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The Prime Minister:
My hon. Friend makes an excellent point. In the Budget yesterday, my right hon. Friend the Chancellor announced unity between the French, the Germans and the British on introducing a bank levy. The one group of people who are isolated, and who say that we have to wait for the rest of the world before we
can ask our banks to make a proper contribution, are the Opposition. Once again, they have no proposals to fill the enormous black hole that the Government are getting to grips with.
Mrs Anne McGuire (Stirling) (Lab): The Office for National Statistics reported that while the richest 10% spent £1 in every £25 of their income on VAT, the poorest 10% spent £1 in every £7 of their income on VAT. How, then, can the Prime Minister justify his oft-repeated refrain that we are all in this together?
The Prime Minister: What I would say to the right hon. Lady-it is an important point and the Red Book sets it out-is that the richest 10% will pay in cash terms 15 times as much in VAT as the poorest 10%. The important point to take into account and look at is the Budget as a whole. In the Budget as a whole, we can see that the richest pay the most both in cash terms and as a percentage of their income. What we have done, by massively increasing child tax credits, is to ensure that there is no increase in child poverty. What a contrast that is with the figures since 2004. The Labour party put up child poverty by 100,000. That is the difference.
Speaker's Statement
12.31 pm
Mr Speaker: Under the Order of the House of 15 June, I will now announce the determination of the party make-up of the Backbench Business Committee, which will be elected on Tuesday 29 June. Four members shall come from the Conservative party, two members shall come from the Labour party, one member shall come from the Liberal Democrat party. These proportions- [ Interruption. ] Order. These proportions reflect the proportions of parties in the House. It follows, of course, that nominations may be received only in respect of members of those parties.
Points of Order
12.32 pm
Ian Lucas (Wrexham) (Lab): On a point of order, Mr Speaker. Is it in order to describe Members as dupes- [ Interruption. ]
Mr Speaker: Order. The hon. Member for Cardiff West (Kevin Brennan) is in danger of becoming over-excitable, and I know that he would not want to be. Let me respond to the point of order from the hon. Member for Wrexham (Ian Lucas). What he has raised is not a point of order-
Chris Bryant (Rhondda) (Lab): Yes it is.
Mr Speaker: Order. I require no help from the hon. Gentleman. It is not a point of order; it is a matter of taste, and we will have to leave it there.
Kevin Brennan (Cardiff West) (Lab): Further to that point of order, Mr Speaker. In the light of your ruling, could we rename the session that we have just had, "Prime Minister's Tantrums"? Is it not more accurate to describe the Liberal Democrats, rather than Opposition Back Benchers, as dupes?
Mr Speaker: There is nothing disorderly about the remark that the hon. Gentleman has just made, but unfortunately his attempted point of order suffered from the disadvantage of not being a point of order. However, he has made his point very clearly, and it is on the record. I have a hunch that he knew that before he got up to speak.
Pete Wishart (Perth and North Perthshire) (SNP): On a point of order, Mr Speaker. Given your statement on the Backbench Business Committee, does that mean, therefore, that we in the smaller parties are excluded from it? In a Committee that is designed to increase accountability and democracy in the House, how can that be right?
Mr Speaker: I am grateful to the hon. Gentleman for his point of order, and I recognise that he and other Members will be dissatisfied with the situation. However, what I want simply to say to him is twofold: first, the Committee is being constituted in accordance with party strength in the House; and, secondly, we are operating in accordance with the Standing Orders of the House by doing it that way. Not to proceed in that way would require us to revisit Standing Orders. Now, whether we should do so or not is a matter for the House to decide, but I am stating the factual position to the hon. Gentleman and for the benefit of the House.
John Robertson (Glasgow North West) (Lab): On a point of order, Mr Speaker. I wonder whether I could have your guidance on how Back Benchers in the Opposition parties with only two Members on the Committee can get a fair hearing when there are five Members from the Government Benches.
Mr Speaker:
The operation of the Committee is a matter for Members on the Committee and for its Chair. I am sure that the hon. Gentleman has every
confidence in the capacity of his colleagues to discharge their responsibilities on the Committee, and I am sure that he would not have wanted to suggest otherwise.
Mr Nigel Dodds (Belfast North) (DUP): Further to the point of order asked by the hon. Member for Perth and North Perthshire (Pete Wishart), Mr Speaker. Referencing your previous admonition to the House about what the public think outside, as opposed to Members inside, is it not ridiculous, and will it not seem so to the public and to the people we represent in the smaller parties, that we are excluded, by whatever device, from the Backbench Business Committee, and from other Committees in this House as well? Would you, Sir, be open to a consideration of how we may meet to discuss how the smaller parties can be properly represented in such Committees in this House?
Mr Speaker: I understand the hon. Gentleman's point, and I understand his frustration, but I have already ruled on this. The House can always look at these matters. I would gently say to him that it would be unwise for the Chair to speculate on the ridiculous.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): Further to that point of order, Mr Speaker. Could you tell me, and the House, why some Back-Bench Members are more equal than others in respect of membership of the Committee?
