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Sajid Javid (Bromsgrove) (Con): I pay tribute to those hon. Members who have made their maiden speeches today. My hon. Friends the Members for Staffordshire Moorlands (Karen Bradley), for Hendon (Mr Offord) and for Camborne and Redruth (George Eustice), and the hon. Member for Kingston upon Hull East (Karl Turner), all made excellent maiden speeches.
After 13 years of Budgets that were predicated on the mistaken notion that boom and bust had ended, it is hugely reassuring to see a Budget that restores some fiscal sanity. This Budget puts at the heart of our economic policy the restoration of our nation's finances and the laying of foundations for stronger economic growth. In response to the hon. Member for Walsall South (Valerie Vaz), however, I must add that we do not know what the previous Government's legacy is, because some costs of the past two or three years' actions have yet to be borne-but will be unless this Government take preventive steps.
I shall not dwell on what has been bequeathed to us, but I must mention a few statistics that speak for themselves. The budget deficit is more than 11% of GDP, and the largest of all advanced nations; the visible national debt is 68% of GDP; and a record 28% of the adult working population-8 million people-are currently described as "economically inactive". Despite all Labour's efforts, no amount of spin can hide the truth of the abysmal inheritance that we have been given. Once again, it has been left to a Conservative-led Administration to clean up the mess of a former Labour Administration. As it says in the Budget, we have to start doing that by addressing this record peace-time deficit.
I am somewhat surprised that Labour Members continue to act as though we can keep living beyond our means, when only £3 in every £4 of Government spending is raised through general taxation. Only eight weeks or so ago, even the Labour leadership admitted during the election campaign that if they won the election they would have to carry out severe cuts as well. There were various estimates, but they averaged about 20% of real cuts in unprotected Departments over the course of the next Parliament. Notably, the then Chancellor of the Exchequer said in an interview that if he were re-elected he would have to make bigger and deeper cuts than Margaret Thatcher did in her time. Now, however, Labour Members act as though those cuts are not necessary and we are able to make a choice.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op): It is not the reduction of the deficit that is the point of conflict between us but the scale and the speed of doing it. Doing it in the way that has been proposed risks pushing the economy back away from growth and into recession. In that situation, the deficit will increase, not decrease. Does the hon. Gentleman accept that point?
The hon. Gentleman's own party said before the election that it expected to make very large, severe cuts, in the order of about 20% in real terms. Our Budget proposes cuts of about 25% in real terms in unprotected Departments. Is he really saying that the
only thing bothering him is a difference of 5%? I have not heard anything from Labour Members in the past two or three days that remotely suggests how they would achieve the 20% cut that they have talked about.
"I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone."
Soon after that, President Clinton abandoned his plans to increase borrowing, recognising instead that, even at that time, he had no choice but to balance the budget. I have traded in the international bond markets for many years, and working on a trading floor I saw for myself just how severe the financial crisis was. There is no question but that we would have faced economic problems regardless of the actions that were taken by the previous Government, but their actions made things worse, and that is the key. The situation has been made worse by the huge amount of borrowing that we have taken on since that time.
I know from my own experience of the bond markets that they take no hostages. We now depend on them utterly for the nation's finances. My right hon. Friend the Secretary of State was absolutely right to point out that we face a major sovereign crisis unless we take serious action. Some Labour Members have said that it does not look as though we have had problems with financing our budget deficit to date. We borrowed about £225 billion in gilts in the last financial year, but at the same time, the previous Government, through the process of quantitative easing, printed about £225 billion of new money. It is therefore not difficult to work out how, in effect, much of that borrowing was paid for.
The United States was the only other major economy that went through a process of quantitative easing, and we cannot use it as an example to compare with ourselves because, as we know, it has a reserve currency and we do not. That makes its situation entirely different when it comes to such an economic policy. The only other country in the world that I can think of without a reserve currency that went ahead and printed money at about the same time as us-indeed, before-was Zimbabwe. It is rumoured that the Finance Minister of Zimbabwe sent a note in 2008 to the then Chancellor of the Exchequer offering him his economic advice in exchange for lifting visa restrictions on him and his family. I think the then Chancellor took the advice but did not give anything in return.
The bond markets are picking off grossly indebted nations one by one with rising bond yields and falling prices. We have heard today about Greece, and we have seen what has happened in Ireland, Portugal, Spain and Italy. Those who observe the markets carefully need only look at what has happened, to a lesser extent, in France in recent weeks, where problems have started. That is why France, too, recently announced an austerity
package. We have no choice but to reduce the record budget deficit, or else we will face an economic crisis of cataclysmic proportions.
