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6 May 2009 : Column 222

Rob Marris: I agree. I am somewhat surprised to agree with a Liberal Democrat about council spending. I can tell the hon. Gentleman that in May 2008, sadly, a Liberal Democrat-Conservative coalition took control of the council in my natal city, Wolverhampton—the city in which I live, and which I represent—and what is it doing? It is cutting all kinds of things all over the place. It is making millions of pounds of cuts. When either the Liberal Democrats or the Conservatives were in opposition, however, they decried Labour for not spending more.

That is what happens when a Tory-Liberal Democrat coalition takes control: big cuts are made. I am talking about what happens at the micro-level, of course. You will know about it, Madam Deputy Speaker, because you represent an area close to Wolverhampton. That is what happens, and it is what I think would happen if we had a Conservative majority Government after the next general election. What I am saying is not simply conjecture. It is to do with what has been said about the Budget, what has been said about the taxation measures in the Finance Bill, and what is being done in my home town.

I do, however, agree with a critique of this Finance Bill which has applied to many other Finance Bills. I say that as one who, as some Members know, has had the great pleasure of being a member of six Finance Bill Standing Committees over the years. It is true that we have experienced too many tax changes—not just under the present Government, although they have probably accelerated the process—and our tax regime is too complicated. Part of the reason for its being too complicated is the fact that the rich keep paying accountants to come up with loopholes that they can then exploit, quite legitimately—if, to my mind, often immorally. Those loopholes have to be closed, and the more that are closed, the more complicated are the avoidance schemes that the well-paid accountants come up with. More complicated measures are then needed to close the additional loopholes. The cycle goes on, and the tax books and the tax legislation become thicker and thicker.

I think that there is more than a grain of truth in the critique that there is too much chopping and changing and the regime is too complicated. I am saying that to my own Government. However, this year’s Finance Bill confronts me with a measure that attempts to implement a difficult Budget which was introduced in extremely difficult times. The background to that is the fact that, as I understand it, the accumulated national debt of the United Kingdom doubled between 1992 and 1997, under the last Conservative Government, and under the present Government—my Government—the accumulated national debt will double over the next five years. We have paid off some of it, and the economic expansion took care of some of it, but we are now proposing to double it so that, in round terms, the accumulated national debt will reach an amount equivalent to 80 per cent. of gross domestic product.

There is no doubt that that is a huge increase. No Labour Member has any illusions on that score. We all know that it will be very difficult for our society and very difficult for our economy. However, I think that we also need some figures with which to compare it—the figures for the accumulated national debts of our main competitor economies. I refer not simply to economic
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competition, but to building the kind of societies in which I think many of us throughout the House would wish to live.

When it entered the current world recession, Italy’s accumulated national debt—I must confess that I have been to Italy only once, for a long weekend in Milan, which was very enjoyable; I am not a Chiantishire type—was more than 80 per cent. of GDP, while ours, in round terms, was in the low 40s. I put it in that way because, first, I do not know the exact figure, and secondly it is very difficult to obtain the exact figure. As Members will know, I believe that PFI contracts should be included in the national debt, and I think that there is consensus on the fact that our accumulated national debt was in the low 40s as a percentage of GDP if the Government’s PFI liabilities were included. If we double a percentage in the low 40s, we reach 80 per cent.

Again, in round terms—I speak from memory, and I stand to be corrected—the accumulated national debts of both France and Germany were around 60 per cent. of GDP. It is more difficult for me to get a handle on the accumulated national debt of the United States, because it has 51 jurisdictions with tax-raising powers—50 states and one federal Government in the district of Columbia—but I estimate it at 60 per cent.-plus. There are many different ways of calculating the amount: it will depend on whether local government borrowing is included, for instance.

The percentage in my beloved Canada was far lower, although that, too, is slightly difficult to get a handle on, because Canada has about 13 tax jurisdictions. The low figure is due to a Liberal Government, not a Conservative Government. They are engaging in deficit financing and fiscal expansion, albeit from a much better position in terms of accumulated national debt. The percentage in Japan was far higher. Someone may know the exact figure, but I believe it to have been about 90 per cent., if not more. It may even have been more than 100 per cent.

