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7.54 pm
Mr. Tim Loughton (East Worthing and Shoreham): It is difficult to address the economy within the debates on Queen's Speech, given that there was so little about the economy in the speech--apart from the Financial Services and Markets Bill, of which we have spoken many times before. Those of us on the Committee seem to have been dealing with it since the Ark, and the leviathan nature of the organisation remains, despite our best endeavours to trim its powers. The only other measures affecting the Treasury are resource accounting and private finance initiative banking, and we will deal with the Second Reading of those Bills in a little while.
The Queen's Speech contained familiar phrases about managing public finances prudently, monetary policy making, interest rates and inflation--words which, in a political sense, did not trip easily from the lips of Her Majesty. I am happy to admit that, on the face of it, our economy appears to be in a relatively sound state. However, it certainly merits closer attention in an international context than the Chancellor is prepared to give it, despite his constant entreaties to look to the examples of Europe or America.
For example, the best forecast of gross domestic product growth, even from the Treasury, for this year is 1.7 per cent., compared with 3.8 per cent. for the US, 2.1 per cent. for the EU and 2.6 per cent. for the whole of the OECD. We are rather near the bottom. For two years' time, the growth forecast for this country is 2.3 per cent.--beaten by France at 2.9 per cent., the United States and the EU, at 2.8 per cent., and again by the OECD at 2.6 per cent. Despite the great growth miracle that is apparently going on in this country, in an international context it is not that exciting.
On the current account balances as a percentage of GDP, we will be suffering deficits for the next two or three years of around 1.5 per cent. at a time when France is experiencing a surplus of 2.4 per cent. The EU average will be 0.3 or 0.4 per cent. It is even better in the rest of the OECD. The current account balance is not looking so healthy in an international context.
Short-term interest rates will remain higher here than in the United States, and much higher than in the EU as a whole. Things are not looking quite so good in an international context as the Chancellor would have us believe.
Productivity has been referred to as the acid test of economic success by the Chancellor. It was growing at 2.2 per cent. at the time of the election, but the figure is 0.7 per cent. after two years of Labour rule. One test of productivity is GDP per capita. Taking the base of 100 for the UK, the figure for the United States is 137. We are well below the rest of the EU in terms of productivity.
My right hon. and hon. Friends have mentioned the tax burden many times. It is interesting that the Chancellor is happy to quote selectively from reports but, when it comes to a fairly definitive report from the OECD on the tax burden, he refuses to believe it. The figures, supported by the House of Commons Library, show that the tax burden in this country has risen from 35.4 per cent. at the last election to 37.6 per cent. Direct payments to the Exchequer have risen from £270 billion to £333 billion a year. I do not know how the Chancellor is able to wriggle out of these facts.
In Germany, the tax take is lower, and it is just 29.7 per cent. in the US. The tax burden is falling in the rest of Europe, but it is rising here. We know the reason for that--the stealth taxes that the Chancellor has dishonestly taken out of people's back pockets.
My major theme has been taken up by Labour Members, particularly those representing constituencies in the north-east of England. I want to counterbalance that, speaking as someone representing a south-east constituency. I am concerned about the divergence in economic performances within the UK. That is a worsening trend.
Unemployment in the north-east is at 9.7 per cent and rose by 1.3 per cent. last year. In Wales, it is 7.3 per cent, but in my area--the south-east--it is 3.8 per cent. and falling. Those are enormous divergences. In the north-east, gross domestic product per head is £9,500; in Wales, £9,400; and in my region, £13,500. We have also heard examples of extreme divergences in house prices.
Not surprisingly, there is mass migration from the north to the south--not only the daughter of the hon. Member for Blyth Valley (Mr. Campbell) has moved. The population of Wirral and Manchester has fallen by 9 per cent. over the past seven years; north-east Lincolnshire is losing 1,000 people a year; and the population ofthe home counties and central London is rising commensurately.
