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Mr. Clarke: It is more likely that Charlie Whelan is trying to deal with the problem if there is some discrepancy in what the Chief Secretary says in public. I trust that the Secretary of State is playing no part in whatever is being done to re-educate the Chief Secretary. I normally have a very good relationship with the Secretary of State-we come from the same part of the world-and I would have been happy to go down memory lane and debate schools and education with him had I known that the Government intended to try to turn the last day of the Budget debate into such a debate.
I knew that the Secretary of State would take part in the Budget debate, as he did last year. He often does, but that is because he thinks that he should take part in all Budget debates. I commiserate with the right hon. Gentleman on that front, because events have moved on even in the last week or two. He has concealed today what must be his deep and bitter disappointment, because he was beside himself with rage when he was not made Chancellor of the Exchequer last year. For some unknown reason, the Prime Minister has just announced that our current interim Chancellor might be reappointed in the unlikely event of the Government being re-elected.
So, with patience, the right hon. Gentleman has to hold himself in exile at the Department for Children, Schools and Families, waiting for what he always believed would be his inheritance-to be Chancellor of the Exchequer. I am sure that he is dying to deliver and explain the Budget, given that, I strongly suspect, he had quite a large input into it-as he has had a considerable input into economic policy ever since he first emerged in opposition as the acolyte of the Prime Minister. We all remember with wonder that amazing speech on neoclassical endogenous growth theory- [Interruption.] Post-neoclassical!
Ed Balls: Will the right hon. and learned Gentleman give way?
Mr. Clarke: He should give it again; we are waiting for the finer details.
Ed Balls: It is important to set the record straight, Madam Deputy Speaker. It was actually post-neoclassical-not neoclassical-endogenous growth theory. The words in draft were written by me. I cut them from the speech, but then a figure more senior than me wrote in the margin, "Put the theory back in!" and that is how it ended up in the speech.
Madam Deputy Speaker: Order. As interesting and entertaining as this dialogue has been, it is important that we now return to the fourth day of the Budget debate.
Mr. Clarke: I shall obey your strictures, Madam Deputy Speaker.
It is difficult to get back to the Budget. We are debating the Budget-the last serious business of this Parliament before we break up-but it was not so much a Budget as a holding statement. In the middle of a serious economic crisis-certainly the gravest financial crisis that anybody can remember-the Chancellor delivered a Budget that was almost totally devoid of content, which certainly did not answer the only serious question, and which made no significant changes to tax, except for one or two that I shall touch upon.
I cannot help commenting on something in passing: I heard the Children, Schools and Families Secretary say, when asked about tax, that he was not going to give any advice to the Chancellor of the Exchequer on tax levels-although the next time he mentioned it, he did at least say, "in future". On behalf of the present Chancellor of the Exchequer, I would like to ask for that in writing, in case it has not been recorded in Hansard, because we know who was responsible for the national insurance increase. The Chancellor did not want to put it in his pre-Budget report; it was not the tax increase he had in mind at all. However, I shall return to that matter in a moment-it just seemed relevant. The Prime Minister and the Children, Schools and Families Secretary told the Chancellor that he could not have the pre-Budget report that he wanted. I suspect that, on this occasion, the Chancellor might have produced a serious Budget, and I strongly suspect that it was the Prime Minister and the would-be Chancellor of the Exchequer, the Children, Schools and Families Secretary, who prevented him from doing so and who gave us the holding statement that we heard.
Ed Balls: On the issue of whose advice was listened to over tax policy, a few days ago, on the question of reversing the rise in national insurance contributions, the shadow Business Secretary said:
"We will only know if we can afford it in the"-
"50-day Budget... The Budget is not just something you knock off for a TV programme."
Does he think that the shadow Chancellor ignored his advice not to offer something on a TV programme without knowing whether it is affordable?
Mr. Clarke: What emerged was the work of Sir Peter Gershon and Martin Read, and the question of how to pay for it was addressed. I have listened to the Secretary of State trying to explain how he will make his £500 million of savings from a budget that is not increasing in real terms-as shown by the forecast for the retail prices index in the Red Book-and I think that we have made it much clearer how we could afford to get rid of this appalling national insurance increase, for which he is in large part responsible. We have addressed the question-I was addressing it in the interview he quoted-of how to account for any changes, and we have explained how we would pay for them.
There is a big, serious question-the one that we are debating and that we will resolve in our proceedings today: whether there is a credible plan for dealing with the nation's problems of a budget deficit and debt. We are having a very entertaining debate, but the dimensions of the problem that the Budget should be addressing, and which we need to address, should overwhelm everything that we do. On that question, the Budget turned out to be a mere holding statement-probably not the statement that the Chancellor of the Exchequer wished to give. I am afraid that he fell into some of the usual traps-the whole recession somehow came from overseas; it was nothing to do with here-and he tried to present as good news the fact that the deficit was going to be only £167 billion, which is just under 12 per cent. of GDP. The fact that the deficit was mildly smaller than his horrendous forecast is not good news.
