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Mr. Edward Davey: The hon. Gentleman was talking about the volatility of interest rates and about whether the Monetary Policy Committee of an independent Bank of England could reduce that volatility. I share his concern, and I asked the Governor of the Bank of England that very question in the Select Committee. His answer was that, although small interest rate changes might have happened more frequently since the establishment of the MPC, the peaks and troughs of interest rates had flattened out. He argued that that was a sign that volatility had been reduced.
Mr. Loughton: I am sure that the hon. Gentleman is right, as that is in line with what has happened to interest rates internationally. When rates averaged between 5 and 6 per cent., changes of a quarter of a per cent. were the order of the day. The situation is rather different when rates average between 10 and 12 per cent., when changes are usually of about 0.5 to 1 per cent. My challenge is to the illusion that the MPC is infallible and that the stability of financial markets has been underpinned by its existence.
The real increase in the UK's GDP is modest when compared with that of our international competitors. The increase for 1999 is estimated at 1.75 per cent., and is expected to be at 2.3 per cent. in two years. However, the comparable figures for France are 2.4 per cent. and 2.9 per cent. For the United States, they are 3.8 per cent. and about 2.5 per cent. For Europe in general, the figures are 2.1 per cent. and 2.8 per cent., and for the countries in the OECD they are 2.8 per cent. and about 2.6 per cent.
The figures show that for the next two years, growth in the United Kingdom is forecast to be lower than that of any of its major competitors. Nor does the current account balance look so brilliant in an international context. We have a deficit of about 1.5 per cent. of gross domestic product, falling to only 1.2 per cent. two years out, whereas France has a surplus of 2.4 per cent., the European Union has a surplus of 0.4 per cent. and the OECD shows a small decline of less than 1 per cent. We are doing pretty badly on that international table. Two years out, our interest rates are forecast to be quite a bit higher than those of the EU and still higher than those of the United States.
There is no cause for the Government's over-complacent attitude.
Mr. Love: Will the hon. Gentleman give way?
Mr. Loughton: If the hon. Gentleman does not mind I will not, because of the time.
I am worried about a number of warning signs on the horizon. Before Labour Members, who cannot take this scrutiny culture, accuse me of trying to talk Britain down, I am just being realistic and--to use one of their phrases--prudent for the long term. The headline growth of average earnings has now accelerated to 4.9 per cent., well above the Bank of England tolerance level of 4.5 per cent. In the service sector it is much higher, running at
more than 5.2 per cent., and that is before winter bonuses have filtered through into the system. That is too high to be compatible with the inflation target.A chief economist in the City, Michael Saunders from Salomon Brothers International Ltd, has said:
- "You have to take an optimistic view on productivity to conclude that pay growth of 5 per cent. is consistent with meeting the 2.5 per cent. inflation target."
The Chancellor told us that productivity is the acid test of economic success. Productivity growth in 1997, when the previous Government left office, was 2.2 per cent.--it is now just 0.7 per cent. On a GDP per capita table, if the UK is the benchmark of 100, France stands at 105, Germany at 113 and the United States is way ahead at 137.
I am also concerned that the overheating of the City and the south-east of England is completely out of sync with the rest of the country. The extended effect of the City of London across a widening region is cause for worry. The commutability of the City extends up to Cambridgeshire, Lincolnshire and even York, and to Oxfordshire and Wiltshire in the west, as well as the traditional commuter belts in my part of the country, in Sussex, Kent and Surrey. The knock-on effect on property prices and on the service sector providing services for the beneficiaries of that wealth leads to great distortions.
There are also great distortions between the public and private sector. For we have grave problems with the social services in west Sussex. In sunny old west Sussex, where apparently we all live in castles, there are serious problems. To give him his due, the Minister of State, Department of Health, the hon. Member for Barrow and Furness (Mr. Hutton), came down to see us two weeks ago. Crawley has a 40 per cent. vacancy rate for child care social workers, and there is a 40 per cent. vacancy rate among orthopaedic workers in the health service in the north of our county. That comes as no surprise, because the hourly rate for care assistants employed by social services departments is £5.17, compared with McDonald's at Gatwick airport, which pays £7.60 an hour. Those wealth effects extend a long way from the City of London.
