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The last Budget statement in the life of this Parliament has been made and we have had the usual post-match analysis from politicians, pundits and experts. The general opinion seems to be that the Chancellor was playing for a draw and that the real match will be held after May, although it may be under new management-only time will tell.
With that in mind, and given the fact that we are now heading for a general election, I was not entirely surprised by the Chancellor's statement, although in fairness to him, he seemed to resist the temptation to indulge in pre-election giveaways-not that there was, perhaps, much left to give away. Also in fairness to him, he has inherited a legacy that few of us would envy. Ruth Sutherland, writing in The Observer, said that the Chancellor's predecessor
"presided over an increasingly unbalanced and indebted economy in which the City grew over-mighty and our industrial base shrank alarmingly".
Despite the Chancellor's efforts, I find myself surprisingly in agreement with the leader of the Liberal Democrats when he said that the Budget was more of an obituary than a manifesto. Indeed, the opening sentences of the Chancellor's statement set the tone of vagueness and ambiguity that permeates most of his Budget. Although I understand the reasons for this, I agree with my hon. Friend the Member for East Antrim (Sammy Wilson), who is also Minister of Finance and Personnel in the Northern Ireland Executive, when he expressed concern
about the lack of detail on future spending plans and how the Chancellor intends to reduce the level of public sector borrowing in the coming years.
The Chancellor tells us that we are emerging from recession, and perhaps there are signs of that, but there is a wide variety of views on that-often, it has to be said, from those who did not foresee the recession in the first place. Even if we are emerging from the recession, however, we are among the last of the developed countries to do so.
The Chancellor says that borrowing is lower than forecast, but it is still worryingly high. We have heard many figures quoted in the debate. The deficit this year is 11.8 per cent. of gross domestic product; the Government have committed themselves to reducing it by half within four years, but that is based on growth figures that are open to challenge. Even if the deficit is halved by 2014-and it is a big if-the CBI and others have said that it will be too little, too late. Cutting the deficit appears to rely on spending cuts that remain vague and on extremely optimistic projections for the economy. The frightening level of the national debt must be tackled. Whoever occupies No. 10 and No. 11 after May will have some hard decisions to make.
One of the Chancellor's ideas on how to reduce borrowing is the encouragement of economic growth. He has rightly stressed that this is the key to genuine recovery. He has repeated the Government's commitment to finding new ways to enable small businesses to grow, to invest in and improve our national infrastructure and to promote research, innovation and enterprise. Those are good aims.
We should all do what we can to encourage the private sector and to reduce the public sector. We can help local British companies by reducing unnecessary red tape, as we heard earlier, and bureaucratic procurement procedures. I welcome the Chancellor's commitment to developing traditional and new infrastructure. We can help by bringing forward some capital projects for schools, hospitals and roads. That is what we have done to good effect in Northern Ireland.
I was encouraged by the fact that an extra £15 billion of Government contracts will go to SMEs. I was also encouraged by an announcement that entrepreneurs' relief from capital gains tax will be doubled to £2 million and taxed at 10 per cent. This will be welcomed by small businesses. I was further encouraged that the investment allowance for small firms will be doubled to £100,000. If British businesses are to compete, we must be at the cutting edge in energy supplies and digital communications, for example.
I fully agree with the Chancellor's statement that access to finance is vital for small businesses. I am encouraged that the Royal Bank of Scotland and Lloyds will provide a total of £94 million of new business loans, nearly 50 per cent. of which will go to smaller firms.
Dr. William McCrea (South Antrim) (DUP): Does my hon. Friend acknowledge, however, that while the banks will talk a good talk, the percentage costs to small businesses-or, in other words, the rates imposed on them-have been exorbitant, so that if we are to see the growth that he wants, the banks need to acknowledge the seriousness of the recession and the need to finance small and medium-sized enterprises?
David Simpson: I totally agree with my hon. Friend. I was just going on to say that we have all heard very distressing stories from business people in our constituencies who are in complete despair because of the attitude of banks. These constituents are solid, sound people, who have done business with the banks over many years and, in some cases, over generations, yet far from offering those people help at a time of need, the banks have put obstacles in their paths. That is totally unacceptable.
Businesses also need to be encouraged to invest in innovation and skills and to increase their levels of exports. We should do everything possible to reduce the burdens on business. We need to move away from the culture of bureaucracy and red tape, as these things stifle business, especially small businesses, which are the very backbone of the British economy.
Although I broadly welcome the small business and infrastructure initiatives in the Budget, I do not think that they go far enough to persuade the markets that we are on the road to recovery and at a fast enough speed. Because of the fragile state of our finances, coupled with the impact of the recession, I fear that there is little incentive for businesses to take risks of any sort. The Small Business Forum said that just 5 per cent. of its members believe the Chancellor's proposals will create an environment for their businesses to develop, while 87 per cent. have said that the Budget will not increase business or consumer confidence.
I am also concerned about unemployment. It is good that the recent national trend has shown a fall in numbers, but it seems likely that high levels of unemployment will be with us for some time to come. John Philpott, chief economic adviser of the Chartered Institute of Personnel and Development, has said:
"Although a fall in unemployment is clearly better than a rise, this should not be read as a sign that the UK jobs market is recovering strongly."
