Debate resumed (Order,
Question again proposed,
(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
Copy and paste this code on your website
This debate should not be about statistics; it should be about people. I am sure that statistics will be bandied around, but we are talking about real people who are worried if they have lost their job and worried about how to support their children, and workers worrying if they might be next. The welfare state is here precisely to support people at times such as this. We have strengthened the safety net so that we pay people's mortgages if they cannot get back into work, we pay their pensions if their company goes bust and—thanks to tax credits, which the Conservatives have said they want to dismantle—we are paying more than 300,000 people an extra £35 a week to soften the blow of losing overtime or work.
For the record, perhaps the Secretary of State will acknowledge that we have said no such thing: we have said that we would like to make the tax credits system work more effectively.
The hon. Gentleman's leader told GMTV that he wanted to dismantle it, and the hon. Gentleman has made it absolutely clear that his party wants to look at cutting tax credits. The fact that 300,000 people are getting an extra £35 a week is softening the blow, and that would not happen under the Conservatives.
At times like this, the overriding role of the welfare state is to help people to find a job. The choice before us is between a Government who are investing £5 billion extra to get people back in to work and an Opposition who cannot say that they support that help, because they are committed to cutting spending now. I predict that they will want to run away from that during the debate, but that is the consequence of their policy, and they cannot run away from it.
I wonder if I could quote my hon. Friend Mr. Swayne, who intervened early in yesterday's debate to say:
"Is this really what this day's debate is about—the Opposition? Is it not extraordinary that the Government begin with an attack on the Opposition rather than with an exposition of their own case?"—[ Hansard, 27 April 2009; Vol. 491, c. 595.]
I repeat that today: why do we not stick to the Government's plans? In the interests of scrutiny, let us hear them.
There is someone else who wants to run away from the consequences of his party's policy. [ Interruption ] The Opposition do not want to listen to the debate. They do not want to have the consequences of their policy spelled out to them, because they want to pretend that it is possible to cut spending now and increase spending at the same time. During this debate we will expose why that is simply not possible.
These are extraordinary times.
I will make a little progress and then give way.
Unemployment has been rising across the industrialised world—in the United States, France, Canada, Japan and Italy. In Spain, it is over 15 per cent. Everyone in this House will be worried about the rise in unemployment to 6.7 per cent. in this country. Yes, of course, we started from the lowest claimant count since 1975; yes, there are still nearly 3 million more people in work than in 1997. However, that is no comfort to people who have lost their jobs—they want to know what Government will do to help them now.
When the Chancellor said that there would be an extra £20 on tax credits, some people might have thought that he meant £20 a week. Will the Secretary of State confirm that he meant £20 a year, which is about 40p a week—barely a pint of milk? He looks confused, but that is the figure that the Chancellor cited in the Budget statement. Does he think that that is sufficient for the Government to hit their child poverty target for 2010?
I am not even sure that the hon. Gentleman's party is committed to that target. We are committed to abolishing child poverty. Clearly, these are extraordinary times. However, we took decisions in the 2007 Budget that will take another 500,000 children out of poverty, and we have already taken 600,000 children out of poverty on top of that. If we had just continued the Conservative party's policies, 2 million more children would be in poverty. We continue to be committed to this policy, which would never have existed if the Conservatives had been in power.
I will make some progress with my argument and then give way to my right hon. Friend.
Labour's policy is to invest now to protect jobs now and to get people back into work as quickly as possible. We estimate that because of our actions half a million jobs will be protected. People who would otherwise be out of work are still in work because of our actions. In contrast, the answer of Mrs. May would be to cut spending now, and that would mean helping the unemployed less. That is the choice—a Labour Government who believe that we are in this together and will only come out of it together, or Opposition Members, who believe that someone who loses their job is on their own and should not be helped by the Government of the day.
Some of my constituents have asked me to put this question to the Secretary of State this afternoon. They do not doubt that the Government's measures are about helping people to get back to work, but those measures do not wash with them, because work is part of their DNA. They are scrambling for any job that they can get, but there are now simply not enough jobs for those who genuinely want to work. Their wives work a small amount, and they are now faced with their national insurance-based jobseeker's allowance running out. Should they tell their wives not to work, so that they can claim benefits, or should they tell their wives to continue working while they scramble for work, and lose their homes because they simply do not have enough money to pay the mortgage? What advice would the Secretary of State give my constituents?
Clearly, we want to help people get back into work as quickly as possible, and the tax credits policy is intended precisely to help women in that situation so that they can have extra work. [Interruption.] Mr. Hammond mutters from the Opposition Front Bench, but these are exactly the JSA rules that his party introduced in 1996. The difference between now and then is that, on top of that, there are tax credits to help people who want to work more, so I have answered my right hon. Friend's question precisely.
I shall make some further progress, as I am going to come to my right hon. Friend's point about real jobs.
The Opposition's policy would increase the human costs of this recession, but it is also economically illiterate. In a banking crisis, we have to get lending going again, support the banks and strengthen confidence. The Tories, of course, would do the opposite. They would take money out of the economy at precisely the time when it needs to be in the economy. They would cut borrowing and would therefore be unable to stand behind the banks, savers, businesses and homeowners in the way we are. Their policy would risk the vicious spiral that the Japanese economy entered in the 1990s. That would be the consequence of their policy, and they cannot run away from it.
Unfortunately we have lost some jobs in my constituency, including in one business that we were able to help with the banking problems. Does my right hon. Friend agree with what was said in the discussion that I had with my local jobcentre manager last week—that, unlike in the previous recession, we now have an active labour market intervention strategy? Will he accept my thanks that there is now a much broader suite of measures that can be used to try to help people who do not have a job to get back into employment? For example, they can be helped to go into business for themselves, look for other employment or enhance their skills. Does he accept that that strategy is very different from what happened in the previous recession?
That is absolutely right. I am sure that my hon. Friend will accept that that costs money, and it was precisely because the Conservative party did not put in extra money in the '80s that the active labour market was relaxed. The link between claiming and looking for work was eventually completely abandoned, and studies suggest that that meant that unemployment was 4 per cent. higher than it needed to be. That is the consequence of the Opposition's policy, and they cannot run away from it. They are ideologically against the extra spending, so unemployment and the recession would last longer and cost more, precisely as they did in the past.
I will make some progress, then I will give way to hon. Members.
What is really extraordinary about the Opposition's policy is that they want to spend less on helping the unemployed. They must be the first Opposition to say at a time of rising unemployment that the Government should be spending less, not more. Of course, it is reasonable for the Opposition to say, as they did at the weekend, that they want to spend less. That is a reasonable policy, but they cannot in the next breath say that they want to spend more. They cannot say in the run-up to the Budget that we should be cutting spending, and then when the Government announce extra money for the unemployed say, "Oh, well, we'd have done that too." It simply does not add up.
We have set out our position on spending clearly in this Budget, and we have been clear about the consequences of our decisions and of asking those who earn more to pay more. The Opposition have made their overall position clear. They would not support the £5 billion that we have invested in unemployed people, and they have said that they want spending restraint now. But they have yet to admit the consequences of that choice, so I shall spell it out for them. We are investing around £3 billion extra in Jobcentre Plus and our private and voluntary providers. That was our choice. The right hon. Lady's choice to oppose that would mean people getting less help to find a job, less time with job advisers and less help with job search.
The right hon. Gentleman seems to pursue the argument that, when people say that they want public sector spending to be restrained, it means cuts. The Government will restrain public sector spending by billions of pounds next year. Where will the Government's cuts fall?
The problem with the right hon. Lady's argument is that she opposes even the efficiency savings that we have made in the past few years. We have saved £2 billion a year through extra efficiency savings. [Interruption.] Mr. Swayne, who is the Leader of the Opposition's helper, may be interested to know that the right hon. Lady goes from television centre to television centre, opposing our changes. She cannot say that she opposes the efficiency savings that we have made in the past few years and criticise us for that, while claiming that she will find more efficiency savings in future. The shadow Chief Secretary may be interested to know, for the right hon. Lady's job prospects, that she has got herself into a position whereby she was against efficiency savings in the past, saying that she would not preside over any in the future, but she still believes that she can spend more money than us. She may have noticed that the leader of her party said at the weekend that he wanted people who would find less money and achieve more. She proposes to spend more money and do less.
The right hon. Lady asked where our cuts were. We set out in our three-year plan last year exactly how we achieved the £2 billion of efficiency savings and we will set out in our three-year plan in the next couple of weeks exactly how we will continue to do that. We will continue to save on IT, telephony and estates. We have reduced jobs in back offices and put them in the front line, where they are most needed. The right hon. Lady opposed all those changes, which shows that the Conservatives want to talk generally about saving but have no idea about how to achieve it. [Interruption.] I think that the hon. Member for Runnymede and Weybridge is twitching.
Let me get this straight to make sure that I have understood the Secretary of State's argument. When the Labour party makes cuts, they are efficiency savings; when the Conservative party proposes the same reductions, they are front-line service cuts. Is that his argument?
That is exactly what has happened in my Department—we have reduced back-office jobs by 30,000 to 100,000. The right hon. Member for Maidenhead opposed that because she wants to present easy arguments about— [Interruption.] She says no. She goes around talking about 750 jobcentre closures. That was a result of putting together the Employment Service and the Benefits Agency, thereby improving the service, reducing the time that we take to process benefits and improving the advice that we give people to get them back into work. They now get back into work far quicker than in the past, yet the right hon. Lady opposed that. Conservative Members have no idea how to make the system more efficient—they are simply ideologically committed to cutting spending.
The Secretary of State speaks continuously about cuts and confidence, but I want to ask him about his responsibilities for employment. The figures for public sector debt, on which the Government rely, are not, in every respect, those that the Office for National Statistics presented. Does he agree that, according to ONS figures, including the banking sector and public sector pensions, the actual amount of net debt is more than £3 trillion, not the amount of around £1 trillion that the Government presented? On ONS figures, that is between 175 and 205 per cent. of gross domestic product. Does he agree that the ONS says that—yes or no?
Not at all. If the hon. Gentleman wants to discuss debt, the International Monetary Fund says that we are the second lowest for debt in the G7. We will remain in that position even at the top of the amount that we will borrow. No one denies that borrowing needs to rise so that we can invest more now. That is precisely to ensure that we return to growth and reduce debt as quickly as possible. The problem with Conservative Members is that, because they would not take action now, unemployment would last longer and the debt would be higher. They made that mistake in the 1980s and the 1990s, and they still have not learned the lesson. Clearly, they do not want to hear about the consequences of their policies, so I will continue to make them clear.
Our policy is to recruit an extra 6,000 people. We announced that in the pre-Budget report, and we have done it. Those people would be fired under the right hon. Lady's policy. She could not hire the thousands of additional staff that we will recruit as a consequence of the Budget. Fewer workers threatened with redundancy would get help through the rapid response service. There would be no pre-redundancy service for small and medium-sized companies.
I will make some progress because Front-Bench Members want me to elucidate our policy.
In January, we announced £500 million for people who are unemployed for six months to provide recruitment subsidies and help with starting a company or with training. The new help started this month, on time, exactly as promised. Again, the right hon. Lady could never promise to do that, because she was against the fiscal stimulus in the Budget. More than 6,000 people have already been referred to that help. She criticises us for not doing that quickly enough; under her it would not happen at all.
The right hon. Lady goes around talking about the flexible new deal. The Budget means that we can invest hundreds of millions of pounds extra to secure the flexible new deal. We will deliver that— [ Interruption. ] It has gone up because, owing to the world recession, we predict that there will be an increase in numbers. She, I am sure, agrees with that. We are putting more money in; she would not do that. If she were now Secretary of State, which would be a terrible thing, she would have— [ Interruption. ] We announced an increase in the Budget in my Department—one that, because of the policy of the hon. Member for Runnymede and Weybridge, she would not be able to match. She would be sitting there, having to work out either how she would put the flexible new deal back by a year or how she would cancel it. That is the consequence of her policy. Today we are announcing the next stage in that extra help.
Does the right hon. Gentleman accept that as a result of the inability to secure much needed investment many small firms are cutting back on staff, placing even more people in unemployment?
Actually, because of the tax deferral policy that we have put in place, £2 billion has been deferred. That is helping 100,000 companies and more than 600,000 people. Because of the policies that we are putting in place overall, we think that the jobs of 500,000 people are being protected. Because the hon. Gentleman's party is against that extra help, the consequences under his policy would be far worse. [ Interruption. ] Again and again, the Opposition want to say that they will cut spending, but they do not want to live up to the consequences of that, which would be less help now.
The next stage of the extra spending is what we have announced today, which is a future jobs fund, which responds to the point that my right hon. Friend Mr. Field made about what we do if there are not enough jobs. What happened in the '80s and '90s when there were not enough jobs for young people was that they were simply abandoned and left on the scrap heap. Many right hon. and hon. Members will have seen the consequences in their constituencies. They will know that often those people never got back into work again and that often their children never got into work when they grew up. That was the root of many of our welfare problems, which we have been starting to put right.
I am grateful to the right hon. Gentleman for his generosity in giving way to me for a second time. He has just been talking about the number of young people who are unemployed. Will he now confirm to the House what the Prime Minister was not willing to confirm in Prime Minister's questions last Wednesday, which is that the number of young people not in education, employment or training is now higher than it was when Labour came into office?
The right hon. Lady knows perfectly well that the number of people overall has increased and the rate is actually down. She knows perfectly well that there has been an increase in the number— [ Interruption. ] Will she confirm that she knows that there has been an increase— [ Interruption. ] No, this is a debate that— [ Interruption. ] She knows perfectly well that the rate is down: it is because there are more 16, 17, 18 and 19-year-olds that that fact gets bandied about. What people actually care about is what we do about that. What we are doing about it, through the policy that we announced in the Budget, is saying that every young person aged 18 to 24 will be offered a job or a training place. That means that the problem that she has identified is being dealt with. We will put in place a guarantee that every young person will be offered a job or a training place. She cannot match that, and if she wants to say that she will, she should say how she would fund it.
I am grateful to the Secretary of State for again giving way. I am going to try again. I asked a very simple question, which he did not answer: will he confirm to the House that the number of young people not in education, employment or training is now higher than it was when Labour came into office?
The rate is down and there are more people in full-time education than there were at the time. Because of the policy that we are putting in place today, all young people will be offered a guaranteed job or a training place before they are unemployed for a year, instead of being put on the scrap heap, as they were in the '80s and '90s.
As the Secretary of State insists on talking about rates rather than numbers, will he confirm that in 2000 the rate of NEETs was one in eight and that it is now one in seven? That is a rate, not a number.
Labour Members are delighted with the Government's proposal to provide jobs. More is the pity that my right hon. Friend was not old enough to be Secretary of State in 1997, so that we could have that programme at the beginning of our stewardship, instead of all this new deal stuff. Earlier I was trying to address the problem of older workers, who are not covered by the scheme, whose national insurance benefit has run out and who will take any job available. Do the Government have any scheme to extend the national insurance scheme's coverage beyond six months?
As my right hon. Friend knows, those jobseeker's allowance policies have been in place since the 1996 legislation, but we are putting in place policies to help people who are in precisely the circumstances that he describes. There is a scheme to help with mortgages, whereby people can defer some of their mortgage payments. That would help people in those circumstances, as would the tax credits policy. It is right that there should be a contributory element, and that people should then get help, whatever the income in their family. After a period, however, it is also right that we should look at the income in that family overall. Anyone wishing to suggest an alternative policy would have to say how they would fund it.
Can the Secretary of State tell me what the Government are going to do about the 16 to 18-year-olds whose education has been cut, if he is not prepared to make a statement about the failure of the Learning and Skills Council to fund sixth-form education?
We actually announced £600 million extra in the Budget—again, money that the hon. Lady's party would not be able to provide. The shadow Chief Secretary to the Treasury will note yet another spending demand from those on his Back Benches.
On a point of order, Mr. Deputy Speaker. I seem to remember, having sat through the Budget statement, that the £600 million fund to which the Secretary of State has referred was actually intended to replace the capital fund and not for sixth-form education. Perhaps you would like to invite the Secretary of State to correct himself?
The hon. Lady is a wise Member of the House, and she knows that that is not a point of order. It is a matter of debate, and it remains to be seen whether the Secretary of State will take up the point; it is not a point of order for the Chair.
The hon. Lady is wrong; it is revenue funding for extra places. I am afraid that she is the one who is confused.
We will offer young people 100,000 jobs in growing sectors of the economy. In addition, we will launch the future jobs fund, which will spend £l billion to create real jobs, paid at least at the minimum wage, which will lead to qualifications and careers. From this morning, the fund has been open for business. We want councils, social enterprises and charities to come forward with their ideas. There are two main criteria: the jobs have to be real jobs, and they have to be socially useful.
Today, my right hon. Friend the Secretary of State for Culture, Media and Sport and I announced that at least 5,000 of those jobs would be sports coaches. That meets the criteria: they are socially useful jobs and they are also real jobs. We expect that many of those young people will then go on to a career in sport. The others will learn good, useful leadership skills that they will be able to take into whatever career they go into. All those people will be better off than if they had been left without work or training, as they were in the past.
Those on the Conservative Front Bench do not want to welcome this policy, because to do so would be to recognise that their policy would involve doing less than the Government are doing. But perhaps they would like to take advice from the Conservative chair of the Local Government Association, who said that that fund was "excellent news". She continued, and I could not have put this better myself— [ Interruption. ] The shadow Chief Secretary might want to listen to the advice from the Conservative chair of the LGA. She said:
"Previous recessions have left tens of thousands of people unemployed for years, even decades, and stuck in a dependency culture without the skills that they need to get a job. The devastating impact of this lost generation"— the Conservative lost generation—
"from previous recessions is still being felt in many parts of the UK today".
I could not have put that better myself, and I believe that that, rather than the view expressed by those on the Conservative Front Bench, is the proper view in the country. It is a shame that, on the same day, the right hon. Member for Maidenhead described the jobs fund as a con. Despite the lack of enthusiasm from some quarters, I hope that MPs on both sides of the House and councillors will lead their local communities and apply through the documents that we have put on the Department for Work and Pensions website today.
There is a choice: stopping long-term youth unemployment, or cutting spending now. We are investing to prevent today's unemployment from turning into tomorrow's welfare dependency. The Opposition would simply abandon people to a life on benefits. In the 1980s Tory recession, the number of young people unemployed for more than six months went from 150,000 to 600,000, and it took 10 years to return to the pre-recession level. In the 1990s, it rose to more than 400,000 and took seven years to fall back. The costs were enormous: the cost to the economy and the taxpayer of the benefits bill, and the cost to society of drug abuse and crime. Yet, we know that the true cost was in the wasted potential of talented young people—the Conservative party threw them on the scrap heap—and that the consequences of making the wrong decisions in a recession are not theoretical. We remember—Labour Members certainly do—that the consequences were felt by real people, and the challenge for this recession is in ensuring that we do not repeat the mistakes that the Conservatives made in the past.
Again, the hon. Gentleman does not want to hear the consequences of his policy, and that is not surprising. He wants to pretend that it is possible to cut spending now and not have less to spend on helping unemployed people now. [Interruption.] It is not rubbish; it is exactly what happened in the 1980s and in the 1990s, and it would happen again if his party ever got back into power. [Interruption.]
Order. Sedentary barracking is not helping this debate—it has enough in it without having a chorus of interruptions and so on. I am not sure whether the Secretary of State was giving way to the hon. Lady—
I wish to get on with my speech, because I know that a lot of people want to get in. The criteria on which we will be judged in this recession are very clear. We cannot be immune from the world economy, which is forecast to shrink this year, for the first time since the second world war.
I have said that I will not give way to the hon. Lady, so perhaps she will let me make progress.
We can and must aim to do better than in previous recessions, and that is why this extra money is so important. As a result of this extra money, we will be able to pay benefits on time; even though more people will be claiming, we aim to reduce the amount of time taken compared with previous years and to meet our target this year. The right hon. Member for Maidenhead would not be able to make that promise.
Because we have reformed Jobcentre Plus we have almost halved the average time that it takes people to get back into work compared with previous recessions, because of this money we can aim to continue to do better than in previous recessions, and because of the way that we have reformed the welfare state we are not seeing the big increases in the numbers claiming other benefits, as happened in the past.
I am grateful, once again, for the Secretary of State's generosity in giving way to me. Perhaps he could explain why, if he has done so much to reform welfare and if he is so concerned about the impact that being out of work has on people's quality of life, we went into this recession with getting on for 5 million people on out-of-work benefits.
Actually, our figure was right at the bottom of the international scale; it was lower than that of the United States. The level of people on disability benefits and unemployment benefits in this country is lower than international levels. Of course we want to do more to reduce that level, and we have a policy precisely to do that—a policy that the right hon. Lady's new colleague, David Freud, said was remarkable. I am sure that she shares the view that our record is remarkable. [Interruption.] She will know that people who were around in the 1990s remember that people were told to go on to incapacity benefit; the numbers were massaged and all the Conservatives cared about was getting the numbers on the unemployment register down. The problem was that when people were put on IB they were never offered any help to get off it, and that is exactly why the number of people on IB trebled under her Government.
We cannot be immune from what is happening, but we can aim to do better than in previous recessions, and we will aim to do so on three key tests: maintaining the active labour market regime and paying people's benefits on time; getting people back into work more quickly than in the past; and ensuring that there are not the sharp increases in the number claiming inactive benefits that happened in the past.
The Secretary of State rightly points out the waste when young people become long-term unemployed. Acting after a year is clearly better than nothing, but does he accept that for a 19-year-old a year is an eternity? Is it not apparent on day one of unemployment who are the groups with a high risk of not getting back to work quickly? Could there not be targeted intervention on day one, for example, to help young people who have no skills or poor literacy, rather than a wait of a year?
I am grateful for the hon. Gentleman's question because it gives me the chance to put right a misunderstanding. We do not wait for a year; we give help to people even when the redundancy is announced. We give them help from day one. We do exactly what he says: we fast-track people on to the flexible new deal, and then at six months we provide the extra support by giving people help to set up a company or providing the golden hello of up to £2,500. The extra guarantee is that we will say to everybody that within a year they will be offered a job or a training place. Already, more than 80 per cent. of people get back into work within a year, but this is a new guarantee that everybody will be offered a job or a training place— [ Interruption. ] We are not wasting a year: we offer people help and training from day one. We have access to the advisory discretionary fund from day one, and we help them with CVs from day one. We refer them to jobs clubs early in their— [ Interruption. ] It does work, because it gets people back into work more quickly than in previous recessions, but in addition we are introducing a guarantee that within a year everybody will be offered a job or training place, and that has been widely welcomed outside the House as well as within it.
It is extraordinary that the Conservatives still have not said that they would match our spending on unemployment. I paid close attention to the Conservatives' party conference at the weekend and they were able to commit to spending extra money on certain things. They say that they want an age of austerity. It is a strange sort of austerity when they will not commit to spending a single penny more on the unemployed, but will commit to spending billions of pounds on those in jobs earning over £150,000 a year. It is a strange sort of austerity when they cannot commit to help young people at all, but they can promise a tax giveaway of £200,000 to the 3,000 richest estates in the country. The Conservatives' priority is clear—no more money for the unemployed, but £200,000 for the 3,000 richest estates.
The Secretary of State cannot defend his policies or his Government's record, so he is making up some policies, attributing them to us and then attacking them. I do not recognise the statement that he has just made about people on incomes of more than £150,000 a year. We have explicitly said that while we think that the Government's proposals will be damaging to the economy we cannot make any commitment to rolling them back. So what is he talking about?
