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I was pleased that the Chancellor spoke about the green investment bank, but if we are serious about protecting the environment and growing the economy, serious about carbon capture and storage, serious about
a biomass non-nuclear base load, serious about offshore wind, wave and tidal, and serious about growing a biomass supply chain, what he could have done today, and what the Treasury should have done, is to change its rules at least to free up the £200 million of fossil fuel levy sitting in a bank account, which can be used by the Scottish Government only to pump-prime such projects, and to change the ridiculous rules that would have seen the same amount of money cut from the block, putting further pressure on other jobs and services.
It has been said before that with household consumption down 1.9 per cent. last year, business investment down 24 per cent., and gross fixed capital formation down 14 per cent., it was only Government investment that propped the economy up. I cannot for the life of me understand why we are seeing cuts now, before we have sustained recovery. If the Government understood that, why would they have pressed on with national insurance increases that will take £10 billion in tax from employers and employees over the next three years?
The Chancellor spoke a little about the banks and about the success of the bank bonus levy, but that tax is paid not by the bankers but by the banks. He seemed delighted to get an extra £2 billion, but that is £2 billion less to lend to real families and real businesses in the real economy. The tragedy, as I said at the beginning, is that the Budget amounts to a pretence that Labour is investing, when the plans are to cut public expenditure and investment.
At least Lord Mandelson was right last year when he spoke about 10 years of austerity under Labour, but it is not austerity that Scotland needs and it is certainly not austerity that the UK economy needs. What Scotland and the UK need is help to get moving, but the Budget today, I fear, does not deliver. It is not a plan for economic renewal, but a political dividing line. It is designed not to deliver growth in the economy for years or decades ahead, but to hide the nature of the Labour cuts to get the Government through to the election in six weeks' time.
6.24 pm
Mr. Andrew Tyrie (Chichester) (Con): I agree with quite a bit of the analysis by the hon. Member for Dundee, East (Stewart Hosie), but not with the proposed policy response, which was, in sum, from my own English perspective, rather a good case for creating fiscal independence for the Scots. However, I will not develop that theme because I want to make some points about the Budget.
This Budget, like all Budgets, should be about accomplishing at least three things. First, a Budget should ensure that the public finances are in reasonable shape and that overall financial policy is on a sound footing. Secondly, it should try to contribute to a credible framework for long-term growth. That requires clarity about the role and limits of government, and a consistency of approach, particularly on taxation, so that the private sector can take decisions in a relatively stable framework. Thirdly, it requires an underlying long-term strategy that the country can understand and accept. Without that public confidence in the policy, any Government action, even when it is right, is unlikely to succeed.
I shall say a few words on each aspect, mainly the first-financial policy. More or less from the moment he arrived, this Chancellor has been forced to choose
between loyalty to the Prime Minister and his party on the one hand, and the best interests of the economy and the country on the other. This Budget is the product of that conflict of loyalty-a phrase that will be familiar to a number of Conservatives in respect of the relationship between Foreign Secretaries and Prime Ministers, as well as Chancellors. The struggle between what the economy needs and what we have, as between the Chancellor's view and the demands that his Prime Minister has been making, were on display today. Everybody in the House-there are not many of us, mind you-knows that Labour's huge structural deficit has to be closed. If it is not closed, then, frankly, financial ruin awaits Britain-a Greek experience. Everybody knows that that can only be done by cutting public spending, among other things. That, in turn, requires a spending review, with announcements of where the cuts will be made and how the most vulnerable in our society will be protected from them.
However, this Budget has persisted with the opposite strategy. The spending review remains postponed, and little extra work has been done to plug the gaping hole in the credibility gap of Labour's financial strategy. This has all happened despite the fact that, even over the past six months, the Chancellor could at least have conducted an internal review and given us some idea of where he is going, which a number of Labour Ministers privately think would have been a preferable strategy. He could have bolstered economic confidence by at least beginning the process of rebuilding the Government's shattered reputation for fiscal management. However, that would have meant going to the electorate with many unpalatable spending cuts out in the open, while confirming an unpalatable truth: that much of the spending binge that we have experienced over the past decade, which took public expenditure from 36 or 37 per cent. of GDP to 48 per cent.-a colossal rise-was a profound mistake. To spell out a reversal of policy, even one which everybody knows that the country needs, would have meant confirming that the Prime Minister's record of economic management was also a ghastly mistake.
Mr. William Cash (Stone) (Con): Will my hon. Friend give way?
Mr. Tyrie: I will just this once, although I know that another Member is waiting to speak.
Mr. Cash: My hon. Friend has enormous experience of these economic matters, and I wonder whether he has a view about the extent of the true debt, because I have just had a letter from Sir Michael Scholar, the chairman of UK National Statistics, confirming that the ONS figure, including financial sector interventions, would be as much as £3.2 trillion.
