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3.35 pm

Mr. Michael Fallon (Sevenoaks) (Con): I remind the House of my interests recorded in the register.

This year’s Budget had to meet three crucial tests: to focus real help on those hardest hit by the recession; to start to rebalance our economy and put it back on a path towards sustainable growth; and, of course, to put the public finances back under control. Some of the Budget’s measures to give real help to the hardest hit are welcome, particularly those to help people back into the labour market as quickly as possible. However, I do not think that the Minister needs reminding that what really matters is that help is real—not just announced, packaged and put up on a website, but working on the ground and getting through in our constituencies.

The two groups who obviously need help are home owners, as the hon. Member for Crawley (Laura Moffatt) said, and small businesses. Home owners who may be facing redundancy, through no fault of their own, are still unable to access the help that the Government announced on 3 December—four months ago—and then re-announced earlier this week. It is still not clear exactly who will be eligible or which banks and building societies are participating. That delay has been scandalous because people being made redundant now are already falling behind with their payments.

Let me give an example from my constituency. A couple living in a village close to mine have both been made redundant—the husband in September and his wife at the end of January. She has been able to find a small part-time job, but because they have some savings they are being told by their lender that they are not entitled to anything more than a three-month payment holiday. I quote:

It is time that we got this scheme actually working rather than constantly being re-announced. I hope that the Minister will inform me exactly which lenders are participating and what the qualifying criteria are.

Small businesses in my constituency are so confused about the various schemes that have been announced that they are writing to me, here in the House, asking that I write on their behalf to the banks or to Ministers to sort things out. The good news is that when I do get
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involved, I generally find that the banks respond quite well. However, local branch managers do not seem to be fully aware of how the schemes should operate, so the help is not getting directly through to the companies that need it most.

I hope that the Minister winding up the debate will assure us that all the schemes that have been announced are now working—including the working capital scheme, which does not seem to be working at all—and yielding results in our constituencies. It is essential that, as the pain continues this year, we try to protect the two groups I have mentioned.

Secondly, the Budget was an opportunity to begin to rebalance our economy. If we have learned anything over the past 10 years, it is that it is not enough to depend on a highly leveraged financial sector, an over-extended private housing market and an ever-expanding public sector. That simply does not give us the investment that we need in new industries or the all-round performance that we need as one of the world’s larger economies.

Roughly every year, I ask the Library to rank our country’s gross domestic product per head against all 50 American states. Over the past six or seven years, the answer, surprising as it might be, has been about the same. This country now ranks 45th, coming ahead of only Mississippi, Arkansas, West Virginia, Idaho and South Carolina. On GDP per head measured in purchasing parity terms, this country is actually poorer than Oklahoma, which is some achievement after 10 years of ever-increasing public expenditure and the so-called investment strategy of this Government.

Why is that? It is because the three sectors that I mentioned—the highly leveraged financial sector, the overheated housing market and the ever-expanding public sector—have all been fuelled in exactly the same way: by debt and excessive borrowing. The levels of borrowing are simply unsustainable, as we have seen in the banking crisis, and are beginning to unwind, and as they do so we begin to see the damage that has been caused by our overdependence on those three sectors. We see how reliance on debt and leverage has crowded out investment, equity and savings as a basis for the commercial markets, and how our obsession with driving up home ownership even among those who could not afford it—we have all been guilty of that—has crowded out the development of a broader rental market. We have seen how the inflation of the public sector has caused growing resentment among those who are not entitled to the special working practices, protected pensions or early retirement enjoyed by those in the public sector.

I would have liked this Budget to encourage other things. For example, I would have liked it to encourage equity rather than debt and to look again at how we can back early years funding for the new companies to which the hon. Member for Sheffield, Attercliffe (Mr. Betts) referred. This country is not as good at that as the United States. We need to look again at venture capital trusts and how they can be developed, for example by allowing them to invest in secondary markets, as the London Stock Exchange suggested in its Budget submission. Of course, we need to look again at having more and better applied industry-driven research to turn a handful of clusters into serious, knowledge-driven business communities, as has been done much more successfully in the valleys of California and elsewhere.

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Thirdly and finally, as my hon. Friend the shadow Chancellor and others have said, this Budget has failed to get the public finances back under control. The deficit that has been announced for the next two or three years is of course appalling, but it is important to understand that a large part of it is structural and has nothing to do with the huge sums that have been put aside to bail out the banks, or the way in which stabilisers kick in and welfare rolls grow during the recession. We have inherited that structural deficit from the boom years.

