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The Government have admitted that public sector debt will increase until 2014-15. Under the Fiscal Responsibility Act 2010, the net debt is required to fall
as a share of GDP by 2015-16, but many think that there is little hope of that happening. It will be a long climb out of recession, and it is unlikely that we will have cleared public sector debt by 2030. It is clear that the nation-and, in particular, its small and medium-sized businesses-will face continued difficulty, and will suffer as a result of this Budget and the Government's actions up to this stage.
The Chancellor has claimed that Budget pledges will help small businesses, but they tell me that that is not the case. Among the measures that will not help them are the national insurance increases involving a 1 per cent. increase for all employers and a 1 per cent. increase for everyone earning more than £20,000. Those increases represent a massive belt to the confidence of industry at a time when it needs all the confidence it can get. The Federation of Small Businesses tells us that they will cost 57,000 jobs. The Treasury's own economic model suggests that national insurance rises will reduce GDP by 1 per cent. after three years. The Forum of Private Business has said that these measures are not helpful for job creation, and suggested that a 12-month cut in national insurance contributions would encourage small businesses and allow them to hire extra staff. I hope that those on the Government Front Bench are listening because, by golly, if there is one thing we need to do at this moment it is to produce wealth and create the jobs that are vital to the future well-being of this country.
I want to touch briefly on the increase in alcohol duty. Many will know that I am a keen supporter of pubs; I enjoy them immensely. However, 2,377 pubs have closed in the past year, thanks to falling beer sales, and seven are going out of business every day. Let us also look at the increase in fuel duty. The Road Haulage Association has claimed that hauliers are already operating on a shoestring budget, and that they desperately need a break. Some have already gone bust and many others are struggling to survive. When VAT decreased to 15 per cent. in January 2009, an extra 2p a litre was levied on fuel, but that was not changed when VAT returned to 17.5 per cent. in January 2010. People feel let down. They feel they were conned, as this has impacted massively on their businesses.
Many businesses have told me they are worried about the lack of measures to tackle the underlying problems. The Institute of Directors would have liked to hear more about the deficit reduction. Miles Templeman said:
"The Chancellor's GDP forecasts are too optimistic and there is still no sign of a credible deficit reduction".
Businesses wanted to hear that; they wanted to hear what the Government were going to do. They felt let down, and we talked about lack of hope because they did not know where they stood. The CBI remains of the view that the Government's target date of 2017-18 for Budget balance is
"too far off to instil the credibility necessary to ensure the UK's public finance position".
I could go on about the plight of small businesses. They are the largest employer in Britain, and if Britain is to recover, small businesses need to be encouraged to grow. They are the life-blood of the nation's creativity: almost 70 per cent. of British creativity comes from this sector. The sector was in the process of producing 2 million jobs up to the recession, at a time when UK plc was shedding 1.5 million jobs. Small businesses are
the powerhouse of jobs growth, and the Government need to recognise the importance of encouraging that particular sector to flourish. My party has pledged to do away with a sizeable part of the planned increase in national insurance because it will help that particular sector to do exactly what it does best: grow jobs, be creative, produce wealth.
My party has also pledged to cut corporation tax for small businesses and will not tax the first 10 jobs in any new company. That is welcomed by them, too, but the national insurance rise that I just mentioned is bad for job creation. It does not encourage people to get back to work. We should be pushing policies that increase economic growth to get Britain working again. My grandmother would have told anyone that the way to get out of debt is not by spending more money but by recognising that too much money is being spent and doing something about it. This Government have not yet reached that position. Perhaps it is because there is an election coming up; that may well be the truth of the matter.
The people to whom I spoke at the weekend felt that this Government had failed them. They said it was time for new thinking, for a new message, for a new approach. They did not want the same tax and spend and waste that they felt had occurred quite sizeably over recent years. They told me it was time for a new Government made up of people who understood the needs of SMEs. I would tell them that this Budget proves that such a Government would exclude the party that has been responsible for it.