Mr Speaker: I am a little concerned that the hon. Gentleman is trying to continue the debate. I cannot believe, knowing his normal regard for order, that he would do that, but I have a worrying hunch that he might be making a first attempt. He has made his point, and I think that we will leave it there.
Ways and Means
Budget Resolutions and Economic Situation
Capital Gains Tax (Rates)
Debate resumed (Order, 22 June).
That provision may be made in relation to the rates at which capital gains tax is charged.
Mr Speaker: Before the shadow Chancellor rises, may I appeal to hon. Members who are leaving the Chamber to do so quickly and quietly so that we can hear him? I call Mr Alistair Darling.
12.36 pm
Mr Alistair Darling (Edinburgh South West) (Lab): I welcome the opportunity to open the second day's debate on the Budget. There are two tests to be applied to this Budget. The first is what it does to ensure that we can secure the recovery and get long-term sustainable growth, and therefore support jobs. The second is what it does in respect of fairness and, in that context, what it says about the promises made by the parties that now comprise the Government.
I expect that over the next few days many points of detail will be explored, but I want to look at some of the bigger issues, especially the context against which this Budget needs to be judged. Before I do that, I welcome the Secretary of State for Business, Innovation and Skills to his place. I have not had an opportunity to cross swords with him in this Parliament, and I look forward to doing that and to hearing what his views are now as opposed to what they were a mere seven or eight weeks ago.
I want to start with the context in which the new Government made their decisions on this week's Budget. Yes, that context has to be the need for us to reduce our borrowing-no one disputes that, although there are very live and real arguments about how fast and the extent to which the deficit ought to be reduced. However, I believe that it must also be seen in the context of growth. For some, like the Business Secretary, what I have to say will not be news because, after all, he largely agreed with the approach that I took during a lot of the last Parliament. However, he seems to have become rather more forgetful in the past few weeks, so a reminder may be useful.
On 28 April, which the right hon. Gentleman may now regard as being ancient history, but for most of us does not seem that far away, he said:
"The deficit problem is easier to solve if there is growth. That is why the next government has to recognise the fragility of the economy and not take action which would precipitate a double dip recession leading to more unemployment and even bigger budget deficits."
I agree with the sentiments behind his statement. He was right on 28 April, and my guess is that he will still be right on 28 June, but I cannot understand why he has changed his mind in the intervening period. Growth is slightly stronger than before the general election, because at that time we thought that it was just 0.3% in the last quarter. However, although it has improved, it can, on
no view, be said to be anything other than pretty modest and pretty fragile. I believe that the measures announced in the Budget yesterday present a risk of derailing that recovery, and worse, of giving rise to a situation in which our economy simply bumps along the bottom for a number of years. In that way, we would not get the growth that we need, and we therefore would not get the jobs. Worse still, of course, we would not have the funds to reduce our deficit and, therefore, our debt.
The past three years have been tough for businesses and families throughout our country and, indeed, many are still experiencing the problems that arose because of the recession. However, as I said, we have seen a return to growth, but it is only 0.3% in quarter one; unemployment has stabilised and begun to fall; and tax receipts are higher than expected, which is why our borrowing is £11 billion less than I forecast in March. All those improvements are a direct result of the action that the previous Labour Government took.
Throughout this debate and for some time to come, doubtless we will hear the now familiar mantra that everything that is wrong and all our problems are confined to one country alone-ours-and that they are due solely to the actions of the previous Government. Like any Government, we got some things right and some things wrong, but I am absolutely certain that the action we took to stop this country tipping from recession into depression was right, as was the action we had to take to stabilise the banking system. I will not yield to anyone who says we should have done differently. We needed to stabilise the economy and to keep people in their jobs and homes. We took that action because we do not believe that in such a situation people should be left to sink or swim. Those actions were taken largely with the support of the Liberal Democrats when they were in opposition, but everything has changed in the past seven weeks.
John Thurso (Caithness, Sutherland and Easter Ross) (LD) rose-
Mr Darling: I will give way to someone who is perhaps an unreconstructed member of the Liberal Democrats, especially one who represents a constituency in the north of Scotland that may be the subject of change because of his leader's determination to reduce the number of constituencies, particularly in his neck of the woods.
John Thurso: I am grateful to the right hon. Gentleman for those kind words, but I suspect I would be out of order if I responded.
May I bring the right hon. Gentleman back to the point he was making and remind him that when the Northern Rock crisis hit, my right hon. Friend the Business Secretary immediately proposed that nationalisation was the correct way forward, and that the Government whom the right hon. Gentleman represented prevaricated for six months before taking that action?
