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The tragedy for our nation is that this is a pre-election PBR. At this time of great economic crisis for the nation, it would be better if we were not on the verge of an election. The PBR has become a product of electoral expediency, not economic necessity. Tragically, it has also exposed the deep divisions at the heart of Government,
as well as a very unwelcome desire to create divisions and add dividing lines in politics in general at a time when we should be doing precisely the opposite.
Yesterday, Lord Mandelson made a very thoughtful speech, which was occasionally devalued by political point scoring. In it, he said:
"We need a politics of long-termism over short-termism; of a smarter, more effective and affordable state; of a return to the values of hard work, enterprise, corporate stewardship and mutual commitment over those of dodging responsibility, making a fast buck, and putting self before others; of working together as a nation to address the shared challenges of the future."
I agree with that, but all we got on 9 December was short-termism by the bucket load. We got a larger, less effective, less affordable state. We got taxes on hard work and enterprise, and deliberate dividing lines designed to split us apart, not bring us together.
Lord Mandelson was right, and the PBR was wrong. As was said in The Guardian recently:
"The Government remains at war with itself, with Brown, Balls and Cooper pursuing the line of 'Labour spending versus Tory cuts' and Mandelson and Darling favouring a pragmatic, deficit-slashing PBR. We can see who won. Lord Mandelson is apparently still seething with anger-'incandescent' at the outcome of the PBR."
As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) said in his thoughtful remarks, this Government's reaction of retreating entirely into increasing taxes rather than attacking public expenditure is the problem. The large increases in national insurance on all of us in society-including those on below-average earnings-and the 50 per cent. income tax rate are taxes on aspiration, enterprise and hard work.
Lord Mandelson tried to justify that in his speech yesterday. He said that
"there is never a case for punitive taxation",
"As for the new top income tax rate, I believe that is justified in the quite exceptional circumstances we face."
What are those exceptional circumstances? As was said in the Financial Times on 11 December, the national insurance increase
"will raise £3 billion a year from 2011, but that money is not being used to pay down the £178 billion deficit; the tax rise is needed to offset Mr. Darling's surprise decision to increase public spending by almost £15 billion in 2011 and 2012 compared with previous plans."
As the Centre for Economics and Business Research put it:
"If public sector wage inflation had risen at the same time as that in the private sector over the past two years, £21 billion of the national insurance and income tax rises to be introduced in April would have been unnecessary."
These are Government decisions that are making our problems worse, not better. They are taxes on jobs, aspiration and enterprise. They may win some short-term cheers in the run-up to an election, but in the long run they will cause more pain, suffering and economic problems.
The same is true of the bankers' bonuses tax. I loathe the scale of the bonuses, and I agree with the Chairman of the Treasury Committee, the right hon. Member for West Dunbartonshire (John McFall) on that, but not only have the measures to address that been brought forward in a technically incompetent way which caused massive confusion in the City, but they will have a
negative impact on our competitiveness. We cannot duck that. We do not live in an isolated country any longer, and I do not see our chief economic competitors-the United States and Germany, for instance-following our lead on that matter.
The scale of our debt mountain is great, and I find it incredible that Government Members are advocating still higher debt. In this week's edition of The Economist, estimates of various countries' budget balances as a percentage of GDP for 2009 are listed. By a long chalk, Britain's is the highest, followed by the United States. Only Spain joins us in having double-digit figures. All the rest of the major industrial nations of the world, and some very minor ones as well, are running smaller budget deficits than us.
In September-before the PBR- The Times illustrated that dramatically in a leader entitled, "Fainting by numbers". I had hoped to have the time to recite quite a few of those numbers, but bearing in mind your strictures, Mr. Deputy Speaker, I will not do so. I shall just use one. The article stated:
"The most succinct statistic is also the scariest: by the 2013-14 financial year, government spending on welfare and on servicing the national debt will total £257.1 billion. How much does that amount to exactly? Just over £1 in every £3 that will be spent by the Government."
