Budget Resolutions and Economic Situation

Part of Orders of the Day — Ways and Means – in the House of Commons at 8:27 pm on 22nd March 1993.

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Photo of Clive Betts Clive Betts , Sheffield, Attercliffe 8:27 pm, 22nd March 1993

The Budget stands condemned on four grounds. It contains broken promises, offers no hope to the unemployed, is based on a Government act of faith that recovery will somehow occur, and provides no means of dealing with the British economy's long-term structural problems.

We are told that, at the time of the 1992 general election, the Government had no plans to increase the scope of value added tax. Those are weasel words. The majority of people who voted for a Conservative Government did so in the firm belief that VAT would not be levied on goods or services such as domestic fuel during the lifetime of this Parliament. For the Government to claim now that they had no such plans in 1992 but that they might at some time during the next five years is dishonest.

The Government claim that their promises were made sincerely in 1992. What of current Government commitments not to extend VAT to children's clothes, food or books? Are those commitments just as sincere as those made in 1992?

The impact of the Budget measures was mentioned by several of my hon. Friends. We have not yet been given a figure by the Government, but they could still cushion the impact of their actions on people receiving income support and pensions. They cannot, however, protect the low-paid who are just above income support levels and for whom fuel expenditure represents pay a higher than average percentage of their income. Those same people must, on average, pay out a higher percentage of their incomes because of the national insurance increases. They, not the higher-paid, will suffer. The Government have offered those in low-paid employment a real double whammy.

I personally welcome the changes in mortgage tax relief. I do not consider the mortgage tax relief scheme defensible; I have held that view for many years. But why did not the Government use the money to introduce a benefit scheme for low-income earners with mortgages—people who are not only struggling to make their mortgage payments now, but, in many thousands of cases, facing the prospect of repossession? The Government could have used the savings resulting from the change in the mortgage tax relief system to introduce benefits to assist those whose earnings place them just above income support level.

What have the unemployed been offered? They have been offered no help and no hope. No help or hope has been offered to the 100-plus who are to lose their jobs at Whitbread in Sheffield, the 100-plus who will lose their jobs at Trebor Bassett and the 100-plus who will lose their jobs at Avesta Sheffield. All those job losses have been announced in the last few weeks.

What do we offer a 50-year-old ex-steel worker, made redundant up to 10 years ago, or a 25-year-old who has never had a job? Do we offer the possibility of one of 100,000 training places, when those people know, and we know, that there is no possibility of their getting a job at the end? That is not merely dishonest; it is immoral.

The Government could have done so much. They could have released the capital receipts that are still locked up in local authority coffers; they could have presented sensible proposals for the development of a proper transport infrastructure, rather than the shambles and the constant delays of the channel tunnel link and the fiasco of the Jubilee line extension.

When will the Government recognise that public investment must be in place before we can create a climate in which private investment can follow, instead of trying to cobble together deals that simply result in years of delay and no action on the ground? All that the Government appear to offer the unemployed is protection from the Labour party and the social chapter. That is a real bargain basement offer: "no pay or low pay" seems to be their policy.

The whole Budget seems to have been motivated by faith—the belief that the recession will end, some time, somehow. In imposing VAT on fuel, the Government have admitted that they got it wrong: they thought that recovery was coming 12 months ago, but it did not materialise; hence the increase in the public sector borrowing requirement. Their economic approach is almost equivalent to the national health service abandoning medical science in favour of faith healing. Behind the facade of the "seven wise men" arguing away, we can almost see Treasury Ministers and their civil servants in a room in No. 11 Downing street—on their knees, eyes closed, holding their hands in front of them, willing the green shoots to appear. There seems to be no more substance than that to Government medium-term strategy.

Every so often, a cry of joy will be heard as unemployment falls for a month—although every serious commentator recognises that that is merely a blip. Cries of delight will be heard when industrial production goes up in one month, but the fact that the far more important three-month average has not shifted will not be recognised. Retail sales have risen since Christmas, but, year on year, they are still down in real terms. Housing activity is increasing slightly, but the scale of the depression has been so great that that increase will not feed into the construction industry for a long time, and the Government are offering the industry no real assistance.

The Government are willing recovery to occur, but what will happen if it does not? What will happen if it is delayed for another year—delayed until the tax increases begin to bite? Where in the Budget is the recognition that recovery is not certain, and that the timing is problematic? Where do we read of the consequences of the Government's getting it wrong, and—as they did 12 months ago—predicting a recovery that does not happen?

Let us turn to the long-term problems. Where is Government policy in that regard? Since 1979, unemployment, manufacturing investment and the balance of payments have worsened. The Government's problem with the economy is not cyclical; it is a fundamental, structural problem. The 1980s were a decade of private consumption and borrowing, which created personal debt. The Government should be turning the 1990s into a decade of investment in manufacturing and infrastructure, but there are no signs that they are doing so.

The Government's dilemma—the PSBR is rising to record levels, while unemployment is doing the same—is a product of the real weakness of the British economy: the inherent failure of our manufacturing industry, its collapse in the 1980s, the loss of a third of manufacturing jobs and the dereliction and destruction of areas such as the lower Don valley in Sheffield, where 50,000 jobs were lost during that decade. The same fundamental problems have brought about our balance of payments crisis at the depth of the longest recession that the country has experienced since the war.

The one thing for which the Government can claim some credit, in their terms, is getting inflation down; but we must ask whether they have solved even that problem. They have brought inflation down to below 4 per cent., but that was at the depth of a recession; they have never managed to achieve the same result at any of the peaks of economic activity since 1979, although each of those peaks has coincided with a higher level of unemployment than the previous one. That is the scale of the problem that the Government not only face—as we do—but have created, and for which they will not accept responsibility.

The Budget does not recognise the existence of such problems. It does not attempt to solve the long-term difficulties of financing British industry, and the relationship between banks and manufacturing industry, which clearly is not working; it makes no attempt to deal with the long-term problems of financing and offering equity capital to small firms, and the skills gap that affects the whole of industry; and it does not try to stimulate research and development to secure long-term recovery. None of those issues is mentioned.

On all counts, the Budget has failed. It has failed the whole nation with its broken promises. It has failed the unemployed by offering them nothing; it has failed to give a clear direction on medium-term strategy, offering faith and hope as a substitute; and it has failed to recognise the inherent structural failings of the economy, or to provide any policies to deal with those failings. It is a failed Budget from a failed Government.