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Mr. Stewart Jackson:
Does the hon. Gentleman agree that the major engine of economic growth was the
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decision in 1992 to leave the exchange rate mechanism, a scheme supported by the great and the good, including the Labour party and the present Chancellor of the Exchequer? Does he agree that that is why the economy has grown over the past nine years?
Mr. Todd: It is certainly entertaining to have 1992 raised when the current Leader of the Opposition was the ghostly figure behind Norman Lamont at that fateful time. I would not have thought that that topic would benefit from further exploration, so I will not venture into it. I will, however, make a European point towards the end of my remarks.
Our level of debt is low by international standards. I take the points about off-balance-sheet figures, which, to be honest, could apply to any nation in the world. If we attempt to use internationally based comparisons, our position is good. Few would dispute that.We have some other advantages, however, to which we need to play firmly over the next few years.
First, we have a reputation of being a liberal country with liberal markets and an emphasis on freedom of movement, freedom of expression and freedom of ability to establish businesses and prosper. My concern is that that is in a world in which protectionism is once again starting to rear its head. I have always been hostile to protectionism, whether in the European Union contextas there are concerning signs of the EU considering and being more sympathetic to protectionist measures than it shouldor in the major threats in the World Trade Organisation process of countries stepping back towards protectionism all around the world. We should play to that fundamental advantage with all our strength, as it builds the skills and flexibility on which, as a relatively small nation, we can play well.
Secondly, the English language is a huge unsaid advantage in the global economy. I earned my living in the media industry, in which we play way above our strength as a result of that advantage. We have another considerable strength in the diaspora of our former empire, and many people trade freely with us partly because of the number of those on our shores who come from where they live. We have a large, prosperous and entrepreneurial Indian community. We have a Chinese community, which, again, has strong links.
If we can play to those strengths over the next few years, I think that we will compete more effectively than any other nation in western Europe, and I am sure that we can do so.
Andrew Selous (South-West Bedfordshire) (Con): It is important to consider Britain's relative economic position, in terms of competitiveness, vis-à-vis the major countries with which we do business. Under this Government, according to the World Economic Forum, we have fallen from 4th to 13th in terms of competitiveness. Productivity in the private, wealth-producing sector of the economy, running at 2.6 per cent. under the last Conservative Government between 1992 and 1997, decreased under the first term of a Labour Government to 2.1 per cent., and today is only at 0.4 per cent.
Savings have also decreased rapidly. Between 1992 and 1997 the savings ratio was 9.7 per cent.; today it stands at just over half that5.5 per cent. The World
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Economic Forum rates the United Kingdom 98th out of 117 countries, and says that our low savings ratio puts Britain at a "significant competitive disadvantage". That is obvious: it is the savings of the nation that go towards providing a decent savings system for our pensions and the business investment that we need to create wealth for the future. Business investment is also at an all-time low. At 9.7 per cent., it is at its lowest level since records began in 1965.
Last year British growth was below the G7 average, below the OECD average and, indeed, below the global average. This year, it is actually below trend growth. Then there is taxation, which is important when businesses decide where to locate in the world. As we have heard from Members today, many businesses do have a choice. When the Government came to power, this country had the 10th lowest business taxes in the developed world; we now have the 10th highest. A few days ago, the ITEM Club and the accountants Ernst and Young concluded that, excluding North sea oil revenues, the UK tax burden was higher than it had ever been. I understand that, on the basis of the figures produced by the Chancellor today, by 201011 it will be touching some 41 per cent. of gross domestic product.
Why is that important? There is evidence that other countries around the world that have taken a different tack in regard to tax rates have experienced significantly higher levels of economic growth. In Australia, John Howard's Government came into power in 1996, just a year before our present Administration. They promptly set about cutting taxes, and as a result the Australian economy has expanded by a third so far, compared with a quarter in the United Kingdom.
What the Government often miss is the fact that a cut in tax rates will lead to an increase in the total tax take as business activity increases and companies from around the world decide to locate here. Ireland has done the same: it cut taxes on business and now has a higher income per head than the United Kingdom. At the other end of the spectrum, Swedenwhich has the highest taxes in Europe and possibly in the worldnow has a pre-tax income that would make it the fifth poorest state in the United States, just behind Alabama.
There are important lessons to be learned from our relative global competitive position. If we want a thriving economy, we must secure a decent tax take with which to fund the public services that we all want.
Chris Huhne : Perhaps the hon. Gentleman will tell us whether the figures that he is using have been adjusted for purchasing power parity.
Andrew Selous: In terms of pre-tax incomes, as far as I am aware the Swedish example has been adjusted. I think that there is a significant lesson for us to learn, whether we look at Australia, at Ireland or at Sweden. Overall, the evidence on relative economic advantage is pretty conclusive.
Rob Marris: Will the hon. Gentleman give way?
Andrew Selous: I will after I have made a little more progress. One or two other Members want to speak.
