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I listened to the Budget yesterday in stunned silence. The figures were enormous. When I left here I went on a sort of comfort-eating crusade. Thank gosh I do not smoke or drink or I would have been a mess by midnight. No slice of carrot cake in the precincts of the House of Commons was safe, and when I had worked my way through the various tea rooms, I got home and raided the fridge. I was just trying to come to terms with the enormous figures that had been put before me, and I thought that if I ate, somehow things would become clearer. I put my svelte figure under huge stress last night, but this morning I was back to the muesli.
I understand that over the next five years we shall have increased the national debt by £703 billion. It will probably be more than that, but right now the Government are telling us £703 billion. Our total debt will be well over £1 trillion. There are 12 zeros in a trillion. I have only 10 fingers and thumbs. There are more zeros in a trillion than I have digits. This is an enormous sum of money. The real concern that I have is that I will not be able to pay it back. Personally, Charles Walker will not be able to pay this money back. My peers will not be able to pay it back. Members of Parliament will not be able to pay it back. People of working age will not be able to pay it back. Our children will not be able to pay it all back. Our small children will have this debt around their necks. Even our grandchildren will struggle with the size of this debt. It is truly an enormous sum of money.
Indeed, we may well find ourselveswe do find ourselvesborrowing to fund our borrowings. We will be borrowing money to pay money back on the gilts that become due in any certain year. Every year, a little more than 30 per cent. of income tax receipts will go to fund our borrowings£43 billion a year. When our constituents pay their income tax, £1 in every £3 will go towards funding the debt mountain. This is a huge sum of money; a frightening sum of money.
I do not want to be churlish because I know that there are many good people in the Government who work hard on behalf of this country. They do not always get it right and they have not got it right this time, but I do not question their integrity for a moment. We were told by the then Chancellor, who is now the Prime Minister, that the Government would borrow only to invest, that he would spend only to invest, but in reality Governments only borrow and spend, however you dress it up. They can borrow prudently and spend prudently, or they can borrow foolishly and spend foolishly. Now, the Government are not borrowing prudently. They are borrowing huge sums of money to bail themselves out of the enormous financial mess that they have got the country into.
I personally blame the previous Prime Minister, Tony Blair. He had this enormous mandate when he came to power in 1997 to reform this country and make real changes to our public services. He allowed the brooding presence in No. 11 to limit his ambitions and aspirations for this country. If only, perhaps in 2000, the Prime Minister of the day had walked over to No. 11 and said,
Do you know what? You are beginning to really annoy me. You are a very, very negative influence on this country. You are bad for my karma, and I am going to make you Foreign Secretary. Then I am going to make you Home Secretary to finish you off very quickly. But he never had the courage to front up Gordon Brown, the now Prime Minister, and now we find not just ourselves but generations to come burdened with his foolishness.
One in every £4 that the Government will spend this year and next year and the year after will be borrowed. No family or home could operate on that basis for any length of time, and I really fear desperately for the future of this country if we have yet another year of this Labour Government. They have no credibility or authority left. That is not necessarily their fault, and it is not necessarily a bad thing. All Governments come to the end of their natural life. We have a democracy in this country, and the democratic wheel turns. After 12 years, the public have had enough of new Labour. There is nothing that the Government can do between now and June next year that would enable them to win a general election, so I say to them: Have the courage to go to the nation now. Go to the nation in June. Lets get this over and done with. You will be beaten in June, but the defeat will be far less severe than if you wait until next year. So, do yourselves and your colleagues a favour: go to the nation now. I did not want this to be a partisan speech, but perhaps it has been slightly so. I do not want to attack anyone in the Government personally, beyond the Prime Minister.
