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So far so good. The second rule was that he would maintain stable public finances-a requirement for our long-term economic stability.

Toby Perkins: The hon. Gentleman will be aware that those rules were changed only in the face of huge, global economic crisis. His party supported the change when the economic crisis struck, so was it incorrect to do that?

Kwasi Kwarteng: The hon. Gentleman will remember that the second rule was that

The then Chancellor concluded the 1997 report by stating:

Everyone applauded him. He was talking about prudence; he was the Iron Chancellor and very much the hero of the hour. In the same report, he referred to the recession of the early 1990s. His conclusion was that the public sector borrowing requirement rose to a peak at 7% of GDP and he said:

That was the position of the Labour party in 1997, and in 2006 Labour was repeating the same mantra and the same pie in the sky ideas. It was saying that

In 2007, it said:

and so on.

David Wright: Will the hon. Gentleman outline what spending he would have cut between 1997 and 2007?

Kwasi Kwarteng: I am merely stating the very prudent rules that the former Chancellor and Prime Minister outlined. All the rules that he set in place in 1997- [ Interruption. ] The hon. Gentleman asked a question and I want to answer it. All those rules were ripped apart. The PSBR figure of 7% of GDP, which the then
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Chancellor had thought was a scandal, went up to 12%. According to the very rules that he set, we have failed and been found wanting. It is in that context that my right hon. Friend the Chancellor of the Exchequer introduced his bold and comprehensive Budget on Monday. It was only because we had to do this that the Budget was introduced to this House. It was not part of any ideology or master plan; it was an act of dire necessity.

I thought that the most interesting contribution in the debate was that of my right hon. Friend the Business Secretary, who recalled with a lot of emotion and understanding the experience of 1976. It was exactly that experience, when another Labour Government had bankrupted the country and had to go to the International Monetary Fund, that he was so anxious to avoid. It is in that spirit that the Budget has been introduced to the House and that is why I am very happy to commend this Budget and to go through the Aye Lobby to vote for it on Monday.

5.29 pm

Ms Angela Eagle (Wallasey) (Lab): It is a pleasure to welcome you to the Chair for the first time, Mr Deputy Speaker. I would also like to add my personal welcome to the Economic Secretary to the Treasury; this is the first time that we have debated over the Dispatch Box since the election, although it is not the first time ever. I hope that she will accept my personal good wishes in the job that she is now doing.

I would also like to commend the maiden speeches that we have heard in the debate today. In particular, I thank the hon. Member for Staffordshire Moorlands (Karen Bradley) for her praise of her predecessor, Charlotte Atkins, who is a very long-standing friend of mine. The hon. Lady spoke passionately about her beliefs and her constituency, which I know is a very beautiful one.

In his maiden speech, the hon. Member for Hendon (Mr Offord) talked about another good friend of mine, his predecessor Andrew Dismore. Alas for the hon. Gentleman, today's 12-minute limit on speeches meant that he could not even begin to compete with Andrew's record for the longest speech in the House. However, I am sure that he will rev up and have a go at that.

Unfortunately, my hon. Friend the Member for Kingston upon Hull East (Karl Turner) is unavoidably absent from the wind-ups tonight. As the successor to Lord Prescott he has very big shoes to fill, but his maiden speech was witty and astute. He spoke about his constituency and his political credo, and I am sure that we can look forward to many more contributions from him.

The final maiden speech was made by the hon. Member for Camborne and Redruth (George Eustice), who has one of the smallest majorities in the House. He spoke about Trevithick, the railway pioneer; as he did so, I was thinking about the fact that whenever I return to my own constituency, I travel through Rainhill, where the famous and historic trials that were won by the Rocket took place-an event that brings back many happy memories as we travel to Liverpool Lime Street station.

We have heard some important speeches today, from all sides of the House. One of most intriguing was made by the hon. Member for Bermondsey and Old Southwark (Simon Hughes). I shall say more about it later, but he said some intriguing things about how he might wish to amend the Budget-particularly with respect to VAT-as
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it goes through the House. I certainly look forward to seeing the amendments that he may propose. I think that I shall look on them with a sympathetic eye if they do what we want, which is to make this Budget more progressive than it is at the moment.

Other speakers in the debate included my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr Clarke), and my hon. Friends the Members for Telford (David Wright), for Eltham (Clive Efford), for Southampton, Test (Dr Whitehead), for Liverpool, Wavertree (Luciana Berger), for Streatham (Mr Umunna), for Walsall South (Valerie Vaz) and for Chesterfield (Toby Perkins). They all made extremely important contributions.

We heard some passionate speeches from the Government Benches, and I agreed with very little of them. However, I can certainly thank the hon. Member for Stafford (Jeremy Lefroy), who was unique among Government Members in recognising that the Labour Government did some good things while in office. I thank him for his grace in accepting that, although I am not sure that it will do him in any good, or help his career.

