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Sir Teddy Taylor: The hon. Gentleman rightly referred to the great difficulties of the Governor of the Bank of England and his board in co-ordinating the effects of interest rates on different parts of the economy, for example house building and industry. I ask him in all sincerity, how do he and his colleagues believe that it will possible to co-ordinate the impact of a single interest rate in Europe? Surely the problems that the hon. Gentleman has mentioned would be infinitely worse if we had a single interest rate in the European Union.
Mr. Taylor: There are two parts to the answer. First, the effects could be addressed through fiscal policy. Secondly--as I am sure the hon. Gentleman, who studies these matters carefully, knows--there are fewer differences between European Union countries than between different regions of the United Kingdom.
Any debate on the economy should consider not only how much tax we raise and the state of the economy, but how public money is spent. The Government put a lot of emphasis on their prudence in planning for stable debt and increased spending on public services, but I watched the tax debate between those on the two Front Benches with some amusement because the simple fact is that the tax rate has risen over the 1990s, under both the Conservative party and Labour. The economy has also grown, not spectacularly--
Mr. Campbell-Savours:
Will the hon. Gentleman give way?
The economy has grown not spectacularly, but steadily. Public spending, however, has been restrained and we see continued deterioration in key areas of public service. Where has the money gone? Essentially, in the past two years, it has gone on building up massive Government surpluses--on their figures, one of £33.5 billion before the next general election--but the true amount is disguised in reserves. For example, there have been increases in planned reserves for social security, even though there has been consistent underspending on benefits, and that has helped secretly to boost the Government's coffers.
The Chancellor has chosen what he calls prudent growth forecasts--I believe that he is right--but if the Treasury papers arguing that the sustainable growth rate is now 2.5 per cent. and not 2.25 per cent. are correct, he has even more in his war chest to spend. He might intend to spend those surpluses before the next general election. If so, he is leaving it so late that there will have been a
bust in public services in the early years of this Parliament to fund a boom at the end. That is no more right for public service spending than for managing the economy.
Mr. Christopher Leslie (Shipley):
Will the hon. Gentleman give way?
The Chancellor may not want a boom for the next general election, and one can understand why. After all, the 2005 general election may--he hopes--be rather more important for him personally and it might be better to offer a boom then, although that is not what his Back Benchers want as the next general election will be tight for some of them.
Mr. Leslie:
Will the hon. Gentleman give way?
Mr. Taylor:
In a moment; I want to proceed on that point.
Perhaps the Chancellor does not believe any of that. Perhaps he simply believes that it is the object of a Chancellor to bring as much money into the Exchequer as possible and to spend as little as possible. It is hard to believe that he thinks that storing up such surpluses would make sense in the long run, let alone be electorally viable, but if he does not, our argument is that steady, sustained growth in public spending would be sensible and that the present plans do not deliver the manifesto commitments on which he was elected. I said that I would give way to the hon. Member for Workington (Mr. Campbell-Savours).
Mr. Campbell-Savours:
The hon. Gentleman has moved on.
Mr. Taylor:
Then I shall give way to the hon. Member for Shipley (Mr. Leslie).
Mr. Leslie:
It seems that I am second choice. Can the hon. Gentleman confirm that the Liberal policy is still to extend the personal tax allowance to about £10,000? If so--and if he wants more public spending, too--will cutting the national debt be the source of his income or does he intend to put up taxes? If so, which taxes?
Mr. Taylor:
The hon. Gentleman will find that our policy has been spelled out in some detail. We have consistently published our proposals, which were to combine the abolition of some of the existing tax allowances with an increase to 50 per cent. in top-rate tax for those earning more than £100,000 a year and the gradual introduction of a carbon tax. That would allow such a process to take place. Incidentally, taxing pollution rather than people would help to tackle some of our environmental problems too. As the Government's energy levy is introduced, my own view is that we shall have to consider the policy position in the light of the current circumstances. We shall again publish our costed proposals for the next general election.
The Chancellor likes to attack Liberal Democrat economic policies and spending proposals, but I remind him that we have set out our costed proposals in detail at each general election, which is clearly more than he has been able to do. In 1987, our costed proposals contrasted with a Labour party manifesto--he was in the team--that
was clearly unbelievable and unaffordable. Labour was unelectable. In 1992, the Labour party learned some lessons from that and presented a costed manifesto. The costings were so high that the party remained unelectable, and it was not elected. The Chancellor was a key part of that team.
By 1997, the Labour party had flipped the other way, and did not cost its manifesto. That is obvious in policy after policy.
Mr. Clive Betts (Lord Commissioner to the Treasury):
We were electable.
Mr. Taylor:
Labour may have been electable but its policies were undeliverable. The Government now face problems with class sizes and waiting lists. They told us that a reduction in class sizes for five to seven-year-olds would be funded by the abolition of the assisted places scheme. The figures tell their own story. It cost many times that amount to get to where we are. Far worse than the financial costs--we are not unsympathetic about the extra spending--is the fact that the Government were not willing to provide money in the early part of this Parliament to fund the reduction properly, so that it has been bought at the expense of children over eight. Parents who had six-year-old children at the time of the last general election and who voted to get their children's class sizes reduced, because they saw the teachers struggling and were concerned for their children's future, now have eight-year-olds in record class sizes. They have paid in this way for that policy because the Government were not willing to provide the money when it was needed.
We should consider the Government's education spending record in this Parliament. It was interesting to hear what the Prime Minister had to say during parliamentary questions about where they will end up, but they should have started with those increases to make that policy happen, and to prevent class sizes from rising. Labour Members know that full well, because, when they visit schools, they hear that story. Incidentally, they cannot recruit sufficient teachers, which says something about what is happening on wages.
On health, the right hon. Gentleman fought the general election on a pledge to reduce waiting lists. The Government have not been able to achieve that, and now we are told that they have dropped that policy. The pledge to cut waiting lists is out of the window, because they are not prepared to provide the funds to make it happen. Waiting lists for out-patients--the people waiting to get on the waiting list--are at record levels. The Government have not even reached their targets on the in-patient lists, and 89,000 operations have been cancelled on the day of the operation. Meanwhile, there is a crisis in nursing such that the Royal College of Nursing's predictions of difficulties in nurse recruitment have been exceeded. The problem is even worse than the RCN dared predict.
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