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Let us look first at the economic forecasts. I am grateful that at last, after it had become obvious to everyone else in the country, the Government have accepted that there will be a very serious downturn this year. After all the lying, weaving and ducking outside this House and the funny figures given inside it, we now discover that even the Government admit that there is going to be the most severe recession since the war—not only the deepest, but also the longest. We now have a Government who admit that there is not about to be an upturn any time soon. According to the new forecast, the magic Ides of July will come and go without us seeing the green shoots, let alone the recovery.
As my right hon. Friend the Leader of the Opposition memorably said, the Government are forecasting a trampoline recovery some time later, with most of the benefits of this improbable gymnastics delayed until after the general election, because they do not want the electorate to be able to compare what actually happens with the ridiculous forecasts they are now coming up with.
Why is it that after 12 years of this Labour Government, who said they were married to Prudence and had learned the lessons of their trip to the International Monetary Fund and of previous economic crashes, we now see this Government in complete disarray, presiding over not just a big increase in debt, not just a whopping increase in debt, not just a colossal increase in debt, but a bigger increase in debt than all previous Governments from time immemorial over a millennium in this country had managed to borrow together? If someone had made that up for a BBC drama, I think that I would have been one of the first people moaning again that the BBC had overdone it and that the plot was preposterous. Yet that is what today’s figures tell us; they tell us that the Government are seriously suggesting that they should, and they can, and they will, borrow more money in a couple of years than all previous Governments added together over many centuries, including all the war debt that we still have, inherited from those earlier tragic and difficult times when different rules and priorities clearly applied on a cross-party basis.
How did the Government get into such a dreadful quagmire? There are three main reasons. First, they foolishly, rashly and needlessly committed this country’s public accounts to two extremely large banks—banks which, as my right hon. Friends on the Front Bench have again memorably said, were too big to fail and too big to bail. The Government were quite wrong to force those banks, at the fateful weekend in question, into trying to find capital that quickly, and they were quite wrong to say that the taxpayer would stand behind those banks and buy all those new shares at too high a share price, which they forced upon the poor reluctant taxpayer. There were many ways of sorting out and standing behind those banks without putting all that taxpayer cash on the line, and the last thing we needed to do in the parlous financial condition we already found ourselves in was put the taxpayer fully, squarely and completely behind the £3 trillion of liabilities on those two massive bank balance sheets, with all the consequences that followed.
I have not had a chance to read the detailed figures, which were not released to Members of Parliament until immediately after the Chancellor sat down, and of course, the Chancellor did not give us the actual cash figures for his current view of how much those banks
are going to lose us. However, he did say in his statement that he now recognises that there will be material losses for the taxpayer. We have heard the figures in the press; as always, we could have learned most of the Budget in advance by listening to the media over the weekend preceding it, and in the days before we in this House are graced with some kind of statement—and then if we really want to know what is going on, we have to go away and read the documents, because they contain at least some of the bad figures that the Government wish to conceal.
We have gathered, however, that the debate is between the Chancellor and the IMF. We learn that the Chancellor thinks that the Government are going to lose £60 billion on the banks. I will be delighted if they lose only £60 billion on the banks, as I have always forecast that they will lose a lot more than that—but let us just think about this: that is £60 billion of needless losses subsidising rich bankers and foolish banks. Why do a Labour Government want to do that? Do they not realise that that is £1,000 for every man, woman and child in the country? What could my constituents do with £1,000 per head extra this year? Would it not have been better to have given them the money so they could have sorted their own lives out and bought a few more things to create some demand, rather than to tip that £60 billion down the drain by making the taxpayer stand behind the banks and pay for those losses?
The IMF, however, says it thinks the losses will be £200 billion, and I fear that it is nearer the mark. We understand that some of the very expensive spin doctors and Treasury officials employed at our expense have thought it a productive use of their time to try to get the IMF to calculate its figures again—in other words, “If there’s a problem, let’s try to spin our way out of it.” I urge the IMF not to be too lenient with these Ministers and this Treasury, because I fear the losses are, as the IMF has said, going to be all too large. It shows the Government’s priorities that when they nationalise the banks, they will not accept that there is any possibility of loss at all, when they have the autumn statement they leave all the figures on the banks out of the borrowing because the borrowing looks too awful with the banking figures included, and when they finally get to the Budget they realise that none of the commentators and City experts are going to buy the idea that there will be no losses on those banks, so they come up with a figure rather smaller than those of the serious commentators and hope to get away with it, and when no less a body than the IMF rumbles them, they send the spin doctors out to deal with it and try to get the figures massaged in the right direction.
