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Mr. Michael Meacher (Oldham, West and Royton) (Lab):
This has been an evening of memorable valedictory speeches, so I do not think we should let this moment pass without paying tribute to two Members-the hon. Member for South Staffordshire (Sir Patrick Cormack)
and the right hon. Member for Maidstone and The Weald (Miss Widdecombe)-who are leaving. However often and however much I have disagreed with them, I have always regarded them both as great parliamentarians who have spoken with sincerity and integrity and, as illustrated here again tonight, with a sense of values and principles in which they passionately believe. I believe that they have set an example to all of us. I also agree with what they both said about the need for a new Parliament after the election that is very different from this quarrelsome and vituperative one that we have had-one that can earn the respect of the electorate because we represent the democratic centrality of Parliament. I think that both those Members will be greatly missed.
I will be brief-I will probably not use my 15 minutes-and I want to concentrate on the general structure and strategy of the Budget. I begin by congratulating my right hon. Friend the Chancellor on, once again, showing how adept he is at playing a difficult hand well. He has navigated a sensitive balance between preventing a double-dip recession, not endangering the recovery, keeping the financial markets on side and at least beginning to reverse some of the more grotesque inequalities that, in my view, so badly mar the face of Britain today.
Having said that, I remain concerned about the proposed strategy for reducing the deficit, particularly the relative weight allotted to higher taxes, public spending cuts and higher economic growth in achieving that objective. The Treasury has proposed tax increases of £19 billion and public spending cuts of £38 billion. If the deficit of £167 billion is to be halved within four years-reducing it to £83 billion-that must mean economic growth yielding something in the order of £26 billion.
I think that the first of those objectives on tax is readily achievable. At last it is being accepted that the burden of tax should rest much more on the shoulders of those who have made disproportionately huge gains in the last decade or two, not least on the shoulders of those responsible for the slump in the first place. The 50 per cent. top tax rate, the bonus tax on bankers, the loss of personal allowances, the freezing of inheritance thresholds and the mansion stamp duty tax will not have any effect on roughly 95 per cent. of the population. In fact, they will very largely be directed at the super-rich 1 per cent.
Frankly, I think it absurd for the Tory press to scream as they have over this last week that this is an attack on hard-working middle and high earners. Who do they think middle Britain actually are? The medium income in Britain today is £22,000, while one third of the population subsists on less than £15,000 a year-a fact that we in this Chamber ought never to forget. The term "middle Britain" roughly applies to those earning between £15,000 and £30,000 a year, whereas the Budget increases will affect hardly anyone earning less than £70,000 a year. This is not spite; it is, at last, the beginnings of a switch back to some semblance of fairness. For that, I praise my right hon. Friend the Chancellor.
Mr. Hayes: I am an admirer of the right hon. Gentleman and I share some of his views about the redistribution of advantages in society. Nevertheless, freezing tax thresholds and increasing national insurance could not by any measure be described as the most progressive ways of enforcing tax increases in line with his ambitions.
Mr. Meacher: I was referring to the tax increases in this Budget, whereas the hon. Gentleman is referring to the increase in insurance, which was signalled by the Chancellor in the previous Budget. I agree, of course, that that applies across the board. My point is that most of the additions in this Budget are concentrated, with a degree of equity that we have not seen before, on those who can afford to pay for them.
As I was about to say, my only concern is why the Chancellor did not go further. Why are the 50 per cent. tax rate and the bankers' bonus taxes just a temporary one-off? Why are they not being made permanent? Why not take the cap off national insurance and make the well-off pay exactly the same proportion as the rest of the population? Why not end the loophole whereby City insiders redefine their income as capital gains so that they pay merely 18 per cent. capital gains tax rather than 40 per cent. income tax, which has made the City of London a virtual tax haven? Taking the lead from the Prime Minister, why do we not bring in a highly popular Robin Hood transaction tax on the banks, as other countries have done, without waiting for an international consensus? Yes, it would be better with such a consensus, but it can certainly be done effectively without it. If all those eminently reasonable proposals were pursued, the balance between tax increases for those who can well afford them and public expenditure cuts that hurt everyone else and begin to undermine the very core of our society could be substantially redressed.
