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In this Budget, it is difficult to establish what the genuine big picture is. In his statement, the Chancellor used the words “stability” and “stable” 23 times, yet most of the indicators suggest that the last thing we
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have at the moment is genuine stability. We are faced with the global difficulties caused by the credit crunch, which have led to significant drops in business confidence across the country. Against that backdrop, the Chancellor wants us to accept not only that the problem is of course a global one, not caused by British Government policy, but that the appropriate response is to carry on more or less as we have been, with relatively little change and only a modest shift in the balance of tax and expenditure. As my right hon. Friend the Leader of the Opposition said, that is because the Chancellor’s room for manoeuvre is absurdly limited. Spending, taxes and borrowing have been driven up to levels that are simply unsustainable.

I want to ensure that there is plenty of time for others to speak— [ Interruption. ] I have considerable support from my hon. Friend the Member for Ribble Valley (Mr. Evans) for that, if for nothing else. However, we have to ask what levers of policy are available. The Bank of England is now responsible for monetary policy, of course, but, as people well know, it is held in a vice: the Bank is trying to balance the need to provide some degree of stimulus for the economy against growing concerns about inflationary pressures.

Normally—historically—we would consider the effect and operation of fiscal policy, but the Government seem to have abandoned that as a lever of policy. The United States has responded with a massive fiscal stimulus to its economy. That may not be appropriate here, but what is really telling is that the Government do not have the freedom even to contemplate such an approach. If it is appropriate to create a little slack in the economy by reducing the fiscal burden, such measures are not found in the Budget, which seems to reflect a degree of tightening, and would require fairly dramatic shifts of policy.

A degree of consensus is gathering on what the Government are now doing to restrain public expenditure growth quite firmly. They are trying over a period of years to regain the control and flexibility that they have abandoned. That objective is shared not only by the Conservatives, but increasingly by outside observers, including business organisations such as the Institute of Directors, which has been pressing for a more sustainable long-term approach in which public expenditure growth is much reduced. That is probably the responsible thing to do now. It is a pity that, as far as we can tell from the Budget announced today, we are instead to see an increase in taxation, and there is little prospect of significant change to that approach in the coming years.

5.28 pm

Stephen Hesford (Wirral, West) (Lab): It is a pleasure to follow the hon. Member for Altrincham and Sale, West (Mr. Brady), who was my MP for about 18 months when we first entered the House. It was interesting to watch him work in the local patch.

It seems a long time since the debate kicked off. The Budget generates considerable brouhaha; there is a circus-comes-to-town aspect to it. Many commentators make suggestions and projections, but time and again most of those who do not agree with the projections in the Budget report turn out to be wrong. That brings to mind the response that the right hon. Member for Witney (Mr. Cameron) made to the Budget. At one point, he misled the House to this extent: he said that the—

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Mr. Deputy Speaker: Order. No right hon. or hon. Member would do what the hon. Gentleman implies. I suggest that he withdraw that remark.

Stephen Hesford: Perhaps the right hon. Member for Witney misled the House unintentionally in this respect: he said that my right hon. Friend the Chancellor was the worst Chancellor in recent memory. I beg to disagree. The right hon. Member for Witney was special adviser to Norman Lamont; that is the embarrassment that he was trying to cover up with his smokescreen.

The right hon. Gentleman made another criticism with which I strongly disagree, and it is one that Opposition Members have repeated. They say that in the past 10 years the Government have not fixed the roof while the sun shone—that is the phrase that they used. That is just a misconception about what has been going on. I will give one example showing why they are wrong about that.

I remember when the third generation mobile phone licences were up for auction. The previous Chancellor raised about £30 billion from the sale. What did he do with most of that money? He paid off debt and reduced the public debt. That seems the perfect definition of fixing the roof while the sun shines, so the right hon. Member for Witney was absolutely wrong on that point. That action is one of the reasons why more public finances now go to the front line, rather than being spent on paying debt, which is what used to happen. Under the Conservative Administration, the public finances paid off failure.

