| Previous Section | Index | Home Page |
Unemployment will rise; we do not know how high, but it is still going up quickly. That is bound to have a dampening effect on consumer demand. There is no hope of consumer demand bouncing back quickly. Even in households where people are lucky enough to have a job, their mortgage may be cheaper and things are not
going too badly—there are some—there is such a level of household indebtedness that sensible people will devote themselves to repairing their finances. The savings ratio will soar, with consequences for consumer demand, too. Restraining consumer demand means that there will be no quick surge in investment.
When we put on top of that the colossal level of public debt, the need for the Government to sell an enormous number of gilts, with the prospect that it will put up interest rates on gilts and thus throughout the economy, the squeezing-out effect of Government borrowing on private sector borrowing and the possible inflation consequences of the unconventional methods of boosting the money supply on both sides of the Atlantic, my fear is that there will be only a slow, and possibly feeble, recovery, which the next Government will have to nurture for many years to come.
These are the early days of this recession. We need as quickly as possible genuine prudence in the public finances for the foreseeable future, for the next Parliament at least. We also need a pro-business agenda to dominate affairs for the next Parliament at least, to encourage the creation of new business and new employment, the stimulation of investment and the rebalancing of the economy that the Secretary of State for Innovation, Universities and Skills rightly said has to occur so that we are less dependent on financial services and start looking to things such as high-tech engineering, design and other areas of our strengths so that we have a more balanced economy in the future.
I turn to the two Departments we are considering today. They are key Departments in the light of what I have just said. I shadow the Department for Business, Enterprise and Regulatory Reform and the Secretary of State speaks for innovation and higher education, which are at the heart of a pro-business agenda. However, I regret to say that although the Chancellor made the most of those bits of the Budget, in so far as he could given the limitations of his eloquence and the time he was able to take, they really are a rag-bag of measures. The Secretary of State and the Secretary of State for Business, Enterprise and Regulatory Reform had no doubt dragged them out of a Treasury that kept saying, “But we can’t afford it”, to every proposition they made.
In the lead-up to the Budget, the Business Secretary, Lord Mandelson, was wheeled out during the pre-Budget preparation that now goes on. When we were in office, leaks before a Budget led to the police being called in to make an inquiry. Ever since new Labour took over, however, Budget leaks merely leave one guessing whether it was a Minister or one of his aides and how accurate the spin was on what is coming. This time there was much trying to create an atmosphere and the unfortunate Secretary of State for Business had to produce a document called “New Industry, New Jobs” to describe his bit of the whole process—the pro-business agenda that is urgently necessary and will continue to be so when recovery starts. It is worthy waffle, but I have never otherwise read a more tedious collection of platitudes in my life. The unfortunate officials in the Department for Business, Enterprise and Regulatory Reform—no doubt Ministers on the Treasury Bench did their best to assist them—produced every platitude that anybody in their Department has produced in the past 20 years.
It was all held up as new activism. The hearts of the left wing of the Labour party were made to beat a little faster for a few moments—until they got the document;
there was to be new active interventionism from a Secretary of State who in principle actually believes in market economics, globalisation and all the things I believe in, but he tried to make bricks without straw. Just to dampen down the hon. Member for Luton, North (Kelvin Hopkins), for example, paragraph 1.18 of the document states:
“In most respects, the Government’s business support will build directly on what we are doing already.”
That just about sums up the document, apart from a bit of consultation. It notes:
“We need to start seeing industrial policy and our competitive strengths in a wider, strategic way.”
They will not have much longer for that wider, strategic vision. There was no content at all. The best and most solid bit was:
“However, the way the Government sees its own role in the market needs to change in order to deliver a more coherent and effective approach. Government can promote investment, growth and jobs in Britain through more policy consistency across departments, greater regulatory certainty, smarter public procurement and a readiness to intervene where necessary. This involves Government acting creatively and pragmatically in new ways to supplement the market, not the Government substituting itself for the market.”
Waffle. Platitudes. Those words could have been used by any Secretary of State in the Department for Trade and Industry or BERR at any time over the past 30 years, because it is not a bad statement—albeit a rather obscure one—of what they should be doing all the time. The Government have fallen down on several of those headings since they were in office. It was all to presage the fact that BERR would get nothing from the Budget—there would be nothing the next day.
To be fair for a moment, I welcome trade credit insurance. It should have been done earlier—we have been urging it for long enough. It may be too little, too late, but it was a worthwhile thing to do. The increase in capital allowances is worth trying. I approve of that. Doubling capital allowances for a year, however, is not likely to shift a lot, as it normally takes people more than 12 months to plan investment that they were not previously planning to make. Furthermore, at a time of falling consumer demand people will not be falling over themselves to go in for capital investment, regardless of the allowances.
I hope that the car scrappage measure works. We have never tried it before in the UK, although it has been urged quite a lot. Obviously, the Government thought they could afford the £300 million that will be available between now and 2010. It will almost certainly boost, or at least accelerate, the sale of small new cars, because if people with old bangers want a new car, they are likely to buy a small one, but we have never tried it here before, so we wait to see what will happen. The effects of such a measure in other countries have been variable. For example, the chief executive of Daimler-Benz in Germany warns that while such a scheme can bring forward purchases, that might be followed by a slump in purchases when it finishes. Apart from that, there was nothing in the Budget for BERR, and many things that had been urged were missing.
