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Simon Hughes (North Southwark and Bermondsey) (LD): I apologise to you, Madam Deputy Speaker, and to the hon. Member for Tatton (Mr. Osborne) for missing the first part of what he said. I had to attend an engagement that had been arranged many months ago.
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However, I have had what he said reported to me, and I heard his position on the radio this morning-I do not think that it has changed from this morning to now.

Yesterday was an opportunity for a new spring awakening of awareness in the Government regarding the crisis that the country faces. I do not think there is a single person in Britain who does not realise the severity of the economic crisis that we are now in.

Christopher Fraser: Will the hon. Gentleman give way?

Simon Hughes: Not yet.

It is clear that the British public want a fairer tax system, but yesterday's Budget did not deliver it. They also wanted a clear plan to reduce the phenomenal deficit that we now have, and I do not think that they bought the suggestion that the growth figures are about to be between 3 and 3.5 per cent. as was suggested by the Chancellor yesterday. They believe that they are far less than that. The Budget was the last opportunity of the current Chancellor, and possibly the Government, to address the severe condition that Britain is in, and the British public were looking for honesty and, above all, reality in how the Government would deal with the biggest problem that confronts us. That is why most people came away from yesterday feeling that the big questions had not been answered by the Government.

One big question is this: how are we going to find the money to pay the debts that Britain has built up under 13 years of Labour rule? The economy is in a deep and profound crisis, but nobody has been surprised by that. There has also been the deep social crisis of an unequal society that was made unequal under the last Tory Government and that was sustained as unequal under Labour Governments. The tax system that could have become fairer under Labour still places a hugely unfair burden on some of the people who work the hardest in constituencies such as mine-traditional working constituencies in inner London-and constituencies up and down the land. After 13 years, the Labour Government have left this country more unfair and more in debt than it has ever been, and neither of those major challenges has been addressed.

Christopher Fraser: Does the hon. Gentleman agree that it is a sad indictment of the Liberal Democrats' policy on the economy that absolutely no Back Bencher from his party-or any other Front Bencher, come to think of it-has chosen to join him in the debate?

Simon Hughes: The hon. Gentleman will hear, as he heard yesterday from our leader, my right hon. Friend the Member for Sheffield, Hallam (Mr. Clegg), and from my hon. Friend the Member for Twickenham (Dr. Cable) and others about our consistent policies, which have been enunciated for weeks and months. We have made clear our position on tax, the deficit and public expenditure.

The hon. Gentleman knows, as I do, that on each day of the Budget debate, the case will be put for each party. The difference between our party and his is that we can answer some of the questions about where money should come from and where savings will be made. Having listened to the hon. Member for Tatton this morning and this afternoon- [ Interruption. ] I told hon. Members
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that I listened to the hon. Member for Tatton this morning and that I listened to a significant part of what he said this afternoon and had the rest reported to me, so I know that the Conservatives still have no answers to the big questions. All he said was, "You'll have to wait and see". A party that aspires to government, because it is currently the major Opposition party, can do no better, a matter of weeks before the general election, than say, "You'll have to wait and see where we'll find the expenditure cuts that this country needs." That is neither an honest nor a straightforward way of addressing the electorate. If it cannot do that in the Budget debate, a matter of weeks before the general election, the British public will realise that the Tories either have something to hide or that they do not have the policies they need to deal with the current economic crisis.

This morning, the hon. Member for Tatton said that this country needed a party with the "energy", "leadership" and "ideas" to deal with our economic crisis. Those ideas were not heard from him this morning, but they have been heard consistently from my right hon. and hon. Friends. We are consistent in our view that fair taxation and a realistic policy to deal significantly and immediately with the deficit are the beginning of the sort of economic policy that we need.

Kelvin Hopkins: The hon. Gentleman has said that his party anticipated the crisis, but if I remember correctly, his party was as wedded to neo-liberalism, globalisation, a free world market and deregulated banking as the other parties were, although I must add that I was not. He talks about taxation. His party had a proposal to increase taxes on the rich, but then withdrew it. I found that very disappointing.