When it came to how the Chancellor would start to tackle his stated objective, there were optimistic forecasts, which I honestly do not believe are likely to be achieved. Everything is being disposed of on the basis that we are likely to get into a mini-boom from next year onwards and to sustain it, and that huge cuts could be made in infrastructure spending. I shall not keep arguing the past, but it was private finance initiatives that enabled the schools capital programme to take off; indeed, huge cuts in infrastructure spending have already been set out by the Government in the Red Book. The problem is that the ballpark figures were plucked from the air and kind of attributed to each and every Department. What the Children's Secretary illustrated was that an individual Department cannot give any meaningful description of how it is supposed to be making its contribution to eliminating the £11 billion of waste or making the £5 billion of lower priority spending cuts that were cheerily set out in the Budget speech and the Red Book.
Mr. Clarke: I will pause to give way in a moment.
In the end, given such inadequate content, all it adds up to is a vague target of halving the budget over the course of the next Parliament. The debt-to-GDP ratio will rise to "only" 75 per cent. of GDP, on the Government's very optimistic forecast.
Ever since the Government broke into heavy public spending and borrowing in 2000, when they stopped following the figures that I had laid down in 1997, public spending has been increasing by 4.3 per cent. on average each year. The Budget set out that it would reduce that to 0.4 per cent. each year; it gives no credible description of how on earth it is supposed to get there, and if it did that, it would still leave the deficit at 4 per cent. of GDP in 2014-15. That is above an acceptable level. As we heard from the Children's Secretary's agitated ramblings about the details of his budget, the Government have not the first inkling of how they are to get to what we regard is an inadequate position and not at all healthy public finances for a return to normal growth.
Mr. Hayes: My right hon. and learned Friend mentioned the spending plans that the current Government inherited. Indeed, I mentioned in an intervention on the Secretary of State that growth was at its greatest under this Government during the period when the fiscal constraints that they inherited still applied. Is it my right hon. and learned Friend's view that a fiscal tightening, coupled with holding down tax, would be more likely to deliver the growth targets that the Government anticipate than their Budget, which will raise tax and not fiscally tighten in the way that most national and international experts recommend?
Mr. Clarke:
I wholly agree with my hon. Friend. Indeed, when the public are trying to make sense of what they probably regard as the confused arguments about tax, spending, borrowing and all the rest, they should recall two previous occasions when similar issues were posed. One was early in the Thatcher Government, when we also had a huge fiscal crisis. We went in for fiscal discipline and a tight monetary policy in order to
get stability, and that produced growth. We were bitterly opposed by the Labour party, however. I took over during a comparatively minor fiscal crisis, albeit an important one: £50 billion was the annual deficit figure that frightened me when I became Chancellor of the Exchequer. I went in for fiscal discipline and a strict monetary policy, and I was fiercely opposed in terms that the Secretary of State still longingly recalls. He sometimes forgot that it was the Major Government, rather than the Thatcher Government, whom he was attacking. We were bitterly opposed.
Now, we have the worst recession-the deepest and longest that we have ever had-and the worst fiscal problems that we have ever faced. We are proposing to tackle that with sensible, courageous fiscal policies while maintaining proper monetary policies. Labour Members call themselves neo-Keynesians, but they are actually the populist, short-term, vote-catching, easy-way-out people of so-called new Labour, and they are opposing the same approach being taken again, dressing it up and-with great respect-getting things rather confused.
Ed Balls: I only wish that I had had the chance to pay tribute to the right hon. and learned Gentleman in my speech; I did not know that I would be facing him today. He was my first MP, and I think that he made some very wise decisions in his time as Chancellor. We have already established, however, that he was ignored on national insurance. Speaking of the time when he was Chancellor, he has also said:
"I got rid of the married couples allowance...This is social engineering, for God's sake, and when I joined the party we weren't in favour of it".
Is he going to be ignored for a second time, on the married couples allowance, or might his view prevail? Might this uncosted, unfunded pledge to introduce an unfair marriage tax break be dropped by the Leader of the Opposition?
Mr. Clarke: I am glad that my pre-Front Bench quotes are being so lovingly preserved by the right hon. Gentleman. We are committed to recognising marriage in the tax system. Those were my comments on the married couples allowance-and on why I abolished it-given at some seminar, I think, before I was exposed to the collective wisdom of my colleagues. But we must still wait to see how we are going to honour our commitment to recognise marriage in the tax system.
Ed Balls: The right hon. and learned Gentleman does himself a disservice in talking about the quotes being lovingly preserved. I was harking back to my experience in 1983 when he was my MP, but his quote about the marriage tax break was actually from December 2008. That is not an old quote; it is a very recent one. The question is will he be listened to, or will he be ignored yet again.
