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The Chancellor of the Exchequer said something extraordinary on the radio this morning. He was asked by the presenter, “Do you wish you had more room for manoeuvre?” He replied, “Well, we are where we are”— [ Interruption. ] Ah, the Chancellor has just arrived. I am grateful to him for appearing at this debate. I was just quoting from what he said on the radio this morning. He was asked, “Do you wish you had more room for manoeuvre?” He replied, “Well, we are where we, you can only deal with the economy as you find it.” However, that prompts the question, who left him the economy that he now finds himself managing? Whose fault is it that we are where
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we are? The answer, of course, is the Prime Minister—the author of this Budget in every sense of the word.

Let us imagine for one moment that the Prime Minister, in his long years as Chancellor, had set aside something for a rainy day. Let us imagine—I know it is a fantasy—that like other Finance Ministers in other countries, he had used the 15 years of global economic growth to reduce the budget deficit or even to build up a surplus. Let us pretend that he actually meant what he said when he promised prudence with a purpose, and had used the good years to prepare for the difficult years. I know that it is difficult to take that leap of imagination today, but let us try. If the Prime Minister had done those things as Chancellor—if he had actually demonstrated the economic competence that he boasted of, if he had fixed the roof when the sun was shining—let us consider what yesterday’s Budget would have looked like.

There would probably have been a big fiscal stimulus package. We would be discussing a reduction of taxes on entrepreneurs, investors and businesses. There would be measures to put money into the pockets of families facing a rising cost of living. We would be discussing a cut in family taxes, not an increase. All these things are happening in other countries. They are happening in the United States, and they are happening because those countries can afford to do them. [ Interruption. ] The hon. Member for Rhondda (Chris Bryant) asks whether the United States is the only country that I can think of. No, in fact. There is Sweden, with its 2 per cent. budget surplus, Spain, with its 1.5 per cent. budget surplus, Australia, with a 1 per cent. budget surplus, and there are Denmark and Ireland. I could go on through a list of European countries.

We could even be considering—who knows?—where Britain’s new sovereign wealth fund was to make its first investment. Instead, what are we debating? We are debating a 3 per cent. budget deficit, £140 billion of borrowing, tax rises on business and measures that take money out of family pockets.

Angela Browning (Tiverton and Honiton) (Con): Does my hon. Friend also agree that, had the Prime Minister not sold the gold when he did and at the rate he did, we would have £4 billion to look at this in this Budget that we do not have now?

Mr. Osborne: My hon. Lady is right. He achieved—

Chris Bryant (Rhondda) (Lab): My hon. Lady?

Mr. Osborne: I thought that the hon. Gentleman was a great fan of modernising Parliament; now he is picking me up on my language. My hon. Friend, the hon. Lady, is absolutely right. The previous Chancellor managed to sell gold at the very bottom of the market. Indeed, the gold traders now call the price at which gold hit its lowest “Brown’s bottom”. Of course, gold might push through $1,000 in the next few days.

Ms Karen Buck (Regent's Park and Kensington, North) (Lab): While the hon. Gentleman is on the subject of fixing roofs, will he comment on the roofs that have been fixed through investment in places such as my constituency, where there are three new schools at £30 million a piece, a new £100 million college and a £184 million Building Schools for the Future
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programme, and where every council and social house has been renovated through the decent homes initiative? Is he saying that he regrets, and would never have implemented, that programme of investment?

Mr. Osborne: In London, I live in the hon. Lady’s constituency. I am well aware that the people whom she represents will be among those hit by the abolition of the 10p starting rate, upon which she will be asked to vote next week.

We were discussing economic incompetence —[Interruption.] I am coming to education spending, because I shall tell Labour MPs about something that they have not woken up to about this Budget. We were discussing this Labour Government’s economic incompetence and how it has left Britain with no room for manoeuvre. If this Chancellor was running for President, on the basis of that Budget his campaign slogan would be, “No, we can’t.” His tactic yesterday was to say that he had no room for manoeuvre and to blame the world economy. It is funny how this lot take the credit for 10 years of global economic growth and then blame everyone else when it slows.

It is the job of any Government to prepare for high oil prices or problems in the financial markets. It is not the fault of some sub-prime estate agent in Mississippi that we enter a downturn borrowing £36 billion—it is the fault of the Prime Minister. It is not the fault of Wall street bankers that we have the highest tax burden in our history—it is the fault of the Prime Minister. It is not the fault of some capitalist conspiracy that 5 million of the lowest-paid people in Britain face a tax increase this April—it is the fault of a Labour Prime Minister who is trying to fix his economic problems on the backs of the poor. His job in the 10 years that he was Chancellor was to prepare for when the global economy hit problems, and he failed.

Mr. Oliver Heald (North-East Hertfordshire) (Con): Does my hon. Friend agree that when there are global inflationary pressures most sensible Governments try to cut taxes, not increase them?

