the charities, to the tune of £300 million. I want to make giving 10% of your legacy to charity the new norm in our country.

The third reform we make to the charitable taxes is about not the biggest donations but the smallest. We will introduce a new scheme where gift aid can be claimed on small donations, up to a total of £5,000 a year per charity, without the need for donors to fill in any forms at all. That means gift aid on the contents of the collecting tin and the street bucket, and 100,000 charities will benefit to the tune of £240 million. Together, these represent the most radical and most generous reforms to charitable giving for more than 20 years. Do the right thing for a charity, and the Government will do the right thing for you. It is a big help for the big society.

But our charity does not extend to those in our society who seek to avoid paying their fair share of taxes. Tax avoidance and evasion mean that we have to ask more from working families, and that is not fair. Unfortunately, not enough has been done in recent years to tackle this injustice. HMRC estimates that £14 billion was lost through avoidance and evasion in 2008. Today we publish our new strategy paper on tackling tax avoidance and we take specific measures to shut down the open abuses that have been allowed to continue for too long.

We will close down three forms of stamp duty land tax avoidance, tighten capital gains rules for companies, and end the practice of disguised remuneration, which sees highly paid employees offered tax-free, lifetime loans that are never repaid; and we are going to tackle the exploitation of low value consignment relief that has left our high street music stores fighting a losing battle with warehouses in the Channel Islands. In total, on the numbers audited by the independent OBR, the tax avoidance measures in this Budget raise around £1 billion a year—that is £4 billion over the Parliament. We are doing more today to clamp down on tax avoidance than in any Budget in recent years.

That gives us more resources, in a fiscally neutral budget, to help those families who do pay their taxes, but who are struggling with the daily cost of living. We have already taken steps to help from this April. I am glad to report that, following measures in my Budget last year, every local authority in England has chosen to freeze council tax in the coming year. Compared with the amount that council tax could have risen by, this freeze will save a family in an average band D property £72 a year. In two weeks’ time, the child tax credit for lower-income families will increase by an additional £255. I can confirm today that in the coming year all workers in the armed forces, the prison service and the NHS, and teachers and civil servants, earning £21,000 a year or less will receive a pay uplift of £250.

As I said last year, the national insurance rate rise that the last Government announced will have to go ahead, but because we have increased the threshold, it will actually be cheaper to employ people on incomes of less than £21,000 than it is today. That is how we have stopped Labour’s jobs tax. Anyone earning less than £35,000 a year will also be better off because in 14 days’ time, the personal income tax allowance—the amount people can earn tax free—will go up by £1,000. That is the largest rise in our history. That means, in real terms, around £160 extra per year or £200 in cash terms for 23 million taxpayers.

The coalition agreement commits this Government to real increases in the personal allowance each and every year and sets this country the goal that no one earning less than £10,000 should be caught in the income tax net. This Budget today takes another step towards that valuable goal. I can confirm that from April next year, the personal tax allowance will increase by a further £630 to £8,105. That is another real increase of £48 extra per year, or £126 in cash terms—together with this year’s rise, a total of £326 extra money each year for those working hard to pay for their family’s needs. It means that just 10 months into office, this coalition Government have taken 1.1 million low-paid people out of tax altogether. And one more thing: last year, we restricted the allowance increase to basic rate taxpayers; this year, we have not. The result is that no more people will be pulled into the higher rate tax band as a result of this Budget.

Let me turn now to excise duties—first, air passenger duty. Let me be straight with the House: we had hoped that we could replace the per passenger tax with a per plane tax. We have tried every possible option, but have reluctantly had to accept that all are currently illegal under international law. So we will work with others to try to get that law changed. In the meantime, we are consulting today on how to improve the existing and rather arbitrary bands that appear to believe that the Caribbean is further away than California. We will also seek to bring private jets, which pay no duty at all, into the scope of taxation. The wealthiest should not escape the tax that the ordinary holidaymaker has to pay. I can tell the House that with the hefty duty rise last year and with the cost pressures on families, we think it would be fair to delay this April’s air passenger duty rise to next year.

Let me turn to duties on alcohol. We have already announced plans to increase duty on the strongest beers and cut in half the duty paid on low-alcohol beers. Beyond that, I can tell the House I have no further changes to announce to the rates of alcohol duty put in place by the previous Government. As usual, these changes will come in at midnight on Sunday. As announced again by my predecessor, tobacco duty rates will increase by 2% above inflation. However, it is clear that the structure of the tobacco duty regime is being exploited to produce cheaper cigarettes, so we will change the regime to narrow the differential between these lower-cost brands and the rest, and between cigarettes and hand-rolled tobacco. This will reduce smoking and improve our nation’s health. These tobacco duty changes will come into effect at 6 pm this evening.

I turn now to other excise duties. Rates of vehicle excise duty will increase by inflation only and we will freeze rates for heavy goods vehicles to help our hauliers. I am also proposing to increase the approved mileage allowance payments. This mileage rate has not increased at all since 2002, making those who depend on their car for work increasingly worse off. It will now increase from 40p to 45p per mile and I can tell the House that we will extend this relief to cover volunteers travelling as passengers, as charities and others have been calling for for many years.

All other duty rises will remain exactly as planned by the previous Government—except fuel duty. The price of petrol has become a huge burden on families. In the last six months, the cost of filling up a family car such as a Ford Focus has increased by £10. This rise has also hit businesses hard, especially small businesses. It is important that when shocks like the steep rise in the oil price occur, a responsible Government are able to listen and respond.

Let us be clear about what is within our control and what is not, so that we do not raise false hopes. British Governments are not in charge of the world’s oil price, and as we have seen, events like those in the middle east can push the cost of petrol at the pump higher. But British Governments are in charge of the duty that we levy on petrol, and the previous Cabinet put in place, before they left office, a new fuel duty escalator that involved seven fuel duty increases. Three have already taken place, adding just over 3p to the price of petrol. The third step on the escalator is due to come into effect next week, and that would add almost another 5p to the price of a litre of petrol.

I have made it clear that I would listen to the concerns put to me by so many people. Many have suggested that we should use the extra revenues we automatically get from the North sea. It is true that they go up when the oil price rises, but the OBR confirms that rising oil prices also cause other tax revenues across the rest of the economy to fall by a similar amount, and I am not prepared to undermine the public finances like that.