One of the paradoxes-it has already come out in our debate-is that all three parties seem to be saying, with varying degrees of panache, that the coming round of spending cuts will be more swingeing than under Margaret Thatcher. Some parties say it with relish-the Tories will always grab at a chance to shrink the state-but the Labour party is very different in that respect. It might regard the cuts as a necessary pain to be endured, but if that is the party's view I would question it on two grounds.
First, if the Government are anywhere near accurate in their growth forecasts-1 to 1.5 per cent. this year; and 3 to 3.5 per cent. in the succeeding two years-the need for massive destabilising cuts is hugely reduced. If the Government are right in their predictions for the two years 2011 and 2012, gross national product will increase by about £100 billion, of which the Government's take would be roughly £40 billion. That alone would go a long way towards closing the deficit, thus significantly reducing the need for spending cuts.
I would be the first to express the doubt-other hon. Members might have the same view-that Government forecasts might well be unduly optimistic, but even if growth were only 2 per cent. a year, which I think is eminently plausible for those two years in a recovery, Government revenues would still increase by nearly £30 billion, which would make for a major shrinking of the deficit, greatly reducing the need for highly damaging cuts.
"We will not go back to the interventionism of the past, but nor can we return to the hands-off approach of the free-marketeers."-[ Official Report, 24 March 2010; Vol. 508, c. 261.]
Of course no one wants a reversion to overall state planning, but the idea that the private sector is, or
should be, exclusively the engine of growth, or that it is the sole or main generator of efficiency, is a Thatcherite canard that should be dispensed with rapidly, because there is simply no evidence to justify it.
It cannot be asserted too often or too strongly that the present recession was caused by the dramatic collapse of private investment before the autumn of 2008. Between the preceding year and the succeeding year, there was a cataclysmic collapse in private investment amounting to, I believe, more than 35 per cent. That was hugely aggravated by the reckless excesses-again-of private banking, and the consequences of those excesses. I must tell Ministers that we have as yet been given no commitment, or even a hint, of the establishment of a committee of inquiry or royal commission to look into the causes of what happened and recommend ways of preventing it from happening again, which I believe is urgently needed.
What I think is called for now is a partnership-I am not referring to interventionism-between the public and private sectors, in which at times of deep recession the public sector would take the lead. Private investment will not improve until the prospects of profitability improve substantially. Merely titillating the private sector with a range of tingling but rather small incentives-which is what the Budget does, because my right hon. Friend's room for manoeuvre was extremely small-will not generate the necessary scale of recovery within anything like the time scale that is required for a Government to deal with the still very high level of unemployment. Let us never forget that 2.5 million people remain jobless.
Mr. Hayes: I am grateful to the right hon. Gentleman. It is arguable that, as he is asserting, in an ordinary economic cycle with consequent ordinary economic conditions, a case could be made for increased public borrowing to offset private saving, but this is not an ordinary saving. The deficit is structural, not cyclical, to an unprecedented degree. I therefore suggest that the right hon. Gentleman's argument does not hold water, although he and I may have a romantic affection for it.
Mr. Meacher: Of course I take the hon. Gentleman's point. There is a significant structural deficit as well as the cyclical deficit. Whichever form of deficit we are considering, however, what the market wants is not the cutting of the deficit per se, but the prospect of the economy's being pushed strongly towards a course of growth that will reduce the deficit more quickly and more effectively than any other measure.
