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Where did the money go? Where was it all spent? We have had a decade of boom, but it all seems to have disappeared. We all remember the stealth taxes, the doubling of council tax, the increases in corporation tax and the raid on pensions mentioned by my hon. Friend the Member for Wimbledon (Stephen Hammond), which have given Labour a staggering £1.5 trillion extra since they came to power in 1997. Where has it gone? The budgets for schools and hospitals have doubled, but can we say that services have doubled? No, we cannot. That money has been spent, but it has disappeared.
Every year, 34,000 people die unnecessarily in our hospitals. Cancer survival rates are still 20 per cent. lower here than in other European countries. Somebody catches MRSA or clostridium difficile every 10 minutes and one dies every 80 minutes. That is a scandal, considering how much money has been spent on the health service. In education, the story is the same. The number of NEETs is increasing and one in four primary school children fail to meet basic standards. Now, the funding problems in the Learning and Skills Council are threatening sixth-form places at the very time when people need education.
Many hon. Members have asked what the Conservatives would do. We have made it clear. Under Labour the economy has been built on debt, which is why my right hon. Friend the Member for Witney (Mr. Cameron) said at his spring forum speech that Britain needs a “complete change of direction” to deal with the new “age of austerity”. We need a plan for economic recovery based on savings and ownership, not borrowing and debt. We need a new low-carbon, high-skilled productive and balanced economy that will be the engine of sustainable growth for years to come, and we must reform the public finances and our system of financial regulation, so that no Labour Government will be able to bankrupt us again.
Tackling Labour’s debt crisis entails ensuring that the Government live within their means—that we control public spending and deliver more for less. That needs to start immediately—not in one or two years’ time, but straight away. We need a new culture of thrift in government, because it is not Government money, but taxpayers’ money. We need to cure our big social problems, not just treat them. That means school reform, welfare reform and strengthening our families.
Never has it been so easy to turn one’s back on responsibility—to give up on education, knowing that the state will pick up the bill. Only now have the Government realised that and started to make amends, but their approach has had a cultural impact that could take a generation to shift. Instead of harnessing the full economic potential of the next generation, this Government have fuelled a cultural shift toward mediocrity. Surely we should be rejuvenating the next generation, encouraging them to stay in school until they are 18 not because the Government told them to, but because they want to; and to seek a job not because otherwise they would lose benefits, but because they have a skill on which they can build, for which they can be paid a good salary and of which they can be proud.
Finally, I shall discuss an important subject that the House often overlooks: British tourism. With exchange rates where they are and with the opportunity of the Olympics heading our way, tourism is our fifth biggest industry, but, as I said, it is overlooked. Tourism is
worth £114 billion to the economy, is twice the size of the IT services sector and four times the size of the agriculture sector, but it does not get the attention it deserves. It sustains more than 2.6 million jobs and is responsible for one in every four new jobs created here in the UK. It is worth our attention because every pound that Visit Britain spends abroad brings £25 back into the economy. How many other departments can say that their spending money in that way brings money back into this country’s Exchequer? I want more emphasis on how we can take advantage of that.
The UK is the sixth most popular place to visit in the world, but this Government do not recognise that. They have just cut Visit Britain’s budget by 20 per cent., which is a scandal. There is no leadership in the Department for Culture, Media and Sport. Regulations are created in other Departments, but the DCMS has no say at all. Visa costs went up by £130 per cent., and DCMS had no say in the matter. Fire regulations are hitting bed and breakfasts hard; DCMS had no say in the matter.
I think that it is page 8 of the Red Book that shows that there is to be a removal of tax relief on holiday lets; that was done without any consultation with DCMS whatever. We have no idea what the impact will be on the industry, and how many holiday lets will close. The measure will, of course, affect places such as Fowey in Cornwall, where I spent a week during the recess. If those places close, it means a loss not just to the individual who provides the let, but to local pubs, the local community, and the tourism operations there.
There is also the issue of structures. The creation of the regional development agencies has taken responsibility for tourism away from a body with a national voice, such as Visit England, and given it to the nine regions, which ended up competing with each other in a confusing and overlapping system. The irony is that the Government have now realised that and are reinvigorating Visit England, but it is a decade too late.
