Orders of the Day — Budget Resolutions and Economic Situation
Mr Ian Taylor (Esher)
Having listened to the speech of the hon. Member for Knowsley, South (Mr. O'Hara), I think that, even were the sun to shine on Halewood, he would see only the gloom. That is not at all how I view the implications of the Budget. In the short time allowed me, I do not have scope to go into the detail on those Budget items that my constituents and I welcome. The Chancellor correctly targeted such prudent tax cuts as he could make on those most in need. I enthusiastically welcome the new 20p rate because it will most benefit those who are beginning to earn and to be taxed at the bottom of the scale, and those working part time whose income is most disproportionately affected by a lower tax on lower earned income. I welcome all those measures; the alternatives which might have been available to my right hon. Friend in other circumstances are to be discounted—he did what was right at this stage.
I strongly welcome the help for pensioners on income support. Businesses in my constituency will benefit from the changes in the uniform business rate—I have received many representations about it, but not because it is wrong as a system. Hon. Members from the north of England should bear in mind that constituencies in the north, not those in the south, have tended to benefit. The burden of the UBR often affected people who wanted to sell their property, because the transitional relief could not be passed on with the property. That meant that sales were difficult, or if a company had ceased business it was difficult for another to occupy its premises.
I shall concentrate on the broader Budget judgment, as my hon. Friends have eloquently analysed the taxation aspects of the Budget. I wish to mention some of the weak-willed people in the City who have allowed their worries to overtake their judgment. I readily admit that I am an adviser to two City institutions, which is not to say that they always accept my advice. Often they appear not to.
In a difficult situation my right hon. Friend the Chancellor has created an extremely responsible framework for the Budget. He made a clear commitment to maintaining our position in the exchange rate mechanism and a further commitment to joining the narrow band at the DM2·95 level. There could be no clearer signal that a Conservative Government mean to maintain a stable exchange rate and will continue to reinforce sound monetary policies. My right hon. Friend's statement on MO clearly underlined that. We need have no worries that a Conservative Government will allow the currency to decline, thereby creating further inflationary pressures, so the City should take careful note of the Budget commitments.
Certainly the public sector borrowing requirement is much higher than any Government would wish, but as a percentage of GDP it is a great deal less than it was under the last Labour Government—and much less than it would be under a Labour Government if the country unfortunately got one after 9 April. Labour is committed to forgoing privatisation proceeds, which will instantly add a further £8 billion to forecasts of the public sector borrowing requirement for next year.
The key point about the PSBR under a Conservative Government is that the rise which has occurred since the autumn statement forecast is due to a decline in revenues from taxation. That is both important and positive. It has not been due to a giveaway in the form of tax cuts; the proportion due to tax reductions in the Budget was small —less than £2 billion net. The rise has not been due to additional public expenditure either. We still work in this strange system—I am delighted that my right hon. Friend the Chancellor is to reform it—in which we announce our public expenditure plans separately from our revenue-raising plans. The public expenditure plans, including a large increase in spending on key social services, were announced last autumn, since when the recession has led to a decline in tax revenues, which in turn has led to an increased PSBR.
I said that this was a positive point, because when the economy begins to pick up again the buoyancy of tax revenues will also pick up speedily. That will lead to exactly what the Chancellor predicted—a rapid fall in the PSBR. The City should therefore take good heart from the fact that my right hon. Friend the Chancellor has set up a reasonable framework in the Budget. Because the PSBR, even at this level, will be fully funded, that will lead to a rapid recovery in Government revenues when the growth in the economy that all the independent forecasters believe is upon us starts.
My right hon. Friend the Chancellor set out another factor in his speech which is not widely talked about but is critical to understand because it gives the lie to the Opposition's claims that we are borrowing to bribe. We are not. We are borrowing at this stage of the recession, with a commitment to balance the budget over the cycle, and at the same time we are financing £30 billion of public sector asset creation.
This is a sound and prudent Budget which will take us out of the recession. It shows that only a Conservative Government is capable of running the economy successfully. I am sure that the electorate will understand that on 9 April.