9.23 pm
Mr. John Hayes (South Holland and The Deepings) (Con): I have never been terribly interested in the present because "now" is an illusion, as it instantly becomes "then". I have always been most interested in the past, as it is the thing we can most readily alter through our memory. Unlike Keynes, however, I am interested in the future. Keynes said that in the long run we are all dead. But I say the long run counts. It counts particularly for those of us who have children. I have two young children and I care about what happens to them. I care about the debt they will face-both personally and as part of a country now facing, as my hon. Friend the Member for Northampton, South (Mr. Binley) has just said, a mountain of debt.
By their very nature, Budgets look to the future. They plan the economic future and particularly the next 12 months in economic terms. This was not really a Budget that looked to the long term; it looked no further ahead than about six weeks. It was an immensely short-term Budget and a political Budget-one that took not difficult strategic decisions but convenient tactical decisions, failing to meet the challenges we face.
It is clear from the Budget that the Chancellor and the Prime Minister misunderstood the scale of the recession from the outset. They did not expect it to last longer than those experienced by their economic rivals. As we know, however, it has lasted six full financial quarters, longer than any recession in any other G7 country, and GDP has shrunk by 6.2 per cent. The International Monetary Fund forecasts that Government borrowing as a share of GDP will be the highest in the G20 this year. What is the response from the Government? The
Budget offers no credible path to a stronger economic future; all it offers are more hidden tax rises in the shape of frozen income tax thresholds and increased national insurance, which is a tax on jobs.
The banking crisis and the recession that followed exposed fundamental problems for an economy that has become too dependent on a single sector. Two of the most profound macro-economic changes in my lifetime, both of them undesirable, have been the growth in the power of transnational corporations with no allegiance to any one nation and, indeed, no loyalty beyond their commercial interests, and the dependence of economies-bought by many liberal economists as desirable-on a limited number of economic providers, or sectors. That is what has happened to our financial services and banking. It is impossible to imagine the Government emerging from the present problem, given that they failed to recognise it and were, to an extent, responsible for it.
Perhaps the most tragic outcome of those failed financial policies is the growing army of young people who are not in employment, education or training, and in the few minutes available to me I want to say a word about their plight. They are often presented in a fairly cold way-they are seen as an economic opportunity cost- but we are talking about up to a million young lives. We are talking about broken dreams and shattered hopes. We are talking about people who, because of their disengagement, are likely to be socially and culturally detached, and who, because of the declining number of unskilled jobs, are unlikely to find employment even in the medium and long term. If one's first experience of the job market is one of disappointment and detachment, that may have profound long-term implications.
Even in the good times, the times of economic growth, the number of young people so affected was rising. That was a trend problem, and not a result of the recession. Nevertheless, it has been exacerbated by the recession, and we have a moral duty to do something about it. We have a duty to create new opportunities for those young people, and to provide them with the skills they will need to participate in an economy that will become increasingly highly skilled and high-tech. For Britain has no long-term future as a low-tech economy: we will not return to the days when we made tin-plate metal toys. We will survive and compete only as a high-tech, highly skilled nation. Those young people's opportunities lie in that vision, but no such vision is set out in the Budget. It contains no such ambition for the generation that I have described-that forgotten army of young people.
In the couple of minutes left to me, let me propose an alternative. Let me give the House a taste of a different Britain. Let me allow the Chamber and the country to dare to dream again of something better. It is entirely possible for us to regenerate the prospects of that forgotten army by investing in skills. The House would expect me to say something about skills.
I do not take the Chicago economist's view that all that matters is flexibility in economies or, indeed, in labour markets. I was interested by one or two of the speeches made by members of other parties in that regard. I believe that investment in skills pays dividends beyond the obvious, and that it has a variety of social
and cultural as well as economic effects. I believe that it gives people a sense of pride and purpose, and builds a cohesive society.
We need to boost the number of apprenticeships massively by transferring large amounts of money from the Government's failed Train to Gain programme, with its immense deadweight cost, to the apprenticeship budget. We must do that by designing new apprenticeship frameworks, by making it easier for small companies to participate, and by changing both the prospects of people and our economic prospects. We could have seen that in the Budget, but we did not. We will see it in a Conservative Budget, run by a very difficult Administration who will bring new hope to those people and to the whole of our country.
