No, I do not think that was the main problem. The system of regulation that we introduced in 1998 brought together about eight or nine different regulators-self-regulators, as the Conservative party used to be very keen on self-regulation. The problem in relation to the Financial Services Authority, the American regulators and most other regulators was that they simply did not understand the systemic risks that arose in the previous decade or the consequences of the failure of one bank for another. The system in this country was not the problem, but there was undoubtedly
a failure on the part of regulators right across the world, including in our country. The FSA's inquiry into what went wrong in Northern Rock demonstrated that the FSA had spotted problems in Northern Rock in February 2007 but had not taken action. I shall say this in the nicest possible way to the hon. Gentleman: he might want to have a word with one or two of the people who were running Northern Rock-members of his party-who might have had a better look at what they were supposed to have been doing when they were running that bank.
Claire Perry: I thank the shadow Chancellor for giving way. May I say that as a bystander, rather than a participant, in the last Parliament, I was always struck by his excellent manners? As a mother of three children, I am very hot on manners. In particular, when my children make a mess that I have to clear up, I encourage them to say sorry. Would the shadow Chancellor like to apologise to the Government and the people of Britain for the mess he has left for this Government to clean up?
Mr Darling: I am glad that I gave way to the hon. Lady for at least the first part of her intervention. I do not agree with her on the second part, but I should like to address that point now. It is true that our borrowing has risen very substantially-
Mr Darling: I shall not give way. I want to make some progress, because I know that many hon. Members want to make their maiden speeches, and I do not want to be blamed for not allowing them to do so. I might give way before I finish, but not just now.
As I was saying, borrowing has clearly increased, but that has to be put into perspective. Our deficit for this year is broadly similar to that of the US. All other major countries have had the same problem.
We went into the recession with the second-lowest level of debt of any of the G7 countries, but IMF projections for this year show that our debt is lower than that of France, Germany, Italy and Japan. Yes, we have to get our borrowing down and make sure that we start to bear down on debt, and I agree with everyone who says that it is far better to spend money on things other than debt interest. However, it is worth making the point-because it is one that the present Government never do make-that this problem does not affect our country alone. It has affected all countries, and certainly all the developed countries.
It is not a surprise that borrowing and debt went up, because our tax revenues fell dramatically in 2007 and 2008. Our spending on unemployment and social security went up because tax credits were there to help people who lost their jobs. Yes, that was increased expenditure but, if we had cut then, the risk was that we would turn a recession into a depression. That was a cost that I was certainly not willing to contemplate.
We made an active choice to allow borrowing to rise to support the economy. As I said, that policy was supported by the then Conservative Opposition right up until 2008. It was not as though they were saying anything different immediately before that, but I fundamentally disagree with the analysis that the Chancellor made when he was shadow Chancellor. He said:
"Even a modest dose of Keynesian spending"
"a cruise missile aimed at the heart of a recovery."
He said that in 2008, when the banking system and the world economies were close to collapse. That seems to me to be complete nonsense. Of course we will have our arguments about how and at what rate we reduce our deficit, but I simply do not accept the argument that by implication he seems to be advancing-that somehow the previous Government should have been cutting spending just as we were going into a recession. I know of no other Government who were doing that.
Ian Lucas (Wrexham) (Lab): The construction sector is one of the most important barometers of the national economy, and I was privileged to serve as construction Minister. If that spending by Government had not taken place in the last two years, would we not have had a massive increase in the level of unemployment in the construction industry? That would have opened up the horrific prospect of having 3.5 million people unemployed-a level that we reached twice under the Conservative party.
Mr Darling: That is indeed right, and many people in the construction industry say that an already difficult situation would have become much worse if we had not done what we did in 2008-09. Not many Conservatives or Liberals-we must include the two together-now stand up and say, "Actually, in retrospect, we shouldn't have been supporting the construction industry." I rather get the impression that they are telling local industries in their constituencies something entirely different.
Margot James: Will the shadow Chancellor clarify his party's position on our proposed spending reductions? Before the general election, it was my distinct impression that the Labour party was planning public expenditure cuts of up to 25% across some Departments. In my constituency of Stourbridge, we were extremely concerned when the results of a freedom of information request on the NHS in the west midlands revealed plans for significant cuts to doctors, nurses and beds in our area. By anyone's definition, they must be front-line services.
