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I want to talk about four things in particular: the rewriting of the history of the economic situation by the Conservatives and Lib Dems; the dogma that drives
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the Budget; my constituency, and Yorkshire and the Humber; and Labour's approach to dealing with the economic situation in which we find ourselves.

I am worried by the rewriting of the economic history of the recession and the falsification of the cause of the deficit. We know that the Prime Minister is familiar with airbrushing, and his deputy routinely airbrushes away more than 100 years of his party's history when it suits him. The deficit was caused not by big government, but by big greed. Bankers and international speculators are at its root.

In 2006 and 2007, I was fortunate to be the Parliamentary Private Secretary to the then Chief Secretary to the Treasury, my right hon. Friend the Member for East Ham (Stephen Timms), whom I was pleased to see back in the Chamber today. During that time, early work was being carried out on the current 2008 to 2011 public spending period. We had enjoyed a decade of low inflation, steady growth and falling unemployment, and there was no serious deficit problem. At that time, the present Prime Minister and Chancellor used a soundbite about sharing the proceeds of growth. They also said that they wanted to match the Labour Government's spending plans up to 2011, as they kept saying until the end of 2008.

We all realised at that time that the spending round would need to be tighter than the one immediately after the millennium, but the adjustment was not remotely on the scale of the deficit in the public finances that opened up from 2008. The events of the two years that followed came about because of the greed-fuelled banking crisis that tipped the world into the worst recession since the 1930s. It is wrong to airbrush out what happened, to blame the problem on big government, and to be oblivious to the fact that public services are important not just for fighting poverty and inequality, and for providing opportunity, but for an efficient, growing, modern economy. Since the middle of 2007, taxpayers have had to pay to rescue the banking system-and not just in Britain-but now hard-working families and public service workers are being asked to pay again because of the greed of the bankers and the speculators.

The Budget is driven by dogma, not good housekeeping. It cuts too early and too deep, and it will hold back growth, which my party saw as the main engine for cutting the deficit. We know that further cuts will follow, including departmental cuts of up to 25%, but I think that the coalition Government will make further cuts again and again, meaning that we have a spiral of cuts and debt.

When Labour was in office, the Chancellor berated our Government for not mending the roof while the sun was shining, but it now seems that he is up the ladder removing the slates as the storm clouds of a double-dip recession gather on the horizon. In Hull, we need public services and investment. They are important to the local economy. The coalition cuts, however, will harm our quality of life. The Tories said in the past-I think that they still say this-that mass unemployment is a price worth paying. The market zealots on the Government Benches who said for years that they wanted less regulation of the markets and smaller government are now getting their way.

Mr Ellwood: I am sad to hear the hon. Lady advocate a double-dip recession so early in a new Parliament. The public do not want to hear those sorts of words. We
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need to get behind the Government and allow the coalition to do its job. I would like to ask her who was responsible for allowing Bradford & Bingley to give away 125% mortgages? Who was responsible for removing regulations in the banking industry in the late 1990s and thus allowing banks to lend people money in ways that they did not understand and when the payments could not be afforded?

Diana R. Johnson: I remind the hon. Gentleman that Conservative Members vociferously argued in the House year after year that there should be less regulation of the financial markets. They criticised the Labour Chancellor and Government for the regulations that they introduced. The hon. Gentleman has a rather selective memory of his party's position in the late 1990s.

I fear that Yorkshire and the Humber will bear the brunt of the majority of cuts that come out of the Budget. I am pleased that my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) is in the Chamber. She has been a powerful advocate for her city of Sheffield and wanted to ensure that the sensible arrangements that the Labour Government put in place for Sheffield Forgemasters went ahead. It is shocking that the coalition Government have refused to continue the process. Sheffield Members are making a strong case for the assistance, so it is a shame that the Deputy Prime Minister is out of step with his city colleagues.

Angela Smith: Will my hon. Friend comment on the fact that the investment offered by the previous Government was covered by an equity stake from Westinghouse, one of the world's largest nuclear industry companies? Given that that stake reduced the financial risk to the Government, the earlier comments made by the Secretary of State for Business, Innovation and Skills were entirely incorrect.

Diana R. Johnson: I am sure that that is absolutely right. I must give credit to our civil service. Civil servants advise Ministers and respect the decisions that they make, but the civil service would have been clear if it thought that the assistance should not go ahead because public money would not be protected as fully as it should be.

I was surprised by the vague way in which the Business Secretary talked about the opportunities that his Department will make available in the regions. He cited just two examples: an incentive on national insurance contributions for small businesses and a proposed fund to be distributed in the regions. There were no details of the fund, however, and it is unsatisfactory that businesses and enterprises in Yorkshire and the Humber have to wait to find out what money might be available to them. That is not good government.

I am sorry that the Business Secretary is not in his place, but perhaps I will get some answers to my questions. First, in view of the cuts to Yorkshire Forward, the regional development agency, and the demise of Hull Forward, and given that the Liberal Democrat-controlled council in Hull does not have a great record on regeneration and moving quickly and effectively, how will we be able to promote investment in my city, which still needs public investment to go in, year on year?

