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Let me say a few words about fairness. We need to protect not just the poorest but those in lower-paid jobs,
who all too often are the group targeted whenever money needs to be raised. In that regard, raising the income tax threshold, thereby taking 880,000 people out of income tax, is a fantastic measure from the Liberal Democrat manifesto-but one that all Conservatives, I think, are happy to support. I also welcome the one-year council tax freeze. My own Conservative-controlled local authority will take advantage of it, and we hope that the Treasury Front-Bench team will find the money to extend it for a second year, as promised in the Conservative manifesto. On being progressive, I draw Members' attention to chart A2 on page 67 of the Red Book, which shows that the overall effect of the package of measures announced by the Chancellor is progressive.
Finally, I would like to make a moral point, above and beyond the economic arguments I have tried to advance. Over the past few years, we in this country have been living beyond our means. The current generation is imposing a burden on our children and grandchildren. Above and beyond the economic arguments that will take place on the Floor of the House about that, it is morally objectionable to saddle our children in this way with debts they will spend their entire working lives trying to pay off. Although the measures the Chancellor has announced are tough, he told the truth and struck the right balance. There is a stark contrast between that and the Labour party's complete lack of recognition of the problem, its lack of responsibility and its failure to apologise.
6.9 pm
Jesse Norman (Hereford and South Herefordshire) (Con): I congratulate those who made their maiden speeches today.
I welcome the Budget. It was extraordinarily wide-ranging, fair and far-sighted, and I particularly welcome its measures to support small and medium-sized enterprises and to raise the tax threshold for the very poorest in our society. I cannot discuss this without mentioning the glorious success of the repeal of the cider tax, which will be of enormous value and very welcome to my constituents in Hereford. If I were to add a small codicil to that, it would be a call for us to look, in the next Budget or the comprehensive spending review, at rebalancing duty in the beer and cider industries from the off-trade to the on-trade, so as to create more supervised and responsible drinking by young people.
I share the view that it is astonishing that just four Labour Back Benchers should be present for a Budget debate, but the person whom we really miss is the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). He should be held to account in this House, and he should apologise. Instead, I think that he is sitting in his cave like Ben Gunn in "Treasure Island", composing his memoirs and dreaming of a triumphant return while the world moves on. All over the country, the owners of bargain bookshops are looking forward hungrily to his next volume filling up the remainder bins.
We can guess the theme already-that the right hon. Gentleman and his party were right all along, but I draw the House's attention to an interesting asymmetry. When the British economy was supposedly riding high, the reason was said to be the far-sighted economic
management of the Government. Now it is struggling, it is supposed to be entirely due to forces outside the previous Government's control.
However, the facts tell a different story. We can see that by looking at how the UK was before the crash in 2007-08. Let us not forget that 1997 to 2007 was what the Governor of the Bank of England called the NICE decade-a non-inflationary time of consistent expansion. It was the period when worldwide monetary conditions were extremely favourable, with low interest rates and headline inflation in the major industrial countries generally at post-war lows. That was how the UK economy looked in 1997, as a result of the extraordinary economic inheritance that the last Government received.
Even then, however, economic growth was never as good as the previous Government claimed. Our GDP growth per capita in the period until 2007 was barely better than that of the eurozone countries, which were themselves held back by German unification. It was far worse than in similarly open and mature OECD countries. Australia, Canada, the US and New Zealand-every one of them grew faster over the period 1992 to 2007 than did the UK, and their growth was not concentrated in the period 1992 to 1997, but in the latter decade.
We have all made much of the fact that the former Prime Minister claimed to have abolished boom and bust, but the fact is that he presided over four booms-in Government spending, immigration, house price inflation, and personal debt.
The first of those booms was the massive ramp-up in public spending after 2001, which was financed by a huge counter-cyclical increase in Government debt. In other words, the previous Government were able to run a budget deficit of 3% at a time when the economy was supposedly growing at 3%. If that was how that Government handled the boom time, is it any wonder that we are in such a hole today?
The second boom was in immigration, with as many as 1 million immigrants from Poland coming over in the period 1997 to 2007. They added to GDP, pushed up demand and kept a lid on wage inflation.
The third boom was in house price inflation, with a massive ramping up of house prices and the diversion of personal savings into housing, pushing the savings rate down from 8% in the 1990s to 1.1% in 2007 and clobbering savings as a result.
The final boom was in personal debt, which totalled nearly £1.5 trillion before the crash. In 2007, personal debt for the first time in our history was higher than the country's entire annual economic output, and 80% of that debt was secured on private property. Is it any wonder that the crash, when it came, was so disastrous?
We have noticed that the Opposition have made great claims that this Government do not have a growth strategy-language that is code for an unwillingness on our part to waste public money as the previous Government did. The Opposition's claims are untrue, however. Exercising control over debt and public spending will have a positive effect on growth, in and of itself, as will the proposed reforms to education, local government and transport policy. Of course, there is more to do to flesh out those policies over the next few months.
Matthew Hancock (West Suffolk) (Con):
Is my hon. Friend aware that since the announcements in the Budget today, the interest rates charged on medium-term
Government debt have already fallen, which adds to a fall that we have seen since the election of a coalition Government who are prepared to deal with our debts?