The hon. Gentleman's leader said that it was in the queue to be reversed. The only commitment that we know will be in the Conservatives' manifesto is the cut in inheritance tax for the 3,000 richest estates in the country. Again, that is their policy and one that they cannot run away from. That is not an age of austerity: it is just not fair.
There is a choice between the parties. My party would put more money into helping people who become unemployed to shorten the recession and reduce the cost, but the Conservatives are ideologically opposed to such spending. They would not help people now and that would repeat the mistakes of the past and make the recession longer. That is the choice before the House today.
Before I respond on this issue, I wish to declare to the House that my husband works for an asset management company, part of whose business is the management of pension funds.
We have just heard an extraordinary speech from the Secretary of State. This is supposed to be a debate about this Government's Budget. Did we hear a detailed defence of the Budget? No. The Secretary of State started by saying that he did not want this debate to be about statistics. Well, we all know why he did not want it to be about statistics. The statistics in the Budget make very bad reading for Labour Members. He then created some fantasy statistics, which he claimed to be Conservative party policy. In fact, he spent virtually all his speech talking about what he claimed was Conservative party policy rather than defending the Budget.
Let us be clear: last week the Chancellor of the Exchequer delivered Britain's bad news budget. We face the worst recession since the second world war. Unemployment is rising at the fastest rate ever and, thanks to Labour's economic incompetence, our national debt will double again to £1.4 trillion, which means that every child born in Britain today will face a debt of £22,500. At the same time, that child's parents will be struggling to cope with the hidden tax hikes that will cost every family more than £1,400 but were not even announced in the Budget.
In the next two years, this Labour Government will borrow more than all previous Governments in history put together. That is only according to the Chancellor's own figures. Of course, as we know, within a matter of hours after the Chancellor's Budget his forecasts were shown to be a fantasy. That means that the reality for families in this country could end up being far worse. Over-optimistic forecasts by the Treasury mean that Labour's debt mountain could grow even higher.
The gross domestic product figures for the first quarter of 2009 have already proved the Chancellor wrong. The economy shrank by 1.9 per cent., which was worse than predicted by the Chancellor in his Budget. Instead of standing up and taking responsibility for the mess that Labour has put this country into, the Chancellor and the Secretary of State, today, have been giving us fantasy figures, refusing to recognise the Government's responsibility for the state of the economy and failing to come up with any credible answers about what needs to be done to fix our broken economy.
We were in a similar position six months ago, last November, when the Chancellor gave his pre-Budget report. Back then, he said that the economy would shrink by 1.5 per cent. in 2009. The Budget prediction is now a 3.5 per cent. fall. Less than an hour after the Chancellor sat down from his Budget, the IMF forecast that growth would fall by 4.1 per cent. If the Government cannot face up to the true nature of the problems that we face, there is no way that they can draw up a credible plan for recovery.
Let us take as an example the handling of the unemployment crisis, about which the Secretary of State has boasted so much this afternoon. The pre-Budget report predicted that the unemployment claimant count would reach 1.41 million by the end of 2009. Last week's unemployment figures showed that the claimant count had already passed the Chancellor's prediction. It was higher in March than the Chancellor predicted that it would be in December.
The new predictions in last week's Budget paint an even more worrying picture. Claimant unemployment will pass 2 million by the end of this year and reach 2.44 million by the end of 2010, 1 million higher than the Government predicted six months ago. On current figures, that means that the Government are now predicting that unemployment will rise to more than 3 million. Sadly, it is the unemployed who will pay the price for Labour's failure to face up to reality.
I consider it welcome that extra support is being given for the unemployed in the Budget and the Red Book, but, unfortunately, because the Government could not be honest about the scale of the problem earlier, many people will have to wait until January to receive that extra help. The Government and the Secretary of State keep using the phrase "Real help now", but "now" is many months away for most people. The help that comes next January will come two years after unemployment first began to rise.
Just to correct the right hon. Lady, it will actually start from the autumn. The guarantee starts from January. This is a massive improvement in policy and it clearly takes a bit of time to put in place. We need to get bids from local councils, but even doing that is quick. The help that we said in the pre-Budget report that we would provide is already here, as is the help that we announced in January. It all came in on time. The right hon. Lady can complain about it not coming in quickly enough—it would not come in at all under her party.
The Secretary of State says that it is all right, because it will take six months, rather than nine months, for help to come in. That is still rather different from saying that there is real help now. Virtually every announcement that the Government have made about the help that they are giving to businesses, home owners and unemployed people has taken months to bring in.
The Secretary of State made some statements in his speech about our considering the impact that this situation has on people. He is absolutely right. When we are debating in this House, we must never forget that while we might talk about the figures, behind those figures lie shattered lives for many people. It is crueller, however, to say to people that they will get help now and then to delay that help. If the home owner mortgage support scheme had come into place when the Government announced it, 28,000 homes might not have been repossessed. That is the impact on people's lives.
If the Secretary of State had not been so complacent earlier about rising unemployment, perhaps we would have seen that help coming through earlier. If he had been honest with himself about the level of worklessness, perhaps he would not have had to make plans last November to cut the new deal across half the country this summer. Indeed, if the Government had taken action when unemployment started to rise more than a year ago— [ Interruption. ] I will talk about jobcentres, as the Secretary of State did. The point that I am making, which I shall continue to make, is very simple. The Government continued to close jobcentres when unemployment started to rise. If the Secretary of State had taken action when unemployment started to rise, 54 more jobcentres would be open to help deal with the increased number of benefit claimants who need support and help to get back into work.
The right hon. Lady always gets her facts wrong on this, and she is wrong again. The six-month offer means that people have almost exactly the same help as they have from the new deal for young people already—they are getting that from April. The flexible new deal will be a further improvement for people after one year. The fundamental thing is that the right hon. Lady says she supports that money. Does that mean she is changing her party's position on the fiscal stimulus in the PBR, which the Conservatives opposed? She has a choice: she can either oppose the fiscal stimulus or not have the extra spending. Which is it?
The Secretary of State really needs to stop running with that fantasy story, which cuts no ice with anybody. I notice that he did not actually respond to me on the issue of jobcentres—the point I was making when he intervened. In the House last November, he declared a moratorium on Jobcentre Plus closures, yet instead of that moratorium being effective from last November, three further jobcentres—in Brixton, Orpington and Feltham—have closed. The last of them closed only at the beginning of this month. Members may be interested to know how much unemployment has risen in the areas where those three jobcentres closed this year: 40 per cent. in Streatham in the last year, 70 per cent. in Feltham and 90 per cent. in Orpington.
In part of his speech, the Secretary of State made quite something of the help that was being given and how people were being helped more quickly by the Government's decisions. In that case, why did more than 35,000 people wait for 17 days or more in December for their claim for jobseeker's allowance—for some money to come through from the Government?
What I am happy to tell the right hon. Gentleman is that when we come into government, we shall ensure that there is extra money available to help the unemployed, because we shall put through the welfare reform proposals that the Secretary of State has tried to copy but has been extremely timid about. They would mean that money could be used to pay for programmes to get people into work at a rather quicker rate than he would do under his welfare reform proposals. [ Interruption. ] From a sedentary position, the Secretary of State says, "Oh, well you're going to be spending more." He is well aware that there is a fundamental difference between our welfare reform proposals and his proposals. He does not like to talk about it, which is why I said he was timid: the switch in the DWP budget that enables us to pay for programmes to help get people into work from the benefits that can be saved will be made across the whole country, whereas under his proposals it would be done merely across half the country, which would mean that half the country will not actually benefit from his welfare reform proposals. In one part of his speech, he said that our policies would abandon people to a lifetime on benefits. In that case why has he copied them?
The right hon. Lady is all over the place on this. She knows perfectly well that those were Government proposals that the Conservatives decided to try to copy. She cannot say that she will spend more on welfare reform and more on unemployment and that, magically, the money will somehow come from the City. She may have noticed that it is quite hard to raise money from the City at the moment. It is absolutely impossible for her to say that she will raise welfare— [ Interruption. ] The point is that if we want to save money on the welfare bill, we have to spend more up front. There is no way the right hon. Lady can increase money for welfare reform and for unemployment—it is simply not possible for her to make that promise.
I am beginning to think that I have been sitting through a different debate from the Secretary of State. I do not think the City was mentioned by anybody on the Conservative Benches. Let us get one thing absolutely straight. The Secretary of State said we were talking about his welfare reform proposals that we had copied. I suggest he looks at the 2001 Conservative party manifesto, where he will see that the "Britain Works" section includes precisely that sort of welfare reform proposal. I know the proposals were in that manifesto, because they were my proposals as shadow Secretary of State for Education and Employment at the time. I am only sorry that it has taken the Labour Government so long, despite the best efforts of Mr. Field in their early days, to accept the need for welfare reform.
Let me examine in detail the extra help announced in the Budget for the unemployed. There is an additional £1.7 billion to support Jobcentre Plus and the flexible new deal. The Secretary of State did not set this out in great detail in his speech, so when the Chief Secretary winds up the debate, I hope she will tell us how much of that money will go to Jobcentre Plus and how much will be spent on the flexible new deal. Given the figures in the Budget, we conclude that the money will support the increased number of unemployed people, rather than giving extra support to jobseekers.
There is also a need to look at long-term youth unemployment and those who find themselves unemployed in the early stages of their lives. I welcome the extra support that the Government have put in place, but I feel like I have heard it all before—about 12 years ago, in fact. Labour's 1997 manifesto promised:
"We will get 250,000 young unemployed off benefit and into work".
Last Wednesday, the Secretary of State pledged:
"We will invest £3 billion in more help for jobseekers, including offering long-term unemployed people 250,000 jobs".
"every young person aged 18 to 25 who is unemployed for more than six months will be offered a first step on the employment ladder."—[ Hansard, 2 July 1997; Vol. 297, c. 308.]
That offer included the option of subsidised employment or training. Last week, the Chancellor announced:
"From January, everyone under the age of 25 who has been out of work for 12 months will be offered a job or a place in training."—[ Hansard, 22 April 2009; Vol. 491, c. 241.]
The big announcement in the Budget actually cut help for the young long-term unemployed by making them wait 12 months for support instead of six.
I want to clarify the right hon. Lady's position. She says that she welcomes the additional funding in the Budget to help the unemployed. Between the pre-Budget report and the Budget, we have been providing an additional £5 billion to support the unemployed, the majority of which comes from additional short-term borrowing to support the economy. Will she confirm that she supports that additional funding, with the additional borrowing, and that, unlike the rest of her Front-Bench colleagues, she therefore supports a fiscal stimulus?
Once again the Government seem to have a fantasy idea of the official Opposition's position on borrowing— [ Interruption. ] Ministers should be patient and wait for the answer. We made it absolutely clear from the beginning of the debate on the recession that automatic stabilisers exist when the economy goes into recession. Of course tax revenues go down and benefit bills go up, and we have never resiled from the fact that that has to be dealt with, so it is quite wrong for the Government to try to claim that we have ever done so.
Let me make it clear that these are not automatic stabilisers. This is additional discretionary investment that is part of our fiscal stimulus to support the economy. Does the right hon. Lady support such additional discretionary funding to help the unemployed?
In an earlier answer to the Secretary of State, I clarified how we will ensure that we can fund our welfare reform proposals. He suggested at one point that our welfare reform proposals were not about unemployed people, but of course they are. The whole point of developing a different welfare reform structure is to give extra help and support to those who are unemployed and to ensure that we do not come out of the recession with more people in long-term unemployment. As the Chief Secretary knows, the questions I was asked were answered by my earlier reference about how we would pay for that.
We are talking about money now. Does the right hon. Lady support the extra spending or the fiscal stimulus? Which one is it?
The Secretary of State is trying to argue that one can have only one or the other. I suggest that he thinks very carefully about what he is saying about the fiscal stimulus and money that might be available for helping the unemployed.
I would like to make a little more progress. The hon. Gentleman may well get in later on, but I have been generous in giving way to Ministers.
I want in particular to discuss further the impact of the proposals in the so-called "Budget for jobs" on the young long-term unemployed. As I was saying before the exchanges across the Dispatch Boxes, under-25s who were long-term unemployed could previously be helped after six months; that period has now been extended to 12 months. That is not an improvement in the support given.
There is another problem in the Budget figures. The Red Book makes it absolutely clear that the guaranteed jobs or training will be available to 18 to 24-year-olds who have been on jobseeker's allowance for more than one year. Their number stands at 6,700, out of a claimant count of 1.46 million. In other words, the Government's plans would help less than 1 per cent. of jobseekers. I notice that the Secretary of State is not rising to say that I am wrong about those figures.
I must correct the right hon. Lady. She is completely wrong. We will guarantee the help no matter how much unemployment increases. She fails to understand our policy and is trying to use figures to create a smokescreen to hide the fact that she simply has no policy. [ Interruption. ]
As my hon. Friend Mr. Harper points out, the Government cannot make up their mind on whether we have no policies or lots of policies that they do not like. I remind the Secretary of State that one of our policies that he does like is our policy for welfare reform, which he has copied, albeit not to the extent that I would like.
As the right hon. Gentleman has challenged me on the figure of 6,700, let us look at the position on young long-term unemployed people. According to the Red Book definition, the help is for 18 to 24-year-olds who have been unemployed for a year or more and claiming jobseeker's allowance, of whom there are 6,700. If the Secretary of State is saying that the money is not there to help 6,700, he must be predicting that the number of young long-term unemployed people will increase significantly in the next few months. That is a rather different position from the one taken by the Minister for Employment and Welfare Reform, who gave evidence to the Work and Pensions Committee last December saying that despite the most virulent stories of doom and gloom from some, there were no projections that the pool of longer-term unemployed would grow at the same rate as unemployment.
For young people, the blow is not just the fact that the help announced in the Budget is not as great as the Government have made it out to be. As was pointed out by my hon. Friends the Members for Broxbourne (Mr. Walker) and for Beckenham (Mrs. Lait), there are also problems with the funding available for further education colleges and sixth-form colleges. The Secretary of State for Innovation, Universities and Skills is doing his best to make the problems worse: as a result of the Government's failure to meet their target on university places, up to an additional 30,000 young people could be turned down for a place.
I thank my right hon. Friend for giving way, especially as the Secretary of State for Work and Pensions did not want to hear my remarks. In response to a question about why post-16 education funding had been cut, the Minister responsible said it was because more people had applied than the Government had budgeted for. He had to admit that they had to pull out the financial rug because they had got their figures wrong, raising expectations that they could not meet or finance.
Absolutely. The way in which the Government have failed to accept the problems that young people are facing as a result of their policies is a betrayal of young people. The issue is not just about further education colleges and university places; between August 2008 and this January, there were 4,000 fewer apprenticeship starts for 18 to 24-year-olds than in the same period in the previous year. [Interruption.] From a sedentary position, the Secretary of State for Work and Pensions keeps muttering about more spending. I remind him that we are talking about his Government's promises, and his Government's delivery on his Government's policies. There are fewer university places, FE colleges are having their expansion plans cut, and there have been fewer apprenticeship starts. How does that help young people who are looking to make their way in the world?
Other aspects of the Government's "Budget for jobs" deserve to be looked at in greater detail. On the Government's pledge of 250,000 new jobs, 50,000 of those would come about by providing the social care sector with a £1,500 recruitment subsidy. Hon. Members may feel that that sounds familiar; indeed it does. It sounds rather like the golden hello announced back in January. The difference, of course, is that the golden hello had a £2,500 subsidy for recruitment, so far from the subsidy being better, it has actually been cut.
I hope that the Chief Secretary to the Treasury will explain in rather more detail how the new proposals for long-term unemployed young people will work in relation to the flexible new deal. What the Secretary of State for Work and Pensions has announced sounds similar to the flexible new deal that will be brought in later this year in parts of the country. We need to know how the programmes will interact. We face the prospect of the Government paying to create jobs, paying to guarantee young people those jobs, and paying welfare-to-work providers to get young people into the jobs that the Government have paid to create and to guarantee for young people. We need to ensure that we do not make the same mistakes that Labour has been making for the past 12 years by throwing money at the issue without giving real thought to how it will help people out there on the ground, and make a difference to their lives.
I want to mention briefly other aspects of the Budget. Increasing the funds available for the social fund will certainly help people during the recession. I am pleased that that measure has been brought forward, but I note that what the Government give with one hand, they take away with the other: they are raiding £145 million from housing benefit next year. Giving tenants incentives to be more flexible in their choice of accommodation was the whole basis of the local housing allowance. It was intended to promote personal responsibility, but the Government have U-turned on it, and claimants will no longer be able to keep the surplus if the fixed LHA rate is higher than their rent. That means that the impact of the Budget will be to cut money from some of Britain's poorest households.
The mess in which Labour has left this country means that the Budget was the death knell for Labour's child poverty targets. The Government were told that they needed to invest an extra £4.3 billion in benefits and tax credits if they were to meet their 2010 target. The Budget delivered £120 million. Steve Webb, who speaks for the Liberal Democrats on such issues, has already referred to the point about the cost of a pint of milk. The Child Poverty Action Group made it clear that the impact of the extra support given in the Budget amounts to less than the cost of a pint of milk a week. The Budget still leaves 600,000 children in poverty—600,000 children whom Labour had promised to help.
Had the right hon. Lady been standing at the Government Dispatch Box, how much would she have allocated to tackling child poverty?
Had we been on the Government Benches, the situation that we would have been dealing with, in relation to the finances of this country, would have been rather different. The reason why the Chancellor of the Exchequer found it so difficult to do anything about the matter when he stood at the Dispatch Box was that 12 years of a Labour Government have led us to the deepest recession since the second world war and to the largest Government borrowing over two years seen in peacetime history. The hon. Member for Northavon should note that what we are talking about is the reason why the Labour Government were unable to provide that help in the Budget.
I am conscious of the time, but I want to talk briefly about pensioners, because they, too, are potentially hit in the Budget. Pensioners and savers are the innocent victims of the recession. That is why we called on the Government to introduce tax changes that would deliver help and support for basic-rate taxpayers and pensioners. Sadly, however, the Government do not understand the value of saving, as all that they have ever done is spend, spend. The savings ratio has been slashed to almost five times lower than what it was in 1997; more than 12.8 million jobs have no pension provision—800,000 more than last year, and 2.4 million more than 1997. I accept that there were measures such as the increased individual savings account limits and the rise in the capital disregard for pension credit, housing benefit and council tax benefit in the Budget last year, but our proposals for the Budget and the change in savings would have put about £3 billion a year back into the pockets of pensioners and savers. The announcements in the Budget are worth only £90 million a year to savers and pensioners.
I would dearly love to be able to welcome a forecast in the Budget, and I dearly hope that the savings ratio will increase. However, at the rate that the Chancellor is going, I do not think that any of the forecasts that he has included in the Budget are to welcomed, because I do not think that we can believe any of them.
I want to refer briefly to the tax rise on pensions. I am afraid that the Budget was more about politics than about presenting a plan for economic recovery. There is a sense of déjà vu. One of Gordon Brown's first acts as Chancellor was to raid £100 billion from pension funds, and now as Prime Minister, his latest tax hike in relation to the higher-rate relief on pension contributions will take a further £3 billion a year out of pensions. Those changes are not being implemented from 2011, as the Government would have people believe—some new rules on higher-rate tax relief for earnings above £150,000 came into effect the day after the Budget. Not only do they taper higher-rate tax relief for those earning over £150,000 but they tax employer contributions. Savings, of course, will be taxed when people begin to draw their pensions. Those proposals break the basic covenant between savers and the Government, enshrined in the Turner report on pensions, that responsible savers will be rewarded for locking up income in pensions savings for their retirement. Instead of being rewarded, however, they will be taxed several times over. The changes will add more complications to an over-complicated system, too. Any claims that the Government want to simplify pension savings and their administration have been completely undermined by what the Chancellor did in the Budget.
The Chancellor said that the measure was about fairness, but the money raised in taxes from the pensions of high earners will not go towards improving pensions for those on low incomes. It will simply help to plug the black hole in finances created by Labour. As Dr. Ros Altmann said in her response to the Budget:
"Instead of encouraging people to save while the economy was doing well, Government policy encouraged spending and borrowing as if there was no tomorrow. But there is a tomorrow. And for those approaching retirement, it is looking distinctly bleak."
Let us be clear: we do not believe that increasing taxes on pensions is the right thing to do. We do not support it, but we are not going to be dragged into playing Labour's games. There are a number of new tax rises with which we do not agree, but this one will have to take its place in the queue. Our priority is that, of all of Gordon Brown's tax rises, the most important ones—
Order. I am sorry to interrupt the right hon. Lady, but she knows that we refer to colleagues not by their name but by their constituency.
I apologise to the House and to you, Mr. Deputy Speaker.
Our priority is that, of all the Prime Minister's tax rises, the most important ones to avoid are those that tax the many, not the few. The most unfair of those is the national insurance increase for millions of people earning £20,000 or more—a tax on jobs. At the very time that Britain will be trying to recover from recession, when millions of unemployed want to get back into work, Labour wants to raise a tax on jobs. We will ignore the dog-whistle politics that was presented in last week's Budget, and focus on avoiding Labour's tax cuts for the many, not the few.
This country needs a Government who will be honest with people about the problems we face and the mess that we are in. We desperately need a realistic route map to recovery, instead of the fantasy forecasts from the Government that do not last even a day. I shall be helpful to the Secretary of State and suggest that the best thing he can do now is launch the leadership campaign that he has been busy planning for months and call a general election, so that Britain can have the change that it desperately needs.
What was striking about the speech from Mrs. May was that it was devoid of any content on the policy alternative she might advocate. The policies advocated so effectively by my right hon. Friend the Secretary of State would be unaffordable and undeliverable if Conservative policy cuts were implemented. I shall explain why.
The economy is contracting faster than the Treasury expected only five months ago, so the Chancellor was right in the Budget to give a further fiscal stimulus, expanding the one announced in November. It brought total fiscal support through discretionary action in the Budget, the pre-Budget report and the automatic stabilisers to 4 per cent. of GDP, on top of the other action to boost the flow of credit and cut interest rates. Goodness knows where the economy might be heading now if the Government had instead followed Conservative strictures, and had not acted promptly to adopt a Keynesian response to the crisis.
The Budget also did the right thing by boosting public investment this year to £44 billion, compared with the £35 billion the Chancellor was planning to spend 12 months ago. These are exactly the right policies and priorities to stop a slide into slump, and exactly the right strategy to ensure that the recession is not deeper and longer.
Conservatives seem to forget that the purpose of extra public borrowing is to make up for the collapse in private spending brought about by the global financial crisis. By helping families who are in danger of losing their homes and their livelihoods, and by helping firms that cannot spend because their banks will no longer lend, Government can stop economic casualties turning into social catastrophes. Without such Government action and borrowing, millions more jobs, and tens of thousands more businesses, would be in jeopardy.
Borrowing is rising because of the impact on UK public finances of the world economic crisis, not the so-called public spending extravagance beloved of the leader of the Conservative party and his right-wing media allies. The Institute for Fiscal Studies reckons that the global financial crisis is costing the Exchequer around £90 billion per year, owing to lost tax revenues and higher social security costs. The fiscal stimulus since last year's Budget accounts for only about £26 billion of the nearly £400 billion increase in Government debt to 2012, or roughly one fifteenth of that total.