Chris Williamson (Derby North) (Lab): I would be interested to hear what the hon. Gentleman has to say about Professor David Blanchflower's comments yesterday. He said that the Budget made him more certain that there would now be a double-dip recession, with no room for manoeuvre because interest rates are already so low. Would the hon. Gentleman comment on that?
We have no choice but to cut the deficit, and that requires both cuts in spending and the raising of taxes. As we have heard today, we have to a strike a balance between the two, and the burden must fall on public spending. We have no choice about that, because if we raise taxes too much we will destroy the very incentives that we need to create the growth that will get us out of this economic mess.
As we go through that process, we must naturally try to protect the most vulnerable as much as we possibly can. Opposition Members have accused us of being ideological about the matter, but how can we be anything else? They are absolutely right, and there is no shame in it, because there is an ideological difference between what they believe and what we believe about how to get our country back on track and our economy going.
The Opposition believe in some kind of Alice in Wonderland economics in which we can go on living beyond our means year after year. We believe in the real world, where we have to pay our way. They believe that the state has the answer to all society's problems, but we believe that individuals, helped by the state, have the answers. They believe in an ever increasing welfare state, in which people are tied down and not allowed to profit from their own industry, and we believe in helping the most vulnerable in society-those who cannot help themselves-but freeing those who can work for themselves and earn an income, and giving them the incentives to do just that. Because of that, we believe that we can get more out of our constrained budget, repair our economy and create a fairer and more responsible society.
The size of our national debt cannot be ignored, either. It has not been mentioned much-we have all talked about the deficit, but let us not forget the enormity of the problem caused by the national debt. Any Government will have to address it at some point. Benjamin Disraeli once said:
"Debt is the prolific mother of folly and of crime."
After 13 years in office, Labour took our visible national debt from £350 billion to more than £900 billion-an almost threefold increase. That does
not include the invisible national debt, public sector pension liabilities, which reputable organisations estimate to be more than £2 trillion, and all the private finance initiative liabilities, which grew from approximately £20 billion to £150 billion. We have a huge debt problem, which must be addressed, otherwise not only will this generation and our children pay for it, but our children's children will inherit it. Let us not forget the changing demographics in our country, where we have a growing elderly population and fewer people of working age. That means that there are fewer people to tax and fewer who are able to fund the state's activities, including repayment of debt.
The Budget addressed how to start promoting growth, which will help us get out of the mess. The Government are reducing corporation tax, the tax on small companies and on entrepreneurs' relief, and addressing some of the problems of bank lending Many banks have been held back from increasing lending since the onset of the crisis because of the uncertainty of the future economy. The Budget gives banks much more certainty about the future of our economy, and that gives them more confidence to lend.
The securitisation market has not been mentioned often in the debate. More than the equivalent of £5 trillion has been issued in the past 10 years. Many banks used that to provide funding to small and medium-sized companies and to fund mortgages throughout the world. Securitisation unquestionably caused some of the problems of the credit crisis, but we must consider that market if we are serious about getting banks to lend again. So far this year, European banks have issued €30 billion of securitised bonds, against €500 billion in the same period last year. Last year, 95% was purchased by the private sector; so far this year, 95% has been purchased by the public sector central banks throughout Europe, including ours.
We are considering a bold Budget to redress a dire situation. Its measures are thoughtful and disciplined and it aims to spread the economising process throughout the nation. No group is spared and none is favoured.
Toby Perkins (Chesterfield) (Lab): It is interesting to follow the hon. Member for Bromsgrove (Sajid Javid). There was one thing in the past 14 minutes that I am glad that he acknowledged; otherwise there was little with which I could agree. However, I agreed with the admission that the Budget is ideological and that the Conservative party has delivered the sort of change that it always wanted to make and scrapped the massive improvements that the Labour party made in the public sector. It is not an economic but an ideological Budget. The hon. Gentleman's honesty, at least about that, does him great credit.
I want to consider the huge and unnecessary gamble that the Chancellor has taken with our economic recovery, and why a genuine growth strategy would enable us to grow our way out of the economic crisis without threatening thousands of people with the dole, and without threatening those who rely on housing benefit or the economic recovery. I shall also talk about the Budget's impact on my constituents in Chesterfield and Staveley.