Peter Bottomley (Worthing, West) (Con): On a point of order, Madam Deputy Speaker. The Secretary of State has six pages of quotes. Can we hear them all at once, rather than one after another? [ Laughter. ]
Madam Deputy Speaker: Order. That is not a point of order for the Chair. May I remind all-
Madam Deputy Speaker: Order. May I please remind the House that a considerable number of Back Benchers are waiting to contribute to the debate? Their speeches will be time-limited, and I therefore ask for some consideration from other Members who are making their contributions.
Mr. Clarke: I shall stop giving way for a time, Madam Deputy Speaker, to help with that.
That quote was taken from an academic seminar at which I spoke before I was on the Front Bench. There were no doubt considered views of the same kind in my Budgets when I was addressing the same question- [ Interruption. ] The Secretary of State keeps quoting-he has probably got a whole wad of quotes of me and my hon. Friend the Member for Surrey Heath (Michael Gove), the shadow Secretary of State for Children, Schools and Families-but I wish he would take more notice of what we say to him from the Dispatch Box and answer some of our questions. He should certainly take notice of my hon. Friend's education reforms.
We are committed to recognising marriage in the tax system, and there are many ways of doing that-on which my right hon. Friend the Leader of the Opposition will no doubt decide in due course. [ Laughter. ] I shall go back to the serious question. I have made my point about the debt. I do not object to the House having a good-natured debate about the most grave situations-I am sure that there have been entertaining debates when the nation has gone to war-but the gravity of our economic situation should not be underestimated. The public are about to take part in the general election campaign-or, rather, to listen to it and then vote-and they realise that this is a very big question. They are frustrated by the difficulty of deciding about it.
The real question is this: are we going to have the present economic and financial crisis resolved by the democratically elected Government of this country, or are we going to have our affairs decided by a collapse in the bond markets and a further collapse in sterling, which is already devalued on a trade-weighted basis by 25 per cent.-the greatest devaluation, I think, since the second world war.
What frustrates the public looking at the major parties is the fact that although we are all agreed on the dimensions of the problem, the present Government are simply not prepared to face up to them. The Chancellor of the Exchequer, not just the Chief Secretary, acknowledged that cuts would have to be deeper and tougher than those under the Thatcher Government. I said that some weeks ago and the Chief Secretary appears to have repeated it. The only person who has difficulty repeating it is the Childrens Secretary, but it is a fact, not an opinion, that we are going to have to get into some extremely serious spending cuts. Whoever is elected will have to make those cuts.
If by chance we were to re-elect a Government who did not have a credible plan and who did not have the political will to face up to the problem-if the present Government were re-elected, they would not do so-the process would have to be introduced by the International Monetary Fund. As happened before, we would have conditions imposed on us to restore our solvency in the
eyes of the bond markets. That is the background against which the Government are not treating the House or the country properly and against which the Government have failed to produce a Budget that could be rationally debated as an approach to the crisis on the eve of an election.
Mr. Sheerman: The right hon. and learned Gentleman is known for his honesty, and I have known him for a very long time. He is talking about what the British public should know as we come to a general election. The truth is that both sides realise that there must be cuts, but would it not be suicidal for our economy if we started to cut public investment before private investment had recovered? That is the truth that the public know, and we should tell them.
Mr. Clarke: No. This is the delay argument. We are supposed to be having a debate about whether we should start to act straight away or whether some economic virtue will allow the Government to go on without making any serious adjustments beyond the election and before recovery comes. I do not accept that. It is arguable, but it seems to me quite obvious that the reason why the Government are arguing for delay is that they have decided to fight the election on a rosy and complacent perspective, so the Chancellor of the Exchequer has been instructed not to address the long-term problem in the Budget. We have all seen the Prime Minister being persuaded only with great difficulty and very belatedly to recognise the need for any public spending cuts at all. It is a political tactic, not economic calculation, that is causing the delay.
The Prime Minister is particularly fond of speaking as though the increased spending and increased borrowing from 2010 to 2011 is some sort of contrived fiscal stimulus or a plan. It is not a plan; it is the fag-end years of the Government in whom there has been no proper control of public spending, leading to a mismatch, now reaching £4 of spending for £3 of revenue, which is piling up the deficit. Yet that is described as a fiscal stimulus. We have no policy in place or in operation to stimulate the economy-apart from a scrappage scheme for boilers, which is not going to lift our economy very far. All that we have is a purely political refusal to face up to answering the questions before the election takes place.
On efficiency savings, there are two elements to consider. Of course we must all make efficiency savings-those on both sides of the Chamber talk about them-and the public are extremely aware of the need to cut wasteful spending. We addressed the national insurance increase and identified areas where we were confident that we could avoid that particular tax increase- [Interruption.] It is no good saying, "Come on, Ken."
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