We have £750 million for the strategic investment fund, but that is like all the other schemes of the past six months. There are no details or any indication of when it will come in, just various broad purposes, and
there are usually six months between announcement and reality with this Government. I am a bit nervous about a strategic investment fund because when I see the word “strategic” I think about picking winners in fashionable areas of industry and key marginal seats. When the details come out, let us hope that Ministers can convince us that it will not be a political slush fund for the 12-month election run-up, because it should be for a serious purpose.
I am left asking, especially because of the way in which the BERR document was paraded, “Is that all there is from this new business-friendly Government?” The Secretary of State said that the Government would nurture business and protect it against the risks that a more fiscally prudent Conservative Government might pose, so is that it? Not only was the document vacuous, but the measures were little indeed. The same is true for the Department for Innovation, Universities and Skills, but I do not have time to go through everything that the Secretary of State said.
The extra money for further education colleges will be valuable. When I was Education Secretary, I thought—I still do—that further education was one of the most vital parts of our educational system. It needs to be strengthened, but the money will merely correct a fiasco of the Government’s making due to the ridiculous Learning and Skills Council. I congratulate the Secretary of State on scrapping the LSC, which his Government should never have created, although I wish that he would follow the prescription for the future of further education set out by my hon. Friend the Member for Havant (Mr. Willetts) by going for a strengthened further education funding council, rather than returning FE to local government control, where it languished in the past. The money will repair some, but not all, of the damage caused by the fiasco of offering capital programmes.
Although I could say a lot about the area of DIUS, I do not have time to do that, so I will leave that for an occasion when my hon. Friend has the opportunity. However, when we consider skills and higher education, we again see 12 years wasted. Going forward, we will need to concentrate on skills, higher education, engineering and science, because we will have a knowledge-based economy in which we have to find new activities.
The most difficult problem, in which FE has a big part to play, is the number of young people not in employment, education or training. I know that there has been bizarre exchange of statistics about that, and that because the age cohorts have gone up, the Prime Minister says that there are now more young people in work in response to the assertion of my right hon. Friend the Member for Witney (Mr. Cameron) that the number of NEETs has gone up. However, the proportion of young people not in employment, education or training has been rising under this Government. If we look to the future, the most horrific thing about the mounting unemployment figures is that 40 per cent. of the unemployed are under 25. A whole generation’s prospects are being blighted, and they face a future of pain, debt and wondering where their pension will come from—that is the legacy of this Government. That is why knockabout politics is not suitable for these problems and why a better Budget was called for.
This country has the potential skills. Thanks to Thatcherite supply-side reforms, followed by globalisation and trading prospects that we had never previously had, we demonstrated that we could be a successful and modern industrial economy. After 12 years, the Government are trying to deny their responsibility for the wreckage, and they have no idea of where to go next. We face 12 months of the living dead; I hope that the country does not suffer too much during that time.
Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I remind the House that Mr. Speaker has placed a 12-minute limit on Back-Bench speeches, which starts now.
6.15 pm
Mr. Stephen Byers (North Tyneside) (Lab): It is always a pleasure to follow a fellow pro-European in the form of the right hon. and learned Member for Rushcliffe (Mr. Clarke).
The Budget and the Queen’s Speech are the two moments in the parliamentary calendar that allow the Government of the day to define their priorities, restate their values and give political direction to their time in office. That is especially important in this year’s Budget, which clearly sets the foundations leading up to a general election that is probably to be held in May or June 2010.
There is no doubt that this Budget has been the most difficult for a Labour Chancellor to introduce since we took office in 1997. In the circumstances, my right hon. Friend the Chancellor of the Exchequer has done an excellent job, with very little material to play with. Individual measures should be commended, especially the support that will be given to people under 26. Those people will not be left on one side as the innocent victims of an economic slow-down, as was the case when the Conservatives were in office. We, led by my right hon. Friend the Secretary of State for Innovation, Universities and Skills, are putting in place positive measures to offer training, support and assistance to those young people at exactly the time when they need it most.
The Government are to be congratulated on the fact that we have a carbon budget for the first time ever, and I hope that that sets a trend for future years. I also welcome measures to support further investment to get the remaining oil and gas from the North sea and support for pensioners, especially regarding savings and the winter fuel allowance.
Mr. Jenkin: How much does the right hon. Gentleman welcome the 50p tax rate?
Mr. Byers: The hon. Gentleman will be delighted to hear that I will focus most of my contribution on the 50p tax rate. However, before I come on to that, I express my regret that not enough was done to address child poverty. I know that this has been a difficult Budget, with limited room for manoeuvre, but we had a clear target of reducing child poverty by half by 2010. We could have done an awful lot more in the Budget to achieve that objective. It is clear that the target will be missed, which is a matter of great regret.
