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Mr. Clarke: Perhaps it has changed. I give way to a former accomplice of the Chancellor.
Mr. Robinson: I just point out to the right hon. and learned Gentleman that I do not think the Conservative party's bribe is permanent. It is strictly limited to four years, I think.
Mr. Clarke:
Well, it is a better bribe than that of the Labour party.
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We all agree that when Parliament reconvenes we must address seriously the issue of future pension provision in the light of Adair Turner's excellent report, including the warnings that it contains about the affordability of future policy.
The other bribe is the adjustment of the thresholds for stamp duty on residential dwellings. I do not have time to express certain doubts about that. As I am standing for election myself, I welcome it, of course, although I have serious doubts about whether it will automatically feed through to reduce the price of houses below the bracket concerned for the benefit of first-time buyers. It is rather curious that the Bank of England has spent so much time trying to damp down the housing market and then the Chancellor produces a measure that tries slightly to reflate it. First-time buyers will come back into the market when it sorts itself out. I rather fear that house prices are likely to sag in the near future, only a little I hope, and then if they stay steady for long enough to reach a more sensible relationship to pay and personal incomes, first-time buyers will come back into the market.
Economically, the measure is a one-off fix which is a rather peculiar approach to the problem that has been caused in the housing market. It was financed by an accounting device—there is some short-term cost to these changes. The accounting device was, as far as I can see, simply a change to the cash flow of the oil companies, bringing forward the payment of certain tax revenues which, as the hon. Member for Twickenham (Dr. Cable) said, they will undoubtedly pass on to their customers.
That was the shape of the Budget, and it does not amount to very much. In a way I am slightly relieved, because so much damage could have been done by a reckless Budget before the election. It has left every problem to be faced by the Chancellor's successor after the election, and problems delayed are not problems solved.
The Budget speech got even further away than the Chancellor has ever got before from any serious presentation of economic policy, either of measures or of the state of the economy. We mainly recall it for the announcement of the statue to the Queen Mother, a very distinguished lady. I am sure it is a noble sentiment to erect a statue, but I cannot remember a more irrelevant statement in a Budget statement to the House, and it indicates how the barrel was being scraped.
The Government immediately tried to change the subject, with the Chancellor joining the Prime Minister in presenting one of the most dishonest election posters that I have ever seen—and that is quite a competitive field—in a pre-election campaign, with a totally fictitious claim that the Conservatives were proposing to cut public spending to an extent that would threaten the livelihood of teachers and nurses across the country.
When the Chancellor spoke about the economic situation, towards which he has some responsibilities, he gave his usual rosy and extremely upbeat and optimistic forecast about where the economy was going. It certainly was not modest, as my hon. Friend the Member for Eddisbury (Mr. O'Brien) said, and it did not acknowledge that the 50 quarters of consecutive growth to which the Chancellor referred began more than four years before he took office. But that is all
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history, and the Chancellor's record has not been too bad in parts of the past eight years for which he has been responsible.
The Chancellor did not address the two issues which the public should have uppermost in their mind when they decide where we are going now and start looking to the future in terms of our economic performance. The first issue, which has been well presented in debates throughout the country, is whether the present Government will be bound to increase taxation as soon as they get back, because of the situation that they are glossing over. That is exactly what they did after the last election, and I continue to believe strongly that that is what they will do if they win the election again. Secondly, and more importantly, how much further will those 50 quarters go, unless there is some drastic change of policy? My fear is that we are getting near the end of this long and sustained period of growth, and the Chancellor's denial that he is now on thin ice and that we are facing problems is becoming ever more incredible.
I have no time to set out the various things that I am worried about, none of which was addressed to any significant extent by the Chancellor in his speech. The increase in oil and commodity prices will almost certainly be sustained for quite a long time. It is a substantial step change in the price of oil and many other commodities, which is bound to have an effect on this country. The balance of payments deficit is at historic levels and seems to be deteriorating still. It is an important measure of how far our competitiveness is generally at risk, because it means that British business cannot produce the goods and services to satisfy domestic demand in competition with an ever-mounting flood of exports.
The most important thing that worries me is the huge amount of debt by which our continuing growth is being sustained. I refer not just to the Government debt, to which I shall turn in a moment. The combination of Government debt and private sector debt, including £1 trillion worth of household debt that has been accumulated largely on the back of a boom in the housing market which is now coming to an end, is a very serious problem indeed. In addition, unlike in competitor countries, wage growth in this country is beginning to increase in a somewhat alarming fashion, led by the steadily increasing public sector wage settlements being won by the ever-expanding public payroll, consisting of staff taken on by various Government agencies. None of those serious threats to our well-being was addressed by the Chancellor.
The right hon. Gentleman did not even convince me regarding the key policy that is within his control—fiscal policy. Are his forecasts for growth, tax revenues and spending correct? He claims consistently that he was right, pointing to his figures for growth in GDP as a whole. In fact, with the rate at 3.1 per cent., he came just within the forecast he made in last year's Budget—he just made it, and when I reminded myself of the speech I made last year, I was pleased to see that I conceded that he had a chance of doing so. However, over the years, the right hon. Gentleman's forecasts for tax revenues have consistently been wrong. I agree with the hon. Member for Twickenham that the Chancellor's forecast
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for corporation tax receipts, which runs far ahead of any likely growth in the economy, is wholly improbable, and his forecasts for public spending are also shaky. In any event, the Chancellor forecasts a continuing substantial rise in taxation and spending and a remorseless increase in the wealth consuming part of our economy relative to the wealth creating part.
