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Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): Does the right hon. Gentleman accept, however, that although the Chancellor's remarks may be seized upon and used for great merriment or other purposes, the truth of the matter is that during the years of the Thatcher curse we were not cutting away fat or meat; we were sawing at bones? Given that there has been a fourfold increase in vital services since Labour came to power, does the right hon. Gentleman accept that however deep the cuts, they will never match the damage done by the cuts under Thatcher?
Mr. Salmond: I advise the hon. Gentleman to look again at the projections in the Red Book, because if they are followed through they will wipe out all the expenditure and public spending gains in the previous 13 years. Although I do not want just to reiterate this single quote from the Chancellor, which will hang around Labour's neck in the coming campaign like an albatross, please let us remember that the Chancellor did not only say that the cuts would be "deeper"; he also said that they would be "tougher", by which he presumably meant he was going to cut deeply where no one had cut before.
That is the wrong approach. Among the G20 nations, only Argentina and the UK stand apart in choosing to provide no further fiscal stimulus. That might have been justifiable if the rate of recovery had exceeded the Chancellor's predictions, but that is not the case. The Red Book revised the growth forecast for coming years downwards, not upwards, yet despite that the fiscal response remains roughly as it was in the 2008 pre-Budget report.
With the honourable exception of the previous two speakers from the Labour Benches, especially the right hon. Member for Oldham, West and Royton, our debate has centred on how deeply the cuts in public spending must slice and how quickly they must happen. Therefore, it is right and proper that a different approach is suggested. I believe that the best way forward is to grow the economy out of recession for the very reasons the right hon. Gentleman spelled out: growth in the economy is the single greatest determinant of closing a budget deficit, just as a reduction-a loss of capacity in the economy, such as the 6 per cent. we have lost over the past two years-is the dominating and overwhelming reason for the £167 billion public sector deficit. The fiscal stimulus is not the cause of this record borrowing, therefore. The stimulus we have had over the last year is one of the reasons why the borrowing has not been even greater and why the economy has not gone totally off a cliff over the last 12 months. Therefore, it is all the more puzzling that the Red Book does not contain a stimulus for this year.
In the introduction to today's debate we were treated to a discussion of economic history from the shadow Business Secretary and the Schools Secretary. I was reminded that Denis Healey said that Margaret Thatcher had given us "sado-monetarism", but, of course, Joe Stiglitz has called the stance of this Government "fiscal fetishism" whereby
"cutting back means the economy goes into a downturn and the markets lose even more confidence, triggering another recession or depression."
We should learn the lessons of other countries' experiences. In the 1990s, the Japanese Government's debt was 65 per cent. of GDP. Following a prolonged economic downturn and slowdown, they withdrew fiscal support too soon, and that debt is now approaching 200 per cent. of GDP.
There is a strong case for a directed capital acceleration or fiscal stimulus this coming year to do the very thing to which the right hon. Member for Oldham, West and Royton drew our attention: getting the economy moving into a growth cycle, which would have more effect than anything else in reducing the budget deficit. We cannot cut our way out of a recession, but we could cut our way into a double-dip recession. Yet the Red Book proposes no further fiscal stimulus, so that is precisely what those on the Treasury Bench are proposing.
These are difficult times for public finances and it is proper that we identify not only general efficiency savings, as the other parties have done, but projects that could be cut altogether and rendered null and void, thus saving the country billions of pounds. I am thinking of the £100 billion over the next generation that is proposed to be spent on Trident missiles. The right hon. Member for Maidstone and The Weald (Miss Widdecombe), who is leaving the House, said that one of her great delights during her time in this place was seeing both parties move to support the Trident missile. Let me forecast that both Labour and the Tories will have to move in the opposite direction over the next few years, because the missile system is now not only totally unjustifiable and immoral, but totally unaffordable under any sensible projection of the UK's finances.