There is not enough time to do justice to other issues, including the closure of 36 pubs every single week. The increase in duties is a tax on the many, not the few who drink irresponsibly. The VAT reduction to 15 per cent. was not helpful at all, because people in the retail and tourism sectors were already giving 10, 15 and 20 per cent. discounts. Why on earth are the Government changing VAT back to 17.5 per cent. on 31 December, at the end of this year? I do not understand that, and I hope that the Treasury Ministers on the Government Bench will take this issue away and consider it. That has to be the busiest period for any bar, pub or club, or any retail outlet. I ask the Government to take a look at that, and to shift the change to a different day.
There was reference in the Budget to bingo; VAT on bingo has now been removed. That has long been called for, but what the Government give with one hand, they take away with the other, as gross profits tax has gone up to 22 per cent. That means that bingo clubs will start closing across the UK. The dear old ladies who like their one night out will have nowhere to go. Bingo halls are part of our community. People who choose to take part in soft gambling may migrate to harder forms of gambling. That cannot be good, so I ask the Government to reconsider that. There is also the issue of what to do with regard to the announcements on swine flu. I just want to show the House the Evening Standard . It says: “Killer flu virus ‘already circulating in London’”. That does not help British tourism at all.
Mr. Deputy Speaker (Sir Michael Lord) rose—
Mr. Ellwood: I knew that I was going to get into trouble.
Mr. Deputy Speaker: Order. Visual aids are strongly discouraged in the Chamber.
Mr. Ellwood: That is exactly why I read the headline out. I thought that I would get away with that. That story is in the Evening Standard tonight, and it is a disgrace that there is such speculation, without any knowledge behind it. It is just scaremongering, and does nothing to help British tourism whatever.
In conclusion, this is the worst Budget imaginable at the worst of times. In the end, it was more about partisan politics than responsible Government. It was a tribal Budget, with its flagship policy of a 50p tax rate—a crude attempt to corner the Conservatives and shore up Labour support rather than care for the nation’s finances. The Government are not on the back foot, but on their knees searching in the gutter for ideas, as the disgraced Damian McBride proved only last week. The Government blame the US, but it is not the US that is responsible for 120 per cent. mortgages here, or indeed for easing the borrowing rules introduced more than a decade ago.
It is said that Governments often reach their sell-by date, and that the nation simply wants a change, and if we are honest, that could be said about 1997, but the difference between John Major’s Government and the Government of today is that we looked after the economy right up to the end date, and we handed over something worth talking about—something that we can actually be proud about. What is happening here is exactly the opposite. Today’s Government seem to be out of touch, and are certainly out of ideas. They are going down, and attempting to drag the country with them. If there was one ounce of honour left in the new Labour project, the Government would fall on their sword and allow the nation the chance to vote and put the country out of its misery. This discredited Administration will selfishly limp on until May 2010, when finally the curtain will come down on a Government who have refused to apologise for their part in Britain’s economic downturn, and who have no idea how to get us out of it.
9.29 pm
Mr. Philip Hammond (Runnymede and Weybridge) (Con): As many of my hon. Friends have pointed out, we have scarcely reached the end of the Budget debate, and already its subject has fallen part. After four days of parliamentary scrutiny, the Chancellor’s Budget, which was flimsy when it was delivered, has comprehensively unravelled. It is already looking as fanciful as the pre-Budget report quickly became. The past week has seen the final nail in the coffin of what little remained of Labour’s economic credibility. Within minutes of the Chancellor sitting down, his growth forecasts were flatly contradicted by the International Monetary Fund, and his Budget was condemned by the CBI as lacking a “credible and rigorous” plan to restore the public finances.
Within days, the first quarter growth showed the economy contracting far faster than the Chancellor indicated in his Budget statement, undermining the foundations on which the entire Budget was constructed. The right hon. Member for Neath (Mr. Hain), who is
no longer in the Chamber, said that the growth predictions were lower than the Chancellor had predicted five months ago. In fact, they were lower than the Chancellor had predicted two days ago. I was struck—and I suspect that many of my colleagues were, too—by the tone of Labour Members’ speeches this evening. They just do not seem to have grasped the implications of the Red Book for future spending, or the fact that it is already obsolete, reflecting, just a week after the Budget, a best-case outcome if economic recovery is far quicker and stronger than the IMF and all other reputable commentators have predicted.