In other words, these are the bills of failure. I remember what Tony Blair said when he was in opposition about what he described then as the "bills of failure". Those bills pale into insignificance by this scale; we are talking about massive borrowing and massive social security expenditure. Those bills of failure have been brought about by this Government. Richard Lambert's new year message from the CBI stated:
"The Government has not yet established a credible path back to fiscal stability for the UK. The longer this is delayed, the greater the threat to long-term interest rates and sterling. Everyone knows that painful decisions are going to have to be made sooner or later about public spending and tax. But the timing and shape of these moves remain unclear-and that is another significant concern for business."
I have already said that the problem is that the Government did not fix the roof when the sun was shining, and that is true-the structural deficit is alarmingly high. It is a structural deficit; it is not the product of bank bail-outs and so on. It is the problem of systemic Government failure to manage the public finances appropriately. The Institute for Fiscal Studies wrote the following on the day of the pre-Budget report:
"The Treasury now believes that the structural budget deficit-the portion of government borrowing that cannot be explained by the temporary weakness of the economy-is 'only' 9 per cent. of national income this year, rather than the 9.8 per cent. it estimated at Budget time. This means that the underlying fiscal problem looks somewhat smaller than it did in March, although still huge by any standard."
It is indeed huge by any standard, but I must add that that is predicated on the very optimistic forecast of a return to above-trend growth rates in two or three years' time. I do not believe that forecast; I do not think we will do that well. Thus, the problem of dealing with this situation is still worse.
I had wanted to talk in detail about one or two specific issues, but I shall just run through them very briefly. I wished to discuss the lack of finance for manufacturing and businesses in general, but that has been done and so I shall not reiterate the point-I
should just say that the situation is extremely worrying. I would have liked to talk about the comments made by those on the Liberal Front Bench about across-the-board cuts in science, but I shall not do that either.
However, I wish briefly to mention manufacturing. I do not want to talk it down-not for a second. It is right to say that, notwithstanding the current recession, manufacturing has grown over the past 13 years under this Government, but it has shrunk massively as a proportion of gross domestic product; it has done that so much more over this period than it did under the so-called Thatcher years. The Government need to think carefully about their policies to deal with that problem and this pre-Budget report does not do that. It talks a lot about future growth, high-technology industries and low-carbon industries, but many traditional industries, for example brick making in my constituency and glass making, have been hit very hard by decisions in this PBR about alterations to the climate change agreements. We are talking about very sharp stealth taxes on traditional manufacturing industries that will lead to further manufacturing job losses in this country, the import from abroad of the products that would have been made here and carbon leakage-no gain, just loss. I urge the Government to think a bit more about traditional industries, as well as about future industries.
I also urge the Government to examine the reasons for the failure of the automotive assistance programme, which has still not delivered a single penny to any automotive business in the United Kingdom a year after it was launched. I welcome the extension of the enterprise finance guarantee scheme, despite the cynic in me thinking that it may have something to do with the fact that the scheme has not got money out of the door quickly enough and the money is still left in the bank, so the Government are extending the period in order to use the same amount of money over a longer time.
The one other issue that I wish to raise is that of a windfall-there is some good news-about which I know the Financial Secretary to the Treasury is aware. It comes from the digital dividend review. I am talking about the sale of the spectrum, which will result in the digital dividend. That spectrum is used largely by television, but it is also used by radio microphones, which are crucial to community halls, outside broadcasting, music, theatre and a range of interests. The Government originally promised to compensate such interests in full for evicting them from the spectrum. The cost of that eviction is about £70 million to £75 million, but it should unlock a windfall of £2 billion for the Treasury. I hope that the Government will stick to their promises, and I have received some encouraging answers from the Minister, who was wearing both of his hats this morning-operating as a Department for Business, Innovation and Skills Minister and as a Treasury Minister-to suggest that they might just do that. I hope that he will stick to that, because that £75 million is the permission to unlock a £2 billion windfall for the Government.