So where is our country going to be in five years’ time if the Chancellor’s figures pan out? I appreciate that that is a big “if”; people have said that, and I agree with them. We are trying to look five years down the road and no one has a crystal ball, because if they did they would make a fortune at the race track—and I do not think the Chancellor of the Exchequer has done that. We expect to have about 80 per cent. of GDP in accumulated national debt. That is a big burden, but its order of magnitude is lower than the likely figures for all our G7 competitors except Canada. In comparative terms, therefore, I am somewhat less concerned than I might otherwise be about the accumulated national debt.

Stewart Hosie: As always, what the hon. Gentleman is saying is very thoughtful. He is focusing on the national debt and comparisons with competitor countries, but does he not recognise that it is not simply the debt level that is important? The US dollar is a reserve currency, and that changes the dynamics, as does the fact that other countries have balance of trade surpluses. Is it not the case that there was a combination of circumstances in the UK that made going into this recession particularly difficult for us, such as our very high debt levels and massive balance of trade deficit, and the fact that sterling is not a reserve currency?


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Rob Marris: I am not as expert on the trade deficit as the hon. Gentleman; he takes a greater interest in finance matters than I do—although, as he knows, I do take quite a bit of interest in them. The UK balance of trade deficit has been worrying under Governments of different political colours ever since I studied for an economics A-level in the early 1970s. The balance of payments has been less worrying, partly because of the—arguably overblown, particularly in recent years—finance sector in the UK, and also because of other invisibles such as those to do with my profession of law. He is right that the balance of payments was a factor to take into account going into this recession, but—through choice, not fortune—the UK is not part of Europe in respect of its currency, and there has been a fairly significant devaluation of sterling in the last nine months. That is, of course, partly a reflection on our economy, but partly not; it is also partly a result of whim and speculation, and sterling has recovered a little recently. There is a small safety valve in this, however, although it was vastly overdone by Governments in the ’70s and ’80s.

Stewart Hosie: The balance of trade deficit for the last two years was £46 billion and £44 billion, so it was basically unchanged even without the devaluation. It is forecast to be £49 billion next year, and the balance of trade deficit in goods is forecast to be in excess of £90 billion, so although there is a safety valve, it might not be all that the hon. Gentleman is imagining it to be.

Rob Marris: I will not go down this track much further, because if I did we would stray far from the Second Reading of the Finance Bill. I simply say, as an MP representing a west midlands constituency, that if our Government and society were able to do more for manufacturing, that would address some of the trade issues to which the hon. Gentleman refers.

I support Keynesian counter-cyclical spending—and we are getting that big-time in this Budget and Finance Bill, with their tax measures—because at the end of the day this issue is all about people’s lives. I am not talking about the general well-being index; this is about jobs, homes, families and people’s feelings of security. I have talked about different courses of action. Do I think that 24 years from now—or when the hon. Member for Taunton is 62 years of age, as he said—our society and our people’s well-being will be better than they would have been if we had slashed Government spending, delayed the economic recovery and left people, particularly those who are most vulnerable, without the services they need? I referred to crystal balls earlier. I do not have a crystal ball, but we need to have a sense of history. With the notable exception of Germany, most western Governments did not pursue counter-cyclical spending in the dirty ’30s, and we know where that approach led. This is a gamble, but, particularly in terms of vulnerable people’s lives, I think the Government are absolutely right to engage in counter-cyclical spending in order to maintain services, invest for the future and build for tomorrow. This Budget and this Finance Bill are good steps in that direction.

3.40 pm

Mr. Andrew Tyrie (Chichester) (Con): The hon. Member for Wolverhampton, South-West (Rob Marris) made a very thoughtful speech, even if I did not agree with all, or indeed, much of it. The answer to the central point
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that he makes is that very high levels of deficit and, indeed, very high levels of public spending, are probably unsustainable in the long run. There is no way of getting around that, and those things have had to be addressed. That is the central issue that we are debating today.