Secondly, what will happen to opportunities for those not in education, employment or training with the end of the future jobs fund and cuts to university places?
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I have the great pleasure of the university of Hull being slap-bang in the middle of my constituency. I am worried about local youngsters in particular not being able to access their local university.

How will the region's construction sector fare, with council house building schemes being cancelled, road schemes threatened and questions still to be answered about flood defence and protection work? Despite the promised good news on port ratings, will the Humber actually get the investment that the Labour Government had identified for the Hull port area and the use of the site for wind turbine manufacturing? That is under review by the coalition, which is worrying, because it might well put off businesses coming to Hull. With the Typhoon fighter project's future uncertain, what will happen to the skilled jobs at BAE Systems at Brough?

I see other hon. Members from the Yorkshire and the Humber region in the Chamber. What about the reduction or elimination of the Humber bridge tolls, which we were so close to achieving under the previous Government? Those are all questions that will affect the economic viability of Yorkshire and the Humber, and I want some answers.

Andrew Percy (Brigg and Goole) (Con): I was previously a councillor in the hon. Lady's constituency, so I consider her a friend. I was interested to hear that we were close to eliminating the bridge tolls. Exactly where had the money for that been identified? Will she confirm that the study started by the previous Government is continuing? To give the impression that nothing is happening on the Humber bridge tolls is not fair. I would very much like an answer to my first question, because some of us think that the previous Government started to talk about the Humber bridge simply because an election was coming.

Diana R. Johnson: The hon. Gentleman does a disservice to the fact that long before the general election, there was cross-party working by hon. Members on both sides of the House to make the economic case for reducing the Humber bridge tolls. He will know that the then Transport Minister, my right hon. Friend the Member for Tooting (Sadiq Khan), had decided not to allow the increase in the tolls and a review was being conducted of whether the toll could be reduced to £1. All I was doing was questioning what was going to happen, and I would be grateful if the coalition partners threw some light on the subject. I am sure that all hon. Members are keen to get a satisfactory resolution to that ongoing problem.

I have a few comments to make about what Labour would have done, had we secured a majority at the election. It is clear-the shadow Chancellor made it clear-that of course we need to get the deficit down. Before the election we had legislated to say that we would halve the deficit within four years, and in the Departments work was being done to identify where reductions could be made. I was in the Department for Children, Schools and Families, so I know that areas had been clearly identified, and my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson) told me that clearly identified savings had been put together in the Home Office. It is wrong to say that the Labour Government had not started work; however, we made it clear that we had to wait until the growth in the economy was secure.

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A key issue that the coalition Government have to grapple with is the fact that just making cuts across the board is not the sensible approach. We need to think about what policies we can introduce to spend and invest now so that we can ensure that we save in future. One of the policies very dear to my heart is healthy free school meals, which piloted in Hull but was slashed by the Lib Dem council without the evidence being evaluated. I believe that there is an economic case to be made. Investing in children early on, making sure that they eat healthily and well and do as well as they can in their education, will reap benefits for us as a society later on. I was disappointed to see that the extension of the free school meals pilot has been abandoned by the coalition Government, as well as the extension of eligibility to those in receipt of working families tax credit, which would have made more families eligible to get free school meals for their children. That is very short sighted.

By cutting too deep and too early, we will risk jobs-jobs in Hull, jobs in Yorkshire and the Humber, and jobs nationally. We will have higher welfare costs and less tax revenue. Growth will be suppressed and I think that the deficit will be much worse.

Geoffrey Clifton-Brown: The hon. Lady has spent her entire speech carping about my right hon. Friend the Chancellor's Budget. Can she not at least welcome the large regional fund that is to be set up, through which funding will probably come to her area and which may well benefit her constituents by providing jobs?

Diana R. Johnson: I do not know-there is no detail. We have had vague promises from Ministers about what the regions will get, but no detail. I cannot explain to business men and entrepreneurs in my constituency where the money is coming from to support and incubate their businesses. As far as I am concerned, this is all hot air. [ Interruption. ] Wait and see? Businesses in my constituency cannot do that. They need to know whether there is to be investment and support. If the coalition Government are serious about supporting the economy in the regions, they should have had their proposals and policies ready for yesterday's debate and been able to explain what money is available to people in the north.

The welfare reforms and the tax changes announced yesterday will cause great problems in my constituency. Although basic rate taxpayers are promised an extra £170 a year in income tax allowance, that will be far outweighed by the VAT increase to 20% from 4 January next year. We have heard at length about the Lib Dem election campaign poster saying that there would be a Tory VAT bombshell, but the Deputy Prime Minister-bless him!-has done another U-turn that takes his party to a new level of opportunism. That regressive tax on growth will cost the average household £425 a year. That is without counting the other regressive changes in things such as housing benefit, child benefit and child trust funds and the disgraceful scrapping of the health in pregnancy grant.

As my right hon. Friend the Member for Kingston upon Hull West and Hessle told the Prime Minister and the Deputy Prime Minister-the self-righteous brothers-they are leading this Government and repeating the PR mantra, "We're all in it together," but some parts of our country will be altogether more in it than others.
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A party that has never been known for sharing wealth and opportunity fairly is very keen to share austerity with everyone.

