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8.32 pm
Mr. Peter Luff (Mid-Worcestershire) (Con): Ultimately, our debate on the Budget raises a fundamental question—who knows best how to spend our money, the Chancellor or the people, the taxpayer or the tax raiser? In their hearts, most people know the answer to that question. The Chancellor could do himself a great service by listening to the arguments that have been made. He started badly in the debate on Wednesday, as he ignored the two speeches that
followed his statement, and chatted to his friend, the Prime Minister, on the Front Bench. He would have done well to listen to those speeches, because in their different ways they were important contributions. He should listen to independent commentators such as the ITEM Club, which today made confident predictions about the black hole and a third-term Labour tax rise, about which my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) has rightly spoken. The British people believe that those third-term tax rises are inevitable, and the Chancellor should listen to them, as opinion polls show.The 2005 election, assuming that that is when it takes place, may be a bad one to win, because of the serious economic problems that the Chancellor of the Exchequer will leave his successor. He, of course, hopes that someone else will succeed him as Chancellor, as he hopes to be Prime Minister then. He hopes that he can blame the new Chancellor for problems of his creation. We have to be honest about the fact that the economy is doing fairly well at present—I do not think that anyone would argue against that. There are looming issues, such as the trade deficit and the appalling savings ratio, which have been mentioned throughout our debate. The truth, however, is that employment is pretty good and people are fairly comfortable. The Chancellor has achieved that with two good decisions and two pieces of good luck. The first of the two good decisions was independence for the Bank of England, which sent a powerful signal to the financial markets about his seriousness of purpose. The other decision, or rather non-decision, was not going into the single European currency—a wise course of action, and I hope that the Chancellor continues to prevail in the argument with the Prime Minister on that.
The Chancellor has had a couple of bits of good luck, though. One relatively minor but nevertheless significant piece of good luck was the enormous revenues that came from the 3G licence sale, for example, which made a huge contribution to bringing down the national debt. The reduction in the national debt owes a lot to that bit of good luck that fell the Chancellor's way. The other piece of good luck is the one that Labour Members always snigger at when it is mentioned—the golden economic heritage that he had when he took over as Chancellor. [Interruption.] I think I heard a few mumbles of discontent from the Labour Benches.
If one looks at the Red Book, as I have done in some detail, one does not have to be a statistician to look at the graph on page 21 showing the inflation statistics and to realise that inflation has been pretty stable since mid-1993, which is a good long time before the 1997 general election. Then there is the matter of growth. The Chancellor allowed himself a few jokes in his Budget speech on Wednesday. He rather wittily corrected himself and said that he had accidentally misled the House. The period of sustained growth was the longest not for 100 years, but for 200 years. He apologised for that omission. What he did not say is where that period began.
The Red Book tells us on page 15
- "with GDP now having grown for 46 consecutive quarters".
The present Chancellor's achievement is, for once, not to mess that up, and for that he deserves some limited congratulations. Although he may not be ruining it, there are some worrying signs. The success that he boasts about so confidently from the Dispatch Box is much more limited in reality. The truth is that if one throws money at a problem, some of it will stick and a bit of the problem will get better, but for the amount of money that is being thrown at the problems of this country, things have not got as much better as they ought to have got. And money has been thrown.
There are guiding lines in the Red Book. On page 189, with reference to income tax, we are told:
- "The starting and basic rate limits are increased in line with statutory indexation and there are no changes to the income tax rates."
The tragedy is—I am indebted to Ruth Lea in her excellent pamphlet, "The Price of the Profligate Chancellor", for drawing my attention to this—that the people who are paying the highest price for that are not the rich, nor those on middle incomes, but the poor. She draws my attention to a table derived from the work of the Office for National Statistics, which shows that while the percentage of gross income paid in tax is 35.6 per cent. on average, for the poorest quintile—the bottom 20 per cent—it is 42.1 per cent. Increased taxes hurt the poor. That is a message that the Chancellor needs to learn. He has certainly taxed them.
We have seen a steady growth in taxation as a percentage of GDP, and we have seen the complete and abysmal failure of the Chancellor to predict his borrowing. We are told on page 3 of the Red Book at paragraph 1.13, and it is repeated verbatim at paragraph 2.38 because the Chancellor is so fond of this:
- "The estimated 2003–04 outturn for the public sector current budget shows a deficit of £21.3 billion compared with projected deficits of £19.3 billion and £8.4 billion in the 2003 Pre-Budget Report",
Again, I am indebted to Ruth Lea for showing us the truth about those borrowing figures. Actually, the increase in the Chancellor's own predictions has been
shameful. In the 2002 Budget, he said that public sector net borrowing for 2002 would be £11 billion, but we now learn that it worked out at £22.9 billion—an increase of £11.9 billion. For 2003, the figure has moved from £13 billion to £37.5 billion, so his error is £24.5 billion. For 2004, he has already increased his estimate from £13 billion to £33 billion—an increase of £20 billion. For 2005 and 2006, he is confidently predicting modest reductions in net borrowing. Let us see what happens, as the trend is far from encouraging.Let us turn to spending. On page 9 of the Red Book, we read:
- "The Government's strategy is to deliver improvements in public services through sustained investment and reform to ensure that taxpayers receive value for money."
The Chancellor is fond of talking about enormous gains in employment. If we look at the figures, we see that between September 2002 and September 2003, there was an increase of 153,000 people in the public sector and of 105,000 in construction. To be fair, much of that increase is coming from capital investment, but largely, although not exclusively, it is PFI investment that is again funded by the Chancellor. In fact, 258,000 of the jobs are public sector jobs, while the number of manufacturing jobs fell by 103,000 in one year.
Paul Farrelly: The hon. Gentleman is being very forensic, but perhaps he is being a touch forgetful. Will he explain to the House whether the 1987 stock market crash, the years of negative equity, withdrawal from the European exchange rate mechanism and the years of imprudently counting one-off privatisation proceeds as negative Government expenditure were, to pick up his theme, bad luck, accidents or acts of God? Or were they were simply bad policy by a previous Conservative Government?
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