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I also welcome the landlord's energy-saving allowance and its extension to solid wall insulation. Again, it may not sound very important, but 50 per cent. of our housing stock cannot be insulated by cavity wall insulation because it does not have any cavities. I live in such a house myself. There is a desperate need for the development of cheap and easily used materials because the existing technique of using dry lining is quite expensive. The allowance will help landlords, particularly in respect of houses of multiple occupation, of which there are many in my constituency. Many are old, draughty, solid-wall buildings and very difficult to insulate. The grant will end up saving potentially thousands, if not millions, of tonnes of CO 2 output.
Reduced taxation for biodiesel and bioethanol is welcome but I should like a more rigorous attack on biofuels in future. I have slightly digressed from education, the principal subject of today's debate, but
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I make no apology for that as the subjects are not that strict. It is also clear that many Members on the Opposition Benches badly need educating.
Mr. Mark Simmonds (Boston and Skegness) (Con): It is traditional to say a few courteous and polite words about the previous speaker, but I struggle to find complimentary words about the contribution of the hon. Member for Brighton, Kemptown (Dr. Turner).
Peter Bottomley: My hon. Friend should at least give the hon. Member for Brighton, Kemptown credit for not raising the question of unemployment. It is sad that unemployment has risen by more than 8 per cent. in his Brighton constituency over the past year.
The Government erroneously make great play of the fact that they alone are responsible for economic stability, growth and sustainability, whereas in fact, post-1997, they immediately built on the successful macro-economic policies of the previous Conservative Administration. They used that economic legacy as a foundation for what will ultimately be unsustainable and wasteful public expenditure.
Mr. Hopkins: The hon. Gentleman talks about the Conservatives' successful management of the macro-economy. Am I mistaken in thinking that the Conservatives entered the exchange rate mechanism and caused economic disaster in Britain? Is not it merely climbing out of that deep hole just before the election that he is claiming to their credit?
Mr. Simmonds: I am grateful to the hon. Gentleman for making those points and I have two things to say in response. First, I seem to recall that at the time the Labour Opposition were extremely supportive of our entry to the ERM. Secondly, the Chancellor admitted in his Budget speech that we have had sustainable economic growth for 50 quarters. That is about 12 and a half years, which takes us well beyond the incumbency of the present Government, so there is no doubt that my right hon. and hon. Friends who had charge of the Treasury for the 18 quarters before 1997 should be given credit for turning our economy around after our exit from the ERM.
Dr. Desmond Turner: The hon. Gentleman is missing a lesson from history. No Conservative Government have ever succeeded in sustaining economic stability for that long. They have always blown it with irresponsible tax cuts that took money from the poor and gave it to the rich.
I shall respond to the hon. Gentleman but then I want to move on quickly. One of the fundamental reasons why Conservative Governments have often struggled with the economy is thatprobably with the exception of the transfer of power that will happen on 6 Mayevery Conservative
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Government have inherited a shambles from the previous Labour Administration. [Interruption.] One example is 1979 and another is 1970.
Despite the Government's claims, almost all independent commentators believe that there is a black hole in the Chancellor's figures and thus a necessity for fiscal consolidation and tightening. The Government will need to cut spending or raise taxesperhaps both. They will have to retreat from their current expansionary stance on fiscal policy and control their spending. If an election were not looming, taxes would now be increasing against the backdrop of a faster-than-anticipated deterioration in the Government's budgetary position.
Mr. Hopkins: The hon. Gentleman seems to be suggesting that we should deflate, yet that would make the problem worseif indeed there is a problem at allby raising unemployment, thereby raising benefits and reducing tax revenues.
Mr. Simmonds: I am not saying that. If the hon. Gentleman had been patient, he would have heard that I am advocating the control of public expenditure and a tightening of the fiscal deficit, which will bring public expenditure under control without harming the delivery of public services. Such a policy has been carefully set out by my right hon. Friend the shadow Chancellor, building on the foundation of the thorough and detailed James review.