We are not out of the woods yet. The international banking crisis could still get worse. Net lending to companies is still shrinking and we face huge structural problems, but I believe that they can be faced in the lifetime of the next Parliament. As Richard Lambert put it
"the job of political and business leaders is to focus relentlessly on those policies that will enable a different and more sustainable pattern of economic growth for the future-education and skills, enterprise and innovation, competitive taxes and flexible labour markets, private sector investment, trade growth and open markets."
Sadly, there is little sign of that in this PBR.
4.55 pm
Derek Twigg (Halton) (Lab): First, Mr. Deputy Speaker, may I apologise for the fact that I will be unable to stay for the closing speeches? It has been a pleasure to listen to the debate and some excellent speeches have been made.
The PBR represents firm action to help secure recovery, to go for growth and to halve the deficit in four years while protecting key services, and the subject of key services and public services in general will form a major part of my speech. I believe that the PBR offers a balanced package, and the best economic approach for long-term stability. The Government are taking tough decisions to halve the deficit and to make a range of savings and efficiencies that we know, in some cases, will be very difficult indeed.
I particularly welcome the commitment in the PBR to spending on schools and to NHS expenditure, the increase in the basic state pension and the child element of the child tax credit.
I also want to highlight the issues to do with the tax on bank bonuses, which is very important. We should not be put off by scaremongering. Many of my constituents welcome that tax, as do most people in the country. Some people in the banks got off very lightly indeed. I also welcome the measures to do with tax evasion and tax avoidance, which are very important for fairness and will raise a significant amount of money. They will play an important role in ensuring that we get that money in and that we stop people avoiding and evading tax.
I want to spend some time discussing the issue of employment. I was pleased to see in the PBR that £300 million will be brought forward to offer a job, training or a work placement to every 18 to 24-year-old who has been claiming jobseeker's allowance for six months. Unemployment is a great concern and many people in my constituency have suffered from the economic downturn. However, unlike the Opposition, we have not walked away from that and we are doing all we can not just through the fiscal stimulus but through the other methods that I shall come to shortly. When the Opposition were last in government, they said that unemployment was a price worth paying. We should never forget that.
In Halton in the 1980s, almost one person in five in my constituency was unemployed. Many were pushed on to incapacity benefit. Let me give some figures that I mentioned before. For instance, in August 1985, 19.1 per cent. of the 16-to-19 age group were unemployed. In August 2009, 6.7 per cent. of that age group were unemployed. That is still obviously too many, and we have to do more, but the fact that one in five of my constituents were unemployed for many years shows the massive scale of the problems that we faced then.
We should also not forget the record interest rate of more than 15 per cent. Rates were very high for a very long time, and many people lost their homes. We saw record levels of repossessions with no help from the Government of the time. I am pleased that we are doing more on that. We have helped people to stay in their
homes and I hope that the Government will continue to do more. Of course, it is still a personal tragedy for those who lose their homes.
I also want to welcome the improvement in support for debt counselling and advice services and access to them. The PBR provides extra money for citizens advice bureaux, which have helped many people to stay in their homes and to get their debts under some sort of control. Only this week I had a call from a constituent who thanked me for helping her by putting her in touch with the right people to get debt advice. She was then able to get an agreement with the mortgage provider and can now stay in her home. That is not untypical of what has been going on during this economic downturn.
The stimulus has been very important in dealing with unemployment, but my right hon. Friend the Financial Secretary will not be surprised to hear that infrastructure projects are one of the big areas in providing employment and stimulus. May I remind him of the proposed new Mersey crossing? It is a £400 million project and the report of the inspector's recommendations and the inquiry that took place last year is due to land on the desk of the Secretary of State in the next few weeks. The crossing will provide hundreds of construction jobs over the next few years, if it is approved, and about 4,000 or 5,000 jobs thereafter through the economic benefits that it will bring. So, as well as improving the congestion problems in my constituency, and in Merseyside and Cheshire, it is very important for jobs. I hope that when the report lands on the Treasury's desk, the project will get the quickest approval possible.