That is the first reason why we are so colossally in debt and so hugely at risk. Never before have a British Government been stupid enough to nationalise banks that in aggregate are bigger than the national income. Never before has a group of Ministers blundered into such a colossal and risky financial commitment as this group of Ministers has. Given the questions I have asked over the months about this, I feel that when they took the decision they had no idea how big the thing they were taking on was, and they certainly had no idea that only £1 in every £7 on the RBS £2 trillion balance sheet was a loan to a British person or British company. Like them, I want to make sure that British companies
and British people do not suffer because of the awful credit crunch. Of course I wish to see the creditors protected, and of course I wish to see lending resume at sensible levels in this country, but only £1 in every £7 on the RBS balance sheet was doing any of those things, yet this Government had to blunder into backing the whole balance sheet, and who knows how much they will lose.
How much do the Government reckon they will lose on the £500 billion casino bank within RBS that they have bought? What action have they taken to protect the taxpayer interest? Have they instructed those bankers to close down the dangerous positions? Have they asked them to calculate the losses and take the ones that could get bigger? Have they agreed with them that they will net out a lot of the positions so we can begin to see what we have got and start to reduce the total risk for the taxpayer? I do not think they have done any of these things. I do not think they have got a clue; I do not think that they care. They thought it was a great idea to nationalise a bank. They thought that would give them control over the economy. They will learn the hard way that they do not control the banks—the banks now control them.
The second reason why we are so deeply in debt—and, even worse, a reason why we will get increasingly into debt under this Government—is the very violent boom-bust cycle that they have unleashed upon our poor economy. This is a boom-bust cycle that was made particularly violent in Britain by wrong policy here in Britain. This is the Government who, when it was becoming obvious to many outside critics that a huge credit explosion was under way, instead of calming the flames by taking some of the material off the bonfire, decided to stoke it some more. This is the Government who, instead of saying to the private sector, “You’re overdoing the off-balance-sheet borrowing, boys and girls,” went out and said, “Do more off-balance-sheet borrowing. We’ll show you how to do it. We’re going to finance most of our public projects on the never-never on an off-balance-sheet basis so that people don’t realise that we’re building up extra public debt, don’t know that we have broken all our own rules, and don’t know that we are doing this on the never-never in the hope that some future Conservative Government are better at running the public books and are able to pay the interest and the debts off.”
Mr. Mark Field (Cities of London and Westminster) (Con): I agree with everything my right hon. Friend says about the appalling state of private finance initiatives, but unfortunately, I disagree with him in one small area: this debt is not on the never-never, as it will have to be repaid. Indeed, it will have to be repaid during the second half of the next decade and beyond, and will be a drag on any recovery that this economy could possibly hope for in that period.
Mr. Redwood:
I was using “never-never” in the common sense—I meant as a way of financing oneself—but we all know that, as my hon. Friend rightly says in correcting me, the never-never is the ever-ever; it is ever-ever with us, and we will have to repay it. These Ministers thought that they could get the glory for the spending and leave the bills with the British taxpayers. These Ministers thought that they could do the borrowing round the corner and leave it off the balance sheet, and that would stimulate the economy. These Ministers thought that if they are having a drink and drugs party on Prudence’s
grave, why not let the public sector lead the way and buy more of the drinks, while the private sector is encouraged to do exactly the same thing.
Far from being the surprised moral Government who did not quite understand how things were out of control, and who can now condemn bankers for getting it wrong, this was the Government who were leading the never-never society, were leading the charge and were leading the off-balance-sheet movement, and who were urging the financial markets of Britain to come up with ever cleverer and, unfortunately, dearer ways of feeding the public monster that they were creating—this huge debt machine in which they were revelling—so that they could have more press releases and more initiatives, and try to give people the impression that they were investing. If only they had been investing, it might have been a good idea—but they were not investing. They were squandering and wasting, and they were not getting the efficiencies, improvements and extra services that we would have liked. There needed to be some extra spending—Governments always have to spend extra on services to improve them—but they were blowing the money in all sorts of ways, not just on nationalising banks, but in ways that I shall examine briefly in the third part of my comments, which will deal with public spending.