Others in this House have suggested that we create a separate VAT rate for petrol.The Treasury has examined this proposal. It would not fully offset the 5p rise that is coming, and it would take six years to come into effect—and that is because it turns out to be illegal. So I have decided to reject this approach and do something different.

The North sea oil tax regime was most recently changed in 2006, when the price of oil stood at $66. It is now almost double that amount. That means that oil companies are making unexpected profits on oil prices that are far higher than those that they based their investment decisions on. Other oil-producing countries have a tax regime that automatically regulates returns when prices rise. We do not, and the North sea is too mature to introduce such a regime now. Instead, we can do something else: we can introduce a fair fuel stabiliser.

From tomorrow, the supplementary charge levied on oil and gas production will increase from 20% to 32%. Even after this, profits on a barrel of oil are forecast to be higher in the next five years than in the last five years, but this will raise an additional £2 billion of revenue, and we will use the new tax money to do this: first, we will delay the inflation rise in duty planned for next week until next year and also delay the April 2012 inflation rise until the following summer; secondly, the fuel duty escalator that adds an extra penny on top of inflation every year will be cancelled—not just for this year or next year, but for the rest of this Parliament.

But I do not want important investment in the North sea lost, so if the oil price sustains a fall below $75—and we will consult on the precise figure—we will reintroduce the escalator and reduce the new oil tax in proportion. That is how it will work: no escalator when the oil price is high; no extra tax on the profits of North sea oil companies if the oil price falls and stays low. That is the fair fuel stabiliser, and this is the result for Britain’s hard-pressed families: I have made sure there will be no fuel duty rise this year; I have cancelled the fuel duty escalator when the oil price is high; and one final thing, as well as stopping these fuel duty rises, I am today cutting fuel duty by 1p per litre. This will take effect in petrol stations from 6 pm tonight.

I know that by itself this will not end the pressure on family budgets, but we have done what we can to help—help for families, help for businesses: a Government who listen and help. There were some who said that this year my job was to help families with the cost of living, but there were others who said, no, my task was to back enterprise, support business and undertake far-reaching reform to help the economy grow. It is the central understanding of this Government, and core to our strategy, that these are not two separate tasks: they are one and the same thing.

We are only going to raise the living standards of families if we have an economy that can compete in the modern age. So this is our plan for growth. We want the words:

“Made in Britain”, “Created in Britain”, “Designed in Britain” and “Invented in Britain”

to drive our nation forward—a Britain carried aloft by the march of the makers. That is how we will create jobs and support families. We have put fuel into the tank of the British economy. I commend this Budget to the House.

I now call on the Chancellor of the Exchequer to move the motion entitled “Amendment of the Law”. It is on that motion that the debate will take place today and on the succeeding days. The remaining motions will be put at the end of the Budget debate on Tuesday 29 March.

The Chancellor spoke for an hour, but one fact says it all, and he could not bring himself to mention it. Growth is down, last year, this year and next year. It is the same old Tories. It’s hurting, but it isn’t working.

What did the Chancellor say last year about growth? “Judge me on the figures.” Well, judge him we will. Every time he comes to the House, growth is downgraded. Last June, 2011 growth was down from 2.6% to 2.3%. In November, it was down again. In January, what did the Prime Minister say? His three priorities for the year were growth, growth, growth. And what has happened in this Budget? Growth is down, down, down. Taking account of all the measures—[Interruption.]

Order. We should show the Leader of the Opposition the same courtesy that was shown to the Chancellor of the Exchequer.

What is the Chancellor’s singular achievement? To deliver a budget for growth that downgrades the growth forecasts. Growth is down this year to 1.8%, and it is downgraded next year too. That did not happen by chance; it happened by choice—the Chancellor’s choice—and it was the wrong choice: to go too far and too fast. In the Chancellor’s own words in the June Budget, he chose to go £40 billion further and faster in tax rises and spending cuts than our plan to halve the deficit over four years. That pace of cuts has seen consumer confidence fall in almost every month since the general election.

In his first Budget, the Chancellor promised

“steady and sustained economic recovery”.—[Official Report, 22 June 2010; Vol. 512, c. 168.]

When last September’s growth figures were published, he took the credit. He called the figures “a vote of confidence” in the Government’s economic policy. But when the economy contracted in the fourth quarter, what did he do? He blamed the snow. Even he must appreciate the irony. While the Prime Minister was grounded from his Christmas trip to Thailand, the Chancellor was on the piste in Klosters. I suppose it was the right type of snow for a ski-ing holiday; it was just the wrong kind of snow for our economy.

What is it about the British snow? There was worse snow in Germany, a big freeze in France, and in the United States the worst blizzards for decades. Despite all that, those country’s economies grew in the fourth quarter. While our growth forecasts have worsened, theirs have improved. [Interruption.] The Chancellor should calm down a little. The German economy is forecast to grow more strongly than last year, and so is that of the United States. Growth in the world economy has been revised upwards. Which is the major country that is downgrading its growth forecasts? The United Kingdom. It is not the wrong type of snow that is to blame, but the wrong type of Chancellor—the wrong type of Chancellor in the wrong type of government with the wrong priorities for Britain—[Interruption.]

Order. Courtesy should be shown. The public out there also want to hear what the Opposition have to say. If there are Government Members who do not want to listen, will they please leave the Chamber? The public out there want to hear both sides of the argument. Some people may agree, and some may disagree.

Government Members shout and jeer, Mr Deputy Speaker, as unemployment hits a 17-year high. What more do we need to know about the Conservative party?

The Chancellor also promised in his June Budget that he would deliver “low inflation”, and what has happened? Inflation has risen, month after month after month. That did not simply happen by accident. It is happening because the Chancellor made the wrong decision on VAT. Same old taxes, same old Tories.

The Chancellor promised us falling unemployment too, and what has happened since he delivered his first Budget? Over 60,000 more people are now looking for work. To this Tory Government, just like those of the past, unemployment is a price worth paying. People who heard the Chancellor’s Budget speech today will wonder what world he was describing. [Interruption.] I think that the Chancellor should listen to this.

In the constituencies of more than 130 Members of Parliament, 10 people are chasing every vacancy. One in five young people is looking for work. Families are seeing their living standards squeezed, not just this year but year after year. What do the Government say to communities that are losing their jobs? Let me tell the House what they recently told the people of Newport, justifying the closure of their passport office. They said that the redundancy payments of the staff who were being sacked would provide a

“boost in trade for the local economy”.

