Pre-Budget Report

I would like to hear how much extra public investment the hon. Gentleman is talking about. Some of the public investment has just been pork barrel—although I have to say that I am grateful for the current proposals for dualling the A46. His tax proposals are marginally stimulating if he is right that some people who pay high tax save more and others on lower tax would spend slightly more, but he was not putting that forward as a fiscal stimulus, and he was prudent not to do so. Many people will dilate on the appalling scale of the fiscal gap that is exposed now that we have up-to-date figures. If the Government had been a trading organisation, they would have been obliged a long time ago to update the ridiculous Budget forecasts that they put out a few months ago. The Prime Minister should be ashamed of himself for getting all his Ministers to repeat the 38 per cent. figure for debt to GDP ratio, which has not even kept up with the Office for National Statistics—it is a completely political figure. The comparisons with other countries are made on a completely different basis from the Maastricht-based accounting system on which the Europeans approach this matter. On the basis of figures used by any other country, we are already at about 60 per cent. debt to GDP ratio. What is worse is that everything shows that the situation is deteriorating. We are not talking about how to pay for the VAT reduction, which is what the public have been told. We are faced with paying for years and years of having run mounting deficits when the current Prime Minister was Chancellor. We are also faced with the rapidly deteriorating position that the recession is beginning to cause, which will get worse as it goes on. The judgment about risk is quite clear. Everyone knows that my preference for fiscal stimulus, if we could afford it, would be a VAT reduction, but I do not have time to argue that case. All possible approaches have upsides and downsides, but VAT reductions have a bigger impact on big ticket items such as cars, furniture and carpets, particularly when we approach the magic period in which the temporary VAT reduction is about to go up again. I have no doubt that had the Chancellor been allowed to print the figure that the Treasury wanted to print, to try to make the future more credible—it was going to put VAT up to 20 per cent. by the time we got to 2012—that would have given an even bigger stimulus to spending. Neither do I doubt that taxes will go up substantially when we get there. As usual, I have used all my time, and have not been able to go into detail, so I shall conclude. At the heart of this issue is the condition of the banks. All democratic politicians will spend the next two years denouncing bankers, who have behaved badly in the past, but they are not on some sort of strike for malicious reasons. Instead of getting them in just to shout at them, we need to get them in to explain why the first package has not worked. The recapitalisation is too expensive—far more than anyone else's—and so are the loan guarantees. The shape of the package needs to be fixed. That is what needs to be done now.