Simon Hughes: I shall deal with taxation in a second. It certainly is not true to say that we have not consistently said that we need continuing public investment that is both responsible and targeted, and that gives us the sort of green, sustainable, long-term growth that this country needs now and has needed for the past 13 years.

On the need for a fair tax policy, the Liberal Democrats continue to argue what we have consistently argued. What the Chancellor should have done yesterday for all those at the bottom end of the income scale-all those with an income of below £10,000 a year-is to relieve them of income tax altogether. We have also argued that that should be financed out of the incomes of the very well-off. Yes, that is a redistributive policy; yes, it is about giving money to the poor and paying for it out of the pockets of the rich. We heard yesterday that the Chancellor had adopted a bit of the mansion tax policy, having heard that idea from us, and a bit of a stamp duty policy from somewhere else. We have argued that people with homes that are worth more than £2 million should make an additional contribution. That is not a secret. We have argued for that and we believe in it. We also believe that those who have the broadest backs and the largest finances should make a contribution. Interestingly, I think that the public want us to concentrate on giving jobs to the builders and people in the construction industry who can get Britain back to work and not give the sort of advantages that the Tory party gave for years to the bankers and people who invest overseas and offshore, rather than investing in Britain and putting their money where the jobs ought to be.


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Mr. John Randall (Uxbridge) (Con): Does the hon. Gentleman agree with his leader's statement that the country needs savage cuts?

Simon Hughes: Both our leader and my hon. Friend the Member for Twickenham, whom the public respect hugely for telling the truth in recent months, are clear that there need to be some savage cuts. I shall set out now what sort of things can be cut, and I shall do so in much more significant, clear and precise terms than did either yesterday's press releases from the Treasury or today's comments from the hon. Member for Tatton, who did not indicate in which areas there would be the specific reductions that the public know have to happen.

We are very clear that there are large-spend items that ought to go, such as the like-for-like replacement of the Trident missile system, the identity card programme with all its costly infrastructure and the child trust fund, which we think was an extravagant, gratuitous and unnecessary way of giving money at a time that it is not needed to people who do not need it. We are clear that we need to have smaller government, a smaller Parliament with fewer MPs and a smaller number of Government Departments-several could be amalgamated. We are clear that there should be reductions in the increase in the salaries of those in the public sector at the top end of the income scale by limiting everybody across the income scale to the same increase.

We have identified about £15 billion of cuts, significantly more than were identified yesterday by the Chancellor and significantly more than have been identified so far by either the Conservative shadow Chancellor or anybody else on his Front Bench. We are not hiding that. We are also clear that immediately after the general election there will have to be a further Budget and that it will have to be an emergency Budget that deals with the crisis properly, unlike yesterday's which did not, and that there will have to be a way of trying to bring the country together to own collectively the serious changes in the way in which we spend our money that need to be addressed.

That is why my right hon. and hon. Friends have argued for a council for financial stability involving all the major parties, the Financial Services Authority and the Bank of England. That will ensure that we have that debate out in the open. The difference between our policy and that of the hon. Member for Tatton is that we are open about what we believe will have to go immediately, about what we believe that the process should be immediately after the election and about the fact that we will get public consensus for the very difficult economic decisions that have to be taken only if the public is consulted and engaged with. It should not be done in secret, behind closed doors, leading to proposals only being produced before the electorate after the election should his party to be elected to form the next Government.

Mr. Gauke: Will the hon. Gentleman clarify one particular point? He has listed a number of cuts proposed by his party, which I think they calculate as constituting £15 billion. Does he consider the cuts that he has listed to be savage cuts, or is it the additional cuts on top of that that he considers will be savage, to use his word?

