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Let me mention something that I have not mentioned for a very long time in this House—my hon. Friends will be very disappointed—and that is the subject of the European Union. Tony Blair, in the good days, thought that we had so much money that he would like generously
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to give some of Baroness Thatcher’s rebate back to our partners. The Government always tell us that they have a lot of influence in Brussels and that they get on well with our partners. I think that the Prime Minister should go back there next week and say that his predecessor made a huge mistake.

When Tony Blair generously decided to give all that extra money to the rest of the EU, he thought that Britain was strong, prosperous and well run. The present Prime Minister now realises that it was not; it is nearly bankrupt and borrowing too much money. We cannot afford to borrow extra billions of pounds—and it will need to be borrowed—to give to other countries, some of which are in a stronger financial position than we are. It is a little challenge for the Prime Minister after the triumph of saving the world: to go back to Brussels, say that his predecessor wrongly and stupidly gave away the good deal that Baroness Thatcher had negotiated with great skill, and tell them that the British people now need that money, because it will all be on our overdraft as the public accounts are out of control.

I come to the public sector rich list. I pay tribute to the Taxpayers Alliance for the work that it has done in getting to the truth about some of the waste and grotesque excess that has substituted for proper public spending under this Government. Up and down the country, there are hundreds and thousands of senior officials in posts in quangos, in Whitehall and in local councils who are earning mega-salaries. Those salaries do not respond to market pressures. In the cold and hard private sector world of which I have reminded the Government, people on high salaries in companies under pressure are not only losing their bonus, but will have to take a pay cut—if they are lucky, because otherwise they will lose their job. When they get another job, if they manage to do so, it is at a much lower rate of pay than prevailed a year or two ago.

I am all in favour of people being highly paid if they earn it and the taxpayer does not have to pay the bill. Good luck to them; I want more and more of my constituents to have well-paid jobs. But we cannot afford to replicate the high pay of the successful in the competitive sector—freely, out of the money that customers make available—in the public sector, where most of our staff are motivated by a sense of public duty and think that, say, £63,000 a year is a decent rate of pay. They should not need £160,000, £260,000 or £400,000 a year, which now seems to be the going rate for some of these quango jobs.

The Labour Government are rediscovering their socialist roots in a big way in this Budget, but I suggest that they could do themselves a favour by having a new rule in quangoland and throughout the public sector: not to give people salaries above the Prime Minister’s level of pay, and to go back to those already on mega-deals and ask them to make a contribution by taking a pay cut or accepting really tough performance criteria so that they have to earn it. We all know that most of those jobs in the public sector have been a joke so far and performance pay has been granted too readily.

Mr. Nigel Evans (Ribble Valley) (Con): I fully endorse my right hon. Friend’s suggestion, but should salaries not be pro rata? Some of the chief executives and senior officials of these quangos not only earn more than the Prime Minister, but work only two or three days a week.

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Mr. Redwood: My hon. Friend is tougher than I am, but he makes a good suggestion. I hope that Ministers have got the point that the situation is out of control. There are too many of these jobs—many of them are non-jobs—and too many are too highly paid. At this time when we need some restraint, we should try to reduce them.

We in this place also have to make a contribution. My worry about the Prime Minister’s YouTube discovery yesterday—I do not know why we could not have been told first, because it is after all a House of Commons matter—is that we are being offered a scheme that on the face of it, although no numbers have been given, will lead to an increase in the total cost of MPs’ expenses. That is completely wrong in this climate. The idea that people should be able to get more money just by turning up than they did by handing in proper invoices for things on which they were spending money is for the birds, and I hope that Ministers back off from it as quickly as possible. If they do not, they will find that the public, far from being impressed by the Prime Minister’s action, will feel extremely let down that he has discovered another way to pump more money to Labour Back Benchers without any proper accountability.

I guess that the proposal would get more hon. Members turning up at the House of Commons, and that could be a good thing—although, given that we are locked out for much of the time because the Government do not want us to meet, they may decide to lock us out for even more days in the year to try to keep the costs down. That would not be a very welcome development either, so I hope that we can look again at the proposal. We need to show leadership on our costs and expenses, just as we do throughout the public sector.

I do not know about you, Mr. Deputy Speaker, but I feel that we have had a surfeit of glossy brochures under this Government. Day after day, a great pile of them is put on the table in my office. I look at some of them, but most get thrown away. Many are worthless and, if I needed it, I could get most of the information from a simpler source or from a website. All the glossy brochures that Members of Parliament throughout the Commons get day after day are paid for by the public sector. Could we not have a glossy brochure sabbatical, or amnesty? That would be a modest saving, but it would show willing. For example, we could have no more glossy brochures until Christmas, which would mean that the Government could save them up and then issue only the ones that really mattered. If they really do have a wish to tell us what they are doing, websites are so much cheaper, and it would be rather good if they were kept updated.

David Davis (Haltemprice and Howden) (Con): My right hon. Friend is talking about cancelling glossy brochures. May I volunteer the piece of fiction that is this year’s Red Book as the first option for cancellation?