Mr. Osborne: My hon. Friend is right. He is also right in the sense that it is not clear that any other major economy’s response to the global economic problems is a significant increase in taxation. I cannot think of any Finance Minister in an equivalent country who will this year present a Budget containing a £2.5 billion increase in taxes. That shows what a mess we are in. The more closely one examines yesterday’s Budget the clearer it becomes, because as usual, of course, many things are hidden. That is one of the Chancellor’s predecessor’s habits that the Chancellor did not kick. Many things hidden in the small print of the Red Book were never mentioned in the Budget speech.

This debate is our chance to examine the small print, and let us begin by considering those public finances. One would never have gathered from yesterday’s performance at the Dispatch Box —[Interruption.] I am a generous man when it comes to this Chancellor of the Exchequer. I genuinely get on much better with him than I did with his predecessor—and I am not the only one. One would never have gathered from yesterday’s performance that not only have the Government got
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their borrowing figures wrong, but they were miles out. Never mind the fact that we have already borrowed £110 billion more than the previous Chancellor forecast in his earlier Budgets, and that the Government have been wrong in each of the past seven years, because even the forecasts made by this Chancellor in October are hopelessly wrong.

The Government are set to borrow in the coming period £20 billion more than the Chancellor predicted last autumn—£7 billion more next year alone. Last March, the Prime Minister told us in his last Budget that we would be in the black next year, but now we discover that we will be in the red to the tune of £10 billion, on the current Budget. As I say, that comes after 15 years’ global economic growth. It is the opposite of prudence and the opposite of what most of the rest of the world have done.

On the figures announced by the Chancellor, Britain enters this economic slow-down with about the worst budget deficit in the developed world; the exceptions are Pakistan, Hungary and Egypt. Labour has achieved the impossibility of making Italy, France and Germany look like paragons of fiscal virtue. We are now discovering the truth about the state of the public finances and about the public spending predictions—a point that was raised by the hon. Member for Regent’s Park and Kensington, North (Ms Buck).

The Chancellor said almost nothing about spending in his Budget; indeed, he said nothing at all about the national health service. I thought the Prime Minister’s mantra was:

It is not a priority that made it into the first Budget of his Government. That does not mean it did not feature, because if one delves into the detail and compares the spending tables published yesterday with those published in the autumn, one discovers something strange. One discovers that health spending is set to be £1.3 billion less than we were told it was going to be last autumn, including £700 million less on capital spending. The Chancellor talked about investing in schools, but we discover that capital spending on education is set to be £300 million less than he predicted in the autumn. The spending of the Department for Innovation, Universities and Skills, which is supposed to be a priority, will be £1.9 billion less than the Government were predicting in the autumn. None of those changes was mentioned in the Budget speech.

Alongside a raid on reserves, the Government pay for not only a big increase in defence spending, but a £1.5 billion rise in Department for Work and Pensions administration costs. Health and education spending growth appears to fall and welfare administration costs appear to rise.

Chris Bryant rose—

Mr. Osborne: I shall certainly give way. Was the hon. Gentleman aware that the Government had reduced the growth predictions on spending on health and education? I was not when I was listening to the Chancellor.

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Chris Bryant: The hon. Gentleman said that the Chancellor said nothing about health yesterday. In fact, one thing, among others, that he said about health was:

I am sure that the hon. Gentleman will now withdraw that remark. More importantly, he just referred to defence spending. The shadow Defence Secretary has said that the percentage of public spending on defence should increase and the shadow Health Secretary has said that the percentage spent on health should increase, so where will the hon. Gentleman find the cuts to pay for those commitments?

Mr. Osborne: What I am trying to explain to the hon. Gentleman is that there is a big increase in defence spending this year, and it is apparently paid for—I am happy to give way to the Chancellor if he would like to explain what went on—by a reduction in the projected growth in spending on health and education. I am bringing that to the House’s attention. If the Chancellor wishes to intervene to explain exactly what has been going on with spending—I am sure the hon. Gentleman did not know what has been going on, just as I did not know, when listening to the Chancellor—I would be happy to give way to him. Apparently he does not wish to intervene.

That brings me on to another story—the impact of the new alcohol and car taxes. What the Opposition demonstrated last week was that one can use targeted tax rises, as other European countries have done, on the drinks favoured by binge drinkers and under-age drinkers to pay for lower taxes on lower alcohol drinks, leaving alone most of the drinks that most responsible adults enjoy. The Chancellor demonstrates this week how general rises in alcohol taxes hit 43 million people and do little to tackle binge drinking.

The Secretary of State for Work and Pensions (James Purnell): On that specific point, the hon. Gentleman is saying that he would not spend that alcohol duty on anything other than tax cuts. Does that mean that he will not support the winter fuel allowance increase this year or the measures on tackling child poverty next year?

Mr. Osborne: The increases in alcohol duty and vehicle excise duty, which I am coming to, are permanent increases, whereas the winter fuel payment is a one-off payment this year. If the right hon. Gentleman, either now or in his reply, makes a commitment at the Dispatch Box that it is an annual increase—in other words, it applies year on year—and if he is honest with the British public about what he is doing, I will tell him how we will vote on the alcohol duty increases. He is not prepared to give that commitment.