As we ditch the Trident system, so let us ditch the remnants of the identity cards system, the underground repository for nuclear waste and, as the climax of this identifiable cuts agenda, which contrasts with the vagueness of the efficiency savings proposed by the Government and the Opposition, we could abolish an entire Government Department in the form of the Scotland Office in Dover house. That would save only £10 million, but I am sure that when the Conservative party looks into its innermost soul it will acknowledge that it has always wanted to abolish an entire Department and will see the sense and logic of getting rid of the Scotland Office, which has managed to overrun its budget by 15 per cent. over the past year. That has been done under the nose of the Chief Secretary to the Treasury.
I have enjoyed and relished this Chamber for all of my 23 years here. The rest of the Palace of Westminster I can take or leave, but this is a fantastic Chamber and a fantastic place for debate to be joined. It has a great atmosphere and at its best it is second only to the Scottish parliamentary Chamber, which looks better on telly. None the less, this is a fine place to have enjoyed debating. I have met and clashed with a number of formidable debaters and speakers from both sides of the House, and I have enjoyed every minute of doing that. I wish well the individual Members-if not necessarily their parties. However, I should say that what has happened over the past 23 years has strengthened my absolute conviction that the case for our having full determination over Scotland's finances and resources has never been more urgent and has never required to be better made than it is now.
Mr. Deputy Speaker: May I remind the House that there is now a 12-minute limit on Back-Bench speeches?
8.3 pm
Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op):
It is an interesting experience following the right hon. Member for Banff and Buchan (Mr. Salmond),
who is known for his rapier wit. I shall resist the almost irresistible temptation to joust with him this evening, because I would not want to have to make a round condemnation of nationalism in any form. I, of course, wish him well in his future role in the Scottish Parliament. It would not have been my personal choice to have a Parliament in Scotland. Birmingham and its surroundings has a larger population than Scotland in any case, so if there is to be a Parliament in Scotland, there should, thus, certainly be a Parliament in the west midlands-but I think that we should resist that temptation too.
I welcome this Budget, not because I think it is scintillating or that it will transform people's lives but because this 14th Labour Budget was smart. It picked up on a little of the Belize debate, by bringing about a new tax regime. It was also smart in its use of changes in stamp duty. The Budget was sensible, because the windfalls afforded to us by lower unemployment than was expected and by the bigger take from the banking bonuses have been used to reassure the international markets, rather than to have a spending spree just before a general election. I believe that that is understood by the British public and will be appreciated.
The Budget is also well crafted. After almost every Labour Budget the Conservative press have done their best to disaggregate it, to take it apart and to ensure that nobody can feel that we have had a good Budget. We have had 14 very good Budgets, but this one was particularly well crafted and it has been extremely difficult to take it apart in the usual manner. Those 14 Budgets have meant cumulative benefits to my constituents which I do not think would have accrued from a continuation of Conservative policies. Pensioner credits, child credits, heating allowances, and Sure Start and children's centres make an extraordinary difference to the quality of life of people in my constituency, as does the minimum wage.
I do not think that the minimum wage is a substitute for vigorous trade union action. There can never be a better guarantee of good working conditions paid for at a proper rate than vigorous, strong and well supported trade unions. The minimum wage is a simple mechanism that, in the absence of strong trade unions, has produced a sensible outcome for people who were being paid a miserable pittance, of whom there were many in my constituency. I am thinking, in particular, of younger people in that regard. Younger people in my constituency were being paid as little as a pound an hour for working in a petrol station, and if there were any deficiencies at the end of the evening, they were expected to make those up. The minimum wage has been a very helpful development for my constituents.
Waiting times have reduced dramatically in the health service. We have four times as many consultants in my local hospital as there were previously. We also have the health teams to back them up: the nurses; the technicians; the maintenance workers on the estate; and the hotel service workers who deal with laundry, the food and the cleaning services, which are so vital to us. The massive improvements in waiting times have made such a difference to so many people. I pay tribute to the hon. Member for South Staffordshire (Sir Patrick Cormack), who gave an excellent speech, and I appreciate the support that he has given to the hospital that Wolverhampton shares with his constituency. This Government have done a
terrific job in improving the quality of people's health, in ensuring better budgetary control, on the quality of treatment and, above all, on providing people with very much better service through these improved waiting times.
