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6.22 pm

Mr. Andrew Tyrie (Chichester): I listened with interest to the speech of the hon. Member for Dumbarton (Mr. McFall). At first, I struggled to find anything with which I agreed, but as he got going I started to find common cause on one or two points.

I agreed especially with what the hon. Gentleman said about the Washington institutions, both of which are in a mess. The World Bank is in a dreadful mess, with a huge bureaucracy out of the control of the shareholders, or even senior staff. That is why, as he knows, I believe that there is scope for an Anglo-American parliamentary initiative. Congress knows better than us what a mess those institutions are in and has been looking for allies for a long time to secure fundamental reform, to cut out waste and to ensure that the institutions use more effectively the huge resources that are available to them. I have suggested an initiative in which two committees of the respective Parliaments come together and issue joint proposals. The involvement of America and Britain, possibly with allies from continental Europe, would make a dramatic impact in an area in which there is now great popular interest, not merely among the balaclava-clad brigade but among much more reasonable people who are trying to think how best to deploy resources in the institutions. So there is something on which I can agree with the hon. Gentleman.

The hon. Gentleman asked whether my right hon. Friend the Member for Wokingham (Mr. Redwood) could find anything in the Budget with which he agreed. I can certainly find some things with which I agree, although on the whole, for reasons about which hon. Members will hear in a moment, I think that the Budget is very concerning. I support the reduced small company corporation tax rate; the ending of automatic fines for late payment of VAT and the ending of the requirement for small businesses to write down every VAT transaction in order to reclaim; VAT relief on bad debts; and the backdating of tax relief on charitable giving. I also support the direct payments that are being made to schools, although I am not sure whether the Government have thought through the long-term implications of bypassing local education authorities and increasing such sums—an approach that betokens a profound transformation of the way we fund education. We need to think through the structures more carefully. Incidentally, I welcomed some years ago the granting of independence to the Bank of England. Indeed, I would have liked the Chancellor to go further in those reforms.

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So, there are some things that the Chancellor has done with which I agree, but I do not think this is a good Budget, although it could become a crucial Budget in the political landscape of Britain. I want to explain why in the remainder of my speech.

Budgets should ultimately be about improving and sustaining the long-term economic performance of the country. Everything should be subordinate to that end, even when we are firefighting in an economic crisis. Distributive aims, including getting money to the poor, are not an alternative policy, because if long-term economic performance is not sustained, there will be no money to distribute.

The background against which all Labour Budgets have so far been announced is the crucial fact that after 19 Conservative Budgets, Britain had been turned from a basket-case economy into one of the leading economies of the world. Every step that the Conservatives took on that road was opposed by Labour. It opposed tax reduction and reform, privatisation, almost all deregulation and the removal of most protection in the economy. The whole lot was opposed. By the early 1990s, even when Britain was in a severe recession, caused partly by a global cyclical downturn and partly by policy mistakes, the British people wanted to stick with those policies and voted the Tories back; they voted to stick with the new economic consensus.

The 1992 shadow Budget was Labour's last great effort to challenge that market-based consensus and get back to tax and spend. It did not succeed in breaking the consensus, but broke itself. That shadow Budget, with its commitment to tax and especially to national insurance contribution rises—not that dissimilar to the Budget proposals announced today—was the main reason why Labour was defeated so decisively in the subsequent election, which took place a few weeks after its announcement. It was at that moment that new Labour was conceived in the minds of the current Chancellor and Prime Minister.

Mr. Hendrick: What happened at that time was very different, as there was a proposal to lift the ceiling on national insurance. The hon. Gentleman will know from today's statement that that ceiling has not been lifted.

Mr. Tyrie: The Chancellor has raised national insurance contributions, and several rises in NICs have been introduced by Labour in its other Budgets. Is the hon. Gentleman saying now that he has found another way to raise a bit of money from national insurance contributions and that that is all right? Is he implying that if he had made such proposals in 1992, they would have looked any better to the electorate? I very much doubt it. The fact is that it was those commitments to rises in national insurance contributions that broke Labour in 1992 and led to the creation of new Labour.

