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27 Nov 2002 : Column 330continued
Mr. Gordon Brown: The shadow Chancellor is making exactly the same economic policy mistakes as those made by the Conservative Government and every previous shadow Chancellor. He said that our spending is unsustainable and tried to say that the national insurance tax rise should not go ahead. He refuses to match our spending on the public services, but his solution is to cut spending this year, next year and in future years. Cutting spending during a world downturn would depress demand, put up unemployment and put stability at risk. His colleagues have said that he would
We will take no lectures from a shadow Chancellor who was Employment Secretary in the early 1990s. Inflation is 2 per cent. in this country, but under him, it was 10 per cent. Interest rates are 4 per cent., but under him, they were 15 per cent. The deficit is 1 per cent., but under him it was 8 per cent. Unemployment is below 1 million but, worst of all, during his term as Employment Secretary, it was above 2 million. We will therefore take no lectures from the Conservative party.
It is not only me who is criticising the shadow Chancellor's record, but the current leader of the Conservative party. In The Sunday Telegraph, 6 October 2002, the leader of the Conservative party talked about the economic mistakes of the shadow Chancellor when in government in the 1990s. XBusinesses," he said,
Mr. Speaker: Order. I do not like it either. The Chancellor must answer the questions that he was asked[Interruption.] Order. Divisions within the Conservative party are nothing to do with me and nothing to do with the Chancellor in the Chamber.
Mr. Brown: First of all, the right hon. and learned Gentleman says that we should not have gone ahead with the ACT dividend tax credit. Let me remind the Conservative party that it cut it by half during its period in office. Then he said that we should be concerned about burdens on business. I have the report of the World Economic Forum from which he was quoting. It says that the improvement in the UK's position is particularly remarkable with its jump from seventh to third this year. It is the Conservatives who must look at their record on regulation.
On the question of public services, which the right hon. and learned Gentleman also raised, does he not know that literacy and numeracy results, A-level results and the numbers of people who are able to go to university are the best that have been recorded in this country?
Mr. Brown: As for the right hon. and learned Gentleman's other points about manufacturing, it is growing in the third quarter of this year and business investment is 25 per cent. up on 1997, but we are facing exactly the same problems that businesses are facing around the world.
As for the right hon. and learned Gentleman's further point on crime, he should recognise that crime is down under this Government. As for his point on savings ratios, he should understand that we have the lowest savings ratio[Hon. Members: XYes."] The lowest savings ratio was recorded in 1988, under the last Conservative Government.
As for the right hon. and learned Gentleman's points about the downturn in world activity, let me point out to him that in 1991, the world economy was growing by 0.9 per cent. in the G7 countries and in 2001, unfortunately, it was growing by 0.6 per cent. That is the pointin far worse world conditions, Britain was first in and last out in the last recession. It is now growing and has a stable economy, and we can meet our public spending plans and have the lowest inflation and interest rates for 25 years and the lowest unemployment. That is a record that Labour Members are proud of.
Matthew Taylor (Truro and St. Austell): At least the Chancellor, unlike the Conservative party, knows how much he wants to tax and spend. The problem for him is that he is running out of money and ideas. It is noticeable that while he used to claim credit for everything that was going right, he now ducks any blame for anything that is going wrong.
The announcement made today involved the Chancellor in doubling borrowing to more than £100 billion over the next five years, compared to his plans in the Budget. His borrowing to cover a short-term problem is one thingthe right response to a temporary setbackbut his Budget will go bust in the long term unless he tackles the collapse in British industry and stops relying on an unsustainable boom in consumer debt to keep his growth figures up.
Does the Chancellor even recognise that UK business investment has now crashed faster than in Japan, the United States, France, Italy and even, on the latest figures, Germany? It has crashed faster than at any time since records began and his latest figures today predict that it will stay lower. Even the Government's own investment in schools and hospitals is 25 per cent. below the level that they planned.
Those are not world problems. Does he know that our share of inward investment into Europe has collapsed from 28 per cent. to only 16 per cent. in a mere four years? Those are not the problems of the world economy.
Is the Chancellor proud of a manufacturing recession that is the deepest since 1981 and the longest since 1945? Is he proud of the fact that 500,000 people have lost manufacturing jobs in this country when such employment has increased in the European Union? Those are not world problems.
Is it not true that record household debt is the only reason that UK growth has held up? Does the Chancellor agree with the Bank of England that increasing debt and booming house prices are not sustainable? They are not the basis for sustainable long-term plans for investment in education and health.
Today, the Chancellor has again provided further tax complication and red tape for business. He has no new ideas for tackling the exchange rate problem that British business faces, the recession in manufacturing and the collapse of investment in this country that is far greater than that of our competitors.
What exactly is the Chancellor's assessment of the additional risk from any war with Iraq? He said that he would have to make such an assessment. We are not simply considering a world downturn. The scale of our manufacturing problems is unique to Britain and it has been engineered in 11 Downing street by meddling, red tape, tax complication and a lack of action on the exchange rate.
Unlike the Conservatives, we do not believe that the Government should cut education and health spending. [Interruption.] The Conservative party does not believe in anything. It has no policy on tax or on spending. Indeed, it has no policies at all, so we will take no nonsense from Conservative Members.
The Chancellor needs to mend his ways and stop passing the buck. He must cut red tape and simplify the tax system. He has to tackle the exchange rate issue or devise an alternative solution. If he does not, his long-term plans for investment in health and education cannot be realised. He risks that today with his complacent approach of refusing to accept that a single problem in the British economy can be laid at his door.
Mr. Brown: I am grateful to the hon. Gentleman for asking about the direction and balance of the economy. However, he must bear it in mind that our economy is stable and growing, while other economies have been in recession. He cannot claim that manufacturing job losses have not hit the German, French, Italian and other economies in Europe. Unemployment in Germany has again increased beyond 4 million, and the German economy is barely growing.
The hon. Gentleman cannot disguise the fact that the slowdown and contraction of industrial activity have been happening throughout the G7 countries. A feature of that is the IT slowdown that has occurred in America and Japan as well as in Europe. That is a major reason for our difficulties because business investment in IT was a critical factor in the late 1990s. He cannot therefore ignore the world factors and the global restructuring of industrial activity.
On the balance of the UK economy, as I said earlier, we expect industrial production and manufacturing output to increase and business investment to recover next year when the housing market slows down and the pace of consumer demand is sustainable. However, I remind the hon. Gentleman that business investment is 25 per cent. higher than in 1997, and that it increased from 11 per cent. to 14 per cent. of GDP. That was partly because we changed the dividend tax credit, cut corporation tax and rewarded corporations for their investments.
The hon. Gentleman complained about the domestic balance of the British economy. We are taking steps to consult about more investment incentives for business. We shall continue to do that, and he should support us.