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7.47 pm
Mr. Geraint Davies (Croydon, Central): Listening to some of the speeches by Opposition Members, I was a little bemused by their recollection of the state of play in 1997. They have described a golden legacy. My memory is of debt doubling and of interest rates being much higher than they are now. I also remember talking to the chief economist of the NatWest bank, who pointed out that the interest rate cycle varies from 7 to 15 per cent. We are now enjoying the low part of that cycle and a stable economy.
Before the Government were elected, unemployment was 1.1 million higher, and inflation was much higher. There were also much higher levels of bankruptcy and repossession. The picture being painted by Opposition Members is a figment of their imagination. Since 1997, the themes in the Chancellor's Budgets--promoting stability, prosperity and fairness, and the focus on benefits to families and businesses--have been remarkably consistent. It is those themes that have regenerated Britain and will serve us in good stead for the future.
Hon. Members will remember that, in the first couple of years of this Government, the overall economic picture was a bit precarious. Hon. Members will recall the so-called south-east Asian financial crisis--when a quarter of the world economy was in recession, world growth targets were halved and Opposition Members were predicting an awful recession and saying that the Government's expenditure plans were grossly irresponsible. They have obviously forgotten all that, and we have moved forward. We still face global threats--the United States economy is slowing down and the Japanese economy is barely growing. Yet there is a robust certainty in the way in which we are moving forward, having prudently paid off debt and repositioned ourselves in the global marketplace for the good of Britain.
We have put an extra 1.1 million people in the workplace; they are making a contribution, rather than taking enormous amounts of money in unemployment
benefit and lost tax. The average cost of an unemployed person is some £12,000 a year. In my borough of Croydon, where I was leader of the council, the unemployment figure has been reduced by 4,877, translating into a saving of £58 million every year that can be invested in more services or tax reductions. Indeed, they are being invested in both, for the good of my constituents and the wider economy.Getting 1.1 million people back into work is the key to the Government's success in being able credibly to say that they will invest more in public services and reduce taxes. The other side of the coin is that people know that Conservative economic policy means lower employment, hence higher taxes and cuts in public services--the worst of both worlds. It is very important, as we approach another time for public decision, that people realise that fundamental difference.
It is not by choice or by legacy that we are enjoying the current economic environment, but by decision and difficult choice. The Bank of England's independence was one of the Chancellor's first master strokes. It immediately took the risk premium out of interest rates. Long-term interest rates dipped and are at a 30-year low. Independence encouraged more investment in jobs, enabled consumers to enjoy lower mortgage payments and allowed stability to reign in the economy and the housing market. In addition, the new deal meant that people who had been taken out of the labour market and had disengaged from the habit of work could get back into work and make their contribution. The Chancellor's overall fiscal management was excellent.
I intervened on the former Prime Minister, the right hon. Member for Huntingdon (Mr. Major), when he was describing how he saw his past. The hard facts show that, in 1996-97, the previous Government's total managed public expenditure was 41.2 per cent. of gross domestic product and 6 per cent. of that went on borrowing. The previous Government did not take tough decisions--although they imposed 22 tax increases--but decided to borrow and borrow, thereby doubling debt. We are all familiar with the statistic that for every pound spent since 1979, 42p went on borrowing, debt and dole. Now that figure has been reduced to 16 per cent.
If we compare the percentage of GDP that was tax plus borrowing in 1996-97--38.2 per cent.--with the figure for 1999-00 of 36.2 per cent., which is 2 percentage points lower, that represents £19 billion more that would have been taxed or borrowed under the Tories. That is an equivalent of 7.3p on income tax. If we were doing what the Tories did with the economy, which we have enlarged through economic prosperity, the punter would be paying 7 per cent. more tax.
People need to realise that, under the Tories, taxes would be higher and cuts deeper because of economic incompetence. They have already announced £16 billion worth of cuts in planned expenditure, but that is a massive underestimate. We must add to it the cost of higher unemployment. For example, the borough of Croydon would be looking at cuts of £72 million a year against planned investment, plus the £58 million saving resulting from people who are back in work. That is a total of £130 million a year--an enormous amount for a borough such as Croydon. It does not bear thinking about.
There have been references to the savings ratio. People are saving less because of economic confidence and because the primary method of saving in the modern economy is through housing, and house prices have been going up.
I realise why the right hon. Member for Huntingdon painted the picture that he did, but I did not recognise it. The Conservatives were responsible for unsustainable borrowing and debt which would inevitably have meant the road to ruin for any business. Thank goodness the Chancellor arrived; he has balanced the books by making tough decisions about containing cost, focusing on job creation and repaying debt. In addition, the cost of that debt has come down because market confidence has led to lower Bank of England interest rates. All those factors have combined to provide a more benign economic picture.