I agree with that and I fear that chronic unemployment could well be one of the long-term effects of the recession. High unemployment reduces tax receipts, increases public spending, reduces consumer confidence and depresses the housing market. We must therefore target resources towards the creation and development of a well and properly qualified work force.
Schools must give realistic career advice to pupils at an early stage of their secondary education. We churn out too many graduates in fields that often provide few opportunities in the workplace. This leaves many good young people unemployed or near-unemployable. There is an urgent need for those problems to be tackled.
"It's the entrepreneurs and business leaders of the UK who will make economic recovery happen. But they need confidence-confidence in their businesses and confidence in the Government's economic policy. So it's deeply worrying that instead of boosting confidence, the Budget appears to have had the opposite effect."
Mr. Richard Spring (West Suffolk) (Con):
I have read that the origin of the word "swansong" is the myth of the mute swan which, as it approached death, expressed itself with an extraordinary outpouring of noise in a very evocative way. I can only hope, for the sake of
those who are left in the Chamber this evening, that comparisons between that and my speech will be somewhat limited.
At some stage in their lives, all Members will have been asked why they entered politics. It is worth recalling what was happening in this country in the 1970s, when I started working. We were beset by terrible strikes, national bankruptcy and a massive brain drain, and I decided that I never wanted to see anything like that again. Sadly, however, as we heard in the Budget statement only last week, our economic situation is dire yet again. Strikes have returned, and our international reputation has been hugely diminished. The echo from an earlier time is there for all to hear.
It is true that in the current economic crisis-although too many may have given up-unemployment has not, on the face of it, risen as fast as might have been expected, although of course it remains too high. That is largely due to the flexible arrangements introduced by past Conservative Governments. Nevertheless, 54,000 people still leave the labour market each quarter. Far too often, the reason is that they have simply become discouraged. They have given up on the belief that they will ever find jobs, and have joined the legions who are already receiving the various worklessness benefits dispensed by the Government. Who can blame them, given that over the three months to January the ranks of those who had already been out of work for more than a full year had risen by more than 60,000, to 687,000?
It is truly incredible that, on top of all that, the Government are proposing yet another tax on jobs. The proposal to force employers and employees-including those on below-average incomes-to pay even more in national insurance contributions is a real economic and social misjudgment. We clearly have a jobs crisis on our hands, and the introduction of extra barriers to the creation of jobs makes no sense whatsoever. According to a report issued last week by Policy Exchange, the Treasury's own economic model suggests that a 2 per cent. rise in national insurance contributions could reduce GDP by a full 2 per cent. over three years. There is no point talking about job creation and then directly hitting the very businesses that could provide those jobs. That is simply crazy, and I therefore welcome the announcement made by my party this morning.
The statistics on start-ups and business failures reveal part of the reason why our trade balance is so bad despite our massive currency depreciation, and why manufacturing has shrunk so dramatically in Britain. Nothing in the Budget really addressed that, and, inevitably, the business community has universally reacted negatively to the Budget overall.
We have been in a recession on a "first in, last out" basis, according to any international comparison. Why has that happened, given that our fiscal stimulus has been smaller than those delivered in the American, French and German economies? Given that our actual budget deficit is so much larger than those of others, given that it costs so much more to insure our national debt, and given that people talk seriously about the threat to the sovereign credit rating of the United Kingdom, why would we not have been able to aid our economy as much as others even if we had chosen to do so? The reason is the Government's irresponsible spending at a time of strong worldwide growth.
Why was the British economy driven into such a weak state that it was impossible for the Government to take measures that might have helped it? The Bank of England has printed as much money as it dared. With Government spending rising to 53 per cent. of GDP and £200 billion from quantitative easing flowing into our economy, we have two new and unwelcome national records to add to a growing list, both of which reflect the rapidity with which we have descended into the present financial maelstrom. Can anyone imagine circumstances in which, in each of the next two financial years, the Chancellor will be borrowing more money than the entire income tax take, and all that borrowing will be based on highly optimistic growth assumptions and the assumption that the markets will continue to allow us to borrow at historically high levels?
All that was not enough to prevent the United Kingdom from suffering not only the worst recession in the G20, but the worst in living memory. The question that we must ask ourselves is "Why?" The true answer goes back to the year 2002, the year in which the then Chancellor of the Exchequer abandoned the prudent approach of the Administration who had preceded him and let rip. In the years that followed, the budget deficit did not fall below £30 billion annually. In the next five years, right in the middle of what the Governor of the Bank of England was calling the non-inflationary constant expansion or NICE decade, the Government borrowed £176 billion.
The total irresponsibility of consistently leaving a gaping hole in the finances of the country broadly equal to the cost of the entire police and criminal justice system, in one of the most benign economic environments of all time, is the source of our present-day anguish. But then the Chancellor of the Exchequer had abolished the economic cycle, or so he absurdly said. The interest on the stock of debt that has built up is now £42 billion, £2 billion more than the entire defence budget, at a time when we are at war. The Institute for Fiscal Studies calculates that by 2014-15 debt interest payments will climb to £73.8 billion, equal to our defence and transport budgets. The proportion of debt interest payments on total tax revenues will be 10.6 per cent. at that stage.
