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1.23 pm
Mr. David Cameron (Witney) (Con): Today everyone can see what an utter mess this Labour Government and this Labour Prime Minister have made of the British economy: the fastest rise in unemployment in our history, the worst recession since world war two and the worst peacetime public finances ever known. As of today, any claim that they have ever made to economic competence is dead, over, finished.
This Chancellor has just told us that he will be doubling the national debt. He is planning to borrow £348 billion over the next two years. That is more, over just two years, than every previous Government put together—not just every Government since world war two and not even every Government since world war one, but every Government since the Bank of England was first founded more than 300 years ago. This Prime Minister has certainly got himself into the history books. He has written a whole chapter in red ink: Labour’s decade of debt.
The Chancellor rattled through those figures for borrowing, so let me read them slowly. The Government are set to borrow £175 billion this year, followed by £173 billion, and then £140 billion— [ Interruption ]—he says he said that; he swallowed it—and then £118 billion. That means that over a four-year period, Britain will now be borrowing £606 billion. They talk about child poverty, but with debt like that, our children will be in poverty for decades. It is a staggering amount and the price will be paid not by the incompetent Ministers who put us into this mess, but by families and businesses up and down our country. They will never forgive the people who have done this. Britain simply cannot afford another five years of Labour.
Even those figures are massaged. On page 204 of the Red Book, the Government are assuming that consumer demand will bounce back to pre-boom levels by 2011. That is what they are forecasting, and that is why they forecast the debt coming down so quickly. That would not be a U-shaped recovery; it would be a trampoline recovery.
What is the Chancellor’s excuse for those dreadful borrowing figures? He just told us that this is a world recession. Of course other countries are suffering, but
there is not one single other major country in the world in a position as bad as the United Kingdom. [Hon. Members: “Rubbish!”] They say, “Rubbish!”, but there is not one country with a bigger budget deficit in any major economy. Why is that the case? Because the Government did not fix the roof when the sun was shining.
It is no good the Chancellor’s pretending that the international factors were some sort of surprise. He knew that there was a world recession when he made those utterly useless forecasts in the November pre-Budget report last year. We now know that what he told us was a complete work of fiction. Let us take just one figure, the growth forecast. He told us that it would be minus 1 per cent., but he has had to downgrade it to minus 3.5 per cent. That is one of the biggest downgrades in the history of forecasting.
The figures are so bad that the Prime Minister and the Chancellor have had to do a spectacular U-turn. For years they have lectured us about how departing from the Government spending programmes means swingeing cuts. Minister after Minister has stood at that Dispatch Box and said that any attempt to depart from the Government’s rate of growth of spending means being savage or inhuman, and now they are doing it themselves. [ Interruption. ] That is right—that is what Labour Members were all cheering in that rather pathetic cheer at the end of the Budget speech. The Government have just announced more than £10 billion of cuts over two years. For years, that was the Prime Minister’s great dividing line, but he is suddenly on the wrong side of it. After today, no one will ever believe a word that they say about spending cuts ever again.
But the Budget still does not do enough to get the public finances under control. In two words, it is completely inadequate. Instead of putting up taxes in 2011, why does the Chancellor not get to grips with spending now and next year? Look at the consequences of failing to deal with spending. Look at the tax rises that he has announced today. Of course, the Government claim that it is just the rich who will pay—and by the way, he has just broken a manifesto promise not to put up the top rate of tax, but people expect that from this lot anyway—but look at the other taxes.
Look at the tax on beer. That is going to hit every drinker in every pub. Look at the tax on petrol. The Government are reintroducing the fuel duty exercise— [ Interruption ]—escalator. That is going to hit everyone who has to drive to work. Those people are not rich; they have to work hard, and they are going to pay the price for Labour’s failure. Those are not taxes for the few; they are taxes for the many, introduced by this Labour Prime Minister.
But what stands out most about today’s Budget is how every single argument and every prediction that the Government have told us about has turned out to be wrong. They told us that the recession would be less severe than in the 1990s. I have lost count of the times that the Prime Minister has told me that over that Dispatch Box, but perhaps he would like to look at page 200 of the Red Book, which states that:
“the current downturn is forecast to be much deeper than that of the early 1990s”.