I shall conclude by expressing my concerns about the Chancellors forecasts. Everyone thinks that they are wildly optimistic, that they are not grounded in reality, and that the Chancellor painted slightly too rosy a picture of the public finances. I am concerned that he perhaps failed to level with the country yesterday, and that he was perhaps notI shall not say honest, because I do not want to force you to stand up and ask me to apologise, Mr. Deputy Speaker. The Chancellor is a very decent man, and he really did not want to tell the country quite how bad things were going to be. Thank God that we have the International Monetary Fund, however. A couple of hours after the Budget, it told us how bad things were going to be. It gave us the real picture and told us that there were hard times ahead. I agree with my hon. Friend the Member for Tiverton and Honiton (Angela Browning) who, in her thoughtful speech, said that the British people were very resourceful and brave, and that they were able to face down a challenge. They are up to the challenge, and it is time that all politicians were honest with them and with their constituents.
The money is running out. I wish that it were not. I would like to spend money as though there were no tomorrow, but those days are behind us. We are in for a very difficult number of years, but I would far rather that the years ahead were difficult for me and my generation than for my children and grandchildren. We must all take collective responsibility for the current financial crisis. I enjoyed house prices booming, and I enjoyed cheap credit to the maximum. We have had the good times, we have had the very best times, and we must now face up to our responsibility to ensure that we leave our children and grandchildren a safe economic
legacy. We must leave them an economy that will allow them to prosper and to have the best chance to enjoy the things that we have enjoyed. That means us making sacrifices nownot next year, not three years down the road, but now.
Mr. David Gauke (South-West Hertfordshire) (Con): We have had a fascinating debate this afternoon, with a number of thoughtful contributions. I should like to highlight one or two of them. My hon. Friend the Member for Tiverton and Honiton (Angela Browning) made some important points about the role of savings in our society and the falling savings ratio. She also made a point that she made last year, and I feel that I must correct her again. She claimed to have been born in 1946, but I think that she is misleading the House. She must have transposed those last two numbers. She made that claim in her very valuable speech last year, and she has done it again today. I do wish that she would stop doing it.
My hon. Friend the Member for Sevenoaks (Mr. Fallon) made a thoughtful speech in which he highlighted three requirements for the Budget. He said that it should help the hardest hit, rebalance the economy and address the public finances. He detailed how this Budget and this Government had failed on all three fronts. In particular, he highlighted the schemes that the Government had announced and re-announced, and noted how little they had achieved.
The hon. Members for Crawley (Laura Moffatt) and for Northampton, North (Ms Keeble) highlighted housing issues and the hon. Member for Northampton, North particularly addressed issues connected with the schemes. The hon. Member for Edinburgh, North and Leith (Mark Lazarowicz) expressed his excitement about the Budgets green proposals, although I think most of them were based on pre-publicity rather than what is actually deliverable. Even the Secretary of State for Energy and Climate Change said relatively little about the green proposals, most of which were, like the electric car proposal and as I said, more about gaining publicity beforehand than any kind of delivery.
The hon. Member for Carmarthen, East and Dinefwr (Adam Price) began his speechan excellent speech, I have to sayby stating that the Government had run out of self-belief. He then made a persuasive case to show that the Government were entirely justified in running out of self-belief.
My hon. Friend the Member for Wellingborough (Mr. Bone) raised a number of important constituency issues. As he has done with some tenacity, he detailed the increasing unemployment levels in Wellingboroughsomething that the Prime Minister, thanks to my hon. Friends many interventions, also follows very closely.
The hon. Member for Angus (Mr. Weir) highlighted some of the Budgets environmental issues, while my hon. Friend the Member for Broxbourne (Mr. Walker) revealed how he sat in stunned silence during the Budget speech. If my hon. Friends stunned silence demonstrates anything, it underlines the magnitude of the difficulties this country faces.
It would be remiss of me if I failed to say a few words about the Secretary of State for Energy and Climate Change. He began by criticising my hon. Friend the
shadow Chancellor for spending most of his speech criticising his opponents, and then proceeded to deliver a speech almost entirely devoted to criticising his opponents. I have to say that his speech appeared to be a rehearsal, or perhaps an audition, for one day being shadow Chancellor. I am not sure whether that is his aspiration.