The hon. Member for Bromsgrove (Sajid Javid) gave the game away when he revealed himself in the Chamber as a crusading small-state Conservative, and proud of it. He praised the Government's ideological basis, something whose very existence many Government Members were frantically trying to deny.

There were other important contributions to the debate today, and the short speech by the hon. Member for Spelthorne (Kwasi Kwarteng) was by no means the least among them. He asked us to look at the context in which the Budget was held, and I want to spend a little time doing that now.

We have lived through a difficult time in the last two years. We have seen the deepest and most synchronised global recession in living memory, with world GDP falling for the first time since the second world war as a direct result of the global credit crunch. That credit crunch was precipitated by monumentally reckless and greedy behaviour in the banking sector worldwide, which made a few people spectacularly rich but also impoverished countless millions of its victims around the world. I thought that the hon. Member for Cities of London and Westminster (Mr Field) probably came the closest of all Government Members to being up-front about that in his extremely good speech.

The credit rating agencies, which are now so frequently quoted by Government Members with reverence as economic oracles, were particularly compromised by the triple A rating that they awarded to complex derivatives masquerading as assets when they were in fact debts, and they did so for lucrative fees. The credit crunch was exacerbated by the undoubted failure of politicians, policy makers, economists and regulators to understand and price risk appropriately in the complex and interdependent global market. That led to a degree of complacency and the misreading of international conditions that were shared by almost every economic commentator. Hindsight is a wonderful thing, and with the benefit of it we can learn many lessons to prevent those problems from recurring-I certainly hope that we do.

Meanwhile, fiscal deficits everywhere had to rise dramatically to cope with the crisis. Our tax revenues
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here in the UK were significantly impacted, while spending had to rise to deal with the costs of recession. The fiscal stimulus, which was necessary to stop the global recession turning into a worldwide depression, also had an effect on the deficit. That is the cause of our deficit problem, and it is certainly not unique to this country. The previous Government were right to take the action that we did to protect people's bank deposits and to shore up the very foundations of our economic system. I am proud that we were able to rise to that challenge.

I have taken some time to outline the economic context, in agreement with the pleas of the hon. Member for Spelthorne, because in four days' debate on this theatrically named "emergency Budget", we have not yet heard any Government Member, from the Chancellor down, have the decency and the honesty to mention it at all. They wish the country to believe that, somehow, the considerable economic challenges that we now face were all caused by the previous Government's irresponsibility and have nothing to do with the greed of reckless bankers and speculators. That is arrant nonsense, and they know it.

Mr Mark Field: Does the hon. Lady not recognise that huge global imbalances built up, and that mistakes by policy makers and politicians of all colours from across the world had their part to play, rather than the problem just being caused by, as she would put it, the greed and recklessness of bankers?

Ms Eagle: I agree, and during an earlier part of my speech I listed all those people as being among those who had things to apologise for, as the hon. Gentleman will see if he reads the record.

In the prelude to the Budget, other preposterous myths have been peddled, designed to justify an austerity programme so severe that it is positively, even gleefully, sadistic. I will just mention one of them in passing. The myth says, "It's all much worse than we thought." We have heard the Prime Minister, the Deputy Prime Minister and the Chancellor all singing that refrain in recent days. They had prepared the ground, they had the newspapers all going along with it, and they had briefed their Back Benchers, who are even now loyally parroting the line. How irritating for them, then, that the facts have failed to conform to their prearranged narrative, and how positively annoying that the Chancellor's new forecasting quango-the pejoratively named Office for Budget Responsibility-should so comprehensively give the game away just before the main show. It quickly became clear that, far from all this being much worse than we thought, it was actually better:

I was quoting Fraser Nelson-that well known socialist writer-from the Telegraph.

Dr Julian Huppert (Cambridge) (LD): Will the hon. Lady give way?

Ms Eagle: The hon. Gentleman has not been here all day, so I will not give way to him.

In the pre-Budget report, Sir Alan Budd was obliged to point out that my right hon. Friend the shadow Chancellor was being too pessimistic-those who know him are not always surprised by that-and that on
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almost every measure, the public finances are in better, not worse, shape than we expected at the time of the March Budget. Unemployment, Sir Alan revealed, would be 200,000 lower than expected, and tax revenues would be much stronger than forecast. Thus the borrowing forecast was £8.4 billion lower this year than predicted in March, and £22 billion lower by 2014-15.

Matthew Hancock: Will the hon. Lady give way?

Ms Eagle: No.

No amount- [ Interruption. ] Conservative Members have had all day to peddle their view of what is happening to the economy. I am now responding to that, and they have to sit and listen whether they like it or not.

