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Mr. Graham Stuart: Is my hon. Friend aware that due to the failure to implement the tax credit system, some of my constituents had to rely on handouts of food parcels from citizens advice bureau staff[Interruption.] Labour Members say that is not true. If the Minister would like to visit my constituency, I will introduce him to the CAB staff who were carrying food parcels in the backs of their cars as a direct result of the Government's failure to implement the system[Interruption.]
Mr. Deputy Speaker: Order. We cannot have this. If the Minister wants to intervene, he must stand at the Dispatch Box and intervene in the normal way. We must not have continued comments from a sedentary position.
At a Sure Start centre in my constituency, I talked to the 20 young mothers who were there. I asked how many of them had had some dealings with the tax credit system and all 20 put up their hand. Then I asked how many of them had had a problem with tax credits and 14 put up their hand. The Minister finds that amusing, but 14 of the 20 said that they had had problems with tax credits. In discussion, it became clear that my suspicion was true: the damage done when money is clawed back from families on modest incomes
The Chancellor should be judged not by his own assessment but by the assessment of others. I have looked at assessments made by the International Monetary Fund, the Organisation for Economic Co-operation and Development and the European Commission of the current state of the UK economy. Paragraph 14 of the European Commission's assessment, on 22 Februarybefore the Budget of coursestates that it would be appropriate for United Kingdom to
The European Commission is warning that it will be difficult for the UK Government to return within the 3 per cent. limit. The Chancellor has done the opposite in his Budget. He appears to have decided to spend and to borrowthe very opposite of what the European Commission recommended.
"The primary balance, estimated as a deficit of 1 per cent. of GDP in 2005/06, returns to balance in 2008/09 and reaches a surplus of ½ per cent. of GDP by 2010/11. The improvement in the nominal balance is mainly driven by a pick-up of revenues, partly due to the projected cyclical recovery of the economy".
That refers to an absolutely classical economist's J-turn. The European Commission is saying that the situation in the United Kingdom will get a little worse, but it will get bettera typical J-curve.
The Chancellor, having been warned that he will come very close to the 3 per cent. limitin fact, he is over it in certain wayshas taken the opposite view and decided to expand expenditure. He recognises that there are problems, but he has decided to trade his way out of them. It is certain that there will be curbs on expenditure, of which we heard nothing in the Budget, and that there will be higher taxation, which is inevitable, and that that will lead to lower productivity.
Under this Government, we have already fallen from fourth to 13th in the authoritative world productivity table produced by the World Economic Forum. We cannot afford to lose out in the productivity table; we need to consider the competition. Let us look just at China. In China, 26 cities are installing underground railways. China wants to build 50,000 miles of three-lane highway in five yearsthat is the same size as the American highway network, which took 40 years to buildand it is building 30 nuclear power stations. The competition is ferocious; we should be facing up to itinstead, with this Chancellor, we have more tinkering, more micro-management, more promises and more taxation: more of the same, and it will not help.
John McDonnell (Hayes and Harlington) (Lab): I clearly welcome much of what the Chancellor has said today about investment in public services and the development of a stable economic growth path. The Chancellor set the scene by referring to the economy's fundamentals and the balance between borrowing and taxation, which has been often mentioned in the debate so far, and competitiveness and elements of equity in the distribution of resources in the economy. I am grateful to him for that, because it was an excellent way to set up the debate for the next few days.
There are important factors to take into account in describing Britain in 2006 and in the economic policies that the Government must address. I want to set the scene somewhat differently by describing other elements in the equation that depict life in Britain today and that need to be addressed. I suggest that the 2006 Budget must place as much priority on addressing those issues as on those identified by the Chancellor in his macro-economic display today.
The Chancellor set his scene by describing Britain as viewed from the Treasury, the Bank of England, the City and, in my opinion, slightly too much as viewed from the CBI conference hall, but I want to describe Britain as we see it on the streets and in our communitiesindeed, the Britain that virtually every Member of Parliament witnesses in their weekly advice surgeries and in the daily volume of their correspondence. Those are the institutions and people whom we meet, and those are the issues and the challenges that we face as MPs in our constituencies.
I regret that the Budget did not contain some measures that I would have welcomed today, as they have been debated for a considerable time not only in the Labour party, in particular, but across the country. I should like to outline some of those measures, and perhaps we can enter into a discussion in the coming
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months about how we can address them. I congratulate the Chancellor on the undoubted progress that has been made in lifting the poorest pensioners out of poverty, but we must bear in mind the fact that, first, pensioner incomes remain relatively low, with annual assaults, particularly from energy and fuel charges, on those limited incomes. The basic state pension stands at only 15.6 per cent. of the average wage at the moment.
Secondly, the Chancellor's strategy has increased the proportion of pensioners on means-tested benefits to just over 50 per cent, but each year £1 billion is unclaimed. I accept what my hon. Friends have said, and I have been working with the Pension Service in my constituency to try to ensure that benefits are claimed. I pay tribute to the Pension Service for its work on the ground. I also pay tribute to the support it has had from the Public and Commercial Services Union. Advice has been given and there has been co-operation with the union, and the service has worked with the union towards flexible working on the ground.
The Budget does not address restoring the link with earnings, which was recommended in the Turner report. Pensioners thus will still fail to share automatically in the growth and wealth of the country and the benefits of the Chancellor's policies on economic stability and growth. My straightforward recommendation is that we raise the basic state pension to the guaranteed credit level and restore the link with earnings. Unlike other hon. Members, I do not have a calculator that runs to trillions, but House of Commons Library figures suggest that my recommendation would cost £7.3 billion, which would be a fairly minimal sum to lift a large number of pensioners out of poverty and enable them to share the future wealth of the country.
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