No one here or elsewhere in the world foresaw the severity of the crisis currently gripping the global economy. Perhaps that is why, after 15 years of expanding UK employment, and Labour's 11 years of unprecedented stability and growth, much of the media appear both bewitched and bewildered by the prospects for Government borrowing and national debt. In one surreal moment last week I heard the Chancellor on the BBC "Today" programme being asked by Evan Davis about Government borrowing for the Budget, not last week or even next year, but in 2014.
Even more preposterous is media speculation about borrowing and debt in 25 years' time, when the average Budget forecasting error is £12 billion for net public borrowing looking just one year ahead. Many commentators have become spellbound by long-term forecasts of public sector borrowing, and are quite unable to focus on the benefits that such borrowing brings, or to contemplate the truly horrendous alternative without it.
The hon. Gentleman will know if he looks at Treasury forecasts that under all Governments, there is always an element of error. The point that I was making is that the amount is much more significant than all the figures being flung about by the Conservatives and their media allies.
Given that, like others, I am time-limited, I shall make some more progress.
It was only a few years ago that Britain finally finished paying off its 1947 American loan that helped to pay for post-war reconstruction. It took us more than 50 years to do so. Does anyone seriously say that we should not have borrowed on a substantial scale to rebuild the nation's social fabric shattered by the war? Perhaps there are some Conservatives and media commentators who sympathise with Johnny Speight's character Alf Garnett, who criticised Winston Churchill for failing to get an estimate of the costs before fighting the second world war.
As with mortgages for owner-occupied housing, good investments are things that are worth more than they cost to acquire at the time. Who can seriously argue that Governments who borrow to prevent a depression are making a bad investment, as the Conservatives appear to be saying? They have failed to learn the grim lesson of the 1930s that cutting Government spending during a recession only makes the economic situation worse, causing total spending in the economy to fall even further, resulting in more redundancies, higher social security spending and even higher Government borrowing and debt. Spending cuts in today's circumstances would be a self-inflicted wound that would weaken, not strengthen, our ability to recover. They could turn business parks into gone-out-of-business parks and trading estates into ceased-trading estates.
By contrast, we see higher public spending and increased Government borrowing to ward off recession as the right role of the state now. In our view, Government's job is to provide a safety net in troubled times, support and opportunity for the good times, and security and protection at all times, not to leave people in the lurch to fend for themselves, which the Conservatives would do. Of course the economy needs to be brought back into balance in the future, but the overriding priority today is not Government debt. It is the danger of depression and rising unemployment. The bond market must take second place to the labour market.
Tackling the threat of slump, which means combining vigorous fiscal and monetary policy with unconventional measures to restore the flow of credit, is vital to recovery. Of course, once we have warded off the threat of recession or depression there is no escaping our responsibility to bring the public finances back into shape in the medium term, as the Chancellor has made clear. That must mean reshaping the subsequent trajectory of Government spending and taxation, which means cuts in some past plans, deferring other ambitions and raising some taxes on a fair basis. But today's problems must come first.
The severity of the current threat to the world economy remains widely unacknowledged, despite the evidence of world trade falling faster than it did at the onset of the 1930s great depression, and despite industrial production plunging all over the world, including in the UK. There is reluctance on the Conservative Benches to admit that this recession is different from every other post-war recession, both in its origins and in its scale. [Hon. Members: "It is worse."] Indeed, and it is much more serious because of the global financial crisis that the Conservatives refuse to acknowledge. There is a refusal to accept that we are passing through extraordinary times that demand an extraordinary response, with action on a scale unprecedented in the post-war period.
It was Franklin Roosevelt's new deal public works projects, combined with bank reforms and monetary measures, and not cuts, that first triggered the American turnaround that began in 1933, and then fuelled expansion over the next four years.
I have been impressed by the advice given by that lone voice on the Bank of England Monetary Policy Committee, David Blanchflower. He was the first to warn of the danger of recession and the first to call for early interest rate cuts. He has proved consistently correct in his reading of the economy. His most recent warning is that, without strong fiscal action, precisely of the kind that the Chancellor announced last week, today's downturn could fall further and last longer than any recent recession, causing UK unemployment to soar towards 4 million next year, potentially condemning a generation of Britain's young workers to years on the dole.
The Conservative party has an obligation to be straight with voters and with the House. The shadow Business Secretary can ooze warm reassurance with the best of them, but one has only to look at the shadow Chancellor to see that it is only a short way from guile to guilt. The Leader of the Opposition described the Government's record as being written in red ink. When will he show us the colour of his party's money? So far, all the public have been offered is counterfeit currency. The Conservatives have pledged to prioritise cutting Government debt ahead of tax cuts and to restrain Government spending, but the Opposition will not come clean about the huge cuts that would be needed if they were to achieve their ambitions. They have given headline-grabbing examples such as regional assembly abolition and senior public servant pay restraint, but those savings would barely register on the spending Richter scale. More ominously, they propose cutting tax credits for middle-income families and the pay of nurses and teachers. Those people are at the economy's centre of gravity: squeeze them and we squeeze the whole economy, as well as damaging vital public services.
I am listening carefully to the right hon. Gentleman. He knows that the figures that the Chancellor set out in his Budget last week, after taking into account the increases in benefits and debt service costs, equate to a minus 2.3 per cent. rate of growth in departmental expenditure budgets—a 2.3 per cent. real-terms cut in departmental expenditure budgets. Mr. Hain may have an inside track, however, so does he know where the Government will allocate those unprecedented cuts in departmental budgets?
One thing that is absolutely clear is that if the hon. Gentleman ever got his hands on the Chief Secretary to the Treasury's job, the cuts would be savage—way beyond the efficiency savings and restraint that will have to be implemented.
The Tories talk a good fight on debt, but, on public spending, would they revert to Margaret Thatcher's policy and abandon Labour's pledge to restore the link between the basic state pension and earnings? Would they reduce the pension credit that helps the poorest pensioners? Would they raise the age at which people qualify for free prescriptions? Would they bring in charges for public services, such as visits to the doctor, or lift the ceiling on student fees in universities and colleges? Would they scrap teaching assistants in schools? On debt, if the Tories were to match their rhetoric with their actions, the cuts for low and middle-income Britain would have to be savage.
The lobby group Reform has proposed a £30 billion cut in Government spending next year to give the Tories' plans a flying start, and £30 billion, by the way, corresponds to 2 per cent. of GDP—exactly the amount by which the Tories cut Government borrowing in their 1981 Budget, which saw unemployment soar above 3 million and stay there for four years. So, perhaps it is not such a far-fetched figure if we want to divine the Tories' true intentions.
Let us look at Reform's list: a 10 per cent. pay cut for all doctors and NHS managers, with £1 billion saved; scrapping winter fuel payments for pensioners and ending free TV licences for the over-75s, with another £3 billion saved; abolishing universal child benefit and targeting it on low-income families, saving £7 billion; and raising the interest rate on student loans to market rates, with another £1 billion saved. Pretty soon, we will be talking serious money, and the group has not even started scrapping pay deals for local government workers or cutting public sector pensions, as the Conservatives have promised.
The media have given the Tories a really easy ride, so the Conservative leader will not say where they will cut public spending, and they will not come clean on taxes. So, let us look at their record in office for a few clues. The first Budget of Margaret Thatcher's Administration saw Geoffrey Howe almost double VAT from 8 to 15 per cent. to pay for income tax cuts. The first Budget of John Major's Government saw Norman Lamont raise VAT again, to 17.5 per cent. to pay for the poll tax. Can the shadow Chancellor deny that he is considering raising VAT to 20 per cent. if they win next time to cut Government debt and pay for the cuts in inheritance and income taxes that he has promised? Can he rule out dropping zero rating for food, fares and children's clothing?
The Tories have cultivated the image of "compassionate Conservatism". We heard that phrase first from George Bush, and we know how destructive his policies were. At Davos, the Conservative leader promised "capitalism with a conscience", but it would be with a guilty conscience. Two days before the Budget, a Financial Times editorial noted that tightening fiscal policy now might deepen the recession and worsen the subsequent fiscal outcome—what it termed "futile masochism". Yet, what does the Leader of the Opposition want? He wants exactly such spending restraint. And when does he want it? Now. That is what he said in his reply to the Budget. By driving the economy into depression, the Cameron cuts would shrink tax revenues and swell social security bills. The outcome would be the opposite of what he has promised, meaning even higher Government borrowing, yet more national debt and mass misery for millions sacrificed on the altar of right-wing Tory dogma.
Despite that, the media in general and, sadly, the BBC in particular have dutifully followed the Leader of the Opposition like lapdogs. They treat all Government borrowing as bad, irrespective of circumstances, and hardly bother to examine the terrible consequences for jobs and living standards of the Tory alternative. It is as if the whole economic debate were being filtered through a single, false prism of debt, and that is quite absurd.
Yes, this Budget is a tough one, but it contains the seeds of hope. The Conservative alternative would not simply be tough, it would be disastrous, sowing the seeds of abject despair for millions and driving Britain backwards.
We are dealing in this debate with two overlapping crises, both of them very serious. First, there is the slump, which is causing large-scale unemployment and requires activism at Government level, not just through fiscal policy but, certainly, including it; and, secondly, there is the looming and truly enormous problem of the budget deficit, which is on a scale—revealed last week—that we cannot treat as anything other than critical. I regret that Mr. Hain, many of whose early comments I agreed with, did not take sufficient account of the seriousness of that problem and of the choices that we will all have to face because of it.
I shall begin with the unemployment situation, which is where the debate started. Then, I shall proceed to wider economic matters, leading to my conclusion. We face the reality of unemployment increasing by 100,000 a month, and the prospect, on a fairly conservative forecast, that one in 10 of the labour force will be out of work by the end of the year. The situation will be concentrated in certain areas. This lunchtime I had a meeting with construction industry representatives, and they think that 500,000 of their employees will be out of work by the end of this year. That will bear particularly heavily on young people. I—like colleagues from all parts of the House, I am sure—was recently in discussions with local universities, and, in the wake of the milk round, many estimate that, this year, one in two of their graduates will not have jobs to go to. A lot of pain will be concentrated among them, as well as among less well educated young people.
It is fair to say that the Budget contained a series of measures that, in themselves, were perfectly desirable and sensible, such as attempts to stimulate the economy and, therefore, employment in different ways. The problem with many of the specific measures, however, was their extremely small impact. I shall touch on two measures. There is the proposal for investment allowances, which are eminently sensible, a response to requests from the business community and welcome in themselves. There was also a useful advance on trade credit insurance, but the problem is that it comes very late in the day—three months after the French introduced a similar scheme—and trade insurers now tell us that they will not implement the top-ups under the scheme. They are not satisfied with the data—the annual accounts of companies—that are available to them, so there is continued credit restriction in that field.
The problem with the Budget, faced with rising unemployment and the need to do something about it, can be summed up by what the Government did on social housing. With a bit of a fanfare, they announced £100 million for council housing, but, when we break that down, it means 600 to 700 houses throughout Britain, or two per constituency. One might say that that argument is unfair, because the announcement comes on top of the pre-Budget report, which, if fully implemented, would probably give us 6,000 to 7,000 houses throughout Britain; however, given the scale of the problem, the contraction of the construction industry and the 1.7 million people on home waiting lists, we are talking about small drops in large oceans.
We recognise the financial constraints that the Government are operating under, and that if resources were to be channelled into job creation schemes, it would have to be done by stopping something else. We have therefore argued that the Government should stop the cut in value added tax. We understand why they did it—they were in a panic in the autumn and had to do something quickly—but it soon became apparent that it was not working. It was not feeding through into employment—a lot of it was ending up absorbed in retail margins. Now, we can reflect on that evidence, stop the cut and redirect that funding into focused programmes. Social housing would be the most important area, and it could be done quickly because the institutions are already available. Amplifying the home insulation programme would provide environmental benefits, as well as jobs and the creation of an asset.
As I said, we are suggesting cancelling the VAT cut to provide funding for social investment. There is also an argument for maintaining the flow of public investment through the cycle; that is a separate issue, and we can go on to discuss its implications.
What is absolutely crucial is what is happening in the banking system. The banking system is the elephant in the room. The measures that the Government introduced are of a minuscule proportion by comparison with the scale of lending decisions by the now semi-nationalised banks. Just to remind ourselves—I have often said this in the past—the semi-nationalised Royal Bank of Scotland has a balance sheet one and a half times bigger than the British economy. It follows that any of its lending decisions far outweigh the fiscal stimulus, or whatever the Government call it, that originated in the Budget.
Two worrying aspects of the controversy regarding the banking system arose during Treasury questions today. First, there is a complete lack of clarity about the potential losses resulting from Government intervention in the banking system. We fully supported that intervention, which had to happen. We do not agree with some of the more recent developments, such as the asset protection scheme, but the intervention last October to put fresh capital into the banks was absolutely essential. However, we are now getting wildly different estimates of the potential losses. The Government have said—it was confirmed in Treasury questions—that the estimate was at the top end, in the order of 3 per cent. of GDP, or about £50 billion. The IMF, even with its qualified and reduced numbers, is talking about £130 billion; £85 billion is a large margin of error, by any estimate. We need some thoughtful figures from the Treasury about what the implications of that would be. Who would bear those losses? How much would accrue to the Treasury? How much would it affect its debt and deficit estimates in the years ahead? There is an enormous black hole over and above the deficits and debts that have already been predicted, and we need to think about that.
The second, more immediate worry is the Government's decision—apparently—to proceed with the rapid sale of Northern Rock. The Chancellor said in Treasury questions that he was not in any hurry, but if that is so, why is Credit Suisse going round the City trying to market it? The Government are clearly planning a sale of the bank. I have no objection in principle to its re-privatisation—we argued from the outset that it was a temporary nationalisation—but to sell it now, in depressed asset markets, is absolutely criminal. It means that the taxpayer will get a very poor return, and there will be very large and unnecessary losses. All the experience that we have learned from other countries that have been through this process, such as Sweden and Israel, is that if Governments show patience and sell off their good banking institutions at the end of a crisis, they can realise many of the losses that they have incurred on the taxpayer's behalf. The Government must not rush ahead with this sale. Quite apart from the financial aspects, Northern Rock, after a somewhat uncertain start when it thought that its job was simply to run down its books, is now lending—it is one of the few banks that seems willing to do so in otherwise depressed markets. It seems beyond comprehension that they should be considering selling it off when it is doing something useful. I hope that the Chief Secretary will be able to elaborate on what the Chancellor said, because the hints that are coming out are very worrying.
Let me move on to the core issue, which is the scale of the deficit—the 30 per cent. of GDP borrowing requirement and the 10 per cent.-plus of GDP budget deficit going forward. That is bad enough in itself, but we know from the numbers that have emerged that it is unlikely to be reduced in any foreseeable time scale unless we make heroic assumptions about the rate of economic growth. I have debated with the Chief Secretary in the media and elsewhere how implausible some of us think these assumptions are. I think that her view—I do not know if it is the Government's—is that there will be a bounce-back in the economy in much the same way as happened in the last two recessions under the Conservative Government. However, there is a fundamental difference, because in those two recessions, unlike the present one, the banking system was not burnt out. We are now dealing with wrecked financial institutions, which means that we cannot assume that the economy will return, as it would normally, to that kind of growth rate.
The hon. Gentleman is painting a gloomy picture, but there are rays of sunshine, are there not? In the insurance industry, for example, he will have seen that Aviva, the parent company of Norwich Union, is boasting that people trust its products and have stuck with them; indeed, savings have increased, and its figures look good at this point. We can be miserable and say that we do not know how things will improve, but that is happening in certain places. Because of good management and good structures, even a FTSE company such as Aviva can survive.
That sounds like a very good story, but it does not have anything to do with the revival of economic growth, which is what we are discussing.
There are some positive things in the public sector figures; following the hon. Gentleman's theme, I will be positive, as perhaps I have been too negative. One very positive statistic, which the Government have not made enough of, is that this year the share of taxation in GDP has fallen to the lowest level for half a century. I do not know whether the Government are aware of this, but they have achieved something that Mrs. Thatcher would have given her right arm for. They have cut the tax burden on the economy to an extraordinarily low level: that may not have been planned for, but it is a real achievement. However, there are two stings in the tail.
First, while the tax burden in the economy has been dramatically cut, expenditure has not. Whereas the tax burden is at the lowest level since 1960, when Harold Macmillan was Prime Minister, expenditure as a share of the economy is now 48 per cent., as opposed to 35 per cent. for tax. That is the highest level since the Falklands war, when we previously had a peak in this respect. Clearly, we will have a symbolic breakthrough when we hit 50 per cent. of GDP as expenditure in the next year or so.
The other major explanation is that it has not been done in a planned way and has happened simply because of the collapse in Government revenue. However, I would say in the Government's defence that this is a long-standing problem; it did not just happen over the past 10 years. We have an economy that has, over the past quarter of a century, become seriously over-dependent on income from the City of London and from the housing market. Over the past five years, when some of us have been warning about the vulnerability of the British economy, the Government relied on those two sources alone for half of all the increase in their revenue. Of course, they have now evaporated.
The hon. Gentleman says that the level of expenditure is at about 48 per cent. Did he see table C7 in the Red Book, which shows that even when the Government hope that the economy will be all singing and dancing again, they only get tax revenue back up to just over 38 per cent., so the structural imbalance that he is talking about is projected forward by the Government?
Indeed, and depending on one's point of view, that is a source of celebration or of enormous anxiety. I believe that it is a source of anxiety, given the difficulties of funding it.
The other reason why this problem is not just a short-term one—it is easy to blame the Government for being complacent, but it goes back much further—is clear from the numbers emerging from the Budget and the Red Book. The underlying weakness of the public finances has been clear for many years. If we go back to the beginning of the 1990s, the net worth of the British Government's stock of assets was about 80 per cent. of GDP. It then fell to about 20 per cent. in 1997, as the Government essentially kept the deficit down through asset sales. According to the Government's new projections, the British state will go into negative net worth in two years. In simple, common-sense terms, that means that if all aspects of the British Government were put on the market—all their land, property and equipment—they would have to pay somebody to take them away. That suggests the seriousness of the problem that we face.
The implications of that are serious. Harsh choices will have to be made about both taxation and public spending. We have taken the view that the burden of those hard choices will have to fall on public expenditure. I shall develop that point in a few moments, but in both cases the choices will be very difficult. There will be tax increase proposals, some of which, such as the fuel duty increase, we will not oppose given the extremity of the situation. In such cases, measures need to be taken to protect people who are particularly vulnerable. That is why we will again propose a rural exemption based on the EU rules, to help people in remote rural areas who will be damaged by the situation. None the less, we will not oppose the principle of such increases.
The big tax controversy that has emerged in the debate is the 50 per cent. tax rate. Perhaps I should say that I am exceptionally well qualified to talk about that, having argued both sides of the case in recent years. Having had that experience, I am reasonably well equipped with the arguments. I and my colleagues have no objection in principle to high rates of taxation on very wealthy people to fund a more equitable society. That seems absolutely right. The problem is that such things will stick only if the many tax loopholes are dealt with.
The Government have tried to deal with pension tax relief, although that has created a more complicated system. The big loophole that is outstanding is due to the enormous disparity between tax on earned income and tax on capital gains. We have made the point over and over again that we should return to the wise system introduced by Mrs. Thatcher and Nigel Lawson, when the two were equalised. There is now a yawning gap between the two, and anybody in the City approaching their bosses for a discussion on bonuses will immediately ask, "What's the point of my paying 50 per cent tax on my marginal income when I can convert it into stock and pay 18 per cent. on any capital gains that accrue as a result of the recovery of the stock market?" That is obvious, and they probably do not even need an army of tax accountants to help them do it.
I understand, although I was not there, that in the Treasury Committee this morning, Treasury officials conceded that as a result of such continuing tax loopholes, the Government would be able to collect only something in the order of 30 per cent. of the potential revenue from the income tax increase. Even their own estimates take no account whatever of the decline in indirect taxation that will be the result of the change. Our view is that the Government have missed a major opportunity to have a much more broadly based, but more equitable, tax system. They could indeed have a higher tax take from high-income groups, but with an optimum maximum tax rate of probably about 40 per cent, provided that they closed all the loopholes associated with it, whether on pension tax relief or capital gains tax. In that way, they would raise substantially more revenue, which could be used to lift people on low incomes out of income tax altogether. That is our broad approach to the problem.
In many ways, that is consistent with what I have said about the need to lift people out of income tax. National insurance on employees is a form of income tax, and we can debate whether we should operate through income tax itself or through national insurance. We certainly want any revenue raised from high-income groups to be used to reduce the tax burden. We have argued that that should be done through income tax, and no doubt the hon. Gentleman would argue that it should be done by reducing national insurance contributions for people on low pay.
It is clear that there will be cuts in public spending in this Budget. That point has been accepted. There have been exchanges at the Dispatch Box about the £5 billion a year additional efficiency savings, and I ask the obvious question why, if the Government knew that there were inefficiencies and that money could be saved, they have tolerated them. If they are genuine efficiency savings, why are they necessary? They are not efficiency savings—we know that they are just a camouflage for real cuts, 60 per cent. of which, incidentally, will be in the national health service. That is clearly part of the plan.
The other big cuts that are coming down the track are in public investment. That suggests to us a need to approach the public spending crisis in a much more thoughtful way. The danger is that Governments of any party will resort to the traditional reflex action when faced with a public expenditure crisis. They first cut money to local government, because there is usually another party running it and it is less painful to central Government. The next step is to cut public investment, because that loss is usually borne by the private sector. Then there is the salami-slicing approach, whereby they choose a growth rate cut and let it work its way through its system, usually resulting in cuts to front-line services.
That is why we are arguing, rather differently from the right hon. Member for Neath, that we need to examine big chunks of public expenditure, some of which are popular and attractive, that are not sustainable under the present conditions. I should perhaps own up to the fact that I was at the launch of the reform document that he referred to critically. I disagreed with many of the specific proposals in it, but it did a valuable service in getting us away from all the waffle about the need for more austerity and general reductions in spending, and saying, "Well, if you're going to make cuts, these are some of the things that you should be looking at." Perhaps, having considered cuts to a lot of the things that he mentioned, we should not pursue them, but it was right for the report to point out the areas on which we need to focus.
I am very interested in what the hon. Gentleman is saying. Like many other people in the country, I follow what he says on this subject with a great interest. However, he seems to be opening the door to the Liberal Democrats following exactly the policy of the Conservatives—swingeing cuts in some of our most essential areas.
I hope that we would not be in that position, but we can avoid that only if we are explicit about these things. I hope that the Conservatives will be equally explicit, and that is the debate that we need to have. There has been some encouraging forward movement in the past few days, such as the suggestion that defence programmes that had not previously been mentioned are suddenly going to be cut, so progress is being made on all sides.
Among the matters that we have highlighted—I am sure that there must be other relevant matters—is one that I raised in a previous debate, the future of public sector pensions. I was shot down from all sides, but then the following day I noticed that the Leader of the Opposition took up the same theme. There is a growing consensus that we cannot continue with the existing arrangements. They will have to be dealt with, and it will be difficult and controversial.
We have made similar arguments about tax credits, about which there has been a lot of discussion in the Chamber. I recognise that when they were introduced, they were an enlightened step forward and one of the Prime Minister's genuine creations, and one should not disparage them. They have been extremely complicated and faulty in their administration, but I do not deny the vision behind them. However, a system costing £20 billion that includes people with incomes of up to £50,000 cannot be sustained on its present scale, and we must consider how it can be cut back.
