The economic crisis is unprecedented in many ways—its scale, its speed, its reach—so people are looking for something bold and distinctive from this Government. Let us think back to the great Budgets of our history. The people's Budget of 1909 introduced the first pension and the first social insurance. Labour's post-war Budgets built a new nation from the rubble of war. What made those Budgets great was their ambition, and their coherent vision for a different future. That is what we needed today, in the aftermath of this generation's disaster. The worst of times demand the best of Budgets.
So what did we get today? We got a mishmash of recycled announcements from a Government skilled in raising false hopes but incompetent in delivering practical help. The Chancellor had a choice: he could have used this Budget to get practical help to the millions of people struggling in this recession. He could have given a people's Budget for the 21st century. Instead, we got just another politician's Budget, desperately rushing around for half-baked ideas to save the skin of this failing Government. This Budget is a political supermarket sweep, a trolley full of random promises, but without even a hint of a plan or of any real likelihood that the promises will be put into practice.
The growth predictions in this Budget stoke up false hopes. The Chancellor says that the economy will grow by 1.25 per cent. next year, and by 3.5 per cent. by 2011. He says that £15 billion can be shaved from public spending without cancelling a single Whitehall project. Given the lamentable failure of this Government to get their own predictions right, people will be asking what kind of fantasy world they are living in these days. If they get things wrong again—particularly the growth predictions—even greater pain will be necessary to get the Government accounts in order in future years.
The economic crash is not the result of a few minor mistakes, and patchwork repairs will not fix it. We need to do things fundamentally differently, and that will need to start with a different kind of banking system, although that barely warranted a mention in today's Budget. Just because the subject is off the front pages today, that does not mean that the problems in our banks have been solved. Businesses are still not getting loans. Banks are still in a mess. The problems have to be sorted: we need a banking system in which no bank is too big to fail, in which high street banks take no unnecessary risks with other people's money, and in which risky casino-type investment banking is cut loose to fail when things go wrong.
The biggest disappointment in this Budget is its failure to sort out Britain's unfair tax system, and its failure to put money into people's pockets to help them to make it through this recession. Britain's taxes are still too heavy on those who can least afford them, and too easy to avoid for those who know how to do so. That is how this Government—and, I think, the Conservatives—seem to want it. We are now the only party that will do things differently, and get practical help, through lower taxes, to people who are really struggling.
This week, we explained that, if we took aggressive action to clamp down on all the loopholes and exemptions that benefit the richest people and the biggest businesses, it would be possible—even in a recession—to cut most earners' income tax bills by £700 by raising the income tax threshold to £10,000 for everyone.
The Government have finally accepted today, having spent years telling us it was not possible, that one of the most unfair loopholes—the doubling of the tax relief on pension contributions from the highest earners, compared to people on ordinary incomes—should be changed, but they have only tinkered with the loophole today by removing the benefit only from the tiny minority of people earning more than £150,000. Like the Chancellor's other tokenistic measures applying to the highest earners, it will raise very little money—only £200 million, according to his own Red Book—while leaving in place the really big loopholes such as the lower 18 per cent. tax on capital gains. That, in effect, serves as a massive subsidy for the very rich when we should be doing everything we can to cut taxes for people who really need help. Our proposals would ensure that 4 million of the lowest paid would no longer have to pay any income tax at all. Our proposals would put fairness and transparency back into this Government's woefully unfair and complex tax system, and I urge the Government, even at this late stage, to take up our ideas.
It is not too late to sort out Labour's failed fiscal stimulus either. There should have been proposals in this Budget to end the pointless VAT cut and replace it with a stimulus package that actually works. Billions have already been poured down the drain, but if the Chancellor stopped the VAT cut now, he would still have £8.5 billion to spend better elsewhere. Just imagine what could be done with that money. We could create thousands of real jobs, as well as lay the foundations for a different, greener economy. We could insulate 2 million homes and every school and hospital in the country, which cannot be done with the piffling amount announced today. We could build new council houses, upgrade public transport with new train carriages and re-open railway lines and railway stations. For every minute that goes by, £22,000 is wasted on the VAT cut, and every minute that goes by, someone else in Britain loses their job. It is not too late to turn things around. We could cancel the VAT cut, put the money into green jobs, and have a quicker recovery and a stronger country.
This mishmash Budget includes a litany of missed opportunities. I welcome the Chancellor's announcements on pensions, but will he confirm that he has still not addressed the fact that many pensioners receive pension credits on the absurd assumption that they are making a 10 per cent. return on their savings?
I have lost count of the number of Government announcements on housing—we have had another one today—yet fewer new affordable homes are being built than ever, young people still cannot get a foot on the housing ladder and the Government persist with their deeply misguided policy of subsidising people to take on new debt in a falling housing market.
Then there is the huge dilemma of how balance and discipline can be restored to the Government's finances in future. Today's figures of projected national debt will cast a dark shadow over future generations, but one thing is more important than anything else when it comes to the public finances—growth. Without growth, there will be no money anywhere to pay off the nation's debt. That means that we must not pull the rug out from under the British economy just as it is struggling to get up off the floor. So the Conservatives are, I believe, just plain wrong to propose slashing budgets immediately, which would be an act of monumental economic masochism. But the Government are wrong, too, to commit right now to the biggest fiscal contraction in the OECD— according to the Government's own figures published this morning, they have committed to a massive 16.75 per cent. cut in capital investment by 2011 when they have no idea what the economy will look like by then and no idea of whether cuts would kill off growth just as it gets going.
We should remember that this time last year, the Chancellor said that the economy would be growing by 2.5 per cent. today, and yet it is now registering 3.5 per cent. negative growth. Six months ago, he said that the recession would be over by
The Chancellor should adopt an honest approach on spending, too. He is trying to pretend that £15 billion can be stripped from public spending without anyone noticing, but talk of pain-free efficiency savings is a joke. We all remember Gershon. All it proved is that money can be moved from one column to another and called a saving.
The Liberal Democrats would do things differently. We would take big choices about what the Government should and should not do in the medium term, once growth has kicked in again. We would ask difficult questions: is the 50 per cent. target for university students either necessary or affordable; what is our international military role and how much should we spend on it; are exceedingly generous pension entitlements for well-paid public servants fair or affordable? We need a national debate about what the state can and cannot afford in the future, not Whitehall salami-slicing today. That is the responsible way—the honest way—to reduce spending in the years ahead and avoid painful higher taxes.
This Budget could have been a great Budget. It could have set a new direction, a new course for Britain out of recession and towards a stronger future. We could have had a new, fair, transparent tax regime; a better banking system; green jobs and green infrastructure for a sustainable economic future; a new era of openness from Government about what the public purse can sustain; and a new era of responsible, lean government that improves people's lives. Today was an opportunity to deliver practical help, but Labour is out of ideas and out of steam. Today the Labour Government have condemned us to years of unemployment and decades of debt. The country deserves something different.