The Government made the cycle worse by the lack of spending discipline and by the over-borrowing in the public sector, and by rigging the inflation target at the end of 2003—a little before the 2005 election. They saw that the Bank of England’s Monetary Policy Committee was likely to have to put interest rates up, because it could see that inflation was perhaps going to get out of control and credit was a bit too lively. So what did the then Chancellor do? He changed the target to one that was performing much more modestly than the retail prices index, and I am sure that he knew, because he is a clever man who studies these things, that by changing that target, interest rates would have to be kept lower for longer. That fateful decision—that decision to encourage the borrowing binge in the private sector by keeping rates too low for too long—stoked up the private sector half of the violent cycle.
By 2007, when it was becoming clear even to the Government that they had overdone it, they allowed or encouraged the monetary authorities to put the brakes on. We lurched from careering up the motorway at 140 mph to trying to do a complete stop—an emergency brake—by putting interest rates up and withdrawing funds from the market. They overdid it, so we lurched from excessive boom to excessive bust, and we, the passengers in the car, were hurled towards the windscreen by the effort to bring the vehicle to a grinding halt. It was a disgraceful piece of bad driving for which the Government will not be forgiven for a very long time by the electorate, who can see that British actions—actions by the authorities here in the United Kingdom—made the cycle more violent and worse. China, India and Germany did not have this sort of cycle, but we had it here, because our authorities were uniquely incompetent and uniquely unable to see how they were overdoing it in both directions.
The third reason why we are so massively in debt is that Labour has blown it with its public sector spending programmes. Contrary to the constant rumours from the Labour party, none of us came into politics to fire
teachers, nurses or doctors; Labour Members should accept that all of us, from all parties, come into politics because we want better schools, better hospitals, better public services and better standards. If they were to examine the record of past Governments, they would see that every Government, be it Labour, Liberal or Conservative, have every year, or nearly every year, increased expenditure on those vital front-line services and the people who deliver them.
Anne Main (St. Albans) (Con): The Chancellor should be thanking the good people of St. Albans, who pay the most into his coffers but get the least back in terms of the delivery of front-line services. My area rattles around at the bottom of the league table in what we get back, so we struggle. I am sure that the good people of St. Albans will wonder how on earth they are going to manage with the new cuts that the Government will be putting in place, given that they have been struggling in the good times. All the things that I heard in the Budget to do with the stamp duty holiday for homes worth up to £175,000 do not help St. Albans. I heard nothing about small business rate relief for my local small businesses; in St. Albans that relief does not even kick in. I am sure that my right hon. Friend will agree that the Chancellor seems to have abandoned places such as St. Albans, merely seeing them as cash cows: he just spends the money.
Mr. Redwood: For St. Albans read Wokingham; my hon. Friend has spoken powerfully for me, for herself and for many of our right hon. and hon. Friends. Our constituents, by and large, pay the bills, go to work, work hard, are prudent and save—they do all the things that, we hope, Governments of all persuasions wish them to do—but we are the ones who get socked with the tax bills, and we do not get any of the extra money if the Government are thinking of money for better schools or hospitals. It is very noticeable how unfair the system has been. The Conservative Government to whom I belonged always gave more to areas with greater needs—and of course that is fair, and a common-sense approach—but the situation has now become extreme. Our areas have needs too, and, as my hon. Friend rightly says, the distribution system is very unfair.
I wish to draw attention to the two economies out there: the huge divide in modern Britain is between those of us who work in the public sector and those who work in the private sector. The big divide is between those who are trying to run small and medium-sized entrepreneurial businesses and their staff, and those who are in the large bureaucracies of the public sector—those in the quangos, the councils and the Whitehall Departments. There is a monumental sense of injustice, because when we talk here about tough choices we are talking about whether we increase public spending at 2 per cent. or 1 per cent. in real terms—above the inflation level—or about whether we are going to have three nice extra things or one nice extra thing in our budgets, but what people in private sector companies are talking about during this awful recession is whether they close one factory or two factories out of their three or four, and whether they get rid of 20 per cent. of the work force today or whether they may have to fire 25 per cent. of the work force in two months’ time because demand is so low. They also talk about how they can halve their stock levels because they cannot
afford to maintain them and they cannot get the borrowing for the stock, and they discuss what impact that has on all the people who would like to carry on in their jobs making things.