What kind of planet do these people live on? On growth, on inflation, on unemployment, on the promises that he made, the Chancellor could not bring himself to admit that his second Budget tells the story of the failure of his first. At this stage of the recovery, growth should be powering ahead and unemployment should be falling fast. Every month that unemployment is higher than it should be stores up long-term damage for our country. Every month when growth is lower than it should be, that hits the future potential of our economy. The problem is that, instead of admitting it, the Chancellor refuses to change course. What did the Energy Secretary say? If the figures change, the Government

“should not be lashed to the mast”

of their reckless gamble. They should be willing to change and to think again.

It is not as if the Government have not had practice in the U-turn business. Indeed, they are becoming past masters at it. On forests, school sport, housing benefit for those looking for work and even the vanity photographer, they have been forced to climb down. It is on this, the issue that matters most, that they are least willing to change. At the weekend we learned something new about the Chancellor. Apparently, his political aspiration is to be a blend of Nigel Lawson and Michael Heseltine. Another comparison springs to mind. We see the same hubris and arrogance that we saw in the early 1990s, the same broken promises, the same view that unemployment is “a price worth paying”. The Chancellor is Norman Lamont with an iPod, and on his playlist, no doubt, is “Je Ne Regrette Rien”.

This is not a growth Budget. It is not a jobs Budget. It is a Budget for more of the same, from a complacent, arrogant Chancellor in a complacent, arrogant Government. It’s hurting, but it isn’t working.

Let us not forget that these are not just the Chancellor’s decisions, and they are not just the Prime Minister’s decisions; they are the Deputy Prime Minister’s decisions too. He is an accomplice to the Tory plan. When it comes to the economy, the man who coined the phrase “alarm-clock Britain” has the snooze button well and truly on. Nobody voted for this deficit plan, least of all his Liberal Democrat voters, who were told in promise after promise that he would never countenance it. If I can put it this way to him, it is no wonder nobody wants to share a platform with him.

On the measures in the Budget, I welcome the support for the armed forces, and on the measures the Chancellor proposes to support growth, we will look at them but there is little reason to believe they will make the difference to growth that we need. Indeed, the Justice Secretary fell asleep during the Chancellor’s speech, his growth strategy was so compelling. The Office for Budget Responsibility has already factored in every single measure he has just announced, and it still produced today’s downgraded growth forecast.

We cannot blame people for being sceptical when the Chancellor says he has a new flagship policy for growth, because they are asking what happened to his last flagship policy for growth at the centre of his June Budget. Does anyone remember the national insurance holiday? He was strangely silent about it today. In June, he took the credit at the Dispatch Box for helping 400,000 small firms, but how many have actually benefited? He has been strangely shy in revealing the figures, but someone let slip to the Financial Times that by mid-January it wasn’t 400,000, it wasn’t 40,000, it wasn’t even 4,000; it was less than 0.5% of the number he promised, just 1,500 businesses.

On the Chancellor’s incentives for small firms, we will look at the detail, but I have to say that his decision to cancel flexible working for families with children aged between 16 and 18 is extraordinary. This Prime Minister took the credit for championing that policy with Mumsnet, and then a few months later he takes the credit with small business for dumping it. We have to ask, has he got no shame? The idea that families needing flexibility imperil our economic future is, frankly, absurd, and it tells us all we need to know about this Government’s values and how they think our economy succeeds: greater insecurity as the route to greater prosperity. We take a different view. Flexible working is yet another broken promise from the broken-promise Prime Minister.

While we are on the subject of broken promises, let us remember what the Prime Minister said before the election: he said he would be the banker basher in chief. The Chancellor made great play of that in his Budget speech, but the reality is this: last year Labour’s bonus tax raised £3.5 billion—it is in the Red Book—and this year the bank levy raises just £1.9 billion; it is a Tory Government cutting taxes for the banks while they raise taxes for everybody else. He should have used the money from the bank levy to invest in the future jobs fund—which they abolished—to make a real difference to housing in this country and to boost enterprise.

They are failing on growth, and they are failing on living standards too. What did the Prime Minister say before the election to families receiving tax credits? He said that below £50,000 a year, their tax credits were safe. When Labour said otherwise, the Home Secretary said this:

“That is a lie, and it is irresponsible for Labour to be…worrying families needlessly.”

But what is the truth? Next year, over 1 million families with incomes as low as £26,000 will lose all their tax credits. The Government should be ashamed of their broken promises on tax credits.

That is part of the cost of living crisis they are imposing. The Chancellor trumpeted the rise in the personal allowance, and said everybody earning under £35,000 would be better off, but let us look at the facts. He came along in the June Budget and put up VAT, costing families £450 a year. Now he has the nerve to expect them to be grateful when he gives them a fraction of their own money back. What did the Institute for Fiscal Studies tell us this morning? It said:

“there is an awful lot of giving with one hand...and taking away with lots and lots of other hands.”

It is a classic Tory con.

What about their decision on petrol? The Chancellor has done the same thing again. He has cut duty by 1p, but he has whacked up VAT on fuel by 3p. Families won’t be fooled; it’s Del Boy economics. For a two-earner family, both on average wages, it will be 5p up in the basic rate of income tax and just 1p down next year. What do the British people know from history? They know that every Tory tax cut ends up costing them more; same old Tories, same old deceit.

We needed a Budget that changed the direction of economic policy. We needed a Budget that protected the promise of Britain that the next generation does better than the last. We needed a Budget that changed course on cutting too far and too fast. The Chancellor said at the weekend, with his customary modesty, that he had completed his rescue mission of the British economy. After this Budget, it is not the Chancellor who is rescuing the country; it is the country that needs rescuing from the Chancellor. When families look at this Budget—look at the squeeze on their living standards, look at the job losses in their communities—they will conclude: it’s hurting but it isn’t working.

On a point of order, Mr Deputy Speaker. A former Chancellor of the Exchequer, Mr Hugh Dalton, resigned in 1947 for leaking part of his Budget to a journalist when on the way into the Chamber to deliver it. Given that we have heard nothing in the Chancellor’s statement today that had not already been trailed in the media on Monday, Tuesday and this morning, please will you, Mr Deputy Speaker, use the good offices of the Speaker to make sure that senior members of this Government make important statements to the House before going to the media?

The principle is clear, and it will have been heard by those on the Treasury Bench. We must now move on.

