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(ii) so far as it is applicable to services, applies to services of every description— [Mr. Gordon Brown.]
1.22 pm
Mr. David Cameron (Witney) (Con): Well, the Chancellor has finally given us a tax cut. He normally does that before a general election, but he is in such a deep hole that he has had to do it before the leadership election. In the process, he has blown open the argument that he has been making year after year. He is conceding what we have said all along—that it is possible to increase spending and cut taxes; that yes, it is possible to share the proceeds of growth. But this Chancellor cannot run away from his record. He is the Chancellor who has put the tax burden up. He is the Chancellor who has taken one tax down but put 99 taxes up. The average family is paying £1,300 more because of his Budget decisions. We will check carefully what is happening to the aligning of national insurance, because we think that it might be hitting middle-income families. [Interruption.]
Let me tell you, Mr. Deputy Speaker —[Interruption.]
Mr. Deputy Speaker: Order. By sitting down, the right hon. Gentleman did my job for me. It is inevitable that a major statement of this kind produces reaction. It has been relatively mild so far. Let it stay that way.
Mr. Cameron: Thank you, Mr. Deputy Speaker. It is a bit like Stalin: they are cheering him on now—he will wipe them out later.
Let me tell you, Mr. Deputy Speaker, what the Chancellor’s real problem is. It is not that he is a Stalinist who holds all his colleagues in contempt, although that probably does not help; it is that he has wasted money on an industrial scale. That is the truth. His great experiment in tax and spending has failed. He is an out-of-date politician wedded to state control, and the question that everybody is asking is: where has the money gone? This is the “Where has the money gone?” Budget. For 10 years, the Chancellor has been telling us that education is his priority—he did it again today—but 40 per cent. of primary school leavers cannot read properly. For 10 years, he has been telling us that he wants a competitive economy, but he has given us the biggest tax burden in our history. For 10 years, he has been talking about child poverty—he did it again today—but the number of people living in
severe poverty is up by 400,000. UNICEF says that Britain is the worst place in the developed world to bring up children.
For 10 years, the Chancellor has been telling us about the NHS. Today there was barely a mention. All that he has done is to reannounce this year’s money, which we already knew about. He has the figures for the future. Why will he not tell us about them? Does that not tell us everything that we need to know about the crisis in the NHS? The hole in the heart of this Budget is the failure to fix the NHS.
The NHS was not the only thing that the Chancellor hardly mentioned. Let us look at what was in the Budget that did not get a mention in the speech; that is always an important list. Soon, the Chancellor and his allies will be going round the country saying that the spin, distortions and half-truths of the Blair era are coming to an end; some of them have started already—but actually, with the Chancellor spin will get worse.
Let us look at today’s Budget. The Chancellor did not point out the savings ratio, which is hidden on page 255 of the Red Book; it has halved since he took office. Business investment as a share of gross domestic product, one of the keys to future growth, is on page 257 of the Red Book; again, it is below 10 per cent. and going backwards. What about page 260 of the Red Book, which says that
“the overall trade deficit is up”?
Again, there was not a mention of that from the Chancellor.
The Chancellor talked about research and development tax credits, but he did not tell us that since they were introduced, R and D has actually fallen. He barely mentioned the Lyons report on local government. He normally trumpets these reports and tells us how proud he is, but today there was not even a mention. Make no mistake—the measures in the Lyons report will hit every family in the country. The Chancellor did not mention retail prices inflation, either, which is now at 4.6 per cent.—almost double what he inherited. All those things are in the Budget; none of them was in the speech. [Interruption.] I know that the Chancellor and the Prime Minister are having their annual conversation, but I do not know why he bothers talking to the Prime Minister; he is not “bovvered” any more.
A fortnight ago, the Prime Minister said that the arts were a “core” part of the script. They were not even in the Chancellor’s script. The Chancellor boasted about foreign direct investment, but he did not tell us that the Red Book shows that half of last year’s foreign direct investment was accounted for by the restructuring of one company—Shell. That did not get a mention. In spite of all the extra taxes, let us look at the borrowing figures. The Chancellor listed them through gritted teeth. They might have been whitened, straightened and privately polished —[Interruption.] He has spent all that money on his smile, but he will not even give us one. He is not going to win over Kylie like that.
