Budget Resolutions and Economic Situation

Iain Wright Excerpts

Thursday 21st March 2013 Commons Chamber

[Richard Fuller (Bedford) (Con)]

It is always a pleasure to follow the hon. Member for Foyle (Mark Durkan), who represents a very different part of the United Kingdom from the one I represent. It is always informative to listen to his contributions, and I always learn something from them.

There are some very good points in the Budget for the people of Bedford and Kempston. The cuts in national insurance rates—Labour’s job tax—are a welcome change, meaning that the people of Bedford are more likely to have a job. When they travel to work in their cars, they can look at the petrol pump and see that fuel duty has been frozen. When they arrive at work, they will know that at the end of the day, thanks to the increase in the personal allowance, they will keep more of the money they have earned. When they get home in the evening and go out to the pub with their mates, they can raise a pint to the Chancellor and say, “Thank you very much for scrapping that other iniquity of our tax system left by the last Labour Government—the beer duty escalator.” Those are all very welcome measures. On fuel duty, it is particularly important for everyone to realise that when they fill up their tank and look up at the price per litre, 13p of that is Labour’s price on fuel, which applies every time we fill up our cars.

Let me draw your attention, Mr Deputy Speaker, and that of Members to page 12 of the Red Book, which features an interesting chart—I see Members avidly reaching for it—showing the growth of debt in this country from the mid-1990s until 2010. It shows that the last Labour Government left this country as the most indebted nation on earth. They grew our debt—this does not include Government debt, which has to be added on top—from two times to five times the size of the economy. That is a massive debt that must be paid for by our children and grandchildren. I wonder whether the Economic Secretary would consider adding the Government debt to this chart and requiring to be displayed on a poster in every single school, so that our children know what they are going to have to pay back owing to the policies pursued by the last Labour Government. Their policies were an abject failure of economic management.

In the private sector, when companies have poorly performing management, we fire them and bring in other people. In the Labour party, they promote them.

[Mr Iain Wright (Hartlepool) (Lab)]

He’s pointing at me!

[Richard Fuller]

The Leader of the Opposition and the shadow Chancellor were promoted, yet their fingers are all over this increase in debt. I must say that the hon. Member for Hartlepool (Mr Wright) has it right. Those two are acting as bed blockers for more talented people on the Opposition Front Bench. Let us hope there will be a change in that regard some day.

Let me say more broadly, if I may—I sometimes get a little controversial—that the debates I have heard in this place since becoming a Member of Parliament have reinforced my view that the political class has let down the people of this country, regardless of political party. The debt is not just the fault of the last Labour Government but of the country as a whole, which had got itself into terrible levels of debt.

There are two ways of looking at the problem. The Government are borrowing £1 billion every three days, the interest on which amounts to £15 million. So, every three days, £15 million has to be taken out of the budget for our schools and our hospitals. That is a very considerable burden that places pressure on the Government, and I say to the Economic Secretary that I am not sure the Government have done enough to bring public expenditure under control. We have to go further. We need to look at the Heseltine review of the way the Government spend their money—not as an end-point, but as a starting-point for a much more radical reform of how we provide our cherished public services, so that we can deliver on the promise of providing more for less money.

In my remaining time, let me mention the Help to Buy mortgage guarantee scheme. I have read the scheme outline and there are some interesting charts in it, but an important chart is missing—that for the loan-to-value ratio over time.

--- Later in debate ---

[Mr Iain Wright (Hartlepool) (Lab)]

I thank all hon. Members who have contributed today. By my reckoning, we have heard valuable and insightful speeches from 30 hon. Members—although, with the exception of the Business Secretary, no Liberal Democrats. All those hon. Members brought to the debate their feelings about, and analysis of, the impact that the measures in the Budget will have on families and businesses in their constituencies and across the country. We have heard about massage parlours, whip cracks and the Kama Sutra—but I shall move on.

At the start of the debate, we heard a tour de force from the shadow Chancellor, who exposed the complete confusion about the new Help to Buy scheme, suggesting that we now have a second omnishambles Budget. We are expecting a U-turn very shortly. It seems that the scheme will not help hard-pressed families get a foot on the property ladder: it is actually a bung, a spare-home subsidy for millionaires. That is not what the housing market needs, and it is certainly not what the economy needs.

We have heard that public sector net borrowing has been, with acute financial management, revised down next year by £0.1 billion. I thought that would have entailed the Treasury going round Whitehall telling Departments not to order photocopying paper this month, but it is a lot more serious than that. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, we are seeing £2.2 billion moving away from the NHS. Valuable, important and often life-saving operations may not happen as a direct result of the Government’s attempts at financial management. That is an absolute disgrace.

[Neil Parish]

Will the hon. Gentleman give way?

[Mr Wright]

I am afraid that I do not have time.

I would support a comprehensive, intelligent and active industrial strategy, based on rigorous analysis and for our competitive advantage. I commend the Government on Monday’s announcement on the aerospace strategy, which is welcome, but there was precious little in the Chancellor’s statement yesterday to back up such an approach.

I was particularly concerned to read in table 2.4 of the Red Book that both resource and capital departmental expenditure limits—DEL—for the green investment bank will be cut to zero in 2014-15. Given that the CBI and others have rightly identified the low carbon sector as a potential growth area in which the UK can be a leading global player if we have the right long-term vision and targeted investment to provide certainty, the figures in the Red Book do not fill me with confidence and I would be grateful if the Minister could outline the Government’s longer term plans and investment for the green investment bank.

Similarly, I was disappointed that no mention was given in the Budget to science. The Chancellor made great play of the need for Britain to compete in the global race. I agree with him. If we are to avoid slipping behind in the international competitiveness race, we must prioritise science and technological innovation, because if we do not, our future industrial capacity will be undermined. Will the Minister outline why science was not mentioned in the Budget?

