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27 Nov 2006 : Column 860

Dream on, Chancellor of the Exchequer. My hon. Friend the shadow Chancellor has made it clear that he will not produce a shadow Budget until much nearer the general election. How wise he is. We have no idea how much worse the public accounts will be before we have the chance to govern the country again. We also believe that if the Chancellor becomes Prime Minister, he will need to delay a general election until 2010, so there is a lot more scope for him to debauch the public accounts. The Chancellor is driven to living in a make-believe world where any random comment by a Back Bencher or any aspiration by the Conservative party is wrongly reported as likely Government policy for 2010, which really does not do the House any good.

Michael Connarty (Linlithgow and East Falkirk) (Lab): The right hon. Gentleman may come on to the fact that a number of shadow Ministers have made spending commitments during the Queen’s Speech debate. If those commitments are not misleading the public about what a Conservative Government would do, what is the purpose of making them? Those promises were made, but the right hon. Gentleman now says that no one should take them seriously. Tell the public that.

Mr. Redwood: The sad truth of life, which the public understand but the hon. Gentleman does not, is that we have no power to do any of those things, and will probably continue not to have that power for another three years, because of the likely delay in the general election. My right hon. and hon. Friends on the Front Bench are quite entitled to give the Government advice about our priorities, and about what we would like more money spent on and what we would like less money spent on, and we do both of those things. We would like to save all the money on identity cards and unnecessary regional government, which we would like abolished. We would like far less bureaucracy and an end to the enormous controls over local government that cost more than £1 billion a year.

We therefore recommend spending reductions and some spending increases to this Government now. We do not want to have to equip our forces properly in 2010 because they were not properly equipped in 2006; we would like them to be properly equipped now. We are not talking about dealing with the spending crisis in the hospitals when we come in 2010; we are giving the Government advice to deal with it now. It is on their watch. They are wasting so much money that it would be quite possible to sort out those problems with inadequate spending in some areas, save more money in other areas and end up with better public accounts, if only they would learn how to spend money more wisely. I do not want to get involved in the political ping-pong that the Chancellor has decided should be the substance of today’s debate, as it frustrates the public and means that we do not discuss the real issues of how we collect money, how much money we collect and how we spend it.

The Economic Secretary to the Treasury (Ed Balls): The right hon. Gentleman should not downplay the importance of his role. Will he inform the House of the date on which he plans to produce his report on competitiveness for the shadow Chancellor?

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Mr. Redwood: That is a sensible question, and if the hon. Gentleman had been present for previous debates, he would already know the answer. I have told the Chancellor many times that I aim to report in the summer of 2007. I am delighted that the Chancellor already knows what will be in my report. He is ahead of me, as I have not yet decided what I and my committee will recommend on school choice, patient choice, health spending and the other issues that he thinks we will cover—we may or may not. I have already published a few ideas on the problems of this economy and why it is not as competitive as it should be.

Let us begin with the issue that always fascinates the Government most: taxation. The Chancellor is right that I gave a presentation a long time ago saying that Britain was still fairly tax-competitive. I went on to say that it was going in the wrong direction and becoming less tax-competitive. Were I giving such a presentation today, I would conclude that we are now not tax-competitive enough. How many more companies need to say that they are thinking of going offshore before the Chancellor and the Economic Secretary will do something? Have they considered what has happened in the case of Shell, which has decided to put everything into Holland? Do they realise that Holland, let alone Ireland, is now more tax-competitive than Britain? Will they understand that Ireland has been growing three times as quickly as the United Kingdom on this Chancellor’s watch? The main reason for that, which he does not wish to accept, is that Ireland has set much lower business tax rates, which have acted as a phenomenal magnet for inward investment into Ireland.

Ed Balls: Let us be clear. The right hon. Gentleman is going to produce a report next summer in which he will propose tax cuts for business to make our economy more competitive. Clearly, that is the implication of his speech so far.