I have no time for analysis, but the opinion of the Institute for Fiscal Studies is well known. The institute has identified what the public are beginning to recognise as a black hole of about £12 billion. Another source that I find attractive is the International Monetary Fund's article IV report for 2004—a report that I began to publish when I was Chancellor; previously, it had been a secret document. The IMF praises the British economy in some ways, but not our fiscal performance. It points out that the deterioration in our fiscal position since 1999 is the worst in the G7 and that a fiscal adjustment of about 1 per cent. of GDP will probably be needed to keep our economic progress on course. That is the tax increase to which the Chancellor will have to turn.
The Chancellor might stay within his golden rule if the statisticians can keep revising certain items of expenditure and if he can keep putting in the bag for the future various estimates of savings on tax avoidance he might make, but even the basic debt rule will be threatened in the not-too-distant future. The accounting conventions on which we now produce the figure for debt of slightly more than 30 per cent. of GDP are highly questionable. All capital expenditure is now off balance sheet and no proper provision is made for the future costs of the private finance initiative or for the huge unfunded pension liabilities that this country faces. The Chancellor's reputation will depend on whether he gets out in time. He needs to get out now so that someone can slow the growth of public expenditure, get control over affairs and guarantee future growth.
4.18 pm
Mr. Piara S. Khabra (Ealing, Southall) (Lab): I was surprised and disappointed to hear the views of the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke). I thought that he had the capacity to be objective about the Budget, but he was not.
I thank my right hon. Friend the Chancellor and the Treasury for producing a sensible, restrained and comprehensive Budget. I am sure that other hon. Members have greater expertise than I in the subject of today's debate—perhaps they have direct experience of working in business, finance or economics—but it needs no expert to see the many improvements that have been made to our economy as a result of the Chancellor's policies over the past eight years. Those benefits, including low interest rates and low inflation, have been felt throughout my constituency. Unemployment in my constituency has fallen by a third since 1997 and long-term unemployment has been cut by about 80 per cent.
Indeed, the British economy is not just healthy on its own terms; it also bears favourable comparison with other nations. Last year, the Organisation for Economic Co-operation and Development described the British economy as "impressive in recent years". As the Chancellor pointed out in his statement, it is a remarkable
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achievement to attain 50 consecutive quarter years of continued growth. However, to maintain those gains it is essential that we should continue to nurture business, now and in the future. That means meeting the needs not only of headline-grabbing large corporations, but of small and medium-sized businesses, many of which are to be found in my constituency.
Small firms contribute about 40 per cent. of the UK's gross national product, and they employ more than 50 per cent. of this country's private sector work force. Therefore, I welcome the Chancellor's stated commitment to cut some of the red tape that, unfortunately, can strangle the entrepreneurial spirit of small and medium-sized firms. In particular, it is right to release small businesses from the obligation of administering working tax credit by next year. That should save them an estimated £90 million and many hours of form-filling.
As the Federation of Small Businesses has noted, we must ensure that we keep our promises on red tape. However, it is important to note the overall confidence that small businesses have in the economy. The small business confidence survey carried out by Teneric in February this year shows continued optimism on growth. More than 80 per cent. of those questioned were optimistic about the UK's economic growth in the next 12 months, and three quarters believed that their businesses would be better off a year later.
I also welcome the Treasury's commitment to transport, which is an essential part of a healthy economy. I welcome especially the funding that has been found to put forward a Crossrail Bill. I realise that transport issues were covered in last Thursday's debate, but Crossrail is of real importance to the economy of my constituency. It should be a real boon to businesses in Ealing, Southall, which has a direct link to Heathrow airport—many of my constituents are employed there and many business men in my constituency have dealings there—and to central London. The Government estimate that Crossrail will result in an extra 56,000 to 110,000 jobs as a result of regeneration activity in areas covered by the route.
It was interesting to hear India mentioned in the Chancellor's statement. I have a particular interest in India for three reasons. First, I was born in India, so I have a particular interest in developing a good trading relationship with it. Secondly, there is a large Indian sub-continent-descended population in Ealing, Southall. Thirdly, I am a member of the Select Committee on International Development, which has a strong involvement with India on developmental issues such as trade and business. For all those reasons, I am keen to promote the UK's trading ties with India. Although the Chancellor mentioned China on a number of occasions, I am sure that he understands the importance of working closely with a democratic nation of India's size. It is huge country with huge economic potential. Moreover, the UK is India's third largest trading partner. I am aware that the Secretary of State has visited India a number of times to promote trade and trade relations between the two countries.
Outsourcing is often a controversial subject. I urge both the Treasury and the DTI to do more to explain to the public why it is good for our economy. The CBI estimates that the UK economy has gained roughly £16 billion through offshoring.
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One of India's advantages in attracting investment from overseas is its educated population, especially in information technology and the pharmaceutical industry. With that in mind, I welcome our Government's commitment to investment in educating a UK work force that is fit for the 21st-century workplace. Measures such as improving financial support for 16 to 19-year-olds in education, including the extension of child benefit and child tax credit from April 2006, are therefore sensible.
It goes without saying that any investment that we make in our young people's skills has the potential to benefit the British economy and enable it to produce many times what it produces now—although I feel that we must not crowd out some of the more traditional subjects just because they do not have business applications.
As the Financial Times has noted, the days of the truly give-away pre-election Budgets are probably in the past, but those who criticise this Budget for not giving enough away cannot then turn around and complain that the Chancellor is overstretching the country's economy.
Ultimately, following what is likely to have been an election year Budget, it will be the people of Britain who make up their minds about our policies, but I am confident that, if we go to the polls in May, there will have been enough in the Budget for me to make a good case to the people of Ealing, Southall for why the country's economy is safe with the Labour party and not with the Conservatives.
4.27 pm
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