Several hon. Members, including my hon. Friend the Member for Denton and Reddish and the hon. Member for North Swindon (Justin Tomlinson), mentioned business rates and retail, and they were right to do so, because the Budget certainly did not. David McCorquodale, head of retail at KPMG, said:

“The decision to go ahead regardless and increase business rates will squeeze embattled retailers further and will not deliver the respite the retail sector needs to recover.

Retailers are now left facing a 2.6% hike to their business rates bill, a move which will add £175 million to their overheads. Amongst a backdrop of flatlining sales and continued austerity, this is not a welcome move by the Government.”

Can I ask the Minister why the Government did not help the embattled retail sector?

In today’s debate, many hon. Members, starting with the shadow Chancellor, reminded the House of what the Chancellor had promised in the run-up to the general election and in his first Budget. He set himself several key targets and tests by which his economic record, competency, judgment and capability should be judged. First, the Conservative party’s manifesto stated that the first objective would be to

“safeguard Britain’s credit rating with a credible plan to eliminate the bulk of the structural deficit over a Parliament.”

In early 2010, he backed that up by saying that

“our first Benchmark for Britain is to...cut the deficit more quickly to safeguard Britain’s credit rating.”

We all know how successful the Chancellor’s performance has been on that score. Curiously enough, there is no mention of the credit rating in the Red Book; nor was it mentioned in the Chancellor’s speech yesterday. Funnily enough, I did not hear many Government Back Benchers mention how important the credit rating is either, although my hon. Friends the Members for Birmingham, Selly Oak (Steve McCabe) and for Scunthorpe (Nic Dakin) certainly did mention it.

At the start of this Parliament, the Chancellor said that the current structural deficit would be eliminated by the end of 2014-15. Yesterday’s Red Book, however, shows that the Chancellor’s target to balance the books by the end of this Parliament will be missed by three whole years. Public sector net borrowing at the end of this Parliament is now forecast to be approximately £96 billion—five times larger than the Chancellor expected it to be in 2010. Every year, he comes to this House and has to admit that borrowing is rising, and that the time scale to cut the deficit is growing ever longer.

The Office for Budget Responsibility has said that deficit reduction has stalled. Net borrowing is higher in each year as a result of weaker economic outlook. My hon. Friend the Member for Barnsley Central (Dan Jarvis) reminded us that the Government are forecast to borrow £245 billion more than they originally planned, and my hon. Friend the Member for Luton South (Gavin Shuker) said that borrowing in the five years of this Government is higher than it was in the 13 years of the previous Labour Government. The dramatic deterioration in sentiment, even since Christmas, is striking. According to Red Book figures, the Government now expect to borrow £55.7 billion more in the next five years than they thought they would have to even three months ago.

The Chancellor assured us that, as a result of his policies, net debt would be falling as a proportion of national income by 2015. That was one of his fiscal targets. Judge me, he said, by my ability to get debt as a share of GDP down. However, the Red Book reveals the true failure of the Chancellor’s approach: net debt as a proportion of national income is not falling but rising in every single year of the rest of this Parliament and beyond, from 75.9% of national income this year, to 79.2% in 2013-14, to 82.6% in 2014-15, to 85.1% in 2015 and peaking at 85.6% in 2016-17. As the OBR states:

“As borrowing now falls more gradually, debt rises more quickly as a share of GDP.”

We are now paying more in debt interest—£51 billion a year, which is more than we spend on the defence of this country—than the £44 billion when this Government came to office. The TaxPayers Alliance, which I do not think is a friend of the Labour party, said today:

“By 2017-18, even on the OBR’s optimistic forecasts, the Coalition Government will have more than doubled the official national debt it inherited.”

The Chancellor is refusing, in the face of all the evidence, to change direction in economic policy, as my hon. Friend the Member for Barnsley Central said. On every single test of economic policy that the Chancellor has set himself and asked to be judged on, he has failed, and because of those failures families in Britain are struggling. Life is worse now and living standards are lower for ordinary families than they were three years ago, and they will be worse in 2015. The Chancellor is pursuing this course for reasons of political vanity and ideological arrogance, rather than from economic necessity. His incompetence and lack of judgment have meant that he has boxed himself in. There is nowhere for him to go with any dignity and he refuses, for reasons of pride rather than economics, to change course. As Andrew Smith, chief economist at KPMG in the UK said in response to the Budget yesterday:

“It is now clear that ambitious deficit reduction is stunting growth. Hemmed in by what is left of ‘Plan A’, today’s measures amount to little more than rearranging the deckchairs…hopes that exports and private business investment will come to the rescue depend crucially on strengthening overseas markets—something over which neither the Chancellor nor the Bank of England have any control.”

The Chancellor is fast running out of excuses. He has blamed the lack of growth in the economy on the snow, on the rain and on the sun. I am sure that the recent eruption of Mount Etna must also somehow be causing a drag on the British economy. He has blamed lack of growth on the diamond jubilee, the Olympics, the number of bank holidays and, as far as I am aware, on the fact that Girls Aloud have reformed and split up, and the Rovers Return has burned down. The excuses have got to stop. The Chancellor needs to look in the mirror.

Despite the difficult European situation, the flatlining economy is down to the Chancellor. A deficit reduction programme without a strategy for growth is no deficit reduction programme at all. Growth forecasts have halved, living standards are falling for millions of people, borrowing is soaring and control of the public finances have been kicked well into the next Parliament. The hon. Member for Bedford (Richard Fuller), for whom I have a lot of respect, has said that we should not kick the can down the road, but with this Budget that is precisely what the Chancellor is doing. He and the Government need to acknowledge their failings and change course, or, better still, make way for a team that will help fulfil the British promise, not hinder it.