I do not think that these Ministers have a clue how tough it is out there for private sector businesses. I do not think that they have any idea what it is like for businesses of just four or five people, where those running the business are personal friends with the individuals whom they are employing, but at some point they are going to have to say to one or two of their employees, “Either you go, or we all go.” That is the tough choice that such people are facing; that is the reality. They are the people who are facing this huge rash of extra bureaucracy, extra regulation and changed tax rules that makes their lives even more difficult at a time when they need to concentrate on sorting out their business, when they need a break from their banks and when they need a break in terms of improved demand and improved economic prospects.
It is this huge divide in Britain that is so unfair and that is causing so much anger, and it is one of the main reasons why the governing party is so low in the opinion polls—about which it must be extremely worried. When listening to the Chancellor and hearing about his many schemes for people who, sadly, lose their jobs, one wondered whether there was at last some forethought about the colleagues of his whose jobs are going to be destroyed by his very bad economic management, and who may well be feeling that pain in a year. They will then discover that it is very brutal out there and things are very different when one loses the protection of the indexed pension, the decent salary, the expenses and all the rest of it.
The public expect us to do everything we can to try to reduce the length, depth and severity of the recession, and to make the tax changes or produce the schemes that might make a difference to those who are struggling to keep going potentially good businesses that have been very badly damaged by the current climate. But they also expect us, above all now, to treat their money seriously and to spend it wisely. They do not believe for one minute that all this extra money that has been tipped in, so much of it borrowed, is buying them a better school, a better hospital, safer streets or stronger border controls. They think that a lot of it is wasted.
I called this Budget the Damian McBride memorial Budget, but I now wish to say something nice about the Government. I know that I will upset my right hon. and hon. Friends by saying so, but I think that the Government did a very good thing in sacking Mr. McBride. I think that the Labour party would agree. However, I have some advice for the Government. They still have dozens of McBrides left in their organisation—spin doctors spinning in favour of their bosses and the Government—although I hope that none is doing all the things that Mr. McBride was doing, at least not any more.
The Government do not need those spin doctors—indeed, I fear that I am doing the Government a good turn by giving them this advice. One reason why they are getting such a dreadful press at the moment is that those spin doctors—and their bosses—are turning on each other, fighting for power and the ear of the current incumbent, and positioning themselves for the leadership
race. If the Government got rid of more of their spin doctors, I could say nicer things about them. It would be a good saving, because many are supernumerary. They are letting the Labour party and the Government down, so some savings could be made there.
A much bigger saving in cash terms could be made by cancelling the ID card scheme and the national computer database. It is hugely expensive and will be deeply intrusive, without making our country any safer. Burglars will not take their ID cards to the scene of the crime and leave them on the mat when they leave. We already have identity documents that people have to show when they arrive at our borders; they are called passports. Instead of ID cards, we should have a border authority that wants to inspect passports properly and make sensible decisions about those visiting our shores. These people do not come across in rowboats; they are not sneaking into the country. They come in through the front door—through Gatwick, Heathrow and Dover. Let us do the job at the port of entry with the proper documents. We do not need to make everyone else live in fear that they will be caught without their ID card when digging at the bottom of the garden. If the Government do not scrap the ID computer scheme, they are not serious about civil liberties, and they are certainly not serious about saving money. It is a no-brainer, because it would be a popular public spending cut.
Unelected regional government is widely loathed and hated in England. The Government can no longer say that it is hated only in parts of England with Conservative local government administrations, because they decided to test the popularity of regional government in what they thought was the Labour heartland of the north-east. At the time, it had mainly Labour MPs and mainly Labour councils—more recently elected than some of the MPs—but the Government lost that vote not by 55 to 45 or 60 to 40 but by four to one against. If they want to repeat the experiment in my part of the world, we can make it five to one or six to one against.
Regional government is widely hated. It is a huge cost burden and involves unnecessary administration, bureaucracy and regulation. If something needs spending on or regulating, it should be done nationally by the Departments or locally by the county or unitary authority. We do not need the middlemen and women—let us sweep them away. Again, I fear that that would make the Government popular, but I can recommend it because I know that there is no chance of their listening to the people of Britain. The Government will go back to the north-east, where they still hope to win some seats in the general election, and they will have to explain why they rode roughshod over the freely expressed and sensible views of the people there.
The people have rumbled the Government. We do not need European government, national government, regional government, county government, district government and parish government. That is six layers of government and too many people bossing us around, too many people on expense accounts and fancy salaries and with public sector company cars. Get rid of some of them. The obvious place to start is the regional level, and it should go.
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