I am interested in the hon. Gentleman's approach, with its asymmetrical reduction in public expenditure, but it assumes that public spending is mostly good and that there is no waste or inefficiency across the board. If it does not make that assumption, focusing on some matters and not on others will leave an immense amount of inefficiency and waste unexamined and untouched.
The approach that I suggest is rather superior. It is so easy to hide behind generalised waste. Throughout my fairly long political life, Opposition parties in local government and national Government have campaigned on cutting waste, which is difficult. Perhaps the hon. Gentleman would like to consider his party's history. In the 1927 or 1928 election, its members all campaigned as Conservatives and as waste reduction candidates. We have been here before. It is a way of disguising real choices. My approach may propose impossible dilemmas in some cases, but I believe that it is superior.
The hon. Gentleman speaks about real choices and a thoughtful and non-waffly approach. The Liberal Democrat party has a policy of getting 50 per cent. in higher education, while scrapping top-up fees. Will the hon. Gentleman abolish top-up fees?
I have argued that we cannot continue with the commitment to 50 per cent. in higher education. Whatever the arrangements for the fee-paying structure, the numbers are not feasible and all parties must retreat from the commitment to one half of the young population going through higher education. That is simply not sustainable. I will happily add that to my list.
The defence budget is another subject that has opened up interestingly in the past few days. For example, I note that one of Mr. Blair's former colleagues has opened up the future of nuclear deterrent expenditure and there are issues about different weapons systems. We must have that debate.
On the point that my hon. Friend Stephen Hammond made, it is Liberal Democrat policy to scrap top-up fees. Does that remain the policy? If we are to be credible about reducing the burdens on the state, additional items of expenditure need to be tackled.
It is a commitment, but its affordability depends on the number of people who qualify. There is an argument about how that number is fixed, and we will address that. It cannot be done on the basis of unrestricted admission and low standards.
I am grateful to the hon. Gentleman for allowing me to intervene and I think that the country is grateful to him for starting the debate about how we balance our books. Let us consider the simple arithmetic: the Government estimate that, by 2013-14, we will raise only 38 per cent. of national income through tax—I say "only", but it is a lot for our constituents—yet we are spending 48 per cent. The review must go way beyond even the hon. Gentleman's list if we are serious about balancing the books and protecting our currency so that perhaps the Government succeed in unloading the shed loads of debt.
I do not deny the right hon. Gentleman's argument. Indeed, he and I have tabled a motion on the Order Paper today, expressing his anxieties and saying that we must rise to the challenge.
In conclusion, I want to refer to the process whereby we pursue matters, as opposed to substance and specific items. In the past, we have said that there needs to be an advance in the discussion of Government budgets and fiscal policy, comparable with that which made the Bank of England independent. For 20 years, Governments in this country and elsewhere struggled with inflation and having an inflation anchor. The concept of independent central banks has been implemented and will be important in the UK as the economy recovers and we get back to inflation. We have nothing comparable for fiscal policy apart from the rules, which have been widely disregarded. Part of the answer, as the Liberal Democrats argued five years ago, is an Ofsted-type system, which has oversight of fiscal rules and their implementation. The Conservatives have devised a variant of that, which is interesting in its slightly different way. However, the House is missing in all that.
It is striking that we will move from the debate to weeks of intensive discussion of tax proposals in infinite detail, but, apart from the Public Accounts Committee, which Mr. Leigh chairs, there is no systematic discussion in the House of public spending, unless it happens retrospectively. We must introduce a process whereby hon. Members hold a mature debate on the subject and preferably approve or disapprove public expenditure. That is currently missing. It is partly a question of debating points and identifying the items, but we must all recognise that we have a responsibility here to start focusing on that debate, which is currently non-existent.
It is a pleasure to follow Dr. Cable. At least there is some consistency in his comments about public expenditure and the commanding heights of the economy. It leads me to conclude that our Government have acted wisely to deal with the banks.
It pains me to criticise Mrs. May because she presented her case with some charm, if little conviction. There was a time when we had 3 million unemployed under the Conservative Government. We were told then that
"the lady's not for turning."
Today, it was a case of the lady's not for telling. We did not hear much more about the Opposition's policies. [Interruption.] Would Mr. Ellwood like me to give way, or do Conservative Members intend simply to sit and heckle, as they did disgracefully while my right hon. Friend Mr. Hain was speaking?
The right hon. Gentleman knows that I have a lot of respect for him, but I am concerned because, as has been said time and again, the debate is about the Budget—Labour's Budget. It is not about Conservative plans. If Labour Members want to hear about Conservative plans, they should call the election.
I well understand why the hon. Gentleman does not want to speak about Conservative plans. However, in our democratic assembly, we pay the Leader of the Opposition not only to criticise the Government constructively, but to tell us and the British people the alternatives that he offers. Today, we are again bereft of that.
I want to talk about the Budget and to thank my right hon. Friend the Chancellor for some of the specific measures that are proposed at a time of international crisis. For example, £100 will be added to every disabled child's trust fund, with an additional £200 for the most severely disabled. The great merit of that is that we know that the money will go to disabled children and their families, unlike the £34 million that went to Scotland—we know not where it is now.
Of course, I want to speak about the downturn, which has dominated our thinking. My right hon. Friend the Member for Neath was right—I am glad that he said it—that even the BBC refers to "Labour's recession." Only a few weeks ago, the G20 was held in London. Countries such as China, America, France, India, Brazil and many more were represented. Were those representatives there to talk about Labour's recession, or did they accept the case for dealing with the global downturn, which means working together and not splitting hairs in the way in which we have done again in today's debate?
The reality, as the Chancellor told us at an earlier stage, is that because of the downturn, 90 million people will fall below the poverty line. We are entitled to deal with that, as well as responding to the views of our constituents. It is no comfort to the British people during this global downturn to look at Germany, Ireland and Iceland, which were being held up as beacons of economic progress, the latter particularly in Scotland. Where are they now? I wish them no ill, but they are facing the realities of the global downturn, and so should we be.
In my constituency people want to know, quite rightly, how the Budget relates to them. They do so in the knowledge that we have had a Conservative Government in most people's lifetime—that is certainly true for everybody in the Chamber and for most of my constituents. What happened? There were 3 million unemployed and the county of Lanarkshire, including Ravenscraig, Gartcosh and Caterpillar tractors, was devastated. Small firm after small firm seeking to serve what were once great engineering and shipbuilding industries found that their talents, ability and commitment were regarded as a price worth paying. I do not believe that unemployment is ever a price worth paying, and I am glad that such a view is certainly not central among my colleagues on the Front Bench.
My mind went back in the Budget speech to some earlier Budgets, when I had been sitting beside my late friend and constituency neighbour, John Smith. He would say to me that he judged a Budget by how it impacted on an ordinary person in his constituency. That is how we ought to be talking about the important initiatives contained in this year's Budget.
On housing, I welcome the extra £500 million in spending, including the extra £100 million for local authorities to build more energy-efficient homes. That is a progressive step. On child benefit, the extra £20 in child tax credit will benefit more than 12,000 families in Coatbridge, Chryston and Bellshill, and I welcome it. The elderly are pivotal to the policies of this Government, as we seek to take people out of poverty. The winter fuel payment, which has done more than anything else to alleviate fuel poverty in my constituency, is to stay at its new higher rate. However, it is time for the energy companies—the electricity and gas suppliers—to respond to the Government's concerns and the actions that we have taken to remove fuel poverty. There is also statutory redundancy pay in the Budget for those who are unfortunate enough to be made redundant. Extra help will now be available to them, with the payment rising from £350 to £380.
We are being asked in the light of this crisis what strategy our Labour Government have. They have made that clear by their very actions. It was a fellow Welsh MP, as my right hon. Friend the Member for Neath will recall, who asked, "Why look in the crystal ball when you can read it in the book?" Just as we know about the Opposition's policies, which we witnessed when they were in government, let us look at what was delivered this week, among many other initiatives: investments in our future; £1.64 billion of tax relief for business investment; £600 million of extra money for pensioners; £590 million of help for the unemployed; £400 million for the strategic investment fund for business; and £380 million in measures to combat climate change. That hardly sounds to me like a Government who are doing nothing or one who are simply being told that they are wrong, with no ideas whatever coming forward to deal with the current credit crisis.
On the right hon. Gentleman's point about investment in business, does he accept that the inability to secure such investment is ensuring that businesses lay off staff, creating more unemployment as a result?
The business people whom I meet in my constituency are well informed enough to know that there are problems internationally, as I have said. However, they also know that if, for example, this weekend's speech by the Leader of the Opposition—I listened for what their policies were; he talked about austerity—means cuts in public expenditure on housing, education, local government, transport and the rest, it will be the small firms above all that will suffer. Indeed, that was the Conservatives' record when they were in office. I will give way if any hon. Gentleman wants to intervene.
Yes, I will, but I am making my speech in my own way. The hon. Gentleman was asked specific questions on "Newsnight" that he could not answer. I give way so that he might try to answer them now.
I do not think that it is the general practice in this House that hon. Members giving way in a debate can make conditions about the interventions to which they gave way. The right hon. Gentleman used the word "austerity". Would he characterise a freeze in real-terms public expenditure as a period of austerity? My right hon. Friend Mrs. May was describing the circumstances that the nation is facing as a result of the crisis delivered upon us by this Government.
The hon. Gentleman is not even on message. It was his own party leader who talked about austerity. If we are going to have austerity, the hon. Gentleman will have to be much more open, as his right hon. Friends ought to be, about what exactly that austerity means.
I come back to the Budget, Madam Deputy Speaker. The decision to put up the top rate of income tax is a difficult one for the Chancellor. I understand that. However, it is not a difficult one for my constituents. Folks in my constituency find it easy, because they know that once again, it is low earners who are losing their homes and jobs. It is they who are being asked to make sacrifices, unless we have both the fairness and the strategy, which I believe is based on decency, that the Chancellor has offered in his Budget.
No, I am not giving way any more. There are others who want to speak.
Public expenditure is important. Why should we hit people with a double whammy, by cutting the numbers of doctors, nurses, teachers and policemen in our communities, which would be the consequence of cutting public expenditure yet again? The Government are accused of not fixing the roof when the sun was shining. Let me tell the hon. Gentleman that there were indeed cases when we did not fix the roof. I remember going round the schools in my constituencies under the previous Government and seeing buckets along the corridor because rain was coming in. I remember the dampness and the kids going to outside toilets.
I will tell you what we did, Madam Deputy Speaker. In my constituency alone, there has been one new school for every year of this Government—a record of which I am immensely proud. We demolished the schools: we razed them to the ground and built brand new ones. This week I visited Coatbridge college in my constituency. When Opposition Members have time to go and see how real people live— [ Interruption. ] The hon. Gentleman is betraying the manners that he was taught at school. We are told about all the money spent on private education, but nobody in my constituency would be so rude as to interrupt a Member of Parliament, and the hon. Gentleman would be well advised not to do so either.
We took action to build our economy—action to introduce 2 million new jobs and give young people opportunities. I welcome very much the initiatives in the Budget that apply to 15 to 18-year-olds and others. I refer the hon. Gentleman to my maiden speech on
I believe that the Budget was carefully considered and that it reflected the agreements made with the other G20 countries. Those agreements were essential, because this crisis will not be solved by one country alone. I believe that we should be entitled to look the other developed countries in the eye, and to look to the developing countries and to our own people when this crisis is over and say, "Yes, we did give a lead, and it was based on fairness and justice." It is a lead that I look forward to the British people making their decision on, just as we will make ours tonight.
It is always a pleasure to follow the right hon. Member for Coatbridge and various other bits of Lanarkshire that I do not remember (Mr. Clarke). I would say to him that no one denies that we are facing a worldwide recession; the debate is about why we are uniquely badly placed to meet it. The Chancellor tells us that we will get through the crisis. Of course the British people will get through it; we need to ask when we will arrive at the calmer waters that we all want to reach, given the £45 billion black hole in our budget. Even the Institute for Fiscal Studies, with all the expertise that it can bring to this subject, finds it difficult to understand where 50 per cent. of the resources to fill that black hole will come from. It refers to measures "yet to be announced", and we would have liked to hear the Secretary of State announcing the measures to plug that black hole here today.
As Chairman of the Public Accounts Committee, I should like to give the House some of my own personal thoughts on how we should deal with this issue. Those on the Treasury Bench have made some promises that I welcome. I welcome the promised £5 billion of efficiency savings for next year, if they can be achieved. I welcome the goal of £9 billion of back-office efficiencies by 2014. That is a laudable aim. I welcome the £16 billion promised in asset sales by the Government by 2015. That is to be encouraged, but can it be achieved? Dr. Cable asked why, if efficiency savings were so clear and so likely to be achieved, it took so long to identify them. The National Audit Office has proved again and again that only about a quarter of the efficiency savings claimed by the Government can actually be validated.
The hon. Gentleman knows perfectly well that I was not talking about income tax at all; I was talking about efficiency gains. If he is going to intervene, he should at least intervene on a subject that I am talking about in my speech.
I want to turn to the aspirations of the operational efficiency programme, which I welcome. It is a laudable proposal, but will it actually be achieved? Mr. Hain tried to paint a picture of an incoming Conservative Government cutting vital services. Let me give the House some suggestions of savings that we might make that would not impact on ordinary people. For instance, why is the civil service pay bill running at 1.4 per cent. ahead of that of the private sector? Can we not cut out unnecessary machinery of government changes? The divorce of the Home Office and the Justice Department was very costly, like all divorces. Was it really necessary?
What about the army of consultants? There are five times more consultants per employee in the public sector than there are in the private sector. That is £10,000 for each civil servant who has a consultant. Do we need them all? Do we need the vast variation in the cost of office accommodation? I have asked before why the Treasury is the most expensive Department in terms of office accommodation. Why can we redeploy only 24,000 civil servants from central London? Could we not get rid of more assets? It is true that the Government got rid of £1.5 billion of assets last year, but they acquired many more. Funnily enough, among those few things that I have been talking about for the past minute or so, I have identified £5 billion-worth of savings, none of which would have any impact whatever on front-line services.
I want to put some serious questions to the Ministers about the detailed and important announcements that have been made. Will the value for money review group have the authority to make really tough choices? Will the Ministers' champions for money be able to say no to spending beyond their immediate control? Will the non-executive directors that we have been hearing about be able to stop wasteful spending when they see it? Will the public value programme have real targets, expressed in pound signs, and will it go far enough and fast enough? Those are a few questions for Ministers. If those detailed questions on efficiency savings and other matters cannot be answered in clear terms, we might be talking about a sticking plaster to deal with the black hole, rather than a real attempt to fill it.
I say to my hon. Friends on the Front Bench that if and, I hope, when we come to power next spring, they will be faced by the "Yes, Minster" syndrome. We all know that the mandarins will say, "Minister, what you are proposing is administratively impossible, legally inadmissible, financially unjustifiable and politically unacceptable." Anyone in the Chamber who has been a Minister will know that those are precisely the answers that the civil servants will give. We shall have to slay those shibboleths; we shall need to be very tough indeed.
The crisis is upon us. The hon. Member for Twickenham made that point very well, as did my right hon. Friend Mrs. May. In the five short months since the pre-Budget report, the public sector borrowing requirement has increased by a staggering £280 billion—more than half as much again as the Chancellor's November forecast. As my right hon. Friend said, that is £22,000 for every baby now being born. My sister-in-law came in when we were having a family lunch last weekend and said, "Great news! We're going to have a baby." That new baby will have £22,000 of debt when he or she arrives in the world.
This is a real crisis. It is much more serious than party political banter. The fact is that the era of imperial spending is over, as is the era of sofa government, of back-of-the-envelope, of Tony Blair committing himself to a new national computer or whatever. That is all finished; it is over. There are such difficult decisions that we now have to make, not only about the NHS computer. Yesterday, the PAC was looking at the third sector, which has not been debated in the House this week. There has been a complete lack of accountability, with £500 million perhaps wasted. We are also considering the Chinook helicopter, GP and consultant contracts, the Olympics, the farce of the Rural Payments Agency and the farce of the Department for Transport's shared services. There has been so much wasteful spending.
Describing the Budget, the London Evening Standard put it well:
"It will surely be nowhere near enough to rescue the public finances. It is hard to see how further cuts are now unavoidable. Some cuts seem obvious: scrapping ID cards, for instance, and freezing plans for colossally expensive government IT upgrades. And there are far more cuts that could be made: a succession of reports from the Commons Public Accounts Committee has identified enormous waste in the public sector. Even then, further tax rises seem likely too."
My hon. Friend is, as ever, making a persuasive, well-informed and well-structured contribution to our debate. Dr. Cable suggested that there might be different ways for Governments to approach these matters. How good have the Government been at taking notice of Public Accounts Committee reports? How responsive have they been to the work that my hon. Friend and his colleagues across the Chamber have done over the years, and how might that be changed?
Members of the PAC are very proud of the fact that it is not partisan and that 90 per cent. of our recommendations are accepted by the Government, but the hit rate on delivery is not so great. As the whole Budget process has been mentioned, may I say that it is fantastically weak? When the President of the United States proposes a budget, Congress disposes. Our Budget process is one of the weakest in the world, so last year I proposed having a proper Budget committee. As the hon. Member for Twickenham was saying, we have to address these problems seriously. The Finance Bill will now go into Committee, where hundreds of amendments will be tabled but not one passed, where there will be no proper debate and where an average of a few seconds' consideration will be given to each amendment. That is not good enough for this democratic Chamber. When we are talking about a crisis on this scale, can we not have a proper Budget process whereby we debate these things properly?
I wish to make one point about how we are going to deal with the national health service and education. I firmly believe that spending on the NHS has to run above inflation to a certain extent, because of an ageing population and the ever-increasing cost of providing reasonable health care, but we must have firm cash limits and we have to trust professionals—the days of targets and of not trusting doctors must be over. This debate will not be reported; all of tomorrow's papers will be talking about swine flu. If that takes off, will anybody want to ask our opinion about it? Will they want to ask the opinion of NHS managers? No, they will want to ask the opinion of doctors; we have to trust professionals in the NHS and in education to deliver those essential services. We politicians constantly say how much we trust and admire professionals, but we constantly take decisions away from them in our schools and our hospitals—that is a debate for another place and another time.
I am reaching the conclusion of what I wish to say. What we now need is political courage. We must face down fantasy and face up to the real fact of the crisis before us. We must restore Prudence to her proper place and marry her to true efficiency. We must have lean government and we must be more disciplined. Some programmes will not pass muster—some will have to be cut. We should echo President Obama, who said:
"Where the answer is yes, we intend to move forward. Where the answer is no, programmes will end."
So courage will count. Some services will have to be withdrawn and we should have the courage to admit it; a lean government will offer less to some, but it will offer more to those genuinely in need.
Only the resolute, obsessive pursuit of lean government, line by line, programme by programme, will do. Out must go complexity and the farce of the tax credit errors. Out must go waste and Government computers delivering commands in German, as we saw in respect of transport shared services. Out must go the outright failure that has occurred in many programmes, such as the national offender management information system.
Making government lean, on its own, is not enough. We must ask the following of any programme: does it matter? The Civil Service Year Book lists 526 central Government bodies—26 bodies are involved in tackling childhood obesity alone. Yesterday, in the Public Accounts Committee, we learned that in respect of the third sector alone 60 civil servants are employed in the Cabinet Office—this organisation that delivers fantastically bad value for money. Although it may not be fashionable, we have to return to stern Gladstonian politics. We need a properly accountable Budget process and we must balance the Budget.
Mr. Leigh is entirely right to say that given the extreme danger that we face from the size of the deficit, this Chamber desperately needs a new and much more rigorous democratic procedure for examining a Budget. That is part of the wider democratisation of this Chamber that is greatly needed. We need a much more thorough and comprehensive analysis of the entire range of options, bringing in experts who can give Members in Committee the full range of their expertise.
I wish to make a rather different point. The unrivalled imperturbability and the hallmark coolness of my right hon. Friend the Chancellor meant that he probably made the best fist of the Budget that he could, given all the circumstances, but I wish to set out why it is the wrong Budget and why it could and should be a very different Budget. The reason why the national debt has ballooned out of all historical proportions and why the cost of servicing it this year is thus so enormous is that the Government's response to the credit meltdown has been misconceived. They have been right to pursue the Keynesian strategy of increasing state expenditure to generate demand in order to head off a slump—my right hon. Friend Mr. Clarke spoke powerfully to that end. The Tories have been wrong to advocate letting a brutal self-corrective capitalism play itself out, while keeping a very tight lid on any increase in the national debt incurred by remedial Government action. Having said that, the manner in which the Government have chosen to develop their strategy has been ill-advised.
As we all know, the Government's approach has been geared to splurging eye-watering sums on bailing out the banks—a staggering £1.2 trillion has been committed so far—in the hope that the banks would correspondingly expand their lending to businesses and home owners. In fact, the banks have been doing the opposite, by continuing to contract their lending. The relevant money supply measure of this lending—M4—fell from 16 per cent. in September 2007, when the crisis began, to the latest figure of just 3.5 per cent. in February.
One is forced to ask why the Government chose this particular route in order to stimulate the economy. I can assume only that it was because the whole power structure of neo-liberal finance capitalism is built precisely on this close nexus between the banks and the state. The trouble is that the concentration on preserving the current power structure as the first priority has led to the whole of the rest of the economy and society being exposed by the failure of this policy. What the Government should have done—and should still do now—is focus their fiscal stimulus, which I strongly support, directly on businesses and home owners, and not through the intermediation of the banks. A much more stable, less costly and more rewarding Budget would thus become possible.
The right hon. Gentleman is making a very good point about the paucity of economic modelling that assumes a very traditional relationship between low interest rates and a resultant level of credit and borrowing. What he perhaps might take on board is that that modelling no longer applies, because it is clear that although the stimulus that he described was designed to encourage greater lending, because of the perversity of some of the lenders its effect has been much less than predicted.
There are many reasons why the banks are not lending as much as the Government would like, one of which is that they have been given something of a conflict between lending to businesses and, at the same time, building up their balance sheets. The lowering of our interest rate—at the start of the crisis it was 4.5 per cent., which was one of the highest figures in the western world, and it is now 0.5 per cent.—was necessary, but I accept that there have been some perverse effects of the layering of different policies. I wish to develop this argument a bit further. As Paul Krugman, the American winner of the Nobel prize for economics last October, has said, the credit crunch is so drastic and the consequences so cataclysmic that it can be rapidly overcome only by taking temporary control of the banks. To be fair to the Government, they have already partly done that. The key point is that with the strength of the state behind the banks, there would be no need for them to put their own interests first by consolidating their balance sheets as their first priority.
The Government, as temporary owner—I accept that it should be temporary, but it should also be for as long as necessary—would then be in a position to restore lending to pre-September 2007 levels, which was always the Government's intention. The effect of that on the public finances would be dramatic. Instead of expending £1.2 trillion on propping up the banks, the Government could take them over at a fraction of the cost. The Government have spent £45 billion propping up the Royal Bank of Scotland, but they could have purchased it for £4 billion, which was its stock market value in January this year. Lloyds, which was valued at £35 billion a year ago, could have been bought on the stock market for just £6 billion last October. All of the major banks could have been taken over at a fraction of the cost.
