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On Wednesday, we got the proof. No wonder the thinking half of the Labour party is searching for someone—anyone!—who can stop the Chancellor.

Whom are their hopes pinned on? Sadly, they are no longer pinned on the Education Secretary. He had his moment in the sun at the time of the last party conference, but now he has retired to the calmer waters of the Deputy Leader contest. The party’s hopes are, of course, pinned on the young Environment Secretary, who speaks to us on Monday. From the very top of the party, they want him to run.

The Environment Secretary admitted recently in a newspaper interview that his friends call him “Brains” after the character in “Thunderbirds”. Let me just say that, as he sits on Tracy island, he is leaving it a little late to launch his international rescue of the Labour party.

Meg Hillier (Hackney, South and Shoreditch) (Lab/Co-op): I represent one of the poorest constituencies in the country, where 22 per cent. of the population is under the age of 16. My constituents are benefiting enormously from this Labour Government. Unlike members of the Conservative party, they are not interested in beauty contests for the leadership of any party, or of the country. They want a Labour Government delivering tax credits and benefits for children and families.

Mr. Osborne: Perhaps the hon. Lady will explain to her constituents that the Budget announced yesterday increases the income tax on the lowest paid people in this country. In a tax-neutral Budget, the Chancellor has redistributed income from the lowest paid to those on middle incomes. That is a con trick, but it is not the impression that people will have got when they listened to the right hon. Gentleman yesterday.

Mr. Love: Will the hon. Gentleman give way?

Mr. Osborne: I will, and then I want to talk about the environment.

Mr. Love: The hon. Gentleman has given a commitment today that he will match the Government’s planned public expenditure. His colleagues are going round the country talking incessantly about cuts in taxes of £21.5 billion— [ Interruption. ]

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Madam Deputy Speaker (Sylvia Heal): Order.

Mr. Love: Does that mean that there will be an explosion in borrowing in the future?

Mr. Osborne: To be honest, I did not fully understand that intervention. The hon. Gentleman appeared to be saying that the Opposition have a policy of sharing the proceeds of economic growth.

Mr. Love: I am talking about borrowing.

Mr. Osborne: If the hon. Gentleman looked at the spending plans announced by the Chancellor yesterday, he will see that the growth rate of spending has been dropped below the growth rate of the economy. That is something that those of us who turn up for Treasury questions know that the Chancellor has been saying for a year could not be done. However, he did it on Budget day, and I shall deal with his spending plans later.

I turn now to the section of the Budget that talked about the environment.

Mr. Sheerman: Will the hon. Gentleman give way?

Mr. Osborne: I will give way in a little while, but I want to make progress.

It is clear that the Chancellor did not speak to the Environment Secretary when he was putting together the environment part of the Budget, but perhaps that is not surprising. Andrew Turnbull, the former Cabinet Secretary, gave us a bit of an insight into the Chancellor’s attitude—

Mr. Bob Ainsworth (Coventry, North-East) (Lab): The hon. Gentleman should not talk about the environment.

Mr. Osborne: I am sorry? I thought that we just heard from the Labour Front Bench that we should not talk about the environment. Is that right? I thought that this was the new green Labour party.

The former Cabinet Secretary described the Chancellor’s attitude as follows:

It is clear that the Chancellor did not talk to the Environment Secretary before putting together the environment part of the Budget. We have the leaked letter that the Secretary of State for Environment, Food and Rural Affairs sent to the Chancellor. Entitled “DEFRA’s Priorities for the Budget of 2007”, it states that

I think that we all agree with that. The letter went on to say that

The letter continues with the very compelling submission that


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Presumably, the Environment Secretary shares my regret that the Chancellor went out of his way to attack DEFRA’s idea in his speech yesterday. Of course, when a Treasury official was asked what he thought of the DEFRA submission, he said that the Chancellor receives “many Budget submissions”.

The truth is that the Chancellor is not seriously interested in the environment. He never has been: it is all politics for him. The word “climate” hardly appeared in his Budgets until my right hon. Friend the Leader of the Opposition came along. Pretty much the only green things about yesterday’s Budget were the endless recycled announcements.

