Amendment of the Law

– in the House of Commons at 1:13 pm on 23rd April 2009.

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Debate resumed (Order, 22 April) .

Question again proposed,

That,—

(1) It is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.

(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation,

(b) for refunding an amount of tax,

(c) for any relief, other than a relief that—

(i) so far as it is applicable to goods, applies to goods of every description, and

(ii) so far as it is applicable to services, applies to services of every description.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer 1:17 pm, 23rd April 2009

It is a great pleasure to open the second day of this Budget debate. It gives us an opportunity to look at the detail of the Budget and to highlight the points that the Chancellor of the Exchequer entirely omitted from his speech yesterday lunchtime. It is also a pleasure to do so opposite the Secretary of State for Energy and Climate Change. The Chancellor has let me know that he is on his way to an important meeting in Washington, and I entirely accept that.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

As my hon. Friend says, the Chancellor might well want to put in a call to the IMF for all sorts of reasons.

It is good to open this debate with the Energy Secretary here. He is always an engaging fellow and we always have a good relationship. After all, he was one of the key economic advisers of the last 10 years—one of the members of the council of economic advisers and one of the adjuncts in that famous Treasury bunker. To be fair, he has always stressed that he just stuck to giving economic advice rather than trying to run the political operations. Given what has happened to the British economy, perhaps in the interests of his long-term ambitions, he should take credit for the political operations and leave Mr. McBride to take the blame for the economic advice.

We welcome the Secretary of State to this debate, and it is a special one. Government Budgets normally take a few days to unravel—sometimes just one day—but this one set a new record. It unravelled half an hour after the Chancellor sat down. He sat down at around 1.30 pm, and at 2 pm the IMF produced its growth forecasts for the world economy and the British economy, which completely contradicted the growth that the Chancellor had given to the House just a few minutes earlier.

Instead of the economy going from a staggering 3.5 per cent. contraction to a fantastically optimistic 3.5 per cent. growth in just two years, the IMF says the recovery will be much slower and, indeed, that Britain's economy will still be contracting next year. I hear sneers and dismissal from Government Members about the IMF's figures, but I thought that the IMF was going to be the new early-warning system for the Prime Minister. In a stroke, the IMF destroyed the credibility of the premise on which the Budget and its borrowing figures had been built. The claim is that within just two years, the British economy is supposed to bounce from the deepest recession that it has known since the second world war to levels of economic growth and household consumption seen only at the height of the boom; we now know that, frankly, in the view of almost every independent forecaster, that is a complete fantasy. No wonder that one paper this morning described the whole thing as "Alistair in Wonderland". I guess that that leaves the Prime Minister as our mad hatter—and given the expression on the face of the Secretary of State for Energy and Climate Change, he is the white rabbit.

As I say, the IMF was not the only one to question the central Budget assumptions. Almost every single business organisation and independent forecaster followed suit, including the Institute of Directors, the Engineering Employers Federation and a host of others. This is what the chief economist at Standard Chartered—one of the few banks that has not gone bust under this Government—said yesterday afternoon:

"The chancellor...believes recovery will be rapid...we will see growth of 1.25 per cent. in 2010 and 3.5 per cent. in 2011. This is fantasy...as this...rebound is expected to occur" while the "legacy" of the borrowing binge "lingers on".

Extraordinarily, the Chancellor of the Exchequer yesterday announced the worst public finances ever announced in the House of Commons, told us that in the next two years we would borrow more than has been announced at that Dispatch Box by all previous Chancellors combined, and said that he would double the national debt, yet he was guilty of being too optimistic. That is the scale of the mess that the Government have created. The tragedy of yesterday was that instead of being honest about that mess—instead of taking responsibility for the mistakes that have been made and giving us a credible plan to pull Britain through—we got that complete fantasy.

This is what the director general of the CBI said yesterday afternoon:

"The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI's preliminary judgement must be that it does not".

That sums up the scale of the failure yesterday. The central task of a Budget in a recession such as this is to inspire confidence in the future—confidence that the Government are realistic about the problems that the country faces, confidence that they have a credible and rigorous plan to deal with those problems, and confidence that they have the leadership and vision to take this country forward. Who would say that in Britain today, people and families are feeling more confident about this country's future as a result of the Budget? Almost no one. That is why yesterday was not a route map to recovery but the death rattle of a tired and discredited Government who are limping on until the law of the land actually forces them to hold a general election.

Let us look at the components of what a credible and rigorous path for restoring the public finances might look like, and then we can see why the Budget failed. [Interruption.] Indeed, and it might come as a surprise to the Secretary of State for Energy and Climate Change, that there is such a thing as a credible and rigorous path because we certainly did not hear of one yesterday. First, it would involve understanding why the public finances are in such a disastrous state. The Prime Minister is still stuck in the rut of claiming that this is the recession that came from America and hit an otherwise sound British economy. I see Mr. Hamilton nodding his head. He must be about the only person in the world who believes that now. [Interruption.] Okay, the three of them do—the hon. Members for Glasgow, North-West (John Robertson), for Coventry, South (Mr. Cunningham), and for Midlothian. Perhaps if we have a swipe-card system, we will get some more in, too.

Whether we are talking about Lord Turner, from whom the Government commissioned a report, or the Treasury Secretary of the United States, there is now consensus that the British economy, like the American economy, went through a credit boom that fuelled an unsustainable rise in house prices, household borrowing and bank leverage. Indeed, it was greater in the UK than in the US. It was an illusion of economic stability built on a mountain of debt. Given that, the claim to have abolished boom and bust was surely one of the greatest political deceits ever told to the British people, and the decision to borrow at unsustainable levels during the boom, instead of fixing the roof when the sun was shining, left Britain totally unprepared for the economic slow-down. That is why Britain now has the worst public finances of any major economy in the developed world. Even in the past 24 hours, after the Government forecast a Budget deficit of over 12 per cent. of national income, Ministers still will not admit it.

I welcome the Chief Secretary to the Treasury to the Chamber. Yesterday, I watched her saying in the media that the US deficit was going to be higher than ours. I do not know whether she read the IMF report published yesterday afternoon. It says that with the exception of Ireland, the UK has the highest budget deficit of any of the countries that it looked at—higher even than that of Iceland, let alone the United States of America. That is the highest deficit in our peacetime history.

Let us remember what the Prime Minister said just last year. Perhaps these words were crafted by the Secretary of State for Energy and Climate Change:

"Look in the early 1990s, let's look at how economies go wrong,"— said the Prime Minister—

"in the early 1990s Government borrowing went up to 8 per cent of GDP, that's what happened under the Conservatives. It went completely out of control."

If he describes 8 per cent. as "completely out of control", what does he call a 12 per cent. budget deficit?

In the Red Book, there is an admission, which we might well be putting on posters in the run-up to the next election, that the current downturn is forecast to be much deeper than that of the early 1990s.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

The right hon. Gentleman shakes his head, but it is there on page 200 of the Red Book. He can read it out if he likes, or I will. [Hon. Members: "Go on!"] Oh, all right. It says that

"the current downturn is forecast to be much deeper than that of the early 1990s".

There we go—from the lips of Labour itself, after all those years of lectures about the 1990s, Black Wednesday and all that, we have that admission, and we will treasure it.

Of course, when the Government's defence on the deficit is looking a little threadbare, they turn to the argument about the stock of debt—overall levels of Government debt—but that argument is now falling apart, too, because the stock of debt is soaring as well. According to the OECD, Britain will have higher debt than 20 other developed nations—higher than France and Germany. The significance of that is that the Prime Minister said, just a few months ago:

"The national debt, even after the difficulties that we go through, will be lower as a percentage of national income than in France, Germany"—[ Hansard, 26 November 2008; Vol. 483, c. 716.]

That commitment—that promise—given by the Prime Minister just a few months ago is now completely worthless. We will see whether the Secretary of State for Energy and Climate Change repeats it today. How on earth can the Prime Minister be trusted to get the future right when he does not understand the mistakes of the past or the problems of the present?

The second component of a credible and rigorous path to restoring some sanity to the public finances is a clear statement that the principal weapon in dealing with Britain's overspending is spending restraint. Let me be fair: Labour has come off its spending plans. Fantastic! At last! We have been telling it to do that for months. We would like to hear an apology from every single Labour Minister who has stood at that Dispatch Box month after month and said that coming off Labour spending plans meant savage public service cuts. Only a few months ago, the Prime Minister said of my right hon. Friend the Leader of the Opposition:

"he wants to cut public spending. He is totally on the wrong side of the argument."—[ Hansard, 14 January 2009; Vol. 486, c. 210.]

But listen to what the Chancellor of the Exchequer said on the "Today" programme this morning:

"I have cut overall public spending" in the Budget. In fact, the Budget Red Book shows that Labour will cut its departmental spending plans by £9 billion, and its capital spending plans by £11 billion, over the next four years. That is what the Labour MPs were cheering about at the end of that Budget statement—not that the cheering went on for very long.

That is the political tragedy of the Budget. We have moved from the age of prosperity to an age of austerity, but the leadership of the Labour party has been completely left behind by events. There should be a sensible debate in this Parliament, now, about how we can deliver decent public services in a period of tight spending control. We should be discussing how to get better value for money now that the cupboard is bare. We should be deciding—and perhaps have a debate between the parties—on the best way of tackling the long-term drivers of public expenditure, such as unproductive services, welfare dependency and family breakdown. We should be working out what replaces the completely defunct fiscal rules and the two-year spending reviews that used to provide at least some appearance of a fiscal framework. But what do we have from the Labour party? Absolutely nothing. The fiscal framework now consists of a temporary operating rule that will be more permanent than the temporary fiscal rules that were supposed to be permanent.

To be fair, some people in the Labour party, and some people who used to be in the Labour Cabinet, want to have debate about the politics of austerity and how to deliver government to the people in a time of spending constraint. The right hon. Members for Birkenhead (Mr. Field) and for Norwich, South (Mr. Clarke) and even Jon Cruddas have all called for such a debate, but their problem is that their party is led by someone who still wants to reduce everything to a pathetic dividing line of Labour investment versus Tory cuts. How on earth does the Prime Minister expect to achieve that? How on earth does he expect to advance that argument when, on the basis on which Labour fought the last election, the cuts announced in yesterday's Budget amount to £84 billion? Does he really think people will not notice that, far from seeing so-called Labour investment, we have just seen investment in the health service—capital investment—cut by £2.3 billion next year and investment in schools and universities cut by £900 million?

The Government have another problem. Although the Budget accepts the principle that Labour spending plans were completely unaffordable, and although the Government have told us that billions of pounds are being wasted in Whitehall as we speak, they cannot explain why they are still planning to increase spending in 2010 by 2.9 per cent. Indeed, yesterday the Government actually increased their spending plans for 2010—next year—by £20 billion, and only half of that was extra spending on debt interest and unemployment. When will they admit in their arguments what the figures in their Budget tell them? Their spending plans are simply unaffordable.

The Chancellor has admitted that there is scope for efficiency savings. On the radio this morning, he said:

"Any organisation can always be more efficient...We"— the Government—

"need to be more efficient."

Anyone listening to that might have been under the impression that the Government were actually taking some of those tough decisions to make things more efficient, but the Chancellor will start to constrain public expenditure only in 2011. I wonder why he picked that date— [ Interruption. ] The Secretary of State says that we want to cut it now. Just to be clear, we are proposing, in a recession, to restrain the growth of public expenditure by £5 billion and use the money to reduce taxes on pensioners and savers and to provide extra courses for people who are leaving university this summer. Even with the right hon. Gentleman's economic understanding, he must realise that that is not a fiscal tightening or a fiscal loosening. It is fiscally neutral and it is the right way to spend money that the Government themselves admit is being wasted at present.

Is it not the most cynical trick of all for the Government to pretend that they are only hitting the rich by raising their taxes before the election, while delaying the real tax rises and tough spending decisions until after the election? How courageous. What leadership: a move worthy of a Prime Minister who has never had the courage to submit himself to a democratic vote. Thankfully, the public have seen straight through it. Instead, we see the Labour party lurching left, off the centre ground that Tony Blair put it on all those years ago. Gone is the language of aspiration and opportunity; in comes the talk of "soak the rich" and "pips squeaking". Never mind that a 50 per cent. tax rate before the election clearly breaks one of the central promises in Labour's election manifesto. It will be interesting to hear what the Secretary of State says about the election manifesto commitment not to raise the top rate of tax. The manifesto said:

"We will not raise the basic or top rates of income tax in the next Parliament."

As I understand it, if there is a general election next May or June, that will have happened and the manifesto promise will have been broken. That is from a Prime Minister who, unbelievably now, came into office pledging to restore trust in politics.

Of course, it is not the rich who will bear the burden of Labour's historic incompetence. When we look closely at the Red Book, it is clear that the headline-grabbing measures announced by the Chancellor will actually raise less money than the national insurance rise on the jobs and incomes of people earning more than £20,000 a year. Although we do not think that higher marginal tax rates are a good idea, and although we agree with all the arguments that used to be advanced from the Dispatch Box by the former Chancellor and the former Member for Sedgefield that higher top rates of tax can damage enterprise, our priority will be to reverse the tax rises on the many, not the few.

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe

Will the hon. Gentleman say whether a future Conservative Government would actually implement the 50 per cent. tax rate? If not, what would he do instead to raise the necessary finances?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I do not know whether the hon. Gentleman noticed, but one of the key changes in the Budget is that the tax will be implemented by a Labour Government before the general election. I make it very clear that I cannot make a pledge to reverse that—[Hon. Members: "Ah."] No, I cannot make a pledge to reverse that. I do not claim that it is a great idea, but my priority is to avoid tax rises on the many, not tax rises on the few. By the way, Labour MPs had better get used to the phrase, "Labour's tax rises on the many, not Labour's tax rises on the few", because they will hear it a lot between now and the general election.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Is my hon. Friend aware that the former Labour Minister, Lord Digby Jones, said today that the Budget gave him no hope whatever about the future of British exporters and the British economy, and that it was a Budget without any kind of vision? Is that not an interesting comment from somebody who was sitting on the Labour Benches only a few weeks ago?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

It is a telling comment from a person who was appointed just days after the Prime Minister became Prime Minister. No doubt the Secretary of State for Energy and Climate Change and his cronies, such as the Chief Secretary, plotted the appointment of Digby Jones for months. They thought it would be a brilliant appointment. I have to say that some Members, including me, were sceptical about whether he should really be Lord Digby Jones of Birmingham, but given how helpful he is being at the moment I think that he should indeed represent an entire city in the House of Lords.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Indeed. He can have a dukedom as far as I am concerned.

The national insurance tax rise, which we will hear much of between now and the election, is about the only real policy the Government have for the recovery: a tax on jobs at a time when we have the fastest rise in unemployment in our history. There was almost nothing in the Budget to help Britain move from an economy of borrow and spend to one where we save and invest.

The measures on unemployment were another cruel mirage on a day when we saw a record rise in unemployment.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I am coming to why if the Secretary of State could be a little patient. Perhaps he can explain why the Chancellor did not tell anyone that the Budget assumption is that the claimant count will go up to 2.4 million, which would put the labour force survey figure well above 3 million. Why was that not in the Chancellor's statement to the House yesterday?

Photo of Peter Bone Peter Bone Conservative, Wellingborough

What would my hon. Friend say to my constituents who have seen a rise in unemployment of 67 per cent. under the Labour Government since 1997?

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

I would advise them to continue returning my hon. Friend to Parliament. I remind the House that he was one of the first to draw attention to the impact of unemployment in individual constituencies as a result of Labour's recession.

The Chancellor made great play yesterday of his guarantee to everyone aged between 18 and 24 who claims jobseeker's allowance for more than a year that they will be given a work placement or work-related training. That was the big promise on unemployment. Well, we have done some research over the past 24 hours. What the Chancellor did not tell us is that, as of today, only 5,755 people are covered by that guarantee. I hope that it is good help to that 5,755, but there are 1.2 million young people aged between 18 and 24 who do not qualify. They are languishing; they are not in school, not in a job and not in training—a record number of NEETs under the Government.

We heard much of the green recovery that would be unleashed by the Budget—something that I know is very much on the mind of the Secretary of State; no doubt he thought all about it in advance and did the spinning. What happened? What about the electric car announcement? The battery ran out before it even made it to the Budget speech. Friends of the Earth said about yesterday:

"The Government has squandered a historic opportunity to kick-start a Green industrial revolution."

WWF says that

"what was announced is not the bold leadership we desperately need to secure a truly low-carbon future."

The leadership on that future, like the leadership on so many other big challenges facing Britain today, has to wait for a new Conservative Government. That lack of leadership is the legacy of a Prime Minister who has always been more interested in short-term political dividing lines than in any long-term vision for the country.

For years, the Prime Minister said that the choice was between Labour investment and Tory cuts; now, he has cut investment in schools and hospitals and given us £84 billion of Labour cuts, but he still lacks the courage to admit it or debate it. For years, he said that the choice was between the many versus the few; now, he is raising taxes on the many and the few, including a tax on jobs in a recovery. For years, he said that the choice was between Tory boom and bust and Labour prudence and stability, and now he has given us the prudence of the worst budget deficit in our history, the stability of the deepest recession since the second world war and the tragedy of the greatest boom turning to the biggest bust.

Eighteen months ago, the Prime Minister cancelled the general election—no doubt on the advice of the right hon. Gentleman the Secretary of State—and said that he wanted more time to set out his vision. That is what he said. Now we know, after yesterday's Budget, that there is no vision to set out, and the sooner we change our Government, the sooner we will get the change that our country so desperately needs.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change 1:41 pm, 23rd April 2009

I am pleased to open this Budget debate with the shadow Chancellor. For one brief, shining moment during his speech, when he said that he would present a positive plan, I thought that he might do so, but we heard nothing positive—no plan for how to get out of recession, no plan for how to build for the future, no plan for fairness in this country. That is the truth about what he said. It was a highly predictable diatribe. He would have convinced more people with a more balanced speech.

The shadow Chancellor says, for example, that the downgrading of growth is a purely British problem, but the International Monetary Fund has forecast negative world growth for the first time since world war two. That shows the gravity of the situation that we are dealing with. He says that we are worse placed than others, but the IMF showed yesterday that we are faring better this year than Germany, Japan, Italy and the euro area. He says that our deficit— [ Interruption. ] I am coming to that. He says our deficit is worse than others', but the United States Congressional Budget Office says that the US deficit will be 13 per cent. this year. On the question of the deficit, we did pay off the debt during the years when the economy was growing—

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

If the hon. Gentleman listens, he is welcome to intervene.

The national debt went down from 42 per cent. to 36 per cent., including the £22 billion of spectrum auction proceeds. It is also true—I make no bones about it—that we did choose to invest in schools and hospitals, which the Opposition opposed at every step; that we did choose to invest in public transport, housing and all the things that matter; that we did fix the roof when the sun was shining; and that, for example, as a result, tens of thousands of children are being taught in schools where that was done.

I shall discuss the future, because it is important, and the three questions that underlie the Budget debate. The parties have some big differences on those questions, which are worth highlighting. First, how do we get Britain out of recession as quickly as possible? That is what people want to know. Secondly, how do we build the economy of the future? Thirdly, how do we meet the challenges that we face, including those on the public finances, in a way that is fair to ordinary families? I know that the shadow Chancellor does not really want to do this, but let us try to engage with the substance of the argument, because on the question of how get Britain out of recession, we have an honest difference of view, which it is probably better to make plain.

Yesterday, my right hon. Friend the Chancellor announced a 0.5 per cent. fiscal easing this year. I assume the shadow Chancellor thinks that that is the wrong thing to do to help Britain out of recession; that the money to help tackle unemployment is the wrong thing to do; that the money for housing is the wrong thing to do—if he wants to intervene and say that it is the right thing to do, he is welcome to do so—and that the money for low-carbon measures which will help this year and next is the wrong thing to do. Perhaps he would like to tell us whether he supports such action. I should be happy to give way to him.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

We support in a recession getting money to the front line from the waste that the Government have identified. They say that there is £15 billion of waste sloshing around Whitehall. If the right hon. Gentleman thinks that those schemes are so good, he should use the money from that waste and not add to the national debt.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I am not quite clear from that answer whether or not the hon. Gentleman supports the action. I suspect that he wants to have it both ways.

On how we get out of recession, however, there is a philosophical difference that is worth highlighting. The shadow Chancellor may not want to talk about it, but it is important that the country knows the difference. In a debate in the House last month, he was asked about his view on borrowing and on borrowing rising in a recession. He gave a very illuminating answer, saying that

"tax receipts fall off and welfare payments increase," and that, as a result—these were not his words—borrowing rises. He continued:

"Those are the fiscal stabilisers, and that provides a fiscal stimulus. That was a debate that was had in this country and many others over many decades since the 1930s."—[ Hansard, 18 March 2009; Vol. 489, c. 932.]

There you have it, Mr. Deputy Speaker. The shadow Chancellor's view, even when interest rates are at 0.5 per cent. in this country, is that the limits of fiscal policy—this is a very important point—are to let the automatic stabilisers work. On that point, however, he is pretty much alone: 19 of the 20 G20 countries have put more money into their economies; the Institute of Directors and the CBI support putting extra money into the economy; the managing director of the IMF supports it, too; and— [ Interruption. ] Opposition Members ask about the Governor of the Bank of England, but he also supported our fiscal measures—and our targeted action in the Budget.

The shadow Chancellor calls himself the moderniser in the Conservative party. I think he once said that we was not an über-moderniser, but he says that he is a moderniser. Interestingly, there is someone who I think is the shadow Chancellor's secret hero: President Obama is, I am sure, someone for whom the shadow Chancellor has great admiration. What did the President say in November 2008? I agree with what he said, and perhaps the hon. Gentleman will tell us whether he does, too. The President said that

"we have to do whatever it takes to get this economy moving again...we're gonna have to spend money now to stimulate the economy...short term, the most important thing is that we avoid a deepening recession".

