Pre-Budget Report

When the Chancellor introduced the pre-Budget report, the focus was rightly on the big deficit and big debt numbers. Those numbers included the £178 billion to be borrowed, the £1.7 trillion of national debt forecast for 2014-15 on the Treasury calculation and a share of national debt that will exceed £60,000 per household. They captured the headlines, along with the tax rises, the return of VAT to 17 per cent., and the introduction of the 50 per cent. top rate of income tax. Other headlines were devoted to the introduction of a fuel duty escalator from this spring, and to the national insurance increases for the employed, the self-employed and for employers. Those were the things that captured the headlines. The Government concede that their total package of measures, and the tax rises in particular, will make up about one third of the £57 billion deficit reduction that they need to make after growth, with the remaining two thirds coming from cuts. Labour has already announced cuts worth £800 million to the Scottish budget, but it is the cuts to UK spending Departments that will almost certainly have a huge impact across the UK and in Scotland. Those cuts have been hidden due to the lack of a comprehensive spending review, which will not now happen until after the election. However, the Chancellor did say many things in the PBR. He said that his task was""to ensure the recovery and promote long-term growth".—[Official Report, 9 December 2009; Vol.502, c. 359.]" Yet the PBR and its measures will do no such things, as they will apply the swingeing cuts in public investment that are to come. The Fiscal Responsibility Bill confirms the total level of the cuts, which will do nothing in the short term to secure recovery and promote longer-term growth. Quite the reverse: the cuts—dishonestly presented without a CSR—will suck the lifeblood out of the economy, and make recovery more difficult. I suspect that there are few people left in the House who fail to understand that it was the 2.2 per cent. increase in Government consumption that pumped some life into the economy at a time when household expenditure fell by 3.6 per cent., business investment fell by 22 per cent, and gross fixed capital formation declined by 17 per cent. I want to spend a little time on the latter point: it is not much spoken about, but it is vital. Gross fixed capital formation is the investment in capital assets such as the plant, machinery and technology that will be needed in the future. So where were the plans to help that grow? There were few, or none, in the PBR. The problem is not just with this PBR and what the Government are planning in the middle of the recession, but that the Government's track record when it comes to encouraging investment in gross fixed capital formation has been so weak. Since 1997, the UK has had the lowest average investment of any G20 OECD 12 country. Our investment has averaged 17 per cent., while the OECD G20 group has averaged over 21 per cent. For the six years between 2003 and 2008, our investment in capital formation was the lowest of any of the G20 countries. Between 1997 and 2007, only Russia spent less, and between 2001 and 2002, only Turkey invested less. Even in the broader list of G2O countries as a whole, only Argentina and Brazil have invested less than this Labour Government have since they came to power. Indeed, since 1997 there has not been a single year when the Prime Minister—either as Prime Minister or Chancellor—has seen a UK investment level that was not below the EU average. That demonstrates that the problem is not confined to now or this PBR, as we have had a systemic problem of under-investment in productive capacity since this Government came to office. Why is that important? Many hon. Members who have spoken today have said that we have to get back to inventing, developing and making things, and providing the jobs in manufacturing—of all sorts— that our people need. I agree: to paraphrase what the Chief Secretary said earlier, we need to rebalance the economy. This is all about jobs and, to be fair to him, the Chancellor spoke about jobs and employment a great deal in his PBR speech. He did not tell us that unemployment now is higher than it was under the Tories in 1997, when Labour came to power, and he glossed over the problem of the 943,000 youngsters who are unemployed under Labour now. That is a higher figure than when Labour came to power in 1997. However, those are not the key things. The key question is: what is the Chancellor's plan? The plan, it would appear, is to slash public investment too quickly and so weaken the chances of recovery. The result of that will be that tackling the deficit and the debt will be rendered more difficult, as will creating employment and jobs—especially if the heroic growth rates fail to materialise, or if we tip back into a double-dip recession. I am afraid that unemployment will keep on rising, as it did for two years after the technical end of the 1991 recession and for three years after the technical end of the 1980-81 recession. In the pre-Budget report, the Chancellor said that""we need to invest in the dynamic sectors of the future—in digital".—[Official Report, 9 December 2009; Vol. 502, c. 359.]" Here are some responses from those who work in the digital industry, which is vital to Dundee. Colin MacDonald, studio manager at developers Realtime Worlds, described the PBR as a "missed opportunity". Alan Mitchell, the chief executive of the local chamber of commerce, said that there were encouraging signs, but that many measures were a waste of time and that""there was no specific mention of the games industry."" Dr. Richard Wilson, of TIGA, the software firms' association, said:""While the public finances need to be brought under control…the UK economy desperately needs to go for growth."" But, of course, there was nothing in the PBR for the games sector in particular.