Under the present Government, we have seen a growth in the divide between different parts of the United Kingdom. Because of a number of funding formula changes, my constituency has experienced a string of NHS budgetary crises. The simple truth is that NHS spend in the Prime Minister's constituency is materially higher than that in my constituency. There is no rational explanation for that, and it certainly has precious little to do with health outcomes. My constituents have a real sense that the spending differentials relating to public services have little to do with need, but plenty to do with the political colour of the area in question. Rural England has become the poor relation of this urban-obsessed Government.
The Government's overspending has resulted in a high cost to the British economy. We have fallen from 11th to 23rd in the league of corporation tax competitiveness. We have slipped from fourth to 84th in the World Economic Forum's global competitiveness report's rankings for the extent of tax burdens and evasion, and from fourth to 86th in its ranking for regulatory flexibility and efficiency of social programmes.
That is part of the reason 1,440 private sector workers lost their jobs each and every day last year, while the number of state employees rose by 126 day in, day out.
The problem goes back to 1998, when the Government introduced the comprehensive spending review. It had been promised by the Prime Minister, but he has since abandoned it. We must ask ourselves why he was willing to continue the practice before the two previous elections but is unwilling to do so on this occasion, as a result of which specific spending impacts remain a mystery. In fact, the Government are so scared of spelling out to the nation the extent of the crisis-so terrified of admitting the true costs of a crisis of their creation-that they are determined to forgo a spending review, and we have had no honesty on the subject.
One of the by-products of the collapse of our reputation abroad is how financial services regulation proposals have arisen in Brussels. For all its imperfections, the City of London is still the jewel in the crown of Europe, in that the range and depth of its financial expertise-and all the ancillary services-are unmatched anywhere else, yet, through neglect and sheer incompetence, this Government have had to witness the growth of EU financial services regulatory proposals that are clearly not in our interest. It is clear that one of the main reasons for that is the catastrophic failure of our tripartite regulatory system.
When the financial crisis broke, the system that was in place was like an animal immobilised in fear by oncoming headlights. I have heard many times from those from other EU countries that Britain simply has no credibility or authority to determine European regulatory architecture because our own has been such a failure, and yet, incredibly, the Government have no plans to reform it. That matches their unwillingness to reform our public sector, where there is both a decline in productivity and a total unwillingness to reform the system.
Especially when reflecting on this Budget and the events that have led up to it, I leave the House on a bittersweet note. Despite the hugely negative view of Parliament and parliamentary colleagues, I for one-I know this sentiment is widely shared-regard it as a huge privilege to have been a Member of the House of Commons and to have represented my constituents in this place. Yet just as I commenced my working life at a time of economic collapse, sadly, I leave this place now with history repeating itself. However, just as before it took a Conservative Government to pull this country back from the abyss, I confidently predict that that will be the case again, some 30 years on.
Mr. Phil Willis (Harrogate and Knaresborough) (LD): It is interesting that I am following the hon. Member for West Suffolk (Mr. Spring) because, unlike him, I do not have a rosy picture of what I inherited when I first entered this House in 1997. I had worked as a head teacher for some 20 years, mostly under a Conservative Government, and every single year there was a cut in my budget-a cut in staffing and in the resources being spent on young people. Therefore, although I agree with many of the hon. Gentleman's comments, I certainly do not believe we should be taking lectures from somebody whose party almost brought the country to its knees before '97.
It is a pleasure to be speaking for the last time in the House of Commons. It is a pleasure to do so not because I am leaving but because, despite all the difficulties, the last 13 years have been an absolute pleasure for me, as someone who came to the House as a 55-year-old-and who had the satisfaction of defeating Norman Lamont at the '97 election. I leave having retained the support of the people of Harrogate and Knaresborough for the last three general elections. That support has been remarkable.
It is interesting, too, that I should be leaving Parliament with my constituency having had very little support from this Government or, indeed, previous Governments. It is a place with a huge amount of residual self-support within it, and it is an entrepreneurial community that has bucked many trends, including the current recession, and long may it continue to do so.
My greatest pleasure in my time in this House has come from chairing the Select Committee on Science and Technology for the past five years, and I want to focus on the future of UK science and engineering. Before doing so, however, I want to pay tribute to the other members of my Committee who are standing down at the election and who have served the House extraordinarily well during their time here: the hon. Members for Bolton, South-East (Dr. Iddon), for Bristol, North-West (Dr. Naysmith), for Daventry (Mr. Boswell) and for Eccles (Ian Stewart). I should also, of course, pay tribute to Dr. Ian Gibson who, sadly, stood down before the end of the Parliament.
I was in the Chamber for today's opening speeches, and I listened to the hon. Member for Meriden (Mrs. Spelman) praising the fact that an incoming Conservative Government would reduce national insurance contributions, paying for that with efficiency savings. I found that interesting because I picked up the following quote from 19 May 2008:
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