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5.29 pm
Mr. Stuart Bell (Middlesbrough): I am grateful for the opportunity to follow the right hon. Member for Yeovil (Mr. Ashdown), the leader of the Liberal Democrats. It is rather sad that he should take the view that, overall, he cannot accept the Budget and will not vote for it, although he was careful to say that there were certain elements in it for which he would vote. He said that the pension funds would pass on the cost of the windfall tax, to the tune of £79 or £80 per individual. He should note the statement by my right hon. Friend the Chancellor that the pension funds are in surplus and that there have been pension holidays. Indeed, he should congratulate my right hon. Friend on his statement that charities will have a different role.
Mr. Bell: I am delighted to note that the right hon. Gentleman has taken that point on board.
The right hon. Gentleman appears to resent the fact that the Government are committing themselves to fulfilling manifesto pledges. We made those pledges when we were
fighting the election and we are now carrying out those pledges. The Budget will equip our country for the future. It delivers on our election promises and our priorities of education and health. I should have thought that the right hon. Gentleman would be pleased--possibly delighted--that we are allocating additional spending of £2.3 billion on schools and £1.2 billion on health, while ensuring that the Government reduce their borrowings.
The Budget shows that we are on message. We were on message throughout the election campaign and we are on message in fulfilling the commitments that we made during the campaign. We are translating those commitments into action. My right hon. Friend the Chancellor should be given credit for staying on message and for putting forward a positive plan that will reduce our deficits over a five-year period.
It must be heartening for the markets in seeking stability--in the emphasis that my right hon. Friend has placed on the global marketplace and the global village in which we now all live, and the emphasis on being competitive within that global marketplace--to know that there is a deficit reduction plan that will cut our borrowing to £5.4 billion next year, so that the Government borrow only to invest and not to fund consumption. I should have thought that the whole House could agree on those principles, not just the Leader of the Opposition or the leader of the Liberal Democrats.
It is difficult--we are all in this boat--to make a Budget speech when we have not seen the Budget. Therefore, I commiserate with both the Leader of the Opposition and the leader of the Liberal Democrats. However, we must look at not only the immediate impact of the Budget as we see it in the House, but the impact on the Bank of England and the financial markets.
One of my predecessors many years ago, Bob Woof--who is still with us, but no longer the Member of Parliament for Blaydon--used to make his Budget speech based on the previous year's Budget. That was helpful on the first day of the Budget. However, he might have had some difficulty with my right hon. Friend's Budget speech today as it was so refreshing and so very different from the Budget speeches of previous years.
Another famous Budget saying came from Iain Macleod. He said that the Budget depended not on the reaction on Budget day, but on how it looked in six months' time. In this soundbite age, however, what matters is how the Bank of England and the financial markets react now. The financial markets have been betting that, following the Budget, interest rates would go up and, consequently, that the value of the pound would go up. I believe that, with his swingeing taxes on cigarettes and petrol, my right hon. Friend has sufficiently attacked consumer spending and taken enough money out of the economy to make the Bank of England carefully consider whether it should raise interest rates.
The financial markets might wish to take into account the fact that if interest rates do not go up, the value of the pound should not go up either. One of the difficulties at this time is that the pound has risen by about 27 per cent. against the deutschmark, by 26 per cent. against the French franc, and by 30 per cent. against the peseta. My right hon. Friend said that it had appreciated by18 per cent. overall. That has had, and will continue to
have, some impact on our exporters, on our industry and, therefore, on those who are employed by industry. That is likely to be a difficulty which we shall face if the value of the pound continues to rise.
My right hon. Friend said, rightly, that we are within the convergence criteria of the Maastricht treaty. In fact, we shall be one of the few nation states that can meet that criteria. Therefore, the question of a single currency follows on from the Budget today. Do we enter the single currency in the first wave? If we do, when do we lift the opt-out clause? Will it be lifted in the autumn? Certainly, it will have to be lifted by the end of the year. If we do not join the single currency in the first wave, what will the exchange rate be against the new euro? Will we have a floating exchange rate? How will that impact on our exporters, our manufacturers and our industry? Those are the major questions being asked by our exporters. However, a currency that appreciates, as ours has, does bring certain benefits to the economy--for example, it plays a role in reducing inflation.
I notice that the shadow Chancellor, in a pre-Budget statement, said that interest rates rather than taxes should rise. It is an odd view to take of the economy. This Budget should keep interest rates down. There should not be a substantial rise in interest rates when the Bank of England next meets. Similarly, the Budget should not result in a higher value being placed on the pound.
As my right hon. Friend the Chancellor said, this is a people's Budget. He has placed emphasis on education, health and getting people into work. He has shifted the emphasis from that in previous Budgets. This is the 14th Budget statement to which I have listened and it is certainly the most refreshing. I like this Budget and I am sure that the people will also like it.
Sir Michael Spicer (West Worcestershire):
In straight economic terms, there is no point in the Budget. By common agreement--the Chancellor made that point several times--the British economy is in extraordinarily good shape. We have a high rate of growth, both historically and compared with other countries--3.5 per cent. and projected to go forward at that rate--and a very low inflation rate, again historically and compared with other countries. Presumably, therefore, there is only one point to the Budget--to stamp socialism back on to our economy and into our society--[Interruption.]
I think that I heard the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) say, "If only that were true" or words to that effect. I assure the
hon. Lady that, despite new Labour rhetoric, this is a socialist Budget: it could not have been introduced by a Conservative Government for at least two reasons. First, it is a high tax Budget. I counted six--other hon. Members may have counted more--new tax rises, which is almost a third of the way towards the 22 rises that we were meant to have introduced during our last period of office. The Labour party is on track to catch up and no doubt overtake us on the rate of tax increases.
Secondly and more particularly, it is a profligate Budget in terms of public spending. As far as I can tell, it spends the entirety of the reserves. We have a £4.5 billion reserve commitment. Far from the Budget filling any black holes or being in the tight grip of an iron Chancellor, it is the reverse. It is a classic, political somersault trick: the rhetoric has been about tight money and improving the Budget deficit, but the Government have spent the entirety of the reserves and have made specific commitments.
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