This Budget will be judged on whether it keeps us on course to tackle the deficit, and on whether it provides a strategy to improve the long-run performance of the British economy. I will mention a number of concerns about the growth strategy shortly, but first let me say that we all need to be clear about one thing: we as a country are living beyond our means, with £1 in every £4 we spend being borrowed. That overshadows everything else today.

Despite all the clash of party cymbals, the gap between the parties on the scale of the action required to reduce the deficit is not so big; at least two thirds of the adjustment had been signalled by the previous Chancellor in his Budget a year ago, and I regret that he is not in the Chamber at present. It was courageous of him to set out that deficit reduction plan and those spending cuts before the election, but he did it, and today the current Chancellor has stuck to his plans to sort out the public finances. That has taken courage too, and he deserves our full support, as he has done the right thing.

I want to make three further points on the deficit. First, the Government are not reducing public expenditure to dangerous levels. At 40% of gross domestic product by the end of the Parliament, it will be returned to broadly the same level achieved by Labour in 2008. None the less—my second point—the retrenchment will feel more painful from this time on. The consolidation in each of the next three years, at about £25 billion to £30 billion a year, is three times the amount implemented in the first year of this Government.

The third point I wish to make on the deficit is that the pressure to flinch will now mount and we simply must not do so, for at least two reasons. First, doing so would cost the country a fortune in higher debt service costs as markets lost confidence in economic policy. Secondly, doing so would mean that the spending lobbies would have a field day and once they smelt blood the Government’s economic strategy would be put severely at risk.

I wish to say a few words about the growth strategy. Today, the Chancellor announced a comprehensive new approach, containing many measures that we should welcome, not least the large list of deregulation measures he cited, the simplification of planning and the measures to improve access to start-up capital. On all those, it is essential that each part of the strategy is consistent with other parts of public policy. Individually, direct measures always sound attractive, but the test is whether they form a coherent strategy. On those grounds, I warmly welcome what amounts to a new agenda for tax reform to create the most competitive tax system in the advanced world. I particularly support the reductions in corporation tax, which will bring it down to 23% within a few years.

It is an absolute disgrace that the UK now has the longest tax code in the world. The complexity of the system is getting in the way of thousands of small businesses in our constituencies—these are the very people who can take us back to sustained growth. We must have a tax system that allows enterprise to flourish. A few weeks ago, the Treasury Committee published a report setting out the key principles that should underpin tax reform. I can summarise them briefly: let us have more simplicity, let us have more stability and let us have lower rates and fewer reliefs, where possible. I note that in this Budget the Chancellor has abolished 43 reliefs and got rid of 100 pages of the tax code, which is a huge step forward. Let us have less meddling in the tax system as well. The Chancellor appears to have set us out in the right direction and it will be for the Treasury Committee and others to judge whether his proposals match up to the principles set out in our report, which match closely what others in the tax advice industry have concluded as being the right way forward.

The Treasury Committee will also examine who gains and who loses from the Budget. Last year, the Committee demanded an unprecedented amount of detail on the distributional effects of the Budget and the Chancellor responded by publishing more information than had ever been provided by a Chancellor before—I commend him for that. This will be particularly important with respect to the plan to merge income tax and national insurance contributions. Successive Chancellors of the Exchequer have examined that beguiling idea closely and in the end rejected it, largely because it hits the incomes of certain groups in unexpected ways. Perhaps its time has come, and the Treasury Committee will take evidence on whether the time has indeed come to implement it. We should also examine a number of other proposals that may have long-term distributional impacts, among which is the encouragement of charitable giving with the sizeable extension of gift aid and the inheritance tax reliefs. I hope that the vast majority of us in the House welcome that too.

The Committee will also do its best to examine the coherence of some of the Chancellor’s other measures when set against wider public policies. I can best illustrate that by alluding to points made to me by colleagues in the House in recent months. For example, the Chancellor announced the creation of 21 enterprise zones, which must be designed carefully to ensure that they create jobs and increase overall activity. The risk with such zones will always be that they distort activity at the boundaries and add no new jobs.

I thank my hon. Friend for his thoughtful remarks. Does he not agree that the enterprise zones should be extended out of the cities and into towns such as Harlow, which has a strong scientific corridor?

It just crosses my mind that my hon. Friend might have an interest in Harlow. The crucial issue is that if we are to create areas that have special reliefs, we must not inadvertently end up merely moving activity around the country while adding nothing to the overall welfare of UK Inc. That involves a difficult judgment and we need to look extremely carefully at it.

My hon. Friend will have heard the Chancellor say that discussions will take place on the position in Wales and Scotland. If the Welsh Assembly were not to follow this policy, the existence of an enterprise zone in the Bristol area might result in that very relocation to which my hon. Friend refers.

I note what my hon. Friend says and think that careful account needs to be taken of those points.

Another area in which it is important to have coherent policy is on the cost of fuel. This Budget gives some relief on fuel duty rises, with the cancellation of the fuel duty escalator, among other things. However, while motoring bills are being reduced, other Government policies are putting up the cost of energy for a lot for businesses and home owners in other ways, not least through the price of electricity, and the cost of rail travel is also increasing. Does all this—a reduction for motorists, but an increase for rail users and much higher energy bills—form a coherent policy? I do not know, but that needs to be carefully examined, particularly in the light of the Chancellor’s announcement of a floor price for carbon. All these issues need to be carefully examined, because a distortive energy policy will make Britain less competitive, particularly in our export markets.

In our efforts to return to sustained growth, we need to make the best use of every pound invested in our public services. Another example of the need to make sure we have coherence in growth policy has been put to me by colleagues on both sides of the House. They have asked whether spending £17 billion on a high-speed rail link is better use of the money than investing in modern rolling stock and improving the existing tracks. I suspect that millions of rail commuters who cannot currently get a seat and whose trains are unreliable and relatively slow will be interested in the answer to that question. I am very pleased that the Select Committee on Transport has just announced an inquiry into that matter, as a lot of people will await its outcome.

Does my hon. Friend agree that high-speed rail has the potential to be a profoundly bad economic decision for the whole country?

What I am trying to do is not answer the questions, but pose them for Select Committees and others to try to answer. I am trying to point out that in order to generate a coherent growth strategy, a large number of policies need to be looked at in the round to ensure that we are not wasting public resources.

rose—

I shall give way to a fellow member of the Treasury Committee.

Does it not concern the hon. Gentleman that nothing has been said in today’s Budget about the centrepiece of the Government’s growth strategy—the national insurance holiday for small companies outside London and the south-east? Should we not know more about how that is going and whether it is, in any way, a success?

