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4.6 pm
Mr. Barry Gardiner (Brent, North) (Lab): I want to share two secrets with the House. The first is what my hon. Friend the Member for Nuneaton (Mr. Olner) told me earlier. Since he gave up smoking, he said, Budget debates have not been as exciting as they used to be. I suspect that even he, though, did not anticipate the effect of the response to the Budget by the Leader of the Opposition, because my second secret is that the Home Secretary's dog aroused severe mirth among the occupants of the Treasury Bench. Opposition Members did not understand why there was so much laughter, but what happened was that, while the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) was speaking, the dog groaned, rolled over on her back and put her rigid legs straight up in the air. Although I do not think that the right hon. and learned Gentleman's remarks had killed the dog, they may have killed off enthusiasm among Opposition Back Benchers.
It is never easy to respond to the Chancellor of the Exchequer, but the job cannot have been made any easier for the Leader of the Opposition by the Office for National Statistics press release of 25 February. It showed that economic growth in 2003 had been revised upwards, from 2.1 per cent. to 2.3 per cent. That was exactly in line with the Chancellor's Budget prediction last year, and contrary to every prediction made by the Opposition.
It is worth surveying the economic landscape if we want to understand the challenges that my right hon. Friend the Chancellor has faced. At an international level, there has been continuing economic depression and currency instability, yet the Chancellor has
managed to keep the British economy on a steady course while at the same time delivering historically high levels of investment to our public services.My right hon. Friend the Chancellor's stewardship has ensured that business has faith in the long-term governance of the economy. The upturn in the world economy will allow British business, and our economy, to grow further. Lately, chief executives have exhibited increased optimism, while company balances look healthier and mergers and acquisitions are increasing. That, of course, is just the view of the Confederation of British Industry.
I remind Opposition Members that they presided over not one but two recessions while they were supposed to be in control of the economy, and that support for the Chancellor has not come from Labour Members alone. Praise has come from some unlikely quarters. After the pre-Budget statement, the director general of the CBI, Digby Jones, said:
- "The Chancellor is right to raise borrowing rather than go for spending cuts or tax increases at this stage."
The speeches by the right hon. Members for Hitchin and Harpenden (Mr. Lilley) and for Charnwood (Mr. Dorrell) were interesting. The right hon. Member for Charnwood is unfortunately no longer in his place, but he made some particularly interesting remarks about Government debt. If one compares the £37.5 billion cash figure for debt this year with the situation a decade ago at the end of the last world recession, when the deficit in this country was equivalent to £90 billion, or around two-and-a-half times higher than it is today, one understands Conservative Members' crocodile tears and mock outrage about current Government borrowing. Net borrowing adjusted for the economic cycle is just 2.4 per cent. this year and will decrease over the next five years to 1.6 per cent. of GDP.
Sir Stuart Bell: Since my hon. Friend has referred to the speech by the right hon. Member for Charnwood (Mr. Dorrell), will he comment on the section about the housing market that seemed to pour cold water on the Chancellor's proposal to have regional house building programmes? Does he agree that the Chancellor's course of action in seeking to liberate more housing on the market to attack price inflation is better than interfering with the mortgage market?
Mr. Gardiner: My hon. Friend makes an important point about the need to spread productivity throughout the regions in a sensitive way, which is exactly what the Chancellor is doing. The Barker report, which is welcome, will be critical to the measures that the Government take in order to get the housing market right.
Returning to my theme, there will be a close call on the golden rule, but all economic commentators now agree that the Chancellor will hit the target. The Treasury says that the margin will be £11 billion, and even the Institute for Fiscal Studies predicts that it will be spot on. When Conservative Members seek to decry the fact that the golden rule will just be met, that view must be contrasted with their claims of a year or more
ago when they discussed a possible excess of £100 billion. The argument was that that money would have been taken but not utilised—in other words, the Government would have set up a slush fund rather than use the money productively in the economy. It is important to compare Conservative Members' remarks on Budget day with the comments they made six months before at the time of the pre-Budget statement and a year before when last year's Budget was announced, because their remarks are invariably inconsistent.
Mr. Jack: The hon. Gentleman has just used the word "inconsistent". Will he accept that we have a right to question today's numbers in the Red Book given that only two years ago we were told that borrowing would be £11 billion, whereas today's figure is £37 billion? We have every right to question the validity of those numbers given the Chancellor's benchmarking about prudence.
Mr. Gardiner: I have no cause to say that the right hon. Gentleman should not examine the figures—indeed, it is incumbent on all hon. Members to examine them carefully. When he examines the figures, he will find that the cash figures are £37.5 billion this year, £33 billion next year, £31 billion the year after, £27 billion the year after that and £23 billion the year after that. He should compare those figures with his record in government, but I warn him that that comparison will not be favourable.