Mr. Robert Goodwill (Scarborough and Whitby) (Con): Does my hon. Friend agree that the problem has been exacerbated by the fact that this Government have failed to distinguish between true investment, which yields a return, and spending through taking on increased debt, which is difficult to justify?

Mr. Fallon: My hon. Friend is right. The word “investment” has been stretched far too wide.

This Government have not balanced the Budget since March 2002, which is seven long years ago. In the March 2003 Budget, they said that they would balance the Budget by March 2006. Two years ago, in the March 2007 Budget, the forecast slipped to March 2009. Three years ago, they forecast that we would be back in surplus this year. Last year, the forecast was pushed out further to 2011. In the pre-Budget report, it went out to 2015, and yesterday, as I understand the Red Book, it was forecast that it will be 2017-18 before we are finally back in surplus.

The Government have consistently mismanaged public expenditure. They have overestimated revenues and failed to get proper control. There was a time when the job of the Treasury was to control spending. In the past seven or eight years, the Treasury has been directing spending and failing to control it. Now we are told that the remedy lies in even more efficiency savings, despite the fact that the National Audit Office has fully scored only around a quarter of the efficiency savings so far claimed.

As my hon. Friend the Member for Tiverton and Honiton (Angela Browning) eloquently explained, if the economy goes on shrinking, government cannot go on growing. We have to start taking out costs and reducing layers of bureaucracy. We must do what businesses across the country have been doing and what households across the country are now having to do, which is, as my hon. Friend has said, cut our cloth according to our means.

The private sector has already outsourced back-office functions, cut layers of middle management and streamlined procurement. Those things have still not happened in central Government, local government, the health service bureaucracy and education bureaucracy. The perfect indictment of the Labour years is what sadly happened at North Staffordshire hospital. While patients were dying and others were drinking out of vases, three quangos—Monitor, which costs £13 million a year, the Healthcare Commission, which costs £76 million a year and the Audit Commission, which costs more than £200 million a year—were writing letters to each other. That was the failure of North Staffordshire hospital—a failure of the culture of ever-inflating quangos.

If we are to maintain the credibility of our currency and reassure overseas investors, we must repair the damage done to our public and private finances over
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the past few years. We must put our public finances back in order, which involves reducing borrowing and the increase in spending. If we do not do that, we will end up with more cases such as North Staffordshire hospital and we will have to cut programmes for the most vulnerable. If we do not do it, in the end the IMF will have to do it for us.

3.49 pm

Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): Like the Secretary of State at the beginning of the debate, I was encouraged by the opening remarks by the shadow Chancellor, because I thought that we were at last going to get an inkling of the Conservative way forward in the current financial circumstances. The shadow Chancellor started quite well and indicated that he had five points. For the next 24 minutes of his speech, I was waiting to go through those five points to examine his solutions. First, he told us that we must analyse how we got here, which is fair enough—I probably disagree about how we got here, but such an analysis is a good place to start. He referred to some relatively minor movement of spending priorities that he said were fiscally neutral and would presumably make no overall difference, therefore, to the general strategy.

I might have miscounted, but the shadow Chancellor seemed to get to only three of his five points. His final big point that I noted was that there should be a national debate about how we tackle an age of austerity. We all recognise that the economic situation is very serious: the Conservatives say that it is one of drastic seriousness yet, at a time when urgent action and policies are called for, the central point of the Conservative shadow Chancellor’s policies is a call for a national debate about the age of austerity.

That reflects the fact that Conservative Front-Bench Members are, to put it bluntly, too frightened to put forward any policies. They recognise that the public would not like what they heard if the Opposition were to follow through the logic of positions such as that taken by the hon. Member for Sevenoaks (Mr. Fallon). I give the hon. Gentleman credit for the honesty of his arguments today, but anyone who heard them could not but conclude that his recipe for recovery from the current crisis involves massive cuts in public expenditure that would affect large numbers of public services. We all heard what he said about the need for much more outsourcing in elements of the public sector such as housing, health and education, and I am sure that we will all eagerly enter into debate about those matters in the months to come.

Conservative Front-Bench Members may not have put forward many ideas today about how we can get out of the current situation, but other people have done so. I am glad to say that the Chancellor has been listening, and that he has implemented many of the more constructive proposals. Many people, organisations and MPs—and I was certainly one of the latter—have urged him to establish a programme for green jobs, arguing that such a programme would allow us to link the need to tackle the challenges of climate change with the need to provide jobs here and now for people facing unemployment.

