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The increased funds available for housing are also welcome, but I urge the powers-that-be to ensure that that money goes to areas of greatest need such as Islington, where 13,000 families are languishing on the waiting list for social housing. I give hon. Members an example of a particular development. On the Holloway road in my constituency, there is a development above the Tesco's with 60 units, only 10 of which are affordable units. Exactly why the Lib-Dem council thought it was appropriate to allow only 10 out of the 60 to be affordable is another debate for another time. Lo and behold, 50 of those units remain empty. It seems to me that that sort of development is a great candidate for public ownership to allow families to have somewhere to live.
I urge the powers-that-be to build large units, because for every five-bedroomed flat that they build, they will be able to move an overcrowded family from a four-bedroomed flat into that five-bedroomed flat, and then a family in a three-bedroomed flat into the four-bedroomed flat, and a family in a two-bedroomed flat into the three-bedroomed flat. That is just from building one five-bedroomed flat. We need to look carefully at what we are building.
I welcome the Government's long-standing commitment to ending child poverty and it is a shame that they have been unable to devote more resources to measures that would make a big difference. It is unfortunate that we have not been able to consider the possibility of introducing London weighting for tax credits and benefits.
I appreciate that there is not much money around, but I believe that there is one pot of money that I urge the Government to use to fund their priorities. I believe that £76 billion, which we could use to end child poverty, is being wasted on building, renewing and maintaining Trident. I appreciate that I am in somewhat unusual company in this. It seems that my right hon. Friend the Member for North Tyneside (Mr. Byers) and the right hon. Member for Banff and Buchan (Mr. Salmond) agree with me on the matter, but that does not necessarily make it wrongit makes it right. At a time such as this, we need to reorder our priorities. It seems to me that at a time such as this all our constituents would appreciate it if we no longer wasted our money on something like Trident.
As we know, many banks are trading today only as a result of money paid into them by the taxpayer. Many members of the public have been completely and understandably outraged at the perception that public money is paying the bonuses of those who have failed. Although we appreciate that legal and contractual difficulties have resulted in our not being able to stop them claiming that money, I was hoping that the Budget would provide an opportunity to claw back those unearned bonuses. I was hoping that we would be able to find a way to tax payments over and above the basic salary paid to the bankers at 100 per cent.
I appreciate that as a Back Bencher I am free to make such suggestions. It is not for me to develop the necessary mechanisms to put those ideas into action. However, although it may be difficult, if anyone can, Alistair can. I ask him to look at that matter again. I welcome his bold move in introducing a 50 per cent. tax rate for the top 1 per cent. of earners. I believe that that is fair and right. It is not a tax for tax's sakethe same old scare
story that Tories and Liberals like to bandy around. That tax rate has been brought in because we need money to get this country through the downturn. I believe that it is right for that money to come from those who are now in a position to be able to paythose who have benefited most from the good times of the past 10 years.
I recently surveyed my constituents through my annual report, and 80 per cent. of respondents agreed that a higher rate of tax on those earning more than £150,000 was justified. [Interruption.] I suggest that Opposition Members listen to this. The higher contribution from those on higher incomes is a policy that only Labour supportsthe Liberals have abandoned it and the Conservatives have an obvious distaste for it. However, it is popular among our constituents because they know that it is fair.
More generally, the Conservatives' response to the economic downturn has revealed what really makes their hearts beat faster. Despite the rhetoric of the past few years, the current crisis has unmasked the Thatcherite zeal of so many in the Conservative party, including David Cameron. The Tories are inherently queasy about spending, and they are suckers for cuts. We saw them go to their weekend conference with a real spring in their step. They think that they do not have to bother with compassionate conservatism any more and that they can go back to small government. At the weekend, David Cameron said:
with a Conservative Government, if ministers want to impress the boss, they'll have to make their budgets smaller, not bigger.