That is an interesting point. As the hon. Gentleman knows, the Committee will be holding hearings next week and we will have an opportunity to take evidence on exactly that point.

I wish to draw my remarks to a close by observing that growth and the deficit reduction strategy—the two issues I have been discussing—will be one and the same thing if a reduction in the size of government allows room for the private sector to grow. I know that this is not something on which agreement will be reached across the House and that it is the very stuff of party politics, but I hope that Members sitting on the other side of the House will permit me to end with a personal view. Even if there were no deficit, we should still reduce public spending because at close to 50% of gross domestic product it is too high. It reduces choice and freedom for millions of individuals, and it burdens enterprises with unacceptable levels of taxation. During the 13 years of the previous Government, public spending averaged about 40% of GDP. I support this Government’s plans to reduce it to that level again.

rose—

Order. Many Members want to speak today—quite rightly—and we want to get as many in as possible. There is no time limit on speeches but brevity would help other people.

I am grateful for the opportunity to speak early and to follow the hon. Member for Chichester (Mr Tyrie). He made three points that I would like to take up. First, he referred to the reduction in the deficit over the next four to five years and said that he thought that that would cause grave concern and bring great pressure to bear on the Government not to continue with the programme. He is perfectly right: £146 billion will be reduced to £122 billion, which will be reduced to £70 billion, which will be reduced to £26 billion in the years 2015-16. That is a massive and steep drop and will have serious consequences for the public sector, which the hon. Gentleman acknowledged.

In his Budget speech, the Chancellor did not mention the welfare state or the point on which the hon. Member for Chichester finished his speech, which is the balance between the public and private sectors. We will see a clear imbalance between the public and private sectors as regards the question of whether the public sector can shed jobs and whether they can go into the private sector. That is an interesting point that will be followed closely in the north-east of England, where some 47% of employment is in the public sector. We will then see the difficulties and dangers of moving quickly and rapidly with such a massive debt reduction over four to five years.

Harold Wilson once said that one man’s pay rise was another man’s ticket to the dole queue, but the deficit reduction we are talking about today involves one man’s job passing from the public sector to the dole queue. I must tell the hon. Member for Chichester, since he made the point, that he must remember that those who work in the public sector are producers who pay taxes and consume and to remove them from that sector with such a drastic and rapid reduction in the deficit will not add to the prosperity or standard of living of our people.

The hon. Gentleman should remember that the Chancellor has announced today that over five years, this Government plan to borrow an additional £485 billion—or a 50% increase in official state debt. They are not paying down the deficit or paying off the debt—they are just trying to borrow a little less each year, but it is still adding a huge amount to the national mortgage.

I was much amused when statements were made about how the debt was reduced, how much we had to pay off and how much the Labour Government borrowed. In the month of February, the Government borrowed £11 billion when they should have borrowed £8 billion. It is perfectly correct that we have mixed up the structural deficit with the overall deficit, but public spending will continue to go up. There was a certain sleight of hand from the Chancellor when he made his Budget speech.

Does my hon. Friend agree that cutting public sector jobs has a direct effect on the private sector? I do not know whether he has seen the study modelling done by Durham university that shows that in the north-east, some 50,000 jobs will go because of public sector cuts, 20,000 of which will be in the private sector.

I have seen that study. I have also seen the study by PricewaterhouseCoopers about the impact on the north-east of the various deficit reduction plans.

May I, without in the least way being sycophantic, congratulate the Leader of the Opposition? He made a short and precise speech but he hit every nail on the head that needed to be hit. Growth is down. Snow or no snow, we entered into zero growth in the last quarter. Where is growth going this year? It is at 1.7% for the year. How does that compare with Germany, where there is 3% growth?

Will the hon. Gentleman enlighten the House about when in any recovery from any major asset-based deflation growth has returned within even a five or seven-year period? One thinks of the 1930s, and there was no return to growth until the end of that decade, and of Japan, where there was no return to growth until the beginning of this decade. How can he possibly attribute the situation as regards growth to this Government in such a way?

I am grateful to the hon. Gentleman for his point, because we have argued consistently—and so has the international community—that we had a financial crisis from 2008 and 2009 and that out of that financial crisis, without referring to tsunamis or earthquakes, there have been many aftershocks and it will take much time to get over that. I agree with that point but it was not us who said that we would raise growth last year—it was the Conservative Government. The hon. Member for Chichester made an excellent point when he said, quite rightly, that under a Labour Government we had 40% debt in relation to gross domestic product. My recollection is that for some years it was 37% and it was the financial crisis that pushed it up to where it was.

Would my hon. Friend also say that what is particularly startling today is that, after all the measures we have heard from the Chancellor about in the Budget, the growth forecast has taken place as an after-effect? How bad would the growth forecast have been without those measures? It is still drastically down from what the Chancellor suggested that it would be when he delivered his previous Budget nine or 10 months ago.

That is the point that the Leader of the Opposition made. I was reminded by those on the Front Bench—I had not got so far in my speech—that if growth is down, inflation is up. The Chancellor made a point about commodity prices going up. They are going up in France, where inflation is 2%. We have higher inflation because of the Government’s policy. We have depreciated the value of our currency over a period of time by 25%. We have increased our exports but we have also increased our imports. Our imports are still greater than our exports. We are now importing inflation. The difference between French inflation at 2% and our inflation, which will run between 3.5% and 5%, is that we are importing it, because of Government policy.

Unemployment is going up; it is at a 17-year high. The Chancellor made a great thing about 3,000 jobs in the manufacturing sector, but he did not refer to all the jobs that have been lost. How many more jobs will be lost when we move into the cuts to local councils that will start on 1 April? How will Middlesbrough council cope with a 28% deficit reduction? How will the national health service cope? We know that we will lose at least 1,000 jobs in Middlesbrough and unemployment in my constituency is disgracefully high. We have the fourth highest unemployment rate in the country and that is wrong. It happened under a Labour Government and under a Tory Government. The cuts that are being announced and those that have been made through the massive deficit reduction programme announced by the Chancellor in his previous Budget will push us further down.

No reference was made, as I have said, to the welfare state. What happened to the welfare state? What happened to the balance between the public and private sectors? What happened to those who are unable to look after themselves? Where was all that in today’s Budget?