I would be happy to give way to the shadow Chancellor, because he did not want to illuminate our differences of view. I am happy for him to come back on this point. I repeat, President Obama said that

"we're gonna have to spend money now to stimulate the economy".

He believes in fiscal expansion and targeted action. I wonder whether the shadow Chancellor will tell us whether he agrees. I am happy to give way.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

The hon. Gentleman does not want to intervene. It is not surprising.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I shall give way to the hon. Gentleman in a few minutes. He might answer on the shadow Chancellor's behalf.

It is not surprising that the shadow Chancellor does not want to intervene; he does not want to admit the central difference that the country must know about—that the recession would be deeper, longer and more painful if he were in charge of the economy. That is the truth that dare not speak its name in his speech.

Photo of Bob Russell Bob Russell Opposition Whip (Commons), Shadow Minister (Defence)

Will the Minister accept that, in the real world, after years of plenty and 12 years of a Labour Government, almost 4 million children still live in poverty, and that, thanks to the Government's 12 years of failure, the housing crisis for low-income people is the worst for a decade?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I think the hon. Gentleman overdoes it. A more balanced view would be welcome not just from the shadow Chancellor, but from him. We have made significant inroads into child poverty on the most testing definition of relative poverty. [ Interruption. ] Conservative Members shout from sedentary positions, but we all know the truth: child poverty would be far worse if they had their way and if they were in power. There would be no money to tackle child poverty or the housing situation. My right hon. Friend the Chancellor made money available for housing, and it is important that he was able to do that even at these difficult times.

The problem for the shadow Chancellor is not simply that he opposes fiscal action, wrong-headed and isolated though that makes him. Obviously, his policies would make the recession deeper, longer and more painful. His problem is also that he does not even follow his own strictures about the 1930s.

The Conservatives' policy on spending is interesting: their argument is that we should cut spending now. In January, the leader of the Conservative party was very clear when he said:

"let's say there's an election April this year...I'd immediately instruct my ministers to go into their departments and say instead of the increase of perhaps 2 per cent. real terms you're expecting, it's a 1 per cent. real terms increase".

I do not think that there is any doubt about what that means. It means cuts in spending. It means taking away money that has been promised to schools and hospitals.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Will the right hon. Gentleman concede that, using his formulation, there are £84 billion of cuts off previously published Labour spending plans? Yes or no?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I am glad to have tempted the hon. Gentleman back to the Dispatch Box. Let me say to him very clearly that his party would take money away that has already been promised and cut the real-terms growth in spending. In contrast to his proposals, we are sticking to our spending plans up to 2010-11 and sticking to the money that we have promised for schools and hospitals. The big difference, although he wants to get away from it, is that he is doing something that is seen to be economically illiterate. He is saying that the time to cut spending is now, in the middle of a recession. Whatever he says, he knows that that is the case. I do not know why he boxed himself into that position.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Let me ask the question again, because it is very important. The definition of cuts that the right hon. Gentleman used is money that comes off previously published spending plans. Will he now concede that that means that, on his definition, there are £84 billion-worth of cuts in the Budget and the pre-Budget report, because they have come off previously published Labour spending plans? Yes or no?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I do not concede that. I was making it quite clear that money has been promised in 2009-10 to hospitals, schools and others and has then been taken away. We have not got to the next spending review; we have not allocated the money in the next spending review.

Photo of Charles Walker Charles Walker Conservative, Broxbourne

I have a lot of time for the Secretary of State—[Hon. Members: "Why?"] Because he is a very nice and honourable chap. However, on 3 March, secondary schools in my constituency were told that they were going to get a certain sum of money to fund their sixth forms. Less than a month later—three days before the new financial year started—£40,000 was removed from each of those schools' sixth forms. Will the Secretary of State at least answer the concern that I am raising and please get someone to return that promised money to secondary schools in Broxbourne and around the country?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I have respect for the hon. Gentleman, too, but let me say to him that he certainly would not get any money from his party's Front Benchers. They want to cut money in the spending review. The Chancellor announced money for sixth forms yesterday, and I hope that it will help the hon. Gentleman's sixth forms.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

The Secretary of State said something pretty significant about future spending plans. During the Budget speech, the Chancellor announced from that Dispatch Box that current spending would grow by 0.7 per cent. from 2011 onwards. The Secretary of State for Energy and Climate Change now says that those spending plans are not valid because there might be a spending review before then. That is the basis of the question. He said that there was going to be a spending review and that we cannot take those figures as fixed. Given what has been promised by Labour, the right hon. Gentleman is now, in his terms, cutting those spending plans by £84 billion. He said that he wanted an honest debate, so why does he not have the honesty to admit that? Then we could debate how to deliver public services in a tight spending environment.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I was making a very simple point. The money has been allocated for the spending review up to 2010-11, because, as the hon. Gentleman knows, we have three-year spending plans. The Chancellor set out the figures for the future spending review. That is a very simple point. The hon. Gentleman wants to take away money that has already been promised.

Let me move on. The second test of the Budget is whether it prepares our industries and our economy for the future. Contrary to what the shadow Chancellor said, significant announcements were made yesterday by my right hon. Friend the Chancellor. Not only were there the first legally binding carbon budgets, which provide a certain framework for industry, but we heard announcements on renewable energy, carbon capture and storage and a range of other things.

Earlier today, I made a statement about carbon capture and storage and the role that it can play for Britain, offering a huge industrial opportunity for this country and thousands of jobs. I am sure that the hon. Gentleman has good intentions, but what he has said reflects a difference of view about the role of the Government. We think that it is right to support the emerging industries of the future and that there is a role for public spending as we do that. However, I do not think that that is in the Conservatives' philosophy. I do not think that the shadow Chancellor really believes in it. I think that he believes that markets will take care of it.

Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North

My right hon. Friend is bringing us to the details of what is in the Budget report. The question is how we deal with energy efficiency and all the other aspects. Does he agree that the announcement to increase the money for the Warm Front scheme will do an amazing amount for households with vulnerable people? That is exactly the type of public expenditure that will help to deliver the decent homes standard, and it will be widely welcomed across the country.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I agree—my hon. Friend is absolutely right. The priority that the Chancellor gave to those measures in a difficult Budget, where there was not much money to spend, is important. That is true of Warm Front, carbon capture and storage and a whole range of other matters.

The shadow Chancellor quoted certain organisations that have expressed disappointment, but I sense a real understanding that significant progress has been made in this Budget, not only on carbon capture and storage but on a range of issues. I think not only of the additional support for offshore wind technology, but of the support from the European Investment Bank, which will get the renewables industry moving. Those measures are very important, just as grid access is.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

Before the right hon. Gentleman moves on, I should say that the two Front Benchers have had a totally artificial argument about cuts this afternoon. The truth is that both of them are cutting. Although the Secretary of State says that there are no cuts, £1 billion is coming off the Scottish budget over the next two years, and similar things are happening in Wales and Northern Ireland. That has been said by the First Ministers of the two devolved Administrations. Is it not a fact that the right hon. Gentleman's Government are cutting just as the Conservatives did, and that the sooner Scotland gets out of the Union, the better?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

If anything, the financial crisis has shown that the Scottish National party's view about independence is completely wrong-headed. The strength that the United Kingdom gives to all of its parts is important. Furthermore, I do not accept what the hon. Gentleman said about the fiscal numbers and the impact on Scotland.

Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport)

The right hon. Gentleman has dismissed the SNP Government, but what does he say to comments made by the First Minister of the Welsh Assembly yesterday? He admitted that the announcements in the pre-Budget report and the Budget would mean £416 million of cuts from the Welsh Assembly Government budget for the following financial year. The First Minister said that he could not give any commitment that that would not result in cuts in public services in Wales. Is the Labour First Minister in Wales wrong as well?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

Those are efficiency savings. I do not accept the notion that they are the cuts in spending that the hon. Gentleman suggests.

I was explaining the investments that we are making in green industry and the £400 million of funding for that. It is clear that we understand the role of Government in supporting these industries of the future; I do not believe that the Conservatives do.

Let me turn to the third question, on which, again, the shadow Chancellor did not want to focus—how we face the challenges, including on the public finances, in a way that is fair. We have set out some pretty clear objectives on efficiency savings and plans of how we can get those savings—[Hon. Members: "How?] Five reports were published on Tuesday about precisely what needs to be done. Again, there is a difference of philosophy that the shadow Chancellor probably will not want to talk about. He now says that he accepts the higher top rate of income tax, but he did not mention his uncosted proposals on inheritance tax, which are still out there and have, I think, been reaffirmed. This is an interesting point, given that we are in the middle of a time when resources are scarce. The shadow Chancellor made his promise in 2007; he now has an opportunity to move off it. Indeed, the shadow shadow Chancellor, Mr. Clarke, gave him a heaven-sent opportunity to do so when he said:

"I don't think we're going around any longer saying this is something we're going to do the moment we take power".

Just to be clear about the proposal on inheritance tax, it represents an extra £200,000 each for the richest 3,000 estates in the country—£600 million. What is extraordinary about the shadow Chancellor's judgment and priorities is that at this moment, of all moments, he continues to think that that would be a good way to spend resources. He says that there will be posters around the country. I can tell him that there will be posters all round the country talking about his commitment on inheritance tax—people all round the country will know that his priority is a tax cut for millionaires. If he wants to challenge the idea that it is a tax cut for millionaires, he is welcome to do so, but the figures are—

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

So that we are fully in command of the facts, will the Secretary of State confirm that the Labour Government cut inheritance tax from the beginning of this tax year?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

Yes, of course I will, but that was to reflect the particular position of couples. Again, I invite the shadow Chancellor to intervene to confirm that he wants to spend well over £1 billion on inheritance tax.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

The hon. Gentleman shakes his head—is he denying it? Oh, so it is his policy. He does not really want to talk about that policy. The shadow shadow Chancellor gave him the opportunity to dump it, but what did he do? He pushed the right hon. and learned Gentleman to issue a statement saying that actually he got it completely wrong and that that was the priority at this stage of the recession. The shadow Chancellor rolls his eyes from a sedentary position, but it is a fair question to ask: does he really think that spending some £600 million on the richest estates in the country, on millionaires, is the right priority at the moment? [ Interruption. ] He is talking from a sedentary position; I am happy for him to intervene to say that he thinks that spending that £600 million, given all the competing pressures on public spending and tax, is the right thing to do. He has suddenly gone a bit coy. I do not think that he really wants to say that it is the right priority.

Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton

How much has the tax take to the Treasury declined since the Labour Government introduced their inheritance tax proposals in a mad panic because we had introduced ours? It is in the Red Book; perhaps the Secretary of State would like to give us some figures.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

Funnily enough, I do not know the figures off the top of my head. What I do know, however, is that there is a big difference in priorities. At this most difficult economic time, the shadow Chancellor thinks that the right priority is more inheritance tax cuts for millionaires. If he wants to abandon the policy at the Dispatch Box, I am sure that many people, including some on his own side of the House who are probably more sensible, would think that was the right thing to do. I give him that chance: he can now say that it is an aspiration rather than a firm pledge. Funnily enough, he does not want to do so.

Let me move on to the hon. Gentleman's other tax priorities. I think that the Conservatives are still committed to a married couples allowance—presumably another uncosted commitment that they have no clue how they would fund. We are very clear about our priority: we think that the right way to support families in the tax system is to support children, and that is what we are doing.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

Will the right hon. Gentleman confirm that his changes, or cuts, to inheritance tax introduced a recognition of marriage into the tax system?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

No, it was correcting an anomaly in the tax system regarding the position of married couples compared with other couples. That is the explanation. If the hon. Gentleman wants to abandon his married couples allowance today, I am happy for him to do so. I think that it is right to support children through the child tax credit.

The other problem for the shadow Chancellor arises from his proposals on tax credits, which have not got much attention. He says that he wants to cut the number of people who get tax credits. When he was on the "Today" programme a few weeks ago, having trouble finding what areas he would cut, he said:

"We raised the question, for example, of whether in-work benefits, tax credits, should go to people on incomes of over £50,000."

Presumably, he wants to cut tax credits for those people.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I will give way in a moment, but this is a Conservative policy to which I should like wider attention to be given, as it is significant. Not only is the shadow Chancellor going to go into the election saying that he would take money away from people, but to cut the level of tax credits he would either have to cut the overall rate, which would affect everyone, or raise the taper in the tax credit, which would worsen work incentives. Those are the two ways in which he could take money away from people through tax credits. That is another policy that he was hoping not to talk about.

We have a completely different set of priorities. Although the shadow Chancellor claims a modernising face, the truth is that on inheritance tax, on the married couples allowance and on tax credits, he does not present a modernising face at all.

Photo of Charles Walker Charles Walker Conservative, Broxbourne

Could the Secretary of State tell the House how many billions of pounds in tax credits have been overpaid in the past five years, how much of that overpayment has been recovered, and how many billions have been lost as a result of overpayment?

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

That says it all, really. There were overpayments in the tax credits system. Some of that is to do with the design of the system, in that it is a flexible system that responds to people's circumstances. As a result, as my right hon. Friend the Chancellor said yesterday, hundreds of thousands of people have seen their hours reduced and their income go up by up to £35 a week. That would not have happened if we had followed the advice of the Conservatives, or if the system had not been designed as it is. We know what their hidden agenda is—it is to cut tax credits, and that is what they would do if they were in government.

Photo of Ed Miliband Ed Miliband The Secretary of State for Energy and Climate Change

I have already given way to the hon. Gentleman.

The Conservatives were not supporters of the tax credits system in the first place—they thought it was a bad idea. They do not want to have the courage of their convictions and say that they would abolish it, but that is the reality.

The truth about this Budget is that we have shown that we have a plan to get our economy out of recession—unlike the Conservatives. We have a plan to build our economy for the future—unlike the Conservatives. In addition, we are the people who will—to use the words that the shadow Chancellor claims that he wants to use but will not be able to—stand up for the many, not the few. That is why this was the right Budget for Britain. We know that the Conservatives have no plan to get our economy out of recession if they are ever in power. We know that they have no plan for the future. We know that what they offer is tax cuts for the few and spending cuts for the many. That is why the House should vote for this Budget next week.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs) 2:10 pm, 23rd April 2009

This Budget, like the previous one, was widely hyped as a green Budget. The Secretary of State himself, who knows that I give him credit when it is due, last week told The Independent on Sunday that it would represent a

"massive greening of the Government."

If green words, green targets and green titles were enough, that would have been true, and perhaps he could have taken the credit. But they are not, it is not, and on this occasion I am afraid he cannot.

The background could not be more serious. Despite the scepticism still being expressed from the Conservative Benches today, the intergovernmental panel on climate change's 2007 assessment painted a deeply worrying picture, stating that any more than 2° of global warming would usher in higher and higher risks of massive species extinctions, droughts affecting billions of people, a loss of food production and increases in deaths from diseases and the physical risks of heatwaves, droughts and floods.

Yet as we warned from these Benches at the time, even the IPCC is an inherently conservative, consensual body with a built-in time lag in its use of data. The latest data suggest that ice sheets in Antarctica and Greenland might be melting faster than predicted by the IPCC, and the same appears to be true of mountain glaciers. Sea levels will therefore rise faster than expected, making floods and storm surges much more dangerous and threatening the homes and lives of millions in coastal communities worldwide. The latest data on Arctic sea ice show its likely summer disappearance in just a couple of years' time. The IPCC predicted that that might happen by the end of 21st century. Some 80 years earlier than expected, the summer Arctic ocean will turn into a dark, heat-absorbing sea and accelerate the melting of permafrost on nearby continents. The latest data on that show that it will in turn release far more methane and carbon dioxide into the atmosphere than previously thought.

More such possible feedback mechanisms are being revealed in study after study. The clear risk is now of global warming of not 2° but 3° or 4° above pre-industrial levels, with almost unimaginable consequences for human civilisation. In theory, we could one day have to evacuate large parts of Africa, Asia, America and the Mediterranean region, which would probably become uninhabitable. Realistically, we would face social and political upheaval, conflict and economic collapse on a scale that would make the current global downturn look like a vicarage tea party. My children, Maya and Sam, are seven and nearly five, and that is not the world in which I want them to live their lives.

The December report of the Committee on Climate Change rightly set out the challenge, stating:

"To contain that threat, the world needs to cut emissions by about 50 per cent. by 2050, and to start cutting emissions now. A global agreement to take action is vital. But a global agreement will not be possible unless the countries of the rich, developed world provide leadership."

We might feel a little less rich than we did two days ago, but we still cannot put that off. We have just seven months to demonstrate that leadership before the critical Copenhagen summit. We need to show continued commitment to decarbonising our economy so that we have some chance of convincing developing countries that we believe in convergence around what the Committee on Climate Change called a "sustainable global average" of per capita emissions, and that we believe that sustainability is compatible with a high quality of life. Of course, we have to show leadership so that we can persuade our fellow economies in the richer world to play ball too. In Kyoto, remember, we allowed a global deal to be watered down for American and Australian Governments who then failed to deliver ratification. Times and people have changed, but initial pronouncements by Mr. Obama's climate change envoy, Todd Stern, that the reduction targets agreed in Bali are just "not going to happen" are pretty depressing.

The Secretary of State will claim that green measures in this Budget, the carbon budgets announced yesterday and the carbon capture and storage announcement that he has just made demonstrate the necessary levels of leadership. However, this is the Government of Gordon "Read the small print" Brown. Their environmental record so far is, to quote the same newspaper article that quoted the Secretary of State, "mainly hot air." In just four years, we have all been able to contribute to a grand total of 91 different consultations relating to sustainable energy in one way or another, yet the proportion of taxation derived from behaviour-changing green taxes is actually falling. Green measures formed only 6 or 7 per cent. of the Government's supposedly world-beating stimulus package, and one study suggests that that package overall could well help to push carbon emissions up, not down.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

May I clarify one point? I assume that the hon. Gentleman's party will support an increase in fuel duty as part of the move towards green taxation.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am grateful for the opportunity to clarify that, ideally, we would abolish fuel duty, and we have suggested a number of fairer ways of taxing motorists. One of the most innovative is a showroom tax, which would place a much higher duty on the most polluting brand new vehicles, so that I am afraid those hon. Members who want to spend their increased salaries next week on Porsche Cayennes would face a much higher bill. That is our approach to that taxation—we need a much fairer system.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I am sorry to interrupt the hon. Gentleman's well thought out speech. The Government say that the car scrappage scheme is a green measure, but surely so much carbon dioxide is used in the production of a new car that it is actually an anti-green measure.

J

Peter Bone is right - the car scrapping scheme is very far from being green. It demonstrates short-termism rather than sustainability and more carbon will be...

Submitted by John Byng Continue reading

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman makes a valuable point. If it ends up stimulating the more frequent purchase of new vehicles, it could well contribute to carbon emissions. Once again, it may be more of a prop to the car industry than a genuinely well thought out green measure. Perhaps more research and analysis needs to be done on that.

As I said, the Government's record has been said to be "mainly hot air", and some of their practical programmes sound a lot like some of the economic stimulus programmes. The four-year-old marine renewables deployment fund has yet to part with a single penny. The low carbon buildings programme has taken household grants for renewable energy to a five-year low. As we heard in questions earlier today, the office for renewable energy deployment has not been set up as such. The implementation of the carbon reduction commitment is threatening to close on-site renewable energy at companies such as BT. The Government's first attempt at a carbon capture and storage competition did close carbon capture and storage projects, and the National Audit Office has recently concluded that Britain's participation in future phases of the EU emissions trading scheme might result in hardly any reduction in real UK carbon emissions.

To give him his due, the Secretary of State made a string of important concessions when he took office last year, from the 80 per cent. target for greenhouse gas reduction to the Climate Change Act 2008 and to the promised introduction of feed-in tariffs for renewable energy in the Energy Act 2008, but even those were relatively easy to concede in the short term, just like the Government's stimulus package, because they are putting off all the really tough decisions.

For years, Ministers cheerfully claimed to be on target to meet their Kyoto greenhouse gas reduction targets, despite knowing full well that they had been met years previously because of the so-called dash for gas in the power industry. That was made quite clear in Sir Nicholas Stern's report to the Government. With a cool economist's eye, Stern also pointed to another successful example of carbon reduction in a major economy—Russia's reductions in the 1990s, achieved through the spectacular collapse of its economy. Come to think of it, perhaps that was the bit of the Stern report that the Prime Minister did read. Let us hope that neither he nor the Secretary of State attempts to make similar claims in future that the inevitable fall in greenhouse gases that will result from recession are anything to be proud of. Instead, we should be wary of the false message that those possible reductions could send. They could mask a dirty but rather shrivelled economy that will be just as dirty or even dirtier when it reflates. If we have started to build a third runway at Heathrow and an unabated coal-fired power station at Kingsnorth in the meantime, that outcome seems pretty likely.

If the Department for Communities and Local Government ignores the Campaign to Protect Rural England, Friends of the Earth, the Environmental Audit Committee and tens of thousands of public objections to its regional spatial strategies—up to 35,000 in my own south-west region alone—it will wake up to see any revival in house building taking place first all over an area of England's green belt the size of Birmingham. Much of that will be prime local, food-producing agricultural land, while a million properties lie empty elsewhere.

