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I have three proposals to make. Those facing redundancy need greater support. As the success of the rapid response service of Jobcentre Plus has demonstrated, support in the workplace in the form of advice on job-search, careers and accessing existing vacancies can make a huge difference to employment prospects. We will now further expand that service so that its work includes all
redundancies, not just those at the largest workplaces. And to complement that, I will offer greater provision of pre-redundancy retraining through the Train to Gain scheme. We will also target the successful local employment partnerships not just on the harder to reach groups, but also on the short-term unemployed.
There are still over half a million unfilled vacancies, and today I can announce a new initiative to help to fill them through national co-operation with the country’s major employers. The national employment partnership, chaired by the Prime Minister, will involve 20 of the largest employers, including Tesco, Centrica and the Royal Mail, who have agreed to take part. Together, they employ over 2 million people. I welcome their commitment to work with us in speeding up recruitment, increasing vacancies through Jobcentre Plus and stepping up access to work-related training.
It is the high-quality support provided by Jobcentre Plus and the new deal programmes to those out of work that has underpinned the success in the last few years in helping people quickly back into employment. I am determined to provide the resources so that the network can continue its excellent service, and I am setting aside additional funding to ensure that Jobcentre Plus and the new deal have sufficient capacity.
Today’s employment measures are worth a combined £1.3 billion—essential to prevent a temporary job loss from becoming permanent unemployment. Again, all of those measures are possible only because we have taken the deliberate decision to support businesses, protect jobs and help home owners. I have set aside £1 billion in the reserve so that we can continue to help during difficult times and ensure that we emerge from the current downturn stronger and ready to seize the opportunities in front of us.
I can also announce additional help for people of all ages. Turning first to motorists, we rightly have a system of car taxation that takes into account the environmental impact from different types of car. In the last Budget, I announced that I was going to take this further by increasing the number of bands for vehicle excise duty.
As planned, the differential first year rates, which people pay when they buy a new car, will be introduced in April 2010 because they give powerful incentives to provide less polluting cars.
I intend to go ahead with the introduction of new bands, reflecting fuel efficiency, but it would be wrong to do this in a way that places undue burdens on motorists at this time. So I have decided to help people by phasing in new rates and lower rates of increase.
First, in 2009, duty rates for all cars will increase by a maximum of only £5, as has been normal practice for a number of years. Secondly, from 2010, we will bring in differential increases in duty. In the original proposal, some cars would have seen increases of up to £90. Instead, I now propose that the more polluting cars will see duty increased, but up to a maximum of £30, and less polluting cars will see no increase, or a cut of up £30.
For savers, we want to encourage those with modest incomes to put money aside. To help them, we are setting up a saving gateway, which will mean that the Government add money to every pound saved. From 2010, up to 8 million people on low incomes who put money into the saving gateway will get 50p added for
every pound that they save. The saving gateway will be widely available through a range of banks, building societies and credit unions, and also the Post Office.
I also intend to step up help for families with children. We have already announced that the child element of the child tax credit will increase by £50 above indexation next April. We have also announced a further increase in that credit of £25 above indexation in 2010. I now intend to pay both those increases together this April, making it worth, in total, £2,235 for modest-income families.
The Government are also working with local authorities to improve further the take-up of tax credits and benefits, because they have a key role in working well with families to tackle disadvantage and to extend opportunities for children.
We are introducing a child poverty Bill next year, which will set in legislation our historic commitment to eradicate child poverty by 2020. I have already announced that child benefit, which was only £11.05 in 1997, will increase from £18.80 to £20 a week in April next year. We are supporting families as well as creating opportunities for all children.
I also want to do more for pensioners. First, for pensioners on modest incomes, I can announce today an increase in pension credit in April. I will increase it from £124 to £130 a week for individual pensioners, and from £189 to £198 for pensioner couples. That is an increase above indexation—and the biggest increase in pension credit since it was introduced in 2003.
I can also confirm that state pensions will increase in line with the highest rate of inflation this year. This will increase the basic state pension for a single person from £90.70 to £95.25—an increase of £4.55 a week. Now that inflation is expected to fall quickly, pensioners should see a real benefit.
I do not want people to have to wait for this extra money. I want them to get it as quickly as possible, which will benefit them as well as the economy. So families will not have to wait until April to receive their increase in child benefit. Instead, they will start to get it in January—three months early.
I want to do the same for pensioners. Pensioners are already getting the winter fuel payment—increased again this year. However, I want to do more. So I will ensure that every pensioner gets a one-off payment of £60, on top of the £10 Christmas bonus, from January. For couples, that figure will be £120, also paid from January. That £70 payment will also go to children with disabilities.
In total, 15 million people will gain from the beginning of next year. We are helping pensioners, children and the economy.
These are exceptional times and they require exceptional measures. They require action now to help people—and action now to help build a stable economy. We have made our choice. We are helping businesses and home owners. We are helping people into work and boosting incomes.
All that is possible only because the Government have taken the deliberate decision to support people and businesses through these difficult times.
I commend the statement to the House.