I think that the role of the public sector is important in that context, especially given the depth of the recession. I do not say this to be aggravating, but it is factually clear that the private sector will never be prepared to make the first move without the support of-indeed, a strong, vigorous lead from-the public sector. I believe that the one serious omission from the Budget is the omission of any systematic action by Government to promote public sector jobs programmes in certain sectors. The decline in house building has been greater than any in the last 80 years-1.8 million households, 12,000 of them in my constituency, are stranded on the waiting list-and there has also been a decline in infrastructure
improvement. We are talking not about "make work" jobs, but about jobs that are desperately needed in our society at present. I believe that there is broad agreement on the need to drive forward the new green, digital economy. That must be done if we are to reduce unemployment by 1 million in two years, thus swinging the economy out of budget-dependent joblessness into job-providing growth yielding higher revenues for the Treasury in the form of income tax, national insurance and VAT.
Let me give credit where it is due: the Government have moved a considerable distance from the market triumphalism of the last three decades. Sadly, however, they are still stuck in Thatcher market mode, in which it is considered only appropriate for the private sector to take the lead. That is an absurd economic prejudice and, in my view, a serious mistake which this Government, once re-elected, should rapidly correct-thus giving a much better grounding to what could otherwise be described as a Budget that has been skilfully balanced in unprecedentedly difficult circumstances.
Mr. Alex Salmond (Banff and Buchan) (SNP): It is a pleasure to follow the right hon. Member for Oldham, West and Royton (Mr. Meacher). As he probably knows, I would always have voted for him in internal Labour party elections if only I had had a vote in those contests. I agree with much of what he said, and I shall return to it shortly.
I have been taking part in Budget debates in this Chamber for 23 years. I know that that is a mere smidgen of time compared with the hon. Member for South Staffordshire (Sir Patrick Cormack), but it is a fair spell none the less. I warmly congratulate the Chancellor of the Exchequer, not on the direction of his Budget and still less on its content but certainly on its timing. He is one of the few Chancellors in recent times-over those 23 years-who have resisted the temptation to hold Budgets in the middle of the Cheltenham National Hunt festival. For that, and that alone, I am profoundly grateful, together with many other people in the country, and in that spirit of generosity I warmly congratulate him.
I said that I had participated in 23 Budget debates, but that is not entirely true. During the first, I was unfortunately and, of course, entirely unjustly suspended from the Chamber by a narrow vote of 354 to 19. It was, obviously, a close-run thing. Any of the 354 who are present now-certainly the hon. Member for South Staffordshire-will recognise the error of their ways. Checking the record today, however, I noted that one of the 19 was the Minister for Children, Young People and Families, the right hon. Member for Bristol, South (Dawn Primarolo). I do not forget these things. Let me assure the right hon. Lady that if-perish the thought-the Portillo effect were to overcome her in the coming election, a warm ministerial welcome would await her north of the border. However, I am sure that no such unfortunate circumstance will befall her in the coming campaign.
The Chief Secretary to the Treasury was unfortunate to miss the start of the debate today. Had he been present, he would have been treated to a fascinating vignette featuring the Secretary of State for Children, Schools and Families-the next Chancellor but one-and
the right hon. and learned Member for Rushcliffe (Mr. Clarke), the shadow Business Secretary, who were discussing whether the cuts proposed by the Government would indeed be deeper and tougher than those made by Margaret Thatcher. I do not think there is much doubt about the Chancellor's view. I have consulted Nick Robinson's Newslog, which has clearly overtaken Hansard as the main record of such matters. Last Thursday's edition reads as follows:
"I asked Alistair Darling to spell out how tough spending cuts could be:
Robinson: 'The Treasury's own figures suggest deeper, tougher than Thatcher's-do you accept that?'
Darling: 'They will be deeper and tougher'."
As far as the Chancellor was concerned, that seemed to be a pretty direct answer to a direct question, but as far as the Secretary of State was concerned earlier in today's debate, that was not the position as he understood it-initially, I thought, just for his Department, but it then emerged that, as he understood it, it was not the position for the entire Government. We went through a range of possible explanations, one of which was incredible. The Schools Secretary actually suggested that Margaret Thatcher had not been engaged in cutting education funding in real terms. I think he should tell Baron Hattersley, who on 12 July 1988 said that the then Prime Minister was planning "massive cuts" in education spending. Clearly, however, the passing of time has altered the Schools Secretary's memory of such occasions. Perhaps he was not advising Baron Hattersley at that particular time.