The regional spatial strategies assume an annual year-on-year growth forecast of 3.2 per cent.—that is plus 3.2 per cent., a fantasy assumption that makes even the Chancellor's growth forecast for the economy as a whole look pessimistic. Incidentally, the Government's reply to the Environmental Audit Committee's call for the suspension of regional spatial strategies on environmental grounds was due in January, but I understand that the Committee is still waiting for a reply. Perhaps the Secretary of State will lend the Minister with responsibility for communities a hand.

Even if his Department does not have that much clout across Government, thank goodness this Secretary of State is at least listening to the Committee on Climate Change. The committee has provided clear advice that we should commit to a greenhouse gas budget that represents a 34 per cent. reduction by 2020, which may give us a chance of challenging other policies. We obviously welcome the Government's acceptance of that target, even if it is comparable to the Chancellor's decision not to cut pensioners' winter fuel allowances or the decision not to beat one's mother—correct, obviously, but anything else would be unthinkable. Let us make it clear that 34 per cent. is the minimum interim target recommended by the committee, assuming no ambitious global deal is struck in Copenhagen.

Liberal Democrat Members also welcome the committee's recommendation of a tougher 42 per cent. reduction target, which is compatible with an EU-wide cut of 30 per cent. by 2020. I would be interested to hear why the Government have not agreed to that recommendation. I realise that the global deal has not yet been struck, but the Climate Change Committee and the EU have made working assumptions and set intended targets, so why are the Government not doing likewise? Whatever the carbon budget, the test is whether we produce the policies and actions to deliver it.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I am listening carefully to the hon. Gentleman's well-crafted speech. Does he support the Government's decision, which is listed on page 173 of the Red Book, to remove the biofuel duty differential, which will increase the cost to people who use biofuels—I declare an interest, because my car is powered by biofuel? Some £1 billion will be raised from people who are trying to save the environment.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I had not spotted that item, and I am grateful to the hon. Gentleman for drawing it to my attention. There are, of course, many bear traps in the area of biofuels. Unless we implement sustainability criteria, we could contribute to global warming rather than prevent it.

The Climate Change Committee says that aviation must face an appropriate cost for carbon to provide an incentive for supply-side abatement and demand constraint. The background to the third runway decision was a fiddled version of the shadow price of carbon, which deviated from Sir Nicholas Stern's proposed formula and, specifically, his discount rate. Perhaps the Secretary of State should seek the committee's advice on the appropriate cost of carbon and how exactly one can constrain demand for aviation while building extra runways at our biggest airports.

On carbon capture and storage, we heard the Chancellor's statement yesterday and have heard and read the Secretary of State's announcements and documents today. The announcements sound great—a bigger, better competition and an apparent commitment to all coal-fired power stations being 100 per cent. retrofitted with carbon capture and storage by 2025, but the vital escape clause is that it is

"subject to the technology being ready".

If it is not ready, the unabated power station will not be shut down and will continue to belch out far more greenhouse gases than any available alternative. In the accompanying document, much is made of carbon capture-readiness. A friend once told me that carbon capture-ready is a bit like paving one's front garden and declaring it Ferrari-ready—aspirational, but no real guarantee of success. How right she was.

Lord Smith, chairman of the Environment Agency, the Government's own environmental advisers, was also right. The agency rejected the idea of building coal-fired power stations that can be fitted with CCS technology later, claiming that it would be

"insufficient for the climate change challenge that we face".

There are some other genuinely welcome steps in the Budget, of which the extra incentive to offshore wind energy through increased renewables obligation certificates is one, but there are also some strange steps in completely the wrong direction. Was the push to exploit new oil and gas reserves the Secretary of State's idea, or has big oil been talking to the Secretary of State for Business, Enterprise and Regulatory Reform? Does the Secretary of State for Business, Enterprise and Regulatory Reform carry more clout with No. 10 and the Treasury than the Secretary of State who is here today? I suspect that he might. It all sounds a bit more Bush than Obama.

A great deal was missing from the rest of the Budget, such as an admission that the Government have got some things plain wrong. For example, it is absolutely irresponsible to waste £1 billion a month on a VAT cut that hardly anyone has noticed. The Budget also lacks any serious measures to help us adapt to climate change. I notice in the detail, because it affects my constituency in particular, that the £800 million flood budget is being supplemented by a £20 million increase, although the increase will be brought forward only from next year, when there will presumably be a compensating cut. The Budget does not include a scheme to compensate those communities located in counties such as Norfolk that face much faster than expected coastal erosion, perhaps in large part due to the action of climate change.

Landfill tax keeps increasing, placing a burden on local authorities, which might be acceptable if there were corresponding help for some of the programmes that have been cut drastically in recent years, such as the national industrial symbiosis programme, the waste recycling action programme, Envirowise, the Carbon Trust, the Energy Saving Trust and the small and much neglected Partnerships for Renewables. The latter was set up to help public sector bodies deliver renewable energy locally at no cost to them. The scheme is exciting and innovative, but it has had precious little support so far.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

The hon. Gentleman is, like me, a member of the Environmental Audit Committee, which proposed an increase in landfill tax, but he seems to be suggesting that landfill tax should not be increased. Will he clarify Liberal Democrat policy on that issue, too?

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman is, of course, correct. I am happy to clarify the policy. I am not saying that we should not increase landfill tax, but if we place such burdens on local authorities, we must give them the corresponding support to develop recycling; otherwise the result will be exactly what we face in Gloucestershire, where the Conservative-controlled county council is pursuing incineration, which will contribute toxic fly ash to the waste disposal site at Wingmore Farm near my constituency. We do not want to force local authorities in that direction. I do not necessarily disagree with an increase in landfill, but we must have compensating support for local authorities to enable them to meet that in an environmentally responsible way.

Where is the investment in railways? Last year, the Office of Rail Regulation turned down millions of pounds of railway schemes. One of the schemes would have been built near Doncaster, and the Swindon to Kemble line would have improved railway services to the whole of Gloucestershire and helped reliability for the whole network in the west country. In our "Green Road out of the Recession", we suggested as an alternative to the £12.5 billion VAT cut that the money might have been better spent delivering almost the entire list of projects turned down by the Office of Rail Regulation for lack of funds. That would have provided not only a fantastic short-term stimulus, but support for business and local economies, which would have been a long-term investment in this country's future. It could have been extended to include high-speed rail to Scotland or Wales and the west country. There could have been more investment in innovative ideas such as ultra-light rail, which would work in not only urban areas, but mixed urban, rural and suburban areas such as Gloucestershire. Instead, we have had the very hyped announcements on electric cars—a very new Labour idea. The Liberal Democrats suggested years ago that the EU might be crucial in directing the whole of the new-car market towards electric and zero-carbon vehicles. However, we also said that a short-term investment in the railways would do much more to reduce CO2 than would subsidies to the car industry for vehicles that, although more efficient, would still run on fossil-fuel powered electricity for years to come.

Where was the investment in housing? The Chancellor announced a few hundreds of millions of pounds for energy efficiency in housing, but if we had not been wasting money on cutting VAT we could have invested billions in providing energy efficiency and insulation for a million homes for some of the least well-off families in the country. We could also have subsidised investment in energy efficiency for a million more.

While the Liberal Democrats and the Government argue about how the money for stimulus measures should be spent, at least we agree that there had to be stimulus measures. The Conservative party could not pay for any of the green stimulus that we propose, because it would not have had any sort of stimulus package. Perhaps its interest in the environment is waning anyway, as it is unashamedly pro-nuclear and pro-incineration, and many of the interesting proposals from its quality of life policy group never made it into party policy.

There is, however, a bigger picture. Do we need to look more fundamentally at how we measure the quality of our economy and society? Barry Gardiner made a speech yesterday that might not have been widely noticed but which I consider to be very important. In it, he said:

"What if today's financial crisis were something more fundamental than merely a serious and deep recession? What if 14 September 2008—the date on which Lehman Brothers was allowed to go belly up—represented the point at which the whole architecture of a consumption-led, growth-based economy collapsed? Perhaps this crisis is telling us that a system predicated on limitless growth must inevitably hit boundaries—boundaries that are not only economic, but ecological."—[ Hansard, 22 April 2009; Vol. 491, c. 298.]

It has been a Liberal party and Liberal Democrat theme for many years that the environment contains the economy, and not the other way around. Will recovery without clear environmental performance indicators and the recognition of constraints on well-being lead us straight back to the obsessive boom-and-bust model perfected by the Conservative party and executed with rash panache by the Labour Government over the past decade? We need a new model of sustainable prosperity that allows us to meet people's aspirations for a decent quality of life, decent homes and a clean environment in a truly sustainable way.

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe 2:32 pm, 23rd April 2009

Madam Deputy Speaker, may I begin by offering an apology to the House? I have a long-standing appointment at 3 o'clock, and I intend no discourtesy either to you or to hon. Members who speak after me if I have to leave at that time. However, I shall of course return to the debate in due course.

I shall not deal too much with the bigger picture of the Budget: instead, I want to focus on some of the particulars. My right hon. Friend the Secretary of State for Energy and Climate Change amply illustrated the clear divide between the two sides of the House. We on the Labour Benches are looking to target measures to help the economy in general, firms and individuals through what is clearly going to be a very difficult time in the next few years. The Opposition offer no hope at all, only totally inappropriate cuts.

I have the honour of representing in this House a constituency in the city of Sheffield, where life is becoming difficult for many individuals and companies. However, it is interesting to note that the success of our local economy during the period of Labour Government has meant that, although unemployment is starting to rise in Sheffield, that is not happening as quickly as it is nationally. That is completely different from the city's experience in the 1980s, when our economy was based very largely on steel and engineering. The collapse of those industries had a devastating and dramatic effect, but we now have a much more diversified economy, with a range of different industries. They include education and health provision in the public sector, as well as firms in the high-tech, financial and leisure-related sectors. That diversity certainly holds us in better stead to come through what nevertheless will clearly be a difficult period.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

I am glad to hear that unemployment is not rising in Sheffield as quickly as it is elsewhere. We in the East Riding of Yorkshire also have a diversified economy, yet we have seen a doubling of unemployment in the past two years. My constituents are suffering from what is the fastest rise in unemployment in the region since the second world war.

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe

Of course, the rate at which unemployment is rising depends on the base from which it starts. I can comment with particular knowledge about my city of Sheffield, and that is what I will do. As I have pointed out, we certainly benefited from the period of a Labour Government and their actions.

Despite the fact that we will have problems—people in Sheffield will lose their jobs and we should recognise the individual trauma that that causes them and their families—many companies are nevertheless doing well, and we should not forget about them. Nor should we forget about the Advanced manufacturing park, which is located just in Rotherham but works with the university of Sheffield. Through that partnership we are now working to redress a long-term British problem, which is that we do well in research and invention, but not so very well in innovating and extending that research and invention into products. That is what the Advanced manufacturing park is all about, and its work with Boeing and a number of other high-tech companies will spin off into jobs for the future.

Then there are companies such as Forgemasters, which had an appalling experience with the floods last year. However, Forgemasters took on 40 new apprentices only a few months ago and has order books for the future. The company is now looking for serious investment and exports most of its products throughout the world. Forgemasters will be a key player in the development of our nuclear industry, because it has the capacity to produce some of the most important parts for nuclear plants.

The other day I went to a firm on the edge of my constituency, just in the constituency of my right hon. Friend Mr. Caborn, called Davy Markham, which is also a success story. A management buy-out of a firm in difficulties a few years ago, Davy Markham now has an order book for months ahead and is exporting most of its work. The managing director said to me, "I can take on any skilled machinist who walks through the door, because we are successful and producing products that are needed." Davy Markham makes massive machining products for turbines and other parts. That is a niche market, but the company is a success story.

However, we should also learn the lessons for those companies from what happened in the past. One of the problems for those firms is the legacy of the lack of training for so many years after the recessions of the 1980s, the effects of which still lingers today. We took away a swathe of skilled operatives and did not train any more. Therefore, firms such as Davy Markham are still suffering today from a shortage of experienced, skilled operatives, even though they run their own training schemes. We must ensure that the recession of the day does not leave for the future the sorts of legacies that we suffered from after the recessions of the 1980s. I therefore welcome the help being given to businesses through capital allowances, the deferment of business rates and the strategic investment fund. All are important to ensure that our successful high-tech firms with export markets are sustained for the future, and helped and encouraged to train the people who will be needed when the recovery comes.

I also welcome the measures taken on the environment. Those on carbon capture, offshore wind farms and combined heat and power are all important moves to sustain those industries and ensure that we fulfil our international climate change commitments. I also hope that some of the measures that we have taken to support industry will help to sustain and develop firms in the green transport sector, which is something that I am particularly keen on. Indeed, I have two ministerial meetings arranged with two companies in my constituency that have some very interesting proposals.

One of those companies is called ITM and is developing ways of producing hydrogen much more cheaply than has been possible in the past. The firm has developed a refrigerator-sized unit for domestic properties that can produce hydrogen that people can then put into their cars. That is an interesting development, because it means that we do not need a great network of sites throughout the country; rather, people can use the unit in their own homes. The unit may not yet be commercially viable, but the research, the invention and the innovation are there, and it is absolutely fascinating.

The Government are looking at help for electric cars, but if we are to help to develop green transport in the future, hydrogen-powered cars will probably be a much more exciting and relevant possibility. When Jeremy Clarkson can welcome an environmentally friendly car as a real possibility on "Top Gear", we are perhaps making real progress. If we can produce an environmentally friendly car that people still enjoy driving, that must make success in tackling climate change a real possibility. I hope that we will consider helping firms such as ITM and seeing how they can be encouraged and helped to produce products that will be important for our economy and our export potential for many years ahead, if we can become a world leader in producing them.

In its ideas for the production of hydrogen, ITM is looking to link in with offshore wind farms, which will certainly be an important source of energy in the future, although they produce energy simply when the wind blows, which is not always when that energy is needed. ITM is looking at the possibility of turning the energy produced by offshore wind farms into hydrogen, storing it under the North sea and using the pipelines from the North sea as a means of bringing it onshore. It is a concept at this stage; it is an idea, but it is exciting and interesting and, again, something in which we have the potential to become a world leader. I hope that firms that have such ideas will be assisted so that those ideas are implemented in this country as a first.

I also intend to have Transport Ministers meet with another firm in my constituency called Magtec. It is developing an interesting electromagnetic motor that can be attached to a conventional heavy goods vehicle or bus. The firm believes that it has the technology, and it works; there are buses running around in Denver in the United States with the original form of the technology on them. It says that it can achieve a 40 per cent. fuel saving on an HGV or a bus. It is a practical proposal. The technology is there; it works. The firm just needs to convince some of the bus manufacturers that its product is the one that ought to be used and developed.

Magtec has just taken on four more skilled engineers and technicians to help it with this work. It is a small company, but again it is looking to grow, even in the current difficult circumstances. Such companies are growing in precisely the industries that we ought to be encouraging and assisting. I hope that they can have access to some of the measures in the Budget to help them through what is obviously not an easy time for any company.

Martin Horwood referred to rail. I certainly support rail transport, and I hope that, whatever problems we have with future Government finances, we will maintain our commitment to invest in rail, especially where it can lead people to stop using internal air transport and where we can switch from diesel to electrified rail systems. I have a constituency interest in two particular issues. I know that a working party that includes Transport Ministers is looking at the potential electrification of the Midland main line. That certainly would be welcomed in Nottingham, Derby, Sheffield and many other places. On the line north of Bedford, we hope for an early announcement and a commitment that the scheme will go ahead.

In the slightly longer term, we are looking for strategic decisions on the high-speed rail network. I raised that issue with the Transport Secretary in questions a short time ago. I argue strongly that, as well as a line to Birmingham, we can take a line off from Rugby—the old Great Central line—and run it through between Nottingham and Derby up between Sheffield and Rotherham and on to Leeds. There is no reason why we should think simply about one line. A line to Leeds via Nottingham and Derby and Sheffield and another line going up to Manchester seems to provide an entirely sensible system if we then have a proper link through the Woodhead tunnel linking the west of the country with the east. The possibilities for rail are real, and I hope that the Government remain committed to them, because their development would be good for British industry, for the travelling public and for the environment.

I welcome the extra money for the Warm Front programme, but tenants who live in social housing are still at a disadvantage because the work permitted under that programme is available to owner-occupiers and private tenants on particular benefits, but not to social housing tenants. It is not just a matter of insulation—often houses in the social housing sector are well insulated—but often a problem with old and antiquated boilers. If social housing tenants had assistance through the Warm Front programme, we could do an awful lot to make their homes more energy efficient and save those tenants money.

It is absolutely right that the Government are targeting help on unemployed young people and the long-term unemployed. Again, I go back to the 1980s in Sheffield. We are still suffering today from the problems caused when the breadwinner of families became unemployed in the 1980s, never got back into work and invalidity benefits were seen as a substitute for jobs. As a result, one generation after another has remained unemployed. We have to recognise that long-term unemployment is a major social problem as well as an economic one, and we must ensure that we focus on those people. It is often easy to forget about them. With more people becoming unemployed, those who have been unemployed the longest and who perhaps have the fewest skills are often forgotten about altogether because they are the hardest to deal with. We must not let that happen now.

When people lose their jobs, it is also important to ensure that they do not lose their homes as well. The Government have already taken steps to ensure that people who end up on income support get help with their mortgage payments after three months, rather than nine months. That was a good step, as is the home owners mortgage support scheme that was announced this week. That scheme will be important, because it is not usually the whole family that goes on to income support. Instead, one family member might become unemployed or go on to short-time working, but the family as a whole relies on both people working full time to support the mortgage. That is why our support for home owners needs to become more flexible in enabling them to keep their homes. When one member of a family becomes unemployed, the family as a whole does not get income support, and it is going to struggle to pay the mortgage. The home owners mortgage support scheme therefore represents an excellent step forward.

In questions earlier this week, I raised the issue of private tenants with the Housing Minister. More people are going to get into difficulty when the owner of a property—sometimes on a buy-to-let mortgage, but sometimes not—defaults on their mortgage, and the private tenants, who have paid their rent and done nothing wrong, suddenly find that their home is at risk. I know that the Government have an agreement to extend the period of notice involved, and I have some sympathy with the mortgage lenders in this regard. When they offer a buy-to-let mortgage, it is clear to them that tenants will be in the property. Unfortunately, however, some home owners with an ordinary mortgage subsequently let their property without telling the lender, which can lead to real difficulties. We have to take that issue on board, and I was pleased that the Housing Minister recognised that that problem still exists and that the Government need to introduce further measures.

I also welcome the help for building more homes, for buying up empty houses, including those on sites where private developers have not been able to sell, and for encouraging local authorities to begin building programmes. We must think about the longer-term issues as well, however. The Government have set a target for 40,000 units of social rented housing to be built each year, but that target is unlikely to be hit, even with this extra help, for the simple reason that section 106 agreements are no longer coming to fruition because the private schemes that would have delivered them are not being built.

Also, housing associations are in difficulties because most of them rely on a mix of funding for their schemes. They get some money from the social housing grant and some from building houses for sale on the same site as their rental properties, which involves cross-subsidising. As there is now greater uncertainty about whether those houses will be sold, the housing associations cannot get private finance and many of their schemes are simply not happening.

There is therefore going to be a real problem hitting the 40,000 target, even with these extra measures. If there is to be any chance of moving forward on building social housing for rent at the moment, the Government must make it absolutely clear that they will provide the money to local authorities that are prepared to provide their land for free in order to make these schemes happen. There is a challenge for local authorities up and down the country to come into partnership with the Government and to get social housing grant, but they then need to make that grant go further by putting their land in for free in order to get homes built in their communities.

Local authorities often moan about the shortage of housing, and there is a real shortage up and down the country. That problem becomes more stark when people cannot afford to buy or cannot get a mortgage. More people are therefore going on to local authority waiting lists, and there is a real shortage of rented housing. This is certainly true of my own constituency; I get people contacting me about this problem almost every day. However, local authorities must be prepared to step up to the mark and recognise that this is a priority for them as well as for the Government.

I have often said to the Government that we must consider the longer-term issues that will apply when we come out of the recession. The fundamental demand for housing, either for purchase or for rent, has not gone away. One of my real worries is that we shall now go through a period of no training for skilled workers for the building industry. It was only a year ago that we were welcoming people from the Czech Republic, Poland and many other places to help us to sustain our house building and to carry out home improvements through the decent homes programme, because we had a shortage of skilled workers. We could now have three or four years in which fewer homes are built, with people being laid off and drifting out of the industry, and no one being trained.

Once demand returns, however, there could be a real problem if we go back to the old housing inflation. Demand will not have gone away, but we will have had a period without adequate supply, in which people have not been trained and others have been lost to the industry. When demand comes back, the resulting shortage of capacity could lead to another sharp upward spike in house prices. How we cope with that and retain people in the industry—we need to retain people in skilled manufacturing jobs as well—is a real challenge.

I am a little disappointed that the Budget paid no attention to the need to offer some help for short-time working in various industries, which has happened in many continental European countries, because that is one way in which we might have been able to keep more skilled people in manufacturing and construction. If the Government had assisted with that, we might have been able to retain more skilled workers. That challenge still has to be met.

No one likes paying more at petrol or diesel pumps for their fuel—an inevitability in current circumstances. One issue people have raised with me—I do not have an the answer for the Secretary of State for Energy and Climate Change—is that they should be buying diesel cars because they are more fuel-efficient, yet diesel is more expensive, quite a bit more expensive, than petrol in this country. In many countries on the continent, diesel is much cheaper than petrol. Why cannot we offer diesel at the pumps for at least the same price as petrol? Why do we have this price differential, which encourages people to buy less fuel-efficient cars? The Government should have a word with the industry about that with a view to mitigating some of the extra costs.