Let me read back the five-year plan—I mean, the Budget. This year, the Chancellor will borrow £35 billion, then £34 billion, then £30 billion, then £28 billion, and then £26 billion. That is a total of £153 billion by 2011, which is £8 billion more than he
told us about just three months ago. This is the Chancellor who has built up a pile of debt. Again, where has all the money gone? We have had a bonanza on spending on the NHS, but nurses are being sacked. He brags about people’s long-term security, but the pension system is shot to pieces. He boasts about spending on young people, but the number not in education, employment or training is up by a third. So he has not just borrowed billions; he has wasted billions. What a wasted opportunity—billions taxed, billions borrowed, billions wasted. [Interruption.]
The Chancellor has run out of money, so let us look at the big tasks, the big things that he said —[Interruption.]
Mr. Deputy Speaker: Order. I am hearing far too much noise from the Labour Benches—and I do not want it encouraged from the Opposition Benches, either.
Mr. Cameron: It is difficult for them, Mr. Deputy Speaker; they are just realising that their next leader has the tendencies of Stalin and the poll ratings of Michael Foot. The Labour Front Benchers are all standing in the deputy leadership contest because they know from history that that is the one way to avoid the gulag.
Let us look at the big tasks that the Chancellor set himself 10 years ago. He said that he would make the economy more productive, make work pay and tackle inequality. He called productivity growth the
“fundamental yardstick of economic performance”.
It has almost halved. It is now lower than in France, lower than in the United States and lower than in the G7 as a whole. As the Prime Minister’s former economic adviser put it, the Chancellor is “furring up” the arteries of the economy. Apart from that of India, our tax code is now the longest and most complex in the world. The World Economic Forum says that it takes longer to start a business here in Britain than it does in Serbia. All we have had from the Chancellor is a super-sized bureaucracy.
The Chancellor promised to make work pay. Budget after Budget, he has poured money into the tax credit system. It now costs £16 billion and employs more than 8,000 people. Last year, more than £2 billion was overpaid. Half of all the awards were wrong. The former Home Secretary said:
“The tax credit system is a shambles—such a shambles that I’ve had to help...my constituents financially”.
“such a total mess”.
The Chancellor did not tell us that those in work face effective marginal tax rates that would not seem out of place in Cuba. There are 160,000 people who keep only 10p out of every extra pound they earn. Last time we had a 90 per cent. marginal tax rate, at least it was the richest who paid. Now it is the poorest. It is not surprising that social mobility has gone backwards.
Having failed on the public services, on inequality and on poverty, the Chancellor is posing as a friend of the environment. Last week he told us that he did not want green taxes. Now he is introducing them by changing vehicle excise duty. But he leaves the Treasury with carbon emissions up and green taxes as a
proportion of total taxes down. I am not surprised that the Secretary of State for Environment, Food and Rural Affairs is standing by the door. He is probably off to launch his leadership campaign. If he had any courage, he would go for it.
The Chancellor spoke a lot about education. Let me take his big pledge. He promised that spending per pupil in state schools would be made equal to spending in private schools. That was the big Budget promise last year. First it was a pledge. Then it became an aspiration. Then it became a long-term ambition dependent on growth in the economy. So what have we learned today in the Budget about this policy that is meant to be the centrepiece? He has told us that he might narrow the gap; that is absolutely nothing.
There is no timetable for this pledge about matching state and private education. So what is the Chancellor actually telling us? Can he tell us what private school spending will be in five or 10 years’ time? No. Can he tell us what state school spending will be in five or 10 years’ time? No. So that is the great message from the Chancellor. It is his aspiration that one day a number that he does not know might be almost as big as another number he does not know, but he cannot tell us when. Labour Members can put that in their election addresses, but it will not save their seats.