9.30 pm
Mr. Philip Hammond (Runnymede and Weybridge) (Con): We have heard some excellent speeches this evening. This has also been a poignant debate, with six valedictories. They were delivered by the hon. Members for Wolverhampton, North-East (Mr. Purchase) and for Thurrock (Andrew Mackinlay); by my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack); by my right hon. Friend the Member for Maidstone and The Weald (Miss Widdecombe), whom I had the privilege of serving under when she was shadow Secretary of State for Health; by my hon. Friend the Member for Daventry (Mr. Boswell), who led for the Opposition on the first Standing Committee on which I had the pleasure of serving in this place; and by the right hon. Member for Banff and Buchan (Mr. Salmond), who said, in referring to his own, that a Member's maiden speech is often the best speech that they make in this place. I suspect that that might not be the case for all Members, but it is probably beyond question that it is the best rehearsed speech any Member ever makes in this place. I pay tribute to all of the departing Members, and I am sure that I speak for all of us in wishing them well whatever they do in the future.
The scale of the fiscal and economic challenge this country faces is unprecedented. The backdrop to the Budget is stark: unprecedented levels of public borrowing and structural imbalance in the public finances. Despite the prediction that we would "lead the world" out of recession, Britain was the last G20 country to emerge from a recession that was the longest and deepest on record. We still have the biggest Budget deficit in the G20 and one of the weakest economic recoveries. In February of this year alone, the Labour Government borrowed more than they will spend on police and immigration in the whole year. They are racking up debt at a rate of more than £300,000 a minute-a legacy to our children and our grandchildren that will take them a lifetime to pay off.
Our credit rating is under threat; one in five young people in this country cannot find a job; child poverty is increasing; the banking system cannot finance the recovery in the small and medium-sized business sector; and national income per head is lower in real terms now than it was at the last general election. Therefore, what we needed last Wednesday was a big Budget: a Budget to match the scale of the challenges the country faces; a Budget for recovery; a Budget with the vision and the
toughness to tackle the challenges we face, not duck them. This Budget was Labour's last chance to bid for fiscal credibility, and they blew it.
For the Chancellor personally, it was the last opportunity to secure his legacy, but he chose partisanship over statesmanship. What did he give us? He gave us a Budget whose good news announcement was that we are borrowing "only" £167 billion this year and £163 billion next year; a Budget whose only big ideas-the stamp duty cut for first-time buyers, the green investment bank and new university places-were stolen from the Conservatives; an empty, cynical, pre-election Budget, lacking in energy, lacking in vision, lacking in new ideas to get the economy moving again. It shows no sign of the Government's having grasped the scale of the mess they have got us into.
It is therefore unsurprising that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) said it was "not so much a Budget as a holding statement." A City commentator described it as
"a do-nothing Budget that had shades of Nero about it".
It contains nothing to deal with the legacy of Labour's debt, nothing to put this country back on the path to sustainable prosperity-instead, just more delay, dissembling and ducking of the tough decisions.
Perhaps we should not be too surprised when we look at the track record of this Government and this Prime Minister: the man who ended boom and bust; the man who doubled the tax rate for the poor and destroyed social mobility in this country; the financial genius who sold the nation's gold reserves at a quarter of what they are now worth; the visionary who raided our pension funds and destroyed a pension system that was once the envy of Europe; who has doubled our national debt and set it on course to double again; who has made an art form of deferring the bad news; and who has made every decision since this crisis began on the basis not of what is good for Britain's economy, but of what will conceal the scale of his failure until after a general election. His credibility is destroyed. Just a few months ago, he was still peddling the line, "Labour investment versus Tory cuts", but now his own Chancellor says that the cuts will be deeper and tougher than Margaret Thatcher's.
What did we get from the Chancellor in the Budget statement on his planned spending cuts? We got about 30 seconds in a 58-minute speech, with the real announcement sneaked out later in the afternoon in a series of press releases that were meaningless in their content and bogus in their precision. I am thinking of the £343 million-not £340 million-of savings identified in the Ministry of Justice over the next three years and the £194 million saving to be made in the Department for Environment, Food and Rural Affairs. Those are meaningless and bogus because the Prime Minister has refused to allow his Chancellor to publish a spending review for the next three years. A departmental saving is meaningless if we do not know what the departmental budget is to start with.
