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Well, I can actually. The answer to the question is as follows. Of course, in a recession Government debt increasesand, by the way, when we go into a recession with a 3 per cent. Budget deficit, it is likely to increase above that in the recession, because tax receipts fall off and welfare payments increase. Those are the fiscal stabilisers, and that provides a fiscal stimulus. That was a debate that was had in this country and many others over many decades since the 1930s. We have not proposed in any way to tamper with the fiscal
stabilisers. What we opposed was the debt-funded discretionary cut in VAT. The question that Labour Members have to ask themselves is this: have they got any evidence that that has in any way stimulated the economy or encouraged anyone to spend any more money? Every single major retailer has come out and said that it was a waste of money and it has not worked. The one thing we can be sure of is that it has, in a discretionary way, added to a very significant borrowing problem, and the shocking figure we will get on Budget day will be the size of the fiscal deficit that this Government are saddling this country with for many years to come. It will be the highest in our history, and the Labour partys reputation for economic incompetence is not only apparent for all to see today, but it will be hung around their neck for a decade to come.
Mr. Andrew Love (Edmonton) (Lab/Co-op): The Institute for Fiscal Studies commended the VAT cut in its green Budget as bringing expenditure forward. I want to ask the hon. Gentleman a question on economic competence, however. Is it competent in the midst of a recession to be talking about public sector cuts?
Mr. Osborne: Again, the hon. Gentleman would do well to look at what we have actually proposed. We have proposed reducing the real growth in spending from 3.4 per cent. to 2.6 per cent., which means that public expenditure will grow by £25 billion next year instead of £30 billion, and using that £5 billion to help the millions of savers and pensioners who have been penalised in this recessionwho did the right thing for the last 10 years and have been punished for it. That is a perfectly sensible allocation of resources.
Mr. John Redwood (Wokingham) (Con): My hon. Friend is making an extremely powerful case. Does he agree that another big hazard for us is that, because the Government have clumsily blundered into giving too much money to banks, taxpayers are now at massive risk and are standing behind grotesquely large remuneration packages and pensions for some who have failed, and that the Government should have been a lot tougher in their support and much more careful in what they did?
Mr. Osborne: Of course I agree with my right hon. Friend, and the tale of Lord Myners and Sir Fred Goodwins pension should ring around the country as an example of how this Government are completely incapable of looking after taxpayers money. It is a miracle that Lord Myners survives in the Government, and it says something about the judgment of the Prime Minister that he put him there in the first place.
Mr. Tobias Ellwood (Bournemouth, East) (Con):
My hon. Friend talked about the importance of helping businesses. The one initiative that has made its way to Bournemouth is a seminar called Employing People from Overseas Countries, which has been paid for and run by the Home Office. At the seminar, people can
learn about step-by-step visa applications, biometrics and the new points system. This is the only initiative that has got to Bournemouth. Is this really the way for us to tackle unemployment in this country?
My hon. Friend brings me on to the subject of Government schemes, which I want to touch upon now that I have taken those interventions. Four months ago, we argued from this Dispatch Box that the urgent priority was to get credit flowing again to businesses large and small, so that they stayed afloat and people were kept in work. We proposed a national loan guarantee scheme as a big, simple and bold answer to the problem that everyone, from the Governor of the Bank of England to the head of the CBI to the trade unions, had identified as the most important problem facing British business. We also said that to help with the cash flow of smaller businesses while they wait for that credit, we should allow them to defer their VAT bills and we should reverse the rise in their small companies tax rate. To help the unemployed get back to work, we suggested a national insurance rebate for any employer who took them on. At the time, the Governmentparticularly the Prime Ministerof course dismissed every single initiative out of hand. Now, four months later, they are struggling to introduce them.
Mr. Osborne: I will give way after I have got through this section of my speech. [Interruption.] This is about the hon. Gentlemans constituentsit is about the many thousands of people in all our constituencies who are losing their jobs. Businesses are going bust because Government schemes that were promised have not been implemented.
Let us look at the working capital schemeno doubt the hon. Gentleman was among the loudest cheerers when it was announced from the Dispatch Box. It was proposed on 14 January and launched in a blaze of publicity. The Business Secretary said at the time:
There will be real results from the schemes that go live today.
Two months later, that scheme does not exist. The date when it was supposed to be up and running came and went weeks ago. The negotiations with the banks are still continuing, and in the meantime good businesses are going bust and good people are losing their jobs.