Mr. Tyrie: I am familiar with these arguments and with the £3.2 trillion figure. I think that there is probably an understatement of the total stock of Government debt and that the true figure lies somewhere between that figure and the Government's figure. When we get into government-in a few weeks' time, I hope-the office for budget responsibility will need to establish what figure the Government should use as the basis for their economic policy and strategy, which is not necessarily the figure that a statistician would think is the right one for the purpose of Government statistics, but one that an economist would consider appropriate for setting policy.
As I was saying a moment ago, setting out in detail what is required to deal with the fiscal mess that we are in would have also meant confirming the Prime Minister's personal responsibility for the boom and bust that we have just experienced. It was not just many of the spending increases that were wrong-headed-damaging enough though they have been, generating a deficit of about 12 per cent. of GDP-but the rhetoric that accompanied them. Millions of individuals and companies up and down the land are living right now with the consequences of having believed the Prime Minister's mantra when he was Chancellor that he had put an end to boom and bust. They went out and borrowed more than they otherwise would have done because they trusted his mantra.
Andrew Stunell (Hazel Grove) (LD): Will the hon. Gentleman give way?
Mr. Tyrie: I will not, if the hon. Gentleman will forgive me.
The Prime Minister is not just responsible for the massive public debt; he also bears a considerable burden of responsibility for the unsustainable increase in personal and corporate debt over the past decade. He encouraged the actions of those who were misled into borrowing more than they should.
Given all that, I can well understand why the Chancellor backed off giving us a Jenkins-style Budget. In 1970, Roy Jenkins did tell the truth and tightened policy, but he lost the election. In his case, of course, at least he was doing that at a time when he did not simultaneously have to confirm that his Prime Minister was a broken reed.
Of course, the boom and bust rhetoric has been abandoned. So, incidentally, has the word "stability". It was mentioned on average 11 times in every Budget speech that the Prime Minister made when he was Chancellor. In the past two Budget speeches-I listened carefully to this one-I did not hear the word mentioned once. Stability is out. Perhaps it was in there somewhere, but if so it passed me by.
I have already said a few words about the Prime Minister's first two contributions to Britain's current dire economic predicament, the spending binge and the rhetoric of boom and bust. The Chancellor, who is a hapless man in some ways, has found his Department responsible for covering the Prime Minister's tracks for a third blunder that he made when he was Chancellor-the tearing up of the system of banking supervision that was in place in 1997 and its replacement with a new system, the tripartite arrangement, which failed its first test. Worse still, only a few weeks ago the Chancellor found himself having to try to justify the Prime Minister's imposition of another piece of rhetorical nonsense legislation, the so-called Fiscal Responsibility Act. In fact, it is worse than nonsense, as it would require the fiscal stabilisers to be set aside in the event of a double-dip recession.
Tucked away in the fine print of the Red Book-I have been sitting here all afternoon, so I have had a chance to glance at it-is an attempt to reconstruct what looks like the code for fiscal stability, the same code that lies in a heap of rubble alongside the golden
rule and the sustainable investment rule. Interestingly enough, it is relegated to a footnote on page 31, whereas in the old days there used to be a glossy publication accompanying the Red Book. That is a measure of the Government's loss of confidence in their own ability to make the case for stability.
The second great task for any Budget to accomplish is to contribute to a programme for long-term prosperity-a growth agenda. I never believed that new Labour's economic strategy for growth was coherent, even when I used to hear it when Labour was in opposition. It has often seemed to consist of a long list of micro-measures, frequently altered and usually requiring higher spending and tax. Many have brought with them a higher regulatory burden, as the Institute of Directors has pointed out, and many have led to complex tax changes that are more distortive than they have been effective.
The Chancellor added to that today when he announced £2.5 billion of so-called investment for industry. The extra money comes out of a slight improvement, which the Chancellor also announced today, in overall public finances since the pre-Budget report, but whatever the merits of the measures it seems highly irresponsible to use that small amount of extra room to start spending more. Surely the logical thing must have been-should have been-to use it to start reducing the deficit. Each individual spending measure could have some merit, but it looks as if this Budget, in any case, has just given us more of the same: meddling in the economy with taxpayers' money.
The counterpart to the accumulation of all those tax rises in recent years, huge as they have been, is the increase in public spending, along with borrowing. The dramatic rises in spending have almost certainly reshaped the British economy-in my view, for the worse. Some measures may have been right, but cumulatively, when the dust has settled, it will be clear that they have reduced, not increased, the UK's long-run growth rate.
Perniciously, much of that spending has been described as investment-an abuse of language. I very much hope that in the next few weeks, when we have, I hope, a new Government, we will get back to calling the salaries of teachers and doctors, for example, expenditure rather than investment. Honest language is a necessary counterpart to honest finance from the Treasury, as are honest statistics and forecasts, which I hope will come with the creation of an office for budget responsibility.
I can well understand that setting out how to dismantle the Prime Minister's public expenditure empire has been too much for the Chancellor, and it has for another reason. Much of the spending has created its own interest groups. One has only to look, for example, at the growth of the quango state. Quangos are everywhere, and many have become state-funded lobby groups. They pervade British life and are powerful pressure groups, impeding any reductions in spending. They may be a way of buying votes and maintaining political support, but such spending does not amount to a strategy for public expenditure or growth in the long run.