On the beer tax, I know that the Government have to raise money, but there is a difficulty with their proposal. Clearly, we have a problem with binge drinking, which is mainly about crates of cheap lager from the supermarkets getting into the hands of young people, and I am sure that we have all heard complaints from our constituents from time to time about that sort of activity. However, we face a fundamental problem in terms of the demise of the British pub as a community institution, so carrying on regardless putting up the beer duty will have an impact. The problem is not just one for the Government. The other day, I met a group of tenants in my constituency who work for Enterprise Inns; they did not point their fingers at the Government, but said that, in their calculations, Enterprise Inns could make a pound a pint on the beer it sold, so perhaps putting 2p on beer duty was not the real issue. Nevertheless, the Government need to be sensitive about this point. Yes, of course we are against binge drinking; yes, of course we want sensible measures to deal with it; but if that means putting at risk community institutions such as pubs, we need to be very careful indeed. I urge the Government to think again.

J

I am glad that Clive Betts is advocating green transport initiatives to help achieve economic recovery but I do not think green cars are the answer. We need to be more radical and think in terms of energy saving, public transport and local economies.

Those countries that take the opportunity of the economic downturn to anticipate the next crisis will emerge in the best shape. As the world emerges from the present debt related crisis it will be faced with the climate change problem and an energy crisis. Energy fuel sources are becoming more expensive to exploit and so will go up in price and climate change measures will increase the cost of burning fuel still further. The UK should therefore use economic stimulus money to encourage radical energy saving and sustainable energy generating technologies rather than the preservation of unsustainable jobs in car manufacturing and air transport. We also need to develop more local economies that are less reliant on transport.

In difficult economic times we need a vision for a sustainable future rather than desparate measures to hang on to the economic patterns of the past.

Submitted by John Byng Read 1 more annotation

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am speaking more from a constituency point of view than as a Front Bencher, but I strongly agree with what the hon. Gentleman says about traditional pubs. Does he agree that having a differential duty that is more generous to beer and encourages drinking in traditional family pubs would actually create a social environment that militates against binge drinking, which is an important factor in the wider issue?

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe

I think it does and I have written to my hon. Friend the Exchequer Secretary to say that a differential tax—on beer sold in supermarkets as opposed to beer sold in pubs—would be very helpful. It may well be that we cannot do that, but it is an issue that needs addressing.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

On that very point, we have looked at this matter and I am afraid that EU directives work in such a way as to make it impossible to tax the same item differentially, according to where it is sold. That is simply not possible.

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe

I thank the Minister for that explanation, and I know that she has also written to me about it.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

Does the hon. Gentleman think that the Scottish Government proposal to introduce minimum unit pricing, which would deal with the problem of cheap deals in supermarkets that fuel binge drinking but at the same time keep prices reasonable in pubs for more civilised drinking, may be another way round the problem?

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe

I am not absolutely convinced of the case for minimum pricing, as there are some difficulties with it. All I am saying is that there is problem about the future of pubs that is worthy of debate across Government to see whether some way forward can be found.

Finally, I should like to discuss one part of my constituency that has the potential for the major regeneration that other parts of my constituency have already enjoyed. It is around the canal in Sheffield, to which British Waterways is very committed. It is working with local people, and David Slater, who has worked closely with me and the council on these matters, is involved. British Waterways is a key part of the regeneration, so we were a little concerned that in stretching its assets, the Treasury might be looking at fire sales of some property. I hope that I am receiving signals of reassurance that British Waterways will not be forced to sell off much of the land around the canal. That may be necessary at some point in the future, but British Waterways has a very good track record of sensitively developing that sort of land and the surrounding buildings, so gaining maximum value for local communities, stimulating wider regeneration and using such properties on the land appropriately. I am not sure that it is a good idea simply to sell the land off to private speculators who may not develop it in the near future, and may develop it badly when they eventually do develop it. I hope that the Government will reassure us that British Waterways will be assisted to develop it properly.

I have tried to cover a number of points. I support the Budget and the help that it will give the economy in general and, in particular, my constituents, who face a difficult time. I believe that the Government's strategy of providing assistance rather than cuts during the current recession is right and appropriate.

Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton 2:55 pm, 23rd April 2009

Let me begin by saying something about personal debt. Many people throughout the country are extremely worried about their personal finances during what will be—notwithstanding the Chancellor's announcement yesterday—a long and deep recession. They are worried about their jobs and their housing problems, and elderly people in particular are worried about what will happen to the income on which they rely from investments, especially building society and bank savings accounts.

We know that even before the recession started, the savings ratio had halved under the stewardship of this Labour Government. That should have sounded a loud warning bell to Ministers, but they were very tardy in attempting to do anything about it. When people lose the incentive to save—to put money aside for a rainy day, or perhaps to fix the roof while the sun is shining—it is a very serious matter, not just for them personally but because it changes the culture in the country. It affects people's feeling that they have a personal responsibility to put money aside.

For many years, I have been concerned about the way in which the younger generation—by which I mean young people of working age, many of them bringing up young families—have taken account of the experience of their mums and dads, who have suffered under this Government as a result of the erosion of their pensions. The former Chancellor's hundred-billion-and-counting taxation raid on pension funds means that many people now do not have the funds that they expected to receive. All too often, their adult children think of what has happened to mum and dad and ask, "What is the point of putting money into a pension?". That should be a worry for us all, and for them in particular, but the Government do not appear to have recognised that the problem has been building up over many years. Now that we are experiencing this appalling recession, the problems of pensioners and those about to retire are particularly acute.

The Government had an opportunity yesterday to remove the basic rate of taxation on people with investment income, but failed to take it. Although I welcome the Chancellor's announcement of an increase in the tax-free amounts in personal individual savings accounts, many people on fixed incomes, especially the pensioner population—a great many pensioners live in my rural Devon constituency—do not necessarily have the capital to put into an ISA. They have depended on interest on which they have drawn regularly to pay essential household bills, including bills for utilities such as fuel, and they feel extremely vulnerable now that interest rates are falling while they continue to be taxed on their income if the aggregate is above the tax threshold. Price reductions do not necessarily help them. In February this year, the Institute for Fiscal Studies estimated that the poorest pensioners—those over the age of 80—faced an inflation rate of 6.7 per cent., more than four times the rate affecting the general population, because of the types of products and services on which the very elderly rely.

We have had many debates in this House about the costs of the various baskets of items that represent the retail prices index, for example, or the real rate of inflation. Members do not need me to explain all the specific individual needs of the over-80s, but their purchasing pattern is very different from that of the rest of the population. Interest rates have fallen, and those with modest savings who rely on interest rates to supplement their income have been hit particularly hard. Therefore, I regret that the Government did not take the opportunity to adopt what was a Conservative policy. They have adopted Conservative policies in the past, such as on inheritance tax. Had they done so on this occasion, I promise that I would not have stood here today and said, "You've pinched one of our policies"; instead, I would have warmly welcomed the abolition of the 20 per cent. tax rate on investment income for basic rate taxpayers.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

This is an important point, and all Members will have encountered constituents who raise such concerns. Does the hon. Lady agree that it is important that people with modest savings whose income from those savings has decreased should look at the changes to the capital arrangements for pension credit? It is, of course, just the income that is taken into account, but nevertheless a raising of the threshold will have a huge impact, and some people might look at pension credit as being a sensible way of supplementing their income in the current difficult circumstances they face, even if they do not like claiming benefits.

Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton

The hon. Lady raises a good point, and that will help some pensioners, although not all. She also points to an issue that I hope the Government will take very seriously. Will they, through various agencies such as the citizens advice bureaux and Age Concern, redouble their efforts to ensure that anybody who is entitled to a state benefit, whether means-tested or not, is encouraged to apply for it and is assisted in obtaining it as soon as possible? I have held surgeries with my own CAB offices to encourage pensioners to apply for various benefits that they were entitled to but did not know they were entitled to, or—to pick up on the point the hon. Lady raised—were entitled to but resisted because they feel means-tested benefits are demeaning. They find the form-filling rather difficult and some of the questions are very personal and can put many of them off.

I have referred to the over-80s. They are members of the generation above mine. It is the generation that lived through the second world war. I am a baby boomer; I was born the year after the second world war ended. I am, because of my age, very familiar with the age group that is one above my own. They are a very proud and independent people and they will not come forward voluntarily to apply for benefits. Nevertheless, I think that we as Members of Parliament, and certainly the Government, should do all we can to make the process as dignified and simple as possible. In this recession, there is an enhanced opportunity for the Government to do all they can to make sure the statutory bodies, voluntary services and charitable agencies encourage more people who are entitled to apply for such benefits to do so. Nevertheless, there was something that the Government could have done yesterday, and I very much regret that they did not take that opportunity.

I began by talking about personal debt. As I represent a rural constituency where communications might not be as good as in a city or large town, I am concerned that a lot of people living in small isolated communities do not always receive information and do not get to know about things as easily as those in urban areas. There is an issue to do with people who loan money—the loan sharks if I may call them that. I am sure all Members have had to deal with constituency casework where people have clearly been taken advantage of—often some of the very poorest people who are truly on the margins in terms of their financial viability. I urge the Government, particularly at this time, when people are going to find the coming years extremely difficult, to ask the Office of Fair Trading to look again at better regulation of the consumer credit market.

In some parts of the country, credit unions do an excellent job, but they, too, are not as easily available and known about in rural communities as they are in city centres. When they were first introduced, they were located in areas where it could be clearly identified that the population there might well benefit from them. Of course, in rural areas, people are scattered about and do not form a hub. None the less, there are outreach services and statutory agencies that can act on their behalf.

I ask two things of the Government on behalf of people who are on very low incomes, including not only pensioners, but those of working age. Will the Government ensure that the consumer credit market is properly regulated? Will they examine how we can roll out credit unions in a more unified way, particularly in the rural parts of the United Kingdom, because I am sure that they will be needed? They will solve a lot of problems for people who might otherwise be seriously taken advantage of.

The other loan sharks that I wish to mention are the banks. They have had a bad press and, like everybody else, I wish to see the credibility of the British banking system restored in a way that allows us to have trust in it, both as personal bankers and, on a much broader level, in terms of its importance as a national institution. I fear that we still have some way to go and the process of restoring confidence will go far beyond this recession.

The Financial Services Authority has clearly failed. We have had debates in the House about how the rules have been changed, how the role of the Bank of England has been changed and how powers have been divested to the FSA. It is essential that the regulation of the financial institutions in this country is clear and transparent, and that it works. When we have debates about regulation and I speak from the Conservative Benches, very often people say, "You always want a light touch. You always want less regulation, not more." I believe that we have got it totally wrong in this place when it comes to regulation. I often find that regulation hits in the most top-heavy way areas where a light touch is needed, and we over-regulate in areas that need a light touch. However, in areas where proper regulation is needed and needs to be enforced, for some reason we get it wrong.

We should all ensure that any proposals that come forward, as I hope they will, to make changes to regulation and the way in which the FSA works are not unduly top-heavy for the sake of it. Very often this is simply a matter of common sense; it is a question of saying, "Where does the regulation need to fall? Is it transparent? Will it be easy to monitor to ensure that it is working properly?". In asking the Office of Fair Trading to regulate the consumer credit market, I am not asking for a lot of top-down regulation just because things have all gone pear-shaped; I am asking for regulation that works and regulation that will genuinely restore the banking institutions of this country.

Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport)

May I just give the hon. Lady an example of the imbalance in the FSA, to which she has referred? Independent financial advisers have been massively over-regulated by the FSA, whereas it has taken a cavalier light-touch attitude to the huge international corporations of the banking sector.

Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton

I am grateful to the hon. Gentleman who, as ever, has put his finger on an example that I wish I had thought of. It is a classic.

When we first introduced the regulation of financial services in the mid-'80s, before I was elected, it seemed on the face of it that there was a very sensible way forward. Financial advisers, whoever they worked for—even if they were linked to a financial institution but were working independently—would carry out an analysis of somebody's financial needs. In giving best advice, as it was called at the time, they would need to ensure that the product that they were selling was right for that person and that they could afford to pay the premiums or put capital in. The advisers were regulated and checked to ensure that they did so. All of a sudden, out of the blue, every department store, every chain store and every bank could market products through the post, over the phone—and now over the internet—without the same criterion of best advice applying.

The principle of best advice was right but, for some reason, it went wrong, and there were loopholes in it. I do not think that the answer is over-regulation. It is common sense to ensure that there is a level playing field wherever we regulate. If we do not have that level playing field, people will take advantage. When they take advantage by selling their products, however they sell them, the person who loses out is usually the poor investor who puts their money on the line.

Let me move on to something else. I realise that today's debate is going to consider housing, in particular, and I want to touch on one aspect of that—that is, park homes. We have an all-party group on park home owners, of which I am a member, and I know that a few years ago the Government made some changes to the anachronistic rules that govern the purchase and sale of park homes. In a recession, park homes offer a wonderful opportunity for low-cost housing.

There are several park homes in my constituency, and although they are not exclusively occupied by pensioners, many people who have not owned their own home or have owned a very small home move to a park home when they retire—that releases a lump sum, too—so a lot of elderly people live in them. Will the Government look again at the rules that apply to the sale and purchase of park homes, as they missed the opportunity to do so yesterday? There is no doubt that we still have what I would regard as restrictive practices in this area.

I understand that site owners are business people who need to make a profit. Nobody is suggesting for one minute that they do not have a material interest in the sale and purchase of park homes. However, the way in which people are obliged to purchase a new home from a particular supplier and the way in which a cut of the sale price goes back to the park home owner is anachronistic in this day and age. I want the Government to think of the recession as an opportunity to look favourably on park homes and consider them as a way of providing more low-cost housing. Such housing would be more readily provided by park homes than by the construction industry, which seems to be moribund. If the Government plan to help the construction industry, I hope that they will equally consider the park home industry, provided that they take a fresh look at the way in which people who purchase homes from site owners are treated under the regulations.

We have heard a lot about helping people on low incomes with energy costs. I have been in correspondence for nearly a year with various Ministers—I received yet another reply today, which was very negative—on the subject of those park home owners who are on sites where the landlord provides the fuel, which is usually liquefied petroleum gas and is often metered. The landlord sells the fuel to all the people on the site, and they are locked into a pricing regime over which they have no control whatsoever. It seems that just about everybody else has the opportunity to shop around, to change supplier and to get the best deal that they can, yet these people are locked in. I have had a letter from a Minister yet again today to say that the Government have no intention of changing the regime. I do not believe that it would be that difficult to change it, and I ask the Financial Secretary to the Treasury, to look at that, as well as at the issue of the selling and purchase of park homes.

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

My hon. Friend is making a powerful point on park homes. Through her, may I make the point to those on the Treasury Bench that many people on low incomes live in park homes for most of the year? They may be paying rather a high price for the fuel that heats those homes, which are often poorly insulated. When I go into many of my constituents' park homes, I find them there with many plugged-in electric heaters, and that costs them a fortune. They often have historical industrial conditions such as emphysema. It is important that the Government take seriously the insulation and the standard of those homes to ensure that those people, who, as I say, are often on low incomes, do not find that most of their money goes on keeping themselves warm.

Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton

I am grateful to my hon. Friend for that. I know that the all-party group on park home owners has made representations to Ministers on those issues. We are talking about low-cost initiatives that would make a difference. They would not necessarily affect the Treasury figures—particularly not the changes to the regulations that I asked for—but would certainly help a lot of people. They might encourage more people to buy and live in park homes at a time when low-cost housing is absolutely essential.

I started on the subject of debt, and I will finish on the subject of debt, but I shall move from personal debt to the national debt. I referred to the fact that I am a baby boomer, born in 1946. I still have an identity card, and I remember when rationing ended for sweets. I have lived through the Attlee, Wilson, Callaghan, Blair and Brown Governments, and as my right hon. Friend the Leader of the Opposition said yesterday in the Budget debate, we always end up with the same situation at the end of a Labour Government. They leave the country bust. Nothing in the Budget, or in what has been said in the debate so far, makes me think that the situation will be any less serious when it comes to the inheritance left by this Government; in fact, it will be a great deal more serious.

I mentioned the generation of those who are 80 and over, and I mentioned the savings culture. There is a culture in the British spirit that says that when we are up against it, we will go without certain items to make sure that we get things right. We saw that in the wartime spirit in the second world war, and we have seen it on other occasions. The British public are intelligent enough and tough enough to know that we are going into a period of great austerity. They want honesty from their politicians and their Government. If there are difficult choices to make, they want to see those choices clearly laid before them.

Yesterday's Budget was dishonest. It deferred until after the general election a lot of tax cuts and swingeing impositions on people who are not the wealthiest in the country. The Government may argue, "It's until the downturn picks up," but nobody believes that the downturn will pick up by the end of this year, and we have heard all the independent evidence that corroborates the view that it will not pick up. None the less, I think that people will understand it if politicians stand up and say to them, "No, sorry, we cannot afford it," or "Yes, it is our intention to do or provide certain things with your taxes, but because of the situation that we are in, the imperative must be to get the economy of this country back on to a stable footing." We are old enough to know what happens if we do not.

If we do not get the economy back on to a stable footing and we go into a period of what I would describe as funny money, in which the whole economy collapses and the currency is a paper currency only, that will a very serious situation. It is about time that the Government treated the British population as grown-ups. Instead of kicking things into the long grass when action is needed now, the Government should grasp the problem, which is with us today and will be with us for a very long time.

The Financial Secretary is a reasonable and honest man, so I am sorry to have to direct these remarks to him rather than to some of his colleagues. None the less, both he and I understand what collective responsibility means. The Government are leaving it far too late to take the right action to restore the economy of this country and that is a grave disservice to the British people. They have been through trials and tribulations in their history and they will not baulk at understanding that we are in a serious situation that calls for serious measures. The Government must rethink what they have told the House over the past 24 hours, because it will clearly not solve the problems.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

If by serious measures the hon. Lady means public spending cuts, can she be more forthcoming than her hon. Friend Mr. Osborne was on the radio this morning when he failed to identify a single substantial savings cut? If the hon. Lady is worried about the recovery not happening next year, can she explain whether those cuts would go ahead under a theoretical Conservative Government, if the recovery was not occurring by then?

Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton

I am sorry that the hon. Gentleman chose to ask that question—it was so Lib Dem. I hope that we will have a Conservative Government because that is the only hope for the country. I shall not be part of that Government because I am retiring, but I and the British people understand that when we are up against it, we cut our cloth accordingly. Anybody who does not understand that simple concept will never solve our problems.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley 3:21 pm, 23rd April 2009

It is a pleasure to follow Angela Browning. I agreed strongly with all her comments about debt and the role of park homes, but of course we parted company at the end of her speech when she started to talk about just a quarter of the last century when Labour Governments were in control. My recollection is that those Governments had to redress the appalling lack of investment in our public services—in our hospitals and in our schools, where children were taught in leaky school buildings with outside toilets. If there was a price to pay, I think it was one worth paying.

When the debate started, I became depressed. I enjoy the cut and thrust of debates in the Chamber, but there were times when there was inappropriate guffawing from Opposition Members at what was meant to be a serious contribution to efforts to get the country out of the most appalling global difficulties. Then I heard the shadow Chancellor planning the Conservative poster campaign by saying that Crawley would be a target for the Conservatives' inheritance tax and tax credit plans. Frankly, I hope they do that, because none of my constituents will benefit from their inheritance tax plans, whereas 10,500 families will be badly affected by their plans to cut tax credits. Such an Opposition campaign would be a very positive move.

I shall concentrate on how we can reduce carbon output in the power we use. We desperately need to do that as quickly as we can. Earlier, we heard an incredibly heartening statement about the carbon capture and storage scheme. It will certainly be heartening in my constituency, where the company Doosan Babcock, which is developing many of the new technologies, has its headquarters. It was interesting to hear Members say that the statement had come far too late, because in fact the technology is untested. It is very new. We are the first country to commit to such investment at that level and I am delighted that we are doing so. I certainly hope that the effort, investment and research that Doosan Babcock has put into carbon capture and storage will pay dividends for the company in the future.

The reason why I take an interest in such matters is that just a few short steps away from Doosan Babcock's headquarters is another company, of which Members may be aware, called Ceres Power. It appears that Ceres Power is one of those companies that could offer the answer to many of our home power needs. It has developed a brand new fuel cell—a very interesting technology, in which many people throughout the world are hugely interested.

It is great that in my constituency there are two companies with very different ways of trying to reduce our use of power and our carbon output—one an older technology that uses the very best research to deal with coal burning, and the other a fuel cell that holds enormous potential. Both received a good lift and encouragement from the Budget, and I am delighted about that. When I revisit those companies, I will be able to hold my head up and say that this Government are serious—particularly given the strategic investment fund, which I hope will take those new technologies further along the line. They have already had plenty of money from the Government to continue their research, but I sincerely hope that they will be able to move to the next phase and, for example, put fuel cells in people's homes, so that we can genuinely see that they work. I see the Budget—particularly proposals to try to reduce our carbon output—as adding to a jigsaw of other measures and building on work that has been going on for a long time to ensure that we continue to play a world-leading role in those technologies. It is a pleasure to represent a constituency that is taking part in such activity.

I shall focus the majority of the rest of my speech on housing, which has truly become one of those subjects that occupy not only people who go to advice surgeries, but young people, for whom access to housing has become a critical issue. It is the key to answering many problems as we try to tackle the global downturn. It is difficult to look at any one subject in isolation, but, if we encourage housing development, as I expect the Budget to, many other issues—education, training, job opportunities for people—will become part of the whole package. There is also an opportunity to ensure that the proposed homes are the best in terms of environmental soundness and liveability for families. That is why I was delighted by the release of the new money.