Let me tell the Chancellor what we welcome in the Budget. We welcome the capitalisation of the student loan book. We suggested that three years ago. We welcome the cut in corporation tax. We suggested that three days ago. In fact, if one looks at the whole approach of this Budget, one reaches an inescapable conclusion. Spending is going to grow —[ Interruption. ] The monkeys opposite jeer, but they do not know this. Spending is going to grow 2 per cent., then 2 per cent. and then 1.9 per cent. The economy is forecast to grow by 2.5 per cent. or more in each of the next three years. So the Chancellor has just announced a third fiscal rule. He is sharing the proceeds of growth. He has spent all year attacking our policy and making up ludicrous figures for cuts in public spending, but now he is introducing it. This is the “great master of strategy”. He has spent months planning this Budget, with thousands of civil servants in a Treasury that costs almost twice as much as when he first walked through its doors. And the best he can do is to introduce a policy that I announced a year and a half ago. What a genius.
When the Chancellor finally gets to No. 10 Downing street, without any sort of mandate from the British people, why not call an immediate election? Then we can introduce all our policies. That is the Chancellor’s problem. He cannot be the change that we need. As the right hon. Member for Birkenhead (Mr. Field) says:
“With such clear responsibility for what has gone on, how can he offer the country a new start?”
The Chancellor is not the solution. He is the problem. That is the tragedy for the Chancellor. For years he wanted to be the young pretender and he has ended up as the old man in the Kremlin. The target culture is his culture. The failing schools are his failures. The pensions system is broken because he broke it. The Blair-Brown era is coming to an end. The great ship of new Labour is now a listing, leaking, rusting hulk, and it is heading for
the rocks. He cannot jump ship because he has been the pilot for the last 10 years. They are going down—and he is going down with them.
Just think what a legacy 10 years as Chancellor could have produced. We could have had a Budget about a better NHS, a competitive economy, protecting the environment or strengthening families. But for a Budget like that, we will have to wait not for a change of Chancellor, but for a change of Government.
1.35 pm
Sir Menzies Campbell (North-East Fife) (LD): Once again, I am struggling to match the intellectual rigour of the previous speech. I am pleased to congratulate the Chancellor as he celebrates his 11th and, as we must assume, last Budget. He is now comfortably the longest serving post-war Chancellor, and that in itself is a remarkable feat. I congratulate him warmly. I also note with some relief his expression of suitable reverence for the record of Mr. Gladstone.
Sadly, this Budget does not quite live up to the auspicious nature of the occasion. We have seen, over the years, the Chancellor’s capacity as a conjuror to use sleight of hand to produce proposals that seem attractive on the face of it but which, examined in a little more detail, are discovered to be rather less attractive than they first appeared. We have had seven years of booming, but often wasted, public sector spending. This is the Budget of a Chancellor ready to move on—a wait-and-see Budget from a wait-for-me Prime Minister.
The Budget has not done enough for the hard-working family that is increasingly struggling with the rising cost of living; for the young couple who have finally got on the housing ladder, but are now fearful that the next interest rise may push them off it again; or for the nurse, police officer or firefighter whose reward for service to their communities has been to see their income squeezed by a burden of taxation higher than that imposed on the richest in this country.
The Chancellor had the opportunity today, in this final Budget, to show that he was listening to the people of Britain, but he has delivered a Budget of missed opportunities. He had the chance to build a fairer Britain, but he has ignored it. He had the chance to create a greener Britain, but he shunned it. And he had the chance to shape a prudent Britain by saving billions of pounds on Government waste, but he has avoided it. He has spurned all those opportunities.
The Chancellor has instead concentrated, perhaps not surprisingly, on his own political succession. But I have a warning for him of a vision of the Prime Minister springing up from his political coffin, like Dracula, to confront the Chancellor. A stake through the heart may seem excessive, but he should beware. As the Americans say, “It isn’t over till it’s over.”
To be fair, I must add that this Budget is set against the backdrop of a reasonably strong economy. Growth remains stable and unemployment remains low. I acknowledge that Britain has a reasonably strong economy. We have supported investment in public services through an increase in taxation from the 1997 base, and we supported independence for the Bank of
England. I hope that the Chancellor in turn will be generous enough to point out that those were Liberal Democrat policies, which he derided in opposition but adopted in government.
