---

Mr. John Horam (Orpington) (Con): I am glad to follow the right hon. Member for Airdrie and Shotts (Mrs. Liddell) and am sorry to hear that that was her valedictory speech. She made it in a typically passionate, robust and personal style, which the House entirely appreciated. She has had a distinguished career in the House, of which she can be legitimately proud. We are also deeply envious of her destination, and many of us wish that we were following her to that splendid continent. I congratulate her and thank her for her contribution.

One of the themes of this Budget debate has been international competitiveness. The Chancellor referred to that in his speech, the right hon. Member for Dumbarton (Mr. McFall), who is the Chairman of the Treasury Committee, referred at length to the threat from China in particular, and my right hon. Friend the Member for North-West Cambridgeshire (Sir Brian Mawhinney), in another excellent valedictory speech, referred to China and India.

There is an old forecast, which even the Treasury Bench may have heard of, that as the 21st century unfolds, China will do the manufacturing, India will do the IT, America will do the farming, and all the tourists will come to Europe. That might be the sort of forecast that is not proved to be accurate in reality, and economic forecasts tend to be the reverse of what happens. It indicates, however, the insecurity and dangers that we face in an international world in which the huge economies of China and India are beginning to flex their muscles in a way that has tremendous advantages for us in terms of reducing costs and prices and keeping our economy competitive, but that none the less poses huge threats to our way of life and standard of living in Europe and this country in particular. I am glad that that theme has been raised, as it is a phenomenon that will grow and grow as the years go by.

Inevitably, in this possible pre-election period, the other theme of the debate has been the contrast between the performance of this Government and their predecessor, who, along with the Chancellor, have lasted eight years, and the preceding 18 years of Conservative Governments and their economy policy. Now that we have had eight years of this Chancellor and this Government, it is legitimate to compare what has happened under them with what happened in the preceding 18 years on the economic front. The contrasts are interesting.

The greatest achievements of the Thatcher years of government, and following that, the Major years, were on what economists call the micro-economic side. Reducing the power of trade unions, the privatisation of monolithic and unprofitable nationalised industries, the elimination of exchange controls, deregulation and the big bang in the City, and the reduction in taxation were all extremely radical at the time. In retrospect, they are an incredibly innovative and radical set of measures that were much envied, much copied and will stand the test
 
16 Mar 2005 : Column 331
 
of time. This Government, despite their different philosophy, have not thought it right to unravel most of those achievements. In terms of the 20th century, they were the most brilliant set of measures achieved by any two Governments in a row.

On the other hand, I must admit, as someone who follows economic policy reasonably closely, that the macro-economic performance of those Conservative Governments was not as good until much later. The way in which monetary targets were followed—as we all know, M1 and M3 are no longer motorways but measures of monetary policy—with great lack of success and great confusion in the early 1980s, was not a great credit to the then Government and their advisers. A period then followed in which the switch was made under Chancellor Lawson to following an exchange rate, and to following the Deutschmark, which was not exactly one in which macro-economic growth was handled steadily. It eventually led to our membership of the exchange rate mechanism, and the fallout from that was disastrous for the Government of the time. It is certainly not something of which they can be very proud.

What followed was brilliant. My hon. Friend the Member for Grantham and Stamford (Mr. Davies) mentioned this. In fairness to Lord Lamont, it should be said that his first Budget after our exit from the ERM was both brave and well judged. It set the framework for what followed. It was brave in that Lord Lamont was well aware, as we all were, that he had been through an extremely bad time after we came out of the ERM, but he had the guts to go ahead and do exactly what the country needed. We needed him to produce a well-balanced Budget, and also to accept inflation targets which have stood the test of time.

When my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) became Chancellor, he took that a step further in what we all remember as the Ken and Eddie show, in terms of management of inflation, interest rates and so forth. That was the beginning of what could legitimately be called the Lamont-Clarke expansion, which has continued throughout the final years of Conservative government and the eight years of Labour government that we have experienced so far.