Simon Hughes: We can all use different adjectives, but £15 billion is a significant cut in the current spend. If we decide, for example, not to have the Eurofighter programme
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or the like-to-like replacement of Trident, they will be significant and, in the two sectors to which they relate, savage cuts. However, we are clear that we will not cut things that will adversely affect the poor. We are not going to cut the sorts of investment that we need to get the economy going again. We have measured and balanced both the necessary cuts and the investment that we believe can be made, too. The manifesto that the public will see in the next few weeks will set out not only the expenditure savings that we expect to make-£15 billion first, with other expenditure cuts to be discussed later-but what we intend to spend more on, which is how we believe that we can get the productivity and the real sustainable growth that this country needs.

Let me finish on the question of the deficit and the immediate response, because out there in the real world people know that that has to be faced up to. We will have a £400 pay rise cap for all public sector workers and a banking levy-a new tax, to deal with the Secretary of State's question about what new taxes we will introduce. We are clear that there needs to be a banking levy so that banks can pay for the financial support they have been receiving. We will scale back the homebuy schemes, reform-and therefore cut back on-the spend on prisons and cut back on the burdensome regulation of local authorities. We have a list of savings that is in the public domain-it is not secret and we have not tried to hide it at all.

We then have to ensure that we have a fair tax system so that people are incentivised to work and employers are incentivised to take people on. There were some areas of policy that the Government addressed yesterday that half addressed the question but did not adequately address it. For example, small businesses- referred to by the hon. Member for Epping Forest (Mrs. Laing), who is no longer in her place-that have been having a hard time want changes in the business rates system. They want automatic rate relief rather than having to make claims. However, our view is that we need a different sort of business rates system based on the development value of the land and that gives local authorities the flexibility to give a less draconian rates bill to a small business than they give to a big business. We need to encourage the self-employed and the small businesses that employ most of the workers in the United Kingdom to blossom and flourish. That would make a difference and be a more sensible approach.

We are also clear that we need policies that reduce the burden on individuals in their homes. That is why we have said that if we take people earning under £10,000 out of income tax altogether, that does not just help people who are of working age-it helps the pensioner who has a small income from their private pension, too. We calculate that just over 3.5 million people would benefit and that people would get an average £700 back in their pay packet or bank account every year. That is significant. Those are the sorts of changes that we should have heard but, as the Secretary of State knows, freezing personal allowances will mean that some of the poorest people will be in a more difficult economic position in the days ahead, when they need to be in a better position.

The Government adopted one other policy from us as well as the mansion tax half-policy, and that was the green infrastructure bank. We welcome that. We believe
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that if we are to have the sustainable growth that Britain needs, we need new systems for raising the money and for spending that money, and a green infrastructure bank is a good thing.

We believe that there ought to be much more support for regional banking as well as a decision to separate the banks into local banks, which lend to individuals and businesses, and the banks that want to play the international casinos, which should not be able to be supported by the public at all. We believe that there ought to be local stock exchanges in the regions of England, providing the ability to invest locally. In the Secretary of State's part of the country and elsewhere, there is a great desire to be economically prosperous as well as great ingenuity and great skill, ability and enterprise. We want Yorkshire and the Humber, the east and west midlands and the south-west, for example, to be able to invest in themselves so that they can prosper.

Of course, some things are national schemes, such as high-speed rail schemes. That will need national investment, and we support it. We support changing the tax regime so that we tax aeroplanes according to the flights they make, not the passengers they carry. That would mean that there would be an incentive for people to move from planes to trains, which is a good thing. It is good for the environment, good for the economy and good for the Exchequer, too.

We also believe that the Government need to invest in a whole new form of green growth as regards the energy sector. There is fantastic potential. One needs simply to go to the east coast of Scotland and talk to people in the oil and gas industries about the remaining work they can do in the North sea, or to talk to the people in the ports down the east coast-in Newcastle and Hull, in the Thames estuary or up on the east coast of Scotland-about the potential to build offshore wind turbines in the ports and to export them offshore to be the new wind farms of the future. We have fantastic potential in this country, but there need to be incentives for those things rather than disincentives.