We suggested that a fund be set up to help local authorities and voluntary organisations provide jobs with an emphasis on tackling environmental concerns.
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Therefore, I strongly welcome the plans announced yesterday for funds to provide 100,000 new jobs in socially useful activity, to be delivered through councils and voluntary groups. I welcome in particular the commitment that at least 10,000 of those jobs will be in the green-job sector. When the Government do something for which one has been calling for some time, it is right to recognise the fact. I am certainly glad that the Government have responded in the way that they have, as that will allow us to tackle some green issues and at the same time provide jobs here and now for people who need them.

I look forward to finding out more about the proposals shortly, and believe that the concept can be built on and developed. The voluntary sector in particular can play a major role in delivering these jobs as quickly as possible. Even more than local authorities, voluntary organisations can move quickly and come up with sensible and practical schemes that will deliver lasting benefits to local communities.

Mr. John Hayes (South Holland and The Deepings) (Con): The hon. Gentleman is making a case for the innovative industries, particularly in respect of what he has described as “green jobs”. However, he will know that one feature of previous recessions has been that businesses tend to cut their investment in training and research and development. The Government’s response has been relatively unsuccessful: the R and D tax credit and the Train to Gain schemes do not seem to be reaching small and medium-sized enterprises. My hon. Friend the Member for Sevenoaks (Mr. Fallon) spoke about venture capital for early-years and start-up businesses. Why did the Government not do more in that regard in the Budget?

Mark Lazarowicz: If the hon. Gentleman looks in more detail, he will find, for example, that the pledge for 16 to 24-year olds is that every one of them facing long-term unemployment will have the opportunity to take up training. That is precisely the sort of positive measure that the Budget contains.

The proposal to create 100,000 new jobs, many of them green jobs in socially useful activity, is one that I certainly welcome. However, I would ask the Government to consider the possibility of extending the scheme even further, to involve more than just younger workers. I understand that there are proposals in the Budget for 50,000 jobs in the programme to be concentrated in those areas of highest unemployment, which is obviously right and proper. However, we have an opportunity to spread the scheme throughout the entire UK once it is up and running, which is something that I would strongly endorse. I look forward to the Government coming up with the details of those proposals, so that they can be put into effect and make a difference to our communities as soon as possible.

I would also emphasise that it is important not to assume that those environmental jobs are only those that involve clearing up rubbish or physical construction or work in that type of environmental project. Such work is of course important and valuable to the community, but there is a host of other green jobs that could be provided and which would make use of the wide range of talents and skills of those who find themselves without work in the current downturn. For example,
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there is interest in environmental education among those in every age group. Work is also to be done in promoting green travel plans for employers and employees. There is also a need not only to install energy efficiency and conservation technology, but to advise people on how to go about saving energy in their daily lives.

Those are just some examples of a wide range of green jobs that could be made available through the development of the scheme that has been referred to in the Budget papers. Such jobs will clearly not fill the gap for everyone who is made unemployed in the current downturn, but they can certainly help to tide people over in the current difficult period. Again, let me emphasise that they are jobs that could come on stream in months, and in some cases perhaps weeks, which is what we need. We need to provide people with jobs soon, because they will increasingly feel the effects of the recession in their communities. Action of that type is therefore needed.

It is certainly the case that many of the proposals for a low-carbon economy can have relatively quick impacts on employment. However, as I am sure the Minister would be the first to acknowledge, other proposals would take a lot longer to have an effect on jobs, because they require investment programmes that would take some time to result in large numbers of jobs. It is therefore important to consider ways of trying to produce employment opportunities in the short term, as well as in the medium and long terms.

That said, the proposals for a low-carbon economy in the Budget as a whole are important, wide-ranging and very much to be welcomed. They have also had a positive response from many in the renewables and low-carbon sector. I would like to pick out a few quotations from those in the sector who have responded to the proposals. The general manager of Sharp Solar UK said:

for solar power. The British Wind Energy Association said:

The chairman of the BWEA said:

I could continue at length, but finally I will quote the Combined Heat and Power Association, which says that the Budget

which could help to deliver up to £10 billion of investment in new CHP plant over the next few years. That is the reality of what people out there in the renewables industry and the low-carbon sector think of the Budget. It is also the kind of message that we should be hearing, not some of the negative messages that we have heard from some Opposition Members today.

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