Macro-economic policy was mixed. It was poor to begin with, but got better under the Conservative Government. During the last eight years, almost exactly the reverse has happened under Labour. I think we all agree that it started brilliantly. Conservative Members have conceded that the new Chancellor's first steps were excellently judged—the independence of the Bank of England, for instance, which could be described as outsourcing. It always amuses me when Labour Members rebel against outsourcing or criticise it, as they often do. One of the largest undertakings of that kind was the outsourcing of the entire fiscal policy to the Monetary Policy Committee. It was a brilliant success, but Labour Members do not see the parallels with other types of outsourcing, which may also prove successful. This was certainly successful, and continued a vein of policy that began with the Conservatives.

Since then, sadly, the Chancellor has got worse—unlike the Conservative Government, who got better after a muddled and difficult start. Prudence was
 
16 Mar 2005 : Column 332
 
followed by profligacy on the public spending side, and there is an obvious black hole that has not been filled by any of the proposals in the Budget. There is real cause for concern about what will happen after the election if the present Government are returned. Let us pray that they are not. My hon. Friend the Member for Grantham and Stamford used the phrase "Après moi le déluge", and I think that that encapsulates the Government's attitude to public spending. We must bear it in mind that higher taxes will almost certainly result if they are returned.

On the micro-economic side, the Government faced two challenges. First, they were required to continue the improved performance in the private sector brought about by successive Conservative Governments. Sadly, they have not achieved such an improvement. One example is public transport in London. If people in the City were asked what one development would make their lives easier and make London an even better magnet for international capital and employment—which are hugely important to the British economy as a whole—they would name better transport, but the Chancellor has played a poor role in the management of London's public transport. He has prevented real expansion and development. We have a crumbling tube system, because nothing was done for five or six years while the Government argued with the Mayor of London. Certainly, for the past four or five years there has been no real investment in London's tube system, as a result of the Chancellor's ridiculous concept of the public-private partnership and a long wrangle with the mayor. That is an example of the Chancellor's getting the task of helping the private sector badly wrong.

The complexity of the tax system has increased enormously. Regulation has also increased enormously, and there have been problems with the pensions system, to which reference has been made. So the Chancellor's behaviour in respect of the private sector has been extremely poor from a micro-economic point of view.

As we know, however, the real challenge that the Chancellor faced was improving public services. If a Labour Government were elected for anything, it was   to improve public services, which had not improved as much as was necessary under Conservative Governments. Rather, they concentrated on getting the economy into shape, which they did very successfully. The Chancellor has got this challenge wrong, and in a number of ways. In the first instance, in successive Budgets he made the mistake of talking about how much money he was going to put into the public sector before asking for the necessary reforms. Any ordinary business manager in such a situation would say, "Let's see your plans, and if they're good I will give you the money." He would not take the opposite approach and say, "Here's the money, now where are your plans?"

As a result of the Chancellor's approach, the temptation was to spend money in all sorts of wasteful ways and to increase salaries. I accept that in some cases, such increases were necessary, as certain public sector employees were well behind those in the private sector—although now, of course, they are well ahead. But that approach was a serious error of judgment and I do not know why the Chancellor came to that conclusion. Perhaps it was an attempt at self-flattery; perhaps he wanted to appear to demonstrate great largesse, in order
 
16 Mar 2005 : Column 333
 
to please his own side. However, in terms of managing the public sector, that approach certainly was a major misjudgment.

As has become apparent over the years and as the Chancellor himself has pointed out, he has been an opponent of some of the reforms that the Prime Minister and other Secretaries of State wanted to implement. For example, at one stage the Chancellor seemed to oppose foundation hospitals, yet freeing managers to make the decisions that they need to make down the line is obviously good and sensible management. Such reform is essential and we believe that it should be taken further, but the Chancellor is glorying in deriding the extent to which the market and decentralisation can play a part in changing the public sector.

Not only does the Chancellor apparently oppose reforms that the Prime Minister and other Government members want; he has strangled the public sector by imposing bureaucracy, red tape, regulations, directives and money controls. At one stage, there were 6,000 public sector targets—more than in Stalinist Russia at its height. The Chancellor has displayed a fatal tendency to control, and a clear misunderstanding of the management required in the public sector.

So the Chancellor is far from being a good Chancellor. Rather, in this competitive world in which China and India, for example, have much lower costs than ours, he has dangerously weakened the private sector through the particular enterprise and growth climate that he has created. Moreover, he has totally failed to improve public services in the way that his supporters and ordinary people want.

---