The south-east of England will always be at a premium vis-a-vis the rest of the country, because of our location--our nearness to the channel, the airports and the M25--and because of City salaries. We will always act as a magnet for investment and for wealth. But the Government are making matters worse by forcing enormous extra house building figures on us and failing to condemn the Crowe report.
A worrying issue that has been raised increasingly over the past few weeks, and which many of us referred to in the debate on the Queen's Speech, is the great imbalance between the north and the south. If you think that you have seen imbalances so far, Mr. Deputy Speaker, you have not seen anything yet if the Government have their way by concentrating south-east England into the powerhouse for economic growth within the top 10 regions of Europe. It will be utterly unsustainable.
I shall not embark on some of the regional contrasts that are possible, as I am aware of the time. However, among the warning signs mentioned by several hon. Members, the savings ratio has collapsed from 9.4 per cent. to 5.8 per cent., which is very worrying.Finally, I shall turn to the tax burden and the quality of services. Even Government Back Benchers are able, when under pressure, to discuss the £40.7 billion levied in extra taxes--largely by stealth--over the life of this Parliament. The burdens of regulation are added to the tax burden, and administering pay-as-you-earn schemes, the working families tax credit and the working time directive has a special impact on small businesses. Those burdens are affecting UK competitiveness, which is sinking fast.
Using stealth taxes, the Chancellor has gathered in a virtually all-time record haul of extra revenue. National insurance rises will hit 4 million middle income earners, despite the assurances of the Paymaster General that no one would be hit. In addition, the Chancellor will reap £3 billion in unexpected windfalls because of the Government's policy for dealing with pensions mis-selling. As more people return to the public sector pension scheme, they will bring with them short-term revenue, but the Government will eventually have to pay out when they retire. Self-assessment for corporation tax and up-front payment bring cash flow advantages to the Government, and the stamp duty bonanza from booming equity markets is disguising the uncompetitiveness of stamp duty in the UK. At 0.5 per cent., ours is the highest of any major equity market.
For all the Government's embarrassment of riches, what evidence is there that ordinary people are experiencing an improvement in the quality of their public services? What evidence is there of secure and sustainable long-term improvement? There is certainly no such evidence in Sussex or in my constituency. My local hospital has some of the longest waiting times in the country. We have had an above-average share of the 500,000 people who are waiting to get on waiting lists. A constant stream of complaints comes to me from people whose operations have been cancelled for a third time and who are pressing towards the 18-month treatment requirement. Hospitals in the north of west Sussex, at Haywards Heath and Crawley, are under threat. West Sussex health authority has a record deficit.
Raids through standard spending assessment adjustments on the shire counties in favour of northern metropolitan boroughs have left our social services underfunded by £7 million, although we are spending more than the amounts recommended by the Government. Our residential homes have been threatened, as have home helps. Cuts of £4.2 million have been instigated.
On law and order, my constituents certainly are not seeing the effect of the Government's supposed extra investment. No police station in my constituency opens in the evenings or at weekends. The existence of at least one station is under threat. No patrol cars operate from stations in the whole of my constituency. Sussex has 161 fewer officers than it did two and a half years ago--the second biggest cut in the country. In addition, we are bottom of the league on crime clear-up figures.
There is no evidence that all the extra tax is feeding into better services. On transport, the phrase "standstill Britain" could have been invented for Worthing and
the A27. Every trunk road improvement scheme for the whole of west Sussex has been scrapped by the Government. As my hon. Friend the Member for Chichester said, the amount of money spent is not the only important thing. The quality and targeting of spending matter too.The Government's motion is arrogant and complacent. It is, therefore, entirely in keeping with the attitude of a Government who are completely unwilling to tolerate criticism and who have set themselves above legitimate scrutiny by the House. When one wades through the fiddled figures, selective quotations from tables and worn-out soundbites, one finds many reasons why the Government cannot afford to be so complacent and impervious to challenge.
Internationally, the UK's performance is not so rosy. Domestically, a creeping cancer of economic apartheid is threatening to fragment the United Kingdom even more thoroughly than the Government have through their constitutional vandalism. When the Government are flush with revenue from their stealth tax crusade, the exaggerated spending figures of which always we hear are having next to no affect on the quality of public services. Their policy will soon prove unsustainable. It is storing up trouble for the future. The Government would be better advised to address the real long-term problems with sustainable solutions, rather than wallowing in sickening self-congratulation, when most of the achievements that they claim are, in fact, down to outside forces.
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