Mr. Redwood: That is one possible conclusion, but I will produce a grown-up report, which shows where we will get revenue from, how much we will spend and so on. I have not completed all that work yet. I am guided and helped by my noble Friend Lord Forsyth, who has produced an excellent report setting out how he would propose to cut the headline rate of corporation tax and pay for some of that through changes to the allowance system, which could create a much fairer system for many companies. That is an interesting idea, which we shall evaluate.

Mr. Brooks Newmark (Braintree) (Con): It might help the Economic Secretary to know that there is something called the Laffer curve, and the evidence seems to show that, as Ireland has become more tax-competitive, its Government have raised more tax revenues.

Mr. Redwood: The increase in taxation in Ireland has been phenomenal, and the super-fast growth of the Irish economy stimulated by lower business tax rates has been the main factor. I have not heard any other possible explanation from the Government. It is some four or five months since I first raised the issue, and there is still no official Government position on why Ireland’s growth has been three times that of the United Kingdom. Nor is there any answer to my supplementary
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question: why does Scotland do so badly, only growing at 13.5 per cent. under this Chancellor between 1998 and 2004, compared with 20 per cent. growth for the UK and 61 per cent. for Ireland? That seems to show that the current Chancellor’s model of heavy public spending and public sector dependence in Scotland, which he seems to like so much, is particularly bad for the Scottish people. As we see in the parliamentary Labour party, many of Scotland’s most talented people come to England in search of better jobs.

Stewart Hosie (Dundee, East) (SNP): Public sector size is an issue, which the right hon. Gentleman should take on board. It is useful to bear in mind that were the Scottish oil and gas sector included in GDP, the public sector would account for only 41 per cent. of GDP, not 51 per cent. With regard to tax, does he agree that if the rumours are to be believed and Northern Ireland is to have a reduced corporation tax rate, offering that to one part of the UK and not the others would blow a hole in the Government’s argument that it is not a useful measure?

Mr. Redwood: I am delighted if the Government now think that Northern Ireland should have that lower corporation tax rate to compete with southern Ireland, but I want it for the whole United Kingdom. If it makes sense for Northern Ireland, surely it would make sense for the UK as a whole.

Ed Balls: Is the right hon. Gentleman saying that he will propose a reduced corporation tax for the whole United Kingdom?

Mr. Redwood: That is a possibility, although the Minister must understand that I study such matters carefully before committing my name to a particular recommendation. But the case is now very clear, and he and the Chancellor ought to be studying it and coming up with an answer, because they have the opportunity to do something. It is a fact of life that some very large companies are thinking of going offshore. One or two have already done so. Ireland is beating us very easily, and is now a richer country per head than the United Kingdom as a result of the Chancellor’s watch. The Chancellor needs to come up with an answer for why we are so slow—particularly in Scotland and western and northern England—compared with Ireland, and what he is going to do about it.

Mr. Dunne: Perhaps my right hon. Friend agrees with me that the Financial Secretary needs to listen more to his new friends in the City, where I believe he is undertaking a prawn cocktail offensive. According to a report by the Investment Management Association and KPMG, since 1995 the increase in funds raised in Ireland has been double that in the United Kingdom. Why?

Mr. Redwood: It is obvious that a more lightly taxed and better-regulated area—which I think southern Ireland now is, in some respects—will do much better. That is a simple example, which the Government ought to study and act on very quickly.

There are many other areas in which the Chancellor seems now to accept that work needs to be done. The Prime Minister has a strategy unit studying all this, and
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we are told that the Chancellor’s own reports are imminent. Why has it taken almost 10 years for the Government to realise that we have a transport crisis in this country? It is no good their saying that there was not enough investment in the railways 35 years ago. There has not been enough investment in any kind of transport for the last decade. It was this Government who cancelled the road schemes. It is this Government who have come up with no new main rail scheme at all: they merely finished off the channel link that we had already introduced. It is this Government who have not come up with any new tube line, unlike the last Conservative Government, who initiated a major new line. Absolutely nothing has been happening on this Government’s watch in terms of major investment in transport.

