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Mr. Francis Maude (Horsham) (Con): It is a pleasure and privilege to follow the hon. Member for Ochil (Mr. O'Neill). I do not know whether that was his last speech—in this place, at any rate—but he distinguished himself and we shall miss him. I liked two aspects of his speech in particular. One was his horror at the suggestion that my hon. Friend the Member for Havant (Mr. Willetts) might have made a political point, which is of course an abhorrent idea to Members of Parliament, especially Front Benchers. I share the hon. Gentleman's concern about such a development. I also relished the reflective, calm and measured way in which he addressed the subject, because that is the spirit in which Budget debates should take place, even those on the likely eve of a general election. I wish to make my observations about the Budget in a similar spirit.

I start by declaring my interests as they appear in the register. I was intrigued by the way in which the Budget was delivered. We are all connoisseurs now of the Chancellor's manner and style, and I faced him across the Dispatch Box on several occasions in the last Parliament. I do not know if I was the only one to sense that some of the Chancellor's élan, verve and enthusiasm had gone. We saw a bit of the old bombast and braggadocio—not to mention plenty of hubris—but I sensed that nemesis might not be far away.

In a strange way, it was significant that he got it over and done with as quickly as he did. It was almost the shortest Budget speech that there has been. It was almost as though the right hon. Gentleman could not wait to get out and away, and away out of No. 11 as well as away from the House of Commons, which he is generally so keen to do.

In the early days of the right hon. Gentleman's chancellorship, there was always the sense that he conveyed that he had magically discovered the secret of perpetual motion—that he was the first Chancellor who had discovered that we could somehow abolish the business cycle, that we could have everything and that it would all be fine. I sensed yesterday that the right hon. Gentleman is now beginning to understand that perpetual motion does not exist, that there are balances in an economy and that we cannot achieve everything all the time.

I think that we all enjoyed the Chancellor's pleasure, not very well concealed, at the fact that he has presided over—or was at the Dispatch Box and in No. 11 when
 
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they came around—50 quarters of uninterrupted growth. The right hon. Gentleman slightly glossed over the fact that the first 20 or so of those 50 quarters took place before he got anywhere near No. 11. Even if he takes the credit for the quarter in which he moved to No. 11—the second quarter of 1997—I think that possibly even his own sense of self-regard might cavil at such a claim. Surely the right hon. Gentleman can claim credit for only 31 of the 50 quarters.

It is worth reflecting a little on the record of growth in the 20 or so quarters and the 30 following those. Was it better or worse before the following 30? I am not seeking to make a partisan point. As far as one can make sense of the numbers—it is not easy to do so—it seems that the situation is about the same. There is roughly the same level of annual growth before and after the right hon. Gentleman's chancellorship. It can be argued that it was slightly higher before, but I do not want to rest on that.

We must consider the Chancellor's main boast that he has "locked in" low inflation and low interest rates. It is right that we should give the right hon. Gentleman full credit for the decision to make the Bank of England independent. That move was overdue and, with hindsight, we should have done it a long time ago. There is no doubt that that decision has delivered lower interest rates than we had before, albeit that that has happened during a period when interest rates globally have fallen. I do not think that the Chancellor would take credit for all of that. However, we are now in an environment of much lower interest rates.

In such an environment, lower interest rates, and the expectation that the market certainly has that lower interest rates will continue into the future, should surely have delivered higher growth, not growth at the same level that existed before such an important decision on the Bank of England was made. The lower interest rates following on from that decision should have delivered higher productivity growth because the cost of capital for businesses was reduced. Therefore the ability to invest in higher productivity should have been increased. We should now be in a virtuous cycle in which the trend rate of growth has decisively risen, but that is not so. The trend rate of growth is roughly the same.

Early on in the right hon. Gentleman's chancellorship, mainly to make his public finance figures work, he claimed that the trend rate of growth had risen by a quarter of a per cent. He has quietly dropped that assertion in this Budget because it was manifestly not true. The trend rate of growth is roughly the same as it was before. Why, given a much better and more benign interest rate environment, have we not seen the trend rate of growth rise? Is it that circumstances in the world economy—the world economic environment—were decisively more favourable before 1997? I do not think so. My assessment, reading the OECD figures, is that the average by which UK growth exceeded the OECD average from 1993 to 1996, when the period of uninterrupted growth began, was about 0.5 per cent. The UK outperformed the OECD average by half a percentage point, on average, during that period. Since 1997, the UK has still exceeded the OECD average, but only by 0.1 per cent. There was certainly not a more favourable external environment before 1997—if anything, the reverse.
 
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It is important for us, in a calm and measured way, to reflect a little on what is the difference that, since 1997, has more than outweighed the clear benefits to the economy and to business—the wealth-producing and wealth-creating sector of the economy—of systemically lower interest rates. I suggest that the answer is that other things have changed in that time and have actively restrained growth.

We have seen much more regulation. I do not claim for a second that previous Governments were guiltless in increasing regulation. Indeed, I say that as a Minister who was responsible for deregulation for some of my time. We all know that there is an inevitable tendency for Governments of all colours and in all circumstances to have an in-built tendency to do things that involve spending more public money and to regulate more. That is because of the desire to do something to show that we have responded to something. We are all conscious of that tendency and it has to be guarded against. A responsible Government have to guard against the tendency to allow public spending, along with regulation, to be ever increasing.

I welcome what the Chancellor said yesterday about his intention to curb the growth in regulation, but I do not think that it amounted to more than curbing it. However, we should acknowledge, and the right hon. Gentleman should acknowledge, that a belated attempt is being made to alleviate the damage that has been caused to the wealth-creating sector by the constant accretion and the constant increment of regulation and more regulation.

There is some sensible reason for having most regulations and there are not many that are completely stupid and pointless, but it is their cumulative effect that is so damaging. It is the lack of proportion in the way in which they are conceived, executed, implemented and enforced that causes the damage.

Mr. Bercow : My hon. Friend is right to point to the cumulative impact rather than the individual significance of each regulation. Does he agree that one of the problems to which the Government seem insensitive is that the impact of regulation is especially damaging to small and medium-sized enterprises, which cannot bear the cost so readily as larger organisations? Would not Ministers be wise to follow the example of the United States, where the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act exercise some brake on the tendency to increase regulation?

Mr. Maude: My hon. Friend makes a good point and I am grateful to him for doing so. It is worth reflecting on what he says being a possibility. It is right that regulation bears disproportionately hard on small businesses, which tend not to respond to consultations because they are getting on with running their business. Before the 1997 election, when I was out of Parliament, I chaired the deregulation taskforce. My hon. Friend the Member for Tunbridge Wells (Mr. Norman), who similarly was out of Parliament, was also a member of the taskforce, and so was my hon. Friend the Member for Sevenoaks (Mr. Fallon). We are all in our places today. It is deregulation day today. There is a gathering, a reunion. One of our recommendations was that,
 
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instead of having a reactive consultation programme on new regulations, the Government should go out and actively research the views of small businesses.

Big businesses are set up to respond to consultation; they have consultation departments. Indeed, there is often an almost deadening conspiracy between Whitehall and the public affairs departments of big businesses, in which one lot will produce a consultation paper and the other lot respond to it. I sense that many big businesses are quite content with high levels of regulation because they increase the barriers to entry and the threshold for competitors.

I have not yet had the opportunity to study the recommendations produced by David Arculus and what is now called the Better Regulation Task Force—the successor to the body on which we sat—or the report by Philip Hampton. I gather, however, that they revisit some of the recommendations that we urged on the Major Government eight years ago—recommendations that I freely confess sometimes fell on deaf ears.

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