Mr. Gauke: I, for one, believe that the right hon. Gentlemans ambition should be higher. I think the Labour party could do a lot worseI genuinely mean thisthan make the right hon. Gentleman its leader. In fact, it is doing a lot worse, so perhaps he should consider this course sooner rather than later.
This Budget is, as right hon. and hon. Members have argued in todays debate, essentially about the issue of borrowing and debt and the state of the public finances. We have seen a spectacular deterioration in our public finances. Just a year ago, in the 2008 Budget, it was anticipated that we would need to borrow £38 billion this yeara not insignificant sum in itself. Now, however, we are looking at a figure of about £175 billionthe highest level of borrowing in our peacetime history. As the IMF has made clear, we have the highest deficit in the G20.
The figure for debtsan area where we were relatively better placed than many of our competitorsis also pretty frightening. In the early years of this Government or up until relatively recently, it is true that debt fell as a percentage of gross domestic product from 42 per cent. to 36 per cent. As the Institute for Fiscal Studies, and, indeed, my hon. Friend the Member for Wellingborough pointed out, it has fallen less than in the majority of OECD countries during those years, but it is now rising more quickly.
Let us not forget the sustainable investment rule, which says that debt should be no more than 40 per cent. of GDP. We have learned from the IFS today that such is the state of our public finances that the rule is unlikely to be met until 2032. In fact, we are going to see a doubling of the figure in the sustainable investment rule level up to just below 80 per cent.overtaking in the process the debt levels of France and Germany. Those figures are based on what the Government provided yesterday, yet the real concern persists that what we heard yesterday was an underestimate. Within an hour of the revealing of the Budget figures, the International Monetary Fund predicted that growth would be worse in 2009 than the Governments projection, and that we would still be in recession in 2010.
Conservatives and, I am sure, Members in all parts of the House hope that the Governments figures will be proved right and the IMFs will be proved wrong, but the Governments claim that growth in 2011 will be at 3.5 per cent. is clearly unsustainable. As my right hon. Friend the Leader of the Opposition said yesterday, that is a trampoline recovery. Independent forecasters whose views were published by the Treasury only a month or so ago predict growth at such levels as 2.2 per cent. and 2.6 per cent. in 2011, 2012 and 2013, not 3.5 per cent. It appears that after many years of the Prime Ministers promising that there would be no return to boom and bust, it is the Governments aspiration and hope to return to boom and bust, with another boom in 2011.
The Treasury has reduced its trend assumption further for Budget 2009, incorporating a permanent reduction in output totalling around 5 per cent, phased in between
the third quarter of 2007 and the third quarter of 2010. What that means is that the productive potential of the United Kingdom has taken a permanent hit of 5 per cent., yet the Government still think that growth of 3.5 per cent. will be possible in 2011. As the hon. Member for Carmarthen, East and Dinefwr pointed out, there is no historic precedent for that sort of recovery from a recession.
The significance of that is twofold. It makes the claim for growth in 2011 less credible, and it reveals that much of the £175 billion deficit£140 billion, according to the Institute for Fiscal Studiesis structural. Given the current projections, we are not likely to be able to grow our way out of a recession unless serious measures are taken.
The test of the Budget is whether it represents a credible route out. As we heard from my hon. Friend the Member for Sevenoaks, the Governments record on projecting the public finances is so grim that they consistently overestimate the position, yet even according to these projections we shall have to wait for many years. For the last eight years or so, the Government have tended to say that the Budget will balance in about two years time. In last years pre-Budget report the period was extended to six years, and, in this years Budget, it was extended to eight. Those are hopelessly optimistic assumptions.
Yesterday the Government had an opportunity to explain how to restore the public finances, and they failed to do so. What did we get? We got their proposal to alter their own spending plans in 2011. In 2010, they will still be increasing spending, although they believe that the economy will be growing. As my hon. Friend the Member for Tatton (Mr. Osborne), the shadow Chancellor pointed out, if we use the methodology that the Government have used against us for many years, any reduction of announced spending constitutes a cut. We see this as a cut of £84 billion.