Mr. Mark Field: The hon. Gentleman would be guilty of inadvertently misleading the House, too, if he did not point out that general Government net borrowing is now forecast to be 3.2 per cent. of gross domestic product for the year 2008-09, which exceeds the 3 per cent. Maastricht limit for the very first time. It is in that context that my right hon. Friend the Member for Witney (Mr. Cameron) made the case that while the sun was shining the roof was not fixed. We will all see the consequences of that in the years to come.

Stephen Hesford: I do not accept the hon. Gentleman’s figure; I understand it to be 2.9 per cent. However, let us not quibble about the figures; let us take a look at where we are with debt. The debt position is low and stable. It is settling down below the 40 per cent. target rate, which is in line with the sustainable investment rule. It seems that we have a strong case on the debt position, contrary to what the right hon. Member for Witney said. Under the Conservative Administration, between 1992 and 1997, while the right hon. Gentleman was assisting—if that is the right word—Norman Lamont, 1,000 businesses were going out of business every week. That position has been reversed.

The right hon. Member for Hitchin and Harpenden (Mr. Lilley), partly prompted by my intervention, asked the following pertinent question: how can we be sure that the UK economy is in a position to withstand the buffeting of the so-called credit crunch? That is the point that I want to address. Professor Patrick Minford, a commentator not known as a supporter of the Government, stated last week in the financial press that whatever else one can say about the Government’s handling of the British economy, they have produced
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the most stable, robust economy in living memory. That will determine whether we can weather the storms. It must be accepted by the House that we have a robust economy going forward. Yes, the growth forecast has had to be reduced, for reasons that are well known to the House, but the economy will certainly not go into recession, unlike the USA economy, which appears to be moving in that direction.

What else did the Prime Minister, when he was Chancellor, lock into the economy that has been continued in today’s Budget? The context for the Budget is a globalised economy. No one has a crystal ball, and the sub-prime problems from the United States could not have been foreseen, but over the past 10 years the Prime Minister tried to build an economy that could withstand the globalisation of manufacturing, financial services and so on, so that when there is a shift in global economic power from traditional areas such as Europe to India and China, our economy can compete on a level playing field.

Another aspect that my right hon. Friend the Prime Minister locked into our economy was the absence of economic patriotism. We should not be little Englanders about the economy. My right hon. Friend the Chancellor made it clear today that there should always be an open market and free trade. I welcome that. Without an open market and free trade in the globalised economy, we would have the sort of spat that President Sarkozy has in France. He wants to introduce reforms into the job market and other aspects of the economy, but there is a debate in France about whether there should be economic patriotism and it causes him problems.

All of us in the House have watched the Democrat primaries in the USA with interest. The two main contenders have got themselves into a mess by talking about the North American Free Trade Agreement between Canada, Mexico and the USA, and whether they can lessen or get rid of it and repatriate jobs to rust belt areas such as Ohio. One of the parties was allegedly saying one thing to one Government and another to the public. My right hon. Friend the Chancellor has made it absolutely clear—and is right to do so—that we will not have such discussions.

My right hon. Friend has also locked into our economy investment in industries that take us into the future. The science base has been supported by a number of Budgets over the years, and the Sainsbury review has been set up to examine and report on it. Capital investment in infrastructure has been one of the areas for which my right hon. Friend the Prime Minister set targets, which my right hon. Friend the Chancellor has continued today. I have seen how the west coast main line, which I use regularly, has improved over the past 10 years.

Mr. Stewart Jackson (Peterborough) (Con): That is due to privatisation.

Stephen Hesford: From a sedentary position, the hon. Gentleman mentioned privatisation. Does he want to intervene?

Mr. Jackson indicated dissent.

Stephen Hesford: No, he does not.

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I have mentioned investment in infrastructure, but I also want to mention investment in the creative industries—supporting those industries, which will be an engine of economic advance. I should like to be slightly parochial about the issue for a second. There has been a cultural success in my area. Liverpool is the European capital of culture this year, and we can see the transformative effect of that in my sub-region in Merseyside. My right hon. Friend the Prime Minister has sought to make that writ large across the country.