I think the Government have now realised, after nine years or more, that our big problem is a shortage of transport of all kinds. It is no good taking the route suggested by the Deputy Prime Minister, who said that the problem could be dealt with by our switching modes—making it very difficult for people to drive around in their cars and vans, so that they would go shopping by train and transport their goods as rail freight. Given that the railways account for only about 6 per cent. of journey miles undertaken, even if the Government could double their size that would deal with only a couple of years’ increase in travel in a strongly growing economy. The Government must realise that while we need more railway capacity, we also need much more road capacity. If the Government wish to be serious about reducing carbon emissions, they must understand that making traffic flow more swiftly is a way of doing that. The main problem of carbon emissions for road transport is the number of cars, lorries and vans that are stuck in traffic jams, thus creating a great deal more pollution.

Another problem is that the Government heap regulation upon regulation on our poor economy. That is why the trend rate of growth in productivity and output per head is slowing under this Government: the extra burdens of tax and regulation are proving too great. It is why we have lost more than a million manufacturing jobs on the Chancellor’s watch so far. The Chancellor never bothers to tell the House about that figure, although he used to be very interested in manufacturing job losses when he was in opposition. He always told us that he would follow a policy that changed all that, but in many ways his record is far worse than that of previous Governments, with over a million jobs gone and all those interventions—all the extra regulation and taxation—getting in the way of manufacturers’ ability to flourish and expand their businesses here.

Of course we need a major deregulation programme, but all we ever get from the Government are statements of good will and good intention. We are told that they will act at some point, but I believe that since the Prime Minister announced his initiative a further 5,000 regulations have been added to the statute book. I do not suppose the Minister can recall the names of any of the regulations that the Government have struck off, so few and so unimportant were they. We need the Government to do something like what the Dutch have done. They have in place, and working very effectively, a system of cutting the regulatory burden imposed by each Department year on year by setting targets.

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Normally this Government, under this Chancellor, love targets. The Treasury loves anything that enables it to put its fingers into the pies of other Departments, so why does it not take on this task, and set regulatory budgets, which will lead to a decline in regulatory costs year after year? So much regulation achieves the opposite of what it sets out to achieve. So much of it produces very little in the way of benefit compared with the enormous cost that it imposes.

On the energy problem, I do not know when the Government will respond to the obvious pain of the heavy energy-using industries, whose representatives have been coming to this House for many months to lobby MPs of all political persuasions. The price of energy in Britain is far too expensive compared with places such as Holland, let alone lower wage areas of the world. That is why we are losing big new investments such as that in extra steel capacity. Such investors would rather go to a place like Holland where the gas supplies are more reliable and the price is a lot cheaper than here in the United Kingdom.

On this Government’s watch, we have in terms of energy gone from being a relatively low-cost country to being a high-cost and uncertain supply country. On this Government’s watch, we have had no proper response on how they will fill the gap as and when the nuclear power stations have to be retired, and as the easy supplies from our sector of the North sea dwindle or no longer meet the requirements of our gas-using industries, homes and offices.

We desperately need policy now from this Government on energy, but all we have had is a weak statement of intent and an expression of the wish to consult and have another public debate on the nuclear issue. We are beyond the point where we need a debate; we are at the point where we need regulatory decisions and other decisions from the Government, and ways in which the private sector can then get on and make the necessary investments.

I suspect that the Economic Secretary to the Treasury is already thinking that he can now add up some figures to show that what is wanted is more railway investment, more road investment and more energy investment and that that can all be put down to the public sector. But please will those on the Treasury Bench be a little less juvenile on this occasion? Most, if not all, of that investment could be put in through private sector activity. We know that people want to spend more on transport. We see them spending fortunes on private transport. They spend a great deal on new vans, new cars and new lorries because they feel that that is the only option that they have for many of their journeys and business tasks. They are prepared to spend, but the Government have to grant the planning permissions, create the framework and provide the rules for infrastructure investment, because infrastructure is important, and there is a need for it to extend across the country, which obviously affects interests around the country.