He is condemned by his own Red Book. This is worse than the ’70s and it is worse than the ’80s or the ’90s. This is not just boom and bust; it is the worst boom and bust ever.
Then the Government told us, in that November pre-Budget report, that the recession would be over by the end of June. I know that the Chancellor does not want to remember what he said in November, but he said that growth would start early as a direct result of the cut in VAT. So by the Government’s own criteria, the VAT cut has failed. The money was wasted and our debt is higher as a result.
What about the last big argument—the one that the Prime Minister tried to get off the ground before the G20? Britain, we were told, was heading for another great fiscal stimulus. Well, where is it? Are we missing something? There is no fiscal stimulus here; there is a couple of extra billion added to what has already been announced. That is less than the cut in next year’s capital budget. This is not a stimulus; it is a delayed tax rise and a delayed spending cut. The Chancellor could not provide a proper stimulus because he had run out of money. The Prime Minister sits there shaking his head, but he is the only person in Britain who does not realise how ridiculous he looked wandering around the world telling Governments everywhere else to open their cheque books and start spending, when the Governor of the Bank of England had taken the Prime Minister’s cheque book and torn it up in public.
Of course we need schemes that will really help the unemployed and that will help British businesses, large and small. We have been calling for a proper credit guarantee scheme for six months. Before we get carried away with the schemes that have been announced today, I think we are entitled to ask what happened to the ones announced last year. The internship scheme: not working. The asset-backed security scheme: not working, but, incidentally, reannounced today. And what about HomeBuy Direct? The Chancellor told us today that it was to be given another £80 million. What a treat for HomeBuy Direct! There is only one problem: we asked some parliamentary questions and found out that, by 25 March, not a single sale had been made through the existing scheme.
What about the home owners’ mortgage support scheme? Peter Mandelson was meant to be in charge of that one, and he knows a thing or two about getting a good mortgage, so you would think that he might have succeeded. It was the centrepiece of the Queen’s Speech last year but now, four months later, the Government have just announced it all over again. And still not a single home owner has received a single penny under the scheme. What a disgrace! What a callow farce from this Government! The Chancellor also told us about his scrappage scheme. Let me see if I can get this right. We take something that is 10 years old; it is completely clapped out, it pumps out hot air, pollutes its surroundings and is absolutely ripe for the knacker’s yard. What a brilliant idea!
Where does all this leave the Prime Minister’s big argument—the one he based his whole premiership on—that he would always be prudent with the nation’s finances? Barely a year ago, he described a deficit of 8 per cent. as being completely out of control. So how
would he describe a deficit today of 11.9 per cent.? That is more than Denis Healey borrowed when he was forced to go to the International Monetary Fund.
Let me turn to the IMF, as the Chancellor might well have to. I would love to read out a list of countries that the IMF says are heading for a larger deficit than Britain’s next year. I can’t; there aren’t any. Russia, South Africa, Turkey and Argentina are all heading for deficits half the size of ours. Is it any wonder that, in a not-very-noticed announcement, Ministers chose this time to announce—some of you might have missed this—that they wanted to remove the stigma on countries going to the IMF. One Minister actually said that the IMF should be seen as something to celebrate—I am not making this up, I promise—and a bit like
“getting wellbeing care or even like going to a spa to recuperate”.
What planet are these people on? When are they going to realise that they cannot spin their way out of this one?
This Budget was a missed opportunity. We need to move from an economy of borrow and spend to an economy of save and invest. The Government talked about the disregard, but why not give proper help in the tax system for people who save? Where was the plan to regulate the banks and to regulate credit properly? Is it not time to end the tripartite system and to restore the Bank of England to its proper role of regulating debt in the economy?
On the fiscal side, the Chancellor has scrapped his fiscal rules and his spending plans, but he has put absolutely nothing in their place. That is why we need spending restraint now and an office for budget responsibility for the future. I have to say to the Chancellor and the Prime Minister that no one will believe that the Government are going to sort out the public finances when the Prime Minister says that they are going to make a serious start only in 2011. We all saw what they are doing today: introducing a few clever, political taxes on the rich before the election while saving up any real tax increases until 2011. But look what we have got between now and then: another Queen’s Speech, another pre-Budget report and another Budget. The Prime Minister sits there in his bunker talking about all the brave things that he is going to do in 2011. Is there no one left to tell him that he has to hold an election between now and then? They just do not get it; they cannot see what is actually wrong. He will never bring in the changes required because he does not accept that the economic model that he has run for 12 years, based on Government debt, consumer debt and housing debt, is fundamentally bust. This Prime Minister can never be the future because he does not understand what went wrong in the past.
