Pre-Budget Report

If we are looking at Japan and Italy, that is a perfectly fair point. The hon. Gentleman says that our indebtedness is rising quickly, and I accept that, but the question continues to be what is the best way of reducing it. The point that I was about to make—he did not give me a chance because he intervened a bit too quickly—is that the best comparison is with Britain's position during the second world war, when our debt-to-GDP ratio reached 250 per cent.—two and a half times our entire GDP. What happened after the war—did we tackle the situation with gigantic cuts in public expenditure? No, it was tackled in exactly the opposite way with large public expenditure programmes of just the kind that I am talking about to get the economy working again and to get unemployment down. I hate to say this but, in some says, that inaugurated the golden age of capitalism between 1948 and 1976. [Interruption.] I say that ironically. The fact is that that was a highly successful policy. Let us not forget that, under the Thatcherite policies of the 1980s, we had not just one collapse, but two. It is all very well to talk about Geoffrey Howe's Budget producing a great deal of growth—it did in the end, of course, because of growth in other countries and the rise in exports, and the end of the oil inflation of the 1970s, but it then produced another collapse in the early 1990s. I should make it clear that I am not at all opposed to public expenditure cuts where they are justified. We should always be looking to see whether public expenditure is justified. I think—a significant number of very senior military chiefs, if not most, agree with this—that the £75 billion planned over the next 30 years for continuing with Trident is not justified. I also think that the £10 billion or so for identity cards cannot be justified on a cost-benefit rationale, and that one cannot justify expenditure running into tens of billions of pounds on massive Government Department IT super-computers, which is pretty wasteful given all the experience we have had. Let me say to the Conservatives, who may agree with some of what I have said, something that they may not agree with—that taxes on the wealthy should be boosted so that they pay their fair contribution at a critical time for the nation. The Government are beginning to do that, but in my book nowhere near to the degree that is justified given that the wealthy and the bankers have produced the problem and that the rest of the country are expected to pay for it. That simply cannot be justified—that is the bottom line. We should crack down much harder on tax evasion, which is reckoned to cost the economy something like £25 billion every year, and significantly increase the penalties for those who are caught. We should end the non-dom abuse, as it is insufferable that it has carried on for so long in this country, and we should certainly introduce a Tobin tax on financial transactions. We should raise capital gains tax to the level— dare I say it?-—at which Nigel Lawson left it at the end of the 1980s of up to the 40 per cent. that is the higher rate of income tax. It is only fair that there should be a rate of 50 per cent. on incomes over £100,000 and 60 per cent. on incomes over £150,000. If the situation is as critical as many people believe, such rates are fair and equitable. We need public expenditure cuts where justified, tax increases where necessary but above all a massive public investment programme in job creation to swing the economy out of recession and decline and back into growth and expansion. There is no other realistic foundation for the Government's prognosis of 3.5 per cent. growth by 2011-12. I trust that the Government will make that the highlight of their last pre-election Budget in March. It would be thoroughly good for the economy and extremely popular in the country, so I ask my right hon. Friend the Financial Secretary whether we can have that assurance.