Cabinet Ministers, including the Schools Secretary, have been tripping over themselves to claim that they have to cut only x hundred million or y hundred million pounds from their budgets. The truth is that they do not know how much they will have to cut, because they do not know what their budgets will be as the Chancellor
has not told them and he has not told the electorate. He has not told the electorate for a reason, which is that he does not want them to know because he does not want a real debate on spending priorities.
Rob Marris (Wolverhampton, South-West) (Lab): The hon. Gentleman decries the Chancellor for lacking credibility, vision, energy and new ideas, but in the few minutes remaining to him tonight will he set out what the Opposition would do, because that was singularly lacking from the Leader of the Opposition's response to the Budget on Wednesday?
Mr. Hammond: If the hon. Gentleman had been listening, he would have heard plenty about what the Opposition will do. I do not know where he was yesterday, when we spent most of our time telling the world what we plan to do. Ending Labour's tax on jobs is our first mission.
The Chief Secretary to the Treasury, wearing his "I am ever so reasonable" straight face, tells us that the reason why we do not have a comprehensive spending review is because it "does not make sense" to set departmental spending totals when we do not yet know what unemployment will be next year or the year after next. However, he does not mind setting a Budget based on a growth projection for next year and the year after, which nobody outside the four walls of the Treasury, and probably not many people inside them, thinks is a sensible Budget assumption.
What the Government's press releases did was confirm that Labour has identified, on its own estimation, £11 billion of waste. That is waste that it says it can eliminate without affecting front-line services, but that it will not eliminate until some time after 2011-12. Move over post-neoclassical endogenous growth theory, because we now have a new economic theory from the Labour party: Labour's waste-induced growth theory. It appears to state that Government waste is an essential ingredient of economic recovery. Presumably, on the Schools Secretary's logic, higher economic growth-perhaps even the achievement of the Chancellor's 3.25 per cent. target-will require even more waste to be identified, but not eliminated. Let us be clear that Labour's stated plan is to carry on wasting and raising taxes to pay for that waste. Its approach is about taxing jobs in a recovery to pay for Labour waste, which the Government have identified but have not got the wit or the commitment to eliminate.
I lose track of who is allied to whom in the Government, and who is speaking to whom this week, but some hon. Members may remember that just a couple of weeks ago the Chief Secretary said emphatically that there would be no tax increases. He was immediately slapped down by the cardinal archbishop and by the Chancellor, and now we know why. Although we would not have heard most of them in the statement that the Chancellor delivered last Wednesday, the Budget contained plenty of Labour's hallmark stealth taxes. It contained a £2.2 billion hike in income tax through the freezing of thresholds-that is a £48 bill for every taxpayer in the country, which did not even merit a mention in the Chancellor's speech. Indeed, he seems to think it a matter of yawn-inducing indifference that everyone will pay £48 more in tax.
The temporary abolition of stamp duty for first-time buyers, which, incidentally, the Economic Secretary to the Treasury said was not
"an effective use of public money" -[ Official Report, Finance Public Bill Committee, 21 May 2009; c. 108.]
when we proposed it, is being financed by a permanent tax increase on higher value property. That is another sleight of hand. The huge tax hikes on cider drinkers put at risk an industry that employs thousands of people in the west country, and I shall ask my hon. Friends to vote against that ill thought through tax proposal.
Despite the Chancellor's rhetoric about helping small businesses, there are yet more stealth taxes on businesses, including an increase in the small business corporation tax rate. There was an apparent cut in business rate relief, but the small print of the Red Book shows that revenues from business rates will go up by £1 billion, not down. The product of a botched rates revaluation and the deferred hikes from last year will mean soaring bills for many small firms from April 2010. That is literally the last straw for many cash-strapped businesses that are struggling to raise credit. There is also the telephone tax on households and businesses across the land-a tax of £7 a year, including VAT, for every line. What is that for? It is to pay for an objective that we have clearly shown can be delivered without any tax rise.
Just when people might have thought that things could not get any worse, tucked away in a footnote on page 204 is the admission that the Government more than doubled our contribution to the European Union between 2008 and 2010. They have gone to extraordinary lengths today to bring back Tony Blair. Perhaps they would like to bring him here to explain what he meant when he told the House:
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