Mr. George Osborne (Tatton) (Con): Listening to the Chancellor’s speech, no one can doubt now that the Prime Minister’s claim to have abolished boom and bust was one of the greatest deceits ever told to the British people.
The Chancellor has just announced the largest amount of borrowing ever undertaken by a British Government in the entire history of this country. What he did not admit is that he is going to double the national debt, to £1 trillion, and that a national debt that has accumulated over centuries is going to double in just five years. That is the bill for Labour’s decade of irresponsibility, initiated by the Prime Minister. To pay for it, the Chancellor has put in place a huge unexploded tax bombshell, timed to go off underneath the future economic recovery.
The Chancellor talked about a 0.5 per cent. adjustment, but Labour Members did not understand what that means. It means that he is giving £20 billion in giveaways and taking back £40 billion in higher taxes, including the major rise in national insurance—a tax on the jobs and incomes of middle Britain. That is confirmation of the time-old truth that in the end all Labour Chancellors run out of money and all Labour Governments bring this country to the verge of bankruptcy.
Stability has gone out of the window. Prudence is dead. Labour has done it again. Massive borrowing; rising unemployment; tax giveaways for Christmas, paid for by tax rises for life; giving with one hand and taking with another—everything that we have come to expect from this Prime Minister. He says that the recession will end halfway through 2009, but the tax rises will not come in until 2011. I wonder why he chose those dates. This Budget is all about the political cycle and not the economic cycle.
Those borrowing figures are on a scale never before heard in the House of Commons. The £78 billion this year is almost double what the Chancellor forecast just eight months ago. The £118 billion next year is a record percentage of national income. He has added £512 billion to the national debt over the next six years—and by the way, that is based on growth forecasts that are vastly more optimistic than those of most independent forecasters. That means that the Chancellor is borrowing more on the nation’s credit card than all previous Governments put together. Now the Chancellor is taking out another credit card, for, like the gambler who cannot give up, he still thinks that he can borrow his way out of debt.
These are the excuses that the Chancellor has deployed. First, he claims that the recession has nothing to do with the people who have been running the country’s economic policy for the past 10 years. “It’s all America’s fault,” he says. What total nonsense. Was it America that gave Britain the biggest housing boom in the world? No. Was it America that gave Britain the highest levels of personal debt of any country in history? No. Was it America that gave Britain the largest budget deficit in the developed world? No. It was this Labour Government. No American politician said that they had rewritten the laws of economics. No American Treasury Secretary boasted that he had done away with the trade cycle and abolished boom and bust. It was the Prime Minister who said those ludicrous things, over and over again. He mistook a boom for stability and he never prepared Britain for the bust.
The second excuse that the Chancellor made today was that he faces this recession from what he called a
position of relative strength. Relative to whom? If he spoke to anyone other than the Prime Minister, he might find that his is not a view widely shared in the world. If he is right that Britain is better prepared, could he answer this simple question: why is the recession predicted to be worse here than anywhere else?
The Chancellor reeled off a list of countries. Let me give him this list from the IMF. It says that Britain’s recession will be more severe than those in America, Germany, France, Italy, Japan, Spain and every other major economy in the world. What about this list from the Commission? Britain’s structural deficit is almost double that of France, three times that of Italy and more than 10 times larger than the deficit in Germany. The truth is that the Prime Minister built our economic growth on the pillars of finance, housing and Government spending, without once stopping to think what would happen if the pillars collapsed. He ran a huge budget deficit on the unstable premise that he could milk the City every year, and never considered what would happen to public finances when the money ran dry. He did not fix the roof when the sun was shining.
That leads us to the third excuse used by the Chancellor today. He believes that the temporary tax measures that he has announced will deliver some huge demand boost to an economy that the Government have led into recession. Let us be clear that half of those measures are to compensate people for the Government’s own 10p tax con and to delay the tax rises that he announced from the Dispatch Box just eight months ago. Labour MPs cheered the measures when they were introduced and now they cheer them when they are scrapped. I doubt whether the rest of the country will be so pathetically grateful that the Chancellor is going to wait a year or two before clobbering their family cars, empty properties and small businesses.
As for the temporary VAT reduction, we will see whether it has the great economic effect that the Prime Minister expects. The Chancellor did not tell us that the German and French Governments have today ruled out a similar move because they do not think it will be effective. He did not tell us that already today many retailers are questioning the cost of implementing it and the impact that it will have on the high street, given that many shops are already selling things at 20 or 30 per cent. off. Borrowing money for a temporary cut when prices are already falling, and telling people that their taxes will go up to pay for it, is not much of a stimulus.
What will make a difference are the massive new taxes on ordinary incomes and jobs that are just around the corner. The Chancellor got a cheer from the Labour Benches when he announced the higher top rate of income tax—no surprise there—but it will raise less than 5 per cent. of the black hole that he has to fill. It is designed to distract attention from the billions of pounds of extra taxes that are on their way for millions of hard-working families. Now we know at least one of those tax rises: national insurance, an income tax in all but name. The Chancellor did not give his figures, so I will: a £4 billion tax increase on families and jobs; more in tax for a qualified nurse, more for a police officer; £100 million on the annual NHS wage bill; £2 billion from British business. That is not just a bombshell; it is a precision-guided missile at the heart of a recovery.