I was asked on Sunday whether I had any idea how the Chancellor had arrived at his 3.5 per cent. growth prediction for 2011. I think I do. My very first boss showed me something that he called the “right-hand up” budgeting approach. He started in the bottom right-hand corner of the spreadsheet with the number he wanted to reach, and he worked up to the top left-hand corner, filling in the numbers that he needed to get the answer he wanted. It is an exercise in fantasy forecasting that undermines not only the robustness of the Budget but the credibility of the entire process. The case for an independent office of Budget responsibility, proposed by my hon. Friend the shadow Chancellor, has never been made more eloquently than by the Chancellor himself in presenting those fantasy forecasts last week.
What the country needed last Wednesday was a clear, objective and realistic statement of the position that we are in and a deliverable projection of future growth and revenue—a Budget that set out the measures needed to restore the public finances from that real base, not from fantasy figures, restoring a discipline to fiscal policy making that has sadly evaporated. What we got was a Budget that had more to do with saving the Prime Minister than with saving the British economy. As usual, it was based on spin.
The story of the day was supposed to be the new 50 per cent. tax rate, signalling not just the casual breaking of another manifesto pledge, like the pledge to hold a referendum on the European constitution, but a final ritual burial of the new Labour project. If new Labour was about anything, it was about reaching out beyond its traditional core support to a wider public in an aspirational nation. It speaks volumes about the Prime Minister that, facing a general election that will be a referendum on his competence and record in managing the British economy, he has abandoned any attempt at broad appeal, and has refocused his efforts on his core heartland vote, chucking a bit of red meat to those who despise aspiration and success, revealing as much about himself, his values and priorities, as a clutch of unauthorised biographies could ever do.
We know that the Prime Minister is obsessed with political dividing lines, and the 50p tax rate was supposed to be a new one. He needed it, because the old one—public spending and investment—was rubbed out when his Chancellor announced the most swingeing real-term cuts in public spending since the second world war. We can probably imagine the scene in the Downing street bunker: things are pretty tense in there anyway—a week or so ago, they had to take one of their own outside and shoot him. Those who are left are understandably nervous. The Secretary of State for Children, Schools and Families,
normally a key player, has to keep his head below the parapet, lest someone derails his plans by reminding the electorate that he is in fact the co-author of the Prime Minister's 1,000-year plan for the British economy that has failed so spectacularly.
A new dividing line was called for, and one was found—no matter that it will damage the British economy; no matter that it will cost jobs in the upturn; no matter the signal that it will send to the next generation of entrepreneurs and inward investors; no matter that the experts do not believe that it will raise anything like the sums of money that the Chancellor is pretending. As the right hon. Member for North Tyneside (Mr. Byers) said yesterday, this so-called policy is mostly about
“political positioning and tactical manoeuvring”—[ Official Report, 27 April 2009; Vol. 491, c. 615.]
The subliminal message is supposed to be, “We’ve got you in a mess, but don’t worry. We’ll sort it out by taxing the rich.” But the British people are not stupid. They have been here before. They know it does not work like that. If one studies the Budget book closely, one sees that it does not even pretend that it works like that, either in the bits that the Chancellor told us about last Wednesday or in the bits that he did not tell us about. In the bit that he told us about, only half the tax increases are paid for by the rich.
The other half are taxes on ordinary families—on alcohol, tobacco and fuel and, of course, the stupidest tax of all, on jobs, which is the national insurance contribution increase in 2011 that will hit everybody earning £20,000 a year or more, just as the economy is starting to grow again. In the bit of the Budget that the Chancellor did not tell us about, there are another £45 billion a year of tax increases pencilled in to make his numbers add up by 2017, even with his highly optimistic growth assumptions. That is £1,430 per family of extra tax every year for every family in Britain—a secret Labour tax bombshell aimed at the many, not the few, and timed to go off after the next general election.
Maybe the Chancellor was a little pushed for time when he was making his Budget statement. He seemed to gloss over the dramatic changes in spending plans in his Budget speech. The downgraded spending growth assumption from 1.1 per cent. to 0.7 per cent. was announced without any fanfare. There was no mention, either, of the allocation of £2.3 billion of cuts to the NHS next year, or of the halving of net public capital investment over the next five years—something that Labour have consistently said they would not do in response to economic pressure.
Let me remind my right hon. and hon. Friends that at the time of the 2005 general election, when the Conservatives were already warning that public spending was growing too fast and needed to be restrained, the Prime Minister told the country that every conceivable efficiency saving had already been made, and that any further reduction in public spending growth would lead to a catastrophic collapse in front-line services. Since that election, he claims to have made £26 billion in efficiency savings. Last November he discovered another £5 billion-worth and, last week, he told us that he had found another £9 billion. That is £40 billion in total.
