Budget Resolutions and Economic Situation — Amendment of the law

Part of Oral Answers to Questions — Prime Minister – in the House of Commons at 6:18 pm on 22nd April 2009.

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Photo of Frank Field Frank Field Labour, Birkenhead 6:18 pm, 22nd April 2009

I shall speak very briefly, because others wish to get in. I shall focus on two aspects of the Budget. On the first part of the speech, Members on the Labour Benches were thrilled when the Chancellor said that even in times of extreme difficulties, we had different priorities from others and would ensure that the Budget was shaped in such a way as to protect the poorest. We are never happier than when the Government are ensuring that there is a wide, red sea between us and the other side. There was slight disappointment among many of us, if I put it gently, when the Chancellor did not go on to say what he was going to do about the 10p losers. I am sure that the Treasury Front-Bench team will not be too dispirited to know that some of us will return to that issue, to ensure that that red sea is even wider than the Government envisaged in the Budget statement. However, all credit to the Government for saying that the worse the crisis, the more focused we must be on the poorest.

My second point is on a similar theme: no crisis, however horrible, should make us waste radical purposes. I have listened to Budget debates in the House for 30 years, yet I have never before felt the excitement, if that is the right word, that I experienced just before 1 o'clock, when the Chancellor announced the public borrowing for this year and next year—£175 billion this year and £173 billion next year. At that very moment, the country's economic future, and much more besides, was cast on the waters of the money markets. If the Government are not successful in raising the record sums of money, we will clearly be in great difficulties. Hon. Members know—thank goodness, the figures have become common currency—that we are attempting proportionately to borrow more than any of our fellow G8 members. The times are therefore difficult for the Government and the country. Even in the early stages of trying to raise the debt, there has been some stickiness—I put it no more strongly—in the gilts market, where the Government have not always got their way in raising the money on the weekly basis that is required.

The Budget contains a table—C7—which gives urgency to my comments. The Chancellor was, thank goodness, as optimistic as ever about recovery, despite the fact that, compared with the time of the pre-Budget report, when we thought that unemployment would be about 1.4 million at the end of next year, he now believes that there will be 1 million more unemployed—approximately 2.5 million. According to the International Labour Organisation's definition, the figure could be above 3 million. Not only constituents in Surrey feel the pain, but Members of Parliament will feel the pain of going into an election, if it is held in April or May next year, with unemployment at that level.

The Chancellor suggests in table C7 that, even after a considerable period of recovery, we will not get revenue to support expenditure—we will not get revenue to reach 38 per cent. of GDP—by 2013-14. Yet all of us are on the drug of wanting Governments to spend 45 or 50 per cent. of GDP. I am worried about how the Government will raise the funds, given that a Government who wished to squeeze the rich "until the pips squeak", as Mr. Healey once said, did not get revenue above 37 per cent. of GDP. Much more than what the Budget outlined today is required.

We must not only think of effective ways in which to raise revenue, but think in a way in which we have never previously thought about how we cut—I use the word "cut"— public expenditure. It is not that I am not radical, but in those circumstances we might find ourselves being even more radical than we have been in the past.

I offer an illustration of that. I have lobbied the Government to adopt a pension reform that, in a sense, leads to a loss of interest in the huge ramifications with which we concern ourselves, and goes for a single objective of trying to guarantee a pension that, over time, lifts everybody out of poverty. It will obviously take time. It is about building an investment fund around the pay-as-you-go state scheme. At the moment, the Government are rejecting that reform and are committing us to a programme that will add 5.5p to the standard rate of tax, spending more on their pensions reform, yet that will leave 40 per cent. of pensioners poor.

In this situation, radicals will say, "Surely we can begin to spend that money much more effectively," which would mean something like the proposals that a number of us have put forward. That would not only secure the huge gain of committing the Government for the first time ever to ending pensioner poverty in times when we are cutting public expenditure, but for the first time ever open the debate in a civilised way about how we disengage from public sector pensions, including our own pension. We could safely say that we were closing all schemes to new members, because we would have in place a guarantee that nobody who is a citizen and does their bit will end up poor. We would then begin not only to save public expenditure on the Government's pension proposals, but build big savings into our national accounts over time from the closure of all public sector schemes, including our own.

That would also begin to give us the vision that was talked about by Mr. Taylor, whom I am pleased to follow. We need some sort of vision to engage, as my hon. Friend Alan Simpson said, in a way that galvanises the population. As we try to get our expenditure down to what taxpayers are prepared to pay, we clearly need some vision of what the new state is going to be like, because it will have to do things differently.

I thank the Government for suggesting that our side is going to have as our priority protecting the poorest. We are going to put even more wind in their sails. I hope that we will do justice to the 10p losers before the Finance Bill is through, as we said we would. There are 3.8 million of them out there still waiting for us to deliver on that pledge, and that is quite a lot of constituents and voters.

In a sense, one's whole empathy is with the Government, as they now try to grapple with what will be, for the rest of my lifetime, the central domestic political issue: how we begin to get the revenue that we can raise in taxes towards the level of what we can afford to spend. That will bring about a change in politics, which will not be just old-fashioned cuts politics and all the rest, but will open enormous opportunities for radical politics. I hope to be around for a few years yet to participate in that.