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Mr. Gordon Brown: The shadow Chancellor says that our promises to the unemployed are hollow. What is more hollow than the promise that he made in one of his previous Budgets that he would create 130,000 jobs for the long-term unemployed by means of a new measure, given that he then created only 5,000? What is worse than making promises, as he did, and failing to keep them? Should he not apologise to the long-term unemployed?
Mr. Clarke: The Chancellor's criticism of the NICs holiday to which he has referred was that I delayed it, and did not introduce it quickly enough. The NICs holiday was part of a package--the family credit package--which has been reduced since that time. Long-term unemployment, together with the generality of unemployment, has fallen. We are achieving that in this country; but, in the real world, these measures can do no more than back up the growth of real jobs in the real economy for as long as stable economic conditions are maintained.
The key in regard to jobs is to keep the present rate of growth, 2.5 per cent. or more, going. Raising billions of pounds in windfall tax will cost us some of that growth, just as higher interest rates will. As a result of my policies, growth in the economy has already reduced unemployment by 400,000 since the date when the Chancellor first announced his 250,000 jobs wheeze.
The key point is that unemployment will not fall so fast. That is the measure that we shall apply. It fell by 60,000 according to the last figures that we had, referring to the last month of the previous Government, only a few days ago. Unemployment will not fall so fast if the Chancellor damages growth by raising the tax burden in his June Budget. I should like to know just how far he intends to go in raising that tax burden. As I warned before the election, people will discover more than a windfall tax in the Budget.
Mr. Philip Hope (Corby):
How can the right hon. and learned Gentleman claim success for his policies to reduce
Mr. Clarke:
That includes disabled households, student households and all kinds of people. The key point is that, whichever measure of employment we use--the labour force survey, which the Government will stick to, or the claimant count, which I bet a pound to a penny that the Government will stick to--unemployment has fallen by more than 1 million since the recovery started, and, as I said, it is falling at an extremely rapid rate. It will not fall so quickly if the tax burden is raised on the scale that the leaks about the forthcoming Budget have revealed.
Sir Iain Vallance is one Labour voter who has already repented. I do not know why he took no notice when the Chancellor repeatedly refused to answer a direct question: "Will the tax apply to British Telecom?" With great respect to my friend Iain Vallance, I think that he was a little slow on the uptake in not realising that when he voted Labour, he would be voting for a massive tax hit on his company. It is, however, the other promises that we now hear about--changing the tax treatment of dividends for pension funds, changing the tax treatment of pension contributions by individuals and abolishing the tax relief on mortgage interest. All those have been floated.
Mr. Tom King (Bridgwater):
Does not the evidence to support my right hon. and learned Friend's claim lie in the latest unemployment figures, which have just come out and which cover his final term of office? May I say on behalf of my constituents how much they appreciate the fact that in the past year unemployment has fallen by 20 per cent. in my constituency? That is reflected throughout the west of England, and, indeed, in the national figures. Is that not the real, genuine way in which to achieve a lasting improvement in employment?
Mr. Clarke:
My right hon. Friend is quite right: that was repeated throughout the country. The current Government will have to live with the test of whether that progress in reducing unemployment can be maintained from now on. I do not believe that it can.
In my anxiety to give way to my right hon. Friend the Member for Bridgwater (Mr. King), I glossed over some of the leaks that we have seen in the newspapers about the further tax increases and tax changes that are forthcoming. I shall wait to see how many of those leaks turn out to be justified when the Chancellor comes to the House with his Budget in June, but he is obviously contemplating such changes. If he delivers measures such as those that have appeared in the press, we shall discover how many voters in middle England will soon feel betrayed by the smooth reassurances on tax that the Labour party gave them only a few weeks ago.
The tax raising that the Government are contemplating is so unnecessary. That is their next mistake. The Chancellor may find some friends out there at the Confederation of British Industry--he has taken over my speaking engagement there this evening--but if I were at the CBI, I would say that it is currently a populist fad among some commentators to claim that fiscal tightening is now needed. That is the kind of popular pressure that the Chancellor should resist, because it is usually wrong.
He should tell the CBI this evening that its members are mistaken if they believe that the Governor will not raise interest rates as fast so long as he tightens fiscal policy by raising taxation, because that is not the case. The public finances are on course for a balanced budget in three years at the most. Along with all the other good figures that we have seen recently, the public sector borrowing requirement figures are much better than I expected, and much better than the right hon. Gentleman deserves. The PSBR is falling faster than I forecast only last November.