Let me remind the House what the present Chancellor said back in 2005:
“Far from being able to fund such huge cuts in ‘bureaucracy’, £35 billion is actually the equivalent of sacking every teacher, every GP and every nurse in the country”,
yet he has done it, and then some, so he claims. No one believes a word the Government say on spending any more. It is pure political spin. If they had taken our advice then, the public finances would not be in the mess they are in now, and our public services would be more robust, more sustainable and better prepared for the challenges that they will face.
The truth, which we did not hear in the Budget statement, but had to glean from the analysis of the Institute for Fiscal Studies, is that after taking into account the increase in the service cost of our mountain of debt and the additional cost of benefits to those caught up in this recession, the Chancellor’s figures presented last Wednesday represent a real cut of 2.3 per cent. in departmental expenditure budgets after 2011—the biggest spending cut that has ever been imposed in Britain’s post-war history. All in all, it was the most dishonest and most partisan Budget that we have yet seen from the Government, and it beat off some competition to win that title.
The Government talk about fiscal stimulus and counter-cyclical policies, but the only cycle that the Prime Minister has ever understood is the electoral cycle, and that has been the driver of this Budget: a crowd-pleasing, economy-damaging increase in tax on the few before an election; a hidden tax bombshell targeted at the many after an election; a huge increase in public spending before the election; a real-terms cut in departmental spending, on a scale never before seen, after the election. It is not about the economy; it is about the election.
In my winding-up speech on the Budget last year, I reminded the House that the Prime Minister, when he was Chancellor, used to like to amuse audiences with the thought that there were just two types of Chancellor: those who failed and those who got out early enough. He clearly thought, as he left No. 11 in the summer of 2007, that he was safely in the latter category, but, as his legacy crumbles around him, the British public can now see that he is not only firmly in the former category, but in a sub-class of spectacular and cataclysmic failure all of his own.
This Government inherited the best economic legacy of any Government since the war. [ Interruption. ] Oh yes they did. Every single economic indicator was set to positive in 1997, yet they will leave to their successors the worst economic situation since the great depression—worse, even, than the carnage of 1979. The Prime Minister, the man who single-handedly managed the British economy for a decade and, as I remember, was happy enough to take the credit for it when it was going well, is responsible for turning that golden legacy into this disaster. It was he, aided and abetted by the Secretary of State for Children, Schools and Families, who was responsible for the failed system of regulation that prevented the Bank of England calling time on debt, and who let our banks and our households borrow too much; it was he who failed to prepare Britain for the recession, so that we entered it with the highest public sector deficit of any major industrial nation; and it was he who failed spectacularly to deliver the solutions that the nation needs to address the challenges that we now face.
This is probably the penultimate Budget of this bankrupt Government. They are an economically bankrupt Government, borrowing more than £1 of every £4 that they spend, and presiding over the worst recession and
biggest deficit that this country has ever seen, with, according to the CBI, no credible or rigorous plan to restore the public finances. They are a morally bankrupt Government, with a vicious culture of spin, manipulation and sleaze—dodging the truth, postponing the pain and putting off until after the election what for Britain’s sake needs doing today. They are inward-looking and focused on saving their own skin at all costs. They said that this Budget was about jobs. Correction: it is about a job. When the Prime Minister talks about his priorities, we know exactly what they are.
They are an intellectually bankrupt Government, too, because the Prime Minister’s only policy, his only solution to every problem, has been to throw more money at it. Any fool can spend money and, to be fair, cut budgets, but, now that the cupboard is bare and the country must start living within its means, the challenge for policy makers is to do things smarter rather than simply to spend more public money. That leaves the Prime Minister devoid of answers to the challenges of the future.
This Budget was a final opportunity for the Government to level with the British people about the scale of the problems that the country faces, and to set out a clear, credible and rigorous plan for addressing them, but they fudged it. They spun it. Within minutes, the assumptions on which the Budget is constructed were discredited; within days, it had completely unravelled to expose how they have ducked the real challenges. It is now clear that they will carry on playing their political game until finally their time runs out and this unelected, failed Prime Minister can be put out of his misery by the British electorate. Then Britain can start the long process of rebuilding its economy and its public finances and of putting this country back on the path to sustainable prosperity.
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