Everyone is agreed that the country is in a huge financial and fiscal mess. The question is whether Labour should be entrusted to clean it up after the next election or whether the Conservatives will be. That is really what the Budget and the Finance Bill are all about, and they will be judged on that basis. The Chief Secretary to the Treasury, who is no longer in her place, suggested that no policy but the Government’s could be followed. Her speech sounded more like that of an Opposition spokesman than that of a senior Minister; it was, as one Member put it, something of a rant. However, I shall briefly respond, in general terms, to some of the sense of her points about how the Conservatives should, as I hope they would, address the key issue: public expenditure control.

My view, which I am confident is that of my party, is that we have to bring public expenditure back under control if Britain is to avoid relegation to second or third division status as a country. The reasons for that are obvious: we cannot hope to be a leading economy while we are saddled with such huge public debt and the cost of servicing it. While our deficit is so large we are vulnerable to the markets, which may demand a premium to service that debt. The relationship between the debt and the very large deficit is crucial. We cannot remain globally competitive with such high taxes and spending as a proportion of gross domestic product in the long run.

Restraining public expenditure will be tough—some are already suggesting that it is too difficult—but it has to be done, and it can and has been done. In the 1980s, I worked for more than four years on public expenditure control and saw how it was done. It will mean the same things this time as we had last time: a very tight envelope set by the Cabinet at the beginning of a spending round; a return to Star Chambers and, probably, to annual rounds; and a change in the mindset of Whitehall, which has been encouraged to abandon a valuable and difficult-to-construct culture of thrift—sadly, that went with the attempt just a few years ago to get Departments to spend money and to castigate Departments that ended up failing to get rid of their annual quota.

Getting public expenditure under control will also require an enormous amount of determination and will from both the Prime Minister and the Chancellor—whoever wins the next election. Are the Conservative leadership up to it? I believe that they are, and there is some evidence to support my view. First, last November, when the fashionable mantra, followed by the Government, was for a further large fiscal boost on top of the automatic stabilisers, the Leader of the Opposition stood out against it. He said what we all know in our hearts: that we cannot carry on racking up debts indefinitely. It was a courageous economic and political judgment that he made, and it looks now as if he will be proved right. I do not rule out in all circumstances the need for a fiscal stimulus, in addition to the stabilisers that are already working, but the right circumstances are not in place at the moment and the G20 was right to thwart the Prime Minister’s attempt to obtain one at this time.


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A second sign of courage from the Leader of the Opposition has been his decision to tell the electorate what public expenditure control really means—that is something that the Government have failed to do. He has described it as nothing less than a period of austerity. We did not hear any of that from the Treasury today. When the forces demanding more spending appear so remorseless, that takes considerable guts. We will do that—indeed, we are already doing so—because it is the right thing to do. It is the start of a crucial period in which the electorate will adapt to a more trustworthy and direct style of politics, and to the reality that public expenditure control will not be easy.

Mr. Love: Does the hon. Gentleman believe that publishing the salaries of senior quango officials is an adequate response to the public expenditure needs of this country?

Mr. Tyrie: I do not intend to linger on the Conservatives’ plans, not least because of earlier exchanges with the occupant of the Chair, but we have committed ourselves to all that we can reasonably do at this stage—a year out from the election—in explaining what we will do. We have said that we will get rid of ID cards and abandon big IT projects such as the NHS IT scheme. As the hon. Gentleman has just pointed out, we will also look at quango salaries, the Government advertising budget, the consultancy budgets and many other things. I could go on, but I shall not do so.

The test that the electorate will apply in gauging the relative merits of the two policies on offer is who they can have confidence in when it comes to getting the deficit under control and getting the debt down. I have argued that the Conservatives have been much more straightforward about that, even in opposition, than the Government. I have said that the Conservative leadership is up to the challenge and has been frank about it. Are the Labour Government up to it?

I have listened to the Prime Minister speak about the economy for many years. He considers himself to be an economist, and he is certainly an intelligent man, but I have worried for a long time that some of his remarks on the economy suggest that he is a little detached from reality. That detachment began early and was well entrenched before he came out with his famous recent slip that he was saving the world.