The hon. Gentleman has talked about what is happening in the north-east. In the north-west, we have seen public sector jobs increase by 100,000 between 1999 and 2009, whereas in the private sector, we have seen growth to the tune of 10,000 jobs in the same period. That is completely unsustainable. What are the Opposition’s proposals to address that situation?

That might be the figure in the hon. Gentleman’s part of the world, but it might not be a figure in other parts of the world.

Let me get back to the point—we created a balance between the public sector and the private sector and we believed that that balance was right for our country. In the north-east of England, when we lost manufacturing jobs, steel jobs, coal jobs and shipbuilding jobs, they were absorbed into the public sector. Those who worked in the public sector created careers for themselves. My hon. Friend the Member for North Durham (Mr Jones) made this point: there was a relationship between the public and private sectors. They worked together.

The hon. Gentleman is being most generous in giving way. Can he explain why the Government whom he supported were running a structural deficit several years before the financial crisis?

We had no difficulty with the structural deficit because we believed in infrastructure projects. We believed in public-private initiatives and off-balance sheet finance, which was exactly the same as what the Germans were doing. At the time, it was thought a fine way of doing things and it is still a fine way of doing things. In my constituency, we got the first public-private initiative in the James Cook university hospital, so we have nothing to regret about what is now called the structural deficit. As I said earlier, the structural deficit is like any other, it is part and parcel of the fullest objective. The right hon. Member for Wokingham (Mr Redwood) was right to say that, while we are tackling that particular deficit, public expenditure in other areas is going up. We need to get the balance right, but that is not happening at the moment.

The Chancellor said that we had moved from fourth in the league of competitiveness to 12th and made a big thing about competitiveness, but he did not mention the eurozone, not surprisingly. He did not mention the conference tomorrow and the day after when the 17 members of the eurozone will get together to create a competitiveness pact. Why are they doing that? Because they wish to increase their growth and exports, and we are in competition with them. We are in competition with Germany and France and we will be in competition with those other countries.

The Chancellor talked about Greece, Portugal and Spain, but why does the fourth-largest economy in the world have to compare itself with Greece, which has a deficit of 150% against gross domestic product, not the 60% or 50% we are talking about? Why does our nation state have to be compared with a small country such as Greece? On that basis, we had £67 billion-worth of deficit reduction in one Budget. Today, the Chancellor was very gracious in saying that, now he has taken all that money out of the economy, he will not take any more out. He might have said, “I’ll do you all a favour: I’ve hit you on the head with one big hammer, so I’m not coming back with another.” How gracious of him to destabilise, within the space of nine months, our economy. That is what he has done and is continuing to do. He will certainly rebalance the economy—away from the welfare state, the public sector and the work force of our country—and he will weaken the fabric of our country. He will weaken the standard of living of all our people.

It is not the Chancellor who has associated our economy with those of Portugal, Ireland, Greece and Spain, but the international markets. When the Governor of the Bank of England was before the Treasury Committee two weeks ago, he and his team confirmed that without a package of fiscal austerity measures, this country would be borrowing in the international markets at a rate 3% higher than we currently are. That is the Bank’s official position and that is why those difficult measures have been taken.

I am not going to go down the route that the shadow Chancellor of the Exchequer might have gone down at one stage of attacking or criticising the Governor of the Bank of England. That would not be appropriate for me. The advice that was given to the Government, when they came to government, was very severe and we were compared with Greece.

The hon. Member for Hereford and South Herefordshire (Jesse Norman) makes an interesting point. At what point in our history did we turn over our economy to the rating agencies instead of saying, “It’s only the rating agencies”. When the rating agencies call the Élysée palace, they have a fit of panic there, asking, “You’re not going to reduce our rating are you?” Why did we, as a nation state, give our economy over to a rating agency—to Fitch, Moody’s or Standard and Poor’s? Where was the Chancellor of the Exchequer who stood up and said, “No, I am not going to do that”? The rating agencies had accepted the Labour Government’s deficit reduction plan and were at ease with it. They were happy with the four-year programme and it was the current Government who fell back to the age of Lord Lamont and John Major, whom my right hon. Friend the Member for Doncaster North (Edward Miliband) has mentioned, and ideas such as, “If it’s not hurting it’s not working”.

Does the hon. Gentleman agree that when John Major left office, he left us with no deficit, unlike the previous Government?

That is not true and could not possibly be true.

I have just referred to the fact that we borrowed £11 billion in February alone. My point in relation to Lord Lamont and John Major is that if one takes every aspect of the Government’s policy on competitiveness, growth, unemployment and inflation, one sees that they are falling back to where they were in the years between 1979 and 1983 and into 1992. So, it seems that the public sector and the welfare state do not count for much and that what counts is balancing the budget. I am surprised that the hon. Member for Chichester did not go one stage further and say that in five years we might adopt the German approach of balancing the budget completely.

I do not want to hold up the House for much longer, but I want to mention my constituency and say to the Chancellor that we are very grateful that we have an enterprise zone and a local enterprise partnership for Tees valley and that we will work closely with the Government on both of them. The mothballing of Redcar steel mill has been reversed and there is a new buyer taking it over. On Teesside, we will look to the Budget, the LEP, the new enterprise zone and the new steel mill, which will create jobs and bring in £600 million in investment. So, despite the cutbacks and the impact on local councils, the future is bright for Teesside. I am happy to be confident in that future, notwithstanding all the blows that we will take over the next four years.

I remind the House that I offer industrial business advice to a Swedish, quoted international industrial group and investment advice to a British investment company.

Some Opposition Members have expressed displeasure that Government Members should have mentioned the circumstances in Greece and Portugal. The Opposition rightly remind us that we have a much bigger economy than those of Greece and Portugal and I am pleased to say that ours is also currently better managed. Those points are important because our public deficit was larger even than theirs, as a proportion of national income, when the big deficit reduction programme started. I praise my right hon. Friend the Chancellor for seeing that his single, central task, day in, day out, month in, month out, year in, year out—indeed, the five-year burden for all of us in the House—is to get that deficit down before it kills our public finances and our economy.

If anyone thinks there is no risk, I invite them to visit Greece, Portugal or Ireland and see what happens when a country ignores a deficit for the best of reasons and says, “I do want to spend a little more on a good public cause so I will borrow it to spend it.” Of course, we all have great causes on which we would like to spend more money. Borrowing is so often the easy option, but when a country gets to the point at which it is borrowing too much, it does not just destroy the general economy and place too big a burden on those who have to pay the taxes and interest charges—in the end, it brings down the public sector as well, with far bigger cuts and far less favourable choices than we have when we take matters into our own hands by planning a steady deficit reduction.