Jesse Norman: I have been in the Chamber since then, but I thank my hon. Friend very much for that intervention, which brings home the credibility and respect that the Government are already earning in the international capital markets.
The deepest truth is that for all their talk, the previous Government never properly addressed the fundamental drivers of economic growth. Far from it being the case that this Government lack a growth strategy, the previous Government's strategy over the past 13 years was not sufficient to ensure decent economic growth. The four booms that I have described washed through the economy, leaving us without a world-class infrastructure or adequate broadband coverage, but with a legacy of educational underachievement, low productivity and low innovation-nothing like the energy, competitiveness and entrepreneurship that we need.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab): The hon. Gentleman refers to four booms, the first of which was in public investment. Does he think that the public investment that my local authority made-investment that saw new hospitals built, along with 45 new primary schools and 17 new high schools, and which was funded by the Labour Government-was wrong, when Members from his party were supporting it at the time?
Jesse Norman: I absolutely accept that a lot of that public investment was very well taken and important. I would not demur from that at all, but there is a huge difference between building buildings and building schools. It is noticeable that levels of educational achievement have not kept pace with the staggering amount of money that was spent under the previous Government. If we had paid more attention to institutions and standards, we would now have a higher quality educational sector.
The cancelled comprehensive spending review was not a thing of great honour or glory for the previous Government. It is noticeable that the Office for Budget Responsibility has downgraded its long-term growth forecasts for this country from the trend rates that we have supposedly enjoyed historically over the past 20 years. That is to say that, instead of the growth rates we should have expected-rates of 2.25%, 2.5% or perhaps even 2.75%-we are now expecting a long-term growth rate of 2.1%. That is the tangible quantification of the lack of success of the investment over the past 13 years, so let us hear no more of Labour's growth strategy, and let us welcome this Government's willingness-already recognised in the capital markets-to take this massive task in hand.
6.18 pm
Pauline Latham (Mid Derbyshire) (Con):
I would like to pass on my congratulations to my right hon. Friend the Chancellor on his prudent emergency Budget, which was so necessary, given the appalling legacy left by Labour. There is one point in particular that I would like to draw to his attention today, although it is about something that will not come into effect until next year, after the proposed rise in VAT. I refer to the listed places of worship grant scheme, which was mentioned in questions earlier and which is due to finish in March
2011. The grant currently enables all listed places of worship across the UK to claim back 100% of VAT incurred on repairs and maintenance.
The scheme is crucial to those places of worship that already require enormous sums for maintenance and repair, of which there are many in my constituency. Since the grant's introduction in 2001, it has enabled those who look after valuable heritage and community buildings to maintain them for future generations and to ensure that they remain available for use by the whole community. Nationally, £110 million is spent every year on the upkeep of those buildings, and 66% of that sum has to be found by local congregations, the remainder being met by English Heritage's and the Heritage Lottery Fund's joint repair grant scheme for places of worship.
Across the country, more people do unpaid work for Church organisations than for any other organisation. Every month collectively, Church of England churchgoers contribute 23.2 million hours of voluntary service to their local communities. At the same time, Church of England congregations give more than £51.7 million each year to other charities, in addition to the large sums raised for local church work.
More than half a million worshippers subscribe to tax-efficient giving schemes. If the listed places of worship grant scheme is not renewed beyond 2011, congregations will have to find an additional 20% of the total cost of repair works, and the impact on them will be huge. That, coupled with the ending of the transitional rate of gift aid for all charities in 2011, means that next year, churches, chapels and other places of worship will effectively face a major financial double whammy.
Many listed cathedrals and churches already have significant maintenance and development programmes, which will begin once they have raised the money. These programmes tend to be quick start and are labour intensive. Often specialist trades are employed. For example, a £100,000 project in a parish church can produce eight or nine jobs for six to 12 months; a cathedral project of, say, £500,000 produces correspondingly more. In terms of job creation in the hard-pressed building industry, one construction job can maintain or sustain up to eight in support services and suppliers, many of which are the small businesses that the Chancellor wishes to help.
That means that, in terms of job creation, repair programmes are much cheaper, quicker, less bureaucratic and simpler than any Government scheme. In other words, the assistance given by the listed places of worship grant scheme is quick and effective, low cost for the employment result and represents extraordinary value for money for those local communities that benefit from the tourist boost and the civil engagement that churches provide.
I know that the Chancellor and his colleagues have had to make very hard choices this year, but I urge him to consider continuing the scheme after March 2011.
6.21 pm
Mr Dominic Raab (Esher and Walton) (Con): This is a crossroads Budget; it sets not just the terms of the next fiscal year, but the policy direction that will determine Britain's economic competitiveness in the years that lie ahead.
The debt crisis was exacerbated, not created, by the banking crisis. The epic challenge we face today is the result of reckless state spending from 1997. In 1999, the OECD calculated that the British state was spending 38% of the nation's wealth measured by gross domestic product. By 2008, before the crisis and the banking bail-out, it was 48%-an unprecedented rise of 10%. By 2009, as we all know, the state was eating up over 51% of national income. On these OECD figures, the British state spends more than Portugal, Spain and Greece, let alone Germany, and 10% more of our nation's wealth than in the United States, Canada or Australia.
