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Tony Baldry (Banbury): Does my hon. Friend think that we should adjourn each year's Budget debate for a couple of days, to enable us to study the Red Book? Trying to have a public debate is ludicrous when the Government obscure so much bad news by hiding it away in the Red Book.
Mr. Tyrie: Parliamentary scrutiny of the Budget is in need of wider reform, and my hon. Friend's idea, which has much to commend it, should perhaps form part of that reform. In the 48 hours after a Budget, the Treasury Committee should engage actively and intensively with it and produce a report in language that parliamentarians can understand, so that they can judge the Budget for themselves. Unfortunately, that is not the way that things are done. I am not even sure that an instant response should be made to a chancellorial statement, which should be treated as a statement. In fact, it is not a statement, even though it is described as such. People should be able to cross-examine the Chancellor on the spot and we should then have a 48-hour delay, after which the debate should begin. I do not feel that strongly about the matter, however, and many might say that that would be a shocking innovation for a process that has been going for some time.
The Government and the Chancellor claim that they are vetting the numbers to which I was referring: after all, they are giving them to the National Audit Office. However, that is little more than baloney. The NAO itself put it on record that it takes little more than a cursory look at the assumptions. It said that, in total, it spends £20,000 on the job. When I asked the Bundesbank what it spends to vet assumptions in the German Government's accounts, it said that the resource cost amounts to between £1 million and £2 million. Of course, huge resources are spent on vetting draft American budgets by the congressional budget office. So we should remember that, in saying today that the NAO has concluded that the audited assumptions are reasonable and cautious, the Chancellor said virtually nothing at all.
So much for borrowing and the bottom line, but what of tax and spend? Here, evidence of a change in policy seems overwhelming, with a move away from the
previous five Budgets and the economic consensus of the 1980s and 1990s, and towards an earlier position. Taxes are up by 2.5 per cent. of GDP, excluding questionable items such as the working families tax credit, which should be reclassified. Page 216 of the Red Book seems to suggest, at least, that the Government are going to concede ground on how it should be classified. Over the equivalent period in the last two cycles, the Conservative Government managed to reduce the tax burden. Of course, reducing the tax burden is partly a cyclical phenomenon: the Labour Government are putting it up by 2.5 per cent. during an upswing, but we managed to get it down. That is a significant change; in statistical terms, it is quite dramatic.
Jim Knight: Will the hon. Gentleman give way?
Mr. Tyrie: If the hon. Gentleman will forgive me, I shall make a little more progress. Perhaps he can intervene a little later.
Five years ago, people thought that, under Labour, taxes and the tax burden might at least be stable. They did not hope for tax cuts, but they thought they would not get tax rises. That was when they were listening to new Labour. The Prime Minister told us time and again that he had no plans to raise taxes.
A little over three and a half years ago—just before a Labour party conference—he suggested in an interview that he wanted to get taxes down, not up. That was definitely new Labour speaking, but I do not think that new Labour was speaking today.
Before 1997, the whole of Labour's policy—of which the Chancellor and the Prime Minister were key architects—involved shedding the electoral millstone of a commitment to high taxation and spending. In the Chancellor's earlier Budgets, when taxes came they came by stealth, as my right hon. Friend the Member for Wokingham pointed out. However, this budget is brazen about tax rises. That is certainly not new Labour speaking, but old Labour.
Spending has risen very sharply under Labour—from £341 billion in cash terms to a projected £470 billion in 2005-06. That is a huge increase of £130 billion. Spending is rising so fast that the Government cannot get rid of the money, hence the underspend. Even where it is being spent, much is being wasted in so many areas.
Let me give an example. What happened to the £280 million spent on cancer care in the so-called NHS cancer plan? We have a Select Committee report on that. In evidence to the Committee, Professor McVie said:
- "I think there is still some mystery about where some of the money is and whether the cheque got lost in the post or whether it has been absorbed like creosote into the fence post of the administration of the health service".
- "I would have thought that seven-eighths of the resource has not yet got out there".