The fundamental truth is that all Labour Governments run out of money. The last Labour Government gave us the winter of discontent; this Labour Government have given us the decade of debt. The last Labour Government left the dead unburied; this one leaves the debts unpaid. They sit there, running out of money, running out of moral authority and running out of time. We have to ask ourselves: what on earth is the point of another 14 months of this Government of the living dead? If they do not have the courage to deal with the debt and take the difficult decisions, why not make way for the team that can?
1.36 pm
Mr. Nick Clegg (Sheffield, Hallam) (LD): The economic crisis is unprecedented in many ways—its scale, its speed, its reach—so people are looking for something bold and distinctive from this Government. Let us think back to the great Budgets of our history. The people’s Budget of 1909 introduced the first pension and the first social insurance. Labour’s post-war Budgets built a new nation from the rubble of war. What made those Budgets great was their ambition, and their coherent vision for a different future. That is what we needed today, in the aftermath of this generation’s disaster. The worst of times demand the best of Budgets.
So what did we get today? We got a mishmash of recycled announcements from a Government skilled in raising false hopes but incompetent in delivering practical help. The Chancellor had a choice: he could have used this Budget to get practical help to the millions of people struggling in this recession. He could have given a people’s Budget for the 21st century. Instead, we got just another politician’s Budget, desperately rushing around for half-baked ideas to save the skin of this failing Government. This Budget is a political supermarket sweep, a trolley full of random promises, but without even a hint of a plan or of any real likelihood that the promises will be put into practice.
The growth predictions in this Budget stoke up false hopes. The Chancellor says that the economy will grow by 1.25 per cent. next year, and by 3.5 per cent. by 2011. He says that £15 billion can be shaved from public spending without cancelling a single Whitehall project. Given the lamentable failure of this Government to get their own predictions right, people will be asking what kind of fantasy world they are living in these days. If they get things wrong again—particularly the growth predictions—even greater pain will be necessary to get the Government accounts in order in future years.
The economic crash is not the result of a few minor mistakes, and patchwork repairs will not fix it. We need to do things fundamentally differently, and that will need to start with a different kind of banking system, although that barely warranted a mention in today’s Budget. Just because the subject is off the front pages today, that does not mean that the problems in our banks have been solved. Businesses are still not getting loans. Banks are still in a mess. The problems have to be sorted: we need a banking system in which no bank is too big to fail, in which high street banks take no unnecessary risks with other people’s money, and in which risky casino-type investment banking is cut loose to fail when things go wrong.
The biggest disappointment in this Budget is its failure to sort out Britain’s unfair tax system, and its failure to put money into people’s pockets to help them to make it through this recession. Britain’s taxes are still too heavy on those who can least afford them, and too easy to avoid for those who know how to do so. That is how this Government—and, I think, the Conservatives—seem to want it. We are now the only party that will do things differently, and get practical help, through lower taxes, to people who are really struggling.
This week, we explained that, if we took aggressive action to clamp down on all the loopholes and exemptions that benefit the richest people and the biggest businesses,
it would be possible—even in a recession—to cut most earners’ income tax bills by £700 by raising the income tax threshold to £10,000 for everyone.
The Government have finally accepted today, having spent years telling us it was not possible, that one of the most unfair loopholes—the doubling of the tax relief on pension contributions from the highest earners, compared to people on ordinary incomes—should be changed, but they have only tinkered with the loophole today by removing the benefit only from the tiny minority of people earning more than £150,000. Like the Chancellor’s other tokenistic measures applying to the highest earners, it will raise very little money—only £200 million, according to his own Red Book—while leaving in place the really big loopholes such as the lower 18 per cent. tax on capital gains. That, in effect, serves as a massive subsidy for the very rich when we should be doing everything we can to cut taxes for people who really need help. Our proposals would ensure that 4 million of the lowest paid would no longer have to pay any income tax at all. Our proposals would put fairness and transparency back into this Government’s woefully unfair and complex tax system, and I urge the Government, even at this late stage, to take up our ideas.