We have witnessed a seismic shift in the balance of our economy, which has blunted our economic competitiveness. On the World Economic Forum international rankings for economic competitiveness, Britain was fourth in 1998; today we are 13th. UK tax competitiveness has dropped from 11th lowest in the world to 23rd. According to The Economist rankings, the business environment in Britain has plummeted on its international rankings from seventh to 19th place.
For 13 long years, we were told that all that state spending was really investment, so amidst the shrill cry and synthetic outrage from the Opposition, let us remember precisely what their so-called investments really delivered. Britain has fallen on The Economist innovation rankings, we issue fewer patents, and the productivity gap still haunts the British economy, mainly because of the grotesque underlying inefficiencies in the public sector. In 2002, our roads were the 23rd most crowded in the world; today, they are the 17th most crowded, and our car-to-road ratio is up by 23%. Rail usage is up 17% since 2006, but we have almost 1,000 km less track.
Perhaps the greatest failure has been on Labour's own terms. Despite unprecedented spending on schools, UK students, measured at 15, have tumbled down the OECD PISA-programme for international student assessment-rankings: from eighth to 24th in maths, from seventh to 17th in literacy, and by a similar measure in science. If social mobility remains an issue in Britain today, as Alan Milburn's report stated last year, that reflects those basic failings in policy, not spending.
The nail in the coffin of the previous Government's legacy must be this year's finding by the National Equality Panel that, after their 13 years in power, inequality has just become worse. Their experiment failed, the spending spree is over, and now, in this Budget, Britain must face up to the reality of the mess that the previous Government left behind.
The OECD has predicted that this will be the last year in which developed countries account for more than half global output. The international competition has well and truly arrived, yet Europe lags well behind the United States in terms of levels of economic growth, and is ill equipped to rise to the challenge presented by new competition from Asia and Latin America.
David Wright (Telford) (Lab): The hon. Gentleman mentioned the expansion of public spending over the past 13 years. One of the things that public spending does during a recession is blunt-a word that he used-the worst impacts of that recession. Can he cite three projects that he would have cut to provide an economic stimulus at the worst point of the recession?
Mr Raab: I will not mention three specific projects now, although it would be very easy to do a trawl and find far more than three. The previous Government spent billions on quangos, public relations, management and marketing. The basic point, however, is that for far too long the nation has failed to cut its coat according to its cloth, and that must end.
Unless we tackle the legacy of debt that we have been bequeathed by the Labour party, we shall be threatened with high interest rates and even higher taxes, which will mean fewer jobs and fewer opportunities for the next generation. Nor will we reach our economic potential, or keep up with our competitors during the mid-term, unless the weight of taxation and regulation comes down. We must never forget that the economic engine that drives wealth also generates the revenue to pay for our vital public services. This is not a zero-sum game.
While we must act out of necessity, we must also act out of fairness. We should bear in mind that 100% of the contraction in GDP during the recession fell on the private sector. None fell on the public sector, which continued to expand. That is unfair. Median salaries in the public sector are 12% higher than those in the private sector, yet private sector employees work 23% longer hours. That is unfair. In the 11 years up to 2008, the proportion of pensionless employees in the public sector dropped to 16%, while in the private sector it rose to 63%. That too is unfair, and it must change.
This Budget marks the first opportunity for us to change the reckless course of the past 13 years. I commend the Chancellor on his structural reforms, the creation of the Office for Budget Responsibility and the strengthened mandate for the Bank of England, and I welcome his resolve in tackling the deficit. Of course, he is right to cut out the reckless waste in the forthcoming spending review: the billions spent on Government PR and marketing, and the bloated quangocracy. However, I also welcome his resolve in making the tougher decisions today which no one relishes, but the necessity of which must now be beyond doubt. He is right to freeze pay in the public sector and review the structure of pensions. He is right to scale down welfare entitlements that we cannot afford, and which have fuelled a dependency culture that traps too many in a rut that leads nowhere.
Cutting the deficit, however, is only half the answer; we also need a pro-growth Budget. I therefore welcome the cuts in corporation tax and small business rates, and the abolition of national insurance for new jobs created by start-up companies. At last small businesses in this country have a Government who are on their side, not on their backs.
I regret that the legacy of the previous Government has forced us into certain unpalatable choices such as increasing VAT and capital gains tax, and I hope that those measures can be short-lived. Given the global competition, when we protect spending it must be to strengthen our infrastructure or to boost productivity, so I accept that it is right to spare capital spending from further cuts. We must also protect those who are in the greatest need-the most vulnerable. It is absolutely right to lift the lowest paid out of income tax altogether, and to protect public sector workers on salaries of £21,000 or less. The days of tax and spend for the sake of social engineering are, however, well and truly over. The economic costs are too high, the social gains a mirage. So I commend the Chancellor and his team on
their first Budget. They must steel themselves with resolve for the long road ahead. Our future economic competitiveness depends upon that.
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