The Government are now offering mind-blowing sums of taxpayers' money to underwrite the banks' toxic assets—£325 billion in the case of RBS and £250 billion for Lloyds, and Barclays is standing in the wings with a few further hundred billion. But given that the Government are the owners, they should either sell off or junk assets that are next to worthless and then redirect the rest into lending in the wider economy that so desperately needs it. I know that that is a drastic approach, but in such times we must adopt such policies.
That policy would transform the Budget prospects. The deficit a year ago was just £38 billion. By the time of the pre-Budget report in November, it had soared to £118 billion. It is now £175 billion, and unlikely to fall before reaching £200 billion. The interest charge on this debt was given in the Budget as currently £28 billion a year and the Chancellor expects it to rise to £43 billion a year. If the banks had not been bailed out so profligately and instead lending on a far greater scale had been pumped directly into the economy, thus sharply reducing the costs of business rundowns and rapidly rising unemployment, the rise in the national debt would be far more modest, and the rise in debt interest correspondingly far less.
It is reasonable to estimate that on that basis the national debt this year might have been reduced by between £70 billion and £100 billion, and the interest on that debt might have come down to below £15 billion a year. That would dramatically change the Budget's bleak projections that investment spending must halve in the three years from 2011-12 and that total spending must be frozen over that period, with actual falls—as Mr. Hammond said—in real terms of more than 2 per cent. a year once fast-rising debt interest charges and sharply increasing unemployment costs are taken into account. The only way in which that could be avoided is by a review of policy along the lines that I have set out.
Is it not ironic that the right hon. Gentleman is proposing a Thatcherite market solution to bank failure? Funnily enough, I agree with him: if a bank fails, it should be allowed to go bust, with depositors being protected. Do I detect a pincer movement on the Government from both sides?
I am somewhat inhibited about embracing the hon. Gentleman, but it is true that I am saying that no bank should be so large that it cannot fail. If banks are manifestly bankrupt, they should be taken over as long, of course, as the depositors are protected. Whatever remains of the assets should then be employed as positively as possible. As for this colossal wave upon wave of credit derivatives that have turned out to be worthless, they should be junked. The idea of protecting the banks and their toxic assets is absurd.
If those policies were adopted, the much smaller hole in the public accounts would be much more manageable—
Does my right hon. Friend agree that when we consider whether any bank is too big to fail, we must take into account the one example in which an investment bank was allowed to fail? The consequences for confidence in the markets were catastrophic, and that is a major consideration.
My hon. Friend refers to Lehman Brothers, and it is true that the sudden decision to allow it to go bust—a reversal of US Treasury policy up to that point—was unquestionably a severe jolt to confidence, not only on Wall street, but across the world. However, we are in a different situation in this country. I am not saying that the banks should be liquidated out of sight, but that they should be taken over at the value that the stock market gives to them and reconstructed in a different direction. That would not significantly undermine confidence.
I cannot resist referring to the speech by the Leader of the Opposition to the Conservatives' spring conference in Cheltenham a couple of days ago. As a means of encouraging his "new age of austerity"—his words, not mine—and to deal with the £175 billion hole in the public accounts, he proposed publishing details of all public sector salaries over £150,000 online. What a stunning idea. I am not sure that it would raise more than £0.0001 billion, but it is such a good idea that we should not confine it to the public sector. In the interests of getting everyone to do more for less, perhaps the earnings of bankers, managers, traders, lawyers and all the financial-industrial executives should all be published online if they earn more than £150,000. Why stop at pay, which is so small a part of their remuneration? On the say-so of the Leader of the Opposition we should also publish their bonuses, incentive schemes, fringe benefits and stock options. When I heard that suggestion, I could not help thinking, "Well, Dave, I really think you've started something."
The Leader of the Opposition went even further. He said that those in the public sector who earn more than the Prime Minister—£195,000—should have to justify their pay to the Chancellor. I thought, "Wow! What a corker of an idea." We should apply that across the economy, including the private sector. There is more joy in heaven over one sinner who repenteth than over 99 just men, but it never occurred to me that that would be Mr. Cameron.
To be serious again, there are three main ways in which that much smaller hole could and should be dealt with, without paring back front-line public services, especially health, education and housing. Housing, incidentally, is something that I think should not be decreased but should be substantially increased. First, some major spending projects have never been justified. ID cards have a cost of £5 billion, while Trident has cost £70 billion over 25 years. There have been Government IT follies, such as the £6 billion Home Office communications super-database. I am glad to see that the Government are backing off from that. Such projects could be much reduced or entirely shelved.
Secondly, there could be a real crack down on tax havens, which, as all the authorities recognise, cost this country something in the order of £20 billion a year. We could certainly generate at least £5 billion to £10 billion a year in extra revenue.
Thirdly, the most popular part of the Budget, which clawed back a tiny part of the gains made by the rich in the past three decades, could certainly be extended. I have been checking on this. Tax could be increased for the 0.5 per cent. of the population that earns more than £150,000 to a rate of 60 per cent., which would raise a further £6.2 billion. For the 1 per cent. who earn more than £100,000, the rate could be 50 per cent. That would leave 99 per cent. of the population entirely unaffected. Higher rate tax reliefs could be removed in other sectors and not just in pensions. Capital gains tax could be modestly restored to parity with income tax, which is exactly where Nigel Lawson left it. Non-domiciled tax exiles could be brought within the tax net from which they should never have been allowed to escape in the first place. I also think—I have thought this for a very long time—that the case for a land value tax should be reviewed and concentrated on the large estates.
The bottom line for social democracy in this country remains that no cuts can be contemplated in front-line basic services, least of all to take the rap for the bailing out of the banks after they brought about the most reckless and irresponsible blow-out in modern financial history. The Government should look again at an alternative strategy, which could be less costly, far more effective and far less risky.
I thank the hon. Gentleman for that correction, which is much appreciated, but I know that. I lived through it too.
What fascinated me was that the right hon. Member for Oldham, West and Royton strongly advocated that the remuneration of high earners should be published online. For the last 20 years, all directors' remunerations have been published in the report and accounts and those—surprise, surprise—are published online these days as are the remunerations of high earners in the City. I suggest that the right hon. Gentleman needs to come up to date and to recognise that this information is already in the public domain.
I was also fascinated that the right hon. Gentleman should advocate the wholesale nationalisation of the banking system, and I am rather glad that it is his Front Benchers who have to answer that question. May I also point out that the Government have to deal with the issue of toxic debt? They cannot just write it off in the modern global banking system. I would have thought—I have spent some time thinking about this—that it would have been much better if the right hon. Gentleman had advocated a structure similar to the Resolution Trust Corporation that was set up in the '80s to deal with the savings and loans banks in the States. In the end, the corporation returned to the taxpayer a net profit from similar toxic debts. A similar system was set up in Sweden, and, again, there was a small net profit to the taxpayer. In my view, that would be a much better way of getting confidence back into the banks so that they could clean up their balance sheets and get their credit ratings up so that the credit could start flowing again.
Credit will not flow until the banking system is clean and that, to me, is one of the big failures of the Chancellor's never never land—or cloud cuckoo land—Budget. I did not know which it was when I sat and listened to it last Wednesday. Sadly, they are both too benign descriptions of what the Chancellor has done to this country. To a certain extent, I suppose that we should relieved that the Government are going some way towards admitting the appalling state of the economy that they have managed to create.
When we have a Labour Government, we always have a bankrupt Government and we always have to sort that out when we come back after a general election. Yet again, we are going through this horrible cycle. A Labour Government spend more money than they can afford and tax people so that they do not want to work in this country, and then we have to sort it out.
We must get a grip on public expenditure in this country. There is no point in expecting to be able to spend our way continuously out of trouble. Towards the end of the Budget, we got nothing other than expenditure. I am afraid that we cannot continue to spend at the reckless rate that this Government have spent at.
I thought it was very interesting that, at the end of the Budget speech, there was such a muted reaction from those on the Government Benches. In 20-odd years of observing this Chamber, I have never seen such a muted reaction to any Budget.
We keep on saying that we have the longest and deepest recession since the second world war. What came immediately before the second world war? The great depression. We should really be comparing events now to those events.
As many people have said, we have seen the fastest rise in unemployment on record. I went to my Jobcentre Plus in Bromley on Friday—many hon. Members will have made similar visits. Bromley does not usually have high levels of unemployment. It is a wealthy borough. We have seen an increase in unemployment of nearly 100 per cent. in the past year—my right hon. Friend Mrs. May mentioned this point earlier. The biggest increase in employment in my borough has been caused by Jobcentre Plus hiring people to deal with those who are now unemployed. Although the staff in the jobcentre are dealing with people as well as they can, they are used to dealing with people who are unemployed from £30,000-a-year jobs and finding jobs with wages of £30,000. The Government's programmes are not geared towards helping the sort of people who live in the borough of Bromley, and so those people are not finding the help that they would expect.
Throughout this afternoon's debate, in particular, I have been struck by the way in which the Secretary of State and others on the Government Benches have alleged that the Conservative Government in the '80s did nothing about unemployment. I fought a by-election in Newcastle upon Tyne, in the Tyne Bridge constituency, in 1985. We had youth training schemes—the YTS—and the enterprise allowance scheme. My younger brother took up the opportunity offered by the enterprise allowance scheme very early on, and he is now running a very successful business, as he has done since the 1980s. The job clubs were introduced and there were a wide range of measures to help young people and other people who had lost their jobs. To say that the Thatcher Government did nothing to help people to get back into employment is a Labour party travesty of the highest order.
I am very happy to go along with the hon. Lady in one regard. At one stage, Mrs. Thatcher did reduce unemployment in this country by the simple device of transferring very many hundreds of thousands of people on to invalidity benefit, particularly in areas such as mine, which was then an active mining area.
It is interesting that the hon. Gentleman talks about the alleged transfer of people to invalidity benefit in the '80s while ignoring what is going on now. There are as many people on invalidity benefit now as there were then, and it is to the shame of the Government that they have still done nothing about it. One of the first things they did when they came in was to abandon the rigorous system we had set up to ensure that only people who were genuinely unable to work should receive that benefit.
I want to comment on what the hon. Lady said about YTS and the other schemes of the mid-'80s. All the evaluations of such schemes have shown that they were virtually worthless. Why? Because the people on them never got a job. There were never any jobs so widespread cynicism developed about the schemes. Ergo, to answer that point, the Labour Government decided that after a year people would have either a training place or a job.
I am fascinated by the hon. Gentleman's point because the criticism of YTS was that if people did not get a job, they got more and more training. What will happen this time? The weasel words offered by the Government are that people will have a job or training. If I was a betting person, I would suggest that the hon. Gentleman should see how often people go from one training programme to another, because until the Government get a grip of the fundamental fault in the economy and get credit flowing again, jobs will not emerge.
I am not entirely certain whether the hon. Gentleman is living in cloud cuckoo land or never never land. If credit is not flowing, businesses will not be creating jobs and we shall not see an increase in employment. With the greatest respect, I suggest that until credit is flowing through the system again and businesses in constituencies such as mine in Beckenham start to take on employees again, we will not get the economy going again.
The economy will not get going until the Government address the whole issue of borrowing. One of my concerns for the long term is their issuance of gilts. There is already resistance to gilt sales. The only way to sell the volume of gilts that the Government will have to produce will be to increase interest rates. The impact of increased interest rates will be an increased need to sell gilts, which means that borrowing will go up—as indeed will inflation, as night follows day. There is no recognition of that by those on the Treasury Bench, nor is there of the fact that if the issuance of gilts is resisted, the UK's credit rating will go down and the Government will be issuing their own junk bonds—their own toxic debt.
The Budget did nothing to reduce the impact of public debt, apart from an attack on higher earners. We are all agreed that when we open the books, there will be more important things to do than dealing immediately with people who earn larger sums of money. It is unbelievably unfair of the Government to slap a national insurance increase on to the ordinary worker—the person earning £20,000 a year, which these days is not even the average wage. Relieving those people of such levels of taxation is much more important than dealing with anything else.
Ordinary people in my constituency will not just be hit by national insurance contributions. They are already complaining about the increase in fuel duty, for instance. Unusually, I have received a series of original complaints about the recent 2p per litre hike in the price of petrol. June Skeet, a pensioner, has written to complain. Natasha Osunde, who works on commission and needs her car, has written to complain. Peter Allchin, who is disabled, has written to complain. The new fuel increases will have a huge impact on people who are just trying to get by.
Pensioners are already under huge pressure from the reduction in interest rates and in their savings income. Businesses are complaining about the impact of the VAT cut; not only has it not increased sales, its implementation has cost them large amounts.
I am sure that some people in Beckenham will welcome the car scrappage scheme. If it helps the car market, I do not have a problem with it—my car dealers are probably delighted—but I have a rather cynical view about what will happen to all the cars that are to be scrapped. Will they go into the scrap market, thereby reducing the value of scrap metal? Will they take over the fields that are to be freed up by the sale of the new cars coming on to the market? Will they be exported to developing countries and will there be an even bigger scandal because we have exported our old, polluting cars? There are large opportunities in the car scrappage scheme for scams and fiddles.
A point that has not yet arisen in the debate is the impact on the retail sector of the various increases in business rates. There will be a 30 per cent. Government-imposed increase for the retail sector. There will be a revaluation of commercial property based on 2008 figures, at the height of the property boom. We have already seen the effect of empty property rates and now local authorities could levy a business rate supplement to provide infrastructure.
People in Beckenham are complaining about the continuing impact on the whole British social scene of the increase in beer prices and its effect on the profitability of pubs. We have talked briefly today about the incompetence of the Learning and Skills Council and the lack of further education and sixth-form funding. That will have a long-term impact on the recovery of the economy.
Time and again, we see incompetence from this failing Government. It is a long time since we have seen such incompetence. We have seen a real decline in their will to govern. It is time they recognised that they have lost the will and it is time for them to go.
Most Labour Members thought the Budget a fair and reasonable attempt by the Chancellor to tackle the worst impact of the recession on families and businesses. It identified and supported, where possible, areas for growth in the economy to help us come out of a recession born of the international credit crunch. It really is absurd and ridiculous for Opposition Members to suggest that the global economic downturn can be attributed to the policies of the Labour Government.
I want to speak about three specific aspects of the Budget and their possible impact on my constituents: help to support unemployed people back into jobs, especially those between 18 and 24; support for businesses, especially those helping us towards a low-carbon future; and help for housing.
Between 1997 and 2008—the time of the Labour Government—employment in my constituency rose by 17,000, which was an extraordinary and positive development. Unfortunately, unemployment in my constituency is now rising. Therefore, during this recession, it is important that we do not adopt the old Tory policies of the past two recessions, which amounted to doing nothing and writing off not one but probably two generations of families. The Tories did nothing for people who lost their jobs and little for young people in school either. They also took no action to tackle the deindustrialisation of the economy that took place in the 1980s and, to some extent, the 1990s. Critically, that meant that they did not identify and support future growth areas, and they also simultaneously disinvested in education and skills.
I want to ensure that this Government do not make the same mistakes, so I especially welcome the package to get 250,000 people back into work and to stop young people entering the ranks of the long-term unemployed. The intention is to provide 100,000 jobs for young people, largely through sectoral pathways in the private sector, through a recruitment subsidy of £2,000 and an additional £1,000 for training, and the measure is specifically welcomed by some of my local businesses. The key sectors identified are care, green industries, and hospitality and tourism. They are important for not only our future economy, but the future of our public services.
It is also worth highlighting the additional £1 billion for creating 100,000 jobs through local authorities and the third sector. The measure is very much about creating jobs in and for our local communities. The local projects will cover such things as arts, the environment and social care. Critically, the jobs will also support the social enterprise sector. I will be urging Durham county council, my local authority, to put forward an expression of interest for some of the money by the May deadline. Parts of County Durham have been particularly affected by the economic downturn, so I hope that some of the money comes our way.
The Government also outlined support in the Budget for a further 50,000 jobs for those areas that are especially disadvantaged and in which unemployment is hitting hardest. I will be arguing that some of that additional support should come to the north-east in general, and County Durham in particular. The critical aspect of the Government's actions is that they are intervening to support job creation in the parts of the economy that particularly need it and the places in the county hit hardest by the recession.
Yesterday's debate, which focused on business, clearly showed that the Government intend that a third of the £750 million strategic investment fund should be earmarked for low-carbon projects. If we are not to lose further ground to our competitors, it is essential that, even in these difficult times, money is found to invest in renewable energy projects and low-carbon developments, such as electric cars. I especially welcome the £405 million to support low-carbon industries and advanced green manufacturing that will help to make the UK a world leader. I also welcome support through the renewables obligation for offshore wind investments that reach financial close between now and 2011. It is expected that that will support £9 billion of investment and power up to 2.8 million homes. I welcome the new funding mechanism to support up to four carbon capture and storage demonstration projects and the £90 million to fund detailed preparatory studies. Several north-east Members have been arguing for additional investment in CCS for some time, so we are especially pleased by the inclusion of additional money for that in the Budget.
In addition to investing in the green economy of the future, the Government need to continue to invest in the development of skills. Of all my sources of anger at the last Conservative Government—there are many, but I will not go into detail because some of them have been outlined—the one about which I feel most strongly is the way in which investment in skills and training ebbed away in each successive year of that Conservative Administration, thus sucking opportunities and young people's potential out of our communities and leaving generations without any prospect of employment and with no belief in themselves. It is essential that the Government keep investing in the development of skills in our communities.
The Conservatives might be talking about problems with further education college building programmes now, but that is truly ironic, because during their period of tenure, they made no capital investment whatsoever in FE colleges, while the schools in all our constituencies were often past their use-by date.
Such lack of investment was reflected in the poor attainment of some of our young people. In 1997, about 30 per cent. of young people in County Durham got five or more A to C grades at GCSE, but the 2008 figure was 66.1 per cent. That absolutely huge increase did not happen by magic but because we mended the roof—or, more accurately, built new schools—while the sun was shining and doubled investment in education.
If the Tories want to know where the money was spent—they appear to need to understand that, because their party's leader tells us each week at the Dispatch Box that the Labour Government wasted it—I would like them to visit my constituency, where they will see the new hospital, the new FE college and new school buildings. There has been record investment in health in my constituency—we have no NHS waiting lists—and there are six Sure Start centres. There has also been a huge increase in employment and industrial development since 1997, although I recognise that that is suffering somewhat at the moment. All that cannot possibly be described as wasted money.
I urge the Government to continue to invest in not only education and skills, but our public services. I also want the money that goes to universities, especially for science, to be protected because universities and science are essential for our future economic development. The Budget adds to substantial investment in schools and colleges to provide help for training young people and I am pleased that there will be a further £250 million to enable 16 and 17-year-olds to stay in school or undertake training.
I applaud the money set aside to more than double the provision of apprenticeships. It is important that we have a wide range of qualifications and pathways to employment open for our young people. In my constituency in particular, apprenticeships are a brand of training that is well recognised and valued. Also, nothing is more important than that we continue to invest in Train to Gain.
I was trying not to be provoked, but I cannot do it any more. The hon. Lady is reeling out a list of great things on which it is good to spend money and, in a perfect world, of course it would be, but has she read the Budget that her right hon. Friend the Chancellor presented last week? Does she understand the scale of the public spending cuts that he is projecting for the years to come? Does she have any insight into where those cuts will be made if a Labour Government are re-elected?
I can answer the first part of the question easily: yes, I have read the Budget.
As I was saying, nothing is more important than that we continue to invest in Train to Gain to support and upskill people in employment. In particular, we must continue to support union learners, who are so excellent at persuading people in the workplace to acquire new skills. We must also encourage young people to value education. I do not think that we can ask them to value their education if we do not value it. We in County Durham were only just starting to overcome the past scepticism about what learning can bring; we must continue to make progress. In partial answer to the hon. Gentleman's question, let me say that, whatever else we do to get efficiency savings, it is critical that we continue to develop our education system and to invest in education and training.
In my constituency, we have just opened a new school, Durham Johnston, which is excellent—much better than anything that I had imagined; it is state of the art. We also have another school, Framwellgate Moor, starting in about a year, as well as a new academy backed by Durham university. The hon. Gentleman has just demonstrated the truth of my next statement: I simply cannot imagine investment on such a scale happening under a Tory Government. It is unfortunate that the whole of the British media and a great many people in the country apparently have such short memories.
We must invest in skills development and knowledge transfer if we are to compete in the global economy of the future. I am therefore pleased about the additional funding for the Technology Strategy Board. We in this country have not always managed to apply technological developments well to create jobs; we have to do that better in the future.
Finally, I hope that the Government will use the additional £600 million to support new house building, as well as the measures previously announced to encourage councils, either themselves or in partnership with others, to build more council houses and to continue to provide affordable homes that are much more energy efficient than those provided in the past. It is a source of great sadness to me that, in my constituency, many opportunities to build affordable and rented properties were not taken by the Liberal Democrat council during the years of growth. The council simply let the market rip, with too many apartments being built, and now we lack good family housing and a real mix of tenures. The Government must put that right by enforcing planning policy statement 3 in any future house building initiatives. We must learn lessons so that money is used wisely from now on to plan for a sustainable future, to invest in low-carbon industries and to ensure that housing is delivered for everyone and not just those who can afford the latest market offering.
There is no doubt that the Budget statement delivered last Wednesday was one of the most significant that the House has heard in several decades, but I strongly suspect that the one that follows the next general election will be the most significant of all. Then, when the real decisions that will affect the whole country are taken, we will see the true extent of where we are headed, although we have a good idea of the general direction, having listened to the Government's projections for future expenditure growth, as well as the Opposition's.
The context of this year's Budget has changed significantly compared even with last year's. Earlier, we heard an exchange between Mr. Meacher and Mr. Love in which reference was made to Lehman Brothers. I remember just over a year ago, in the run-up to the US investment conference in Northern Ireland, in my capacity at that time as Minister of Enterprise, Trade and Investment in the Northern Ireland Executive, visiting Wall street and the headquarters of Lehman Brothers. I was taken to the 75th floor, where a presentation was made to me about the bank's global ambitions and how it hoped to expand and perhaps invest in Northern Ireland. The fact that that bank has now disappeared shows the extent of the change that has happened.
At this time last year, people's biggest concern was the cost of living—the rise in energy prices and the cost of mortgages. Now, their concerns are much more focused on whether they will have a job or keep their home. Various parts of our economy have been devastated, especially the construction industry. We in Northern Ireland know all about that, because the construction industry plays a massive role in our economy, particularly in the private house building sector, which has been utterly devastated. The extent of the downturn and its rapidity have staggered everyone and made people extremely frightened and anxious about where we are headed. We have heard all the talk about unprecedented times and the worst borrowing figures since the second world war. Given the eye-watering amounts that have been mentioned in connection with the banking crisis and so on, for most people these truly are uncharted waters, so they are extremely worried.
This year's Budget was largely defined by the massive downturn, although I think that most commentators were right to say that the Chancellor has been over-optimistic in his growth projections. The Budget will be regarded historically as very much a holding Budget before the real decisions are taken after next year's election. The fact is we have to deal with the present position; we cannot go over the history of how we arrived here—whether it is entirely a global phenomenon, or more of a domestic creation. I think that there is a little bit of truth in both analyses. The accusation can be made that, since coming to power, the Government have increased public spending based on additional receipts, but gained too little in terms of our public services and structural foundations. However, we have to address the here and now and how we get through the next period.
