Pre-Budget Report

Part of the debate – in the House of Commons at 4:01 pm on 7 January 2010.

Alert me about debates like this

Photo of Richard Spring Richard Spring Vice-Chair, Conservative Party 4:01, 7 January 2010

My hon. Friend is right. We have had a dramatic devaluation of our currency, although I suppose it will ultimately be helpful to the recovery. The markets have made a judgment on our currency based on their view of our economy, and it is not exactly an A-plus judgment.

Other statistics are also revealing. Not only are we a considerably less acceptable risk than other countries, but we are less creditworthy in fact than many firms and private companies. On the same basis as I mentioned a moment ago, it would cost $11,000 per year more to insure our debt than Vodafone's, $15,000 more than McDonalds', $32,000 more than BP's and an astonishing $35,000 more than Gap's. The sad fact of the matter is that the finances of large numbers of companies, in the midst of the biggest recession in living memory, are considered more creditworthy than those of the United Kingdom. That is an incredible judgment.

The Chancellor has kept quiet on the specifics of the pain to come. That is of course simply naked politics. He steadfastly refused to go into the detail of how and where he would cut spending, or how and where he would raise more money, and therefore how, in reality, he would go about dealing with the crisis that the country faces. The IMF says that $36 billion needs to be cut from Department budgets by 2013-14 to meet the borrowing requirement.

The few measures that the Chancellor did announce included an increase in national insurance contributions. That is a tax on jobs and affects everyone who earns as little as £20,000 a year-hardly progressive politics. That is why Richard Lambert, director general of the CBI, wrote in his editorial page in the CBI's magazine:

"The Chancellor managed to annoy almost everybody with his Pre Budget Report. Yet despite imposing higher taxes on business, he failed to show how he would restore the public finances to health."

He continued:

"Put simply, the extra taxes he announced are being used mainly to support current spending for the next couple of years, rather than to reduce borrowing."

That view can only be reinforced, because the Prime Minister has claimed that, if there is better than expected economic news in the next few years, some of the extra money could be used to sustain public spending rather than to reduce the deficit. And of course the Chancellor has disagreed with him. That is part of the problem of a disunited and dysfunctional Government.

As the right hon. Member for Oldham, West and Royton effectively said, the key issue is what effect these policies have had on consumer confidence in the UK. According to the most recent survey by the Nationwide building society, in December consumer confidence suffered its biggest fall in more than a year. The proportion of consumers who thought that the economic situation would be better in six months fell to 34 per cent.-down from 41 per cent. the month before. The proportion of consumers who felt that now was a bad time to make a major purchase rose by 4 per cent. to 38 per cent. last month.

Expectations for employment also worsened in December, with the proportion of people who thought that there would be many or some jobs available in six months falling to 25 per cent. from 27 per cent. Nationwide's chief economist said that although it is still early days, those lower expectations might foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn-we certainly hope that is not the case, but it does not look good. Consumer confidence, which is at the heart of our system, is one of the fundamental elements that the Government should be working to improve. It is what keeps money flowing around an economy and people in work. In that, I am afraid, they are clearly failing.

When we look at these statistics, we have to ask ourselves whether any of this is in the least surprising given that since last year the Government have been borrowing at the fastest rate ever and the Bank of England has printed enough money to purchase the economic output of Denmark. People are crying out for somebody to show the way out of this mess. Regaining the confidence of the British people should be the job of the Government now. That is what will decisively break the country out of this vicious cycle of debt and decline. That is what will keep interest rates in this country as low as possible for as long as possible. In turn, that will help to lead to a sustainable economic recovery. We are now borrowing net nearly £500,000 per minute. It is simply not sustainable.

I accept some of the points made by Labour Members-of course this debate might be arid, and I accept that we have to relate what we say to the reality of people's lives. Of course it is a matter of some satisfaction that, for a variety of reasons-not least the growth of the public sector, but also flexibility in the labour markets-unemployment has not reached the levels that some had forecast. Ultimately, however, we simply cannot deal with problems of employment, confidence or interests rates if we do not grasp that particular nettle-borrowing. However, that simply is not being dealt with.

The whole picture of chaos and contradiction in this Government was truly exemplified by the Prime Minister on Sunday talking about his pursuit of aspiration-one could not make it up-while attacking the Conservatives for wanting to make cuts. Absurdly, the next day, the Chancellor, and indeed the Chief Secretary, launched a document attacking the Conservatives for excessive spending promises. One need not have graduated from a kindergarten class to know that that is completely contradictory and shows that the Government have no clue how to respond.

When the Government leave office this year, we will have seen a decline in our international competitiveness and relative educational achievement, the longest ever recession and our international reputation in tatters. How dismissive our European partners are of a country whose tripartite regulatory system so failed us that we now have so little credibility in influencing the key area of European financial services regulation! We have been led not by Presbyterian frugality, but by the most profligate Chancellor in history. When this tired, broken-down, dysfunctional and disunited Government leave office, this PBR will simply be a milestone on the path to the electoral oblivion that they deserve.