Let us compare that with the shadow Chancellor's proposition to ask the Monetary Policy Committee to reduce target inflation from 2.5 per cent. to 2 per cent. We should remember that the Conservatives did not want a Monetary Policy Committee; they did not want independence for the Bank of England. Now they have come round to the idea--in fact, they have gone a step further. They know that the public have no confidence in their capabilities, so they want an independent commission to look at fiscal policy as well. Their attitude is, "Don't worry, vote Conservative and we will not actually manage the economy at all. We will ask Evan Davies of 'Newsnight' to do it."
The Conservatives want a 2 per cent. inflation target. I realise that, given the good management of the economy, that would be achievable in terms of the current inflation rate. However, that is not a desirable constraint because it would inevitably mean that, other things being equal, interest rates would have to be higher than they would otherwise be. That would reduce investment and increase the cost of mortgages, thereby increasing unemployment, debt costs, and the cost of unemployment, and reducing the tax take.
Even if the right thing to do were handed to the Conservatives on a plate, they would go back to the bad old days of boom and bust. That is why their claims to match our expenditure and our action on taxes are completely unbelievable.
Mr. Willis: To give the hon. Gentleman a break, does he think that that is why, in last Friday's Yorkshire Post, Mr. Paul Sykes, the multimillionaire who has rejoined the Conservative party, said:
- "I don't want anything to do with the Conservative Party. They are a disaster."?
We are all concerned about sovereignty, as opposed to the single currency. Sovereignty is, by definition, about having maximum control over the choices that dictate our
destiny. Are we around the table, leading the debate, or are we on the sidelines, being led by the "Nos"? I have nothing against people who live in the rest of Europe, but some of the speeches made in Harrogate suggested that much of the policy is led by a loathing of foreigners as opposed to a rational analysis of the pros and cons of the single currency and of integration.Turning back to the good fortune that I see personally in Croydon as a result of the masterly management of the economy, the NHS locally has received an extra £18 million. There is a linkage between good health, a strong economy and good education. People who are able to work more regularly are healthier and happier. Their morale is higher--that is good for the economy. We can see that in the police force in London, where the reduction of absenteeism has added the equivalent of 500 police officers to the force.
The Mayday hospital in Croydon does not have the best reputation in the world, but there have been an extra 2,000 operations; there are 90 more nurses, a new kidney unit and a new maternity unit, and the accident and emergency department has been refurbished. Things are getting better; people realise that. They want more and that is what they are getting.
I know that hon. Members are interested in the education situation in Croydon. There is an extra £370 per pupil. Standards are rising--an improvement of 13 per cent. in mathematics since 1997. Primary class sizes are smaller. There are difficulties in teacher recruitment, but that is part of the wider economic success that the country is enjoying. If 1.1 million more people have jobs, if after-tax income has gone up by 10 per cent.--as it has--and if the labour market is tight, graduates or trained teachers enjoy more choice. We must work harder to get those people into the classroom. We are working harder and they are coming into the profession. The other day, a chap who had just left college told me that, because of the "golden hello", he was becoming a mathematics teacher--good luck to him.
We are investing in areas that faced economic and poverty challenges. Often, because of economic circumstances and educational background--in respect of the availability of books in the family home--people from those areas have not succeeded as much as they might have done. That is why we have an education action zone in Croydon, where the business community has come to the table--I helped in that process. Companies such as Sainsbury and Mondial Assistance see that initiative as a one-way street to success.
Individual self-esteem is being raised. Often children are held back in school because perhaps their parents or parent say, "I didn't do very well in school son, and you're not very bright. School's not a very good thing." That holds people back. Education action zones break down those difficulties with more investment and more new ideas. That brings new success by raising standards that will shape the life choices of our children so that they can contribute to the new economy that is growing for the future.
Education is the key to the new economy and the family is the key to education. The big challenge faced by the Government, in a tight labour market, is how to add to productivity and skills. Yes, we can do so through technology, but also by enabling parents--especially women with young children--to engage flexibly with the
labour market in a way that does not ruin their family life. With a family of small children, it is extremely difficult to engage meaningfully with the labour market. That is why we have introduced all the extra benefits--the working families tax credit, the children's tax credit and help with child care. There is universal provision of nursery schooling at four--now at three. There is extra provision before and after school. Those measures are of enormous importance to providing flexibility.People with very young children also have the choice to stay at home to look after them. As a parent of very young children, aged six, three and three months, I believe it important to invest enough time with them--reading to them, and so on. We must create a flexible environment whereby people can engage in the labour market and have a meaningful family life. That is why we have invested more in maternity and paternity benefits. I very much welcome that. With working families tax credit and children's tax credit, working families are better off than ever.