Mr Darling:
The hon. Gentleman raises an interesting point. He is right that the right hon. Gentleman called for nationalisation at an early stage. The current Chancellor, however, was dead against that. I imagine that if that situation arose now, the Chancellor's view would prevail
and the Business Secretary would have to do what he is told. The hon. Gentleman is absolutely right that at the time I agreed with a lot of what the Business Secretary was saying. For reasons that I will not go into just now because of the various legal requirements and other considerations, we did not nationalise Northern Rock until February 2008, but we were absolutely right to do so then. The Chancellor still thinks that we were wrong, but I am glad to say that the current Secretary of State for Justice believes that our action was right. The action we took, whether in relation to Northern Rock, the rest of the banking system or the rest of the economy, was critical.
Ms Karen Buck (Westminster North) (Lab): While we are reflecting on recent history-the Chancellor yesterday spoke of the levels of debt prior to the economic crisis and blamed a long history of alleged Labour overspending -will my right hon. Friend speculate on why the Conservatives supported the Labour Government's spending plans right up to the end of 2008?
Mr Darling: The Conservatives did so because they thought it expedient, but at the end of 2008, they decided to change tack. In all we heard yesterday, the Chancellor did not explain why, if everything was going wrong and we were spending too much in the previous few years, he was quite happy to support such spending right up until the end of 2008.
Mr David Evennett (Bexleyheath and Crayford) (Con): I am listening with great interest to the right hon. Gentleman's exposition of what the last Labour Government did. However, if everything is so good, why is our economic and financial position so much worse than those of our competitors after his tenure as Chancellor of the Exchequer?
Mr Darling: It is largely because we have a very large financial sector that contributed about 25% of all our corporation tax receipts. When the banking crisis hit, those receipts fell. There is something in the argument that has been advanced on both sides of the House in recent years-although, perhaps in retrospect, sadly not as much as it might have been over the past 30 years -that our economy has become dependent on the financial services sector, particularly on tax receipts. I think we would all like to see that rebalanced. Of course, there is a big question about how we do that, and I cannot for the life of me see how cancelling the help to Sheffield Forgemasters, for example, will go anywhere towards helping that rebalancing. However, I shall come on to that in just a moment.
At the moment, our recovery is fragile. What makes matters worse is that the position in our main export market, Europe, is extremely worrying. I am far less optimistic than I was in March about what is likely to happen in the European Union economies over the next year. Growth in France has fallen back; in Germany, it is pretty flat-just positive; other countries have tipped into recession; and Spain has unemployment over 20% and other well-understood problems. On top of that, whereas the predominant view certainly until the beginning of this year was that we had to support our economies to ensure that we established growth, the Chancellor is right that he can pray in aid the change of view among
some of his counterparts, such as in Germany, which is now pursuing policies to reduce the deficit that will impact on demand, not just in that country but within other parts of Europe as well. Germany is our major trading partner. If demand there is suppressed, and if taking large sums of money out of our economy here has the effect I suspect it will have, the result will be reduced demand, which will affect business confidence, its propensity to invest and, therefore, our ability to grow and generate the receipts we need to get our borrowing down. That is a real concern.
There is no doubt that, over the past few months, the balance in the approach has moved away from what one might characterise as the Keynesian towards the more orthodox. I, for one, think that that is a profound mistake.
Huw Irranca-Davies (Ogmore) (Lab): Does my right hon. Friend share my worry about the much-cited examples of the quite savage cuts agendas in Canada, Sweden and elsewhere? They were done against the backdrop of growing export markets, monetary policy and currency devaluations. His analysis of what is happening in the eurozone at the moment should fill us with caution, if not dread, because if the Chancellor's judgment is wrong, this country is going to hell in a handcart.
Mr Darling: My hon. Friend's point about Canada is an important one. Yes, Canada reduced its deficit quite dramatically. As a result of that country's provincial set-up, a lot of the action was taken by the provincial governments rather than the national Government. It was taken, however, an the back of a growing US economy. Given the relative size of the Canadian economy compared with the US economy-it is much smaller than the Californian economy alone, for example-there is no doubt that the Canadians could do things on the back of their next-door neighbour's rising prosperity. Our problem is that our next-door neighbours, the EU, are not in the same position at all-indeed, quite the reverse. Equally, when Sweden was going through a similar exercise, it was helped by the fact that the economy of much of Europe was growing at the time.
Sajid Javid (Bromsgrove) (Con): Does the right hon. Gentleman agree that he should also consider the example of Spain, of which I am sure he is more than aware, when talking about our EU neighbours? Despite having a lower debt-to-GDP ratio than us and a lower budget deficit, it is on the verge of a sovereign debt crisis. Its banks have been frozen out of the borrowing markets for the past three weeks, and it has reportedly held emergency meetings with the International Monetary Fund, the EU and others to try to arrange a bail-out package. Does that not make what we had to do yesterday even more critical?
Mr Darling: There is another difference, of course. Official unemployment in Spain is more than 20%. The Spanish construction industry is in dire straits. A lot of Spain's smaller banks, which are heavily tied to that industry, are finding things difficult. There is a world of difference between the Spanish economy and our own, just as there is a world of difference between the Greek economy and our own.
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