There is much to talk about in the Budget, but in the 12 minutes that I have, I want to address specifically the 50p income tax rate which, rightly, has been the subject of a lot of comment and debate since its announcement by the Chancellor last Wednesday. I am told that when the proposal was put to the various focus groups that political parties use nowadays, it received broad support as a popular measure— [ Interruption. ] My hon. Friend the Member for Luton, North (Kelvin Hopkins) is applauding the use of focus groups; this must be the first time that he has supported them.
Kelvin Hopkins: I am applauding not the use of focus groups, but the wisdom of this particular focus group. Does my right hon. Friend accept that during previous years’ Budget debates, I have proposed much more radical increases in taxation on the rich that would make our tax system more socially just and enable us to spend more on tackling child poverty?
Mr. Byers: We can tackle child poverty in a number of ways, but I am not sure that my hon. Friend’s prescription is the right way forward. I was about to make a point that reflects comments that he has made in the past: focus groups are not always right. On this occasion, over-reliance on such a popular measure for the moment—we understand the circumstances in which such a proposal is thought to be popular—might not be the right way forward.
All too often Budget proposals have been applauded on the day but have been regretted in time, and simply have not stood the test of time. Of course, there is a strong case for saying that in a spirit of fairness, and at a time of recession, those earning most should pay more, and I accept that. It has to be right that when we need to raise revenue, we should focus on those with more money, rather than less, but to raise significant amounts of money, which is what we need to do given the present financial circumstances, we need a broad tax base. The 50p rate for those earning more than £150,000 will apply to some 350,000 taxpayers in this country. They simply do not provide the broad base to raise the revenue that will be needed in our present circumstances. Indeed, for a variety of reasons coming together, the Institute for Fiscal Studies doubts that the 50p rate will raise any extra revenue at all.
That leads one to consider why the 50p rate was introduced in the first place. When one looks at the fact that it is being brought forward to April 2010, probably just a few weeks away from a general election, and when one considers that it targets a very small number of taxpayers, the only sensible conclusion to draw is that the 50p-rate proposal has more to do with political positioning and tactical manoeuvring than a principled, strategic approach to taxation and the raising of revenue.
Some people have said that the political motive behind the proposal was to provide an elephant trap for the Conservative Opposition to fall into, but the trap is so large and well-signposted that even the most myopic old tusker would have little difficulty avoiding it. There are many ways of describing the Leader of the Opposition, but a short-sighted elephant is not one of them, so for understandable political reasons, the trap has been avoided by the Conservative party. I think that many people in the Conservative party will be very disappointed that the 50p rate is, I understand, not to be opposed by the
Conservative party, but I believe that it should be opposed, because in the long run it will be damaging for both the Labour party and the economy. First, and perhaps most importantly, the measure breaks a key manifesto pledge made by the Labour party not to increase the top rate of tax.
Mr. Graham Stuart: Both the Prime Minister and the right hon. Gentleman wish that the Conservative party would oppose the 50p tax rate; I wonder whether that is the first thing on which the right hon. Gentleman has agreed with the Prime Minister for quite a number of years.
Mr. Byers: That is simply not true, as the hon. Gentleman will know. I was making a serious point about the breaking of a key pledge in the 1997 manifesto. We repeated that pledge in 2001 and 2005, for good reason. For many years to come, the Labour party will regret that a manifesto pledge on tax was broken in such a way, and broken literally a few weeks before a general election. If the 50p tax rate is so important, why not bring it in during July next year—three months later? We would then have honoured the pledge that we made in 2005. However, we are not doing that. We are introducing the 50p rate in such a way for, I believe, cynical political reasons, and that simply will not work in our interests.
Secondly, the approach is mistaken because it fails to recognise that wealth creation and social justice are two sides of the same coin. We need wealth to be created if we are to provide the money to finance our social programmes. We need entrepreneurs to go out, work hard and take responsible risks. Given the difficulties that we have had in the banking sector, I know that it is difficult to make that case at present, but the “heads I win, tails you lose” approach of some in the banking sector should not be used to penalise genuine entrepreneurs.
I have heard that the argument for the 50p rate is one of fairness. That clearly must be a key part of any modern, progressive tax system, but the tax regime of a country such as the United Kingdom cannot be based just on fairness; there are other objectives that we need to achieve as well. We are still an important trading country. I take the point already made in this debate about an over-reliance on the financial services sector, but even as it diminishes, which it will, it will remain a key part of our economy in the United Kingdom. It will be a significant employer, and it will bring money into our country.
We are home to major international companies that recruit from around the world, and they have to make sure that they can attract the most talented people to work in the United Kingdom. The United Kingdom needs a tax regime that is not only fair, but internationally competitive and attractive. That will be of particular importance as the world economy begins to grow in the foreseeable future—in a year or two. To take full advantage of the opportunities that will come from that growth, we need talented individuals working in the United Kingdom. The danger is that the measures in the Budget will make the United Kingdom less attractive. That will mean that wealth creation will be slowed down, and that will have negative consequences for public spending. For those reasons, I do not think that the case for the 50p rate has been made.
| Next Section | Index | Home Page |