Pre-Budget Report 2009

I will not follow the noble Lord, Lord Bilimoria, in his interesting speech. I do not recognise some of the things that he had to say. I do not see my country in quite the same way as he seems to at the moment. I agree with the shadow Chancellor when he said that we are all in this crisis together, although that is a thing that politicians say before they begin their more partisan remarks. I want to try to be as non-partisan as I can today. I do not intend to go back over the causes of the crisis. I do not want to say anything about the origins of the financial crash, which had its beginnings in the United States and which led to the global downturn, or about the United Kingdom banking crisis and the Government’s wise decision to prop up the banking system, a policy that was followed in other advanced countries. If it had not been followed, the banking system throughout the world would have been in terrible crisis, which is why we had to prop it up. The industrial system does not work without the financial system working with it, which is why we had to act in the way that we did. I shall also not say anything about the G20 and the way in which it led international action to support the world economies at a critical moment, with Governments introducing tax cuts, government spending and co-ordinated action to lower interest rates and increase money supply. It is right that they did that; again, that helped the world to recover and to come out from this very deep recession, as it is now beginning to do. It is also right that the United Kingdom Government, faced by falling corporate and income tax revenues—the main reason why we have a large public sector deficit at the moment—should have acted not to cut public spending at that moment but to sustain public and private demand, thus saving businesses and jobs. I am struck by the fact that even now there are 2.5 million more people in work than there were in 1997 and the fact that our employment levels are higher than those of many of our main competitors. We can argue about the level of public spending. I listened to what the noble Lord, Lord Lamont, a previous Chancellor, had to say, although we should occasionally remember what public spending is for. We need our hospitals, which were in a very bad state in 1997, as indeed were our schools; they were chronically underinvested and I am proud that the Government took the action that they did. We now have a much better situation. It is true that there was a small public sector deficit in 2007, but I cannot remember terrific criticism of that. In fact, in 2007 the shadow Chancellor committed an incoming Conservative Government, if they won the election, to supporting the Labour Government’s spending plans for the following three years. It did not seem that everyone was aware that there was such a large structural deficit. They were not aware, frankly; it is only with what has happened with the collapse of revenues that this has been revealed. It is not fair to say that the Government are not coming forward with a plan. They have a plan—although they have not given us all the figures—to reduce the budget deficit by £100 billion or by more than half over four years. That is the deepest and fastest cut since the Second World War. I advise the noble Lord, Lord Kirkwood, to read the excellent report, where he will see some of the figures. As the Pre-Budget Report shows, fiscal tightening will be achieved by a combination of increased taxation and reduced spending: one-third by increased taxation and two-thirds by reduced spending. On spending cuts, I am pleased that the Government are committed to protecting education and front-line health services and to maintaining police and community support officers.