It is not too late to sort out Labour’s failed fiscal stimulus either. There should have been proposals in this Budget to end the pointless VAT cut and replace it with a stimulus package that actually works. Billions have already been poured down the drain, but if the Chancellor stopped the VAT cut now, he would still have £8.5 billion to spend better elsewhere. Just imagine what could be done with that money. We could create thousands of real jobs, as well as lay the foundations for a different, greener economy. We could insulate 2 million homes and every school and hospital in the country, which cannot be done with the piffling amount announced today. We could build new council houses, upgrade public transport with new train carriages and re-open railway lines and railway stations. For every minute that goes by, £22,000 is wasted on the VAT cut, and every minute that goes by, someone else in Britain loses their job. It is not too late to turn things around. We could cancel the VAT cut, put the money into green jobs, and have a quicker recovery and a stronger country.
This mishmash Budget includes a litany of missed opportunities. I welcome the Chancellor’s announcements on pensions, but will he confirm that he has still not addressed the fact that many pensioners receive pension credits on the absurd assumption that they are making a 10 per cent. return on their savings?
I have lost count of the number of Government announcements on housing—we have had another one today—yet fewer new affordable homes are being built than ever, young people still cannot get a foot on the housing ladder and the Government persist with their deeply misguided policy of subsidising people to take on new debt in a falling housing market.
Then there is the huge dilemma of how balance and discipline can be restored to the Government’s finances in future. Today’s figures of projected national debt will cast a dark shadow over future generations, but one thing is more important than anything else when it comes to the public finances—growth. Without growth, there will be no money anywhere to pay off the nation’s debt. That means that we must not pull the rug out from under the British economy just as it is struggling to get
up off the floor. So the Conservatives are, I believe, just plain wrong to propose slashing budgets immediately, which would be an act of monumental economic masochism. But the Government are wrong, too, to commit right now to the biggest fiscal contraction in the OECD— according to the Government’s own figures published this morning, they have committed to a massive 16.75 per cent. cut in capital investment by 2011 when they have no idea what the economy will look like by then and no idea of whether cuts would kill off growth just as it gets going.
We should remember that this time last year, the Chancellor said that the economy would be growing by 2.5 per cent. today, and yet it is now registering 3.5 per cent. negative growth. Six months ago, he said that the recession would be over by 1 July. The Chancellor may fancy himself as the new Mystic Meg, but he should get out of the predictions game. We do not know where the economy is going, so we simply must keep our options open until growth is restored, when we will need to face difficult choices. That is the only honest approach.
The Chancellor should adopt an honest approach on spending, too. He is trying to pretend that £15 billion can be stripped from public spending without anyone noticing, but talk of pain-free efficiency savings is a joke. We all remember Gershon. All it proved is that money can be moved from one column to another and called a saving.
The Liberal Democrats would do things differently. We would take big choices about what the Government should and should not do in the medium term, once growth has kicked in again. We would ask difficult questions: is the 50 per cent. target for university students either necessary or affordable; what is our international military role and how much should we spend on it; are exceedingly generous pension entitlements for well-paid public servants fair or affordable? We need a national debate about what the state can and cannot afford in the future, not Whitehall salami-slicing today. That is the responsible way—the honest way—to reduce spending in the years ahead and avoid painful higher taxes.
This Budget could have been a great Budget. It could have set a new direction, a new course for Britain out of recession and towards a stronger future. We could have had a new, fair, transparent tax regime; a better banking system; green jobs and green infrastructure for a sustainable economic future; a new era of openness from Government about what the public purse can sustain; and a new era of responsible, lean government that improves people’s lives. Today was an opportunity to deliver practical help, but Labour is out of ideas and out of steam. Today the Labour Government have condemned us to years of unemployment and decades of debt. The country deserves something different.
1.46 pm
John McFall (West Dunbartonshire) (Lab/Co-op): Today’s Budget is set against the backdrop of a banking crisis that has in the past year become an economic crisis and is now a social crisis. Witness the problems in Europe, whether we are talking about France, Spain, Greece, or the Republic of Ireland, not to mention the central European countries. Against that backdrop, thousands of jobs have been lost and many more people have had cuts in their working hours and wages.
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