Pre-Budget Report

I will not give way, as I have already done so three times. The cut in VAT is but a temporary stimulus at a time at which prices are already falling. The real disappointment in the pre-Budget report is that no other options on fiscal stimulus were discussed. We have simply been told that the policy is 2.5 per cent. off VAT. I should have declared my business interests at the outset of the debate. One of the problems that businesses face is the cut in industrial buildings allowance, which was the price for the fall in corporation tax. However, if a business is not making a profit, such measures are irrelevant. What are the Government doing to maintain and stimulate industrial investment? There is effectively nothing in the pre-Budget report that deals with that. My right hon. and learned Friend the Member for Rushcliffe has discussed big-ticket items. Maybe there was a case for selective reductions in VAT, because companies will either consider the reduction in VAT as a benefit to their cash flow and keep some of it or use some of the money to reduce prices on one or two things. The 2.5 per cent. cut across the board for a limited period of time must be paid for by a substantial increase in borrowing, which estimates indicate will cost this country by 2014 the equivalent of increasing the basic rate of tax by 2.5p. That is not necessarily the best way to stimulate the economy. We should have had a thorough debate about the long-term alternatives to get the economy going. Unless the Chancellor of the Exchequer addresses monetary policy and at least gets normal service resumed, we will not know whether the Government have done too much or too little with fiscal policy. If there are too many variables, one does not know whether one's policy ideas will work. Particularly from the standpoint of north-west England, I urge the Chancellor to reflect on major defence contracts when he considers his public expenditure options—I imagine that every penny of Government spending is currently under review. The aerospace industry in north-west England accounts for some 40,000 jobs. Many of the constituents of the right hon. Member for Bolton, West (Ruth Kelly) are involved in the aerospace industry, so she understands, and the same is true of the hon. Member for Ellesmere Port and Neston (Andrew Miller). I urge the Chancellor to make certain that projects such as Eurofighter are at least maintained both for their military importance and for their importance to the economy. The public in this country will not easily forgive what the Government have done. My right hon. and learned Friend the Member for Rushcliffe left the economy travelling in the right direction. The profligate spending by the former Chancellor, who is now the Prime Minister, has left us ill equipped to deal with a downturn in the economy. One of the things that worries me about the Chancellor's attitude of throwing bell, book and candle at the problem now is that none of us knows precisely what will happen in the future. This recession is uncharted waters, and I wonder what is left in the locker, if there are further shocks. I hope that the Chancellor will review alternative fiscal stimuli, because industry may need such help. The most important thing is to maintain people in employment, which is the cheapest and best way to maintain economic activity, but I am not certain whether the Chancellor's VAT cut will do that.