During this debate, we have heard much discussion of whether we should go for a fiscal stimulus, or ride out the current crisis and allow matters to take their course, and all the shades of grey between the two views. I have to refer to the contrast between what this country is doing and what others are doing in terms of borrowing now to invest. We should compare that with what is happening in the Irish Republic, which is having to try to cut its way out of recession. Of course, we know that one of the reasons it is in that position is that as part of the eurozone it has a lot less capacity than the United Kingdom, in terms of the currency being devalued, and in terms of borrowing and so on. People in Northern Ireland are grateful at the moment that we are part of the United Kingdom and out of the eurozone. Northern Ireland has benefited on both those scores.
The daily influx of shoppers from the Irish Republic to Northern Ireland shows that people see real value in the cost of goods and services in Northern Ireland, to the extent that one major national grocery chain in the United Kingdom has a 2 or 3 per cent. share of the market in the Irish Republic without having a single store there. That tells a story, and shows that people are voting with their feet.
While the hon. Gentleman is making a comparison with the approaches taken in different countries, he might consider the following point. There are two ways of approaching the crisis. The first is to inject a fiscal stimulus into the economy, as he put it. However, to make a difference of about 1 per cent. in unemployment, one needs to inject a stimulus of about £39 billion, according to most academic studies. Frankly, the Government simply do not have enough money to do that effectively. The Keynesian route, advocated by Mr. Meacher in a very eloquent speech, is simply not possible. The alternative route is retrenchment. The Government are not really going for that in a meaningful way. We are falling between two stools, which is likely to have a very limited effect.
I am grateful for the hon. Gentleman's contribution, and I understand what he is saying; effectively, his point is that if we want to make a real difference, we have to go much further. I remember a previous debate in the House in which the Liberal Democrat spokesman, Dr. Cable, made the point that the Americans' fiscal stimulus was on a much greater scale, and that it would require something of that magnitude to make a difference. Nevertheless, I believe that it is better to try to inject some kind of fiscal stimulus in the current situation than to go the other way. The approach adopted in the Irish Republic illustrates how painful the alternative is.
I hold the position of Minister of Finance and Personnel in the Executive, and the fact is that there is a certain amount that the Executive and the Assembly can do locally to try to help the people of Northern Ireland—businesses, communities and hard-working families—through the current challenges and difficulties. We have taken measures to try to do that, such as freezing the small business rates in real terms as of
We could go further. Our party has suggested that there is a need to look at the issue of government infrastructure, and how much money we are spending on the machinery of government. A number of Members today referred to suggestions on how public expenditure could be cut without going into the details of individual Departments' spending. In Northern Ireland, we have 11 Departments running a Province of 1.7 million people. There is growing consensus that a Province the size of Northern Ireland does not need 11 Departments; we could get by with a lot fewer.
We know why that situation came about. During negotiations and debates, primarily between the Social Democratic and Labour party and the Ulster Unionist party, there was a view that we should create many seats around the Cabinet table and elsewhere, to accommodate parties. People need to move on from that and ask, "What is in the best interests of the people of Northern Ireland? What delivers the best value for money?" As regards the duplication of Departments—on that issue alone, before we get down to the issue of cutting the number of Assembly Members and other areas of expenditure that could be looked at—we calculate that we could save the people of Northern Ireland, and the Northern Ireland budget, between £40 and £50 million per annum. That is a significant saving in the context of the Northern Ireland budget. We have to look into that seriously, and I hope that parties in Northern Ireland will do so in the forthcoming period.
My hon. Friend is outlining a range of options that could come before the Northern Ireland Assembly to bring about reductions, and a number of cost-effective steps that could be taken. Does he agree that we are more likely to achieve such aims in a mood of political consensus if all parties commit themselves to adopting such measures? People across Northern Ireland and the UK would think that very wise, and would say, "This is a cost-effective way of ensuring that government works even better in Northern Ireland than it did."
I agree. The greater the political consensus that we can achieve on such approaches to saving money and on making Government work in a leaner, more effective way, and the more that we can devote that money to front-line services—health, education, training, skills and so on—the better.
On the issue of diverting money, through efficiencies, to front-line services, I want to come on to the public expenditure position arising from the Budget. There was a lot of discussion in earlier parts of the debate on the Budget resolutions on the question of cuts versus efficiencies. There has been a lot of argument about what is a cut, and what is an efficiency. When it comes down to it, it depends on which side of the House one is on, whose cut or efficiency one is talking about, and how it is categorised. I think that all of us agree that efficiencies should be implemented where possible, and where money can be released for front-line services. I do not think that there is any doubt that we should be as efficient as we can be in the delivery of Government and public services.
In Northern Ireland, the Executive and the Assembly are committed to 3 per cent. efficiency savings, year on year, over the three-year period of the budget. That is on the basis that the moneys saved will be used for front-line services in Northern Ireland. When devolution was set up, the Province was given repeated commitments from the Prime Minister and the then Chancellor that all efficiency savings made over the comprehensive spending review period would be retained by the Executive to allow devolution to bed in. It was on that basis that the Northern Ireland Executive agreed to match the efficiency savings targets for Whitehall Departments. It is therefore deeply regrettable that in the Budget, some £122 million-worth of so-called efficiency savings were announced. That was at the lower end of expectations.
I welcome the fact that over the next two-year period of the budget, some £116 million will be given to the Northern Ireland Executive's Department for Employment and Learning as a consequence of budget allocations to Whitehall Departments under the Barnett consequentials. However, I seek an assurance from the Chief Secretary to the Treasury that those additional allocations will continue beyond 2010-11, instead of being subject to the same form of smash-and-grab seen after the 2007 CSR. A measure is only truly an efficiency saving if the money is released and spent elsewhere in Northern Ireland. That £122 million is being taken out of Northern Ireland and back to Whitehall.
When we had a debate about efficiencies or cuts on
"Where would the £5 billion spending cuts this year fall?"—[ Hansard, 27 April 2009; Vol. 491, c. 671.]
If he defines the efficiencies called for by Opposition spokesmen as cuts, the same must apply to the efficiency savings in 2010-11. We are not against efficiency savings: we are prepared to make whatever efficiency savings can be made, but we must deliver those savings to front-line services. Taking that money back to Whitehall is a raid on the Northern Ireland block and the Northern Ireland budget.
There are a number of UK-wide measures that I welcome, including the decision to retain the increase in the winter fuel allowance for 2009-10. The increase in the child tax credit from 2010 will offer a real benefit to people, and I welcome the improvements to statutory redundancy arrangements. As for local business, I have outlined some of the measures that we have taken in Northern Ireland to help business, and there will be automatic rate relief for businesses in the Province. Parties in Northern Ireland agree that there is still a strong case for a reduction in corporation tax in Northern Ireland in recognition of our unique circumstances, given the land border with the Irish Republic. I accept, however, that the measure to help firms with cash-flow problems will help businesses to survive the downturn, while the enhanced capital allowance for 2009-10 will encourage firms to prepare for recovery.
The Government have announced a £750 million strategic investment fund to support advanced industrial projects, with a third of the funding earmarked for low-carbon projects. It is important to encourage Northern Ireland firms to apply to that fund, and hopefully they will be considered fairly for support. As I said, people will look back at this year's Budget as a holding Budget, with the significant decisions that will affect the national and local situation in the Province being made in the Budget that follows the next election.
I fully agree with Mr. Dodds about the significance of the Budget. I certainly felt a chill in my spine last week as the Chancellor announced the figures. Yes, the figures had been canvassed in the media and elsewhere, but to hear the projected high borrowing figures expressed in the Chamber struck me very deeply indeed.
We have to contemplate the implications of that scale of borrowing for future Budget exercises and for future public expenditure—the Chancellor has already indicated some of the adjustments that would be required and the squeezes in public expenditure in years to come. Equally, there are implications for projected revenue. Other hon. Members, particularly Dr. Cable, have spoken about the serious gap between projected revenue over the next few years and projected expenditure, and people have questions about the projections in the Budget.
We can ask questions about the implications of that scale of borrowing and how we manage it down in years to come, but we must also ask ourselves what the implications for all of us and the future of the economy would be if the Government had not resorted to that scale of borrowing and had not sought to manage the range of interventions with which they have had to deal. In all our assessments of the Budget, we must be mindful of all the issues that are in play.
Over the past couple of years, as the hon. Member for Belfast, North said, there has been a transformation in the assumptions, presumptions and projections for the Budget and the economy. We have seen a virtual meltdown in parts of the banking sector, both nationally and internationally. People's confidence in financial services has been fundamentally shaken. It is not just public expenditure that has been affected; private investments and pensions have also been deeply affected. That has changed the order of what people expect from politics and from Government, not least in the Budget debate. People want to hear politicians, business and banking leaders tell them as it is—good, bad or uncertain. We need more of that in this debate. I have heard it in some parts of the debates to which I have been able to listen, but inevitably a degree of partisanship has crept in.
I am not sure that this is particularly a time for dwelling on the records of all sorts of Governments in the past. As an MP for Northern Ireland, whenever I refer to issues in our past that are still current, I get a bit fed up of hearing a lot of English MPs say, "Oh, forget about that—that was 10,15 or 20 years ago. Don't dwell on the past." I have heard an awful lot about the past, however, and the record of previous Governments in the Budget debate, but we very much need to look at the present and the future. Similarly, the Opposition have strayed beyond their legitimate role of talking down the Government's performance to talking down the economy. People should not be so irresponsible as to short-sell the economy with an eye to their own immediate, partisan profit, but there have been undertones of that in what we have heard from some Opposition Members.
I have just heard the hon. Gentleman accuse the Opposition of talking down the economy. The Red Book explicitly says that this will be the longest and deepest recession since the second world war, so I do not think that we can be accused of talking down the economy.
I accept fully what the hon. Gentleman said about the Red Book, but as I have said, people expect and want the Government and politicians to tell them as it is—good, bad or uncertain. If things are uncertain, they should be told, which is why I join others in questioning how optimistic some of the projections are. Equally, I recognise that in other respects, the Chancellor has been pretty direct. We must all recognise the enormity of what we are facing—not just what the Government are facing, but what we as a Parliament are facing.
In the course of the debate a number of Members have raised issues about the degree of parliamentary scrutiny or oversight of some of these matters, which we as a Parliament need to consider. In respect of the current intervention in banking, the bail-out and the high degree of public ownership of a number of banks, we cannot credibly leave it to the Treasury Committee, on top of all the other huge structural issues that it is dealing with in relation to the Budget and other matters, adequately to discharge the legitimate interest of the House in how those matters are handled. We need a special dedicated Committee to deal with that.
Does the hon. Gentleman accept that many business throughout the UK feel themselves short-changed by the banks that have been bailed out? A great deal of pressure is put on business because the banks will not lend them money, even though the businesses are fundamentally sound?
I fully accept the point that the hon. Gentleman makes. Indeed, I made a similar point in an intervention in the debate last week. Some of the banks in Northern Ireland—I previously named the Ulster bank, for instance—are, according to some of the business customers whom I have been talking to, are engaged in bondage banking practices. They are trapping and binding people with ever higher rates and charging them very high re-arrangement fees for that purpose. It is not only the Ulster bank that is doing that.
Banks are operating in the current situation not just to try to extract more money from some businesses but, I believe, to price some businesses off their books and to force firms that are otherwise sound and that are good medium to long-term investments into liquidating and possibly aborting their sound business prospects. We have heard that from all parties in all corners of the House when they refer to banks in their areas and how they are treating businesses.
That is why we cannot rely on Treasury Ministers to receive the monthly reports that are meant to come via the lending panel. That is no credible scrutiny or oversight. It is no credible way of guaranteeing that the commitments made by the banks, we are told, towards business lending and other lending areas will be honoured in practice. A bank in Northern Ireland has large banners up with the message, "Lending isn't ending", but that is not the message that customers get when they speak to the bank.
We need to examine our procedures as a Parliament in respect of the special and hopefully temporary intervention in the banks, which will obviously take some time to manage. There are aspects of the Budgetary process that the House should consider. Because of the scale of the issues with which the Government are contending, they could use parliamentary scrutiny to assist in the better proofing and control of expenditure. In his contribution the hon. Member for Belfast, North referred to the Chancellor's projection of efficiency savings later in the Budget cycle, and he spoke of the implications of those for Northern Ireland.
The fact that the Chancellor is able to project those efficiency savings right down to the impact that they will have on the Northern Ireland block in a couple of years is interesting, but should be set against the fact that there is still no move to curb expenditure or cut out altogether some of the prestige follies that other hon. Members have mentioned. I refer to ID cards and the huge expenditure that there will be on those. There will be a huge outlay on replacing Trident—a huge prestige folly that might have something to do with people's idea of status, but has very little to do with serious modern defence strategy. Other prestige follies include massive, expensive and very questionable databases in the health service and elsewhere. The announcement of some pullback in the telecommunications database was welcome.
If the Government are serious, and if we as a Parliament are to be serious about trying to rebalance the Budget, which Mr. Leigh spoke about, we must ask how we in Parliament play our role in that. I believe that in some cases Parliament is better than Government at controlling expenditure on such prestige follies, precisely because of the "Yes, Minister" syndrome that the hon. Gentleman mentioned. Such projects become big status issues and big totemic demands within Government. Nobody out there in the country particularly wants them, but Government have a huge need for them and Government know best. There is also a false belief that Government can spend and buy better. More parliamentary control of those big ticket items would be a great help in the future. We need to consider structural reform of the way that we manage Budgets in the House.
There were significant measures in the Budget, not just the high borrowing figures and the implications for future spending. Because of all the other details in the Budget, perhaps we have lost sight of the Budget's significance in terms of carbon budgeting. It is the first big step towards that. Many people say cynically that the Government have produced a Budget for the short term, with a view to the election, but we should appreciate the enormity and the significance of the carbon budgeting measures. Some hon. Members might disagree with the value of that measure in the present context, but it proves the sincerity of the Government's commitment. The exigencies of the current circumstances are not being used as an excuse to pull back from those principles and targets.
In the context of the commitment to carbon budgeting and the Budget's positive interventions, there is the £750 million strategic investment fund and the high profile that has been accorded to the low-carbon economy to ensure that we have a green recovery from the recession. I, like the hon. Member for Belfast, North, hope to see Northern Ireland companies avail themselves of that fund and flex their innovatory muscles to make the most of it.
There are other interventions in respect of business, including some on taxation, so that people can offset losses this year against previous tax. That is very welcome in the circumstances. The measures on payroll shelter and short-work schemes are very important, and I and others will want them reflected in Northern Ireland, using our devolved capacity. We have argued for such measures.
Given the range of measures that different parts of the manufacturing sector require, we must ask the Government to create a proper framework for intervention. Many different measures have been announced for the short term, and some in the Budget are projected for the short term, but the method whereby different measures are announced by Lord Mandelson in one meeting and then announced somewhere else does not convey the sense of a coherent framework of intervention, and we need one.
We must ensure also that Europe plays its role in properly allowing creative intervention nationally and regionally. The First Minister and Deputy First Minister of Northern Ireland were in Brussels recently, and the President of the Commission encouraged them to use public spending innovatively. Sometimes, concern about EU state aid rules gets in the way of the innovative use of public expenditure, and EU state aid rules can be called on and used against positive intervention measures. Although the EU says that it is trying to relax those rules, there is no clear framework for what is and is not relaxed, so, when people speculate on possible proposals to help particular sectors and industries, they are not quite sure where things will stand with regard to state-aid. We therefore need to press Europe for a clear regime, so that, nationally and at a devolved regional level, we all know our discretion to intervene to support our competitive businesses, and they are not counted out under those rules.
We must recognise that, through some of the Budget's other measures, the Government have shown a continuing commitment on child poverty, including the provisions on child tax credits. I also strongly welcome the measures for pensioners to extend the enhanced winter fuel allowance and, on pension credit, to relax the rules on savings limits.
This has been a mixed Budget in very difficult circumstances. We need to recognise that we are in an unprecedented matrix of uncertainty, and, in that situation, we cannot rely on all the projections. I fully accept that some of the Budget's projections are on the optimistic side, but I am glad that it includes, first, commitments that show the Government's determination to try to protect businesses and people in the front-line economy just as much as they tried to protect the banks, which the Government did not do just because the banks wanted it, but to try to ensure that we, ourselves, had a basis for economic stability; and, secondly, measures to try to offset the impact of unemployment and reverse its pattern where it takes hold, so that it does not just hit and, then, drill down and pervade the economy. Such interventions are welcome, but they will have to be developed, and I hope that the Government listen to Members of this House as we come forward with more schemes and ideas as to how best we can do that.
I recently went to visit my local citizens advice bureau to see how its staff were faring in the economic downturn. They told me that their recent figures show that visits have increased by nearly half in the past year, and painted a stark picture of the recession in Haringey. They have seen a 44 per cent. increase in visits from residents of Hornsey and Wood Green compared with last year. Most of those new inquiries were job-related; almost twice as many people as last year are asking for employment advice. Unemployment has a knock-on effect on other areas of concern such as debt and benefits advice. Between 2007-08 and 2008-09, there has been a 60 per cent. increase in debt inquiries and a 30 per cent. increase in benefits inquiries.
A whole raft of people who are usually employed have become, in a sense, a new wave of unemployed. They have no experience of how to work their way round a benefits maze or to understand their statutory rights or what is available to them in help from the Government. Many of my local residents are clearly struggling with the recession and in need of such help and advice. The best way to be recession-proof, or as much so as possible, is to know one's rights and entitlements. The citizens advice bureau is therefore vital.
I saw a constituent this week who is not so well, and she has been trying for four weeks to be seen at the local CAB. It has a queuing system, so people have to get there very early in the morning. Because my constituent is not well, she waits for an hour and then has to go home again. It is no use having a citizens advice bureau if it is buckling under the weight of the rising number of inquiries resulting from the effects of the recession and if it does not have enough advisers to cope with demand. Given that dramatic rise in inquiries, I was disappointed that there was nothing in the Budget about extra grant funding. Of course, I am on to the local council, Haringey, as well, but its main funding comes from national Government. I am sure that my constituency is not alone in being affected.
I have been to speak to the North London Network, which comprises very small businesses, including one-person businesses. They are suffering dreadfully. The banks are still not extending loans to them, and there is no relief from their landlords in moratoriums on rent rises. I wondered about the possibility of automating small business rate relief. That is quite complicated to apply for—I think that it is based on square footage—yet it is worth about £1,200 a year to small businesses. It would help them enormously if it were automatic.
We recently had a debate in this House on what would happen to women in the economic downturn. We agreed, on a cross-party basis, that it would be tragic if the high level of female employment and the advances made on equality were swept away by the recession. Women already have a tough time in the workplace. It was clear from the debate that sectors such as retail and services, which are populated mainly by women who are already poorly paid, would be hit extremely hard, as would part-time work.
Another problem is employers and others apparently believing that somehow women's earnings are not as important as men's and that if someone has to go, it should be a woman. I have not told Miss Kirkbride that I would mention her, so I apologise to her, but she raised that issue in the previous debate, saying that she had known people who had heard of such situations. She was absolutely right in her contribution.
We must also consider maternity costs. In a recession, with employers facing unprecedented challenges in maintaining the viability of their businesses, maternity benefits may be a cost too far, particularly for good employers who pay above the statutory minimum. As employers try to squeeze their costs down, it is not hard to imagine that firms offering maternity pay plus benefits will begin to reduce such costs. Women who choose to stay in work rather than be persuaded out of it will have to manage on a very low amount if their benefit is reduced to the statutory minimum, which is £117.18 a week. Miraculously, most women receive about £400 a week because of good employers providing maternity pay plus benefits. That is a substantial difference.
Alternatively, if offers are made to women not to come back to work after maternity leave, and instead to receive a redundancy package, it is reasonable to assume that some will exit the workplace. Evidence about that is being collected. They will then face even greater barriers to getting back into work in a few years' time.
The Minister for Women and Equality and the Government held an event—I want to say a bit of a do—at No. 11 Downing street for women from across the country, who gave evidence about their experience of what the recession is doing to women. That is clearly a major concern, but I did not hear anything in the section of the Budget about helping people fairly that would give direct help to women in the circumstances that I have mentioned.
There is also a danger that in the recruitment process employers might favour applicants with no children. In an economic downturn, anybody with children is at a disadvantage if they apply for a job. According to the Equal Opportunities Commission in 2005, before it became part of the Equality and Human Rights Commission, 30,000 women a year were sacked for being pregnant. More recently, Nicola Brewer, the chief executive of the commission, said that women were not being employed because it was better for employers not to take them on, as they might open themselves up to the risk of further costs through maternity benefits. It will be terrible if our maternity benefits, which are relatively good although with room for improvement, become a cause of women not being able to access jobs. If the situation is bad now—that was a couple of months ago—we can expect that women will find it harder and harder.
The hon. Lady makes an interesting point. Economists argue that extra costs to businesses through regulation are absorbed during periods of economic growth but exposed, as she argues, in times of economic downturn. Furthermore, they argue that when employers face tougher times, they take steps that they would not take in a period of growth. What measures would her party put in place to counteract that?
Much as I would like to discuss the measures that my party would put in place, I am actually discussing what the Government are going to do. My intention was to find out whether any direct help would be provided. A debate was held in the House about what would happen to women in an economic downturn, but I did not hear that reflected in the Government's Budget.
The final matter that I wish to cover is youth. I very much welcome the Government's proposal to guarantee every 18 to 24-year-old a job or training. The prospect of a whole generation of young people coming out of education, particularly tertiary education, to nothing is one of the most appalling aspects of the recession. The loss to an individual of confidence, skills and their future is unconscionable. Let us consider the effect on self-confidence of finding nothing after studying and hoping, and dreaming, of getting a good job. There is a great individual cost, and the loss of a generation of young people with ability, talent and skill to the whole of Great Britain would be immeasurable.
Does my hon. Friend share my concern that the promise to which she refers will be implemented only after a year, which is long enough even to someone in middle age? It seems an absurdly long time. Does she agree that we can identify young people at high risk of being unemployed for a year almost on day one, and perhaps be more interventionist earlier?
My hon. Friend makes an interesting point. Indeed, I shall make almost the same point shortly.
Earlier this year, Martin Bright, who is the former political editor of the New Statesman, wrote a piece entitled, "A New Deal of the Mind". I do not know how many hon. Members read it, but the Government were greatly interested and supported it. It was a truly visionary piece, which was about scooping up that potentially lost generation and creating a version of Franklin Roosevelt's new deal of the 1930s. It is targeted more towards those leaving university or tertiary education so that a whole generation will not be lost. It would mean an army of young people employed on projects—the article also suggests using that army to do things that are not normally done—to record, write, film, photograph, design and archive aspects of our lives, the recession and living histories, thus creating a legacy from this era for future generations. They would document all the communities in our land—that does not get done in better times—while battling the scourge of unemployment in current times.
The article was so inspiring—I tell everyone to google "A New Deal of the Mind"—that it received much cross-party support. There was another bit of a do at No. 11 Downing street to launch the new deal of the mind— [Interruption.] I do not spend all my time at No. 11 Downing street. There was a stellar gathering, with the head of every artistic, musical and literary institute and organisation in this country present. I have never seen a guest list like it. They were all buying into the concept. The Secretary of State for Work and Pensions and the Secretary of State for Culture, Media and Sport were there and fully signed up to the ideal. Mr. Vaizey also attended and spoke in support. I am sure that it will come as a relief to Conservative Members to know that support was not caveat free, but we all spoke in favour. The leader of my party also supports the new deal of the mind—it is simply a good idea.