That is not just a pedantic point. At the last election, the Government managed to reach a figure of £35 billion on the basis of an alteration in our announced spending plans. We heard the statements made by Labour Members at the time. The current Chancellor said that it was the equivalent of sacking every teacher, doctor and nurse in the country. Over the past 10 years, the central argument has been that the Government could always afford these big increases in public spending: increases of 4, 5 or 6 per cent. We have argued against that, and in doing so have been portrayed as slashers and burners of public services. We could not afford those increases then, and we cannot afford them now. The question now is how we can deliver quality public services in an age of austerity. The Government, however, continue to search for the old dividing lines, trying to pretend that we are the party that cuts public spending while they are entirely different.
What is the Governments approach to bringing down the deficit? Let us look at tax. They have tried to highlight one issue above all others: the 50p rate. That has the singular achievement of being cynical in at least
four respects. First, it is a breach of a manifesto pledge. The Secretary of State for Energy and Climate Change was very keen for the shadow Chancellor to intervene on him, and I am perfectly prepared to let the Secretary of State intervene on me to say whether he denies or accepts that the Labour partys last manifesto stated that it would not raise the basic or top rates of income tax in the next Parliament and therefore that the policy announced yesterday is the clearest and most blatant breach imaginable of a manifesto pledge.
Secondly, it is cynical because it is a distraction from other taxes. In truth, even before the next general election, most of the taxes imposed will apply across the board, such as the fuel duty increases, and the increases in the cost of alcohol and tobacco. However, the really big tax increase will happen after the next general election. As soon as the election is over, Labour will increase national insurance contributions, affecting everyone earning more than £20,000 a year.
Mr. Betts: The hon. Gentleman was talking about manifesto commitments. Will the Conservative party put in its manifesto that immediately after it wins the next general electionif it doesit will reverse the 50p income tax rate? Also, as he has described a black hole that he believes exists in the public finances, will he come clean and spell out precisely the cuts in public expenditure that he would make if he got into power?
Mr. Gauke: The Labour party has announcedunder, I suspect, the same methodology that it used at the last election£84 billion-worth of cuts. The Conservative party position is that our priority will be to try to tackle the tax increases introduced by the Labour party that will affect the many and not the few. Therefore, there is no commitment here to reverse that particular tax ratebut whether we can reverse it or not, the fact remains that it is a cynical policy.
That point brings me to another reason why this tax rate is so cynical. One can see what happened here. As the Government sat down in No. 11 Downing streetor, more likely, No. 10 Downing streetthe thinking was not, How are we going to bring in some tax increases that are good for the UK economy and will not damage its productivity? Instead, the thinking was more, What can we do to put the Conservative party in a difficult position? That is the way that this Government work.
The fourth reason why the policy is cynical is that it will not raise the amount of revenue that has been claimed. We do not dispute that it will raise some revenue, but as the IFS has stated today, no account has been taken of the fall in indirect consumer spending that will result from this tax increase, so the Government will not raise as much money as they claim.
Let me return to the issue of how this Government operate: they are not thinking about what is best for the country; they are not thinking about addressing the fiscal crisis that we face; the way they operate is all about political positioning and trying to damage their opponents. This is all of a piece; it is consistent with the way that this Prime Minister has operated throughout his career. Even when dealing with his own party colleagues, he blocked public services reform because it suited his own internal party position. As Chancellor of the
Exchequer, he abolished the 10p tax rate to try to wrong-foot the Leader of the Opposition. It is no wonder there is an atmosphere within Downing street that leads people to believe that there are no limits on what can be done to put pressure on their opponents, as we saw over Easter and in the McBride affair.
This is a Budget that fails to address the long-term needs of the country and ducks the big issuesit is a cowardly and dishonest Budget. Tony Blairs speechwriter yesterday described it as a Budget of a Government preparing themselves for opposition. The Government have neither the ability nor the desire to govern responsibly, and it is time that they made way for those who can.
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