Education services are another issue in respect of the economy. A small example of that is attracting overseas students to our higher education base; that is a significant form of foreign investment in this country. My right hon. Friend has always said that we should invest in talent; that is locked into our approach to the economy and has been made clearer in today’s Budget. Our target is to get 50 per cent. of the 18 to 30 age cohort into higher education, although there are divisions on that in the House, which saddens me. We need to equip our young people with a high degree of skill to compete in the global economy. At a different level, the Leitch review has discussed apprenticeships. The Government have made it clear that we are looking to bring in 250,000 more apprenticeships in the coming months and years.

Investment in the environmental field and international development has been touched on today. I should like briefly to say something about the latter issue. Increasingly, India is an economic powerhouse. For many years, thanks to the Department for International Development, it has been our biggest partner in respect of overseas aid, and that is one of the reasons why for many years, the Indian economy—particularly in rural areas—has had access to water, roads and education. In a reciprocal way, we have applied a “good neighbour” principle. When the urban Indian economy comes forward, we will be in a good position to set up trade with what will be a tiger economy.

Finally, although we have a good and sound economy going forward, how can children and families look forward to the future in uncertain times? First, there is job growth—there are 2 million more people in jobs than there were in 1997. There is record employment; more people are now in employment than ever before. That is another reason why we are in a good position to withstand the buffeting. All that contrasts with the £10 billion in cuts suggested by the Conservative party. If we are talking about bringing stability into the situation, we should realise that those cuts would destabilise the economy and put those children and families at risk.

Mr. Mark Field: That allegation of £10 billion in cuts is every bit as fatuous as that made by the hon. Member for Dundee, East (Stewart Hosie). He said that if there were a change in the Barnett formula, there would be cuts in schools, hospitals and policemen. He was shouted down by Labour Members. It is fatuous nonsense to suggest that there would be any cuts whatever.

Stephen Hesford: The hon. Gentleman has made his point, but I do not agree with it. I welcome the Budget.

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5.44 pm

John Thurso (Caithness, Sutherland and Easter Ross) (LD): The hon. Member for Brent, North (Barry Gardiner) drew me to my feet with his full and erudite exposition of the Ramsar convention. I should state to the House, for good order, my proprietary interest in the bog mentioned. [ Interruption. ] I own it, yes. He also said that I was shameless in raising a constituency interest. I have no shame whatsoever in doing so, and I intend to raise four matters that have an impact on my constituents, as well as a brief point about the Budget as a whole.

The Chancellor of the Exchequer came to his current job with a reputation as a safe pair of hands; time will tell whether they are safe enough to accept the hospital pass that he has received from his predecessor. The critical test of the Budget will relate to financial stability and whether our economy will survive. The right hon. Member for Hitchin and Harpenden (Mr. Lilley) made some interesting points, many of which I agree with. For the second time this week, he told us about the tide and the bathing trunks. I could tell him from personal experience that if the bathing trunks are loose enough and the tide is strong enough, the tide can take the bathing trunks. He said that the way in which the banks have sought to package and sell unsecured debt is not a factor in the problems that we now face. I disagree—I think that their use of extreme financial technology has been a major factor in those problems.

One of the key tools that will see us through is the independence of the Bank of England. I welcome the fact that, for the first time in its history, the Bank is independent at a time when the economy is being tested. Particularly in the light of the studies of lessons learned from the Federal Reserve and the European Central Bank, there is room to look again at whether the Bank should have the sole objective of curtailing inflation, as currently, or a mixed objective combining inflation and employment.

