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Steve McCabe (Birmingham, Hall Green) (Lab): I am grateful to the hon. Gentleman for giving way, and I welcome him to his new post and wish him well in the internal strife ahead. Which of these two positions does he agree with more—that of his hon. Friend the Member for Havant (Mr. Willetts), who says that concentrating on cutting red tape and tax cuts is not much of an economic policy, or that of his right hon. Friend the Member for Wokingham (Mr. Redwood), who says that unless the Tory party concentrates immediately on promising £12 billion in fresh tax cuts, there is no way forward? Whom does he agree with more, and will he ever be able to speak to his hon. Friend the Member for Buckingham (John Bercow) again?

Mr. Osborne: I am not sure that I got that last bit. If the hon. Gentleman is saying that cutting red tape is not a serious economic policy, he should have a word with the Chancellor of the Exchequer, because that is all that he has been talking about for the last two weeks. As for the internal strife that the hon. Gentleman alleges is in our party, does he agree with the national consensus
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that the Prime Minister should perhaps step down earlier in this Parliament and let the Chancellor of the Exchequer take over? Did the hon. Gentleman have a picture of the Chancellor in his election address or one of the Prime Minister, or was he hedging his bets and using both?

If we can get on with building this national consensus, let me mention the housing proposal. If the Chancellor wants to help first-time buyers, as I do, we will support the principle of shared equity—after all, we proposed it first, more than a year ago—but he has to admit that the number of first-time buyers each year has fallen by almost a third under Labour. We will wait to see the details of his proposal.

Mr. Robert Flello (Stoke-on-Trent, South) (Lab): Will the hon. Gentleman give way?

Mr. Osborne: I am happy to give way to the hon. Gentleman. Did he have a picture of Blair or of Brown in his election address?

Mr. Flello: I am grateful to the hon. Gentleman for giving way. I feel that a point needs to be pressed, because I am not quite sure about it. I think that he said to the House on 6 April that he was in favour of £4 billion of tax cuts, but I am not sure whether he still feels that way, or whether he agrees with the right hon. Member for Wokingham (Mr. Redwood) that that does not go far enough. Will he clarify that point?

Mr. Osborne: If I may give some advice to the new Member, he should not take the planted questions of the Labour Whips Office. They are not very good.

Let us get on with some consensus on the state of the economy. I will accept that inflation is low, if the Chancellor accepts that it is higher than when he became Chancellor of the Exchequer. I will accept that official unemployment has fallen, if he will accept that the number of young people languishing neither in work nor in full-time education has risen to more than 1 million. I will accept the good news that he has to tell us about the economy, if he will accept that disposable incomes are down, retail sales are down, the housing market is fragile, output growth is down, corporate profits are down, manufacturing jobs are being lost and foreign investment is shrinking, and that we have a record trade deficit and a huge balance of payments problem.

Mark Tami (Alyn and Deeside) (Lab) rose—

Mr. Osborne: What is the hon. Gentleman's answer to that?

Mark Tami: I thank the hon. Gentleman for giving way. For the third time, can he tell us what Tory tax policy is?

Mr. Osborne: We proposed at the general election a reduction in taxation of £4 billion, including an incentive to help people save for their pensions, which is part of the subject of this debate. We lost the election, although we got more votes than the hon. Gentleman's party did in England. Therefore we will review our policies, and no doubt produce policies to reduce taxes later in the Parliament.
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Previous Chancellors of the Exchequer had a medium-term financial strategy. This Chancellor has a medium-term political strategy. He wants to be out of the Treasury before the chickens come home to roost. I do not mean that the business cycle will turn but that it will become increasingly clear that he does not have the answers to the long-term economic challenges facing the country. Those challenges are clear, and include the competitiveness challenge. Can Britain compete with the rest of the world so that we continue to raise the living standards of our citizens? There is a public services challenge—can Britain build modern reformed public services so that we continue to improve the quality of life in our communities? There is also a pensions challenge—can Britain solve the pensions crisis, and give millions of people security in their retirement?

Let us start with the competitiveness challenge.

Mr. Alex Salmond (Banff and Buchan) (SNP): Is it true, as The Times reported today, that the shadow Chancellor was intent on pursuing an honest career in journalism before he met someone from Tory central office in a pub? Is that not an object lesson in the dangers that can lurk for young people in drinking dens?

Mr. Osborne: I think that I had better answer that question at the end of the debate.

I was talking about the competitiveness challenge facing the country. Britain is losing ground to the rest of the world. Under this Government, Britain has fallen from fourth to 11th place in the World Economic Forum's international competitiveness league. The amount of direct foreign investment that we attract has almost halved. Our share of world trade has plummeted at a time when the share enjoyed not just by China and India but by Germany has increased. The Governor of the Bank of England said earlier this month that our

for every year of the Labour Government. He said that that was

Why does the Chancellor not stick that record in one of his election posters?

People realise that Britain is going to struggle to compete in future for low-cost low-skilled work, but they must also accept that highly skilled jobs are under threat too, not just from China, which is producing 2 million graduates a year, or India, which has more than 1,300 engineering colleges and 270 universities, but from central and eastern European countries.

Mr. Kevan Jones (North Durham) (Lab) rose—

Mr. Osborne: I shall give way to the hon. Gentleman. He is a Brownite, so presumably he wants the Chancellor to take over sooner rather than later.

Mr. Kevan Jones: Part of the competitive economy is a well-trained and well-educated work force. Does the hon. Gentleman, as an ex-public schoolboy, stand by his party's commitment to passporting money to parents,
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or does he agree with the hon. Member for Buckingham (John Bercow) that that policy would be rejected by the electorate? One would expect most people to give up such a policy.

Mr. Osborne: I suspect that that was a veiled attack on the Prime Minister and his public school education, which is true to form for the hon. Gentleman. I remind him that our education policies, which were designed for England, received the majority of the votes in England—but obviously we will review them. We do not want to compete by cutting wages and living standards. We want to compete by improving our country's productivity.

The only thing that drives sustainable economic growth and a long-term improvement in living standards is productivity growth. The Chancellor himself calls productivity

His record, however, simply does not measure up to that yardstick. Productivity growth has fallen in each of the last eight years, and the productivity gap with the United States is widening. Why is that the case? It is not because the British people do not have the dynamism and the energy to succeed in the world, but because they are being held back by the Chancellor's obsession with meddling and interfering—his micro-management of the micro-economy. For a start, he is holding back businesses with £40 billion-worth of new regulation. He admits that there have been too many false starts on cutting red tape. He should know, because he started them. He launched and relaunched regulatory drives in 1997, 1998, 2001, 2003 and 2004—and he will probably launch another one when he speaks in this debate.

Instead of judging the Chancellor on his words, we will look at what happens on the ground, and whether life becomes easier for the small business struggling under a mountain of Government paperwork. He will not get very far lecturing the rest of Europe about the need for economic reform when his own MEPs have voted to extend the 48-hour working week to Britain. I keep reading that he is the most powerful man in the Labour party and that no one dares to sneeze in its councils and committees without his say-so, so why did he allow his MEPs to stick two fingers up to him just as he is about to take over the chairmanship of meetings of European Finance Ministers? I would be interested to learn what he has to say about his MEPs.

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