Central to all that development is the fact that we must allow our local authorities to play a part in developing housing. We tend to bandy about "affordability", and the Library had a good stab at trying to define it. I find it extremely difficult, however, to sit in my surgery opposite a lovely young couple who have recently married and are saving furiously but have nowhere near enough for the price of a small flat in my constituency—even though, thank goodness, the amount that can be borrowed has been reduced to three times a person's salary. People in the south of England face problems of affordability and they will find it extremely difficult to access housing, even with the new HomeBuy scheme and access to shared equity programmes, but attempts to tackle scarcity, which is at the heart of the housing problem in the south-east, will assist those young people enormously.

We are fighting tooth and nail for a university centre in Crawley, because, again, it is part of the jigsaw of keeping our young people in the town and giving them the education that they deserve and the job opportunities that they so badly want. No measure can be taken in isolation, but we have to make sure that we can house people decently. I am extremely pleased that my right hon. Friend the Minister for Housing is now giving serious consideration to allowing local authorities to play their part in developing housing projects within our towns and communities. They are key to most of the things that happen; they understand how a community needs to exist and know that housing development without any of the services that make houses decent places to live does not reflect how we want to develop in the future.

I am extremely lucky to be associated with the post-war Labour Government who decided that people who had been in the war and families who had suffered should have the opportunity to come into homes in a lovely community such as Crawley. Such places have neighbourhoods with pubs, shops, churches and community centres. Local authorities must be at the heart of the decision making and they must be able to develop housing in the way that we believe is right and proper. People deserve to live in homes with an environmental rating of at least "very good" so that they do not spend most of their money on fuel and so that they can be proud of their new homes for many decades.

I hope that you can see, Madam Deputy Speaker, that I am keen for local authorities to play their part and get access, so the extra £100 million for local authorities to develop their housing was very welcome. We also have to consider the quality of the services offered by those local authorities into the future. Before we allow Government money to be placed in the hands of a housing authority, we must make sure that it is held in the highest regard. I shall press Ministers to ensure that, as the scheme goes ahead—I certainly hope that Crawley borough council will take advantage of it—the highest-quality local authorities are able to take part.

Another part of the jigsaw is the negative subsidy of many local authorities. I applaud and support those who have bought their council homes, but in Crawley, where there were more than 20,000 council homes, fewer than 8,000 are left in the control of the local authority. I want the local authority not to give up the principle of having a housing pool, but to be allowed to use more of the money to continue to build new homes and to improve the homes of existing tenants to the decent homes standard.

There are lots of competing arguments. The one thing that stops me from being flippant or taking part in all the shouting and jeering today is that tomorrow I will probably have to sit in front of a hard-pressed business man who is trying to hang on to his business, which employs fewer than 10 people in these difficult times; I will look into the eyes of a man who is working hard and trying to find out what the Government can offer. There are numerous schemes to help him, particularly the ability of Her Majesty's Revenue and Customs to delay payments. That is incredibly welcome for many companies. There are also hard-pressed families who have difficulties with mortgage payments and are looking to see how they can be helped. The Budget certainly allows such help. However, it is difficult to be jolly at a time such as this.

J

Like Laura Moffat, I live in Crawley and am glad that we have companies investing in new technologies to tackle climate change and energy conservation. But Crawley and the surrounding region is still far too reliant on Gatwick Airport for employment.

The airport has been hugely beneficial to the local economy in the past but the need to tackle climate change and to conserve oil supplies means those days are past. Sadly there are some who still believe the airport should expand but such expansion would be unsustainable and permanent contraction is not many years away. The present downturn in aviation, is of course, the product of present economic problems but any economic recovery will soon bring oil price increases which, with climate change taxes, will bring a permanent reduction in demand for aviation.

I am glad that Laura Moffat recognises the need to diversify the Crawley economy and hope the Government she supports will soon recognise the unsustainability of their airport expansion plans

Submitted by John Byng

Photo of Graham Stuart Graham Stuart Conservative, Beverley and Holderness

It is indeed hard to be jolly at a time such as this. If they are still in work, the hon. Lady's constituents will go through the week with the worries that she has described. They may well go to their local bingo hall on a Friday night to have a little bit of fun and let their hair down. Will she sympathise with them when they see that bingo duty has been put up in this Budget and that in the next three years £105 million extra will be taken from bingo players? That is more than the amount that the Government are putting into housing.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley

I thank the hon. Gentleman—I think—for that intervention. At times such as this, when families are facing a difficult time, knowing that we now have a scheme to enable them to keep their home is something that they will appreciate much more than levels of duty.

Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills)

My hon. Friend will be able to reassure her bingo-playing constituents that we have relieved stakes of VAT and that, overall, the announcements in the Budget on the taxation of bingo are welcome to the industry.

Photo of Laura Moffatt Laura Moffatt Labour, Crawley

That is great to hear; I am glad that my right hon. Friend has answered the question for me.

It is important for our constituents to know that they have a Government who are here for them—a Government who are prepared to put money on the table to keep them in their homes and in their jobs and to get them through the most difficult times. I am extremely proud that I am part of a Government who are prepared to do that.

Photo of Michael Fallon Michael Fallon Chair, Treasury Sub-Committee 3:35 pm, 23rd April 2009

I remind the House of my interests recorded in the register.

This year's Budget had to meet three crucial tests: to focus real help on those hardest hit by the recession; to start to rebalance our economy and put it back on a path towards sustainable growth; and, of course, to put the public finances back under control. Some of the Budget's measures to give real help to the hardest hit are welcome, particularly those to help people back into the labour market as quickly as possible. However, I do not think that the Minister needs reminding that what really matters is that help is real—not just announced, packaged and put up on a website, but working on the ground and getting through in our constituencies.

The two groups who obviously need help are home owners, as Laura Moffatt said, and small businesses. Home owners who may be facing redundancy, through no fault of their own, are still unable to access the help that the Government announced on 3 December—four months ago—and then re-announced earlier this week. It is still not clear exactly who will be eligible or which banks and building societies are participating. That delay has been scandalous because people being made redundant now are already falling behind with their payments.

Let me give an example from my constituency. A couple living in a village close to mine have both been made redundant—the husband in September and his wife at the end of January. She has been able to find a small part-time job, but because they have some savings they are being told by their lender that they are not entitled to anything more than a three-month payment holiday. I quote:

"In fact we have been advised by several people that NOT ONE of the banks/mortgage companies that have 'signed up' to the scheme have helped anyone. In fact one broker was informed by the Halifax that they would only give mortgage holidays to people who were going on holiday as they had a job!"

It is time that we got this scheme actually working rather than constantly being re-announced. I hope that the Minister will inform me exactly which lenders are participating and what the qualifying criteria are.

Small businesses in my constituency are so confused about the various schemes that have been announced that they are writing to me, here in the House, asking that I write on their behalf to the banks or to Ministers to sort things out. The good news is that when I do get involved, I generally find that the banks respond quite well. However, local branch managers do not seem to be fully aware of how the schemes should operate, so the help is not getting directly through to the companies that need it most.

I hope that the Minister winding up the debate will assure us that all the schemes that have been announced are now working—including the working capital scheme, which does not seem to be working at all—and yielding results in our constituencies. It is essential that, as the pain continues this year, we try to protect the two groups I have mentioned.

Secondly, the Budget was an opportunity to begin to rebalance our economy. If we have learned anything over the past 10 years, it is that it is not enough to depend on a highly leveraged financial sector, an over-extended private housing market and an ever-expanding public sector. That simply does not give us the investment that we need in new industries or the all-round performance that we need as one of the world's larger economies.

Roughly every year, I ask the Library to rank our country's gross domestic product per head against all 50 American states. Over the past six or seven years, the answer, surprising as it might be, has been about the same. This country now ranks 45th, coming ahead of only Mississippi, Arkansas, West Virginia, Idaho and South Carolina. On GDP per head measured in purchasing parity terms, this country is actually poorer than Oklahoma, which is some achievement after 10 years of ever-increasing public expenditure and the so-called investment strategy of this Government.

Why is that? It is because the three sectors that I mentioned—the highly leveraged financial sector, the overheated housing market and the ever-expanding public sector—have all been fuelled in exactly the same way: by debt and excessive borrowing. The levels of borrowing are simply unsustainable, as we have seen in the banking crisis, and are beginning to unwind, and as they do so we begin to see the damage that has been caused by our overdependence on those three sectors. We see how reliance on debt and leverage has crowded out investment, equity and savings as a basis for the commercial markets, and how our obsession with driving up home ownership even among those who could not afford it—we have all been guilty of that—has crowded out the development of a broader rental market. We have seen how the inflation of the public sector has caused growing resentment among those who are not entitled to the special working practices, protected pensions or early retirement enjoyed by those in the public sector.

I would have liked this Budget to encourage other things. For example, I would have liked it to encourage equity rather than debt and to look again at how we can back early years funding for the new companies to which Mr. Betts referred. This country is not as good at that as the United States. We need to look again at venture capital trusts and how they can be developed, for example by allowing them to invest in secondary markets, as the London Stock Exchange suggested in its Budget submission. Of course, we need to look again at having more and better applied industry-driven research to turn a handful of clusters into serious, knowledge-driven business communities, as has been done much more successfully in the valleys of California and elsewhere.

Thirdly and finally, as my hon. Friend the shadow Chancellor and others have said, this Budget has failed to get the public finances back under control. The deficit that has been announced for the next two or three years is of course appalling, but it is important to understand that a large part of it is structural and has nothing to do with the huge sums that have been put aside to bail out the banks, or the way in which stabilisers kick in and welfare rolls grow during the recession. We have inherited that structural deficit from the boom years.

Photo of Robert Goodwill Robert Goodwill Shadow Minister (Transport)

Does my hon. Friend agree that the problem has been exacerbated by the fact that this Government have failed to distinguish between true investment, which yields a return, and spending through taking on increased debt, which is difficult to justify?

Photo of Michael Fallon Michael Fallon Chair, Treasury Sub-Committee

My hon. Friend is right. The word "investment" has been stretched far too wide.

This Government have not balanced the Budget since March 2002, which is seven long years ago. In the March 2003 Budget, they said that they would balance the Budget by March 2006. Two years ago, in the March 2007 Budget, the forecast slipped to March 2009. Three years ago, they forecast that we would be back in surplus this year. Last year, the forecast was pushed out further to 2011. In the pre-Budget report, it went out to 2015, and yesterday, as I understand the Red Book, it was forecast that it will be 2017-18 before we are finally back in surplus.

The Government have consistently mismanaged public expenditure. They have overestimated revenues and failed to get proper control. There was a time when the job of the Treasury was to control spending. In the past seven or eight years, the Treasury has been directing spending and failing to control it. Now we are told that the remedy lies in even more efficiency savings, despite the fact that the National Audit Office has fully scored only around a quarter of the efficiency savings so far claimed.

As my hon. Friend Angela Browning eloquently explained, if the economy goes on shrinking, government cannot go on growing. We have to start taking out costs and reducing layers of bureaucracy. We must do what businesses across the country have been doing and what households across the country are now having to do, which is, as my hon. Friend has said, cut our cloth according to our means.

The private sector has already outsourced back-office functions, cut layers of middle management and streamlined procurement. Those things have still not happened in central Government, local government, the health service bureaucracy and education bureaucracy. The perfect indictment of the Labour years is what sadly happened at North Staffordshire hospital. While patients were dying and others were drinking out of vases, three quangos—Monitor, which costs £13 million a year, the Healthcare Commission, which costs £76 million a year and the Audit Commission, which costs more than £200 million a year—were writing letters to each other. That was the failure of North Staffordshire hospital—a failure of the culture of ever-inflating quangos.

If we are to maintain the credibility of our currency and reassure overseas investors, we must repair the damage done to our public and private finances over the past few years. We must put our public finances back in order, which involves reducing borrowing and the increase in spending. If we do not do that, we will end up with more cases such as North Staffordshire hospital and we will have to cut programmes for the most vulnerable. If we do not do it, in the end the IMF will have to do it for us.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith 3:49 pm, 23rd April 2009

Like the Secretary of State at the beginning of the debate, I was encouraged by the opening remarks by the shadow Chancellor, because I thought that we were at last going to get an inkling of the Conservative way forward in the current financial circumstances. The shadow Chancellor started quite well and indicated that he had five points. For the next 24 minutes of his speech, I was waiting to go through those five points to examine his solutions. First, he told us that we must analyse how we got here, which is fair enough—I probably disagree about how we got here, but such an analysis is a good place to start. He referred to some relatively minor movement of spending priorities that he said were fiscally neutral and would presumably make no overall difference, therefore, to the general strategy.

I might have miscounted, but the shadow Chancellor seemed to get to only three of his five points. His final big point that I noted was that there should be a national debate about how we tackle an age of austerity. We all recognise that the economic situation is very serious: the Conservatives say that it is one of drastic seriousness yet, at a time when urgent action and policies are called for, the central point of the Conservative shadow Chancellor's policies is a call for a national debate about the age of austerity.

That reflects the fact that Conservative Front-Bench Members are, to put it bluntly, too frightened to put forward any policies. They recognise that the public would not like what they heard if the Opposition were to follow through the logic of positions such as that taken by Mr. Fallon. I give the hon. Gentleman credit for the honesty of his arguments today, but anyone who heard them could not but conclude that his recipe for recovery from the current crisis involves massive cuts in public expenditure that would affect large numbers of public services. We all heard what he said about the need for much more outsourcing in elements of the public sector such as housing, health and education, and I am sure that we will all eagerly enter into debate about those matters in the months to come.

Conservative Front-Bench Members may not have put forward many ideas today about how we can get out of the current situation, but other people have done so. I am glad to say that the Chancellor has been listening, and that he has implemented many of the more constructive proposals. Many people, organisations and MPs—and I was certainly one of the latter—have urged him to establish a programme for green jobs, arguing that such a programme would allow us to link the need to tackle the challenges of climate change with the need to provide jobs here and now for people facing unemployment.

We suggested that a fund be set up to help local authorities and voluntary organisations provide jobs with an emphasis on tackling environmental concerns. Therefore, I strongly welcome the plans announced yesterday for funds to provide 100,000 new jobs in socially useful activity, to be delivered through councils and voluntary groups. I welcome in particular the commitment that at least 10,000 of those jobs will be in the green-job sector. When the Government do something for which one has been calling for some time, it is right to recognise the fact. I am certainly glad that the Government have responded in the way that they have, as that will allow us to tackle some green issues and at the same time provide jobs here and now for people who need them.

I look forward to finding out more about the proposals shortly, and believe that the concept can be built on and developed. The voluntary sector in particular can play a major role in delivering these jobs as quickly as possible. Even more than local authorities, voluntary organisations can move quickly and come up with sensible and practical schemes that will deliver lasting benefits to local communities.

Photo of John Hayes John Hayes Shadow Minister (Education)

The hon. Gentleman is making a case for the innovative industries, particularly in respect of what he has described as "green jobs". However, he will know that one feature of previous recessions has been that businesses tend to cut their investment in training and research and development. The Government's response has been relatively unsuccessful: the R and D tax credit and the Train to Gain schemes do not seem to be reaching small and medium-sized enterprises. My hon. Friend Mr. Fallon spoke about venture capital for early-years and start-up businesses. Why did the Government not do more in that regard in the Budget?

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

If the hon. Gentleman looks in more detail, he will find, for example, that the pledge for 16 to 24-year olds is that every one of them facing long-term unemployment will have the opportunity to take up training. That is precisely the sort of positive measure that the Budget contains.

The proposal to create 100,000 new jobs, many of them green jobs in socially useful activity, is one that I certainly welcome. However, I would ask the Government to consider the possibility of extending the scheme even further, to involve more than just younger workers. I understand that there are proposals in the Budget for 50,000 jobs in the programme to be concentrated in those areas of highest unemployment, which is obviously right and proper. However, we have an opportunity to spread the scheme throughout the entire UK once it is up and running, which is something that I would strongly endorse. I look forward to the Government coming up with the details of those proposals, so that they can be put into effect and make a difference to our communities as soon as possible.

I would also emphasise that it is important not to assume that those environmental jobs are only those that involve clearing up rubbish or physical construction or work in that type of environmental project. Such work is of course important and valuable to the community, but there is a host of other green jobs that could be provided and which would make use of the wide range of talents and skills of those who find themselves without work in the current downturn. For example, there is interest in environmental education among those in every age group. Work is also to be done in promoting green travel plans for employers and employees. There is also a need not only to install energy efficiency and conservation technology, but to advise people on how to go about saving energy in their daily lives.

Those are just some examples of a wide range of green jobs that could be made available through the development of the scheme that has been referred to in the Budget papers. Such jobs will clearly not fill the gap for everyone who is made unemployed in the current downturn, but they can certainly help to tide people over in the current difficult period. Again, let me emphasise that they are jobs that could come on stream in months, and in some cases perhaps weeks, which is what we need. We need to provide people with jobs soon, because they will increasingly feel the effects of the recession in their communities. Action of that type is therefore needed.

It is certainly the case that many of the proposals for a low-carbon economy can have relatively quick impacts on employment. However, as I am sure the Minister would be the first to acknowledge, other proposals would take a lot longer to have an effect on jobs, because they require investment programmes that would take some time to result in large numbers of jobs. It is therefore important to consider ways of trying to produce employment opportunities in the short term, as well as in the medium and long terms.

That said, the proposals for a low-carbon economy in the Budget as a whole are important, wide-ranging and very much to be welcomed. They have also had a positive response from many in the renewables and low-carbon sector. I would like to pick out a few quotations from those in the sector who have responded to the proposals. The general manager of Sharp Solar UK said:

"This was a good day" for solar power. The British Wind Energy Association said:

"With this boost we should see the UK speeding the progress towards exploiting our massive indigenous wave and tidal energy potential."

The chairman of the BWEA said:

"This package of measures deserves a welcome from our industry, and is in line with proposals that we have been working through with government. It addresses the short-term economic hurdles we faced due to the fall of the £ against the €...It also restates the Government's long-term commitment to the renewable energy sector, and should enable us to unlock up to £10bn of private sector investment in wind and marine energy projects over the coming few years."

I could continue at length, but finally I will quote the Combined Heat and Power Association, which says that the Budget

"marks a major step towards establishing a low carbon industrial base in the UK," which could help to deliver up to £10 billion of investment in new CHP plant over the next few years. That is the reality of what people out there in the renewables industry and the low-carbon sector think of the Budget. It is also the kind of message that we should be hearing, not some of the negative messages that we have heard from some Opposition Members today.

I believe that my right hon. Friend the Chancellor was absolutely right to place a major emphasis in his speech and in his proposals on the longer-term economic and industrial strategy, with a focus on the low-carbon economy, as well as on dealing with the immediate economic and financial pressures. He was right to do that for two reasons. First, there are short and medium-term economic and employment benefits to be had from investment in the low-carbon economy. In my constituency, that is particularly relevant because we have had a major reliance on the financial services sector for a number of years. Much of the financial services sector in Edinburgh, as elsewhere, is still doing well, but some of what is happening in the banking sector is bound to have an effect on the local economy, and that will obviously be the case in other areas where the financial services sector has been important.

Fortunately, in my community and other areas where financial services have been important we also have a strong and growing energy and environmental sector. There are many companies big and small in the renewables sector that are well placed to gain from domestic and international opportunities in the low-carbon economy. There may even be expertise in the banking and financial services sector that could be used in the low-carbon economy. For example, there are interesting proposals for a green bank to use expertise in providing finance for long-term investments in low-carbon technology. That could represent part of a shift in emphasis in banking away from short-term speculation and playing financial markets to longer-term strategies and investment in the real economy, which certainly deserves every encouragement.

The shocks that we have seen reverberate throughout the world economy triggered by the mortgage and banking crisis in the USA have certainly underlined how interlinked and fragile is the structure of the world economy. I am in no doubt that, in the long term, returning to business as usual in the financial and wider economy is not a viable strategy to prevent future turbulence and shocks. While in the short term we are right to seek a global stimulus to bring back economic growth, we certainly cannot expect business as usual to return.

Photo of John Hayes John Hayes Shadow Minister (Education)

The hon. Gentleman makes the case that we should be more economically diverse. He makes a persuasive case that there has been too great a concentration on financial services in Edinburgh and elsewhere. Yet the Chancellor told us yesterday that one of our "underlying strengths" was that we were already a diverse economy. How does the hon. Gentleman reconcile that with his own analysis?

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

Clearly, we have to diversify more. There should be no dispute about that. We still have many good companies in my constituency in the financial services sector, which have many strengths and employ many people with skills and expertise, but clearly we want to diversify. Just as in the past not too many people criticised the strength of our financial services sector, it would be wrong for anyone now to dispute the fact that we need to diversify to reflect the lessons that we have all learned from what has happened in the past few months and years.

The situation is clearly going to change in the future, and we have to recognise that there are plenty of other destabilising factors out there in the world that could easily trigger similar economic upsets. They include the demand for resources—energy and food—and environmental pressures, leading to the spread of deserts and an increase in flooding, which we were rightly warned earlier would accelerate as a result of climate change. Some suggest that some of those factors may have already played a part in triggering the current crisis. Certainly, they have every potential for doing so in even more dramatic ways. Those underlying issues must be addressed by the world community with every bit as much urgency as the economic and financial crisis.

The Government, and the Prime Minister in particular, have sometimes been criticised for focusing on the wider issues too much. Many of us remember the sneering comments from some Conservatives from time to time at the Prime Minister's efforts to achieve a worldwide consensus. Reference has been made to the G20, for example. I am glad that the Prime Minister recognises the importance of tackling the wider issues. He will certainly have the support of Labour Members and many people in the country if he and his Government continue to devote considerable efforts to bringing about international agreement and action to tackle the underlying issues.

Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport) 4:04 pm, 23rd April 2009

Mark Lazarowicz must be one of life's eternal optimists. Perhaps that is no bad thing, given that he has a majority of 400. There are some points of light in the Budget, but I got the impression from listening to him that the problems that we face could almost be micro-managed away. That cannot be right. We are in the midst of one of the most severe economic downturns that we have ever faced. It might not turn out to be a great depression—that risk might have been averted at global level—but it will certainly be known as the great recession.

My criticism of the Government is that the Budget does not contain the kind of bold, confident thinking that we have seen from the Obama Administration in the United States. It contains hints of the things that the Government think are important. There is a nod in the direction of dealing with child poverty, for example, and a gesture towards greater progressiveness in the income tax system, but even these are not grasped firmly. I am left with the overwhelming feeling that the Government have run out not only of cash but of political capital and self-belief. I applaud some of the things that they have done, but the figures are so nugatory and limited that their effect will be negligible, given the scale of the overall challenge that we face.

A more fundamental charge can be made against the Government, although it cannot be made lightly: in many ways, this is a dishonest Budget. I understand why the Government might believe that being honest, open and up front with the electorate at this time could risk driving us further into a depression. If you like, this is the beneficent lie—the white lie—that the Government feel that they have to tell to put a positive gloss on the economic situation that we face. I understand the argument that they are in the business of perception management, but I believe that things have been done for political reasons. As Angela Browning suggested, the Government need to treat the electorate as adults. We can see a sleight of hand at the heart of the Budget statement, which is unforgivable, and I think that the electorate will see through it. That expresses itself in a number of different ways. Earlier, the Secretary of State suggested that this was a case of "We say cuts, they say efficiency savings; let's call the whole thing off". The electorate probably will, soon.

In Wales, the Labour Finance Minister has confirmed that changes announced in the pre-Budget report and the Budget will mean that the £416 million that the Labour-led Welsh Assembly thought was available for public services will no longer be available. The Minister on the Front Bench might find that amusing, but many people, including Labour Assembly Members—and people who have hitherto been Labour voters—will not find it amusing when those measures result in cuts in public services. The Labour First Minister—the leader of the Labour party in Wales—has said that he cannot give any guarantee that there will not be public sector job cuts or cuts in the quality of public services as a result of the changes made in the Budget.

The Barnett formula means that, regardless of any efficiency savings made in Wales or Scotland, we have no choice about this. The changes will affect the bottom line there. The Government's report on the operational efficiency programme praises the efficiency savings programme in Wales. On page 34, it refers to Value Wales and to the savings that have already been made. The First Minister in Wales told the Prime Minister that one would need to be the Archangel Gabriel to find any further efficiency savings in the Welsh Assembly Government. They simply are not there, as what the devolved Administrations by and large do is focus on health, education and public services; there are no armies of project managers and other non-jobs that may abound here in London.

I find it curious for a Government suddenly to find all these efficiency savings when they have been in office for 12 years. Is it an admission of their inefficiency and the lack of productivity in the public sector? If these are genuinely efficiency savings and not cuts, why have they not been found up until now? Why did the Government, by their own admission, waste public money while the economic situation was far better than the one we face at the moment?

The other element of dishonesty is, as we have heard, in the growth figures. We may have averted an L-shaped depression, but we are in the middle of a classic U-shaped recession, which is going to continue for some time. Nobody believes that this is a V shape and that we are suddenly going to bounce back from the worst fall in economic output in the post-war period. It has never happened—not once in the post-war period—that we have bounced back to a reasonable level of growth in the second year. That is clear if one looks at the Government's own table on page 200 of the Red Book. All the post-war recessions have involved either a second year of output reduction or minimal and negligible growth, which happened in the early 1990s. The British economy has never bounced back, as I say, in the second year. Nobody believes that.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

The hon. Gentleman makes a good point. Will he expand on it, because the depth of this recession is much worse than the previous one, making it even more unrealistic that we will bounce back?

Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport)

Absolutely. This recession is much deeper than all the other examples that are cited. The other factor, of course, is the global economic outlook, which was different in the 1990s—the example most often cited by the Government as the comparator for this recession. If anything, this recession is closer to what happened in the 1980s. The three great drivers of economic growth in the UK— exports in the global economy, financial services and the housing boom—have all gone, so where is the basis for this projected incredible growth? Suddenly, it appears, after next year we are going to re-enter the golden days and a halcyon era will be born again. That is the only way anything close to the Government's projections on tax revenue will be realised.

Photo of John Hayes John Hayes Shadow Minister (Education)

The hon. Gentleman is making a studious argument and he is right. Does he accept that growth over the last 12 years was predicated on two bases—first, borrowing, both Government and personal; and, secondly, state or Government spending—and given that neither will apply, the economy cannot possibly bounce out of the recession in the way the hon. Gentleman describes?

Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport)

The hon. Gentleman has put his finger on it. There is a structural demand gap and an output gap in the British economy, and the loss of the financial services sector means a once-and-for-all loss of about 2 per cent. of non-inflationary economic output, which will certainly have repercussions for many years to come. It is absolutely right that the public sector was a major driver, but that will not be there either.

One feasible scenario is that we could face a double-dip recession, which is what happened in America in the 1980s. There was a recovery in 1980-81, but the effect of the fiscal stimulus America had embarked upon fell off, taking the country back into recession in 1982. A double-dip recession is as likely as any other scenario, because the growth in public sector spending is falling.

Photo of John Hayes John Hayes Shadow Minister (Education)

The point that I was making, which I think the hon. Gentleman accepts, is that the basis of economic success over the past 12 years was flimsy. The case that he seems to be making is that the response to the recession must not be equally flimsy. In other words, if we invest in infrastructural improvement, we can shorten the recession and make it more shallow, but if our response to it is flimsy, like the one in the USA which he described, the recovery is likely also to be temporary.

Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport)

I am one of those who say that if we are to rip up the public balances, we had better make sure that we do it with a comprehensive strategy in place. We have not seen such a strategy from the Government. I advocate a radical fiscal expansion on the Obama model, which is based on long-term investment in the economy. David Blanchflower has made a similar point, as has the National Institute of Economic and Social Research. We have not seen that from the Government; nor have we seen the Conservative line of retrenchment and a more targeted approach. What we have seen is something in the middle, which amounts to nothing at all.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

The hon. Gentleman has been brandishing the Red Book. Would he care to look at page 28? Box 24 contains a chart entitled "G7 average annual effect of discretionary measures and automatic stabilisers". That is the fiscal stimulus to which the hon. Gentleman is referring. On the chart, the United Kingdom comes second.

Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport)

If we add up the figures, we may find that I am wrong, but the pre-Budget report mentioned a stimulus of about £21 billion. According to my analysis, the maximum in terms of active stimulating measures in the Budget is not much more than an additional £5 billion. That does not compare with the £820 billion to which the Obama plan amounts in toto, and it is a fraction of what others have demanded. David Blanchflower called for a £90 billion stimulus in the Budget, and the NIESR called for a similar figure—£50 billion or £60 billion. Even the Sustainable Development Commission called for a £30 billion green new deal.

The hon. Member for Edinburgh, North and Leith quoted some positive comment about green jobs in the Budget, but most people in the sector have been desperately disappointed by the lack of delivery. According to Friends of the Earth:

"The Government has squandered a historic opportunity to kick-start a green industrial revolution".

Even Jonathon Porritt of the Sustainable Development Commission has said that the scale of Government investment

"is not going to put us on track to achieving the extremely ambitious targets of the Climate Change Act", and the Campaign for Better Transport has observed:

"The Budget is a missed opportunity on transport."

We have not seen the green new deal. Once again, the Government's rhetoric is not backed up by reality. We are not seeing in this Budget anything like the stimulus that is needed to counteract the difficulties that we face. In this so-called Budget for jobs, I see nothing that is likely to deliver a significant number of new jobs in any part of the United Kingdom.

There may be difficult times ahead. It is possible that we shall experience a further round of financial shocks at a global level. Some hedge funds may collapse. What is the Government's strategy for dealing with that? What if there is a fully fledged financial crisis in some of the eastern European economies? What will be the effects on the economy here? I certainly do not have any confidence that the Government have a comprehensive strategy to get us through the next few years.

The final dishonesty is to do with tax. People say that new Labour is dead because the Government have finally embraced the idea of a progressive income tax system, but I think the Chancellor was hoisting a white flag yesterday, not a red flag, because this was a defeatist Budget. It is almost as if they have given up, because not only is the cupboard bare financially, as they believe, but it is bare of ideas as well.

I welcome the fact that the Government have finally come round to the idea of tax justice, but to give the impression that raising the tax on the 1 per cent. of taxpayers who earn more than £150,000 will do anything to close the massive deficit that we face is deeply and utterly dishonest. The Government must be honest with people. It is my understanding—I would be happy for Ministers to correct me if I a wrong—that 60 per cent. of tax revenue comes from income tax, national insurance and VAT, which are paid by most people—or everyone, in the case of VAT. Therefore, everyone will have to contribute more to close the Budget deficit; otherwise that will be impossible.

There is an obscure theorem in economics called Ricardian equivalence, which suggests that in a perfect world of perfect information and perfect markets, a Government do not have to say that they will raise taxes because, in the current situation, people will read the Red Book, see how much the deficit is, and realise that it is inevitable that they will raise taxes. However, most people might not have the time to plough through the 280-odd pages of the Red Book in the way that we Members do, and it is important that the public realise that we will be paying for the mistakes that have been made in economic policy and the management of the public finances for many years to come.

This great recession will cast a long shadow. Unemployment continued to rise in Wales from the early '80s right up until 1986, and the Welsh economy did not begin to pick up again and emerge from that lost decade until the early '90s. I fear that we are facing a similar situation now. The Government have not been honest with the electorate—or possibly even with themselves—about the scale of the challenge we face both in terms of the economy, unemployment and growth and in terms of defending public services, because of the economic hole that I believe the Government have, in part, dug for this country.

Photo of Sally Keeble Sally Keeble Labour, Northampton North 4:23 pm, 23rd April 2009

Adam Price made an interesting speech, but I do not agree with him that the Government have not been honest or bold. If he wants to compare us with the United States, the tables in the Red Book that have been referred to show that the Americans did implement a large number of discretionary measures, but that was because their automatic stabilisers were so small that they had to have a much bigger discretionary package to deal with the pressures they were facing as a result of the same global recession that we have experienced. Our discretionary package is smaller because our automatic stabilisers are larger—by and large, in line with those of our European partners, with whom our welfare packages and tax systems are also much more closely aligned. The hon. Gentleman is therefore wrong to say that we have acted differently from the Americans. We have dealt differently with some of the macro problems to do with the banks' toxic assets and cleaning up their balance sheets, as well as getting cash flowing again.

Photo of Adam Price Adam Price Spokesperson (Communities and Local Government; Culture, Media and Sport; Defence; Transport)

But does the hon. Lady accept that some key commentators, not least Nouriel Roubini, the so-called "Dr. Doom", who more than anyone else predicted the worldwide financial crisis, have been critical of the level of the fiscal stimulus in Europe as a whole? The point has been made by a number of US-based commentators.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

An active debate on the fiscal stimulus took place some time ago, but when one looks at the figures, one finds that the packages that most countries have come up with are roughly similar, give or take a bit. After all the hullabaloo caused when Germany said that this country was doing the wrong thing, the package it has come up with is not dissimilar to ours. I also think that there is a lot of wrongspeak about whether people predicted the crisis.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

On the fiscal measures alone in this financial year, 2009-10, does my hon. Friend agree—I think that she is making the point very well—that fiscal support worth 4 per cent. of gross domestic product from measures announced in the Budget, combined with what is in the pre-Budget report and the operation of the automatic stabilisers, will make the fiscal expansion in this country one of the largest overall in the G20?

Photo of Sally Keeble Sally Keeble Labour, Northampton North

Yes, indeed. Giving way allowed me to pick the Red Book up. If one looks at what Germany did, one finds that its discretionary measures were actually larger than ours. Given all the debate that took place and all the criticism that the Chancellor and Prime Minister faced from the Germans, one would never have expected that.

The hon. Member for Carmarthen, East and Dinefwr is also wrong to say that people predicted the crisis. Some hon. Members, particularly Mr. Fallon, who is not in his place but with whom I serve on the Treasury Committee, have listened ever since 2005 to various people, almost all of them men in grey suits, talking about the economy. I did not hear any of them say that we were heading for the biggest ever cataclysm. The only people who were predicting the crisis were the people who have always predicted the collapse of capitalism, and they are to be found in the Socialist Workers party and the Liberal Democrats. Everybody else failed to spot it.

Even at the end of 2007, after the collapse of Northern Rock, people were saying that the situation was difficult but it would get better in the spring. It was not until the collapse of Lehman Brothers that it became absolutely clear that a domino effect was taking place and that we were into something that we had not seen before. The first person who publicly called it, much to my irritation, was the Chancellor on that infamous weekend that he spent in Scotland with that Sunday Times journalist.

Photo of John Hayes John Hayes Shadow Minister (Education)

I certainly do not wish to claim that I predicted the crisis—it would be an unwise Member who did so—but the hon. Lady has to acknowledge that real doubts were expressed by Conservative Members and others about the level of personal debt and, in particular, the dependence of economic growth and prosperity on borrowing. I, like others, argued that the collapse in the savings ratio over the period of this Government was extremely dangerous and jeopardised the future of the economy. That point was continually made, was it not?

Photo of Sally Keeble Sally Keeble Labour, Northampton North

The hon. Gentleman is absolutely right about the arguments that were made about personal debt, but what was not predicted was the drying up of the wholesale market, the impact on and collapse of Lehman Brothers and then the extent to which the UK retail banks were exposed to the risks involved in Lehman Brothers. I did not hear anybody calling that set of circumstances, despite my having listened and listened. The angst about the level of personal debt is real and a very important discussion took place on whether that should be limited, but one cannot extrapolate from that predictions of what has actually unfolded.

Photo of John Pugh John Pugh Shadow Minister (Treasury)

Is it not a strange irony, that although practically nobody predicted the present situation, everybody seems capable of predicting where we are going now?

Photo of Sally Keeble Sally Keeble Labour, Northampton North

While things were going well, everybody wanted to believe that that was going to continue—

Photo of Sally Keeble Sally Keeble Labour, Northampton North

A lot of people did. It is now really important to learn the lessons of what happened and to work out not only how to prevent it from happening again, which is not the subject of this debate, but how to build our way out of the difficulties that we have experienced. The Government have been very bold—some might say excessively bold—in what they have done through the asset protection scheme and the asset purchase facilities that have been extended. We do not know exactly what the outcomes will be, but such schemes are one way to get the financial markets moving, to get credit flowing and to get things moving again.

The Government have also been bold in picking up some of the immediate pressures and dealing with them in this Budget. The hon. Member for Carmarthen, East and Dinefwr was a bit unfair on this point. He and I were at the same presentation by David Blanchflower. The fiscal stimulus package that he wanted was not huge, and its main focus was a measure to deal with what happens to young people who miss out. The focus in the Budget on the opportunities for 16 to 24-year-olds is very important, even though it is perhaps more modest than David Blanchflower might have liked. I want to see the detail of these provisions because I want quality schemes to be provided, unlike the youth training schemes, youth opportunity schemes and so on that we saw before. The Budget has dealt with some of the issues raised by David Blanchflower in type, if not in scale. The hon. Gentleman and I have both pressed the Government to deal with those issues, too.

Let me talk a bit about housing and about the elephant in the Chamber—the shape of public services and how we fund them. That is a major issue, and we all have an interest in its resolution. I am keen to see improvement in the housing market in terms of people's ability to buy houses and the availability of mortgage finance; I also want the supply of housing to be improved. I am pleased that the Budget has dealt, to an extent, with both those points. More money is being put in, particularly for new builds, which are extremely important, through local authorities and in conjunction with the private sector, in order to ensure the provision of a range of housing and tenures. Again, I want to see the details, because it is important that there should be some qualifications and some clarity about what will happen. I hope that guidance will be given on the cost per unit and so on, as well as specifications for the number of units.

I hope that when money is provided to local authorities to enable them to build, they will be given clear guidance on how procurement should work. My local authority is spending money on getting housing up to standard—it is not building new housing, but carrying out refurbishment—and the procurement is being done in such a way that, so far, all the local firms have been excluded from the tender list and have been unable to bid for work. Particularly during a recession, it is extremely important not only to get the houses built and to obtain good value, but to support small and medium-sized local businesses, so that we retain across the country a good range of skilled workers and people who can win and manage building contracts.

I hope that when the money is provided to local authorities, they are given clear guidance on two points. The first is on having local labour clauses, so that there are no arguments about whether the jobs are being given to British workers, and so that there is clarity about what is expected in terms of making sure that local unemployed people and local young people coming off apprenticeship schemes get the chance of a job. Secondly, local building firms should clearly be given the opportunity to compete for contracts with the very big contractors on a level playing field. Particularly at present, some of the big building firms will try to keep themselves going by picking up public sector work, and the pricing will be very competitive. Unless we make sure that we support small and medium-sized building firms and enable them to keep going, we might find that when the upturn comes, we have the brickies and the plasterers, but not the contract managers and the people who can look after the range of types of contract that we will need.

On the mortgage side, in what may be a hidden part of the Budget, the proposals include those for the mortgage rescue scheme, which is in place now. Four of the big building societies are signed up to it and a number of other building societies are providing similar programmes. It is vital that the money starts flowing again for the provision of mortgages. The most recent figures from the Council of Mortgage Lenders show that there have been improvements. It is important that that continues and that institutions continue to provide the financing for new building schemes in the private sector.

I have been dealing with a case in my constituency in which HBOS reviewed a loan facility provided to a local small or medium-sized developer and withdrew it. As a result, a residential unit, which was to have provided social housing, has been mothballed purely because of a lack of available financing. I ask my hon. Friend the Exchequer Secretary to make absolutely sure that banks that have received public funds stick to their obligations to maintain their 2007 lending levels, and that we get reports quarterly, not just annually. That way, we can be absolutely certain that the banks that the public bailed out are now supporting the public by providing the lending that is needed for recovery.

Photo of John Hayes John Hayes Shadow Minister (Education)

While the hon. Lady is on the subject of housing—I know that she shares my interest in that subject—will she say a word about HomeBuy? The Government announced £80 million for the HomeBuy scheme, and the estimates that I have suggest that that will help roughly 10,000 buyers. However, given that, even in very bad times, there are about 10,000 applications for mortgages each month from new buyers, is that not an extraordinarily marginal proposal by the Government? Does she see shared equity as a critical way of helping new buyers on to the ladder, as we have done for many years?

Photo of Sally Keeble Sally Keeble Labour, Northampton North

There are quite a few measures that will help people in different sectors of the housing market, of which HomeBuy is one. It is not a huge scheme, just as the mortgage rescue scheme is not huge. There is a range of different measures targeted to support different groups of people. Furthermore, although it might sound cruel, the reduction in house prices will help first-time buyers, and the Building Societies Association projects that that reduction still has a bit further to go. Figures that have come out show that the cost of housing as a multiple of income is at its most favourable level for first-time buyers for a long time.

The group about which I am most concerned, to which a lot of people in my constituency belong, comprises those who lose part of the family income, but who still have half a job, or work some hours. They do not qualify for the income-based jobseeker's allowance and so do not qualify for the support for mortgage interest payments. They are the people who will probably have the hardest time in the coming months, which is why I ask the Government to look again at that measure.

Photo of John Hayes John Hayes Shadow Minister (Education)

But the whole point is that what we actually need is a more fluid housing market, where people—for example, those in local authority housing who want to own their own home—can get on the ladder through shared equity, freeing up social housing for the 4.5 million people who are, I remind the hon. Lady, on local authority housing lists. As she will know, that is a 73 per cent. increase since 1997.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

I agree, but what will help greatly is the increase in supply that the Government are providing through the Budget. That is really important and will be one of the measures that improves the housing market.

Before I make my main point about the shape of services, I want particularly to welcome the proposals to allow grandparents' care for their grandchildren to be counted towards their pension. That is a really important scheme, which will give practical help to many women who have already taken time out of work to look after their children. It also sends out important signals about support for the family and about our understanding of what people want in terms of caring for their children. I pass on my thanks for that.

One of the big issues we all have to face is that, even without the recession, there were real questions about the future direction of public services and their provision. Because circumstances have changed in the years of Labour Government, people have become used to a different standard of living and different standards of service. Those questions will become more acute now that spending is tighter. As a number of Members on both sides of the House have said, we have to make sure that public spending counts and is even more effective than it has been so far. We need to look at how we provide services and think about not just how we cut, but how we reconfigure. By any measure, cutting services year on year until 2015 would probably destroy the morale of everybody who came into public service, because, by and large, they do so to make sure that public services are provided.

During the lifetime of the Labour Government, people have got used to having more choice of service and more control over the type of service they receive, which is all to the good, but it has profound implications for the range of our delivery agencies. There are many tiers of local government and there are different types of quango and semi-quango and arm's length delivery agencies. We need to take a hard look at them, so that we can have not necessarily a smaller state, but certainly a flatter one without so many quangos and hierarchies of structure. For example, I know of one town where there are two chief executives sitting across the road from one another—I suspect my colleague on the Conservative Benches, Mr. Bone, knows about them too. Each of those executives draws a large salary and each has a large bureaucracy serving exactly the same community. We need to give some thought to how such services are delivered in the future, while of course maintaining the democratic commitment.

The one service that the public want to access most acutely is probably the health service, where public pressure for access to drugs such as Herceptin and treatments such as in vitro fertilisation has driven the provision of services, rather than the local purchasing authority. It is all to the credit of the Labour Government that people have got used to a standard of public service that is light years ahead of what they were used to—now, people complain if they have to wait two months for an operation, whereas previously they had to wait two years.