Mr. Redwood: My right hon. Friend makes a very good point. There are lots of useless glossy brochures, but even the ones that we want have got glossier, bigger and more unreliable. We need to show a little common sense: the information that we need should be timely and accurate, not produced in this extremely elaborate way.

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I have many more ideas, but many colleagues wish to speak in this debate so I will not go on at any greater length. My conclusion is that there are three major reasons why this country has been landed in such massive debt. The first is the huge mistake that has been made over the banks. My advice to the Government is to get out from under the bank assets and liabilities as quickly as possible. We cannot afford them, and they will only lose us a bigger fortune.

The Government still do not seem to know what risks they are running, so will they please take action today to start limiting the risks and selling off the assets that they have acquired? Will they also please tell people in the publicly owned banks that they will not be earning £300,000, £400,000 or £500,000 a year or getting mega-pensions as long as those banks are making losses? They are public sector bodies and we are responsible for the money. It is a waste of money to spend those sorts of sums on such banks unless they are going to go back to the private sector immediately and earn their living sensibly. If they do that, and the sort of salaries that I have mentioned can be paid for from private means, I have no problem with them.

The second reason is the violent cycle. We desperately need proper welfare reform from this Government. We went into the downturn with more than 5 million people of working age out of work. That was a disgrace, and it shows what a dear mistake it was to sack the man who was Minister for Welfare Reform at the beginning of this Government, the right hon. Member for Birkenhead (Mr. Field). I think that he would probably have done a rather good job in improving incentives for work and limiting the welfare bills. Instead, we have gone on for years with no proper welfare reform.

The Government have allowed many people to be out of work, for good reasons or bad, and they have not ensured that they were brought into the work force in the good times. We need proper welfare reform so that we can get people back into work more quickly. If the Government do not reform welfare, they will not solve the problem of unemployment and they certainly will not control the budgets.

The third big reason why we are too heavily in debt is wasteful, needless and unnecessary public spending. There are many examples of that, and I have listed some items to show Ministers that we would know what we were doing. They must understand that pretending that there are a few more efficiency savings to be made without naming them is not a good enough answer.

I therefore have one last proposal that would make a big impact on Government budgets over the next couple of years: a complete freeze should be placed today on all staff, throughout the public sector, who do not work on the front line, and that replacements should be allowed only where they are absolutely necessary. If that were done, the Government would soon start to make an impact on the huge increases in spending that they have presided over. There are 300,000 extra civil servants compared with the number under the previous Conservative Government. Why does it take so many more to do a worse job? Of course, that is exactly what happens: the more people who are employed, the more difficult it is to control them, the more things they do that do not need doing and the more money is wasted.

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The message is simple: the Government cannot solve a crisis of over-borrowing by borrowing more, or get out of a credit explosion by going on a public sector credit binge. If they take too many chances with the public accounts, there will be a buyers’ strike on Government debt. There is already a dangerous bubble in Government bonds which has been brought on by quantitative easing and their monetary antics. That is very insecure for savers and our economy.

As the Leader of the Opposition said, the way out of this problem is through saving, investing and exporting. We have had the years of borrowing, importing and spending foolishly. We now have to pay the bills.

2.46 pm

Dr. Gavin Strang (Edinburgh, East) (Lab): Economic predictions are notoriously unreliable, but few of us at the time of last year’s Budget would have imagined that we would be where we are now, with a major share of our banking industry in public ownership and the world in the throes of recession.

The economic crisis began in the financial sector, and I would imagine that most people would agree that we would be suffering a far worse situation had the Government not stepped in to rescue the banks. The scale of the measures taken to save the banks and get them lending again is enormous but, had there not been Government action on this scale, we would have faced the real prospect of a collapse of our banks. Allowing our banking system to collapse following the bankruptcy of Lehman Brothers in the US would have been catastrophic for the entire country. It is important to remind people that these measures were not taken for the sake of the banks but for the sake of everybody in the UK. Had the banks been allowed to fail, the entire economy would have suffered from the impact.

The financial sector is of vast importance to the broader economy, and the current economic problems have shown the degree of interaction between the two. The ill-health of the financial sector caused an acute reluctance on the part of the banks to lend to each other, and to people and businesses. This credit crunch soon put the so-called “real” economy into difficulties, leading to an increasing number of individuals and businesses whose finances look precarious. In addition, lenders stop providing credit to people who they perceive as at risk of being about to go bust. As well as preventing the collapse of the banks, the measures taken by the Government have been designed to get the financial institutions lending again.

There is real hardship—and fear of hardship—as the recession takes its course. My constituents are particularly exposed, owing to the high proportion of jobs in Edinburgh that are in the financial sector. Edinburgh is Europe’s fourth largest finance centre. In 2007, 32 per cent. of employees in our city worked in the job category of finance, IT and other business activities, compared with 22 per cent. in Britain as a whole. That is quite a big difference.