No amount of Orwellian double-speak emanating from No. 10 or No. 11 can cover up the basic fact that things are not worse as far as the deficit is concerned, but better. Shorn of the prearranged excuse for ratcheting up the pain levels in his austerity Budget, the Chancellor has been exposed as a small-state ideologue and a true child of the 1980s. He has imposed the most brutal cuts in public spending that the country has ever experienced in peacetime for reasons of dogmatic delusion, not economic necessity. The Tories are doing this not because they have to, but because they want to. They have made a political choice, not an economic choice, and we will see the results of their return to their Thatcherite roots.

There is no electoral mandate for the economically dubious dance with dogma that is at the Budget's intellectual core. The majority of the electorate voted for parties that did not want to make immediate cuts at a time when the recovery was not locked in and our major EU trading partners were seeing their upturns falter. Those who voted Lib Dem did not expect their chosen party to experience a wholesale conversion to Tory fiscal hawkery after a quick cup of tea with the Governor of the Bank of England. They feel betrayed-and they have been.

Make no mistake: this is a very Tory Budget. It contains the largest spending cuts in our peacetime history, focused on the neediest areas of the country. It brings about a huge rise in the most regressive tax available, which will hit the poorest hardest. The decision to attempt to eliminate an 8% structural deficit in five years, and the choice of a ratio of 77% spending cuts to 23% tax rises, are more brutal than Mrs Thatcher ever dreamed of. The Chancellor has paraded Canada and Sweden as examples to follow, but as Will Hutton recently pointed out, the plans for fiscal consolidation in the Budget are three times tougher than those achieved in Sweden and twice as tough as the Canadian example. Sweden took 15 years to achieve 20% cuts in some departmental spending, but this Tory-led Government want to cut 25% in five years.

The lesson from Japan is that it is positively dangerous to attempt radical fiscal consolidation when the private sector is deleveraging, so why are the Government prepared to risk making the same mistake? Because of its error, Japan experienced a lost decade of growth and achieved the opposite of its intentions: not a shrinking deficit, but an increasing one. The Budget contains no strategy for growth beyond the usual tired old Tory refrain that the private sector will fill the gap. That is not a growth strategy, but a statement of blind economic faith that might or might not be fulfilled.

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It has taken a mere two days for the pitifully thin Lib Dem veneer attached to the Budget to flake off completely. The Lib Dem leader promised us "progressive cuts", but the devastating analysis of the IFS has put paid to that absurd and oxymoronic phrase. When we take out Labour's remaining Budget changes, this Budget is deeply regressive, and it gets more regressive as the years go on and the huge cuts in welfare support and tax credits bite. It is now clear what the Deputy Prime Minister means by progressive cuts: he will cut this year, cut more next year, and cut even more the year after that. His phrase is true, when it is taken literally.

A Budget that targets £6 billion of cuts on the most vulnerable, including pensioners, by delinking benefit uprating from the retail prices index, yet hits banks with only a £2 billion levy that is being given back through corporation tax, is not sharing the pain. A huge hike in VAT that hits the poorest hardest is not sharing the pain. A deliberate decision to destroy large swathes of social support, and cutting support for the jobless and home owners when they are most under pressure, is not sharing the pain. The choices in the Budget make it abundantly clear that we are not all in this together.

Today's Financial Times carries an article that states:

The hon. Member for Bermondsey and Old Southwark said today that he would not allow that to happen. Well, if he wants to stop that betrayal, he has to table those amendments and carry his Lib Dem colleagues through the Lobby with us to stop this Conservative-led Budget doing even more damage. We look forward to seeing him in there with us.

5.45 pm

The Economic Secretary to the Treasury (Justine Greening): Mr Deputy Speaker, may I start by saying what a pleasure it is to give my first speech as a Minister with you in the Chair? I thank the hon. Member for Wallasey (Ms Eagle) for her kind words. I very much enjoyed debating with her when I was the shadow Minister and I look forward to continuing to do so in government.

We have had a good debate this afternoon and evening. It was broadly meant to be about the Budget in relation to the environment, but we have not heard a lot about that, apart from in the thoughtful speech made by the hon. Member for Southampton, Test (Dr Whitehead). The hon. Member for Eltham (Clive Efford) said that there is little on the environment in the Budget, but given that the Labour Government had stalled on reducing emissions and wanted to go ahead with polluting measures such as a third runway at Heathrow, I am not surprised that the shadow Secretary of State for Energy and Climate Change failed to mention the environment in the half hour that he was on his feet.

I wanted to start by reflecting on the many speeches-23 or 24, by my count-made today, in particular some excellent maiden speeches. I was delighted to hear from my hon. Friend the new Member for Staffordshire Moorlands (Karen Bradley), especially when she said that she is an accountant. Speaking as an accountant myself, I think that this House needs more of us, and I dare say the Opposition could do with a few more as well, so that they can start adding up properly.

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