The Government could and should have signalled immediate action for growth in the economy in the year ahead as well as a long-term strategy. We believe that immediately after the general election, there could be investment in tens of thousands of green jobs by bringing the 250,000 homes that are empty back into use-that would probably produce 50,000 jobs. I saw a glass and glazing van going past me this morning. Huge additional numbers of people would be willing to work in the building industries, renovating and repairing. There could have been an incentive for that had the value added tax rules been changed so that there would be less VAT on repair and renovation. It would be an incentive to people to restore their homes.

We believe that there could be an immediate scheme allowing people to have what we call an eco-cash back, so that they could put in some double glazing, replace their boiler or replace their inefficient, environmentally unfriendly fridge with a more environmentally friendly one. There could be schemes to get people to work in the first year of a new Government after the general election, such as one that ensured that all our schools were well insulated, saving energy on the one hand and creating jobs on the other. There is a whole programme of investment activities, which we have costed and believe could start now, that would put people in this
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country back to work. That could be part of our scheme-and Ministers have heard us enunciate it from these Benches-aimed at ensuring that every home in Britain that can manage it will become a warm home in the 10 years between 2012 and 2022.

Establishing a fair and sustainable economy means delivering growth that lasts. It means delivering the necessary infrastructure now, and investing responsibly in the years after the election. It also means that there must be development in the future.

We agree that it would be foolish not to continue to invest. The hon. Member for Luton, North (Kelvin Hopkins) hinted that it would be wrong to turn the tanker around suddenly, and that reducing, slashing and burning would be quite the wrong thing to do. We share that view, but there is a difference between my party and the others. We also believe that, while the green shoots may or may not be showing now, people need investment in the jobs that will produce more jobs. That is why the housing and construction industries, which will carry out the work involved in repairing homes and insulating factories, hospitals and schools, have such potential. People in our constituencies around the country say that they are ready to take on that work. With the right adjustments on the fiscal tiller, they can be incentivised to do so.

Kelvin Hopkins: I entirely applaud what the hon. Gentleman has been saying in the last few minutes. He seems to be suggesting that we should have more targeted public expenditure, particularly in the construction industry. I entirely agree with that.

Simon Hughes: That is what my hon. Friends and I have argued for months and for years. We have said for a long time that the present economy has been unsustainable. We have overstretched ourselves and been irresponsible as a nation. We have been irresponsible economically, by spending more than we could afford. People, and bankers in particular, have been gambling with the nation's finances. We have also been irresponsible environmentally, using the resources of tomorrow rather than investing the resources of today.

To pull ourselves back, we need targeted investment that is set out clearly, managed appropriately and held to account democratically. Often, that investment should be led locally, with local government involved in delivering the Warm Homes scheme. The regions of England and the devolved Administrations must be encouraged to develop renewable energy, and the like. We support that, and the manifesto that the House and the public will see in the next few weeks will set out that targeted investment. Our plans for taxation will be at the centre of our proposals, flanked on either side by plans for reducing the deficit and plans for targeted investment.

Unlike the Conservatives, we are clear about tax changes. We would make tax simpler, and give help to the many and not the few. Unlike them, we are clear now that we would make spending cuts, to give help to the many and not the few. We would reduce pay increases for the well-off to help the pay of the less well-off.

The people of Britain are waiting for the election, and desperately want it to happen soon. I think that they realise that the main party options across the whole of the UK give them three choices. They can have more of the same if the Labour Government are re-elected,
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even though the past 13 years have been only a wasted opportunity that has given us our worst ever deficit. They have a promise from the Conservatives of a completely different economic approach, although nothing has been revealed yet. From the Liberal Democrats, they have a realistic, pragmatic and costed programme that would deal with the deficit. It would do so with the consent of the public, yet continue to sustain investment where it is needed.

We need productivity and growth in this country, but that growth must be sustainable and long term. We need that for the builders, not the bankers. It must be onshore, not offshore, and in the interests of the many and not the few. My colleagues and I will be putting that case to the British public in the weeks ahead.


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