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Mr. Tyrie: I do not want to wreck the hon. Gentleman's career, but he is giving quite the most thoughtful speech that we have heard from the Labour Benches this afternoon--and, indeed, for some time.
He is quite right about resource accounting, but does he think it possible to draw a clear distinction between capital and current spending where no income stream is derived from the investment? Is it possible to clarify that distinction--as is being attempted in the accounts--to the degree that the Government are planning?
Mr. Beard: Yes, it is far more possible than what is happening now. There may be some grey areas as to what is capital or whether it is being consumed currently, but the vast bulk of projects can be accounted for in terms of capital. That would be a great improvement.
The instinct of people in looking for a cross-fertilisation of the best of private and public is right. Without a new approach to public accounting that values capital assets and ensures their maintenance--as well as the new arrangements for fund raising and risk sharing--this country will rot. A rising tide of dereliction and decay will disfigure all our environments.
Any fair and progressive modern society must have a proper balance between public service and private activities. The steps now being taken to display and manage public expenditure more effectively are essential to achieving that balance, and essential to modernising Britain.
5.13 pm
Mr. Tim Loughton (East Worthing and Shoreham): It is always a pleasure to follow the hon. Member for Bexleyheath and Crayford (Mr. Beard), as we have been doing a lot of recently in Committee. I concur with my hon. Friend the Member for Chichester (Mr. Tyrie) that the hon. Gentleman has made one of the more considered speeches that we have heard from the Labour Benches today.
It strikes me as odd that a Government motion and debate on the economy has been sidelined to the last sitting day of this millennium, before Christmas, and that large parts of the motion are concerned not with defending the Government's record on the economy, but with criticising their own warped, soundbite-ridden and factually incorrect version of the Opposition's policies. That trend was repeated time and time again by Labour Members in the debate. One would think that the Conservatives were still in office.
I do not think that any of us would deny that the economy is in a relatively healthy state at the moment. By most measurements--unemployment, inflation and borrowing figures--the economy is doing fairly well. However, the key considerations when judging the Government's economic record must be threefold. We must ask, first, how the UK is doing internationally--we are continually told that that is important, and I agree; secondly, how well spread the current prosperity is throughout the country and whether all our subjects are enjoying the alleged investment boom; and--
Mr. David Taylor (North-West Leicestershire): Subjects? I thought that we were all citizens now.
Mr. Loughton: We still live in a democratic monarchy, even though Government Members have done their level best to reverse that--and may yet succeed.
Thirdly, we must ask whether the Government's policies will achieve long-term sustainability or are storing up trouble for the future. All three considerations
produce rather worrying results and show the Government's economic policy in a different light from what they would have us believe.I had hoped that we would have a proper debate, be able to question the Government freely and receive genuine answers, but those hopes were dashed a little after 12.30 today. The culture that has built up--it pervaded the opening speeches today--is that to oppose the Government, to question the basis of any of their policies or merely to scrutinise closely the validity of their figures is nothing less than a cardinal sin; it is anathema, in the Vatican of new Labour, to be at all critical. The riposte is always, "How dare you?"
We have seen that attitude yet again this afternoon. The motion smacks of such arrogance and intolerance. A good example is a written answer on company bankruptcies that I received recently. It would be of particular interest to the hon. Member for Luton, South (Ms Moran), if she were here. If Labour Members are to be believed, the years 1979-97 were a period littered with businesses going under and since 1997, miraculously, it has been a one-way growth trip.
I questioned that attitude and asked the Minister then responsible, the hon. Member for Pontypridd (Dr. Howells), how many companies had gone out of business since May 1997. The answer was interesting. It said:
- "Companies House maintains statistics on the number of companies in liquidation . . . During the period from 5 May 1997 to 27 June 1999, 105,540 companies were reported as dissolved by means of the voluntary procedures . . . 118,227 companies were dissolved other than by section 652 . . . making a total of 262,321. As of 27 June 1999, 69,479 companies were in course of liquidation."--[Official Report, 1 July 1999; Vol. 334, c. 229W.]
I then asked the same question of the Minister for Small Business and E-Commerce, and her answer was rather different:
- "There are no official statistics on the number of business closures. Collating them would impose too great a burden on business. Quarterly estimates from Barclays Bank show that there were 922,000 business closures in England and Wales in the 27 months between April 1997 and June 1999 . . .
Other indicators confirm that business closures are lower than in previous years. There have been 97,700 company and individual insolvencies in England and Wales since April 1997, 32 per cent. fewer than when insolvencies peaked in the early 1990s."--[Official Report, 22 November 1999; Vol. 239, c. 163-64W.]