The first of my four points of particular concern to my constituents relates to transport. I was glad that the Chancellor, with his particular knowledge of transport issues, brought that up in his Budget statement. I have no particular problem with the concept of using vehicle excise duty to encourage people into vehicles that are less polluting; in fact, I rather support it. Indeed, my colleagues and I tabled an amendment to that effect this time last year. However, I still have grave concerns about the cost of fuel to people who live in remote and rural areas. The hon. Member for Beckenham (Mrs. Lait) mentioned a fuel price in her area of 106p or thereabouts. I can take her to a petrol station in my part of the world where it is 126p and rising. That big premium is the main problem. The hon. Member for Brent, North made several points about the principles behind taxation, including the concept of fairness. In seeking to change behaviour, one of the key points about fairness is that there is somewhere for that behavioural change to go. If someone in the far north of Scotland has a car, that is the only way that they will get around. There is never going to be a bus service in the middle of Sutherland. We need a system that is fair. The long-term answer, which the Chancellor brought up in his statement, is road pricing. We should look to make progress on that
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policy, and I hope that he will. However, we need an interim measure to deal with that premium that exists in remote rural areas.

My second point is one that was brought home to me forcefully by one of my constituents who is a pensioner. Typically, many pensioners have a modest occupational pension to supplement their state pension, and they own a house and a car, but they have a pretty fixed income. They have suffered from inflation in council tax, the price of fuel and other areas, but particularly fuel. My constituent said that when the winter fuel allowance began, it paid for an entire winter’s supply of fuel for his house. Prior to today’s announcement, it accounted for exactly half; his bills have precisely doubled in that time.

I welcome the £50 and £100 increases to the payments; I note that they are one-off payments, and I hope that that policy will be revisited. But that will not go more than a quarter of the way to redress the balance of the impact on bills since the winter fuel payment was first brought in. We must consider further the issue of fuel poverty, to which a number of hon. Members have referred. The final point that my constituent made to me was that on top of everything, his 10p rate of tax has doubled. He is paying more tax, he has higher bills and he has nowhere to go. We must take account of people who have such problems.

My third point is on renewable energy. I am an ardent and well-known supporter of all forms of energy that have a low-carbon life-cycle and can help to reduce our carbon emissions. One example is the renewable energy that can be supplied from the Pentland firth—scientists who have studied it tell me that it could supply 31 GW. The core barrier is the transmission regime. If the Chancellor would really like to help, then on top of the renewables obligation certificates that are available, perhaps something could be done to make the grid more accessible for renewable energy produced in outlying areas. Having produced renewable energy, it would be helpful if we could get it to market.

My fourth point—I cannot let the Budget go by without commenting on it—concerns, of course, whisky. Here I must declare an interest. Most of my interests are in the register, but one that is not is that I am about to become grand master of the Keepers of the Quaich, which is an organisation designed to celebrate and promote whisky. I have no problem with putting tax on alcohol as a method of raising money, and given the cracks in the Budget, I see why the Chancellor would need to raise money from that source, just as he raises it from vehicles, cigarettes or elsewhere. I have difficulty, however, with the concept of linking the need to raise money with social consequences.

The social consequences of binge drinking are an extremely complex area. Some good organisations, such as Alcohol in Moderation, are working in this area, and I counsel all parties to be careful about pretending that a modest tax hike will have any great social benefit. Other methods could be used, and should be studied.

Mrs. Lait: While the hon. Gentleman is on the subject of the difficulties of increasing taxation, I wonder whether, given his interest in the whisky industry, he has been able to do a back-of-an-envelope calculation on what the impact will be on the smuggling of whisky, spirits and alcohol. That might undercut what the Chancellor is trying to achieve through the duty increase.

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John Thurso: As I am trying my level best to give up the weed, I do not have a fag packet on me, so I have been unable to do any calculations, but the hon. Lady makes a valid point, which needs to be taken into account.

I make one piece of special pleading on behalf of the industry. It has been remarkably successful at exporting overseas—indeed, more than 75 per cent. of Scotch is sold overseas. Small distilleries are being brought back into production or newly created. I happen to know about one in Huntly. It would be a shame if that production was put in jeopardy by tax rises that had knock-on consequences in other jurisdictions.

The Budget can be characterised as small areas of pain with large doses of Mogadon. We will have to wait and see whether it will do the job that we, as a nation, need to preserve financial stability, but I sincerely hope that it does.

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