First, I shall deal with the myth that the Chancellor had no choice and that the measures were taken out of economic necessity rather than, as the hon. Member for
Bromsgrove admitted, political ideology. That is nonsense. The Chancellor's Office for Budget Responsibility's report confirms that the borrowing requirement this year was £8 billion less than that forecast by my right hon. Friend the shadow Chancellor in March. Before the Chancellor's intervention in the Budget, we were on target for the growth forecast for 2011 of 1.25% that the shadow Chancellor had made. The OBR admitted that the shadow Chancellor's plans for spending restraint over the next four years would have halved the budget deficit by 2014-15, just as he said they would when he delivered his Budget in March.
Uniquely among the main parties, the Labour party is putting forward policies that we campaigned on in the general election a month ago. This could catch on: we could go into elections telling the public what we wanted them to vote for, and then we could come to this place and deliver those policies.
Hon. Members should remember that the previous Labour Government were the first Government for many years to start paying off the national debt. The stringent financial rules that the former Prime Minister put in place during his long stint at the Treasury put this country into the position whereby we entered the recession with the second lowest debt to GDP ratio in the G7.
Jacob Rees-Mogg (North East Somerset) (Con): Is it not the case that the only time when the economy was run properly under the previous Government was when they followed Conservative spending plans in their first three years?
Toby Perkins: It certainly is not the case. The hon. Gentleman should remember that in 1997 we inherited hospitals that were in a disgraceful state and where people died of things that they could have been treated for, if only they had got to the top of the waiting list. We should also remember that we inherited schools where the roofs leaked every time it rained. Our children were educated in quite disgraceful conditions. That was the legacy of 18 years of the Conservatives, which is why when they lost, they lost so massively that they were not even credible as a party for another 13 years.
Mr Tom Harris: May I congratulate my hon. Friend on a terrific election result in Chesterfield? Does he share my bewilderment-and, I have to say, amusement-at the efforts by the Chief Secretary to the Treasury and the Business Secretary to claim not only that they were wrong to oppose an increase in VAT, but that they have miraculously transformed VAT from a regressive tax before 6 May into a progressive tax now?
I was certainly bewildered by the Secretary of State for Energy and Climate Change's contribution in opening this debate, and by the idea that when the Liberal Democrats talked about the tax bombshell, what they meant was that VAT was regressive only if it was levied on food, a suggestion that nobody had made and which was never part of the debate. His speech was one of the most bizarre contributions that we have
heard over the past three days. I look forward to watching it on iPlayer tonight and reliving the moment, because it is something that will live long in the memory.
I want to talk about the choice that the Labour party made. What we enjoyed under the previous Labour Government was 11 years of stable economic growth. That was the longest period of stable economic growth in this country's history, yet unlike the Conservatives, we went into recession only when the entire world went into recession. The Conservatives did it differently: they could go into recession when the rest of Europe was in a strong position. It was only the global economic crisis that threw the economy off course under a Labour Government.
Toby Perkins: What he was probably referring to was 11 years of stable economic growth. What he did not foresee was that we would be hit by the biggest global economic crisis for more than 80 years. Of course, nobody foresaw that. There were no Conservative Members suggesting that the ways in which our banks were regulated would lead to the economic crisis. To pretend that you knew that that was coming or that the deficit that has been built up is somehow irrelevant to that is just ludicrous, and no one believes you, so you really must stop trying to treat people like fools when you say that the deficit that has been created was something that happened just because we had a Labour Government-
It is right to talk about the choice that Labour made, which was to protect the jobs that people relied on and to prevent an extra 500,000 going on the dole. Labour's choice was to protect the homes that people had saved up over their whole lives to be able to buy. Labour's choice was to support industry and bring forward public spending projects to keep the construction industry working when the private sector was sitting on its hands. Labour knew that the price of salvaging those jobs, those homes and those businesses would be an increase in our deficit. We delivered a plan for the recovery, which is working, and a plan for reducing the deficit after the recovery had been secured in the following year. The hon. Member for Bromsgrove told us that we could not keep living beyond our means, but of course we already knew that; that is exactly what the shadow Chancellor was referring to in the previously attributed quote. He made it absolutely clear what our strategy was.
Jonathan Reynolds: Does my hon. Friend agree that there is something deeply disingenuous about the fact that the Conservative party supported our Government spending plans until 2008-before the economic crisis hit home? They believe that we are living beyond our means, but they supported our spending at the time.
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