Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 8:39 pm on 10th March 1999.

Alert me about debates like this

Photo of Geraint Davies Geraint Davies Labour, Croydon Central 8:39 pm, 10th March 1999

What a great Budget! It was not red nose day for the Opposition; it was red face day. We had a fantastic media reception, involving winners and more winners: pensioners, businesses and families. It has been reported that even Stella Hague, the Leader of the Opposition's mother, thought that this was a great Budget.

Nevertheless, it is important to take a strategic view of the impact of the Budget on UK plc, as we move forward in the global economy during difficult times. The Budget will create a fairer, stronger Britain for the future. We should look at the big picture, rather than making puerile jokes about Roger the dodger. No doubt Stella was not very impressed by that. Anyway, we should consider the broader impact on the British economy.

I think that we all welcome the lower tax rates: the reduction from 23p to 22p, the l0p tax band and the cash for families. Some 16,800 families in my constituency will benefit from that. We also welcome the stimulus for enterprise, the support for pensioners and the recommitment to health and education in the form of £40 billion. There is also extra money for accident and emergency services, and £2,000 for each school.

All that is welcome, but I heard some scepticism from Opposition Members. Where was the money to come from? In fact, this is the stability dividend from the drawing of a line under the period of boom-and-bust chaos created by the last Government. The reality is that we inherited a debt cost of some £28 billion a year—debts which have now been transformed into budget surpluses. The reality is that, since the new Labour Government took power, nearly half a million more people are now in jobs—no longer claiming benefits, but creating economic wealth. The reality is that long-term interest rates are lower than they have been for 40 years, and that short-term interest rates have fallen seven times in succession. For that reason, we are spending less on social security than was anticipated.

The current position contrasts with the vivid picture painted by the right hon. Member for Wokingham (Mr. Redwood), who seemed to be describing another world—a world to which, presumably, he has now gone. The right hon. Gentleman conjured up a picture of escalating unemployment; as I have said, nearly half a million more people are now employed. He talked of recession—and, of course, there is a recession in wider terms. A quarter of the world is in recession. Global forecasts have been halved, and difficult times lie ahead; but we must face those times realistically.

That does not mean a repeal of the independence of the Bank of England, which the right hon. Gentleman seemed to be calling for and which would cause interest rates to hurtle up. It does not mean rejecting, in perpetuity, entry into the euro, which would drive away all international investment. Conservative Members keep badgering us about the need for sterling to go down. Sterling will go down only if the City and the international markets lose confidence in it, and that will happen only if those markets have confidence in the Conservative party's ever regaining power and, as a consequence, preventing Britain from joining the euro—and the reality is that no one thinks that will happen.

Earlier this week, the Financial Times reported the International Monetary Fund as describing Britain as a glowing example to the world. One of our key objectives is to make work pay by guaranteeing an income of £10,000 for every working family in Britain, and—as we shall do through this Budget—lifting an extra 7,000 children out of poverty. Family support, in terms of income, is crucial to a Government whose priority is education, education, education: a Government who see that as the key to the liberation of our children, enabling them to be productive in a new economy and a new world.

In the world of Tory poverty, children in millions of households went to school with low self-esteem, low nourishment and low prospects. That sounded the death knell of Britain's economy, but we have turned the situation around.

I welcome the structural tax changes that will eliminate some of the distortions that we have inherited—distortions that were not tackled during the 18 solemn years of Tory rule. The move on mortgage interest relief at source is particularly brave. MIRAS is a distortion of the housing market which causes normal people to invest enormous amounts in housing rather than in British industry. It has also made the UK economy too sensitive to interest rates. We want to consider the prospect of joining the euro; we do not want interest rates to be set on a pan-European basis, and then to find that there is a particular sensitivity in the UK economy. That prospect has been eliminated. Moneys have been recycled more fairly and effectively, supporting enterprise and families.

I welcome the alignment of national insurance and tax, which goes hand in hand with the transfer of responsibilities for national insurance to the Inland Revenue. That is good for business, for the markets and for Britain. I also welcome the new tapering of business taxation. Corporation tax is at 30 per cent., an all-time low, the tax for small and medium enterprises is at 20 per cent. and the tax for companies that are starting up is just 10 per cent. The Budget is creating a ratchet for the generation of a new enterprise culture in Britain of prosperity and employment.

The support for SMEs will encourage rational risk taking. Lower capital gains tax, regional research and development tax credits and university cash for science and innovation are all to be independently welcomed.

For a new Government, their approach on environmental sustainability is forward looking and brave. They have taken the opportunity with both hands. The tax on fuel, the investment in transport, which is yet to be announced, the neutral system of business energy tax, combined with reductions in national insurance, the attack on company cars—it is about time that we did something about them— and supporting company schemes that provide communal transport for employees, are all to be welcomed.

We are creating a virtuous investment environment in Britain which is based on low tax, high skills, an open economy, market access to Europe, stability and an end of boom and bust. The fact that it is an environment in which English is spoken will be well received by the north Americans, the Japanese and others. There will be opportunities for more and more investment in a new Britain and new world.

The Budget has been good for families, the elderly, small business and the environment. Well done Gordon for making Britain great again.