A recent study commissioned by Scottish Enterprise projected that the Scottish banking and insurance industry could lose up to 8 per cent. of its work force—that is 24,000 jobs—over the next two years. Unemployment in Edinburgh has indeed jumped: the number of people claiming jobseeker’s allowance leapt by 59 per cent. in
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the year from February 2008, and the number of unfilled jobcentre vacancies more than halved. There are now nearly six jobseeker’s allowance claimants for every jobcentre vacancy, up from just under two last February. While there are signs that the worsening of the economic situation may be slowing down, the economic downturn is far from over and unemployment in particular, as a lagging indicator, is likely to increase for months to come.

We must make a massive effort to identify the lessons to be learned from this crisis, and all involved should accept their share of the responsibility. It is undeniable that events abroad played a major role in igniting the global and domestic recession. In his report published last month, Adair Turner, the chairman of the Financial Services Authority, identified the US housing market as the source of the origins of the crash. However, it is also clear that all was not as it should have been here in the UK. Practices of the banking and finance industries have been roundly condemned and the Government have moved to identify the weaknesses that must be addressed. In addition to the Turner review, David Walker will report later in the year on the banks’ corporate governance, and the Chancellor said today that the Treasury will bring forward its own proposals for reform in due course.

The culture of excessive borrowing has also been criticised. We still have huge levels of personal indebtedness. Total net outstanding lending to individuals is just under £1.5 trillion. Consumer spending that was funded by borrowing on the basis of inflated property prices drove our economy to an unsatisfactory extent. In time, as more information becomes available, it will be possible to determine the extent to which the Government and their agencies could have better mitigated the impact of the crisis, especially in the regulation and oversight of the banks.

It is clear that we must help the UK’s productive economy—sectors such as manufacturing, food and agriculture, which require support. I would like to take this opportunity to raise again—I have done so in the past two Budget debates—the question of our international trade in goods and services. In the past decade our balance of payments has deteriorated substantially. At current prices, the deficit stood at £7 billion in 1998. That rose to £25 billion in 2003, and the figure stood at £44 billion last year. Of course, the global economic crisis will have an impact on the trade balance. In fact, last year, the balance improved slightly on the previous year. Economic difficulties at home may dampen demand for imports, while the effect on exports of the global slump in demand may be softened to some extent by the recent devaluation of sterling. However, the long-term trend has been one of continued and substantial deterioration, and I encourage my right hon. Friend the Chancellor to address the importance of the trade balance to our economy.

It is understandable that there has been focus in this debate, particularly on the part of the Opposition, on the scale of the borrowing that the Government are having to undertake to fund their programmes, but it is inevitable that Government debt will rise if the Government take action, through tax cuts and increasing public spending, to stimulate our economic activity. The Government were right to take action in recent months to increase demand in our economies. The Chancellor has announced a range of positive measures today that
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we should all be able to support. These are difficult times. The Government are on the right lines in investing at this time. We need to stay the course and continue to have the courage to invest in our economy.

2.53 pm

Mr. Michael Jack (Fylde) (Con): May I first remind the House of my entry in the Register of Members’ Interests? I am a non-executive director of a plc.

The first test that one has to apply to any Budget is a bit like the question that one asks after a Chinese meal: “There is an awful lot of it to digest, but how will I feel in the morning?” The second test is to ask what the reaction was in the House. This Budget got what I might describe as muted applause towards the end. Both the Chinese meal test and the applause test reflect that there was an awful lot of very difficult information to digest.

I was thinking about the Budget and, remembering the time when I was in the Treasury, reflecting on the kind of decision-making process that has to be gone through when a Budget is framed. I was almost stunned mentally by the enormous size of the numbers, and the changes that have occurred in the state of the public finances even since Budget 2008; that is without even commenting on the pre-Budget report. Last year, I wrote an article for my local newspaper, in which I said that between planting my potatoes on my allotment in May and harvesting them in September the world had fundamentally changed, economically speaking. I do not think that any of us have seen such an enormous turnaround—not just in the United Kingdom economy but in the global economy—involving such very large numbers in so short a space of time. It takes a long time for the public to come to terms with the enormity of what has occurred.

The Chancellor was almost emotionless in his delivery; he read out the Budget a bit as though it were the annual statement at the annual general meeting of some great corporation. The attitude was, “We’ve got everything under control. Fingertips are on the pulse. We have understood the numbers, and we have got the model working. Everything is all right. In about 2015, all these problems will be over.” It was just surreal. It was too serene and did not, in my humble judgment, reflect the reality and the pain to which the real economy is having to adjust in a very short space of time.

At Prime Minister’s Question Time, the Prime Minister denied to my right hon. Friend the Leader of the Opposition that boom and bust was the busted flush. That was not looking reality in the eye. Let us spend a moment analysing what the former Chancellor of the Exchequer used to say. When he said, “I’m bringing an end to boom and bust,” fundamentally he was trying to say, “I’m going to restructure the economy. We’re not going to do what previous Administrations did. We’re not going to put the economy at risk.” However, if we look in the Red Book, we see a rising trend in the percentage of gross domestic product that was used for public expenditure before the recession. That brings to mind that much-used but now rapidly discarded word, “prudence”. It indicates that what perhaps was a responsible start to the former Chancellor’s regime rapidly went off the boil when public expenditure and borrowing got out of control.

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