He said that the Government should have reduced spending in 2008 and should now reduce planned spending in 2010. No one denies that repaying the borrowing will mean tough decisions, but it is inconceivable that a Labour leader would ever wear the badge of service cuts with such pride as David Cameron clearly wishes to wear it. We will protect
Emily Thornberry: It is inconceivable that a Labour leader would ever wear the badge of service cuts with such pride, as the right hon. Member for Witney (Mr. Cameron) clearly wishes to demonstrate. We will protect people during the recession, and when we build the economy of the future, public services will always come firstas they always do with Labour. The Tories aim is similarly clear: cut some now, and cut some later.
Mr. Ben Wallace (Lancaster and Wyre) (Con): It is always a pleasure to follow the hon. Member for Islington, South and Finsbury (Emily Thornberry), who has one of the loveliest voices in Parliamentit is a like that of a narrator of a fairy tale and one can listen to it for a very long time. Unfortunately, she is living in a fairy tale and is in complete denial about the high proportion of NEETsthose not in education, employment or trainingin this day and age; right now, those very young people are in the process of losing some of their future. It is no good harking back to the 80s. She said that no milk round came to her university then, but that cannot be substituted with a milk round made up of quangos and local authorities; it must be substituted with one made up of wealth creators.
I do not wish to dwell on the macro-economics of the Budget or the general issues that have been discussed over the past few days and will doubtless be mentioned tomorrow. My right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) covered those issues comprehensively and he pretty much demolished the Governments case. Interestingly, the opening half, at least, of the Secretary of States speech focused very much on the policy of Her Majestys official Opposition and did not sing from the rafters the so-called solid policy of the Governmentthat tells us a lot about the state that the Government are in today and about the level of disappointment that the wise Secretary of State, who is one of the most capable in the Cabinet, feels in private about the Budget having been a missed opportunity.
I wish to discuss a number of the Budgets retrograde steps and, in particular to deal with the attack on those earning £150,000 and above through the 50 per cent. tax rate and the break of the principle in respect of taxing pension contributions. Although the right hon. Member for North Tyneside (Mr. Byers) is not from my party, he comprehensively put into words the importance attached to personal taxation and why new Labour had been such a vote winner in 1997 and beyond: it understood the needs and aspirations of people in the wealth-creating sector. The Government have fallen into their own trap, by automatically assuming that the only high earners are bankersthe enemy of the dayand those who belong to private equity houses. In my constituency, and throughout the north-west, there are plenty of wealth creators, be they in small businesses, in the aerospace industry, in manufacturing or in the sciences. They do earn quite a lot of money, but they create wealth. The phrase creation of wealth was remarkably lacking from this Budget. If we do not create wealth in the UK economy, we will definitely not be able to get out of the dire state that we are in and the shoulder the huge debts that we have today and that are sure to come in the future. It is clear that this Chancellors economic growth forecast is fantasy, and the previous Chancellor, who is now the Prime Minister, indulged in that fantasy too; I am not sure that he ever got the tax receipts right in any one of his predictions since he came into office in 1997.
Kelvin Hopkins: I must admit that I am getting rather tired of the implication that wealth creators are all rich people and that wealth creation is not about working class people, who do daily work. On this argument about tax, I must point out that some of the most successful economies in the world are those of the Scandinavian countries and France, which have much higher tax takes than Britain does, but are not witnessing the end of civilisation as they know itthey are doing very well with relatively high taxation levels.
Someone who thinks that France is doing very well because of its relatively high tax burden, despite having 12 per cent. unemployment, could make that argument, but I do not agree with it. I think that the UK has become wealthier because it has embraced enterprise and encouraged people to come here to create wealth and exploit innovation and technologies. That was actually what new Labour recognised all those years ago, but now seems to have abandoned. I understand that people work in the private sector and contribute to creating that wealth, but innovators need to be rewarded
and incentivised. I do not think that I will ever earn £150,000, but that does not upset me or motivate me to go out to stop other people making that sum. I hope that if I can encourage people to be rewarded for their innovation, that will create wealth for this country and contribute to the coffers that pay for the vast public services that we all enjoyI support public services and I do not want them to be reduced or cut.