I turn now to the package for business. I welcome the cut in the headline corporation tax rate, which is to be paid for by cutting corporation tax reliefs. I welcome it, because I proposed it. I am obviously having more luck with my Budget submissions than some Secretaries of State.

What is baffling is that, in this Budget, the Chancellor has taken a completely opposite approach to small-business taxation. There, he has increased the tax rate and introduced more reliefs. What has the right hon. Gentleman done in his time as Chancellor with the small companies tax rate? In 1997, he cut it from 23 to 21 per cent. In 1998, he cut it again to 20 per cent. In 1999, he introduced a new 10 per cent. rate, and in 2002 he abolished the 10 per cent. and made it zero.

All that sounds pretty good. Unfortunately, in 2004 the Chancellor put the zero rate back up to 19 per cent. Yesterday, he raised it again to 22 per cent. After 11 Budgets, and six changes in the tax rate, we are pretty much back where we started. The only thing that small businesses have to show for it is a hugely more complicated and burdensome tax system.

It is no wonder that the small business organisations are up in arms about the Budget. Last night, the Forum of Private Business stated:

and the Federation of Small Businesses said that it was “very disappointing”. They will be even more disappointed when they discover that total business taxes are set to rise by £1 billion next year, and by almost £2 billion the year after. What sort of response to globalisation is that?

Mr. Wayne David (Caerphilly) (Lab): Will the hon. Gentleman give way?

Mr. Osborne: Perhaps the hon. Gentleman will tell me.

Mr. David: Does the hon. Gentleman accept that the Institute of Directors has welcomed the Budget?

Mr. Osborne: I shall tell the House what the business organisations have said about the Budget. Michael Saunders is chief economist of Citigroup, and he has said:

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The hon. Gentleman mentioned the Institute of Directors. Its director general, Miles Templeman, signed a letter that appeared in the Financial Times on Tuesday supporting the policies I proposed for inclusion in the Budget. I am delighted that he was able to do so.

Another thing that the Chancellor did not mention was the fact that the overall tax burden is set to rise to its highest ever level. There it is, buried in table C9 on page 285—the highest tax burden in our history. That is the remarkable thing about the Chancellor’s management of the public finances. He came in promising prudence; a decade later we have the highest tax burden in our history and a bigger structural budget deficit than Italy. That is truly incompetent.

Yesterday, the Chancellor had to announce that even the borrowing figures he revised up at the Dispatch Box in December are already wrong and that we are borrowing £8 billion more than he announced before Christmas—not that he spelled it out exactly. Nor did he tell us that he was again revising down the current Budget figures. What he did was to follow our advice and bring the growth rate of spending below the growth rate of the economy. For a year he has been telling us it cannot be done, yet he did exactly that—sharing the proceeds of growth.

Let us have a debate about how the money is spent.

Mr. Sheerman rose—

Michael Gove (Surrey Heath) (Con): Arise, Sir Barry.

Madam Deputy Speaker: Order.

Mr. Sheerman: I did not know it had been announced yet, Madam Deputy Speaker.

I was a Member for the 10 years before 1997 and experienced how Conservative Administrations ran the country. Is the hon. Member for Tatton (Mr. Osborne) really saying that the past 10 years do not stand out as an amazingly good experience for most people in this country, compared with the disaster when the Conservatives ruled?

Mr. Osborne: Yes, I am saying that, because the question the public are asking is: where has all the money gone?

It tells us everything about the Government’s failure on public services that in the Chancellor’s last Budget—his great swansong as Chancellor—he barely mentioned the national health service. Out there in the country it is the biggest political issue of the day. Pick up a local newspaper almost anywhere in the country and it will be full of articles about hospitals facing closure, maternity wards under threat, nursing posts being axed and junior doctors up in arms, yet the NHS hardly features at all in the national newspaper coverage of the Budget. For the Chancellor, it has become the health service that dare not speak its name. That is because he has no one but himself to blame for the monumental waste of public money and the meddling and interfering that have sent NHS staff
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morale plummeting, and for the old-fashioned, top-down attempt to control everything from Whitehall that has ended up with a health service in crisis.