I want to spend a little of the short time available to me talking about public spending, which the Conservative party sees as a great evil. There have been massive improvements during Labour's time in government; Labour Government expenditure has brought great improvements throughout the country, not least in many public services in my constituency. Many people now take those services for granted, and it is worth reminding them what has happened. The greatest contrast is between hospital waiting lists now and previously, when it was common for people to wait two years or more for an operation. Those waiting times are now down to a few months or even weeks in some cases. That has been a massive turnaround. If anything shows the differences between now and previously, that change is it.
Other benefits in my constituency are the modernisation of many schools with the provision of new buildings and sporting facilities. There have also been tremendous improvements educationally, with many great improvements in exam results. There have been improvements in transport and significant improvements in local health services and access to such services. Whiston hospital, for example, which serves many of my constituents, has received investments of £250 million. There are many private rooms in that hospital. We would like to know what the Tory promise is on private rooms, because they seem to be backtracking again. That brand-new, modern facility will serve my constituents and the wider area, replacing the Victorian buildings that the Tories always thought were okay for treating our people in. There are also improved cancer services, and more doctors and nurses.
Let me make a point about the current weather situation and public expenditure. We should not forget the cold weather payments that are being made. The winter fuel allowance is particularly important to pensioners
and the disabled. I want to make that point very clear. The free bus pass for pensioners and the disabled is another thing that is often taken for granted now, and is another example of good public expenditure.
It is important to remind people what life was like under a Conservative Government. We have only to remember Black Wednesday and what happened to the pound then. There were record unemployment rates of more than 3 million, two recessions, long NHS waiting lists, as I have mentioned, and record numbers of repossessions. That is what life was like under a Conservative Government. Even on tax, the Conservatives' record was dodgy. It took them almost 18 years to reduce the tax burden-that was a long-held promise that they made early on in their years of power-so even they had trouble doing that. We should remind people about that.
I believe that our approach to the economy is the right one, and that the Conservative approach lacks credibility-whatever that approach will finally be. The hon. Member for Runnymede and Weybridge (Mr. Hammond) refused to give a date for when he wanted the deficit to be halved when I asked him to do so. He was asked about that two or three times. It is clear that a Conservative Government would revert to type, would introduce massive cuts in public expenditure and would not support public services or maintain the improvements that the Labour Government have made.
Any Government will have to make significant savings, but the speed and scale of the savings will be crucial. That is the difference between the Conservatives and us: we will continue to put whatever stimulus we can into the economy and will also improve public services. The scale of cuts could be horrendous under the Conservatives, but we do not know what the full scale would be because they are not being open and honest about what they intend to do. I believe that we have the right approach to deal with the situation.
I also believe that the people of this country will not be fooled by what the Conservatives are saying. They know what the Conservatives are like and what will be reintroduced if they get back into power. I believe that they will stick with and trust the Labour Government, having seen Labour's good management of the economy. The economic downturn has been handled well, and we have been seen as a world leader in that regard. The downturn has been very difficult for millions of people in this country, but by having a stimulus, by improving public expenditure in certain areas and through good stewardship, we can continue to bring improvements for the future of this country, its public services and the economy.
5.4 pm
Stewart Hosie (Dundee, East) (SNP): When the Chancellor introduced the pre-Budget report, the focus was rightly on the big deficit and big debt numbers. Those numbers included the £178 billion to be borrowed, the £1.7 trillion of national debt forecast for 2014-15 on the Treasury calculation and a share of national debt that will exceed £60,000 per household. They captured the headlines, along with the tax rises, the return of VAT to 17 per cent., and the introduction of the 50 per cent. top rate of income tax. Other headlines were devoted to the introduction of a fuel duty escalator from this spring, and to the national insurance increases for the employed, the self-employed and for employers.
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