On education, considerable increases have, again, been made in staffing and we have brought new technology into classrooms. We said, "Education, education, education", but just as importantly the then Prime Minister promised that every child would have access to a computer. Who believed that that would happen? Now, every school that one visits has been re-equipped and equipped again with the latest technology to assist pupils in learning. That has been a tremendous achievement.
My disappointment, which I cannot cover up, is that we have spent far too much time on structures, new missions, reorganisations and this idea of choice-it is a myth really. I am sorry to say that until there is a 10 to 15 per cent. surplus of places, the idea of parental choice is nonsense. I wish that Labour Front Benchers had recognised right from the start that the Labour mantra "Every school a good school" was the right one for socialists to pursue. Despite the great increase in expenditure, which was most welcome, and other wonderful achievements, the obsession with form, content and reorganisation has been a missed opportunity.
On council housing, Labour has a great record on refurbishment, but why have we not been building? Why, in Wolverhampton, do we have as big a waiting list for council houses as we had in the 1970s when we were trying, and succeeding, to build council houses? If the health service is Labour's greatest legacy to date, the greatest legacy that we could produce for public health is the provision of well-maintained council housing for people who need it.
I want to discuss manufacturing, which is at the heart of my constituency. Throughout the post-war years, almost 70 per cent. of the people in my constituency were involved in manufacturing either directly or indirectly, but that percentage has fallen dramatically. From the '80s onwards, there were terrific job losses, which continued through later years. But modernisation has come, and productivity has been massively increased by the efforts of workers and managers pulling together to ensure that the best technology is available and that there is investment. Perhaps other hon. Members will, like me, recall visiting factories in their constituency where they would be likely to see a machine that had been pulled off the sea bed after the first world war, which some poor sod-excuse me, Mr. Deputy Speaker-had to operate. Now, old engineers like me can barely understand the technology that is being used to improve productivity in our factories.
I welcome the approach that we have taken to boost apprenticeships, which are the lifeblood of engineering and our prosperity. I pay tribute to the aerospace industry in my constituency for continuing to take on apprentices through all the bad years. Goodrich-formerly known as Lucas, and as Hobsons before that-has continued to take boys and girls into apprenticeships year on year, and that is paying off. It is doing extremely well and is taking on more people. We must grasp the new opportunities that improvements in manufacturing can bring in international markets, but such opportunities must be tempered by the recognition that all trade from now on must be fair trade that recognises the rights of workers here and internationally. It must be ethical.
The mention of ethics makes me recall my friend and fellow socialist Robin Cook, whose tragic death has left a lacuna at the heart of Labour politics. He is sorely missed. He was my friend for 20 years, and I still miss him now, and I believe that the House also misses him. He was a great parliamentarian. He was the Leader of the House and the Foreign Secretary, but he will be remembered for his brave and intelligent attempts to bring reform. He warned us what would happen in relation to freedom of information, and we ignored what he said to our present-day cost.
It remains for me to say something about this Parliament-the tribune of the people. Again, I agree with my colleague the hon. Member for South Staffordshire. This is the tribune of the people, but the fourth estate continues to criticise, undermine and damage, almost certainly at the expense of the vitality of our democracy, and we find ourselves in positions that we have to defend when we should be getting on with the business here. A free and vigorous press is a necessary, but insufficient, part of our democracy. Above all, it needs to become rhetoric-light and hyperbole-light. It should try to produce reports that reflect the reality, rather than producing some of the diabolical reporting that we have had the misfortune of seeing.
As I leave this place, I thank the many people here who have treated me with kindness and fairness. The staff have been terrific. I thank the people of Wolverhampton who elected me four times, even though they once failed to do so, which was a terrible thing to do, and I thank the Labour party for choosing me to stand for it. Most of all, I thank my wife, without whose support and love I could not have done what I have done. This year, we celebrate 50 years of marriage. I leave this place a happy man.