Nothing in this Budget reversed the effect of some of the anti-saving mechanisms introduced during this Governments past 10 to 12 years: the taxes on pensions and the clear signals from the Prime Minister that borrowing was far more important than saving; time and again, the mantra used to be about, The lowest mortgage rates since the war. That came out of the then Chancellors mouth every time, and it was really telling people that they ought to be borrowing, not saving. We could pave the way to ensure that one of the ways out of this mess is to instigate saving again as the first rule of good fiscal policy, not the last.
I wish to deal with the thrust of my argument, which is about research and technology. My working background was in Britains biggest research and technology organisation, QinetiQ, as it was known then. I also have the privilege of representing Lancaster university, which recently featured as having the United Kingdoms top physics department for research. Importantly, it will be our research, both pure and applied, that will get us out of this mess, and it will be the exploitation of intellectual property, especially in the sectors where Britain leads the world, that will help us to catch up in respect of the competitive impediments that we face.
I look with interest at the strategic investment fund of some £750 million that has been announced, £250 million of which will focus on low-carbon workthat is fine because that is in line with a Government policy; it is also a policy of ours to encourage alternative energy supply. Some £50 million will go to the Technology Strategy Board, the work of which I examined today and found that although it carries out a number of measures, I remain unsure whether such a body is needed to deliver such things; it has the right impetus, but it does not have nearly enough money as it should have.
I cannot quite account for where £450 million of the money is goingthe Budget contains no detail about this, and I hope that the Minister who sums up offers a breakdown of that figure. Some £10 million is to go to UK Trade and Investment to promote British technology abroad, and that is welcome. When I used to deal with UKTI or the DTIdeter trade internationalas it was then, it put so many bureaucratic barriers in our way when we tried to do business overseas that it was simply often not worth doing business with it.
We have missed the opportunity to strengthen or broaden the research and development tax credits measure, which was a good measure introduced by the Prime Minister when he was the Chancellor, and it is something for us to build on. In the Budget we should also have examined regional development agency reforms, as huge budgets are involved and they should be used to assist with pure and applied research. Amazingly, in my constituency, the physics department at Lancaster university is developing research that will help Britain in the short, medium and long-term, and when it faces pure education funding cuts, we should look to the RDAs to support that work, because it keeps scientists and top innovators
in the country. It is a missed opportunity if we keep the work of the RDAs too far apart from that of some of our higher education institutions.
Amazingly, the most successful sector in which we exploit and develop intellectual property and research has not been mentionedthe aerospace industry. It exports roughly £20 billion of exports, employs 170,000 people up and down this country, is a world leader in many sectors, such as those associated with materials, applied technologies and enginesone thinks of companies such as Rolls-Royceand it employs 2 per cent. of all the UKs apprentices. The reason it is not mentioned is that within the Ministry of Defence budget, defence research and development has been cut this year alone by 7 per cent. The Government have cut funding in the most successful sector in terms of our job and wealth creationin those high-end competitive technologiesby 7 per cent.
That is not the only contradiction in the Governments small ambitions for job creation, because it abolished the Defence Export Services Organisation last year, which helped export the great inventions and technologies that defence put together. The aerospace industry helps to support the north-west and Lancashire as it is one of the biggest job providers in the region and in my county. It could be argued that abolishing DESO last year will provide more money for UKTI this year, but it has not made much difference. A bit of money has been moved from one place to another, but DESO was very successful.
Table 6.1 of the Red Book shows the efficiency savings made in all the Departments, and almost all have made cuts in sectors that are key to employment generation and the creation of a competitive economy. For example, the British Council has been cut by £18 million, but it is a long-term generator of customers and partners for the UK. If we prevent people from learning English in other countries or stop promoting cultural exchanges, they will not come and do business with Britain. They will go elsewhere.