When the Prime Minister was Chancellor, and shortly after Labour’s second landslide victory of 2001, he wrote a foreword to a book published by the Treasury and edited by his then loyal lieutenant—I am not sure whether he is still loyal—the right hon. Member for Normanton (Ed Balls). In that foreword, the then Chancellor wrote:

The House will recall that 1944 was the year of perhaps the grandest of all grand economic projects with the creation of what became known as the Bretton Woods project for the complete reconstruction of international economic activity. The Prime Minister, then Chancellor, was saying in effect that he was the man for the hour—he was John Maynard Keynes, Harry Dexter White, FDR and Churchill rolled into one. In the same way as the allied powers set out to prepare the Bretton Woods system, so he had set out in 1997 to reconstruct the global economic architecture. There is no little hubris
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involved in such a remark. It was not even a flip remark, but one carefully crafted for the foreword to a book published by his Department.

The book gets much more interesting and becomes very pertinent to this debate and to the boom and bust that has led to this crisis. In the same foreword, the Prime Minister went on to say that we needed

and that we needed to pay

If only he had done so. The introduction to the book—

Madam Deputy Speaker: Order. I wonder whether the hon. Gentleman would perhaps make his remarks more germane to the Finance Bill.

Mr. Tyrie: If I can have your indulgence for a moment, Madam Deputy Speaker, I think you will see the close connection between this book, which sets us on the path to all the problems that we are now having to deal with in this Finance Bill—

Madam Deputy Speaker: Order. The hon. Gentleman has quoted quite a bit from the book, but I wonder whether he might bring the quotes from the book to a close and concentrate on the Bill.

Mr. Tyrie: I would be grateful for the opportunity to give one more quotation, Madam Deputy Speaker. I hope that you will find it of some interest and pertinence. It says that

That is the new system that we are now considering, which is in ruins. We are now trying to find a way of reconstructing it, of which the Finance Bill is playing a part. Let me go on—

Madam Deputy Speaker: Order. I have already allowed the hon. Gentleman some leeway, and I hope now that he will not quote any more from the paragraphs but will concentrate his remarks on the Finance Bill.

Mr. Tyrie: The then Chancellor invited people to assess how well he was going to do in years to come—I am paraphrasing what I might have read out. We can now make such an assessment and this Finance Bill gives us part of the answer. That was an economic policy built not on firm foundations but on rhetoric and self-delusion, and it has been completely destroyed by the first recession that tested it.

Mr. Newmark: My hon. Friend might also add that it was also built on a mountain of debt, both off and on-balance sheet. Therein lies the weakness of the Prime Minister’s strategy as Prime Minister and Chancellor for about 10 years.

Mr. Tyrie: My hon. Friend has been absolutely right to investigate in depth something that also interested me some years ago—an interest I share with the hon. Member for Wolverhampton, South-West (Rob Marris)—which is the importance of considering off-balance sheet finance in assessing the overall strains on the economy from the terrible mistakes that have been made. I completely agree with what my hon. Friend has just said.


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I have just read out hubristic and delusional stuff from the then Chancellor, who is now Prime Minister and who seems unable to grasp the scale and depth of the crisis with which we are faced. The origins of the calamitous fiscal crisis that we are dealing with—this year’s Finance Bill will be only the first step in a decade’s worth of Finance Bills that will have to address that crisis—do not lie in the collapse of Lehman Brothers, the sub-prime crisis or even the spending spree in which Labour has engaged in the past few years. The origins lie at the heart of new Labour and its rhetoric and at the translation of this rhetoric into a policy that, in a succession of big spending Budgets starting in 2000, has left the public finances in a parlous state.

It should be recalled that new Labour won the public’s confidence in 1997 by promising the country that it would honour Conservative spending plans. That was the origin of “prudence with a purpose”. Of course, it was in 2000 that Labour felt finally able to be released from those shackles. The then Chancellor initiated what I think—although I might be contradicted by the Financial Secretary—was the biggest sustained spending binge in peacetime. Public expenditure has risen by a little under 50 per cent. over that period.

In a debate on the 2000 Budget, I said:


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