That is not an isolated example of the incompetence of this Government. The automotive assistance programme is supposed to help the car industry. Two months after it was launched, there is no evidence yet that a single car manufacturer has been helped. Earlier this week, the Department for Business, Enterprise and Regulatory Reform floated the idea of a car scrappage scheme. Today, the Treasury is briefing the media that it is not in favour of the schemeThat one did not even last a week. My hon. Friends will recall that the home owners mortgage support scheme was announced by the Prime Minister in the Queens Speech debate, yet we are now in March and that scheme does not exist; the number of repossessions is rising, thousands are losing their homes and not a single home owner has received support. What about the national internship scheme, which was
announced three months ago? I can find no record of that scheme anywhereit has completely disappeared without trace. Perhaps the Chief Secretary to the Treasury could tell us what has happened. Ministers cannot distinguish between getting a headline on the Today programme and actually making sure that the schemes they promise are implemented and are working, but the public can and this is causing widespread disillusion and despair.
Mr. Oliver Heald (North-East Hertfordshire) (Con): My hon. Friend is making such a strong case. Does he agree that one of the real dangers of delay is that rising unemployment will simply overcome all these efforts, as consumer confidence falls and the chances of rescuing these businesses and saving jobs are lost?
Mr. Osborne: I completely agree with my hon. Friend; we are facing a very severe rise in unemployment. The tragedy is that if some of these schemes, particularly the credit and guarantee schemes, had been in place months earlier, some businesses could have been saved and some of those people could have been kept in work.
Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP): The hon. Gentleman is discussing a long list of Labours, and in particular the Prime Ministers, broken promisesthe Prime Minister is going to introduce £1 billion of cuts in Scotland, in addition to everything else that is happening there and in Northern Ireland. May I remind the hon. Gentleman about last weeks Prime Ministers questions? The Prime Minister told the hon. Member for Macclesfield (Sir Nicholas Winterton) that he would be
happy to debate the economy at any time in this House.[ Official Report, 11 March 2009; Vol. 489, c. 292.]
Mr. Osborne: For once, I agree with the Scottish nationalistsperhaps there will be many other such occasions in the future. The hon. Gentleman rightly says that the Prime Minister said that he wanted to debate the economy, yet he will not even send the Chancellor of the Exchequer to debate it today.
I know that many hon. Members will raise constituency cases in this debate, but I just want to read a letter that I have received from a constituent of mine, because I think it touches on a wider national issue. The letter states:
Dear Mr Osborne
I am writing concerning an article which was published in The Times...The article was entitled White-collar workers to get special help as jobless hits 2m...I have recently become unemployed and am keen to undertake some training to extend my skills so this
would be ideal. Unfortunately, no one at the local JobCentre (including their management team) has been told about either scheme and they were...totally unaware of the article. This lack of information reflects badly on the JobCentre staff which is unfair as, for the most part, they are doing a good job under very difficult circumstances.
Mr. Osborne: Again, the hon. Gentleman is making light of the fact that thousands of people are losing their jobs. He is making light of the fact that someone who has lost their job went to the jobcentre clutching an article that they had read in The Times about a Government scheme that had been launched only to find that the jobcentre knows absolutely nothing about it. That is why in a years time the hon. Gentleman will be the one losing his job. [Interruption.]
Rob Marris (Wolverhampton, South-West) (Lab) rose The very end of the Opposition motion refers to the country living within its means, and that has an impact in terms of savings. At the moment, there is a 10 per cent. return from the capital rule for savers who are pensioners in terms of benefits. Many of us think that that 10 per cent. is unrealistic now. If the shadow Chancellor agrees, would he indicate the level to which he thinks that percentage ought to come down?
Mr. Osborne: I agree with the hon. Gentleman that the way in which many of the benefits and the pensions operate makes assumptions about returns from capital that are totally unrealistic in the modern environment, with its near zero interest rates. I think that we will find many examples like the one that he raises. He makes his point very seriously, and I shall go away and give it full consideration and come back to him on it. He will find as we go through this year that there are many examples of how the prospect of deflation interacts in a very odd way with the benefits system to which we have got used.
Mr. Shailesh Vara (North-West Cambridgeshire) (Con): This morning, I received a reply from the Minister with responsibility for higher education saying that, since 2007, career development loans provided by banks are down by a third. These are the career loans for people, mostly young people, who have suddenly found a halt to their careers. Does my hon. Friend agree that this is yet another example where the Governments policies simply are not working and the money is not trickling through to the public?
Mr. Osborne: My hon. Friend is right; there are numerous such examples, some of which I have raised. One has only to listen to what the Minister for Employment and Welfare Reform was saying just a couple of hours ago in order to realise this. He acknowledged that
there is a frustration about these
schemes and the money and the credit getting through.