Mr. Salmond: Although I concede it may not be the likeliest circumstance to arise from the campaign and election, with balanced Parliaments a possibility, perhaps the hon. Member for Dundee, East (Stewart Hosie) will be taking up that role-or I understand that it might be the sainted presence on the Liberal Benches, the hon. Member for Twickenham (Dr. Cable). Unfortunately, it will not be my old friend the hon. Member for Thurrock (Andrew Mackinlay) since he, tragically in my view, has decided to forsake the House just when it needs him most to step in to that role. Any of these people, however, would be infinitely preferable to Tweedledum or Tweedledee, whom we might well get.
Enough of this frippery, however; let us move on to the substance-if I can find it-of the Budget. When Members make their final speech in the House, it is traditional for them to refer back to their maiden speech-after all, it often contains the best lines we ever deliver here. In my maiden speech, I said-and I meant it-that my constituency of Banff and Buchan has
"robust characters who work with their hands and get their faces dirty. They are involved in producing, making and catching things. They are people engaged in the manufacturing and primary sectors who are the real creators of wealth. If Government policy was orientated more to the primary and manufacturing sectors of industry, rather than to the rentier economy produced by the
Conservative party, the long-term health and welfare of this country would be better served."-[ Official Report, 29 June 1987; Vol. 118, c. 321.]
I believed that then and I believe it now, and I am astonished that the process over recent years has managed to make the rentier economy of Thatcher's Britain of the 1980s look like small beer, because it is clear that this Prime Minister, who once claimed to have abolished boom and bust, had pinned the foundations of that in a totally unsustainable fashion, and now we have landed in the largest bust since the great depression.
When I was elected as a Member of Parliament back in 1987, the public sector's net worth-the value of public assets minus liabilities-stood at 74 per cent. of national income. By 1997, it had fallen to 15 per cent., and if we are to believe the forecasts in the Red Book-I should stress that "if"-in 2014-15 it will reach minus 5 per cent., which is the lowest level since records began. I suppose that boom and bust was abolished, therefore: certainly the boom bit has been abolished, and we have been left with the bust.
What I cannot understand in this process is that in the equivalent debate last year, when I suggested that the detail of the Red Book would, indeed, show that there would be greater cuts than those of Margaret Thatcher in the early 1980s, there was a huge amount of irritation from those on the Labour Benches. Now, however, the Chancellor-if not the Schools Secretary-admits that, and when the Chief Secretary appeared on "Question Time" last Thursday night with me, he immediately confirmed the Chancellor's view when that direct question was put to him. This is a serious situation.
I argued in the debate 12 months ago that until there is enough strength in the private sector, it is vital that fiscal stimulus is maintained. I am not alone in arguing that case. It is not only the right hon. Member for Oldham, West and Royton who agrees, but so too does the International Monetary Fund. We can both quote it in our favour, although that is not something we have done regularly over the years. None the less, the IMF argues that
"one of the key lessons from experiences of similar crises is that a premature withdrawal of policy stimulus can be very costly, particularly if the financial system is weak."
"risk driving our economy back into recession."
"To start cutting now risks derailing the recovery".-[ Official Report, 24 March 2010; Vol. 508, c. 235.]
Therefore, just as I looked at the Red Book last year and identified a trend of public spending cuts greater than that of Margaret Thatcher in the early 1980s, chart 2.5 of this year's Red Book clearly shows that the UK's fiscal stance for 2010-11 is negative. Discretionary fiscal policy will act to tighten public spending and taxation relative to 2009-10. One analyst states that
"despite all the warnings about withdrawal"
"support too early, the fiscal stance is being tightened in 2010/11 by 1.1 per cent. of GDP."
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