When the Conservatives increased NHS spending by 6 per cent. in real terms for several years—something that is often forgotten—they allied those increases to radical
changes in the structure of the NHS. As a result, there were huge productivity gains, measurable in output terms and available as public statistics. I am prepared to wager that we will see little in the way of productivity gains over the next few years from the new spending increases. I am sure that if we keep a constant series going—I would not mind betting that the Government are trying to find a way to end that series—we will still see a fall in productivity.So far I have talked about financial policy—getting monetary and fiscal policy right. However, the supply side is at the heart of improving economic performance, and new Labour has never taken on board that part of what is required to make an economy successful.
Jim Knight: I question the premise of the hon. Gentleman's argument about breaking the consensus. I put it to him that the Conservatives cut spending dramatically, leaving the Labour Government to inherit an under-resourced and under-invested health system. The Conservative party now seems to agree that we need to increase spending on health, but thinks that the money needs to come from people's pockets in a different way. That is what the debate is now about. If the hon. Gentleman wants to go back to the 1990s, we can talk about boom and bust and the 22 tax rises. Let us instead move the debate on and discuss how to rebuild and reinvest in our NHS.
Mr. Tyrie: The hon. Gentleman attempts to make an honourable intervention, but he does not know many of the facts. The NHS saw a real-terms increase of 3.2 per cent. a year on average throughout the time of Conservative government. Health spending grew faster than the increase in gross domestic product for the same period, which was nearly 2.8 per cent. In other words, the NHS absorbed a steadily increasing share of GDP throughout an 18-year period, which is a long time. The hon. Gentleman is wrong about what went on.
The question before us is whether Labour has learned the lesson that increased taxation can easily and dramatically reduce economic performance. That is the heart of the matter. Has it learned that spending alone does not solve problems? Like spending in a business, it is the quality of the investment that counts. That is what determines whether extra spending is translated into better and more services.
Let me return to supply-side reform—I have been slowed down by intelligent distractions from various quarters. Supply-side reform is at the heart of improved economic performance and Labour has never had its heart in that. The plain fact is that the economy is being clogged up with intervention and subsidy everywhere. Over the past five years, subsidies have come from all quarters. There have been subsidies for the coal industry, the airbus, the car industry, for films and much else. There has been a massive increase in regulations on the utilities, financial services and employment bureaux. There is a new body of regulations for everything.
The public sector has been given the same treatment. Hon. Members only have to go to their local schools and ask about the increase in regulations to know that. Indeed, the same story is given by those who run primary schools. I was going to spare the House an anecdote about a school in my constituency, but I am beginning to enjoy myself. A school with an experienced headmaster got no fewer
than six questionnaires, each of which he said would take him several hours to complete. They were sent by central Government via the local education authority and came with a note saying, "Congratulations. You've been chosen at random to help us find out more about how to improve the education system." He was sick of filling in forms and worked out that it would take him many man hours to complete them, so he pinned them together and wrote back saying, "Congratulations. You have been chosen at random to receive these unanswered. What I want to do is get on with some teaching." I have every sympathy with him.The structure of the tax system is crucial to an efficient economy. A huge number of distortions has been put into the system. The hard work of nearly 20 years of simplifying the tax system has been put into reverse. Hon. Members should not take my word for it—the British Chambers of Commerce said a while ago about capital gains tax:
- "The CGT system is now so complex as to be almost unworkable. Many businesses say they and their accountants are just unable to work out their CGT liabilities."
On tax above all else the Chancellor has explicitly abandoned the crucial plank of something to which the public thought Labour was committed. They thought that Labour had learned its lessons on tax and they believed the Prime Minister when he said that he had no intention of increasing taxes. Today, however, the Chancellor made it clear that he is prepared to raise tax, and by large amounts.
New Labour came into existence out of the decision by the Chancellor and the Prime Minister in opposition to abandon tax and spend, but the Chancellor has now put up national insurance contributions, the very tax commitment that sank them exactly 10 years ago. It is almost 10 years to the day since Labour's 1992 election defeat.
It looks as if the Chancellor may have taken the word "new" out of new Labour. It is for that reason above all others that the Budget could come to be seen as a turning point in British politics. This day may come to be perceived as the one when Labour broke with the consensus of the 1980s and the 1990s. It may be the day when new Labour returned again to being just the Labour party.
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