We are debating, in a relatively civilised atmosphere and in a relatively sane and sensible way, an economic position about which there are strong disagreements. However, there is no overall disagreement about the imperative to avoid big rises in bond rates and interest rates and to get on with some kind of deficit reduction. It is particularly poignant that we are having this debate on the same day that the Portuguese Parliament is meeting to discuss not its first, second or third, but fourth package of emergency, deep, damaging public spending cuts and unaffordable tax increases. Such is the plight that its economy has been driven into by reckless overspending and too much borrowing and, of course, by being in the euro area.

Does my right hon. Friend agree that to answer the question of the hon. Member for Middlesbrough (Sir Stuart Bell), who asked when the rating agencies took over, one need go no further back than 1949, 1969, and 1976 to 1979, when there were runs on the foreign exchange markets under Labour Governments?

My hon. Friend is quite right, but the Labour party could point to one or two examples under Conservative Governments, so I do not want to be drawn too far down that historical path. We can see what we need to see by looking at the modern reality. As my right hon. Friend the Chancellor said, fortunately, British bond rates—the rate that we have to pay to borrow money for public purposes—are much closer to those in Germany than those in many other countries in Europe. They are under half the level of those in troubled Portugal. The Portuguese 10-year rates went above 8% today. I stress to beleaguered Portuguese parliamentarians, who are battling over whether a general election is the answer to their problems, that if they do not take dire and immediate action, their country simply will not be able to borrow at an affordable rate of interest. They cannot go on spending the extra 10% of national income that we are spending, which is borrowed, to tide us through and get us to better-managed times.

My right hon. Friend the Chancellor, having set out a pathway for tackling the deficit, was right to turn to the question of how he can accelerate growth. The truth of the five-year deficit programme is simple: we need well-above-average growth in the last three or four years of the programme to deliver the numbers in the Red Book, which are similar to those in the Chancellor’s first edition of the Red Book last summer.

To remind the House of the scale of the task, the Government plan to spend £70 billion a year more, in cash terms, in the fifth year of the plan—2014-15—than in the last Labour year; that is not a big increase, but there will be pressures because of it. They plan to get the deficit down by increasing the tax revenue collected in the last year of the plan to an eye-watering £175 billion more than in the last Labour year. We believe that we have seen all the important tax rate rises that the Chancellor thinks are needed to do that; the rest depends on the above-average growth that is still in the official forecasts of the Office for Budget Responsibility.

As I understand it, the right hon. Gentleman is laying out why we need a credible reduction in our deficit in the light of the likely market reaction, but is he not concerned about the impact that any austerity programme might have? Although there has been only a limited impact so far in the United Kingdom, as in Greece and as is likely in Ireland, it may be too much, too soon.

That is absolutely right. The policies that Ireland, Greece and Portugal are being driven to may well not work because they are excessive, but that is the result of going into the euro and following the market pressures that that inevitably produces. I see some Labour Members trying to pretend that that is nothing to do with them, or looking the other way. I remember being a pretty lonely figure in the ’90s when I said that we should never join the euro. I am pleased that my party now seems to be very broadly of that view, and I believe that the other two principal parties in the House have come round to the view that we certainly should not join the euro any time yet, but we have still to receive apologies from them. Surely they must now accept that if Britain had been driven into the euro, as they wanted, we would have broken the euro and broken ourselves. The euro could scarcely contain small economies the size of Greece, Portugal and Ireland, with their amount of debt; it certainly could not have contained Britain comfortably with the level of debt that the previous Government started to incur. It would have found the British banks over-mighty subjects, just as it is finding the Spanish banks rather difficult to tackle.

I am glad that the right hon. Gentleman added the words “any time yet” to his remarks about joining the euro, because it is inevitable that, over many years, we will join the euro. Tomorrow and the day after, 17 euro states will get together and put forward a proper plan for competitiveness within the euro. For the first time in our history, the United Kingdom is excluded.

If those countries come up with good ideas, we can adopt them, and if they come up with bad ideas, we would be wise to sidestep them; that is exactly the freedom that I and others have argued for passionately over many years, and that the Government wish to enjoy if all goes well.

The hon. Gentleman also said that the reductions could prove difficult. Believe it or not, I did not become a Member of Parliament to have teachers sacked from my schools or doctors sacked from my surgeries; I want them to be well paid and well funded, and I want sensible growth in numbers where there is extra demand. We are all of that view—it is quite misleading of the Opposition to suggest that some of us do not appreciate that and do not want that for our constituents—but it has to be affordable. It has to be within the power of the free enterprise part of the economy to pay for that out of reasonable taxation in a way that does not damage our growth; that is so important.

The Government have managed to find an extra £70 billion of cash spending for the fifth year of the plan, compared with in the start year. It is crucial that we keep public sector costs down, so that the maximum amount possible can go to improving service and quality, and, in some cases, to improving the amount of service, and the minimum goes on extra costs and extra inefficiencies. All parties will say in office that they want more efficiently run public services, but they have to will not only the end but the means. That is why the reforms on which the Government are embarking are so important. It is crucial that the Government listen, and that sensible criticisms be taken on board, but public services have to be reformed so that we can say to people in five years’ time, “You are getting more for that £70 billion. We haven’t had to cut things that really matter, because we have managed things better and have found a bit of extra money.”

Is my right hon. Friend aware of the enormous interest in the private finance initiative community in reform of the PFI? A succession of chief executives of PFI companies have asked me, “Why can we not be allowed to save money?” The reason is the enormously expensive procurement process. Not a single school has been built recently that does not have an atrium, and that is because it has been decided that schools, which have nothing to do with corporations, must have corporate atriums. Nothing could be sillier or more resistant to good Government spending.

My hon. Friend is quite right. Improving the quality and cost-effectiveness of our purchasing is crucial in Government. There are many opportunities; PFI and public-private partnerships provide some good examples, but so does general purchase. It would speed up the deficit reduction if there were a stronger moratorium on purchasing items and supplies where there are already stocks. Any company undertaking the kind of radical turnaround that the country is trying to achieve would immediately freeze all unnecessary purchases and make people run stocks down to save money.