Employment is growing and productivity is rising. There are some interesting misconceptions about productivity growth; some criticisms have been made. Last Friday, at a dinner of the Chartered Institute of Bankers, there was a question about relative productivity rates and the slow-down in productivity growth, and I pointed out the simple fact that if employment is quickly increased by 1.1 million, it is obvious that the extra people will be less productive on average than the existing stock of workers. One would expect current average productivity to go down, because marginal productivity is less than the existing average. After any rapid increase in employment, productivity will slow down in the short term, but will then quickly speed up. That is the Chancellor's ambition and I am sure that with the investment in education, skills and information technology, our economy will go from strength to strength.
Business is, of course, the basis of the prosperity that we enjoy and that we invest in the social products which we all consume--through education and health. Businesses are succeeding. As someone who has run his own business and worked in multinationals, I believe it right to hold robust discussions on red tape, discrimination and the relative focus on administration versus entrepreneurial activity. However, it is also right to remember that some of the key costs identified by the British Chambers of Commerce--the minimum wage and the working time directive--themselves make contributions towards more profitable and productive business. When those costs are taken out, the BCC's somewhat exaggerated claims become massively deflated.
Enabling people to join the labour market effectively and profitably is part of the process of business success. People who run small businesses say that there is too much red tape, but when one asks them whether they are making more money and employing more people, the answer is, "Yes, yes, business is good." If we had listened to the Opposition, we would be back in the world of small business bankruptcy that we all vividly remember.
The right hon. Member for South Norfolk (Mr. MacGregor) mentioned that he would have liked to reduce debt. Sadly, his Government increased debt. He said that he would have liked to give more help to small
and medium enterprises. Sadly, bankruptcies ran at a record high. We have delivered his aspirations; I am glad about that.On the environment, people have mentioned the fuel tax problems. We all know that fuel taxes in Britain are higher than they are on the continent. However, income and other taxes are higher on the continent, so on average, taxes are much lower in this country. That is a clear choice. When people tell me, "I have paid too much for my petrol," I say that, yes, it is right that the Chancellor has taken away the escalator because world oil prices have risen.
People have a choice. Do they want income tax or fuel tax? I do not have a queue of people asking for more income tax. If I did, we could discuss the matter. However, I do have a queue of people worried about asthma in children and about the environment they live in. The people who complain about greenfield site developments need to understand that we have to create a good environment in our towns and cities in respect of air quality, education and security. Those are key drivers that make towns nicer places to live in. That is what I am pressing for in Croydon as a local MP. People understand that there are better alternatives in transport. I very much back the extra investment in public transport to be made over the next 10 years.
Through the combined effort delivered in the Budget, we have a situation in which education standards are being driven forward to help the economy, but where the economy also helps education. Health is improving; that is helping the economy. Institutionalised poverty tends to cluster--in bad housing, bad health, bad education and poor pay. Those problems, which were endemic under Conservative Governments, are being targeted directly and broken down. We are taking an enormous step forward.
Only a few years ago, those of us who talked about full employment were told that it could not happen again. We were asked how we could compete with the developing world, but we are doing just that by empowering people with skills and by providing the infrastructure and the human-based services that people desperately need, whether in care homes, public services or, indeed, in restaurants and all the other services that we enjoy because of our higher disposable incomes. All those things are moving forward; we are living in a better Britain. There are difficulties and there is a long way to go, however.
Crime is an issue, but it is down by 10 per cent. Many people are misled about crime. As hon. Members may know, the British crime survey is the only reliable indicator of all actual crime. It records all crime in a sample of about 20,000 people and shows that crime is down by 10 per cent., as crime recorded by the police represents only between a quarter and a fifth of total crime. A bit more crime is being recorded, so people believe that there is a real problem.
We need to invest in more Bobbies and Beatrices on the beat; we need to make progress on crime. As a London Member, I am glad that an extra 2,044 police will be provided and that, because of previous Budgets, almost an extra £3,500 has been added to the pay of new police recruits. I am also glad about the extra investment in closed circuit television and in partnerships with councils.
In my own area, the police budget is about £30 million; the local authority budget is, of course, 10 times that amount, so much of the incremental, unseen investment in combating crime takes place through local authority partnerships. It is not surprising that crime is down when we have more people in work and more people are being educated. The difficulties with mobile phone thefts and one-on-one assaults are being confronted, but they are non-financial issues.
Overall, in relation to business success, our fundamental services, stability, mortgage payers and the wider community, we have much to be proud of in the Budget; it is a stepping stone to the future. We do not want to be complacent, but actions such as paying off an enormous amount of debt strengthen us for the inevitable buffeting of the world economy, in which the future is unpredictable. We are stronger and better prepared than any of our European partners, and I commend the Budget to Parliament.
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