This past month shows that we have replaced a one-nation Government with a coalition of the two oldest parties, representing the misconceived interests of the privileged classes in this country. My constituents in Hull North, Bransholme, Orchard Park and similar areas, who need public support and public investment to give them the opportunities that, through no fault of their own, they lack, will suffer because of this Budget and this coalition Government.

2.39 pm

John Thurso (Caithness, Sutherland and Easter Ross) (LD): I congratulate you on your election, Mr Deputy Speaker. This is the first time I have spoken with you in the Chair.

First, let me respond to the hon. Member for Kingston upon Hull North (Diana R. Johnson). The thrust of her speech was almost entirely, "It's the banks wot done it," whereas her party, although in government, did not have a great deal of responsibility. She is right in that the major part of the crisis was brought to a head by the irresponsibility of the banking community throughout the world, especially in the UK, but she is not right to ascribe the whole crisis to that one cause, because there are two more that must be taken into account. Probably the most important-it has driven many of the problems in the economy-is the imbalances in the world economy. I served on the Treasury Committee in the last Parliament, and even before Northern Rock, that was something to which Members from all parties were drawing attention. There is a major structural problem in the world economy, and because of our particular weakness in relation to the financial sector, we suffered more than others.

The second thing that has to be taken into account is the amount of debt in the economy. The point is extremely well made by the chart on page 7, which sets out that relationship, so that one can see the inexorable rise of debt in the financial sector in comparison with debt in non-financial companies and households. If I remember the figures correctly, over the past 50 years or so, the consolidated balance sheet of the financial industry has gone from roughly half of GDP to five times GDP. That is the core of the problem: at every level in society we have been living beyond our means, and it is necessary to deal with that.

I want to focus mainly on enterprise, growth and rebalancing the economy, but I should like to make one or two general points about the Budget as a whole. The right hon. Member for Edinburgh South West (Mr Darling) is not in the Chamber now, but having shadowed him as a Minister in several Departments in the last two Parliaments, and having dealt with him in the Treasury Committee, I have great respect for him, and I echo the remarks of my right hon. Friend the Secretary of State for Business, Innovation and Skills about his integrity. He was given a hospital pass when he accepted the keys to No. 11, and it is to his credit that he managed to stay on his feet. None the less there have been some significant mistakes, to which I shall allude.

Looking at the Budget as a whole, I ask myself two questions. First, how would I feel about the Budget if I were sitting in my old home on the Opposition Benches?
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Secondly, how would I feel about the Budget if I were sitting on the Government Benches supporting a wholly Liberal Democrat Government? We can all have aspirations. Let me answer the first question. I would feel extremely cross, deeply angry and irritated, because I would see a Budget that contained a mass of things for which I had just campaigned and which I had proposed to my constituents as things I wanted to do in government-so I would have been sitting on the Opposition Benches powerless, while whoever was in government was introducing all the measures for which I had fought. I would say to myself, "How on earth do I oppose that?" but I would not be able to come up with much of an answer.

Angela Smith: I wonder therefore whether the hon. Gentleman campaigned against Lib Dem policy in the election, and campaigned for massive cuts to the economy now rather than later.

John Thurso: As a matter of fact, given my experience on the Treasury Committee, I was extremely careful about what I said. I stated my preferences, but I also stated the principles underlying them; I shall come on to that in a moment. First, however, let me answer my second rhetorical question, which requires a little more consideration. The first thing that I would look at-this pertains to what the hon. Lady was asking-would be whether the deficit needs to be dealt with now in depth. I shall draw guidance from my experience as a member of the Treasury Committee and from my own experience of rescuing nearly bankrupt companies in the past.

In past three years or so on the Select Committee, I observed how often Members in all parts of the House were behind the curve in estimating the scale of the problem. When we looked at Northern Rock in our report "The run on the Rock", it took time to perceive not only the scale of what happened at that institution but the fact that it was a precursor or early symptom of what was to come later in 2008. I remember the Governor telling us quite late in 2008 how this was a financial crisis that he hoped would not get into the real economy. Looking back, one has to say that that was a false hope.

Huw Irranca-Davies: I share the hon. Gentleman's frustration, as many people were behind the curve, but one person who was not is "Danny" Blanchflower, the economist, who spotted it coming, identified it and sent out the warning signals. We, collectively, were not listening. He is now warning, "Cut hard and deep and you'll send the recession backwards." Should we listen to him?

John Thurso: We should certainly listen to "Danny" Blanchflower, for whom I have great respect. He gave evidence to the Select Committee on several occasions, and he is one of a number of voices that we should- [ Interruption. ] Absolutely-it was David Blanchflower's nickname at the time. We should certainly listen to him, but we should also listen to all the evidence. He was, on that occasion, more right. I am not persuaded, having heard other voices, that he is entirely right now-but he does highlight a danger, and we should certainly not disregard that. Across the piece, as the hon. Gentleman acknowledged, we did not appreciate the scale of what was coming.

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