"New Labour was a strategy for winning power...not for dealing with Britain's fundamental problems, such as our inability to pay our way in the world, the pools of poverty and deprivation, and the widening social gaps... these were Labour's lucky years, with steady growth, a balance of payments cushioned by oil, the City pouring out money, the majority kept happy by rising house prices and living standards improved by accumulating debt. This
fool's paradise conned New Labour into thinking that its policies...were working, when in fact all was bubble-blowing."
Those are not my words but those of the hon. Member for Great Grimsby (Mr. Mitchell), and you will find them, Mr. Deputy Speaker, on page 41 of T he House M agazine.
Nor has Labour delivered a strategy for success in its own terms-helping the poor and vulnerable in society. That should always be, and has always been, a central task for any responsible Government, and to be frank the record is very mixed. The right hon. Member for Birkenhead (Mr. Field) said that there has been a
"steady increase in the numbers dependent on meanstested assistance... an increase in the number of families pushed onto meanstested assistance... and... more and more people are eligible for one form or another of meanstested relief.
"The tax burden of families"-
"faster than for other groups,"
"These failures cannot be explained away entirely by the collapse of the...Labour Government's economic strategy."
The interesting thing about those remarks is that the right hon. Gentleman did not write them a few weeks ago; he wrote those words in 1979 in a book entitled, "What Went Wrong", after Labour's last disastrous spell in office.
History, of course, does not exactly repeat itself. Not all the poverty figures have deteriorated exactly as they did last time, and nor, as a matter of fact, are the industrial action on our streets today and Labour's vulnerability to the power of the unions owing to the extent to which it is dependent on them for funding, as serious as that was a quarter of a century ago.
The similarities, however, are at least as strong as the contrasts. A misunderstanding about what creates and sustains growth, and complacency about growth and how to maintain it, have always been hallmarks of Labour Governments, including this one. Today, the Chancellor announced his forecast for growth, above trend-3 to 3.5 per cent. for 2011. It might happen, but it is well above the average of independent forecasts. I hope that it happens, but I cannot help feeling uneasy about relying on it, as he has. I cannot help sensing that those optimistic numbers have more to do with showing a plausible forecast for the reduction in the deficit than with confidence in the economy's resilience.
Seven years ago, in a major publication on economic policy published by the Treasury, the Prime Minister wrote:
"in 1997, as in 1944"-
he does not do things by half measures, does our Prime Minister-
"a new paradigm"
"far more effective mechanisms for crisis prevention"
"far greater attention to financial stability".
The introduction of the same book reads:
"No doubt in the years to come, as the UK economy experiences various shocks, it will be possible to assess the strengths and weaknesses of the new system"-
the one that he had just announced and was putting in place.
Those years have come and gone. The weaknesses of Labour economic strategy have been brutally exposed and much damage has been done. We now need another Government, and a fresh team, to repair the damage.
6.42 pm
Rob Marris (Wolverhampton, South-West) (Lab): It is a pleasure to follow the hon. Member for Chichester (Mr. Tyrie). I often disagree with most of what he says, as I do today, but he is always thoughtful and well worth listening to. That is in the nature of parliamentary debate.
I want to start my remarks on the Budget, somewhat prosaically, on the question of excise duty on beer, which is no less than the Economic Secretary to the Treasury, my hon. Friend the Member for Dudley, South (Ian Pearson) would expect, because he, like me, is a west midlands man. The three main pub chains in the United Kingdom are based in the west midlands-Enterprise Inns, Punch Taverns and, of course, Marston's, as it now is, but Banks's, as my hon. Friend and I have known it for 40 or more years. I am proud to say that Banks's brewery, as it was-Marston's now-is headquartered in my constituency. Not only is it in charge of the third largest pub chain in the UK; it is a major brewery in its own right.
I am dismayed that the Government, yet again, have put up excise duty on beer to the tune of 2p a pint-2 per cent. above inflation. We have a problem with alcohol in our society, but generally it does not emanate from pubs or people drinking Somerset cider, which was referred to earlier by the hon. Member for Somerton and Frome (Mr. Heath); it comes from cheap off-licence alcohol, and often from what one might refer to as chemical cider-if it has been near an apple, it is because it passed a vegetable or fruit wagon on the road going the other way.
Of course, putting up duty on cider to a swingeing level might have an effect on chemical cider, and on drinking in a way that contributes too often to antisocial behaviour, but it will also hurt pubs. That is true not only of cider but particularly beer, which is a major drink in our society. Cider, of course, is a great drink, but less widely drunk in the UK. This is a case of the Government looking at a problem but coming up with the wrong solution. So I make my annual plea to the Government-it has not been successful so far, but it is worth continuing to make it-to rethink the increase in excise on beer and to focus their efforts on the minimum price proposals. Indeed, those are being discussed in Scotland, although I do not know if they have been enacted there. That would do more to tackle the antisocial behaviour about which many people are concerned.
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