Amendment of the Law

Part of Budget Resolutions and Economic Situation – in the House of Commons at 4:42 pm on 10th March 1992.

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Photo of Mr Neil Kinnock Mr Neil Kinnock Leader of Her Majesty's Official Opposition, Leader of the Labour Party, Member, Labour Party National Executive Committee 4:42 pm, 10th March 1992

Such is the run-down in British industry that, as the Engineering Employers Federation and several others testify, much of the borrowed giveaway would be spent on imports and not on generating jobs in Britain. The Government know that, but they still borrow for tax cuts in an economy which, despite the long recession, has a rising balance of payments deficit as the Chancellor again confirmed in his speech. In making those changes the Government demonstrate their desperation and their irresponsibility.

If the Chancellor believes that borrowing for tax cuts is an effective way to promote recovery, he has to answer a simple question. If borrowing for tax cuts is the fast lane to recovery, why did not he hit upon this great scheme last year or a year ago when the recession was already nine months old instead of waiting until the recession was 21 months old? Why did not he do it a year ago when he was forecasting that Government borrowing would be just £8 billion instead of £28 billion? Why did not he do it when 50,000 more companies were still in existence or a year ago when 100,000 more families were still in their homes? Most of all, why did not the Chancellor do it a year ago when 800,000 more people were still in their jobs?

The answer is obvious. The Chancellor did not take any action to combat recession because there was no election to come just weeks after the Budget. Now the election looms and borrowing, yesterday's original sin, has become today's prudent virtue. However, the debt will still have to be paid. Perhaps the Chancellor wishes to avoid burdening the next generation with the cost of money that has been borrowed for these pre-election tax cuts. That would be noble of him but, of course, there is only one way for him to stop the obligation falling on the next generation, and it would be quickly to reclaim the cost of this year's borrowing by raising taxes on the present generation. Obviously, that would mean that what he gave with one hand this year he would have to take back with both hands next year.

If the debt that the Chancellor has run up for tax cuts was not to be permanent, he would have to repay it with higher and wider VAT and other taxes and charges. I heard what the Chancellor said about having no plans to make changes in VAT. It was a faithful echo of what his right hon. and learned Friend the Member for Surrey, East (Sir. G. Howe) used to say in those precise words before the Government doubled VAT at the beginning of their period of government.

The Chancellor knows that this is the only alternative to saddling rising generations with tax. The Prime Minister also knows it. All that they have not done is to admit it. I shall give the Chancellor an opportunity to make his Budget a little more honest. First, I ask him to acknowledge the basic truth that money borrowed for tax cutting would soon have to be repaid by tax raising if he was to keep his pledge to balance the Budget over the cycle. That must be the case. The Chancellor shakes his head. Unless he has developed a new system of mathematics, what I have said must be the case. One way or another that money will have to be repaid.

Secondly, I ask him whether he would do that in this generation or leave the unavoidable task of repayment to the next generation. Which is it to be—extra tax for our children or extra tax for us? I know that the Chancellor could tell us now if he wanted to. He must have worked it out. If he can give an honest answer so that the country will hear about the real cost of his Budget and who will pay that cost, he should rise and tell us. It should not be difficult because all that he has to do is to repeat the recent words of the Prime Minister who said: if borrowing takes the strain,"— which it clearly is— taxes … have to go up to service the debt". If there is not an acknowledgement of that, so much for the "simple rule" of honest financing and for the Prime Minister's declarations about honest taxation and borrowing. So much for this discredited Government.

Borrowing money for tax cuts in this recession will not stimulate recovery in any significant or sustained way. It will not strengthen the economy or improve the essential public services. If the borrowed money goes into consumption, it will suck in imports and increase the deficit and debt, and bring a rise in inflation which will be combated in due course by higher interest rates, so pushing the economy back into recession. That is where Tory policies have led this country already, and that is why the British people do not want to rejoin the treadmill that they have twice been on in the past 13 years.

The British people know that in this recession, if there is to be borrowed money available, it must be invested in industry, construction, capital works, transport and other essential services. People know that if borrowing is used in that way it will generate sustained orders, production, profits and employment in Britain. It will create wealth and incomes by building a recovery with staying power. It will generate the extra revenue that will be needed in future for rising standards of health provision, education opportunities, childcare and proper security for the old.

That is the kind of resilient recovery that Britain wants and needs. The Government have never been able to produce a resilient recovery because they have always relied on the consumption-led recovery that the Chancellor advocated yet again in his speech. We need an investment-led recovery that will make Britain well equipped, well trained, competitive, consistently successful and socially just. That change will never come from this Government. They have got it wrong for the past 13 years and they will not start to get it right now. They have had all that time in power and at the end of it, it is a matter of fact that our country is under-trained, under-invested and under-performing.

Because of the Government's policies, Britain is increasingly dependent on imports and is still in recession. Our essential public services are run down, and poverty is spreading across the land. Now the Government are asking the country to believe that, having got it so wrong for so long, they can with this Budget put it all right. They cannot be believed: they are not believed. That is why they will be beaten. They are hollow men—and the Tory Government ends not with a recovery bang but with a bribery whimper. The British people will not be deceived. They want real recovery. They will not support the bribers; they will support the builders.