The Department for Innovation, Universities and Skills has cuts of £118 million and £106 million linked to the research councils. The jargon that accompanies the table is waffly in the extreme, promising to save
£118 million through increasing the effectiveness of research activities funded by the Research Councils by reducing administration costs and refocusing spend on new research priorities.
£1.4 million savings from the Competition Commission Councils fundamental review of the Competition Commission including through reducing burdens on business.
So the Government will cut the study that may help to reduce red tape on business and that would help business get us out of this mess. The Department for Environment, Food and Rural Affairs promises to save £44 million by putting the cost of animal disease monitoring and compensation on to farmers and rural businessesand we should not forget that it was a Government lab that spread foot and mouth last year. That will not help our farmers in this economy.
To see the seeds of recovery, we have to sow the seeds of recovery. That means focusing on productivity, red tape and over-burdening employment legislation. The Government have avoided doing that in the Budget. Instead they have sown the seeds of uncertainty by pushing aside all the real economic truths, so that a certain new Government will have to pick up the pieces in 12 months time.
Tony Baldry (Banbury) (Con): It is a pleasure to follow my hon. Friend the Member for Lancaster and Wyre (Mr. Wallace), but it is also worth observing that here we are, halfway through the Budget debate, yet there is not a single Labour Member in the Chamber to defend the Governments record. That is a dismal situation
David Taylor: On a point of order, Madam Deputy Speaker. I request that the hon. Member for Banbury (Tony Baldry) corrects that statement. My hon. Friend the Member for Wolverhampton, South-West (Rob Marris) is waiting to defend the Government loyally.
Tony Baldry: The hon. Member for Wolverhampton, South-West (Rob Marris) has spent most of the debate outside the Chamber. Even if he had spent most of the time here, it is pathetic that Labours huge majority is reduced to one. It is so inefficient of the Whips that they cannot organise a rota of Members to defend their own Budget
Last November, the Chancellor of the Exchequer said that the Government would need to borrow £118 billion next year. In last weeks Budget he upped the amount to £175 billion. The increase of £57 billion is bigger than any of the Labour Governments previous Budget deficits. Borrowing that amount in the current financial year will be the highest level of borrowing since the second world war. Experts think that even those desperate figures are too optimistic. Hardly had the Chancellor sat down than the IMF contradicted his forecasts. It said that the British economy would contract by 0.4 per cent. next year as opposed to the Chancellors prediction of growth of 1.25 per cent.itself a desperate figure in any other circumstances.
After the Budget, everyone has to accept that, as a consequence of this Governments mismanagement of the economy, national debt will climb to about 80 per cent. of national income. Let us be clear that that indebtedness is the result of decisions made by this Government. They entered the recession, as the Governor of the Bank of England has said, borrowing too much and with little room for manoeuvre.
The overwhelming reality that everyone now must recognise is the complete mess into which the public finances have descended. The challenge now is how to
control state spending before it destroys national solvency. There is no way in which the Government can any longer pretend to spend and borrow their way out of the hole they have created. There is no more money to spend. As for borrowing, the figures are nightmarish. This year, the Government were already planning to sell a record £220 billion of bondsgiltsfollowed by more than £240 billion in 2010-11 and £250 billion in 2011-12. In all, over five years they plan to sell some £900 billion of gilts, or twice the size of the entire UK Government bond market. What happens if overseas investors decide not to buy UK gilts? They are under no obligation to hold gilts and they have no reservations about selling them, especially as there will be competition from other countries wishing to attract lenders. What will happen if overseas investors seek higher yields elsewhere?
The reality is that before us lie at least two Parliaments of pain as we repair the damage caused by this Governments financial mismanagement and the resulting £90 billion a year black hole in the nations coffers. The Institute for Fiscal Studies has estimated that it will take more than 22 years for the national debt to drop back to 40 per cent. from the nearly 80 per cent. that the Chancellor forecasts. Hamish McRae said in The Independent last Thursday:
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