Ideas included a brains trust for the 21st century, a national oral history taskforce, a national family history project and a new deal for art and drama. I have been so enthusiastic about the project since I first heard about it that I have been blogging about it. At the weekend, I visited another constituent, who happens to run a charity. He said, "You're interested in this new deal of the mind—you've been blogging about it." His charity is cataloguing oil paintings in public ownership in every county of the land. He said that if I could hook him up with new deal of the mind, he had an apprenticeship to offer in every county because a book of oil paintings in public ownership is produced for every county. Apart from local councils, there are many people who have a vision, want to help and could be harnessed in that way.
I hope that the new deal of the mind will be part of the Government's guarantee. As my hon. Friend Steve Webb said, I do not understand why those projects cannot start from day one. The sooner people leaving college with nowhere to go get involved in that worthy and marvellous idea, the better. What part of the guaranteed budget will be used to ensure that all 18 to 24-year-olds will be in a job? How can it be accessed? How will it work? How much of that budget will go to a new deal of the mind? It is important to realise that vision, which has the hallmark of greatness. It will leave a legacy to this country for which everyone in years to come will be grateful.
It is a pleasure to follow Lynne Featherstone, who brought a passion and an energy to her advocacy of the aesthetic aspect of what might be done to engage people usefully and purposefully.
How one responds to the Budget depends on how strongly one feels about the long run. I assert that the political class has become less concerned with the past and the future. The view of the past and the future among politicians has changed, as the here and now has predominated. The "want it all and want it now" culture, which has been fuelled by a "borrow and spend" paradigm, is bound to displace a proper consideration of the long run. Yet surely we know that the present is a momentary thing. We live our lives—do we not?—in the then and the when. Thus an emphasis on the long run is important for politicians and this House, and it is certainly important for the Government.
The Budget was couched in the language of Keynesianism and we heard something of Keynes from Mr. Meacher, who made the best speech that we have heard in the debate today. It was Keynes who once famously declared:
"In the long run we are all dead."
However, Keynes, as his comments imply, had no children. I, on the other hand, have two young sons. I care desperately about their future and about that of their contemporaries—the children and grandchildren of my constituents in South Holland and The Deepings. That means that I care about the long run and about our duty to those who follow us, a duty that informs my conservatism. I prefer Edmund Burke to Keynes. It was Burke who said:
"History is a pact between the dead, the living and the yet unborn."
The Budget breaks that pact. It is the product of politicians and Ministers who are preoccupied by the present, largely ignorant of the past and careless of the future.
Of course the Chancellor is focusing on how to get through the next 12 months, but to do so he plans to borrow an incredible £175 billion, which is 12.5 per cent. of national income. We surely know across the House that we cannot go on spending for ever, but like St. Augustine, the Chancellor declares, "Lord make me chaste, but not yet." He and the Prime Minister hope that the tough decisions can be delayed until after the general election and probably, therefore, taken by somebody else.
It is instructive in these circumstances to consider the crisis faced by the Labour Government in 1931. Then a Scottish Labour Prime Minister put country before party. Now a Scottish Prime Minister should do the same, yet the Budget burdens future generations with a mountain of debt. The Institute for Fiscal Studies has estimated that the national debt will return to sustainable levels in 2032, which is 23 years from now. That is not acceptable. I do not want to be excessively partisan—these debates are often too partisan—but in the end, when the Prime Minister speaks of a "decade of irresponsibility", one has to reflect that he was the man, first as Chancellor and now as Prime Minister, who presided over the policies that fuelled that irresponsibility.
There was much in the Budget about housing. The Government's policy on housing illustrates the sort of short-termism of which I am so critical. For me, the idea of a home is the emblem of my conservatism. To talk about housing is one thing; to talk of the home lifts us to a different emotional plane. The difference between a house and a home is like the difference between calling a parent a mum or an acquaintance a friend. The home stands at the bright centre of our lives. It is where lives start and end; it is where we return at the end of each day and at the end of all our days. Our hearts are where the home is. But there are far too many people in our country who either do not have a home or do not have the kind of home that they need and deserve.
Frustrated aspirations to home ownership and overcrowding are the painful symptoms of what is going wrong with Britain. The Government's failure to tackle these problems helps to explain why social mobility has declined. To build a socially mobile, cohesive and socially just society, we need to help people find the homes that they need in the right places, yet we have wasted a decade of opportunities to do so.
Over the past decade or so, about 24,000 fewer homes a year have been built than under the tenure of the last Conservative Government, and house building has now shrunk to an historically low level. The Government have also failed to develop other methods—particularly share equity—to help people into the homes that they want. In the Budget, the Chancellor promised an extra £80 million for the HomeBuy Direct shared ownership scheme, but that will help a maximum of 10,000 buyers. Even in these grim times, about 10,000 new mortgages are approved per month for first-time buyers. So the sum of £80 million represents one month's mortgage applications, so it is no wonder that experts have already dismissed the proposal as marginal.
More than five years ago, when I was the shadow Minister for housing, I published a paper proposing 33,000 new homes via HomeBuy, which was far more than the Government were delivering. If they had taken the Opposition's advice then, and backed shared equity when house prices were rising, they could have generated receipts through sales that could have been recycled to provide further support, but instead we had far too little, far too late.
The same is true if we look at the Chancellor's other proposals on housing. He promised £100 million for local authorities to build new energy-efficient housing, but experts say that that will pay for just 900 new homes at a time when 4.5 million people are on waiting lists for social housing. More than 28,000 people have lost their homes as a result of delays in the implementation of the home owners' mortgage scheme, following its announcement last December. In February, the Prime Minister said that he would do everything in his power to stop repossessions, yet the Council of Mortgage Lenders estimates that there will be 75,000 repossessions this year alone, a rise of 67 per cent. on last year. Members will have seen the figures in today's press which suggest that the repossession rate will continue to rise, and the frightening graph projecting a forecast of mortgage arrears that will undoubtedly lead to yet further repossessions.
I also want to say something about public debt. We face a future crippled by debt and, while the Prime Minister keeps talking about the global nature of this crisis, we should understand that we are alone in our present approach to debt. Of the G7 countries, not one other will countenance an increase in the level of debt such as that proposed in this Budget. Shockingly, the Office for National Statistics revealed this month that, in the financial year 2008-09, the public sector recorded a deficit of £52.3 billion. That public sector net debt, expressed as a percentage of gross domestic product, was 50.9 per cent. at the end of March 2009, compared with 43.1 per cent. at the end of March 2008. By 2013, total Government debt will rise to a staggering 79 per cent. of GDP. Across the EU, no other country is considering such a rapid rise in debt levels.
The International Monetary Fund report, "The State of Public Finances", indicates that, from 2009 to 2014, we are alone in our reckless approach to borrowing. Germany's debt will rise from 76.1 to 77.2 per cent., and Spain's will rise from 48.6 to 56.3 per cent. Even for Italy, a country that is no stranger to borrowing, the IMF predicts a rise of under 10 per cent. across the same period.
The circumstances to be found more widely across the world are even more alarming. China's debt will fall, as will that of Brazil. Indeed, the IMF's "World Economic Outlook" indicates that world public debt, including that of vast numbers of developing economies, will only rise from 61 per cent. in 2008 to 71 per cent. in 2014. All of this risks our competitiveness, productivity and prudence.
I am not an economic liberal. Indeed, I am not a liberal at all. It is one of the destructive products of the orthodox acceptance of liberalism that we have come to regard individuals and their will as being more important than the history that precedes them, the coming generations that they spawn or the families and communities rich in values and ideas that nurture them. So I am not an economic liberal and have no problem in principle with the role of government in mitigating the excesses of the state of nature. But I am a fiscal conservative. The reason for my being so is that I believe in the long run and the long term—what we see in this Budget and in the Government's economic policies is what happens if one does not. Rather than prepare for the future, the Government built their economic programme on two things—high levels of public debt and private borrowing, and high levels of public expenditure—which in the end could not be sustained.
Those are the things that fuelled our economy for more than 10 years. They emphasise the material, the immediate and the individual, but what really counts is the permanent, the communal and the prudent, and it seems to me that the day of reckoning has now come. Good parents want the best for their children—as I said, I want the best for mine—and they must despair, as I do, when they read that their children will have to pay for the decisions that we are going to take today. If we want to give our children the best possible chance in life, the opportunities to succeed regardless of from where they start and the chance to live in a home of their own in a strong, cohesive community, we need public policy that focuses on the long term, we need politicians who are prepared to sacrifice the immediate interest for something greater, better and more strategic, and we need a Government who care about the long run.
It is a great honour to be called to speak in this debate, and I am delighted to follow my hon. Friend Mr. Hayes. Deciding exactly what to say is one of the problems for tail-end Charlies in this debate, because although there is a lot to talk about, so much has been said before. I do not seem to get invited to the same number of things as Lynne Featherstone, so I spent my one-line Whip night off last night, and indeed this morning, reading the contributions that other hon. Members have made—that shows what an exciting chap I am—and I found that it appears that Budgets are judged by certain tests.
The Secretary of State for Work and Pensions opened today's debate by saying that it should be about people, not statistics, but of course he spent the remainder of his contribution making up statistics and fantasy policies of which to accuse the Conservative Front-Bench team. He missed out the key statistics—the amount of debt with which this Government will saddle future generations and the fall in total managed expenditure that will result. He was completely wrong in what he said, because the statistics are what this is about, for it is they and the forecasts that underlie what the Chancellor has put into the Budget that will determine the fate of people.
Many hon. Members have observed that every Budget is judged by certain tests, and it seems to me that those tests are threefold. The primary and central test of a Budget is whether it does and will improve the health of our economy and the wealth of our people. In today's economic climate, one might judge that by considering whether a Budget delivers the real help that people need in the recession. One of the concerns expressed by a number of hon. Members has been that some of the help that is available is too little and too late.
Like other hon. Members, I have received representations from businesses in my constituency over the past three or four months. People tell me that they have heard about various Government schemes to ensure that banks start lending but that are not happening in reality. Representatives from one business came to see me here less than six weeks ago, with exactly that problem, and that business is now relocating to Toulouse rather than staying in Wimbledon.
Another test should be whether the Budget will put the public finances back into order and deliver sustainable growth. Beyond the central tests, there are two other tests, the first of which is the unravelling test. How long does it take before the forecasts are found to be inaccurate? How long does it take for the consequences of the measures announced to be revealed? Everyone will remember the dramatic 2 per cent. cut in the basic rate of tax, but it only took half an hour to work out that it came at the expense of those paying the 10p tax rate. This Budget has failed that test spectacularly. Even as the Chancellor was speaking, the borrowing numbers—which are linked to the growth numbers—became incredible, and my right hon. Friend Mr. Cameron rightly accused the Chancellor of swallowing the numbers rather than announcing them.
The third test is the devil in the detail test. Much has been written over the years about the 1997 smash and grab raid on UK pensions, but there are some equally pernicious measures in this Budget on pensions, including the tapering of relief and the limit on one-off contributions that will hit the aspirational and wealth-creating class whom we need to encourage.
Other hon. Members have spoken about some of the other devils in the detail today, including the point that the support through the tax credit is £20 a year, not £20 a week. The biggest failure of the devil in the detail test is that anyone earning £20,000 a year will see an increase in tax through their national insurance contribution.
The central test is the health of the economy. As Mr. Field said, at the moment we are taking 38 per cent. in tax and spending 48 per cent. If the forecasts are wrong, those numbers are wrong, and they are wrong in a harmful direction for the economy. The slowing of growth is the norm for economies in economic cycles: recessions are not, and the UK has had only three recessions since the second world war. Page 200 of the Red Book states clearly that
"the current downturn is forecast to be much deeper than that of the early 1990s, but not as deep as that of the early 1980s."
However, if that forecast is wrong, the implications for everyone in this country are even more worrying.
As my hon. Friend will know, recessions have a shape. The Government do not know whether this is a V-shaped recession or a U-shaped recession. Their projections for growth suggest a V-shaped outturn to the recession, and that is not just optimistic but suggests a degree of magic—not so much Dumbledore or Gandalf, but more Tommy Cooper.
It is more likely to be Ali Bongo. He was a failed magician and these are likely to be failed forecasts.
Page 181 of the Red Book says that UK GDP will contract by 3.25 per cent. in 2009. It then states:
"As macroeconomic stimulus builds and credit conditions ease" there will be
"annual growth of 1¼ per cent. in 2010" and
"3½ per cent. in 2011".
We have to ask ourselves whether that is actually credible.
Let us forget the fact that the IMF disagrees with the 2010 number, and the fact that the Chancellor has just put up the 2011 growth number by a whole percentage point against the figure in his pre-Budget report. The real test of credibility is found in testing against the evidence of history. History teaches us first that recessions are not common, and secondly that quick recoveries from recessions are not common either. Typically, once a trough is reached—this is the point about a U-shaped or V-shaped recession—it takes two years to return to trend growth rates.
Let us consider the two recessions that are referred to in the Red Book. During the recession of 1979 to 1982, the first quarter of negative growth happened in the first quarter of 1979. However, the recession was not evident until the fourth quarter. We had consistent negative growth through to the first quarter of 1981 and we did not return to trend growth until the first quarter of 1983. The recession of the 1990s followed a shallower but similar pattern. The first quarter of negative growth was in Q3 of 1990 but it was not until Q3 of 1993 that we returned to trend growth.
It seems to me that what the Chancellor has postulated, which is that we will see a growth of 3.25 per cent. in 2011, borders on the incredible. The first negative quarter of growth in this recession was in the third quarter of 2008. We have had three quarters of negative growth since then. It is quite clear from the Chancellor's prediction for the fall in GDP this year that we will continue to see negative growth quarters up until the fourth quarter of this year—let us be optimistic and say that that will be the last quarter of negative growth. The point is that we will not see any return to trend growth until at least two years after that, which takes us well beyond the Chancellor's expectations for 2011.
The implication, if I understand what my hon. Friend is saying, is that there will once again be a hole in the Government's budget. If growth is not V-shaped, then the tax revenues that the Government have assumed will be collected will not magically appear. Does my hon. Friend share those concerns?
My hon. Friend, as ever, gets to the point that I wanted to make rather more quickly and more eloquently than I did. I am making exactly that point. These statistics and these forecasts do matter, because they matter for people. When they are proved to be wrong, the hole in the public finances will be even bigger, the debt mounting on people will be even bigger and the tax receipts that will have to be raised in the future will be even bigger.
I accept that there are international causes to this recession, but it is not true that, as one hon. Member said, this is a very different depression or recession from any other. If we look at history, by what are recessions characterised? They are characterised by a sharp drop in house price inflation and a drop in business investment as a percentage of GDP. Company profits and corporate profitability fall as a share of national income. There is a sharp rise in unemployment, a rise in inflation as measured by the retail prices index and a rise in short-term rates. We can all agree that, barring the last two, those features are present in this recession. A number of people would also argue that the difference in inflation as measured by RPI and the consumer prices index shows that a lot of people are experiencing that hike in inflation, because the CPI has been deflated by the mortgage impact.
A number of people, including in particular Mr. Meacher, made the point that there is a big difference in lending levels at the moment. The base rate might be at 0.5 per cent., but the banks are lending to the companies that need to make the investment at levels closer to LIBOR and over LIBOR. The banks are not allowing companies to borrow at rates that will allow them to make the investment they need.
My hon. Friend illustrates the point that one of the differences between responses to earlier recessions and to this one is that it is much harder for the Government to pull policy levers that have a direct effect. Interest rates are a classic example; another is what economists call saturation—people are unlikely to spend on capital goods they already have. Cars are a good example, which is one reason the Government's car scheme is unlikely to succeed.
My hon. Friend is obviously correct. He leads me to my next point.
Today, a number people have spoken about John Maynard Keynes, of whom much is made by the Prime Minister. However, we have forgotten two of Keynes' central propositions, one of which was about counter-cyclicism. After years of growth, the public finances ought to have been in a position to bear large fiscal stimuli, but because the Government spent all the way through the good times, the public finances are not in that order.
The second point is taken as an absolute shibboleth even though it is not actually what Keynes said. He did not say that we should spend our way out of recession. He said that public finances and public spending might need to be raised, but that what was actually needed was to raise effective demand. There are a number of ways of doing that, which lead directly from my hon. Friend's absolutely correct point about saturation.
The central point is that the Secretary of State for Work and Pensions was wrong this afternoon. The debate should be about statistics and forecasts, because they will undermine the Budget and its effect on people's lives. It seems to me that history tells us that the Chancellor's forecast numbers are unlikely to prove either credible or sustainable, that a number of the actions taken have been too little, too late, and that there is dishonesty in postponing until after the general election—without telling people—the taxes on the many and the cuts in public expenditure that the Government propose in the Budget.
The Budget will not return the economy to sustainable growth or restore public finances. As my right hon. Friend the Member for Witney said, it is absolutely true that all Labour Governments run out of money and it will be an incoming Conservative Government who will have to encourage saving, prioritise reductions in taxation on the many and spend responsibly on essential public services. This country needs that cure sooner rather than later.
It is a pleasure to follow my hon. Friend Stephen Hammond and an honour to be the last Bank-Bench speaker in this important debate on the 2009 Budget. Although my words of wisdom may not be remembered in perpetuity, we shall certainly not forget this important debate.
I have a six-month-old son. He has yet to learn to say the word "Daddy", let alone "quantitative easing", but it is a statement of the problems we now face that, along with every child yet to be born, he is saddled with a debt of £22,500, thanks to the Government. Not since the war have we been in such a bankrupt and battered state as we are today. It is of course a global economic downturn.
I was taken by the age of my hon. Friend's new son. Is my hon. Friend aware that his son will probably be 23 or 24 years old before we return to a debt to GDP ratio of about 40 per cent?
I did not intend that my son should become the focus of the debate, but I am grateful for my hon. Friend's intervention. I thought that I knew how my son would vote, but after he realises that he will have to pay back £22,000, we will be sure of his voting intention.
The extent to which countries may protect themselves from exposure by avoiding large-scale debt differs from country to country. Thanks to the Government's relaxation of the rules in the UK, banks were lending money that they did not have, to people who could not afford it, in ways that they did not understand. The Bank of England's powers were transferred to the Financial Services Authority, which did not know how to use them, and the Government then saddled the country with debt. They even tried to change the economic cycle to conceal the debt that was being accumulated. As a result, Britain has been the worst hit economically of all G20 countries, which puts in perspective the importance of the 2009 Budget for leading the nation through choppy waters towards a calmer and more stable economic environment.
As hon. Members have repeated throughout our four-day debate, however, there has been no leadership or vision, or even a sustainable and costed plan. The Budget not only lacked honesty in spirit, but broke Labour's own rules, which have arguably kept them in power for three Parliaments. As soon as the Chancellor sat down last Wednesday, every economist worth his salt was queuing up to criticise the Budget.
The first criticism was about the amount that the Government will borrow: £348 billion over the next two years. That will not only double the national debt, but exceed the total borrowing of all Governments going back 300 years. If that is not shocking enough, the Government say that borrowing will reach more than £600 billion over the next four years, which will saddle even those taxpayers who are yet to be born.
The next criticism was about the way in which the Government intend to pay the money back. A pivotal point of the Budget statement—when, if the country had not already written the Government off, they would have done so—was when the Chancellor claimed that the economy would grow by 1.25 per cent. next year. Let us not forget that the Chancellor predicted in the pre-Budget report that GDP in 2009-10 would be 2.5 per cent., with net borrowing at £38 billion and income receipts to the tune of £171 billion. Six months later, he had to admit that the economy would not grow by 2.5 per cent., but shrink by 3.5 per cent., and that net Government borrowing would be not £38 billion but £175 billion. The shortfall comes in because of net income receipts, because they are to be not £171 billion, but just £141 billion.
How, therefore, can we believe any prediction that the Chancellor or the Prime Minister make? The only thing that can be believed with any assurance is the Chancellor's reputation as the worst forecaster in modern history. I am sure that last Wednesday's statistics will come back to haunt him in November's pre-Budget report.
I am grateful to my hon. Friend. He makes a good point about debt, but it would be helpful to set out a broader picture. He talks about debt of £600 billion or £700 billion, but when that is added to what already exists, the figure will be closer to £1.4 trillion, which is 100 per cent. of GDP. While that is shocking in itself, what is most shocking is the Government's lack of transparency, as they are probably hiding an extra £1 trillion or £2 trillion off balance sheet.
I am grateful to my hon. Friend for giving way.
My hon. Friend's argument explains exactly why the IMF has dismissed the Budget—no wonder it has been given the nickname of the fantasy Budget. The IMF predicts not a recovery next year, but a worsening of the UK's situation, with not 1.25 per cent. growth, but a decline of about 4 per cent. The bottom line is that the Budget does not add up. The shortfall in tax revenues alone means that an additional £170 billion will be needed this year and next to meet the Government's targets.
My hon. Friend talks about the large borrowing figures, but will he estimate the possible impact of the downgrading of the UK's credit rating because of that requirement?
My hon. Friend makes a valid point. We are at the mercy of the gilt markets and there is a danger that we will lose our triple A rating as a result, which would have a devastating effect on the economy.
Today, embarrassingly, many hon. Members have taken us down memory lane: rather than talk about this year's Budget, we have heard all about life under Margaret Thatcher. They fail to remember that it was Denis Healey, the Chancellor at the time, who in 1976 had to go to the IMF, first for a loan and then to be bailed out completely. I have a sneaking suspicion that we are wandering down that road again. I hope not.
Where did the money go? Where was it all spent? We have had a decade of boom, but it all seems to have disappeared. We all remember the stealth taxes, the doubling of council tax, the increases in corporation tax and the raid on pensions mentioned by my hon. Friend Stephen Hammond, which have given Labour a staggering £1.5 trillion extra since they came to power in 1997. Where has it gone? The budgets for schools and hospitals have doubled, but can we say that services have doubled? No, we cannot. That money has been spent, but it has disappeared.
Every year, 34,000 people die unnecessarily in our hospitals. Cancer survival rates are still 20 per cent. lower here than in other European countries. Somebody catches MRSA or clostridium difficile every 10 minutes and one dies every 80 minutes. That is a scandal, considering how much money has been spent on the health service. In education, the story is the same. The number of NEETs is increasing and one in four primary school children fail to meet basic standards. Now, the funding problems in the Learning and Skills Council are threatening sixth-form places at the very time when people need education.
Many hon. Members have asked what the Conservatives would do. We have made it clear. Under Labour the economy has been built on debt, which is why my right hon. Friend Mr. Cameron said at his spring forum speech that Britain needs a "complete change of direction" to deal with the new "age of austerity". We need a plan for economic recovery based on savings and ownership, not borrowing and debt. We need a new low-carbon, high-skilled productive and balanced economy that will be the engine of sustainable growth for years to come, and we must reform the public finances and our system of financial regulation, so that no Labour Government will be able to bankrupt us again.
Tackling Labour's debt crisis entails ensuring that the Government live within their means—that we control public spending and deliver more for less. That needs to start immediately—not in one or two years' time, but straight away. We need a new culture of thrift in government, because it is not Government money, but taxpayers' money. We need to cure our big social problems, not just treat them. That means school reform, welfare reform and strengthening our families.
Never has it been so easy to turn one's back on responsibility—to give up on education, knowing that the state will pick up the bill. Only now have the Government realised that and started to make amends, but their approach has had a cultural impact that could take a generation to shift. Instead of harnessing the full economic potential of the next generation, this Government have fuelled a cultural shift toward mediocrity. Surely we should be rejuvenating the next generation, encouraging them to stay in school until they are 18 not because the Government told them to, but because they want to; and to seek a job not because otherwise they would lose benefits, but because they have a skill on which they can build, for which they can be paid a good salary and of which they can be proud.