Liz Blackman (Erewash): Did the hon. Gentleman also request information on the number of business start-ups, and does he intend to mention the number of jobs created since 1997 and the present number of job vacancies, which runs close to 1 million?
Mr. Loughton: The hon. Lady is right. Back in the 1980s, the then Government would have liked to see the
figures for net job creations. According to the hon. Member for Luton, South and others, those 18 years were a one-way trip of business closures, but of course that was not what happened. Many new businesses started, in the same way as many have started in the past two years. However, many of those--probably more than 1 million--have gone bust. We should be more balanced, as well as more transparent, about the figures that we are attempting to analyse.More evidence of the great arrogance that is displayed by Ministers when we question them was relayed by my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley).
Mr. David Taylor: There is nobody behind you.
Mr. Loughton: There are many people behind me--spiritually, if not physically. My hon. Friend the Member for Bury St. Edmunds revealed the amazing confession by the Chancellor in the Select Committee on the Treasury a week ago. The Chancellor later denied it, and Ministers have repeated that denial today. However, there is no questioning the statistics which show that the amount of tax taken as a percentage of GDP has risen from 35.3 per cent. in 1997 to 37.2 per cent. In anybody's book--indeed, in anybody's warped calculations--that is an increase in the tax burden of some 2 per cent., even without taking into consideration the fiddled accounting of the working families tax credit. By comparison, the tax burden in Germany is 37.1 per cent. and in the US it is much lower, at 29.7 per cent. of GDP.
Mr. Taylor: I have listened to the hon. Gentleman's argument carefully. He said earlier that the Government would be judged on three basic themes at the next general election--how they had done internationally, how they had distributed growth between groups of people and geographically, and the sustainability of the economic policies that they had pursued. The hon. Gentleman did not suggest that the electorate would rely on the figures for the tax burden in deciding how they might vote.
Mr. Loughton: I am impressed that the hon. Gentleman has listened so closely. He mentioned the three criteria that I flagged up earlier, and one could include the tax burden under any of them, starting with the international context. That is why I have just put the tax burden in the context of what is experienced by our major competitors. This country's tax burden is higher than--and rising above--those in Germany and the US, and that makes this country far less competitive and its subjects poorer.
If the Government are so proud of their economic record--as they would have us believe judging by the complacency of the motion--why are not they brave enough to admit the real figures? I challenged the Minister earlier on the point that not a single independent economic forecaster agrees with Ministers' fiddled premise, because everybody knows that the tax take as a percentage of the economy has gone up, is going up and will have gone up by the end of this Parliament compared with May 1997. The only way to claim otherwise would be by using fantasy figures.
In actual terms, a retired couple, for example, on a total pension of some £5,750 and a modest amount of savings, will have paid £1,306 extra in tax over the past two and a half years, even if they do not own a car, have a mortgage or take foreign holidays. In real terms, that is a lot of money.
The independence of the Bank of England is another key plank of the Government's self-congratulatory motion, which praises the new monetary policy framework that is supposedly delivering stability and steady growth. The Chief Secretary could not resist the poke at the idea that the Conservative party opposes independence for the Bank of England, but I am not sure that it is true. It takes no account of the establishment by the Conservative Treasury team of a high-level monetary policy commission to examine Bank of England independence, and to determine how real independence could work.
I agree with my hon. Friend the Member for Chichester that the Monetary Policy Committee is not fully independent at present. It is a matter that needs proper consideration. Making the MPC independent is not something that should be rushed into within two days of coming to power--especially when such a full-scale constitutional change had not been mentioned before.
There is great merit in the notion of an independent Bank of England, but the MPC must have no chance of exerting political influence. Certainly, the terms of office of its members must resemble much more closely those applying in the Bundesbank in Germany and in the Federal Reserve Bank in the United States. Longer terms of office render office holders more impervious to political intimidation and control.
We also need a properly resourced MPC that gets far more research from the Bank of England--a recent bone of contention. The Government's claim to take credit when rates go down, and their "not me, guv" mentality when they go up, are absolutely absurd. The Government issue strong signals about the direction in which the Chancellor wants rates to go. Just this week, for example, the right hon. Gentleman was quoted as signalling a new year rate rise to the Select Committee on the Treasury.
It is also not entirely true to talk about the great period of stability that we have enjoyed under the MPC. A report by the journal Economic Affairs states that there has been
- "a clear increase in financial market volatility"
In addition, the National Institute of Economic and Social Research has said that it would have made little difference to the economy if rates had been left unchanged at the 6 per cent. that the Government inherited. Professor Kent Matthews of the Cardiff business school, who carried out the research, stated:
- "If the Bank was trying to reduce volatility in the markets there is little evidence that it has succeeded. If volatility of financial markets is a constraint on the setting of interest rates, the MPC has clearly given it little weight."
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