The Government's solution is to take councils such as West Sussex to court to force massive housing development on largely greenfield, rural counties. They fail to condemn the Crow report, which would impose 1.1 million extra homes on the south-east by 2016. We are witnessing a catastrophic and fundamental shift in the regional economic fortunes of the United Kingdom.
I have various quotations on the subject. One is:
Concentrating economic development in the south-east will act as a magnet for more population migration from the north, more inward investment that would have gone to areas with greater need and more concreting over of largely rural south-east areas, leaving vast swathes of brownfield sites in the north undeveloped.
Ms Keeble:
The hon. Gentleman makes an important point about the north-south divide, but does he not accept that the Government set up the regional development agencies to deal with the problems in the teeth of opposition from the Conservative party?
Mr. Loughton:
Yes, indeed. The problems have been accentuated and the RDAs have failed, inevitably, to deal with them, simply because the south-east, by its very nature, will always command a premium because of its proximity to the continent and the financial markets in London.
Amazingly, there is blatant discrimination against the north of England. The people of the south-east do not want it to become one of the top 10 regions of Europe if it is at the cost of turning the garden of England into a patio. Many people in the south-east would prefer it to be equal 20th with all the other regions of Europe.
The Government have done more than any other to destabilise the United Kingdom constitutionally and are now guilty of accelerating its economic fragmentation. There is increasingly no such thing as a single, homogeneous state of Britain.
The damage is being accentuated by the energy tax, for example. Large industrial concerns, especially in northern urban areas, are being penalised to the benefit of service industries in the south. Even after the partial climb-down in the pre-Budget statement, it will still prove lethal for the chemical, steel and paper industries among others. It has no regard for companies that have invested in energy efficiency and there is still no emissions trading policy, which is an essential part of an integrated energy policy. All the Kyoto targets could be achieved by converting more coal-fired power stations to gas.
There is an enormous extra burden of red tape on industry, with 2,700 extra regulations, costing £10,000 a year extra for medium-sized businesses and £1,700 for companies with fewer than 10 employees. There is an annual bill of £500 million for firms to administer three new Government measures on PAYE, national insurance and statutory sick and maternity pay.
The Government have slashed the savings ratio. The problem is most severe among lower-income families in the north. Individual savings accounts have signally failed to attract a single one of the 6 million new investors we were promised. The new schemes for wider share ownership, which are welcome as far as they go, are surely a tacit admission that ISAs have failed to attract new investors.
Many problems are being stored up for the future. The tax system has become hopelessly complicated. Many of the tax advantages, such as the 10 per cent. starting rate
for tax on savings, will go unclaimed because of the complexities involved. One tax adviser said:
The tax burden is up and the tax system has been drastically complicated. Businesses and individual taxpayers are all feeling the effects, mostly imposed by stealth. The savings ratio has crashed despite warm words about encouraging greater pension provision and savings for later in life. We are storing up trouble for the future.
All the trends fly in the face of what is happening in the rest of the OECD countries, especially in Europe, whose growth and productivity are outpacing ours. Most alarmingly, the greatest ever divisions are emerging between the regions. After a frenzy of splitting up the United Kingdom through constitutional iconoclasm, it is a great irony that the Government, who have their greatest concentrations of seats in the north of England and in Scotland and Wales, are promoting a severe form of economic apartheid that is causing the greatest pain in those parts of our still, nominally at least, United Kingdom.
There is nothing in the Queen's Speech to reverse that worrying trend.
"There's no doubt there's going to be a brain drain."
Another says:
"It means some of the new investment that might have been spread around the country will not take place."
24 Nov 1999 : Column 686
A third says:
Those comments are all by Labour leaders of northern metropolitan boroughs. I wholeheartedly agree with them.
"You would have the north-south divide back again and it would devastate the north of England."
"The average person in the street would find it almost impossible to understand our tax system and recognise whether they are entitled to any tax rebates . . . The people who are most likely to suffer are those who can least afford it."
That has all apparently been in the service of building up a war chest, which has been made up of stealth taxes taken dishonestly from everyone's back pocket and which should be given back, not used as an election bribe.
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