Mr Darling: I agree with that. If the hon. Lady is worried about spending cuts, she is going to have an interesting time over the next few months. I look forward to the exchanges that she has at future Question Times.
Mr Darling: No, I am not going to give way. I want to draw attention to one of the biggest problems that I see in the future. I know that Governments in countries right across the world have to get their borrowing down and reduce their deficits. However, I am particularly worried that, if we do not have some countervailing pressure to support growth and measures to get growth in our economy, we run the risk of having many years of it merely bumping along the bottom, sometimes growing and sometimes not. That will inevitably mean that we will have higher unemployment and that aspirations and sentiment will be affected.
I see that especially in the EU at the present time. The EUROSTAT figures published last Friday went almost unreported in this country, but what is worrying is that we see that Germany's growth in the first quarter of this year was 0.2%. We see France's at 0.1%. We see Greece not surprisingly, back in recession. We know that Spain has unemployment of more than 20%. I am glad that the Chancellor enjoys going to ECOFIN so much, and long may he enjoy that. I am fascinated that the Conservatives now find so much succour in Europe. All I can say to him is that I worry that rather too many finance Ministries, yes want to get their deficit down, but are not concentrating on the structural reforms that are necessary within the EU or on measures to achieve growth in the future. That is a real threat.
It worries me that the present Administration here in the United Kingdom also fall into that camp. It is interesting that in the past six months the Prime Minister has made only one speech on growth. It flickered into life in November just before the CBI conference last year. We do not hear what measures the Government intend to put in place to get the rebalancing of the economy that we want to see-measures to encourage private sector investment to come back. It is not coming back yet in sufficient volume to take the place of the public sector investment that the Chancellor wants to take away. We have to have a clear, strategic look at this to make sure that we can get growth in this country as well as in the EU, which after all is our major export market.
Mr Cash: I do not want to disappoint the shadow Chancellor, but I am much more interested in the reasons why, when he was Chancellor-despite the tissue of self-justification that we have just heard-he was never prepared to refer to the true level of debt. He said that no Conservative raised it, but a number of us raised the true level of debt from 2008 onwards. Does he deny that the true level, according to the Office for National Statistics, is £3.1 trillion and not the amount that he has been describing over the past few months?
When comparing the judgments that we make about what is necessary fiscally, I do not think that bringing on to the main balance sheet PFI, Network Rail and everything else particularly helps. However, if
that is the course of action that he has managed to persuade the Chancellor to take, we will look with great interest at the Budget in a couple of weeks. I just do not think that it is a particularly accurate or informative way of looking at the accounts. I have said that before to the hon. Gentleman.
Robert Halfon: Before the last election, in an interview with the BBC, the right hon. Gentleman said that he believed that the cuts needed to be more savage than anything Mrs. Thatcher had done. Does he still hold to that view?
It is important in the task that confronts the whole country and the Government that we do not get ourselves into a situation of almost competitive austerity, in which Governments and countries become blind to the need to secure growth. There is a substantial risk, as I have said for a long time, that if the Government take action prematurely without considering its consequences as a whole, they will choke off the recovery. We have to get borrowing down, but we also have to get growth and recovery firmly established.
Mr Darling: No, I will not. If we are to maintain jobs and ensure that borrowing does indeed come down, we need to have growth. Policies to achieve that are notable by their absence both in this country and the rest of continental Europe. It is no use Government Members citing what happened in Canada and Sweden. Yes, Canada reduced its structural deficit, but it did so at a time when its next door neighbour, which happened to be the biggest economy in the world, was growing strongly. So the Canadians benefited from a strong US economy. Equally, when Sweden was going through its retrenchment, Europe was starting to grow again. So the comparisons are not entirely appropriate.
We must realise that we need to put in place policies that ensure growth, get our borrowing down and, critically, equip this country to compete in the markets that are going to be opened for it and take advantage of the opportunities that will be here.
As I said during the election campaign and have said since, I believe that the Conservative party remains a risk to the recovery. I believe too that no matter how they dress it up, and how they seek to blame other people, even if they use the Liberal Democrats to cover their true intentions, what they are about is ensuring that they cut exactly the same expenditure as they have always wanted to, and they are using this as an excuse for doing so.