The Chancellor could not even give us the spending figures for the coming three years. Why not? We have had the figures for the Home Office, the Treasury, the Department for Constitutional Affairs and, yesterday, the Department for Education and Skills—no doubt the Secretary of State will be talking about that later—so why not the NHS? The Chancellor must have done the sums if he has done them for the other Departments. Presumably he is keeping the NHS figures back only for political reasons, so that he can deploy them later in the year. People who are already struggling with financial deficits in the NHS should have firm financial planning horizons.

One Budget measure that will affect the NHS has not really had an airing yet. It is buried in table A2, on page 210, and is called “Tackling Managed Service Companies”. That is Brown-speak for a stealth tax that will raise £350 million next year and £450 million the year after. Will the Secretary of State for Education and Skills confirm that the biggest user of managed service companies in the country is the NHS? Will he explain to the Chancellor that if he puts their taxes up they will put their fees up and that hospital trusts will end up footing the Bill for his entirely self-defeating stealthy manoeuvre?

Of course, the Chancellor talked about education. Can the Education Secretary confirm that despite all the spin in yesterday’s Budget statement it is clear from page 139 that education spending growth is set to halve to 2.5 per cent., below the growth rate of the economy? That means that the share of national income devoted to education is set to fall, yet the 2005 Labour manifesto promised:

Perhaps the Education Secretary could explain the contradiction between the Budget and the manifesto?

While the Chancellor was talking about how much money he would put into education, he did not say a word about how it would be spent—not an inkling that he understood what a waste it has been to throw money at education without also achieving reform. That was not how it was supposed to be. Earlier this week the Blairites were in ecstasy. They thought they had finally got the Chancellor to sign up to city academies, finally got him to commit himself in public to something that he has spent the past year bad-mouthing in private. Just wait for the Budget, we were told—Gordon’s going to commit to education reform—

Madam Deputy Speaker: Order. On more than one occasion the hon. Gentleman has not referred to Members of the House or of the other place in the correct parliamentary manner. Perhaps he would now do so.

Mr. Osborne: Of course, Madam Deputy Speaker. From now on, I shall refer to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr. Brown) rather than to Gordon.

There was not a word in the Budget speech about education reform, and nothing about public service
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reform or how the Chancellor will make sure that our tax money reaches the front line. The only mention of city academies in the entire Budget speech, despite the briefing to the newspapers, was the promise to remove VAT restrictions so that their facilities can be used by the community. It is a great idea. We proposed it, and the Chancellor has now accepted it.

Kerry McCarthy (Bristol, East) (Lab) rose—

Mr. Osborne: Presumably the hon. Lady welcomed it.

Kerry McCarthy: Does the hon. Gentleman accept that removing the VAT restriction on city academies will make a huge difference, because their facilities will be available to the community? Does he not welcome that significant move as something for which they have been lobbying for the past few years?

Mr. Osborne: Of course I welcome it—the Leader of the Opposition proposed it.

Yesterday, the Chancellor began his speech by comparing himself, with characteristic modesty, to William Gladstone, but he said that when he becomes Prime Minister, unlike Gladstone, he will not try to be his own Chancellor. He then spent the rest of his speech writing the Budgets for the rest of this Parliament. The income tax changes we have been discussing will not come into force until April 2008. The rise in national insurance and the top rate threshold will happen in April 2009. The inheritance tax changes take place in April 2010.

The Chancellor has fixed the Budgets of his future Chancellors and given them their marching orders before he has even chosen who will do the job or before they turn up at the Treasury. Perhaps it will be the Education Secretary—who knows?—thrust into a job that the Prime Minister of the day will not let him do, no doubt exposed to death by a thousand cuts from the daily press briefings of the Brownite cabal. That may be the right hon. Gentleman’s fate, but what the Budget tells us about the fate of the country is that the Chancellor will not change his ways. We shall have the same stealth, the same spin and the same con tricks. We shall have the same complete contempt for colleagues and belittling of Ministers that the Cabinet Secretary told us about. We shall have the same old-fashioned, top-down Stalinist control that is so out of tune with our times. With his last Budget, the Chancellor has shown us that he cannot be the change the country wants—that he is part of the problem, not part of the solution. One thing is clear from yesterday: if people want change and to restore trust in the political process, we do not just need a change of Prime Minister—we need a change of Government.

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