I talked about the Chancellor’s sleight of hand—and I refer the House to page 13 of the Red Book, and item 15. The Chancellor told us as he sat down, to waves of applause, that he would cut the basic rate of income tax from 22p to 20p. On the face of it, that is a Liberal Democrat proposal and a welcome one. But if one looks carefully, one sees that the revenue to justify that reduction will be obtained from the abolition of the 10p rate. To fund the reduction, income tax will be increased for many taxpayers. One could say that we will be asking the poor to subsidise the rich. That is an example of the sleight of hand that the Chancellor has demonstrated in the past.
The sad fact is that despite a reasonably strong economy, the wealth gap between rich and poor is greater today than it was under Margaret Thatcher. By introducing loopholes in the capital gains tax regime, the Chancellor has allowed the wealthiest individuals to minimise their tax bills.
An example of that is the Chancellor’s proposals on inheritance tax. They are obviously welcome, but he did not point out that the number of estates valued at more than £2 million that pay inheritance tax has fallen by nearly 10 per cent. since 2001. That tells us that the rich find ways of avoiding paying inheritance tax, and we are entitled to look for some recognition of that by the Chancellor, and for some willingness on his part to take steps to deal with it.
I am afraid that the Chancellor has proved to be every bit as susceptible as some of his Conservative predecessors to giving tax breaks to our richer citizens at the expense of our poorest. The lowest-earning fifth of UK households still pay a greater proportion of their income in tax than the highest earning fifth. This Budget was an opportunity to rebalance the tax system in favour of the less wealthy, but the Chancellor has refused to take it.
With a proper, full approach to raising green taxes, the Chancellor could have helped to encourage a change in environmental behaviour. Of course his proposals on vehicle excise duty are welcome, but they fall far short of what is required. I listened to his speech with care, but I did not hear him say anything about aviation. Do the Government believe that the right hon. Gentleman’s recent imposition on aviation has had a significant—or even a discernible—environmental effect? We also need to know whether the proposals apply only to new motor cars, or are retrospective.
This should have been a tax-cutting Budget. It should have cut the tax burden on the low and middle-income families who need it most. That is what one should do with the proceeds of green taxation. That is the true moral case for tax cuts, and it is a matter of regret that the Chancellor has not chosen to act on it.
Of course, taxes have been raised significantly since 1997. Neither I nor my party is persuaded by the case for raising them further. The Chancellor must resist the temptation to tax and spend. Indeed, he should seek to save in order to spend.
Large sums of public money have been wasted on unnecessary and unpopular measures, but now the Government are planning to waste more. We should recall that the war in Iraq has cost more than £5 billion so far, and that is quite apart from the human cost that is emerging. We know that the President made the decisions on Iraq, while the Prime Minister made the case for the war, the Chancellor signed the cheques, and the Conservatives voted it through.
Secondly, identity cards will cost at least £6 billion, and some estimates put the cost as high as £18 billion. That money should be invested in the police and security services. Thirdly, we are already committed to spending £76 billion on the decommissioning of the existing generation of nuclear power stations. Building a new series of nuclear power stations—something to which the Government appear to be committed—will simply add to that bill. The Government should not be wasting taxpayers’ money in that way.
The announcements in the Budget were made against the background of an increasingly unbalanced economy. Britain’s accumulated private household debt has now reached a total of £1.2 trillion. Any decline in the housing market would be devastating, for millions of families and for the economy as a whole. Moreover, the burden of servicing that accumulated debt is also rising. The average cost of debt repayment in relation to income is now close to the level experienced during the debt crisis under the previous Conservative Government.
The Chancellor talks about the fiscal rules, but he should take steps to restore their credibility. He should have established an independent fiscal authority, as advocated by the Institute of Fiscal Studies. We should have an independent assessment of the economic cycle on which the Treasury bases its figures. The Chancellor simply should not be allowed to mark his own examination papers.
Some questions arise from the Budget statement that need to be answered. The public are entitled to know the effect of the Budget on their tax bills, and on the overall state of the economy. Will the Chancellor confirm that it raises the tax burden on lower and middle-income earners? Why has he failed to combat rising levels of personal debt, or to set up an independent system of assessment for fiscal policy? And why, in his 11th and final Budget, has he not rebalanced the tax system properly, with proper tax cuts for lower and middle-income earners? Those are questions of crucial importance, and the Chancellor should answer them.
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