I believe that action does need to be taken, but crucially I believe that we need to ensure that we secure the recovery, and I hope that this Government have got the sense to see that now, before it is too late.
The Chancellor of the Exchequer (Mr George Osborne): I enjoyed what sounded very much to me like a valedictory speech by the shadow Chancellor, going through all the decisions he took and explaining to the House why they were all right. Of course, I paid tribute to him in Treasury questions for the work he did during that period, which was clearly a very stressful one, but it was pretty extraordinary that he did not once accept that he had made a single mistake during those three years-that for all his good manners, he did not once apologise for the fact that he has bequeathed to the incoming Government the worst inheritance that any British Government have faced since the second world war.
I guess that the shadow Chancellor is entitled not to apologise. I would only say this to the people who are standing for the leadership of the Labour party. As far as I can tell from their contest at the moment, they seem to think that they just did not speak enough about immigration and Europe in the campaign. Let me tell him: I have done that campaign and I did not get the medal. Perhaps the leadership contenders will at some point turn their attention to the very serious economic problems that this country faces, and tell us what they would do-what they would cut. The amendment that we are being asked to vote for tonight-tabled by the Leader of the Opposition and the shadow Chancellor-states that we need
"a clear plan to bring down the deficit".
I agree with that; I would happily vote with the shadow Chancellor if he could perhaps tell me exactly what his clear plan to bring down the deficit is because, as far as I could tell, he opposed every single decision that we have taken to try to reduce the deficit.
Mr Ivan Lewis (Bury South) (Lab): In The Sunday Times, the Prime Minister said that the cuts would be unprecedented in their severity and would change Britain. In The Observer, the Deputy Prime Minister said that the cuts would not at all be as serious as in the 1980s and '90s, and would be progressive in nature. Can the Chancellor tell us-which is it?
It was the shadow Chancellor who said-and we were reminded of this-that the cuts would be deeper than anything that Margaret Thatcher had undertaken, and that was the proposal from the Labour party when it was in government. It is unfortunately an economic fact that the budget deficit that this country faces is higher than at any point in our peacetime history, and whoever forms the Government of this country has to deal with that budget deficit and cannot ignore it. Indeed, there is a rather striking fact about the Labour Government's proposals, which they left in their Budget book-the shadow Chancellor has a copy in front of him. There are £50 billion of cuts built into
the Labour Budget produced in March, and not one single pound of those cuts has yet been identified by the Labour party.
David Tredinnick: Many congratulations to my right hon. Friend on taking up his position. Was not one of the greatest weaknesses of the last Government, which the former Chancellor avoided mentioning, the fact that the number of people in non-taxpaying employment rocketed up and the number of those working in productive jobs that produce taxes drifted down?
Mr Osborne: My hon. Friend is right. There was a profound imbalance in the economy. We heard the shadow Chancellor saying, "What are the Government going to do about the unbalanced economy?" He seems to forget that he has been running the economy for the last three years. His Government have actually been in charge for the last 13 years. If there is an unbalanced economy, the people responsible are sitting on the Opposition Benches.
Mr Osborne: I want to make progress, as I know that a lot of people want to make their maiden speeches; I was talked out of my maiden speech on the day I wanted to give it by over-long Front-Bench speeches. However, I want to give way to the hon. Member for Dudley North (Ian Austin), because I want to know where his Friend the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) is.
Ian Austin (Dudley North) (Lab): This morning, we all read the Prime Minister's comments telling us that the cuts would affect every family in the land, and that no one would be exempt from the deep pain that those cuts would cause. Given that we are all in this together, can the Chancellor tell me which public services he and his family rely on, and which they will miss the most?
Mr Osborne: If that is the quality of the intervention by the Labour party as the country faces a very serious economic challenge, it confirms my view that, at the moment, it is not a serious player on the national political stage.
Mr Osborne: I want to make a little progress because a lot of Members on both sides of the House want to make their maiden speeches. I will give way in a little while, perhaps, to Members who stood up.
Of course, the economic situation is the backdrop to the Queen's Speech. Our country is borrowing £156 billion a year. Our national debt has doubled and is set to double again. Those Opposition Members who think that this is some abstract problem should pay heed to the warning noises from the European continent. Countries that cannot live within their means face high interest rates, greater economic shocks and larger debt interest bills.