The fiscal deficit in the United Kingdom last year was greater than that of France, Germany, Italy and Canada. The deterioration in the UK's fiscal position since 1999 is bigger than in any G7 country. Indeed, the International Monetary Fund has advised that a cut in expenditure of £12.5 billion is required, equivalent to 3.5p on the basic rate of income tax; in other words, a fiscal adjustment of 1 per cent. of gross domestic productan enormous sum. Almost all informed commentators have estimated growth forecasts below the Chancellor's, which currently stands at between 3 and 3.5 per cent. That is well above consensus expectations, which are much closer to between 2.5 and 2.75 per cent.
When I looked at the detail of the Chancellor's forecast I was shocked to see that growth in investment spending and exports looked wildly optimistic, at a figure of between 6.75 and 7.25 per cent. Even if we accept that world trade picked up last year, we see that UK exports grew by only 2.6 per cent. The deteriorating budgetary position has been facilitated by two factors: faster than projected growth in spending and a shortfall in tax receipts. That shortfall was hardly surprising given that between 2001 and 2003 growth failed to reach 2.5 per cent. per annum, on which the public finances arithmetic is based. Nothing was done when that growth figure was not hit. That is why public borrowing is deteriorating and the Chancellor has to keep revising his borrowing forecast.
It was clear from the Budget statement that the Chancellor had to start tightening his fiscal position immediately, which he supposedly did by penalising businesses such as the oil industry. Alternatively, had he loosened his fiscal policy it would have increased pressure to raise interest rates, as the hon. Member for
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Luton, North (Mr. Hopkins) correctly said, which could have triggered a further sell-off of sterling. The Government's net cash requirement has been revised upwards since projections three months ago suggested precisely the opposite of the fiscal tightening that the Chancellor claimed in his Budget speech.
We hear much about the Government's success in job creation. The figure that is often bandied about is 2 million jobs. However, the House may not be aware that 927,000 of those jobs have been created in the public sector since 1997jobs bought with taxpayers' money, not created by economic growth. Public sector employment growth continues to accelerate. Of course, some of those jobs are extremely valuable and worth while. The people taking them make an extremely valuable contribution to the delivery of public sector services in all our constituencies.
The problem is not just that public sector jobs have been purchased by taxpayers' money. In the manufacturing sector, 1 million jobs were lost between 1997 and 2005, yet in the previous seven years, between 1990 and 1997, only 500,000 jobs were losthalf the amount. Those job losses are a direct result of the UK's losing its competitive edge in a globalised marketplace.
Mr. Love: Does the hon. Gentleman accept that, at a rate of nearly 75 per cent., employment is at a record level? Does he accept the contribution that the Government have made in getting people back into work?
Mr. Simmonds: I welcome any economic policies that stimulate employment and stop the unemployment trend. I accept that there has been significant growth in the number of people in work as a result of some of the Government's policies. However, I argue that that economic growth was built on the foundations that the previous Conservative Administration put in place after the UK fell out of the ERM. As I shall say later in my remarks, I want to ensure that, especially given the competition from China and India, we remain competitive in a globalised marketplace. We cannot sustain a situation where there is an increasing tax burden, an unsustainable increase in public expenditure and increases in regulation and bureaucracy that make us less competitive in the global economy. That position is evidenced by the United Kingdom's trade deficit.
Last year, the trade deficit was £57.9 billionfive times worse than in 1997. The UK's overseas trade deficit in January alone was £5.2 billion for goods and £3.7 billion for goods and services. The UK has not become more competitive since 1997, but significantly less. Our productivity is 11 per cent. below the G7 average. Our only saving grace is that we are efficient in comparison with the inefficient EU economies, but as I said in response to the intervention made by the hon. Member for Luton, North, competing with Europe is not where the main battle will be in the near future.
An economy with high and increasing tax and low productivity that is increasingly uncompetitive is music to the ears of the business people in China and India. The UK must become more competitive, not less. Those two countries alone will account for 25 per cent. of the world's output in real terms by 2015. The Chinese middle class has just passed the 250 million mark
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larger than the total population of the United States. Increasing tax, spending and regulation, poor public sector productivity and minimal reform of public sector services are not the answer. Both being economically competitive and upskilling our work force is the answer to those challenges.
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