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The first thing to emphasise about this Budget, and the Finance Bill that gives effect to it, is that it satisfies the discipline that the Chancellor has imposed on public finances for the past seven years through the fiscal rules: the golden rule and the sustainability rule.
Adherence to fiscal self-discipline has brought about an unparalleled period of stability in the economy. At the same time, a fair distribution of financial liabilities has been achieved between the generations. Disciplined fiscal policy has been complemented by the Bank of England's independent conduct of monetary policy, which has given the financial system confidence that interest rates are fixed for economic reasons and not for political expediency. The consequence has been an unprecedented period of national prosperity, resulting in record low levels of inflation, interest and mortgage rates and unemployment, a stable economic climate that encourages businesses to invest and plan ahead and a resilience internationally that enabled the British economy to keep growing when the rest of the world moved into recession. On top of that, we are maintaining record investment in health, education and training to remedy 18 years of wanton neglect and to secure the foundations of the future.
None of that has been achieved at the expense of a fundamental commitment to social justice, which has been maintained through the working and child tax credits, the minimum wage and state pension increases that far surpass what would have been gained by linking pension increases to incomes.
Those are historic achievements that this Budget and Finance Bill continue. Yes, there are questions for debate, which are raised in the Treasury Committee's report, about regulation, whether consumer debt is too high, the significance of rising house prices, the impact of the falling dollar and future tax revenues. I recognise all that, but those issues are the pimples and scratches on the great edifice of the country's economic achievement. They are real issues, but they must be kept in proportion. Above all, we must not accept what the Opposition would no doubt like the country to believe—that the present prosperity and fair prospects for the future depend not on the policy of the Government but on astrology or the position of the planets in certain constellations. This country's prosperity does depend on Government policy, it will depend on it and it could be wrecked by the ideological folly of the Conservative party. After determined opposition, and some kicking and screaming, they have now accepted the Bank of England's independent role in framing monetary policy.
The dog that did not bark in the night is the Conservatives' unwillingness to accept the Chancellor's fiscal rules. They are within two years of a general election, but they will not say that they accept these rules or, indeed, any other rules. All they will say is that, whatever the economic circumstances, they will reduce taxes. We know what impact that would have on public spending, and Labour Members will ensure that the public at large understand the local and national impact on the national health service, schools, universities, public transport and roads.
The other question is what the impact will be on the overall management of the economy when the Conservatives do not accept the discipline of any guiding rules. What will be the impact on jobs, on industry, on interest and mortgage rates and on training? What is there in the golden rule and the sustainability rule that a modern political party cannot accept? The golden rule secures fairness between generations. It says that the Government—on balance, over the five or six years of the economic cycle—should borrow only for capital spending: spending that will benefit the next generation and perhaps beyond. In other words, people who enjoy benefits now and in the future will pay for them. The opposite approach is to borrow for immediate current spending, which benefits only those who are around today but leaves much of the payback to future generations who do not benefit at all.
The sustainability rule ensures that even if borrowing is for capital investment, the burden of debt now and in future does not build up disproportionately. In other words, it prevents people today from investing in capital projects to such an extent that the next generation is so burdened by inherited debt that they are prevented from investing for their future.
It is important to stress that the golden rule, whereby borrowing equates to capital spending, does not apply to any one year, but to the whole economic cycle. Thus, when economic activity is at a low ebb and, consequently, Government tax income is low, borrowing may provide for some current expenditure, which then stimulates economic activity, but when the high tide of economic activity comes along again and tax revenue to the Government is high, that revenue must be used to repay the excess borrowing when the economic tide was low.
Although the Conservative party is reluctant to sign up to the Chancellor's fiscal rules, its economic performance in the past came nowhere near this Government's achievements. It cut public spending when tax revenues declined as the tide of general activity receded; thus, it deepened the recession. As an alternative, when the high tide of economic activity came along and tax revenues increased, the Conservatives cut taxes for the better off and so overheated the economy as to create runaway inflation. They penalised low-income families on the downturn of the economy through unemployment and rewarded the top 10 per cent. or so with tax reductions when the economy improved.