Investment in energy should come wholly from the private sector. Why is that not happening at present? Because the Government are not giving a certain sound on the trumpet in respect of how the rules will be worked out, what the pricing mechanisms will be, which planning permissions will be available and which technologies are favoured. It is up to the Government to make clearer sounds, and private investment will then follow.

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One of the very few positive moments in the Chancellor’s speech came when he said that he was going to tell us something about improving skills in Britain, but he then went off on yet another rant about some statement made by some Conservative Back Bencher, which obviously fascinated him rather more. It would have been good to have heard from the Chancellor about what he is going to do about the 5.3 million people on benefits, many of whom would like, or need, jobs. We know about the unemployed; we have already heard in this debate about the plight of the unemployed and rising unemployment. But there are many other people, such as those on single-parent benefit and disability benefit, who would like jobs of a kind, and who could make a contribution, but they are not managing to get those jobs.

We are told that the Government wish to do something about that. What are they going to do about it? Ten years on, have they yet found the magic key to the door? Will they do something to improve the quality and attractiveness of vocational skills? Will they get rid of some of the awful bureaucracy that stands between the employer and the potential student and the vocational training course? Will they do more to strengthen the vocational strand for 14 to 16-year-olds in schools? A few schools are doing well—as is one in my constituency—but others have not copied what they do or followed on from that.

When will the Government do more to help higher education? We have some very fine universities in this country, and they remain high up in the world league tables, but the Chancellor must have noticed that Harvard is getting into a league of its own, given the amount of money it raises and its success not only in attracting money, but in investing that money very well. I suspect we in Britain need to freshen-up the range of tax reliefs to private donors to universities, because we need to strengthen the voluntary principle and the endowment funding of our universities; that is falling a long way behind the levels of private endowment that the leading US institutions enjoy.

Why does that matter? It matters because if people want to have a top university, they have to be able to pay top dollar to get the best brains to become faculty members. If they wish to have a top university, they need to attract the most talented students from anywhere in the world, and some of them come from very poor families, and if they can offer bursaries, scholarships, travel grants and so forth, that helps to attract such talent.

Will the Chancellor also have a word with the Home Office about such people’s access to visas? Genuine students have difficulties in getting visas to enter our country, which puts them off and means that they would rather go to the United States of America. For example, there can be difficulties in them getting a visa for one year of working after they have graduated in Britain—because they wish to get the experience as well as the academic qualification—before they go home, where they wish to go. The Government could take an interest in practical measures and in doing something, if they were not spending all their time reading Conservative websites and Back-Bench Conservative Members’ speeches.

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We find it very flattering that everything we say is of such enormous significance. But the Government must understand that they are, believe it or not, the Government. They are responsible for the lack of transport capacity, the lack of energy capacity and the lack of tax competitiveness that is now getting worse in this country, as well as for the over-burdensome regulation, and for the lack of good vocational skills programmes, which could get many of those millions who are currently not in the work force back into that.

5.56 pm

Michael Connarty (Linlithgow and East Falkirk) (Lab): It was a pleasure to listen to the grown-up speech of the right hon. Member for Wokingham (Mr. Redwood), which was much better than the childish rant of the shadow Chancellor, the hon. Member for Tatton (Mr. Osborne). I do not know what has come over the right hon. Gentleman, but I think that he should be brought back to the Front Bench to make a serious contribution, rather than remain stuck on the Back Benches. I also enjoyed the contribution of my hon. Friend the Member for Cannock Chase (Dr. Wright), and I might refer to some of the things that he said later.

I shall not pick up on all the points made by the right hon. Member for Wokingham, but I wish to raise certain matters. It is stated in the second paragraph of the Queen’s Speech:

The Chancellor should be commended for doing that over the past decade. The Queen’s Speech also states that the Government will try

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