Where I have had answers to my questions on this subject, I have found that the current rate of natural wastage of staff in core Departments is running at about 6% per annum; it was about 4% in the first eight months. Quite a number of those posts have been filled by taking on new people from outside. I urge my friends on the Front Bench to get more of a grip on that, because the easiest way of reducing the administrative overhead on the scale that they want—the least painful way for their staff, who need their morale to be up—is to not replace people who leave and not to make others redundant. We cannot afford the redundancies. If we make greater use of natural wastage, Ministers can say to their staff that it means better opportunities for promotion and a change of job. If the post vacated is not essential, it should be removed; if it is essential, we should appoint someone from inside and remove some other, less important, post. That surely is the civilised, sensible way to tackle the necessary task of cutting the administrative overhead. If the Government can cut their administrative overhead by the very large 30% that they are talking about, it takes the pressure off cuts in the areas where none of us wish to see them—in the schools and hospitals, the front-line services that matter so much.

The question that I was about to ask before the interventions was about the international context. How easy is it going to be for the Government to have the three or four years of above-average growth which are so crucial to the strategy? I must warn those on the Front Bench that I fear that the world background will get more difficult going into 2012 and 2013 than it is at present. There has been a prolonged boom in the emerging market world, and we now see China, India and Brazil lifting their interest rates to very high levels. They are desperately trying to squeeze inflation out of their system, so in a year or so we must anticipate some fall-off in demand and spending power growth rates in those big emerging market economies.

The United States economy will have a good year this year, by the looks of it, on the back of a lot of money printing, low interest rates and other matters. That comes to an end in the middle of this year, so by next year we will see a slower rate of growth in the United States of America as well. Were the situation in the middle east to get worse, and the damage from politics to spread into oilfields outside Libya, we could have another unpleasant external shock on the oil price, which would also serve to impede the growth of the world economy.

The conclusion that I take from this is that the world economy does not look as though it is going to go back into another deep recession—we are not going to have that kind of impossible situation—but the world economy is not going to provide the impetus that it is currently providing. It may not feel that great, but it is providing quite a bit of impetus at the moment. It will provide less impetus next year and beyond. That means that the Chancellor must intensify his pursuit of measures that make the UK that much more competitive and that much more successful.

Will my right hon. Friend comment on the importance of improving our export position vis-à-vis the BRIC countries in particular—Brazil, Russia, India and China—and how important a part that could play in our recovery?

It is a good point. We have heard figures from the Government indicating that we export less to the BRIC countries combined than we do to Ireland, but we have a close relationship with Ireland and we are close neighbours. It is understandable that we export a lot to Ireland and it to us. That figure conceals one important point, which is that British business has probably been a little more active than it suggests, but for various reasons the larger British companies tend to go into India, Brazil and China and set up joint ventures or factories of their own there to service the local market. It is easier to service those markets in that way, for reasons that we need not go into in detail today, but I agree that it would be good if we exported more, and it would be good if we helped small and medium-sized enterprises that do not have the capability to set up factories on the other side of the world to export in their turn.

The devaluation that happened more than a year ago has given us one nasty result, which is a much higher inflation rate than comparable economies, but it has given us one pleasant result, which is that it is very easy to export out of a British base now because British industry is so much more competitive at the current level of the pound. We should have that on our side. Paradoxically, quite a bit of British business in the manufacturing sector is close to capacity, and those businesses are tending to put the prices up a bit to collect a little more revenue and improve their balance sheets because it is not that easy to expand turnover. That is where the things that the Chancellor is talking about are vital and need to be done speedily.

Britain needs to be able to put up factories more quickly and get them into use more quickly. It needs to define the skilled engineers and the other skilled individuals who want to work in an industrial setting rather than in an advisory or City setting, and then expand the capability of their companies as a result. Modern manufacturing requires a very high degree of skills input, talented people and good management. It does not require so many people to operate machines because really good manufacturing now is highly automated. It needs the precision of expensive machinery. Indeed, the easiest way to compete out of a German or a British base is to have highly automated plant, so labour costs are a rather unimportant part of the total cost. The intellectual property content, the skill content and the plant and equipment content are much higher, but they are affordable with a quality product.

Further to my right hon. Friend’s points, a director from JCB gave evidence to the Select Committee on Education yesterday and said that he had 57 vacancies for engineers that he cannot fill order to ensure that JCB’s products remain globally competitive, reduce energy usage and so on. That, unfortunately, is a legacy of too many years in which we have not delivered the technical, vocational, practical education that is required. Is my right hon. Friend, like me, enthusiastic about the Government taking forward the programme from the Wolf review and supporting Lord Baker with his university technical colleges?

I am happy with those proposals. The Government are clearly on the right lines and I hope there will be cross-party agreement that we need to raise our game at skills, training and education, particularly in engineering, pharmaceuticals, chemistry and so forth, where we have an advantage and can have a much bigger advantage if we do more. Yes, we need to review how easy it is to buy or build a factory and how easy it is to equip it. Anything that can be done to lower the effect of tax rate on business will make Britain a much more attractive place to be.

As hon. Members know, I take the view that if we set lower rates, we normally collect a lot more revenue. If we want that kind of growth rate, the lower the realistic rate that we can set, the more revenue growth and the more overall growth we will have. It would be a great tragedy to abort the recovery in certain sectors because the tax rate was too high. I am pleased to see the progress on corporation tax. We need to see the details of some of the individual tax schemes and how the carbon tax rebate would work. If we went ahead as trailblazers in Britain and set a high carbon price, we would price our energy-intensive business out of Britain into a less clean or less acceptable venue. It is important that the rebates and discounts are properly thought through, so that at a time when the Government are trying to promote more industry, they are not taxing it too heavily.

On the competitiveness of British industry, my right hon. Friend has in the past talked of a cut in regulation being equivalent to a free tax cut. Does he welcome the measures in the Budget to have a low level of regulation for new start-up companies and small companies? Does he share my hope that Europe will become more competitive by reducing the regulatory burden that it seeks to impose on British business and business in other member states?

Of course I welcome that. One of the big barriers to entry and to more effective competition for the large companies in Britain is the weight of regulation, which hits anyone who tries to start up a new business. I have done it in the past and I know what it feels like. One has to raise a lot more extra money because for six months to a year one is just trying to comply in many areas before one can trade. Yes, of course we want sensible regulation. We do not believe in an unregulated world. We believe in the law of contract. We believe that people should have a duty of care towards their staff and their customers, but if there are too many and too detailed competing types of prescriptive regulation, it puts people off and they say, “It’s too expensive. I can’t be bothered.”