The borrowing that the Chancellor announced today has been described, quite properly, as deferred taxation. That is exactly what it is, because our constituents will
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have to pay it back in the years to come. The figures are £37 billion for this year and £175 billion over the next six years. Those are very large sums, equating to £7,000 for every family in the countrya figure that people can relate to slightly more easily. In addition, of course, there is the off-balance-sheet debt, be it from unfunded public sector pensions liabilities, Network Rail or, indeed, private finance initiative and public-private partnership schemes, all of which will bear very heavily on the public purse. I am not arguing that we should not, therefore, have gone ahead with certain PFI and PPP schemes, but we need to be honest and to take into account the impact of the payback costs on the public finances going forward.
This month, the CBI has estimated that the cost of UK regulation on business under this Government is approaching £50 billion. My hon. Friend the Member for Braintree (Mr. Newmark) told us that Google and Amazon have recently decided to locate in Ireland, rather than the UK; so has Oracle. At £47 billion, our trade deficit is the largest it has ever been. Our trade deficit with China increased by 20 per cent. during this year alone. I find it completely ridiculous, moreover, that Belgium is exporting more to India than we are, bearing in mind our historical and cultural links with that great country.
The Chancellor talked a lot today about education and he was absolutely right to do so. Business people tell us that one of the issues that they are most concerned about when deciding whether to locate here or elsewhere is this country's skills levels. As far as I am aware, Amazon decided to locate in Ireland in part because its work force has greater language skills than does the UK's. That should be a significant lesson to us. We need to increase language ability in our schools, because we do not do nearly well enough in that regard.
The Opposition welcome the money for our schools announced in today's Budget, but here I return to the issue of literacy and numeracy, which is tremendously important. According to the CBI, employers believe that one in seven adults in the UK is functionally illiterate. As my hon. Friend the Member for Braintree pointed out, according to the National Audit Office the total number of adults in that category is increasing by 100,000 per year. The Department for Education and Skills told us in January that one in three 16-year-old school leavers do not even have five A to C GCSE passes. As a result of all that, we are ranked 33rd in the world in terms of the quality of our state education system. That simply is not good enough for the fifth strongest economy in the world.
What can we do about that? I am delighted that the Government have at long last agreed that synthetic phonics should be the basis for teaching children to read in our schools. Those of us who are familiar with the work of Melanie Phillips know that she argued for synthetic phonics many years ago in her book "All Must Have Prizes". I regret that this issue became a matter for party political debate. I salute the efforts of my own party, particularly my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb), who has campaigned tirelessly on this issue. I hope that Members in all parts of the House are pleased that we have eventually adopted a position that should lead to an improvement in our children's reading ability.
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On maths teaching and numeracy, I hope that the Government will take note of the many children throughout the country participating in the Kumon maths scheme, in which, I should point out, I have no financial interest whatsoever. There is a Kumon centre in Dunstable, in my constituency, to which many children from both independent and state schools go. A DFES study on this scheme would be useful. However, it is what goes on in schools that is crucial. The money is welcome, but it is hard for children to get the education that they will need in a competitive world when discipline and control are absent.
A lady in my constituency has been a teacher for more than a quarter of a century and she told me about an incident that happened in one of my upper schools only a couple of weeks ago. One class was being disrupted by a pupil and the teacher concerned was unable to handle it. He appealed for help from other staff, but nothing happened for half an hour. That was because the spare member of staff allocated to help in such situations was dealing with an incident in another classroom, where a different child was disrupting a lesson. As a result, the children in the first class to which I referred learned nothing for half an hour. Discipline is fundamental to education. The Government have launched a review into the matter, but some of our schools face very serious difficulties that we need to address.
More funding was announced today for further education, and I welcome that. Further education gives people the second chance that they desperately need and which they did not get at school, but the Government have adopted a very stop-go approach. Dunstable college in my area lost 25 jobs and almost 1,000 student places last year because of a budget cut. Why cannot we have a smooth progression? What is the point of cutting funding one year and increasing it the next? That approach has a very serious impact on the morale of both staff and students.
The Chancellor said that a link would be established between British students and American business schools. I am all for such schools, but why should taxpayers' money be used? The excellent Cranfield business school is near my constituency, and Luton university has very good business courses. I am sure that both institutions would welcome some of that money. No doubt American business schools turn out some excellent graduates, but I question whether taxpayers' money should be used for that purpose.
The same stop-go approach is evident in respect of science. We all know that the science base is essential for this country's future, but science departments up and down the country are being closed because they are so expensive. A couple of weeks ago, I had the privilege of welcoming one of my constituents to the Terrace of the House, where an exhibition of her work was being held. She came to my constituency from Exeter, where the university's chemistry department had been closed because it was so expensive, and she now teaches at the Open university. The same thing is happening all over the country. Why cannot we have a consistent approach? I welcome the money that the Chancellor is giving to science, but science departments around the country should not be closing.
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Very little mention of health was made in the Budget speech. That was surprising, as all hon. Members know from their post bags that health is a very serious issue. My PCT is the Bedfordshire Heartlands, which has a deficit of £20 million. The Luton and Dunstable hospital has had to close an elderly care ward, and there is almost no prospect that Leighton Buzzard, the largest town in my constituency, will get any sort of community health facility.
Matters are likely to get worse next year. The managers at my PCT are very good, but they have to operate under such severe constraints, in the form of directives and targets set by the centre, that it is very difficult for them to exercise good financial stewardship.
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