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Mr. Skinner: The Chancellor has been talking about the feel-good factor and claiming credit for things that are not the responsibility of the Government. Interestingly,he has said nothing at all about tax revenues.
It has been reported that, in the run-up to the end of this financial year, there is a likely shortfall of about£9 billion compared with the Chancellor's expectations.
That massive shortfall is surely due in part to the fact that some of the people who are supposedly in employment are actually in part-time work, and hence not paying the sort of tax that they would pay if they were in full-time employment.
Mr. Clarke:
The hon. Gentleman is right to say that it appears likely that there will be a shortfall compared with my forecasts in the previous Budget on tax revenues this year. I have never heard anyone putting forward the explanation for it that he has. Differing explanations exist, but that shortfall is one reason why my plans will lead to a higher public sector borrowing requirement than I forecast in November 1994. Good government, however, is to respond in policy terms to that. That is what I did in the last Budget, which showed the public borrowing requirement on a downward path.
Mrs. Anne Campbell (Cambridge):
The Chancellor paints a rosy picture of the state of the economy, but will not a typical family still be paying more tax after next year's Budget tax cuts than in 1979? Is that not the real state of the economy?
Mr. Clarke:
I paint a rosy picture--which I have not always done as Chancellor--because I give solid reasons for expecting such a picture in 1996. That is no thanks to the hon. Lady and her colleagues, who voted against most of the things that underlie it. The tax take in 1979 was artificially brought down by the Labour Government, who incurred vast sums of public borrowing.
It is true that, from 1979 to 1981, in the early years of the Conservative Government, we raised taxation as we controlled public spending to bring public borrowing back under control. It was unsustainable in 1979. When they left office, the Labour Government must have known that all that borrowing was merely tax deferred, so, under Baroness Thatcher, we raised taxation and cut public spending. The tax level is now below its level in the early 1980s. It is on the downward course again, and our party believes in a downward force on taxation.
Mr. Bruce Grocott (The Wrekin):
Will the right hon. and learned Gentleman give way?
I have given the reasons for my forecast growth of3 per cent. The key thing is that everyone, I think--every financial commentator certainly--expects that 3 per cent. will be healthy, non-inflationary growth and good for our economy's medium and long-term future. That growth in 1996 will be the product of good government and the firm foundation for our ambition to make Britain the enterprise centre of Europe.
The nature of the recovery is also interesting. In 1996, the ordinary citizen will at last begin to feel the real benefits of healthy economic recovery on his or her family finances. To produce today's good prospects, I have had to take some tough and unpopular decisions in the past three years. Sorting out public finances after a recession and keeping down inflation after a devaluation is good for business, but it can be hard in the short run on the taxpayer and the job seeker. However, in 1996, middle
England will begin to realise that our promise of greater prosperity and of more jobs without a return to boom and bust is beginning to be delivered.
I believe that consumer confidence will increase in 1996, for justifiable reasons.
Mr. Grocott:
Will the right hon. and learned Gentleman give way?
Mr. Clarke:
Let me just finish 1996, and then I will give way.
Added to what I have said, I am cautiously optimistic that the housing market is beginning to show signs of life. My cautious optimism about the housing market is again based on solid evidence. Mortgage rates are at the lowest level for nearly 30 years, and house prices in relation to incomes are at their lowest level for more than a decade. Nationally, house prices are just beginning to edge up a little.
Mr. Robert Hughes (Aberdeen, North):
You said that last year.
Mr. Clarke:
I did not say that last year.
The Halifax house price index has risen for six months in succession. The latest figures from Nationwide, published on Friday, confirmed the tentative trend, with an increase of no less than 1.4 per cent. in the last month alone. Since last June, the number of mortgage loan approvals is up 13 per cent., and there are great bargains for first-time buyers on today's house market, so spring 1996 could be a good time for our housing market as well.
Mr. Grocott:
As the gist of the Chancellor's argument is that middle England should be exceptionally happy with his management of the economy, rather than exchange insults across the Chamber, why not put it to the test? The South-East Staffordshire by-election is awaiting the movement of the writ by the Government. For nearly three months, it has not had a Member of Parliament. Let us end the words, put the argument to the voters, and find out what the people of middle England think about the Government's handling of the economy.
Mr. Clarke:
From the interventions so far, it seems that some Labour Members need to be better informed before they face the electorate of South-East Staffordshire. I should not like them to mislead that electorate about where we are at the moment. However, I should like them to think of some mitigating reasons for voting against most of our measures that have produced the improvements, or even think of some policies of their own that might show how things could be done better.
Labour Members are singularly bereft in both those aspects. I have not spent my time over the past three years coming to this House and presenting a rosy picture. We have had some tough times, and all the improvements are not yet being felt by the ordinary citizen. That is inevitable, but again the Opposition will not face up to that.
A modern, flexible economy is an uncertain place for working people to earn a living for themselves and their families. No Labour Government could change the nature of the modern industrial world. The combination of modern technology and free trade causes rapid and massive changes to traditional patterns of employment.
A competitive economy must respond rapidly to those changes, but that will inevitably mean that fewer people will have jobs for life. People and businesses will increasingly favour more flexible working patterns, although that can be taken to extremes. The apocalyptic message, put about by some merchants of doom, that there are no safe jobs at all any more is plainly nonsense.
The creation of a buoyant, dynamic enterprise economy creating ever more new jobs is the only credible answer to today's insecurity. No left-wing stakeholder alternative can substitute for that; it is simply a return to old, failed left-wing nostrums. Job security in this country will be increased as this Government continue to deliver sustainable economic growth, better job prospects and rising prosperity. After 29 successive months of falling unemployment, I am glad to say that British workers are beginning to regain the sense of job security that is essential to public well-being.
People are understandably wary, but their confidence will grow as the Government continue to deliver a sound macro-economic environment, low inflation and sound public finances; as we continue to cut red tape, to cut taxes when we can afford to, and to reduce the share of national income that goes on public expenditure; and as we continue to modernise our public services and make sure that they and our welfare system are affordable--in short, as we continue to create the very best conditions for businesses and individuals to prosper by their own efforts.
I will not be satisfied with a one-year-growth wonder. That is not what the Conservative Government have been labouring for over the past few years. I would not expect the British people to be satisfied with that, either. I am determined that the British economy will continue to deliver a world-beating performance into the next decade.
I want to refer to the league tables. Labour does not look to the future; it has no views on the future beyond the next polling day. It has no economic policies that it dares to utter. It denies that it has any tax plans. It is for ever denying the spending promises of its Front-Bench spokesmen and the lobbies to which they pander. It has no inflation target as a guide to monetary policy. Labour actually hides its economic policies in shame. It tries to divert attention from the optimistic present by giving a distorted and depressing picture of the past, by blathering on about our supposed decline in international league tables during the Tory years.
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