Mr. David Winnick (Walsall, North) (Lab): The hon. Gentleman was not in the House at the time, but can he explain why during his party’s 18 years in office it never, at any stage, had a winter fuel allowance and why child poverty and pensioner poverty grew, as he well knows?

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Mr. Osborne: Although I was a young boy at the time, I seem to remember that the Conservative Government who came to power in 1979 inherited a situation where there was no winter fuel at all, because the power stations were on strike.

Mr. Nigel Evans (Ribble Valley) (Con): My hon. Friend knows that I am vice-chairman of the all-party group on beer. The alcohol changes announced yesterday will do nothing to tackle binge drinking. Four pubs are closing each day in this country. Pubs are one of the great British institutions and in rural areas they add to the fabric of society. The announcements made by the Chancellor yesterday will condemn more British pubs to closure.

Mr. Osborne: My hon. Friend makes a powerful point. Interestingly, on the radio this morning, the Chancellor gave up any attempt to claim that the changes were about binge drinking or health measures. [Interruption.] That is exactly how they were billed as in yesterday’s Budget and in advance. He made no attempt to make such a claim today because he knows that they are just a stealth tax. That is also true of the vehicle excise duty changes.

Barbara Keeley (Worsley) (Lab): Will the hon. Gentleman give way?

Mr. Osborne: If the hon. Lady will allow me, I shall make my points about cars and then I will take an intervention.

Listening to the Chancellor yesterday, people would think that only the biggest, most polluting 4x4s will be hit, but of course that is not true. Family cars face a higher tax bill, including the Renault Espace, the CitroĆ"n Picasso and, worst of all, the Ford Mondeo. In opposition, young researchers such as the now Secretary of State for Work and Pensions toiled to build new Labour on the promise of helping Mondeo man, and they have ended up taxing his car.

There is nothing wrong in principle with green taxes—far from it. I actually want to see the proportion of the tax take from green taxes rising instead of falling. Indeed, our policy group examined ideas such as a showroom tax, but the key difference in our approach is that rises in green taxes should be offset with tax reductions elsewhere. That is the only way to command any public confidence that the changes are transparent weapons in the fight against climate change, not sneaky devices for raising more stealth taxes. While we are on the subject of sneaky green taxes, why did not the Chancellor mention that he is removing the duty differential on biofuels, raising a cool £550 million, in two years’ time?

Barbara Keeley: The hon. Gentleman has already been asked—he failed to answer—whether his party will make a commitment to halving and then ending child poverty. Can he confirm that that remains an aspiration, not—this is what the Government have made—a commitment and an action plan to make it happen?

Mr. Osborne: It is our aspiration to end child poverty, and it is also an aspiration for the Government, because on their present course they will not hit their target of
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halving child poverty by 2010. They have got one more Budget next year to do something about it, but even on the measures announced today they are still well short of their 2010 target. They can call it a commitment, but it is actually an aspiration.

There is another hidden tax in the Red Book. It is buried away in table C6 on page 187, which shows that the Government anticipate a 5.1 per cent. increase above their own capping limit in council taxes. That should certainly be drawn to the attention of local electors in the forthcoming elections. Yet again, we discover that the Government are squeezing everything that they can out of hard-pressed British families, who are already feeling the pinch.

As the Secretary of State for Work and Pensions has joined us, we should talk a bit about the Government’s commitment to welfare reform. I have some sympathy for the Secretary of State. He is Brown’s Blairite and the self-styled heir to the right hon. Member for Darlington (Mr. Milburn)—not that I want to kill off any leadership prospects that the Secretary of State might have. I can see his anguish as he watches the party, in whose Government he has risen so high, fall apart. I can also see his relish at the prospect of being the leader who puts it all back together again in opposition. On the back of this Budget, with its tax rises as we approach a general election, he may well get that opportunity.

Let us be honest about the child poverty figures. Let us be honest and say that they have risen by 100,000 in the last year. New figures are about to be published by the Secretary of State’s Department—perhaps he can give us a preview of what has happened to child poverty. He could be honest about the fact that 400,000 more families are in deep poverty. He could acknowledge, as the right hon. Member for Darlington did in this debate last year, that poverty has become more entrenched under Labour. He could be honest about the fact that, even if we accept the Government’s claims about the Budget, they are still well short of their target of halving child poverty in 2010. In-work benefits are part of the answer, but so is getting people off out-of-work benefits and into work. It has been clear since the Secretary of State took his post that it is his job to copy as closely as possible the policies of the Opposition. But this Budget exposes the central differences. There are no plans for sanctions on those who turn down reasonable job offers and no proper community work programmes. There is nothing to insist that people attend welfare-to-work programmes—

James Purnell rose—

Mr. Osborne: As the right hon. Gentleman is about to intervene, will he confirm that he would like to see the removal of the departmental expenditure limits-annually managed expenditure—or DEL-AME—divide that prevails in the Treasury? At the moment, he only has a commitment from the Chancellor to explore that.

James Purnell: As the hon. Gentleman has just said, that is on page 60 of the Red Book. He claims that we are copying his proposals, but it is the other way around. His policy document states:

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