Looking at the way in which a new configuration of services might work and the savings that it might produce, I refer my hon. Friend the Exchequer Secretary to the Treasury to an interesting report—I have already mentioned it to her briefly—by PricewaterhouseCoopers on bridging the fiscal gap. It considers two models: one would make cuts, but PWC finds that completely unacceptable, because it would mean a level of cuts that we had never seen in the public sector; and the other would raise taxes, combining a 2 per cent. rise in VAT, a 1 per cent. rise in all national insurance contribution rates and a £5 billion increase in green taxes, which, again, would test public patience past breaking point.

The report also considers the savings that could be made by reconfiguring public services in a way that maintained front-line services but changed some back-office functions. For example, over the time scales in the Budget, there are projected savings in back-office operations and IT of £8 billion, in collaborative procurements of about £24 billion, and in properties and facilities of about £5 billion. Those figures are indicative, but they certainly posit that, if we think carefully about the services that the public want, the way they want to access them and how they are provided, in a very different world where people want more say and do not want people to purchase for them—in other words where purchasing power is with the public, not with an institution—we can maintain the quality and quantity of public services to which people have become accustomed and still make sensible savings that chime much more with the public mood than heavy tax rises or public spending cuts ever would.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

My hon. Friend is right to point to the potential savings from collaborative procurement. Some of the work of the operational efficiency programme, the results of which were published the day before the Budget, demonstrate that there is up to a 200 per cent. difference in the price per therm that Departments pay for electricity and gas. Does she agree that such differences must be driven out? Those are potential efficiency savings that would not impact on the front line.

J

At last the Government is beginning to realise that local procurement has been taken too far in government. Gas, electricity, paper, pens, desks, chairs etc could all be bought more cheaply and ethically by a central buying agency. Instead Departments have been encouraged to allow local...

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Photo of Sally Keeble Sally Keeble Labour, Northampton North

I completely agree that there is scope for efficiency savings. It points to changes to the way in which services are provided, so that, instead of having multi-tiered delivery agencies between a Department and the public, the public have much more direct control over the way in which services are provided. That involves much careful thought about service design, implications and ensuring equal access for disadvantaged groups that do not have the same clout as others. It also means ensuring that the people who work for such agencies—an awful lot of whom are women—do not suddenly lose their jobs. Given the current situation and attitudes towards public services, it is important that we think carefully about how our polices are designed and how services are provided. We should not just think, "Let's take a standard model, chop a bit off there, put a bit of tax on there and roll it forward for the next 10 years to a time when, perhaps, the public finances will be balanced again."

The Government have taken some big and important steps towards getting the economy moving again, and in the Budget they have introduced a range of important measures, particularly on housing. I welcome them and look forward to seeing them make a real impact in the community.

Photo of Peter Bone Peter Bone Conservative, Wellingborough 4:49 pm, 23rd April 2009

It is a great pleasure to follow Ms Keeble. She made some very good comments about house building and I can relate them to my constituency. One of my constituents, a builder, cannot get on the tendering list, although I am sure that he would be as cheap and efficient as some of the other builders.

Let us not be under any illusion: this Labour Government have destroyed our economy. It does not matter whether we are talking about new Labour or old Labour—there has been a tax and spend approach, which has increased unemployment. Every time a Labour Government have been thrown out, unemployment has been higher than when they came in—and it will be just the same with this one. We can talk about the global financial crisis and its far-reaching effects on world economies, but the United Kingdom is in a far worse position than most. In fact, our country has the worst public finances in the G20. Under the Prime Minister's stewardship, our country is now in the longest recession since the second world war.

In my constituency, unemployment is more than two thirds higher than it was in 1997. That is not a mistake; it is 67.1 per cent. higher than it was in that year. That is the dire consequence created by the man who spent and spent and never planned for the future economic stability of this country. He is the man who has created the fastest rise in unemployment.

Let me put the issue in the context of families in my constituency. At the end of March 1997, under the Conservative Government, unemployment in my constituency was 1,938—one thousand nine hundred and thirty-eight families were looking at a bleak future. At the end of March 2009, after 12 years of Labour rule, the figure had increased to 3,239, so three thousand two hundred and thirty-nine families—67 per cent. more—were facing such a future.

The Prime Minister built his boom on excessive and increasing borrowing. For 12 years he presided over the lending of billions to individuals against inflated house prices and he has allowed the banks to lend at the most extraordinary level of leverage. His Government borrowed and borrowed with no thought of how his boom would ultimately lead to bust. In this Budget, the Government are to borrow an incredible £175 billion this year and another £173 billion next year—£348 billion in the next two years alone. That assumes that the forecasts are correct, but given that the Chancellor's forecasts have a record of being far too optimistic, no doubt the Government will borrow even more.

The whole thing is rather like a huge balloon that constantly expanded through borrowing. The balloon grows and grows, and as long as borrowing increases the balloon continues to expand. However, eventually something pricks it and there is a huge explosion. The borrowing stops, the balloon bursts and economic growth pours out. When a balloon is pricked, the air does not come out slowly—it gushes out. That is why the recession has been so sudden, sharp and severe.

It is hard to believe that John Major's Conservative Government were thrown out in 1997 because of any mismanagement of the finances. In fact, the economy was growing in 1997. This year, however, the Government are predicting negative growth of 3.75 per cent. of gross domestic product. How do those figures translate to the situation in Wellingborough? I have already said that unemployment there is two thirds higher and that we are in the longest recession since the war. Yet the Prime Minister is still here and the Government stagger blindly along, rather like a rabbit caught in the headlights of a car.

So what is this incompetent Government's solution? It is to borrow even more. We are told in the Budget forecast that public sector borrowing will be 12.4 per cent. of GDP this year, and 11.9 per cent. of GDP next year. In 2013-14, on the Government's own hugely optimistic forecast, public sector net debt will rise to an incredible 79 per cent. of GDP—in other words, twice the golden rule's upper limit of 40 per cent. They decided not to fix the roof when the sun was shining, but, worse still, when they found there was a problem, they sent in a cowboy trader to fix it. They did not call in Trotters Independent Traders—although Del Boy might have done a better job—but Darling and Co., who, like all cowboy traders, said, "Well, guv, the problem's a lot bigger than we first thought—it's going to cost a lot more to fix", and left the problem in a worse state than it was originally.

The Institute for Fiscal Studies stated in "The Green Budget 2009":

"Labour entered the crisis with one of the largest structural deficits in the industrial world and a bigger debt than most OECD countries, having done less to reduce debt and—in particular—borrowing more than most since 1997."

The Prime Minister's beleaguered quest to throw money he has taken from hard-working taxpayers at trying to fix problems has left this country with an unprecedented amount of debt, which is predicted in the Budget to rise to an extraordinary £1.4 trillion. I believe that he will not be satisfied until he leaves this country bankrupt.

The Prime Minister wanted a huge second financial stimulus at the G20 summit. In fact, he travelled round the world—I remember him missing Prime Minister's questions because of it—to encourage everyone to adopt that second stimulus, saying that it was absolutely vital; only the courageous decision of the Governor of the Bank of England stopped this. Effectively, he tore up the Prime Minister's cheque book and cut his credit card into pieces. It is unique for a Governor of the Bank of England to disagree so publicly with a Prime Minister, and he would not have taken such a step unless he thought that our economy was in the gravest peril. One auction of Government gilts has already failed; if the Prime Minister had had his way, that would have become a regular occurrence. The IFS says that there is a £39 billion black hole in the public finances. For families in Wellingborough, and across the country, that is equivalent to a tax rise of £1,250, or 8p on income tax.

That is what the Prime Minister has left us with, and it is quite different from what he said in his speech to the CBI in 1997:

"The British economy of the future must be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management for the long term. It is only these firm foundations that we can raise Britain's underlying economic performance."

He has done just the opposite. In 2002, he said in his speech to the TGWU conference:

"There will be no return to the short-term lurches in policy that would put long-term stability at risk. No relaxing our fiscal disciplines".

Again, he has done exactly the opposite.

I would like to talk briefly about how the Prime Minister's actions have affected my constituents. The Bank of England's base rate is 0.5 per cent., yet the APR on credit cards is rising, not falling. Some banks are sending out special promotional offers—I am sure that Members have seen them—claiming to charge 0 per cent. for six months. In fact, the small print says that there is a 3 per cent. flat fee to start with, and that after the six-month period the normal variable rate will apply. One would think that with the base rate at 0.5 per cent., the variable rate for credit cards should be falling, but instead it is rising. Banks, including the nationalised banks, are raising their interest rates to between 20 and 25 per cent. At a time when the base rate is at its lowest, people in my constituency are being asked to pay bumper credit card interest rates.

Apparently, I am a valued customer of the Royal Bank of Scotland, because it sent me a rather glossy promotional booklet saying:

"An exceptional card. Impressive benefits. Too good to miss? Find out more.

With an RBS Black Card you can look forward to a level of personal attention and exclusive benefits that are second-to-none."

So I thought I had better look at the small print, and it certainly is an exceptional card. Its APR is 51.8 per cent. a year—and that is from a nationalised bank. I kindly turned down the offer.

I am afraid that the situation for businesses is even worse. The Bank of England reduced the base rate to 0.5 per cent., the intention being that the cost to businesses would fall. Unfortunately the reverse is happening, and the nationalised banks have been particularly damaging. Instead of providing more facilities and cutting interest rates, they have actually increased interest rates, imposed extra fees and cut facilities. It is almost as though the banks saw a way of making excessive profits out of companies following their previous ghastly mistakes. I am talking about existing, established and respected businesses that are fighting the recession but are fundamentally sound.

Photo of Sally Keeble Sally Keeble Labour, Northampton North

The chamber of commerce that covers the hon. Gentleman's constituency and mine hosted a small meeting for me and some businesses at which it complained about charges going up from £100 or so to several thousand pounds. It is a major problem for businesses right across our area, especially the smaller ones.

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I am grateful to the hon. Lady, who shares my concern about that.

I wish to refer to a specific instance in my constituency. There is an international company headquartered there, with a turnover of £170 million a year and 248 employees. It has a £16 million loan, which it is not seeking to extend. Its bank is one of the nationalised banks, and the rate is linked to 1 per cent. above base rate. If the Government's policy was working, interest rates for that company should fall. But what has this nationalised bank done? It has said, "Oh, no. You're not going to have 1 per cent. over base, you're going to have 4 per cent. over LIBOR."

The company has already had to lay workers off because of the recession. The hike in interest rates means that it will pay an additional £640,000 a year, and to cover that it would have to lay off 20 people. The only way in which it could cover the increase imposed by the nationalised bank would be to lay off 20 people in the research and development department. Although that would cover the costs in the short term, it would greatly damage the future of a leading local company in a field in which it is imperative to remain at the forefront of development. The research and development department is at the cutting edge and does groundbreaking work. It is developing products for use in wind farms and products that reduce weight for transportation—two areas that the Government want to promote. Job cuts to the department would be a huge loss.

On top of the significant extra cost that the company faces during the recession, the bank is charging unjustified fees. For example, it has demanded that the company's budget projections are audited at a cost of £25,000. In effect, it is imposing a £25,000 fee that will merely prove that the company's projections are right. We are not talking about a new company or a fly-by-night company; we are talking about an international company that has been in existence for a long time and is extremely well known.

The Government have announced a number of schemes to help businesses through the downturn, but that company has not been able to access any funds. It appears that a successful, innovative and respected company based in the UK does not qualify for that money. Lots of money that is inaccessible to businesses is sloshing around quangos, and numerous Government schemes, most of which are not even operating, have been announced. For example, only one agreement has been signed as part of the working capital scheme, which Lord Mandelson announced in January and which was said to be "going live" on 16 January 2009.

The position looks even more pitiful if we compare it with the practical help being provided abroad. In France, research and development operations are being encouraged through a scheme that covers 50 per cent. of the cost of staffing research and development projects. That practical help will ensure that those companies come out of the recession with a bright future. It is not surprising that the company in my area is having seriously to consider expanding its research and development project abroad, despite having a firm preference to locate it in the United Kingdom. Surely the Government should be encouraging successful businesses to remain in the UK and not to go to France. Let us not forget that the company in my constituency is a well established, international company that is based locally and at the cutting edge of its field. Instead of receiving help and support in the recession, it is being punished by a nationalised bank and this Government. The schemes that have been implemented are simply not working, and the help that is available overseas is threatening to encourage companies from this country to relocate abroad. The Government's policies are failing. They are failing the company in my constituency; they are failing thousands of companies across the country; and they are failing the British people.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs) 5:08 pm, 23rd April 2009

I came along today hoping to discuss the environmental and energy aspects of the Budget, which, to be fair, includes some quite good measures in that respect. Unfortunately, we were treated at the outset to a Punch and Judy show between Front Benchers on the question of cuts. Whether one calls it an efficiency saving or a cut, the effect is the same at the end of the day—there is less money for services. The Government are going to cut £1 billion from the Scottish budget over two years. The problem, other than that they are cutting money, is the danger of choking off a recovery, should it start to happen—nobody believes that it will start in the next few months.

We must look at, for example, what President Obama is doing. The state of Maryland has a similar population to that of Scotland. It will receive £2.6 billion in extra funding supporting 66,000 jobs over the next two years rather than destroying jobs with budget cuts. The Government need to look again at what they are doing in that regard. The problem is not confined to Scotland, as the First Ministers for both Wales and Northern Ireland have made similar points.

During the initial exchanges between the Front-Bench teams, the Secretary of State said that people on short-time working were being helped by tax credits. I accept that, but a loophole exists that I have taken up with the Financial Secretary to the Treasury. He was here earlier and I hoped that he would return to the Chamber to hear me make the point again, as I am still waiting for a response.

Many people in my constituency put on short time have ended up working for fewer than the minimum hours required to qualify for tax credits. For those who do not have children, that minimum is 30 hours. People are facing a double whammy—losing wages and also their tax credits—and that is causing a great many problems. I have asked the Treasury whether there is any scope for treating people whose hours have been cut as though they were still working the minimum number, as that would both avoid the double whammy that I have described and help them out of what is a difficult situation.

I appeal to the Exchequer Secretary, who is on the Front Bench at present, to give consideration to that proposal. The problem is serious, and it is getting worse as short-term working increases. Many firms are trying to hold on to people and skills rather than making them unemployed, and the proposal that I have made would be a way to help them out in that regard.

I turn now to the environmental element of the Budget. It makes a good start in some areas, although it remains well below what is known as the Stern test, which is that 20 per cent. of fiscal stimulus should go towards green initiatives. It compares unfavourably with South Korea, for example, which has achieved a rate of 82 per cent.

The Budget has made progress in respect of carbon capture and storage—a subject in which I have had an interest for many years. It is possible that I have bored successive Energy Ministers about it—

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

I see John Robertson nodding at that, but there was a good chance that Scotland could have been well ahead with carbon capture and storage through the Peterhead plant. However, Government indecision dragged on and eventually they decided not to back it, with the result that the project went to Abu Dhabi. That proved to be a disaster, and a great disappointment for the CCS industry.

Since then, the Government have set up a competition that the earlier statement on carbon capture suggested was still grinding on. The Budget papers reveal that £90 million has been allocated to fund companies in that competition to undertake detailed preparatory studies for CCS schemes, with £60 million transferred from the existing transport budgets. I understand that the purpose of the studies is to reduce the technological risk associated with CCS projects and to give greater clarity on costs, but I wonder whether it will merely lead to yet further delays. I am not sure how that interacts with the announcements about CCS made in today's statement for, although it seemed to move things forward, it also left a lot of unanswered questions.

We are very keen, especially in the Scottish context, that the Forth basin and the Longannet plant in particular should be part of the CCS project. As I mentioned in connection with the earlier statement, Scotland has some of the largest carbon storage reserves in Europe in the North sea's saline aquifers and depleted oil and gas fields. It also has the skills from the North sea oil and gas industry to access them, something that will be very important in the development of CCS.

The Budget also makes some tax changes to the petroleum revenue tax and those governing the use of installations for other purposes, both of which are designed to help the development of CCS. However, the Energy and Climate Change Committee, of which I am member, has been conducting an investigation into the oil and gas reserves of the North sea and one company raised a slightly different problem with me. It had a licence for exploration for one part of the North sea. It decided that it was not economic to use that licence for oil exploration, but it thought that it would be possible to use it for carbon capture and storage, which may have had the benefit of extracting some oil from that area by pumping out the carbon. However, the company tells me that the licence conditions do not allow it to use carbon capture and storage technology, which means that it has to surrender the licence. The Government should look into whether there is any scope for giving a bit more leeway. Carbon capture and storage can also have quite a long lead-in time. Total has launched a scheme in the south of France, but there is a two-year period in which it will be looked at before a decision is taken on whether it is commercially viable, so we need to get moving as quickly as possible.

There are other things that might stand in the way of carbon capture and storage. In questions this morning, I raised the balancing charges being proposed by Ofgem and the National Grid Company with the Minister of State, Department of Energy and Climate Change. Those charges may impact on Scottish generators' ability to invest in new plant, and in carbon capture and storage in particular. The Minister kindly said that he was prepared to meet me to discuss the issue. I will be taking up that invitation, because it is important that we look into the matter.

Transmission charges have long been a problem with renewable generation. It would be dangerous if we did not sort the issue out or if we imposed new charges that affected the ability of Scottish generators to develop carbon capture and storage, especially given that Scotland is nearest to many of the possible storage places. The Government need to look at the issue in the round and not put carbon capture and storage up against the competition without looking into its distribution and the investment that could come from energy companies.

There is also the question whether the Government are considering transferring the carbon to the offshore field or wherever it is ultimately to be buried. Is the intention to build a transmission network for the carbon, once it has been captured, or is it intended to be stored on site? Significant investment will be required if the carbon is to be transferred in order to be eventually stored. The Government also said that we would look into pre and post-combustion, which is welcome.

I also welcome the move to allow greater help for offshore wind energy. However, I noticed that there seemed to be no mention of wave or tidal energy, both of which can be very important. Again, both may be some way from commercial application, but we need the investment to get them up and running, and to strengthen the grid so that they can be fed in. I would like to ask the Exchequer Secretary whether there are any plans to extend the help for offshore wind to wave and tidal power, with a view to moving them forward. As she may know, the Scottish Government have launched the Saltire prize to try to bring that development forward, which has generated a great deal of interest from all over the world.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

Because wave power is further behind than wind power, there is £405 million for technology transformation, which is aimed at things such as wave power. However, the support through renewables obligation certificates, to try to ensure that the existing potential in offshore wind comes about, is—to use the oil analogy that the hon. Gentleman has been using—further upstream. I hope that that gives him some reassurance.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

I thank the Minister for that explanation, which clarifies the matter slightly. I promised to allow the final Back Bencher in, so I will end on that point.

Photo of Charles Walker Charles Walker Conservative, Broxbourne 5:19 pm, 23rd April 2009

I thank Mr. Weir for allowing me in. I would have given him a couple more minutes before getting even more fractious in my seat.

I listened to the Budget yesterday in stunned silence. The figures were enormous. When I left here I went on a sort of comfort-eating crusade. Thank gosh I do not smoke or drink or I would have been a mess by midnight. No slice of carrot cake in the precincts of the House of Commons was safe, and when I had worked my way through the various tea rooms, I got home and raided the fridge. I was just trying to come to terms with the enormous figures that had been put before me, and I thought that if I ate, somehow things would become clearer. I put my svelte figure under huge stress last night, but this morning I was back to the muesli.

I understand that over the next five years we shall have increased the national debt by £703 billion. It will probably be more than that, but right now the Government are telling us £703 billion. Our total debt will be well over £1 trillion. There are 12 zeros in a trillion. I have only 10 fingers and thumbs. There are more zeros in a trillion than I have digits. This is an enormous sum of money. The real concern that I have is that I will not be able to pay it back. Personally, Charles Walker will not be able to pay this money back. My peers will not be able to pay it back. Members of Parliament will not be able to pay it back. People of working age will not be able to pay it back. Our children will not be able to pay it all back. Our small children will have this debt around their necks. Even our grandchildren will struggle with the size of this debt. It is truly an enormous sum of money.

Indeed, we may well find ourselves—we do find ourselves—borrowing to fund our borrowings. We will be borrowing money to pay money back on the gilts that become due in any certain year. Every year, a little more than 30 per cent. of income tax receipts will go to fund our borrowings—£43 billion a year. When our constituents pay their income tax, £1 in every £3 will go towards funding the debt mountain. This is a huge sum of money; a frightening sum of money.

I do not want to be churlish because I know that there are many good people in the Government who work hard on behalf of this country. They do not always get it right and they have not got it right this time, but I do not question their integrity for a moment. We were told by the then Chancellor, who is now the Prime Minister, that the Government would borrow only to invest, that he would spend only to invest, but in reality Governments only borrow and spend, however you dress it up. They can borrow prudently and spend prudently, or they can borrow foolishly and spend foolishly. Now, the Government are not borrowing prudently. They are borrowing huge sums of money to bail themselves out of the enormous financial mess that they have got the country into.

I personally blame the previous Prime Minister, Tony Blair. He had this enormous mandate when he came to power in 1997 to reform this country and make real changes to our public services. He allowed the brooding presence in No. 11 to limit his ambitions and aspirations for this country. If only, perhaps in 2000, the Prime Minister of the day had walked over to No. 11 and said, "Do you know what? You are beginning to really annoy me. You are a very, very negative influence on this country. You are bad for my karma, and I am going to make you Foreign Secretary. Then I am going to make you Home Secretary to finish you off very quickly." But he never had the courage to front up Gordon Brown, the now Prime Minister, and now we find not just ourselves but generations to come burdened with his foolishness.