The end of year report by the International Monetary Fund on the UK economy states:
- "The macroeconomic policy and financial supervision frameworks remain at the forefront internationally and are consistent with Fund recommendations."
- "Directors commended the continued strong performance of the United Kingdom's economy."
However, my constituents like my right hon. Friend the Chancellor not because of his ability to deliver macroeconomic targets or because he looks set to fulfil his promise to maintain the golden rule but because he is good at delivering on the bread-and-butter issues. It is thanks to my right hon. Friend that 1,565 fewer people in my constituency are unemployed and can share in the prosperity of this country. That is a 42 per cent. reduction in unemployment claimants since 1997 in my constituency, and it mirrors figures across the country that are a testament to Britain's lowest unemployment level for three decades. Many of my constituents also take comfort from this week's announcement on the uprating of the minimum wage. Those constituents will be among the 100,000 people in London who will see an increase in their pay packets when the minimum wage rises to £4.85 in October.
When the minimum wage was first put forward, the Opposition said that it would cost 2 million jobs, but we are now living with the highest level of employment that this country has ever seen. When Opposition Members claimed that the Government had not been instrumental in managing the economy to achieve its present stability and that one needed to look back before 1997—God
help us!—to see the policies responsible for that stability, they should remember that they opposed every successful intervention in the economy by this Government. That included independence for the Bank of England and the dramatic introduction of the minimum wage. The Opposition opposed those policies tooth and nail. They voted against them, saying that they would have disastrous consequences for our economy. None of their predictions of doom has come true. The Government gave us the first minimum wage in the UK and continue to deliver on their commitment to social justice by ensuring that new entrants to the work force will be paid fairly. My younger constituents—aged 16 and 17—will also benefit from the new minimum wage.Another bread-and-butter issue is school investment. In my constituency, we can see the results of the money that my right hon. Friend the Chancellor has consistently put into education. For example, £3 million has been invested in Wembley high technology college, and a further £3 million has been spent on new buildings at Kingsbury Green primary school. The same has been spent on Roe Green junior school. People in my constituency can see the tangible effect of Government policy in their environment and their children's schools. They can walk into new school buildings.
The same investment is apparent in Northwick Park hospital. The accident and emergency ward has been completely refurbished, with double the capacity. Consequently, waiting times have fallen. Before 1997—and after—they were among the worst in the country, but they have now fallen so much that they are compliant with the standard of within four hours, in all but 2 or 3 per cent. of cases. That is how my constituents see the real benefits of the Chancellor's fiscal and economic prudence.
The Chancellor who brought such stability to the UK economy has also been taking great care to address the structural economic problems that have dogged our economy for decades, such as the housing market—to which my hon. Friend the Member for Middlesbrough (Sir Stuart Bell) alluded in his intervention—and productivity, but, above all, investment in human capital and research and development. The assessment and work being conducted by the Treasury in all those sectors is to be welcomed if our current short-term economic successes are to be developed into a long-term model. The Chancellor's commitment to improving the UK's human capital through increased funding for education, and improvements in research and development, will create a step change in our economy.
In his statement, the Chancellor made a commitment to 4.4 per cent. year-on-year real-terms growth in education and skills, and an £8.5 billion commitment to education and skills in 2007. That is exactly the commitment we need to address some of the points made earlier by my right hon. Friend the Member for Llanelli (Denzil Davies). He talked about outsourcing and about the way in which call centres and other jobs in this country were moving not only to eastern Europe but also to India and elsewhere in the far east.
Two nights ago, I chaired a meeting in the Attlee suite of Labour Friends of India where there were more than 200 business leaders involved in foreign direct
investment, both from the UK to India and vice versa. We discussed outsourcing and, of course, call centres. We faced up to the real challenge of an Indian economy that is growing at between 6 and 8 per cent. a year, with a huge population—1 billion people—and a huge pool of skilled and highly educated young people who are prepared, willing and able to offer services that reflect those skills.One of the most interesting speeches made at the seminar was from Dinesh Dhamija, the chief executive of ebookers, the famous online travel company. He made the point that in the after-shock of 11 September—when sales of tickets for air travel dried up—his business in this country was faced with an almighty crisis. The only way in which he could appropriately respond was to cut his costs, to use offshoring and to outsource his call centres to India. By doing so, he saved 546 UK jobs and the entire business, thereby saving the contribution that the business makes to the UK economy.
It is nonsense to think that this country or any other country can insulate itself against globalisation. Globalisation is to be neither welcomed nor denigrated; it has to be accepted as a fact and we need businesses that can respond to that global challenge. The only way for them to do so is by upskilling—by ensuring that we have skills in this country. However, that means that we increasingly move up the value curve as jobs in this country reflect our standard of living, so we cannot compete simply on labour costs; that is impossible in a global economy.
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