Pre-Budget Report

We have had a good debate. My right hon. Friend the Chancellor delivered the 2009 pre-Budget report after a very difficult period for the world economy. As we see signs of recovery, new confidence has been achieved through co-ordinated action by Governments and central banks around the world, co-ordinated successfully through the UK presidency of the G20. Britain's Prime Minister deserves enormous credit for that achievement. What we can now do is compare the effect on jobs and families of the recessions of the 1980s and '90s—home-grown problems those, as my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) pointed out, not worldwide ones—with the recession that we have just been through. Those comparisons are made in the Treasury Select Committee report before us and they were also made by a number of contributors to the debate, including my right hon. Friend the Member for Holborn and St. Pancras (Frank Dobson), who rightly set out in sombre terms the consequences of some of the policies urged by Conservative party supporters. In the 1990s, home repossessions reached 75,000 a year. The Council of Mortgage Lenders forecast 75,000 repossessions again in 2009. A few weeks ago, it cut that estimate by more than a third because the policy of protecting home owners through the recession has worked. The alternative policy urged upon us—of letting the recession take its course—would have led to far more repossessions, such as we saw in the 1990s. In both the 1980s and 1990s recessions, the number claiming unemployment benefit reached 3 million. Many of us remember all too well the damage to our communities that resulted. We heard about that in the excellent speeches by my hon. Friends the Members for Halton (Derek Twigg) and for Sedgefield (Phil Wilson). Today, the number is just over half that—less than 1.7 million. In the most recent figures, it went down. The increase in unemployment has been half of what was forecast. Our policies of supporting the economy and supporting jobs have been working. Let me say to Conservative Members that the right hon. Member for Hitchin and Harpenden (Mr. Lilley), in an interesting speech, really let the cat out of the bag. The policies urged upon us by the Conservative Front-Bench team are exactly the policies applied by the Tory Government in the 1980s. The difference between us is whether those policies were successful or not. The right hon. Member for Hitchin and Harpenden clearly takes the view that that was a successful experience of management of the economy, but I have to tell him that that is not the country's view. As my hon. Friends have said, the realities of that experience should be taken to heart by Conservative Members. We have not seen in this recession the big increases in long-term unemployment that were so damaging in the 1980s and 1990s, or the big rise in the number receiving sickness benefits, which was in some ways the worst aspect of the 1980s recession, when jobcentres were incentivised to move people from unemployment benefit on to sickness benefit. Quite a lot of those people who went on to sickness benefit in the 1980s never worked again. We are still paying the price for the way in which that recession was managed by the Tory Government. As we have heard, businesses are failing at about half the rate that we saw in the earlier recessions. To put it bluntly, Labour policies have worked a great deal better than Tory policies did. The pre-Budget report, however, did not look back; it looked forward. Big challenges remain in the world economy, and our challenge now is to secure the recovery. That is why, in the pre-Budget report, my right hon. Friend the Chancellor decided to continue support for the economy now, which is what we should be doing. My hon. Friend the Member for Glasgow, North-East (Mr. Bain) was right to underline that point. We must continue to invest in services on which people rely, and in industries that will support our future. The pre-Budget report also spelt out our commitment to halving the deficit over four years. The shadow Chief Secretary, the hon. Member for Runnymede and Weybridge (Mr. Hammond), appeared to edge towards agreeing that that was the right period in which to tackle the task—which would constitute a striking U-turn, given all the U-turns, forwards and then backwards, that the Conservatives have performed this week. The Conservatives have demanded greater detail from the Government, but we still have not heard their target for the deficit. The hon. Member for Twickenham (Dr. Cable) made a characteristically thoughtful speech. He was right to spell out the dangers of precipitate spending cuts, and I welcomed his assessment of the PBR stance, which I think he described as reasonable. He asked whether the bank bonus tax should be made permanent. My answer is no, it should not. It is a one-off measure. For the long term, we shall have the Financial Services Bill and the G20 rules on bankers' remuneration. The Chairman of the Select Committee, my right hon. Friend the Member for West Dunbartonshire (John McFall), spoke of the importance of keeping an eye on the problem of child poverty. We announced in the PBR that households receiving full tax credits and with incomes up to around £16,000 a year would qualify for free school meals for children of primary school age. That will boost the incentive for parents to obtain work and will reduce child poverty. The Select Committee was right to underline the continuing importance of our goals in that regard. As my right hon. Friend the Chancellor has observed on numerous occasions, support in the downturn goes hand in hand with steps to rebuild our fiscal strength once recovery is firmly established. The right hon. Member for Hitchin and Harpenden suggested that the pre-Budget report had not had much to say about that. He was entirely wrong. Across the world, countries are borrowing more. Stabilising the banking system and supporting the economy impose costs, although those costs will be much lower in the long run than they would be if we decided to let the recession run its course. Now, support during the downturn needs to be followed by steps to restore the public finances once recovery is established. We have set out clear goals for the consolidation. We have specified in the pre-Budget report how much we expect to spend in each year up to 2014-15 and how much we expect to receive in tax payments in each of those years, given the tax measures that we have announced and published. As a result, the deficit will fall to 5.5 per cent. of GDP by the end of that period, less than half the current level. Given further consolidation thereafter, debt as a share of GDP is projected to fall in 2015-16. To secure consolidation, the pre-Budget report announces tax rises for those with the greatest ability to pay, while ensuring that those on the lowest incomes will be protected. The pre-Budget report was right to support the economy in the way that it did and we were right to support the economy during the downturn, but now, as the economy starts to emerge from the crisis, we must not think that the job is finished. We have a great deal more to do over the next few years. The pre-Budget report set out actions to secure the recovery, to restore the public finances as we must, and to build our future. I commend it to the House. Question put and agreed to. Resolved,"That this House has considered the matter of the Pre-Budget Report."