Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 7:59 pm on 27 November 1996.

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Photo of Alan Simpson Alan Simpson , Nottingham South 7:59, 27 November 1996

Not long ago, I was driving through a village that was clearly in the middle of its own environmental campaign. Along the road on the outskirts of the village, and in front of a large copse of trees, was a row of placards and posters that proclaimed with ironic innocence, "Save our Trees—they break wind". Having listened to the Chancellor yesterday, I became aware that the trees were not the only ones to do so. The Chancellor painted a picture of hot air and self-acclaim that was in stark contrast to the realities of the country and the economy that he has created.

Nowhere was the contrast starker than when the Chancellor claimed to be the architect of a recovery that was built to last. I think that the phrase he used was "a Rolls-Royce economy". I ask the House to consider this. If we genuinely have a Rolls-Royce recovery, why can pensioners not have Rolls-Royce pensions? As my hon. Friend the Member for Walthamstow (Mr. Gerrard) pointed out, we shall face a housing shortage of some 4.5 million homes. Why can we not have a Rolls-Royce social housing programme? The country is facing 50,000 excess winter deaths each year, of people living in fuel poverty. Why can we not afford a Rolls-Royce home insulation programme?

A homeless person sleeping in a doorway probably feels that he has as much chance of getting a home of his own as of owning a Rolls-Royce. Is it really a Rolls-Royce recovery when students today face Rolls-Royce debts, rather than Rolls-Royce grants? One in three children are growing up in asthmatic childhood and in poverty—in the shadow of Rolls-Royce exhaust fumes. Is it a Rolls-Royce recovery when there are probably shorter waiting times to buy a Rolls-Royce than to get a routine operation? But perhaps that is the Rolls-Royce recovery to which the Chancellor referred—a society in which more people can buy a Rolls-Royce. If that is what he meant, it was probably true.

In analysing the impact of the Budget this morning, the Institute for Fiscal Studies said that the top 10 per cent. of the population would probably be 1 per cent. better off, while the bottom 10 per cent. would be 1 per cent. worse off. That must be added to the position when the Chancellor rose to make his speech yesterday afternoon. From 1979 to 1996, the poorest 10 per cent. of the population have become 13 per cent. worse off, and the richest 10 per cent. have become 65 per cent. better off. Those who earn more than £100,000 a year receive an annual tax handout from the Chancellor of £15,000. That is not enough to buy a Rolls-Royce, but it is certainly enough to put down a healthy deposit on one.

Yesterday's Budget took place in the middle of the International Year for the Eradication of Poverty. It is worth asking ourselves in what way the Chancellor will have contributed to that initiative. Sadly, the answer is, "Probably not one jot." As he tinkered about with tax rates and bands, it is worth pointing out that marginal tax rates hit no one harder than the working poor. The marginal tax rates of those in work, on low pay and having to interact with the benefit system are at least 97p in the pound. If the person is really unlucky and is on passported benefits—entitling him or her to access to free school meals—he or she can lose 1 My in clawback on every pound earned. Taking 1p off the basic rate of tax will not impact in any way upon the harshness of this tax and benefit claw back regime, which hits the working poor most cruelly.

Any sensible and objective analysis must begin by recognising the need to return to a reform of the benefit system that rediscovers the virtues of platform, universal benefits, at the expense of the obsession with increasing means-tested benefits. The tax cut that the Chancellor came up with will not turn out to be the wind of change for the working poor. At best, it will turn out to be the wind of small change. But for most households in Britain, it will mean the wind of less change in their pockets than they had the previous year.

Would that be ameliorated by the macro-economic situation—the analysis against which the Chancellor pitched his policies for the medium and long term? Sadly, the answer is again no. That would have to be consigned to the category of "all PSBR and wind".

The Chancellor painted a rosy glow on that, and referred to the economy as the strongest industrial economy in western Europe".-[Official Report, 26 November 1996; Vol. 286, c. 154.] He failed to mention that the Government have become dependent upon privatisation receipts, which, for the past decade and more, have amounted to an income of more than £5 billion a year. The Government now depend on those receipts just to balance the books.