Rob Marris: The hon. Gentleman talks about the political and economic situation in 1992. Does he think that it is better to tax and spend or to do what happened between 1992 and 1997, when the national debt doubled: flog off the family silver, borrow lots of money and spend?

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Mr. Tyrie: Those comments will lead me into a digression, but I shall try to deal with the hon. Gentleman's point. He suggested that the Conservatives got out of their difficulties in 1992 merely by racking up debt. In fact, they took very tough decisions to bring order back into the public finances in extremely difficult circumstances. As I said, those circumstances were created not only by the global economic downswing—other countries had similar problems—but by policy mistakes, mainly in monetary policy. I agreed that those mistakes were made.

The hon. Gentleman is wrong about the overall debt record; indeed, the Chancellor uses sleight of hand whenever he makes such points. In fact, if he looks at the figures for 1980–1995—they do not vary much from those for 1979–1997—he will see that Britain was the only country of any significance that succeeded in reducing its debt as a proportion of GDP. Every other country experienced a sharp increase in debt as a proportion of GDP: Canada, France, Germany, Italy, the United States, Sweden, Spain, the Netherlands—the lot. One way or another, all were hit by the same kind of crisis, and all racked up debt. Contrary to the impression that the Chancellor gives, we were the only country that coped successfully without racking up debt. Of course, he has been able to reduce debt because the economy is sufficiently strong to enable tax revenues to pour in. Combined with the windfall to which my right hon. Friend the Member for Wokingham referred, that has allowed him to bring down the debt burden.

Jim Knight (South Dorset): Will the hon. Gentleman give way?

Mr. Tyrie: If the hon. Gentleman will forgive me, I shall not prolong this part of the debate. Otherwise, I will not get around to making the speech that I want to make.

As I was saying, Labour was defeated in 1992 because it said that it would tamper with national insurance contributions. It was elected in 1997 after committing itself to adopting the new economic consensus lock, stock and barrel—even to the extent of accepting Conservative spending plans Department by Department. Until it did so, the country was simply not prepared to trust it with power. The big question now, which will reverberate for the rest of this Parliament, is the extent to which this Budget breaks with that consensus.

Beyond the Chancellor's customary rhetorical fog, I detect that not new Labour but the whole Labour party—including the "borrow, tax and spend" Labour party of yesteryear—is behind this Budget. Perhaps I might illustrate the point with a few words on each of those elements.

On borrowing, the figures might not look too bad, but careful inspection of the Red Book shows that off-balance sheet finance is growing every year. As page 229 shows, if off-balance sheet finance already made is added to planned off-balance sheet finance, we arrive at a figure of £44 billion. According to old accounting principles, in the 1980s and 1990s such expenditure would have scored in the year in which it was incurred. The private finance initiative and public-private partnership are creating huge bills for taxpayers to pay in years to come. Of course, that off-balance sheet finance would have been in the bottom line for borrowing. Borrowing is understated in the Red Book.

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In any case, borrowing should be all right at this point in the cycle. In fact, it is not that bad, but even so borrowing of £25 billion is proposed over the next two years, and the situation is certainly worse than the figures suggest. Exactly how bad it is I cannot tell, and I do not think that anybody can be sure. I doubt whether anyone in the House—even the Economic Secretary—really has a grip on the numbers in the Red Book. Even as someone who at one time tried to help draft parts of a Red Book, I find it incomprehensible. Changes to definitions of the accounts are mesmerising, and it is impossible to work out what is going on without a degree in Balls-Brown economics.

To ensure clarity, we desperately need to sort out these numbers. We need a fiscal policy committee, independent of the Government, akin to a small version of the congressional budget office. Such a committee, for which I have called for a long time, needs only a dozen people or fewer. Their job should be to draw up truly independent and authoritative accounts, to vet the Government's accounts, to create agreed definitions and to scrutinise the forecast in depth.

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