Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 7:23 pm on 10th March 1999.

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Photo of Sir Ray Whitney Sir Ray Whitney Conservative, Wycombe 7:23 pm, 10th March 1999

The hon. Member for Worcester (Mr. Foster) believes that the Government are good for business. I fear that he will be disappointed in future. I am sorry about that, and I shall tell the House my reasons for thinking so later.

We are accustomed these days to the phrase "spin doctor". It is a feature of modern politics, and yesterday proved that it has become a feature of economics and Budget presentation. The Chancellor of the Exchequer, however, qualifies less as a doctor of spin than as a doctor of obfuscation. It was he who gave us the famous phrase about neo-classical endogenous growth theory, and he has talked about the symbiotic relationships between growth and much more. He has progressed from that to the performance that he gave yesterday: the words were simpler and crisper, but they were no less misleading.

We must carefully consider the reality beneath the golden words of the Chancellor. Two points may be briefly made. The first concerns the tax position and the reality that my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) so successfully exposed in his exchanges with the Prime Minister today. The reality is that Labour's first two Budgets involved an increase in taxes of nearly £41 billion, and in the coming year taxes will rise by more than £7 billion. Stealth taxes are an important theme, and we should hear much more about them.

The second reality obscured by the Chancellor's carefully phrased delivery was the matter of the golden legacy, on which we have already heard some exchanges this afternoon. It is a sensitive point with the Government. The going concern that took over in May 1997 will of course always reject the proposition that the Conservative Government left a golden legacy, so I must draw Labour's attention to The Times yesterday, in which Anatole Kaletsky wrote: The real authors of Britain's present economic prosperity—and of the present Chancellor's good fortune—were Kenneth Clarke and Norman Lamont. Mr. Kaletsky points out that automatic revenue growth is built in to the British system, which is ungainsayable, but which has not been said by Treasury Ministers, who seem always to try to reject a legacy that truly was golden.

Kaletsky also rightly makes a proviso—that the economy must not be in recession if automatic growth is to occur. That is one of the dangers that the Chancellor's seemingly solid edifice stands precariously against. In his projections for the next two or three years, the Chancellor still relies on growth of 1 to 1.5 per cent., which is about twice the average forecast of well-respected economic commentators throughout the country.

There is surely no doubt that manufacturing industry is already in recession, or that it has been seriously damaged. Many of yesterday's measures will increase the damage to that unhappy sector. We have heard quoted many times the assertion of Sir Clive Thompson, president of the Confederation of British Industry, that an increase of £20 billion in business taxes has already been inflicted.

Business does not face merely taxes, of course. A bureaucratic burden is also being heaped on industry. I am not prepared to enter a Dutch auction between the present Government and their predecessor about whether there have been 3,000 more documents or 2,500, but we all know that there have been too many of them. That is certainly the view of British industry, and many quotations to that effect can be adduced.

Another danger manifest in the Budget is the temptation to meddle. In The Times today, Anatole Kaletsky cites the interventions that will burden and harass industry, saying: Individually all these may be small measures, but taken together they seem to represent a covert triumph for the traditions of interventionist economic meddling and social engineering that appeared to be buried with old Labour. That is true, and it is being said by an independent economic commentator rather than coming only from Conservative politicians. The Labour party still believes that everything can be done from Whitehall. We heard bland words from the Secretary of State for Trade and Industry about the necessarily limited role of Government, but by their deeds shall ye know them. As the Budget works out in the months to come, I fear that it will become all too clear that it spells bad news for industry.

There is another danger. The Budget will make it harder to continue the downward pressure on interest rates. If anything, it might put pressure on interest rates to rise again, when set against the inflation target. We all know that if that happens, the impact on the pound, on our export potential and on business and jobs will be hugely negative, coming on top of an already difficult situation for British exporters. That would have negative consequences should we approach membership of European monetary union, although I do not wish to go too deeply into that subject from the Conservative Benches tonight.

Like many Budgets in the past, this Budget received a warm reception on the day and the day after, but that means that in six months' time there will be wailing and gnashing of teeth. This will be a classic example of such a Budget.