Sir John Butterfill (Bournemouth, West) (Con):
Does my hon. Friend agree that it is very worrying that one of Bournemouths leading construction and engineering companies has written to me saying that it has tried to get one of these guaranteed loans, but the banks will
accede to that only if the directors give a personal guarantee? That negates the whole objective of guaranteed loans, does it not?
Mr. Osborne: My hon. Friend is absolutely right. The whole purpose of these guarantees is to try to get the money out of the banks and into businesses. We were told that the recapitalisation in October would achieve that, but it failed. That is why we needed a national loan guarantee scheme. The examples that we are hearing about todaythere are countless other such examples around the countryare examples of how the Government are failing to deliver on the promises that they have made to the public and are failing to deliver on their basic duty to help people in this recession.
Mr. Osborne: If both distinguished former Treasury Ministersto varying degrees of distinctionwill allow me, I shall make a little progress. I know that lots of hon. Members wish to speak, given that we have not had a debate on the economy since December. I am sure that the hon. Member for Coventry, North-West (Mr. Robinson) will wish to tell us all about how successful the Government schemes for the car industry are proving at the moment.
Let me deal with the second major question: do the Government understand that the model of debt-fuelled growth that they pursued for 10 years is fundamentally broken and needs to be fixed? Judging from the Prime Ministers increasingly contorted answers to the questions of blame, the answer is noindeed, his answer seems to amount to, Im sorry I didnt get other leaders to agree with me earlier. That is not much of an apology. He, alone in the country, still maintains that there was nothing wrong with the British economy and with the way in which he regulated financial services in the country, and that we are simply the unwitting victims of a recession that came from America. That is his argument, although I note that he left it out of his speech to the American CongressI guess that speech will not be appearing in the next edition of Courage.
The problem with the argument that the recession came from America is that it does not explain some basic facts. Of course there has been turmoil in the world financial system and huge problems in America, but was it America that caused British families to become more indebted than American families or that caused British house prices to rise twice as fast as US house prices? Was it America that caused British banks to lever up 37 times their capitalalmost double the leverage of their US counterparts? Was it America that gave Britain the largest budget deficit in the developed world? Was it an American politician who said with the hubris of peace in our time that he had abolished boom and bust? No, it was a British politician. The Turner report, which was published at midday, blows apart the Prime Ministers claim that all was well with the British economy until we were hit by a transatlantic storm. It supports the Conservative argument that the problems in the British economy are deep-seated and that the model of growth pursued over the past decade is fundamentally broken.
rapid credit growth in the UK household sector in the decade running up to 2007.
the UK experienced a credit and property cycle similar to that seen in the US.
The trigger may have been pulled by US sub-prime, but the gun was loaded here in the UK. The failure to fix the roof when the sun was shining was a British failure and a Labour failure. Until the Prime Minister understands the mistakes that we made in creating an economy built on debt, there is no prospect of the Government leading a lasting and meaningful recovery.
What needs to be done? We need to shift the corporate tax system away from encouraging debt towards supporting equity and new investmentnot a word from the Government on that. We need to provide new start-up capital for the businesses that we want to see emerge from the ashes of this recessionnot a word from the Government about plans to do that. We need to make changes to the personal tax system, so that pensions and savings are supported, not penalisednot a word from the Government about how to do that.
I urge the Government to act in the coming Budget to help pensioners and savers and adopt our proposals to abolish income tax at the basic rate for savers and increase the pensioner personal tax allowance so that those innocent victims of this recession are helped.
We have heard nothing from the Government, not even from the Chief Secretary herself, about what will take the place of the three-year spending plan and the fiscal rules that were supposed to be the centrepiece of Budget policy. We have proposed an office of budget responsibility, so never again can a Government borrow recklessly in a boom and leave our country so exposed when the economy turns. The Government have no answers to any of these things. Indeed, the Prime Minister will not even accept that the system he created 12 years ago for regulating banks needs changing.
When we asked James Sassoonthe man who actually advised the Prime Minister, when he was the Chancellor, and who sat as his representative on the tripartite committee for yearsto reflect on his experiences, think about what had gone wrong and propose reforms to the system of regulation, the Prime Minister rejected them out of hand without even reading the mans report.
Today, Lord Turner too has proposed major changes to the system of financial regulation, and I support some of them but have doubts about others. However, yet again, the Prime Minister is not engaging in the debate. He is not even prepared to admit that there is a debate to be had about whether we return to narrow banking. He has dismissed that without allowing Parliament to discuss an issue of such fundamental importance.
Mr. John Gummer (Suffolk, Coastal) (Con): Is my hon. Friend aware that the FSA is demanding £120 million extra to pay for more regulation of the same kind, and that much of the burden of that will fall on the very companies that have suffered because of the failure of the FSAs regulation?
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