Finally, I shall discuss an important subject that the House often overlooks: British tourism. With exchange rates where they are and with the opportunity of the Olympics heading our way, tourism is our fifth biggest industry, but, as I said, it is overlooked. Tourism is worth £114 billion to the economy, is twice the size of the IT services sector and four times the size of the agriculture sector, but it does not get the attention it deserves. It sustains more than 2.6 million jobs and is responsible for one in every four new jobs created here in the UK. It is worth our attention because every pound that Visit Britain spends abroad brings £25 back into the economy. How many other departments can say that their spending money in that way brings money back into this country's Exchequer? I want more emphasis on how we can take advantage of that.
The UK is the sixth most popular place to visit in the world, but this Government do not recognise that. They have just cut Visit Britain's budget by 20 per cent., which is a scandal. There is no leadership in the Department for Culture, Media and Sport. Regulations are created in other Departments, but the DCMS has no say at all. Visa costs went up by £130 per cent., and DCMS had no say in the matter. Fire regulations are hitting bed and breakfasts hard; DCMS had no say in the matter.
I think that it is page 8 of the Red Book that shows that there is to be a removal of tax relief on holiday lets; that was done without any consultation with DCMS whatever. We have no idea what the impact will be on the industry, and how many holiday lets will close. The measure will, of course, affect places such as Fowey in Cornwall, where I spent a week during the recess. If those places close, it means a loss not just to the individual who provides the let, but to local pubs, the local community, and the tourism operations there.
There is also the issue of structures. The creation of the regional development agencies has taken responsibility for tourism away from a body with a national voice, such as Visit England, and given it to the nine regions, which ended up competing with each other in a confusing and overlapping system. The irony is that the Government have now realised that and are reinvigorating Visit England, but it is a decade too late.
There is not enough time to do justice to other issues, including the closure of 36 pubs every single week. The increase in duties is a tax on the many, not the few who drink irresponsibly. The VAT reduction to 15 per cent. was not helpful at all, because people in the retail and tourism sectors were already giving 10, 15 and 20 per cent. discounts. Why on earth are the Government changing VAT back to 17.5 per cent. on
There was reference in the Budget to bingo; VAT on bingo has now been removed. That has long been called for, but what the Government give with one hand, they take away with the other, as gross profits tax has gone up to 22 per cent. That means that bingo clubs will start closing across the UK. The dear old ladies who like their one night out will have nowhere to go. Bingo halls are part of our community. People who choose to take part in soft gambling may migrate to harder forms of gambling. That cannot be good, so I ask the Government to reconsider that. There is also the issue of what to do with regard to the announcements on swine flu. I just want to show the House the Evening Standard . It says: "Killer flu virus 'already circulating in London'". That does not help British tourism at all.
That is exactly why I read the headline out. I thought that I would get away with that. That story is in the Evening Standard tonight, and it is a disgrace that there is such speculation, without any knowledge behind it. It is just scaremongering, and does nothing to help British tourism whatever.
In conclusion, this is the worst Budget imaginable at the worst of times. In the end, it was more about partisan politics than responsible Government. It was a tribal Budget, with its flagship policy of a 50p tax rate—a crude attempt to corner the Conservatives and shore up Labour support rather than care for the nation's finances. The Government are not on the back foot, but on their knees searching in the gutter for ideas, as the disgraced Damian McBride proved only last week. The Government blame the US, but it is not the US that is responsible for 120 per cent. mortgages here, or indeed for easing the borrowing rules introduced more than a decade ago.
It is said that Governments often reach their sell-by date, and that the nation simply wants a change, and if we are honest, that could be said about 1997, but the difference between John Major's Government and the Government of today is that we looked after the economy right up to the end date, and we handed over something worth talking about—something that we can actually be proud about. What is happening here is exactly the opposite. Today's Government seem to be out of touch, and are certainly out of ideas. They are going down, and attempting to drag the country with them. If there was one ounce of honour left in the new Labour project, the Government would fall on their sword and allow the nation the chance to vote and put the country out of its misery. This discredited Administration will selfishly limp on until May 2010, when finally the curtain will come down on a Government who have refused to apologise for their part in Britain's economic downturn, and who have no idea how to get us out of it.
As many of my hon. Friends have pointed out, we have scarcely reached the end of the Budget debate, and already its subject has fallen part. After four days of parliamentary scrutiny, the Chancellor's Budget, which was flimsy when it was delivered, has comprehensively unravelled. It is already looking as fanciful as the pre-Budget report quickly became. The past week has seen the final nail in the coffin of what little remained of Labour's economic credibility. Within minutes of the Chancellor sitting down, his growth forecasts were flatly contradicted by the International Monetary Fund, and his Budget was condemned by the CBI as lacking a "credible and rigorous" plan to restore the public finances.
Within days, the first quarter growth showed the economy contracting far faster than the Chancellor indicated in his Budget statement, undermining the foundations on which the entire Budget was constructed. Mr. Hain, who is no longer in the Chamber, said that the growth predictions were lower than the Chancellor had predicted five months ago. In fact, they were lower than the Chancellor had predicted two days ago. I was struck—and I suspect that many of my colleagues were, too—by the tone of Labour Members' speeches this evening. They just do not seem to have grasped the implications of the Red Book for future spending, or the fact that it is already obsolete, reflecting, just a week after the Budget, a best-case outcome if economic recovery is far quicker and stronger than the IMF and all other reputable commentators have predicted.
I was asked on Sunday whether I had any idea how the Chancellor had arrived at his 3.5 per cent. growth prediction for 2011. I think I do. My very first boss showed me something that he called the "right-hand up" budgeting approach. He started in the bottom right-hand corner of the spreadsheet with the number he wanted to reach, and he worked up to the top left-hand corner, filling in the numbers that he needed to get the answer he wanted. It is an exercise in fantasy forecasting that undermines not only the robustness of the Budget but the credibility of the entire process. The case for an independent office of Budget responsibility, proposed by my hon. Friend the shadow Chancellor, has never been made more eloquently than by the Chancellor himself in presenting those fantasy forecasts last week.
What the country needed last Wednesday was a clear, objective and realistic statement of the position that we are in and a deliverable projection of future growth and revenue—a Budget that set out the measures needed to restore the public finances from that real base, not from fantasy figures, restoring a discipline to fiscal policy making that has sadly evaporated. What we got was a Budget that had more to do with saving the Prime Minister than with saving the British economy. As usual, it was based on spin.
The story of the day was supposed to be the new 50 per cent. tax rate, signalling not just the casual breaking of another manifesto pledge, like the pledge to hold a referendum on the European constitution, but a final ritual burial of the new Labour project. If new Labour was about anything, it was about reaching out beyond its traditional core support to a wider public in an aspirational nation. It speaks volumes about the Prime Minister that, facing a general election that will be a referendum on his competence and record in managing the British economy, he has abandoned any attempt at broad appeal, and has refocused his efforts on his core heartland vote, chucking a bit of red meat to those who despise aspiration and success, revealing as much about himself, his values and priorities, as a clutch of unauthorised biographies could ever do.
We know that the Prime Minister is obsessed with political dividing lines, and the 50p tax rate was supposed to be a new one. He needed it, because the old one—public spending and investment—was rubbed out when his Chancellor announced the most swingeing real-term cuts in public spending since the second world war. We can probably imagine the scene in the Downing street bunker: things are pretty tense in there anyway—a week or so ago, they had to take one of their own outside and shoot him. Those who are left are understandably nervous. The Secretary of State for Children, Schools and Families, normally a key player, has to keep his head below the parapet, lest someone derails his plans by reminding the electorate that he is in fact the co-author of the Prime Minister's 1,000-year plan for the British economy that has failed so spectacularly.
A new dividing line was called for, and one was found—no matter that it will damage the British economy; no matter that it will cost jobs in the upturn; no matter the signal that it will send to the next generation of entrepreneurs and inward investors; no matter that the experts do not believe that it will raise anything like the sums of money that the Chancellor is pretending. As Mr. Byers said yesterday, this so-called policy is mostly about
"political positioning and tactical manoeuvring"—[ Hansard, 27 April 2009; Vol. 491, c. 615.]
The subliminal message is supposed to be, "We've got you in a mess, but don't worry. We'll sort it out by taxing the rich." But the British people are not stupid. They have been here before. They know it does not work like that. If one studies the Budget book closely, one sees that it does not even pretend that it works like that, either in the bits that the Chancellor told us about last Wednesday or in the bits that he did not tell us about. In the bit that he told us about, only half the tax increases are paid for by the rich.
The other half are taxes on ordinary families—on alcohol, tobacco and fuel and, of course, the stupidest tax of all, on jobs, which is the national insurance contribution increase in 2011 that will hit everybody earning £20,000 a year or more, just as the economy is starting to grow again. In the bit of the Budget that the Chancellor did not tell us about, there are another £45 billion a year of tax increases pencilled in to make his numbers add up by 2017, even with his highly optimistic growth assumptions. That is £1,430 per family of extra tax every year for every family in Britain—a secret Labour tax bombshell aimed at the many, not the few, and timed to go off after the next general election.
Maybe the Chancellor was a little pushed for time when he was making his Budget statement. He seemed to gloss over the dramatic changes in spending plans in his Budget speech. The downgraded spending growth assumption from 1.1 per cent. to 0.7 per cent. was announced without any fanfare. There was no mention, either, of the allocation of £2.3 billion of cuts to the NHS next year, or of the halving of net public capital investment over the next five years—something that Labour have consistently said they would not do in response to economic pressure.
Let me remind my right hon. and hon. Friends that at the time of the 2005 general election, when the Conservatives were already warning that public spending was growing too fast and needed to be restrained, the Prime Minister told the country that every conceivable efficiency saving had already been made, and that any further reduction in public spending growth would lead to a catastrophic collapse in front-line services. Since that election, he claims to have made £26 billion in efficiency savings. Last November he discovered another £5 billion-worth and, last week, he told us that he had found another £9 billion. That is £40 billion in total.
Let me remind the House what the present Chancellor said back in 2005:
"Far from being able to fund such huge cuts in 'bureaucracy', £35 billion is actually the equivalent of sacking every teacher, every GP and every nurse in the country", yet he has done it, and then some, so he claims. No one believes a word the Government say on spending any more. It is pure political spin. If they had taken our advice then, the public finances would not be in the mess they are in now, and our public services would be more robust, more sustainable and better prepared for the challenges that they will face.
The truth, which we did not hear in the Budget statement, but had to glean from the analysis of the Institute for Fiscal Studies, is that after taking into account the increase in the service cost of our mountain of debt and the additional cost of benefits to those caught up in this recession, the Chancellor's figures presented last Wednesday represent a real cut of 2.3 per cent. in departmental expenditure budgets after 2011—the biggest spending cut that has ever been imposed in Britain's post-war history. All in all, it was the most dishonest and most partisan Budget that we have yet seen from the Government, and it beat off some competition to win that title.
The Government talk about fiscal stimulus and counter-cyclical policies, but the only cycle that the Prime Minister has ever understood is the electoral cycle, and that has been the driver of this Budget: a crowd-pleasing, economy-damaging increase in tax on the few before an election; a hidden tax bombshell targeted at the many after an election; a huge increase in public spending before the election; a real-terms cut in departmental spending, on a scale never before seen, after the election. It is not about the economy; it is about the election.
In my winding-up speech on the Budget last year, I reminded the House that the Prime Minister, when he was Chancellor, used to like to amuse audiences with the thought that there were just two types of Chancellor: those who failed and those who got out early enough. He clearly thought, as he left No. 11 in the summer of 2007, that he was safely in the latter category, but, as his legacy crumbles around him, the British public can now see that he is not only firmly in the former category, but in a sub-class of spectacular and cataclysmic failure all of his own.
This Government inherited the best economic legacy of any Government since the war. [ Interruption. ] Oh yes they did. Every single economic indicator was set to positive in 1997, yet they will leave to their successors the worst economic situation since the great depression—worse, even, than the carnage of 1979. The Prime Minister, the man who single-handedly managed the British economy for a decade and, as I remember, was happy enough to take the credit for it when it was going well, is responsible for turning that golden legacy into this disaster. It was he, aided and abetted by the Secretary of State for Children, Schools and Families, who was responsible for the failed system of regulation that prevented the Bank of England calling time on debt, and who let our banks and our households borrow too much; it was he who failed to prepare Britain for the recession, so that we entered it with the highest public sector deficit of any major industrial nation; and it was he who failed spectacularly to deliver the solutions that the nation needs to address the challenges that we now face.
This is probably the penultimate Budget of this bankrupt Government. They are an economically bankrupt Government, borrowing more than £1 of every £4 that they spend, and presiding over the worst recession and biggest deficit that this country has ever seen, with, according to the CBI, no credible or rigorous plan to restore the public finances. They are a morally bankrupt Government, with a vicious culture of spin, manipulation and sleaze—dodging the truth, postponing the pain and putting off until after the election what for Britain's sake needs doing today. They are inward-looking and focused on saving their own skin at all costs. They said that this Budget was about jobs. Correction: it is about a job. When the Prime Minister talks about his priorities, we know exactly what they are.
They are an intellectually bankrupt Government, too, because the Prime Minister's only policy, his only solution to every problem, has been to throw more money at it. Any fool can spend money and, to be fair, cut budgets, but, now that the cupboard is bare and the country must start living within its means, the challenge for policy makers is to do things smarter rather than simply to spend more public money. That leaves the Prime Minister devoid of answers to the challenges of the future.
This Budget was a final opportunity for the Government to level with the British people about the scale of the problems that the country faces, and to set out a clear, credible and rigorous plan for addressing them, but they fudged it. They spun it. Within minutes, the assumptions on which the Budget is constructed were discredited; within days, it had completely unravelled to expose how they have ducked the real challenges. It is now clear that they will carry on playing their political game until finally their time runs out and this unelected, failed Prime Minister can be put out of his misery by the British electorate. Then Britain can start the long process of rebuilding its economy and its public finances and of putting this country back on the path to sustainable prosperity.
We have had four days of debate on Budget measures. We heard from my right hon. Friends the Members for Coatbridge, Chryston and Bellshill (Mr. Clarke) and for Neath (Mr. Hain) about the importance of not returning to the policies of the 1980s, which had such devastating consequences for Britain. We heard from the hon. Members for Gainsborough (Mr. Leigh) and for Belfast, North (Mr. Dodds), who talked about the importance of efficiency savings; many of the kinds of things they mentioned are under way as a result of the operational efficiency review. We heard from my hon. Friend Dr. Blackman-Woods, and from the hon. Members for Hornsey and Wood Green (Lynne Featherstone) and for Foyle (Mark Durkan), about the value of support for those who are losing their jobs. We heard, too, from the hon. Members for Wimbledon (Stephen Hammond), for Bournemouth, East (Mr. Ellwood) and for South Holland and The Deepings (Mr. Hayes), who argued for the importance of public spending cuts.
We hold this debate at a difficult time for the British economy and the world economy. For the first time since the second world war, the economy of the entire world is shrinking. Many of the biggest banks in the world have had to be rescued by their national Governments. World trade has dropped. By the end of last year, the German economy had shrunk by 3.1 per cent., the Japanese economy by 4.6 per cent., and the UK economy by 2.3 per cent. The world stock market is down £30 trillion from its peak in 2007. So, as we agreed at the G20 summit, it is vital that every Government act to support their economy through a difficult time. That is why this Budget sets out further measures to help those who lose their jobs, to help those fearful of losing their homes, to help businesses struggling to invest, and to help savers affected by interest rate reductions—all measures to support the economy at a difficult time. My right hon. Friend the Secretary of State for Work and Pensions set out proposals for £5 billion of extra investment to help the unemployed: extra help and advice; extra training places; golden hellos for employers who take someone on; and now a jobs guarantee backed by 250,000 new jobs. I think that those are the most important measures in the Budget, because we should never go back to the travesty of long-term youth unemployment that we saw in the 1980s.
Before today's debate I had assumed from the statements of Conservative Front Benchers that they opposed the extra help for the unemployed, but Mrs. May said that she supported it. As we made clear, this is £5 billion of extra spending over this year and next, paid for primarily by additional short-term borrowing; it is part of the fiscal stimulus. Again, I give her an opportunity to tell the House whether she supports the extra investment for the unemployed and has done a U-turn on the fiscal stimulus, or opposes the additional £5 billion of investment over the next two years to support the unemployed. I give Conservative Front Benchers the opportunity to intervene—Back Benchers may also want to do so—to tell us whether they support the £5 billion of additional investment to help the unemployed. The right hon. Lady said that she did, yet the shadow Chancellor has said that he does not. Do they support extra investment to support the unemployed, or not? Do they support the fiscal stimulus, or not? [ Interruption. ] They are saying that it is not £5 billion. We have set out £5 billion of additional spending over this year and next as part of the pre-Budget report, and yet Conservative Members refuse to support it.
Let us turn to business, where the same question applies. The shadow— [ Interruption. ]
Order. The Chief Secretary should be allowed to address the House properly. [ Interruption. ] Order. Far too many right hon. and hon. Members are interfering.
I have offered Opposition Members the opportunity to get to their feet and tell me what their policy is, but they repeatedly refuse.
I shall set out the issue for business. As part of the Budget, we have set out additional capital allowances for business. Mr. Clarke, the shadow shadow Chancellor, said in yesterday's debate that he agreed with those measures, but they, too, are part of the fiscal stimulus, funded by more than £1 billion of extra borrowing this year. We will get extra revenue in future years as a result.
Do the Opposition support those tax allowances and the extra funding for business, or would they prefer the shadow Chancellor's approach? He has argued that in fact we should cut such tax allowances and make it harder for businesses to invest in the future. No Opposition Member will tell us what they think about policies to help the unemployed and businesses. Those are the measures in our Budget that we are debating today, and the Opposition have refused to support them. They refuse to support the economy through a downturn and a recession, and they refuse to back the additional support that the economy needs.
The Budget also set out extra help for families, savers and pensioners, and of course we have the sustained cut in VAT. Dr. Cable has opposed that, yet independent economists are now saying that it is working to support the economy and retail sales. The total fiscal stimulus is likely to reduce the drop in national income by 0.75 per cent, yet Opposition Members have opposed that action to reduce the severity of the recession.
Alongside the action on interest rates and the action to safeguard people's savings in the banking system and get banks lending again, those measures are supporting more than 500,000 jobs, but again, the Conservatives are opposing that. When we debated the last Budget 12 months ago, their soundbite of the month was that they wanted a Government who got off people's backs. It turns out that they wanted a Government who turn their back, just as their party did in the '80s and '90s.
The right hon. and learned Member for Rushcliffe argued yesterday that we could not afford to support the economy in this way. The truth is that we cannot afford not to. If we do not take action now, this recession will run longer and deeper, push debt up higher and cost us all more in the long run. The Nobel prize-winning economist Paul Krugman has said:
"The bottom line, then, is that people who think that fiscal expansion today is bad for future generations have got it exactly wrong. The best course of action, both for today's workers and for their children, is to do whatever it takes to get this economy on the road to recovery."
"Some countries entered the crisis with greater fiscal space to expand, including more favorable levels of deficits, public debt contingent liabilities and interest rates (Canada, China, France, Germany, the UK and the US)".
But yes, public finances are being affected here, as they are across the world. Tax revenues from the City have been particularly hit, but we have automatic strong support for families during an economic downturn built into our tax credit and welfare system.
The IMF forecast, on which Opposition Members are so keen, is still that UK public sector debt, when it is at its highest level in a few years, will be below that of Germany and the US, significantly below that of Japan and Italy and only slightly higher than that of France. Every one of those countries is backing increased Government action to support their economies right now, because they know, as we know, that we cannot cut our way out of recession. We have to invest and grow our way through a downturn such as this.
There is a clear choice. The Conservatives are offering a very different approach to recession. Not only are they opposing all the extra support to help our economy recover, they want to go further and make cuts in the budgets with which public services are operating right now. Mr. Cameron has said:
"We have said that the government should have come off its spending plans in 2009 and 2010, that they've got to make a start in reducing this deficit."
It is time that the Conservatives told us what their plans for this year and next would really mean. They previously told us that they wanted £5 billion of cuts in the budgets that people are already spending this year. On Wednesday, Mr. Hammond said that they would deliver £6 billion more in 2010. On Sunday, his party leader said:
"They've just announced a spending increase... of £20 billion for next year."
He later said,
"and now we're saying they should abandon their irresponsible plan to increase spending in 2010."
So which is it—£5 billion, £6 billion, £20 billion? The shadow Chief Secretary should watch out; his figures look positively profligate compared with those of his boss.
However, Conservative Members have never said where any of the savings would come from. They say the NHS computer, yet they have admitted that there are no savings to be found. They say ContactPoint, yet that recommendation of the Laming review costs £40 million to run and saves more than £80 million across services. They say tax credits for households on over £50,000, but that includes couples, both on the average wage, who form 0.2 per cent. of the tax credit bill—less than £40 million. That is not £5 billion of cuts, but tinkering. Again, Conservative Members play hide and seek and do not tell people where their axe would fall.
The Conservatives were a bit more open in February when they described specific restrictions on departmental budgets. Housing would lose £810 million in the middle of a recession, and education and training would lose £910 million this year—equivalent to cutting 220,000 apprenticeships now. That is economic madness. It is economically dangerous, not just today, but for the future. Such cuts would not only delay recovery, but push up the bills of recession and leave the Conservatives making even more cuts in future.
There will be tough choices for the future. The Budget sets out plans to halve borrowing over four years, because we need it to decrease, and we need those on the highest incomes to pay more. That is a fair way in which to help reduce borrowing. Public spending budgets will be tighter, which means setting priorities, and we will do that as part of the spending review. However, we have been clear: we will continue to support front-line services and we believe that it is right to reduce borrowing step by step, steadily as the economy grows, precisely so that we can continue to safeguard public services for the future. It is not the shock and awe approach of the Conservative party, which appears to want immediate cuts in borrowing and public services.
In the four-day debate, some Conservative Back Benchers have been literally salivating at the prospect of spending cuts. So much for modern, compassionate Conservatism and backing investment in public services. The right hon. Member for Witney has let the dogs off the leash and they are slavering for the flesh of the NHS. There are serious choices to make and the Conservatives are making different choices. We should listen to the glee with which the right hon. Gentleman calls for austerity. For whom does he want austerity? He wants austerity for public services and couples on the average wage who get tax credits, but not for the millionaires, whose tax increases he wants reviewed. He wants no austerity for millionaires' estates, to which he would give more money. Three thousand of the richest estates in the country would get an average of £200,000 each. At the weekend, the right hon. Gentleman said, "that will be done."
Conservatives say that the economic circumstances are so severe that they must ditch their plans to support our investment in public services. Yet the economic circumstances are clearly not sufficiently severe for them to drop their commitment to tax breaks for millionaires. That is shocking—a shocking set of priorities from the Conservative party, which would rather defend tax breaks for millionaires' estates than public services. They would rather cut investment in apprenticeships and housing in the middle of a recession than support action to help the unemployed and people who need our help now, so that we can get through the recession faster, come through it stronger and build for recovery.
We have set out our Budget for the future and plans not only to help the British economy through the world recession, but to build for the long term.
I commend the Budget to the House.
Question put and agreed to.
(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.