The final excuse that we heard from the Chancellor today was that, despite all the economic evidence of the past 40 years, Britain can borrow and spend our way out of this recession. Does he not see any parallels in what happened to Japan, which followed the path that he advocates and found itself saddled with debt and stagnation for a decade? The international bodies that he quotes in his defence have clearly stated that fiscal stimulus is an option only for countries with strong public finances. Perhaps this generation of Labour politicians needs to be reminded of what Jim Callaghan told them at a Labour party conference— [Interruption.] The Lord Chancellor was probably there.
“We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists”.
If the candour of the last unelected Labour Prime Minister will not do, we can listen to what the current unelected Labour Prime Minister used to say:
“We have learned from past mistakes...you cannot spend your way out of a recession”.
It turns out that he has forgotten past mistakes, and now he is condemned to repeat them.
The Chancellor could have taken a different path today—the path of radical monetary action and responsible fiscal policy. That is the right route out of a recession. Instead of boasting about the bank rescue abroad— [Interruption.]
Mr. Speaker: Order. Mr. Campbell, try and break the habit of a lifetime and be quiet. While I am on my feet, Mr. Ruane, you are not so good either. I have seen you. Try and be quiet.
Mr. Osborne: The hon. Member for Blyth Valley (Mr. Campbell) is very excited because he has his U-turn on the vehicle excise duty increase, for which he has been campaigning for so long. Unfortunately, it is coming down the track.
Instead of boasting about his bank rescue abroad, the Chancellor could have made sure that he was rescuing the real economy at home. He could have got credit moving through the veins of the economy by telling us that he was directly insuring business lending—to keep small businesses going—instead of storing up tax rises for them in the future. He could have helped the private sector get back on its feet with properly funded help on tax bills and employment costs, instead of piling on them crippling debts and national insurance bills that will take ages to pay off. Instead of yet another phoney efficiency review while public sector waste runs rampant, he could have brought proper restraint and independent oversight to the way that public money is spent. He could have got a grip on Government spending so that in future the state would live within the country’s means. That is what we would do and he would not. Instead he offers temporary tax give-aways paid for by a lifetime of tax rises for the British people, the national debt doubled and the future mortgaged to bail out the mistakes of the past.
This is exactly the road Britain is now on with this Prime Minister and this reckless Budget. Far from being an action plan, it represents the greatest failure of public policy for a generation. It will make the recession worse because it will make the recovery more difficult.
If Denis Healey had had to announce these figures, he would not have turned around at the airport; he would have kept going—but the right hon. Gentleman did not.
When the Chancellor rises to reply, let him answer just these three straight questions. First, does he accept that the national debt will now double to £1 trillion? Secondly, does he have an explanation for why Britain is forecast to have the worst recession of any major economy? And will he confirm that families will be worse off because the tax cuts he announces are temporary, while the larger tax rises are permanent? I know that he will not want to answer those questions, but the choice at the next election could not be clearer. A record— [Interruption.] A record borrowing binge and a lifetime of tax rises under Labour, or fiscal sanity, and lower taxes that last, under the Conservatives.
Mr. Darling: The hon. Gentleman— [Interruption.]
Mr. Darling: The hon. Gentleman is right about one thing: there is a very clear choice before the country today—and that is between a Government who are prepared to help people and help businesses and an Opposition who are prepared to do absolutely nothing to help. [Interruption.] He was also right to say that we have chosen to take a different path. We have taken a path that will help businesses, help pensioners and ensure that everyone is helped through a reduction in VAT. At no point in the hon. Gentleman’s intervention did he even mention pensioners or children or families. He had absolutely nothing to say.
The hon. Gentleman then warned about repeating the mistakes made by Japan. The mistakes made by Japan in the early 1990s were precisely to follow the course of action that he is advocating today. I know that because a Japanese Finance Minister told me that those were the mistakes that his country made. You would have thought, Mr. Speaker, that at this stage of a Parliament, when we have seen countries all over the world recognising that action needs to be taken to support the economy, the shadow Chancellor would have had at least one suggestion to make to help people out of this difficulty. Instead, he has absolutely nothing.
It appears that the shadow Chancellor is against the reduction in VAT. At least he has gone a bit further than the Leader of the Opposition, who was unable to tell Andrew Marr on Sunday whether he was for or against reducing VAT. The shadow Chancellor has nothing to say about the help that we are giving to businesses. Instead, all he is saying is that, faced with today’s difficulties, which are recognised the world over, he is not prepared to take any action.
In some ways, that should be no surprise. This is the shadow Chancellor whose judgment led him to back a call to get rid of mortgage protection regulation just before the problems arose in the housing market. He is the one who said that the International Monetary Fund would not support the idea of a fiscal stimulus across the world, only a day before the IMF said that that was precisely what was necessary. This is the man who said that the Bank of England could not cut interest rates because of our policy, just a week before it cut interest rates by the largest amount for many, many years. [Interruption.]
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