Why on earth does the Chancellor wish to speed up fiscal consolidation when we are three years away from a balanced budget? I am not alone in saying that. Hon. Members should read an extremely good column by Anatole Kaletsky, which appeared this morning. Anatole Kaletsky is not a Conservative; hon. Members are wrong if they think that he always supported me. Sam Brittan is a Tory: I do not think that he has always voted Tory, but he is a Tory. I could quote him, but let me quote Mr. Kaletsky, who writes that
At this stage, before the Budget, I can only guess at why the Chancellor is charging into all these tax-raising measures within a few weeks, at the expense of the corporate sector, pension funds and middle England, which is what he is doing if half the rumours are to be believed. The reason, presumably, is that he cannot deliver our public spending plans, and there again I have some sympathy with him. I gaze at the Benches behind him, and I know that he cannot deliver our public spending plans. He should never have promised to deliver our public spending plans.
This morning there was an amazing revelation, about which there is no point in saying, "We told you so." However, we warned about it before the election. The Chancellor is looking at the books and the National Audit Office is being brought in to look at the straightforward Treasury-produced figures for the national finances. The Chancellor hopes that the National Audit Office will say, "It is far worse than we expected; all bets are off." The Chancellor will say, "I am sorry I said that I would not have to increase taxes." I shall look with interest to see how such matters are presented in the Budget. The Chancellor is struggling to produce a tax-raising, promise-breaking Budget, and it will damage the economy.
I am taking too long, so I shall try to be brief--[Interruption.] Hon. Members will hear more hereafter. Just wait. I am grateful to the new Labour Members for listening so attentively to my words, some of which will be burned upon them in two years as a result of the Government charging ahead with policies such as the independence of the Governor of the Bank of England, a tax-raising Budget and sticking to Tory spending plans, which I am sure does not fill every Labour Back Bencher with delight. The Chancellor is not even doing that correctly.
It is no good saying that there will not be a public spending round in the autumn. The Chancellor has repeated that since the election. I would have had a public
spending round in the autumn. The key is that the right hon. Gentleman says that he will stick to the published total figure. I agree with that and I shall hold him to it. The acid test is whether he can deliver the total public spending figures. It is flattering that the Chancellor says that the figures that we set down for three years are right. If that means saying to every Department, "The previous Government got your figures right for each of the three years," he is heading for total disaster. That is not how it is done.
I delivered total public spending plans for four years. The art of public spending rounds is to deliver the total while responding to events and pressures that cannot be predicted for three years ahead by playing a zero sum game. Our Cabinet used to agree that we were sticking to the total and we delivered it. We had a lively public spending round, with cuts in allocation for some Departments to respond to pressures elsewhere. When I produced the Red Book, I did not say that it contained the precise figures for the next three years for every Department. Every year, I had to change.
I shall give an example. If it becomes obvious in the light of demand that the national health service needs more money next year than we allocated for it in last year's Red Book, I hope that the Chancellor will not expect me to support him and the Secretary of State for Health when they say, "These are the previous Government's figures. That is the full growth and we cannot adjust the totals." The Chancellor will need a public spending round if that occurs, because no one has ever succeeded in forecasting demand in the NHS three years ahead. My right hon. Friend the previous Secretary of State for Health would not have allowed me to make him stick to the figures and I would have had to go to people who are not currently on the Opposition Benches to find the money.
I hope that newly elected Members will forget what was said about health spending during the election. I regret that I missed my old friend the new Secretary of State for Health at the Dispatch Box. I hope that he did not repeat all the rubbish about £100 million to be taken from management to solve all the problems. [Hon. Members: "He did."] I do not know where he thinks he will get the money, but if he does, it represents a quarter of 1 per cent. of total health spending. No doubt my hon. Friends told him that at Question Time. Neither he nor anyone else believes that that amount will solve the problems. If there are health pressures, there will have to be a public spending round, and I do not think that the Government will respond to them.
"it is simply untrue that the Tories have left a mess in the public finances",
and goes on to give his reasons. It is absurd to go back to the argument that tax-raising fiscal measures are some kind of substitute for monetary tightening when a Government are hitting an inflation target.
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