8.15 pm
Mr. Tim Boswell (Daventry) (Con): First, may I congratulate the hon. Member for Wolverhampton, North-East (Mr. Purchase)? I have always found him to be an authentic and tremendous voice for the manufacturing industry-a great tribute and honour to the House. In making my own concluding remarks, I also want to mention my great affection and respect for my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack) and my right hon. Friend the Member for Maidstone and The Weald (Miss Widdecombe), who made distinguished contributions, as did the leader of the Scottish Nationalists here, the right hon. Member for Banff and Buchan (Mr. Salmond).
This has been a rather good debate, which has been enjoyable to listen to. There is not much time left, but I must say that I am struck by the way in which a career can cycle around and come back to where it was. In July 1966, I joined the Conservative research department as a very young economist. The day after, one G. Brown, Her Majesty's Secretary of State for Economic Affairs, had confided in the House, and I paraphrase, "We are running the economy in a way that no economy has ever been run before." Now, one could find that another G. Brown and his Chancellor are running the economy in very much the same way as the first G. Brown did 44 years ago.
At some time, we all have to get around to clearing out our offices, and I am doing that. Today, I came across the transcript of the Committee stage of the
Bank of England Act 1998, which my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) has also mentioned. In that Committee, we discussed the independence of the Bank of England and the restructuring of the regulatory system. On 4 December 1997, I moved a series of amendments that were intended to test the strength and integrity of the Government's tripartite financial regulatory system, and we were told that it was all down to a memorandum of understanding. All I will say now-with hindsight, I readily admit-is that things went wrong not just in Britain, but internationally, and beyond our worst fears. They have triggered a massive recession and have paved the way for what I would describe as a hiatus of a Budget, because everyone is too frightened to move, at least on the Government side. They have left us all in the waiting room. We are waiting for some very unpleasant fiscal surgery, further particulars of which will be afforded at a later stage.
On the balance of judgment, I have found it interesting that the voices from the left-we heard two together-and from the Scottish Nationalists have gone for the public spending solution. I do not believe that is plausible, but we have to find a balance, and I do not want my position to be caricatured at this late stage as saying that we want a kind of fiscal masochism of any kind. We need to tune things very carefully, but we need to bring the private sector with us, but the fear of further tax increases is the best way of killing any recovery.
Let me make two brief points that are more or less tax-related, and then three wider points. I regret that the Government have done nothing to abort the proposals to increase national insurance contributions or to reverse their proposals to truncate the personal allowances and superannuation deductions for higher earners. In that alone, they have aggravated a problem that has long troubled me, because they have imposed further arbitrary fits and starts in what should be a reasonably progressive-I hope moderately progressive-tax system.
Just as there are ridiculous marginal rates with benefit withdrawals, we now have in the tax system-wilfully-hurdles, dips and troughs. Spikes of marginal rate that are highly anomalous create deterrence. That is perhaps best seen, and most relevantly to the Budget, in the classic slab system that still applies to stamp duty. How many transactions for houses are done at £250,001, or at £1,000,001? The answer is very few, and that of course creates marginal rates on the order of thousands of per cent., because it is all or nothing when one goes over the limit.
The second anomaly has to do with national insurance contributions. They have been built up by the Government as a second and politically more palatable form of income tax, but there are again major anomalies. For instance, one arises when a man reaches 65: I have worked out that the grossed-up value of no longer having to pay employee national contributions is almost as great as the value of the pension. We need to tackle such anomalies if we are to provide rational, coherent and consistent incentives for people to stay on in the labour force. Given the possible abolition of the default retirement age, such an approach might even give employers some incentive to maintain people in employment after that age.
I shall share my wider concerns briefly with the House. They may appear a bit diverse, but I think that there is a common underlying theme. My first concern
is that we still say too little about effective productivity and competitiveness. That has been a bit depressing today, yet we are in a lethally competitive world. Alongside British car firms, Volvo has just gone to a Chinese buyer. On the financial side, it is interesting to note that the City of London Corporation commissioned an Asian consultancy to produce reports on global financial centres. The seventh and final report has just been published, and the research has been described as being
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