One in every £4 that the Government will spend this year and next year and the year after will be borrowed. No family or home could operate on that basis for any length of time, and I really fear desperately for the future of this country if we have yet another year of this Labour Government. They have no credibility or authority left. That is not necessarily their fault, and it is not necessarily a bad thing. All Governments come to the end of their natural life. We have a democracy in this country, and the democratic wheel turns. After 12 years, the public have had enough of new Labour. There is nothing that the Government can do between now and June next year that would enable them to win a general election, so I say to them: "Have the courage to go to the nation now. Go to the nation in June. Let's get this over and done with. You will be beaten in June, but the defeat will be far less severe than if you wait until next year. So, do yourselves and your colleagues a favour: go to the nation now." I did not want this to be a partisan speech, but perhaps it has been slightly so. I do not want to attack anyone in the Government personally, beyond the Prime Minister.

I shall conclude by expressing my concerns about the Chancellor's forecasts. Everyone thinks that they are wildly optimistic, that they are not grounded in reality, and that the Chancellor painted slightly too rosy a picture of the public finances. I am concerned that he perhaps failed to level with the country yesterday, and that he was perhaps not—I shall not say "honest", because I do not want to force you to stand up and ask me to apologise, Mr. Deputy Speaker. The Chancellor is a very decent man, and he really did not want to tell the country quite how bad things were going to be. Thank God that we have the International Monetary Fund, however. A couple of hours after the Budget, it told us how bad things were going to be. It gave us the real picture and told us that there were hard times ahead. I agree with my hon. Friend Angela Browning who, in her thoughtful speech, said that the British people were very resourceful and brave, and that they were able to face down a challenge. They are up to the challenge, and it is time that all politicians were honest with them and with their constituents.

The money is running out. I wish that it were not. I would like to spend money as though there were no tomorrow, but those days are behind us. We are in for a very difficult number of years, but I would far rather that the years ahead were difficult for me and my generation than for my children and grandchildren. We must all take collective responsibility for the current financial crisis. I enjoyed house prices booming, and I enjoyed cheap credit to the maximum. We have had the good times, we have had the very best times, and we must now face up to our responsibility to ensure that we leave our children and grandchildren a safe economic legacy. We must leave them an economy that will allow them to prosper and to have the best chance to enjoy the things that we have enjoyed. That means us making sacrifices now—not next year, not three years down the road, but now.

J

I must congratulate Charles Walker on his final remarks. Yes we owe it to future generations to cut back now. Not business as usual but frugality now.

The good news is that this seeming sacrifice need not be hard to bear. Our recent predilection for ever increasing consumption has not brought happiness whereas a simpler way of life can be much more enjoyable. Walking and cycling, for example, are fun ways of getting around and yield health benefits that enable us to enjoy leisure activities such as dancing and singing. By comparison driving and flying are stressful and destroy our ability to enjoy an active life.

The present economic difficulties are an opportunity to invest in new energy saving and climate change technologies and to adopt a simpler, more enjoyable lifestyle.

Submitted by John Byng

Photo of David Gauke David Gauke Shadow Minister (Treasury) 5:28 pm, 23rd April 2009

We have had a fascinating debate this afternoon, with a number of thoughtful contributions. I should like to highlight one or two of them. My hon. Friend Angela Browning made some important points about the role of savings in our society and the falling savings ratio. She also made a point that she made last year, and I feel that I must correct her again. She claimed to have been born in 1946, but I think that she is misleading the House. She must have transposed those last two numbers. She made that claim in her very valuable speech last year, and she has done it again today. I do wish that she would stop doing it.

My hon. Friend Mr. Fallon made a thoughtful speech in which he highlighted three requirements for the Budget. He said that it should help the hardest hit, rebalance the economy and address the public finances. He detailed how this Budget and this Government had failed on all three fronts. In particular, he highlighted the schemes that the Government had announced and re-announced, and noted how little they had achieved.

The hon. Members for Crawley (Laura Moffatt) and for Northampton, North (Ms Keeble) highlighted housing issues and the hon. Member for Northampton, North particularly addressed issues connected with the schemes. Mark Lazarowicz expressed his excitement about the Budget's green proposals, although I think most of them were based on pre-publicity rather than what is actually deliverable. Even the Secretary of State for Energy and Climate Change said relatively little about the green proposals, most of which were, like the electric car proposal and as I said, more about gaining publicity beforehand than any kind of delivery.

Adam Price began his speech—an excellent speech, I have to say—by stating that the Government had run out of self-belief. He then made a persuasive case to show that the Government were entirely justified in running out of self-belief.

My hon. Friend Mr. Bone raised a number of important constituency issues. As he has done with some tenacity, he detailed the increasing unemployment levels in Wellingborough—something that the Prime Minister, thanks to my hon. Friend's many interventions, also follows very closely.

Mr. Weir highlighted some of the Budget's environmental issues, while my hon. Friend Mr. Walker revealed how he sat in stunned silence during the Budget speech. If my hon. Friend's stunned silence demonstrates anything, it underlines the magnitude of the difficulties this country faces.

It would be remiss of me if I failed to say a few words about the Secretary of State for Energy and Climate Change. He began by criticising my hon. Friend the shadow Chancellor for spending most of his speech criticising his opponents, and then proceeded to deliver a speech almost entirely devoted to criticising his opponents. I have to say that his speech appeared to be a rehearsal, or perhaps an audition, for one day being shadow Chancellor. I am not sure whether that is his aspiration.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I, for one, believe that the right hon. Gentleman's ambition should be higher. I think the Labour party could do a lot worse—I genuinely mean this—than make the right hon. Gentleman its leader. In fact, it is doing a lot worse, so perhaps he should consider this course sooner rather than later.

This Budget is, as right hon. and hon. Members have argued in today's debate, essentially about the issue of borrowing and debt and the state of the public finances. We have seen a spectacular deterioration in our public finances. Just a year ago, in the 2008 Budget, it was anticipated that we would need to borrow £38 billion this year—a not insignificant sum in itself. Now, however, we are looking at a figure of about £175 billion—the highest level of borrowing in our peacetime history. As the IMF has made clear, we have the highest deficit in the G20.

The figure for debts—an area where we were relatively better placed than many of our competitors—is also pretty frightening. In the early years of this Government or up until relatively recently, it is true that debt fell as a percentage of gross domestic product from 42 per cent. to 36 per cent. As the Institute for Fiscal Studies, and, indeed, my hon. Friend the Member for Wellingborough pointed out, it has fallen less than in the majority of OECD countries during those years, but it is now rising more quickly.

Let us not forget the sustainable investment rule, which says that debt should be no more than 40 per cent. of GDP. We have learned from the IFS today that such is the state of our public finances that the rule is unlikely to be met until 2032. In fact, we are going to see a doubling of the figure in the sustainable investment rule level up to just below 80 per cent.—overtaking in the process the debt levels of France and Germany. Those figures are based on what the Government provided yesterday, yet the real concern persists that what we heard yesterday was an underestimate. Within an hour of the revealing of the Budget figures, the International Monetary Fund predicted that growth would be worse in 2009 than the Government's projection, and that we would still be in recession in 2010.

Conservatives and, I am sure, Members in all parts of the House hope that the Government's figures will be proved right and the IMF's will be proved wrong, but the Government's claim that growth in 2011 will be at 3.5 per cent. is clearly unsustainable. As my right hon. Friend the Leader of the Opposition said yesterday, that is a trampoline recovery. Independent forecasters whose views were published by the Treasury only a month or so ago predict growth at such levels as 2.2 per cent. and 2.6 per cent. in 2011, 2012 and 2013, not 3.5 per cent. It appears that after many years of the Prime Minister's promising that there would be no return to boom and bust, it is the Government's aspiration and hope to return to boom and bust, with another boom in 2011.

Let us look at the small print of what was published yesterday. Paragraph 108 on page 26 of the National Audit Office's "Audit of Assumptions" states:

"The Treasury has reduced its trend assumption further for Budget 2009, incorporating a permanent reduction in output totalling around 5 per cent, phased in between" the third quarter of 2007 and the third quarter of 2010. What that means is that the productive potential of the United Kingdom has taken a permanent hit of 5 per cent., yet the Government still think that growth of 3.5 per cent. will be possible in 2011. As the hon. Member for Carmarthen, East and Dinefwr pointed out, there is no historic precedent for that sort of recovery from a recession.

The significance of that is twofold. It makes the claim for growth in 2011 less credible, and it reveals that much of the £175 billion deficit—£140 billion, according to the Institute for Fiscal Studies—is structural. Given the current projections, we are not likely to be able to grow our way out of a recession unless serious measures are taken.

The test of the Budget is whether it represents a credible route out. As we heard from my hon. Friend the Member for Sevenoaks, the Government's record on projecting the public finances is so grim that they consistently overestimate the position, yet even according to these projections we shall have to wait for many years. For the last eight years or so, the Government have tended to say that the Budget will balance in about two years' time. In last year's pre-Budget report the period was extended to six years, and, in this year's Budget, it was extended to eight. Those are hopelessly optimistic assumptions.

Yesterday the Government had an opportunity to explain how to restore the public finances, and they failed to do so. What did we get? We got their proposal to alter their own spending plans in 2011. In 2010, they will still be increasing spending, although they believe that the economy will be growing. As my hon. Friend Mr. Osborne, the shadow Chancellor pointed out, if we use the methodology that the Government have used against us for many years, any reduction of announced spending constitutes a cut. We see this as a cut of £84 billion.

That is not just a pedantic point. At the last election, the Government managed to reach a figure of £35 billion on the basis of an alteration in our announced spending plans. We heard the statements made by Labour Members at the time. The current Chancellor said that it was the equivalent of sacking every teacher, doctor and nurse in the country. Over the past 10 years, the central argument has been that the Government could always afford these big increases in public spending: increases of 4, 5 or 6 per cent. We have argued against that, and in doing so have been portrayed as slashers and burners of public services. We could not afford those increases then, and we cannot afford them now. The question now is how we can deliver quality public services in an age of austerity. The Government, however, continue to search for the old dividing lines, trying to pretend that we are the party that cuts public spending while they are entirely different.

What is the Government's approach to bringing down the deficit? Let us look at tax. They have tried to highlight one issue above all others: the 50p rate. That has the singular achievement of being cynical in at least four respects. First, it is a breach of a manifesto pledge. The Secretary of State for Energy and Climate Change was very keen for the shadow Chancellor to intervene on him, and I am perfectly prepared to let the Secretary of State intervene on me to say whether he denies or accepts that the Labour party's last manifesto stated that it would not raise the basic or top rates of income tax in the next Parliament and therefore that the policy announced yesterday is the clearest and most blatant breach imaginable of a manifesto pledge.

Secondly, it is cynical because it is a distraction from other taxes. In truth, even before the next general election, most of the taxes imposed will apply across the board, such as the fuel duty increases, and the increases in the cost of alcohol and tobacco. However, the really big tax increase will happen after the next general election. As soon as the election is over, Labour will increase national insurance contributions, affecting everyone earning more than £20,000 a year.

Photo of Clive Betts Clive Betts Labour, Sheffield, Attercliffe

The hon. Gentleman was talking about manifesto commitments. Will the Conservative party put in its manifesto that immediately after it wins the next general election—if it does—it will reverse the 50p income tax rate? Also, as he has described a black hole that he believes exists in the public finances, will he come clean and spell out precisely the cuts in public expenditure that he would make if he got into power?

Photo of David Gauke David Gauke Shadow Minister (Treasury)

The Labour party has announced—under, I suspect, the same methodology that it used at the last election—£84 billion-worth of cuts. The Conservative party position is that our priority will be to try to tackle the tax increases introduced by the Labour party that will affect the many and not the few. Therefore, there is no commitment here to reverse that particular tax rate—but whether we can reverse it or not, the fact remains that it is a cynical policy.

That point brings me to another reason why this tax rate is so cynical. One can see what happened here. As the Government sat down in No. 11 Downing street—or, more likely, No. 10 Downing street—the thinking was not, "How are we going to bring in some tax increases that are good for the UK economy and will not damage its productivity?" Instead, the thinking was more, "What can we do to put the Conservative party in a difficult position?" That is the way that this Government work.

The fourth reason why the policy is cynical is that it will not raise the amount of revenue that has been claimed. We do not dispute that it will raise some revenue, but as the IFS has stated today, no account has been taken of the fall in indirect consumer spending that will result from this tax increase, so the Government will not raise as much money as they claim.

Let me return to the issue of how this Government operate: they are not thinking about what is best for the country; they are not thinking about addressing the fiscal crisis that we face; the way they operate is all about political positioning and trying to damage their opponents. This is all of a piece; it is consistent with the way that this Prime Minister has operated throughout his career. Even when dealing with his own party colleagues, he blocked public services reform because it suited his own internal party position. As Chancellor of the Exchequer, he abolished the 10p tax rate to try to wrong-foot the Leader of the Opposition. It is no wonder there is an atmosphere within Downing street that leads people to believe that there are no limits on what can be done to put pressure on their opponents, as we saw over Easter and in the McBride affair.

This is a Budget that fails to address the long-term needs of the country and ducks the big issues—it is a cowardly and dishonest Budget. Tony Blair's speechwriter yesterday described it as a Budget of a Government preparing themselves for opposition. The Government have neither the ability nor the desire to govern responsibly, and it is time that they made way for those who can.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee 5:45 pm, 23rd April 2009

We have had an interesting, at times thoughtful, sometimes amusing and sometimes vitriolic debate this afternoon. I shall first mention a few of the contributions that we have heard.

My hon. Friend Mr. Betts, who welcomed the support in the Budget, particularly to prepare for the upturn, gave many examples of companies in his constituency that are preparing for just that. He also rightly pointed out our determination to lead in environmental technology.

Angela Browning, who always makes thoughtful speeches, particularly about retired people, talked about loan sharks and banks in the same breath. We all share her desire to see the standing of financial services and UK banks return from its present point to somewhere reasonable. She also wanted cuts in taxes on investment income, which is a feature of what we hear from the Opposition. They scaremonger about the size of the debts that face us after what is a global shock and then complain about anything that we do in terms of fiscal consolidation to try to raise money and restore the sustainability of the public finances. They always make the basic argument that the deficit is too large and then complain when we try to raise money to shift it.

My hon. Friend Laura Moffatt again demonstrated her commitment to and experience in housing, and she particularly welcomed the fund that will allow local authorities to build. She emphasised the importance of housing—we share that view—and particularly wished to ensure that we deal with some of the existing shortages. The Budget contains modest but important measures in that regard, despite the problems that we are experiencing in the public finances.

Mr. Fallon made his usual robust speech. We have shared many years of experience serving on the Treasury Committee and I continue always to enjoy his contributions. He talked about the structural problem of debt, but when we have had a shock of the sort that we have seen in the global financial system, which, without being predicted—my hon. Friend Ms Keeble mentioned that point in her extremely good, thoughtful and interesting presentation—shifts our tax receipts in such an unprecedented way, it is not surprising that a structural deficit occurs. We have to think very carefully about how to restore some of that tax funding, and I believe that the approach that my right hon. Friend the Chancellor took in his Budget will begin to do that.

The hon. Gentleman, in line with a lot of his party, said that the public sector was too big and has to be cut, but he did not explain quite how he would like to see it cut. I thought that my hon. Friend the Member for Northampton, North made much more interesting comments on the efficiencies that can be driven through the public sector—we have made a beginning on that with the operational efficiency programme—and how collaborative procurement, shared services and a different way of delivering public services are beginning to give us the chance to transform how our services are used. She described this as a "flatter" public service, more driven by its users than providers, and she offered us some important and interesting insights into what the future will be if we can do that in an appropriate way, while protecting front-line services. That is the important difference between the two sides, it seems to me. The question is whether we should slash and burn in the middle of a recession, or take a careful and focused look at how we can deliver real service efficiencies while protecting those on the front line.

Adam Price at least admitted that the Government have put in effect policies that might have—I am quoting him—averted a recession—

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

Indeed, a depression. After that, his contribution went downhill. We probably do not agree on much more. He is at least in favour of a fiscal stimulus, and we had some discussion about the size of that. Of course, that puts us on the same side of the argument, against those who said that we could not afford a fiscal stimulus. The Opposition voted against the fiscal stimulus that was a centrepiece of the pre-Budget report. They would have put us in a position where we would have been unable to bring forward the £3 billion of investment that was already planned, as my right hon. Friend the Chancellor announced. We would not have been able to stimulate the economy in order to support people now.

Mr. Bone made his usual trenchant remarks. I hope to see him in the Committee on the Finance Bill, so that we can carry on our jousts there. Naturally, I do not agree that the Labour Government have destroyed the economy. He needs to take into account what is going on outside the country. We have had a massive unexpected global banking shock, which has created the first synchronised global downturn and decrease in world gross domestic product since the first world war— [ Interruption. ] It does not say that anywhere; I am just describing what is happening in the world economy.

I know that it suits the Opposition to pretend that all these problems and the sudden huge shock in our financial services have somehow been generated internally in this country, leading to the deficits that the Opposition go around the country trying to scare people about, but the circumstances of the credit crunch and of events in the global international financial system are unprecedented. Inevitably, those circumstances have had a big effect on all economies in the world, both advanced and developing, and we face major economic challenges as a result. I would have thought that, just once, an Opposition Member might acknowledge that that is going on, instead of peddling the view that all the problems were internally generated in No. 10 and No. 11 Downing street—that we could all have foreseen them somehow and that we have deliberately got ourselves into a situation where we have to deal with a borrowing requirement of 12 per cent. of GDP. If the Opposition were being more honest, rather than talking in their slogans for the forthcoming general election, they would acknowledge that we have been affected by an unprecedented global situation and that we have to recover from that.

It is important that we acted to shore up the banking system. That was essential, but it was done at a cost. Initially, the Opposition opposed our action, then they were in favour of it, then they opposed it again. Their thoughts on what we should be doing to save the global banking system seem to change from one day to the next. They spent years acknowledging that financial services were a major part of our economy and that we are an open and trading economy, but they now blame the Government for the fact that the global downturn is having a greater effect on our economy than on some more closed economies. That is true, because ours is an open economy that had a comparative advantage in financial services. That is why we have been hit more severely than some economies. Japan and Germany, neither of which have large financial sectors in the same way as we do, have been hit even harder because they manufacture and export. They are being hit by the same sort of global slow-down—the stalling of the economic engine—that was the result of the credit crunch.

We have to get the world economy through the present problems, and we have to get this country through the challenges that we face, so we acted to shore up the banking system, despite the Conservatives' less-than-helpful approaches. That was essential, but it had a cost. We acted in the pre-Budget report to provide real help for people and businesses, and that included the fiscal stimulus that the Conservatives voted against. A tax cut for the 22 million basic rate taxpayers will go into their pay packets this April. The Conservatives have to explain to the people of this country why they voted against it. They have to explain why, when things are so challenging and difficult, their priority for expenditure is to spend £1 billion on giving £200,000 each to the 3,500 richest estates in the country. Our priority is giving a tax cut to 22 million basic rate taxpayers. They have to explain why they refused to change their mind about that when they had the chance to do so—the shadow shadow Chancellor, in his usual way, suggested that perhaps they should change their mind about the policy. They have to explain why it continues to be their priority.

The Conservatives also have to explain what they will do about the increase to a tax rate of 50 per cent., which we have had to introduce to deal with the unprecedented situation that we are in. They have to explain why the Mayor of London today announced that he was against it and that the Conservative party should vote against it, when the Conservative Front Benchers are being rather coy about their view. The Conservatives have had much fun talking about potential leadership challenges in our party—they even tried to provoke my right hon. Friend the Secretary of State for Energy and Climate Change, who is doing a fantastic job where he is, to join the next leadership contest—but the Mayor of London is stalking the leader of the Conservative party before the latter has got anywhere near the gates of No. 10. He announced that he might not even bother to stand for a second term as Mayor, and that he might be looking for a seat in this place, so that he can see whether he can cause a leadership election in the Conservative party.

Photo of Angela Browning Angela Browning Conservative, Tiverton and Honiton

I am sorry to take the hon. Lady away from Boris, but could I bring her back to inheritance tax? We have repeatedly heard from Ministers this afternoon about the £1 billion that the Conservatives would spend on inheritance tax, but if she looks in her Red Book she will see that on the back of the announcement that her Government made following the Conservative party conference, in which they set out their own change to inheritance tax, tax revenues and receipts to the Treasury have exceeded £1 billion. That is the result of her party's policy.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

The interesting point is that the Conservatives' stated priority—indeed, it has been restated, including last night by the shadow Chief Secretary to the Treasury on "Newsnight", despite the attempts of the shadow shadow Chancellor to get the party to ditch the policy—is to give £1 billion of revenue, at a time when fiscal consolidation is really important, to 3,500 of the most well-off people in the country. It is truly a Conservative millionaire's manifesto, and they keep confirming the policy.

The Budget prepares the economy for the recovery. It ensures that we will be able to protect investment at this most difficult time, so that when recovery comes, we will be best placed to make gains as rapidly as possible, and to restore the prosperity and the balance of our economy following this unprecedented global economic shock. We will always seek to protect the most vulnerable, which is why we announced policies worth nearly £3 billion to protect the unemployed and give a jobs guarantee to 16 to 24-year-olds. We will do those things. We will protect investment. We will be able to rebuild our economy and our public services on a firmer, fairer footing. The alternative, as we have seen—

The debate stood adjourned (Standing Order No. 9(3)).

Ordered, That the debate be resumed on Monday 27 April.