Budget Resolutions and Economic Situation

It has been a pleasure to hear some of today's valedictory speeches. It has also been a pleasure to follow the hon. Member for Brent, North (Barry Gardiner), who mentioned the fiscal stimulus. The hon. Member for Birmingham, Selly Oak (Lynne Jones) also mentioned the fiscal stimulus. Indeed, one of the few times that she praised the Government was when she said that they had taken a lead in some of their work to tackle the difficulties of the recession, but the UK's fiscal stimulus package, which relates directly to the Budget, came after the first stimulus package in the United States. It also came after the packages introduced by the French, with their 100,000 subsidised work contracts, by the Spanish and by the Japanese, who provided $20 billion simply to help households with mortgages. That is almost as much as the total UK fiscal stimulus package. Our package even came after Germany's first $50 billion stimulus—so although I agree with many of the things that have been done, the idea that the UK took the lead is false. The hon. Lady was correct, however, when she quoted the International Monetary Fund later in her speech in relation to the suggestion that the UK is the only G7 economy, and one of only two in the G20, fully to withdraw its fiscal stimulus package in 2010. She was also right to be critical about investment, and this relates directly to growth. If we look at investment in productive assets for the future—in gross fixed capital formation— since the Government came to power, we find that on the OECD 12 list, the UK beat Russia for the first three years after 1997, and Turkey for the next two, but was beaten by everyone else, and has been bottom of the pile every year since then. Even on the wider G20 scoring for the last full year, the UK's investment was larger than only Argentina's and Brazil's, and of course our investment in gross fixed capital formation has been below the EU average in every year since the Government came to power. Today's Budget speech was a pretty miserable epitaph after 13 years, coming at a time when unemployment is higher than it was under the Tories when Labour came to power in 1997. The speech confirmed that the deficit, even at £167 billion, will still be some 12 per cent. of GDP. It confirmed a national debt of £1 trillion, and £1.1 trillion next year, and that that will rise on the Treasury calculation to just shy of 90 per cent. of GDP in a few years. Of course, the Budget also confirmed the cut to the Scottish budget in the coming year. The budget was forecast in the 2008 pre-Budget report at £30 billion—£3.5 billion of capital and £26.5 billion of revenue—but today's figures for 2010-11 are £3.2 billion and £26.2 billion, or a total of £29.4 billion, which represents a cut in the anticipated budget of at least £500 million. The Chancellor also confirmed that no matter what the Government say, their approach to tackling the problems, and especially the deficit, remains one of deep and savage cuts. It is still expected that £57 billion will be taken out of consumption—taken out of the economy—in 2013-14. That is made up of nearly £20 billion in tax rises and nearly £40 billion in cuts, and I ask the Government how they can conclude that taking the equivalent of 3 per cent. of GDP in consumption out of the economy in a single year will do anything other than tip the economy back into recession, especially when the GDP forecasts are based on growth rates of 3.25 per cent. in four of the next five years. We have already heard that that would be at least a point above trend growth, and we are coming from a difficult situation in which a great deal of capacity and output has been lost. I suspect that few believe those growth rates, but if we do not have growth of 3.25 per cent. in four of the next five years, and the Government stick to the plan in the Fiscal Responsibility Bill, the cuts will need to be even deeper. We will then run the risk that if we hit a downturn, we will not have the flexibility to use even the automatic stabilisers, let alone a fiscal stimulus, if we thought that that was required. The Chancellor suggested that he wanted a Budget for growth, but he instead delivered a recipe for disaster, not least because although he restructured the fuel duty increase—we are now getting three 1p increases over the next year—that will add to the three increases in December 2008, April 2009 and September 2009. Those six fuel duty increases in the space of barely two years will represent something close to a 16 per cent. rise in fuel duty, which is massively above inflation, and that will put more pressure on hauliers and families, as well as being an inflationary measure in its own right. I am indebted to Alliance Trust for its most recent inflation report, which tells us that real inflation for people between the ages of 50 and 64 is 4.5 per cent.—some 50 per cent. higher than the official rate. That means that with national insurance going up, which was barely mentioned today, and tax allowances frozen, which was possibly not mentioned at all today, plus the rises in fuel duty, we are seeing a very real cut in the living standards of ordinary people. The bankers still got their bonuses, and the banks, not the bankers, paid the tax—but again under this Government it is ordinary people who will pay the price. What the Budget failed to do, and the Chancellor ought to have done, is to recognise that recovery remains fragile and deliver a continued fiscal stimulus to ensure sustainable recovery. Instead, as I said, he confirmed, in effect, that the UK is the only G7 economy fully to withdraw its fiscal stimulus package this year. The fact that total managed expenditure is down £2.7 billion on the forecast given in the PBR late last year tells its own story. If we were serious about rebalancing the economy to make up for the 1 million manufacturing jobs lost before the recession and the many lost during it, we would have had far more information about the various incentives for growth. I genuinely hope that the equity and venture capital fund for growth works. I hope that RBS and Lloyds will lend money, and that that was not simply an assertion—although when we hear about the actuality that followed the rhetoric of the past year, I am not so sure. I hope the Government are telling the truth when they say that they will introduce a system for the video games industry similar to that used for the film industry; that is dreadfully important in Dundee. Yet the Red Book tells us that in terms of assistance for video games, there will be no cost to the Exchequer in 2010-11. That means no action in 2010-11. Another industry sector will have to wait down the line while its competitors in Canada and other countries are racing ahead with incentives and looking to take the work and the contracts away from the UK. I was pleased that the Chancellor spoke about the green investment bank, but if we are serious about protecting the environment and growing the economy, serious about carbon capture and storage, serious about a biomass non-nuclear base load, serious about offshore wind, wave and tidal, and serious about growing a biomass supply chain, what he could have done today, and what the Treasury should have done, is to change its rules at least to free up the £200 million of fossil fuel levy sitting in a bank account, which can be used by the Scottish Government only to pump-prime such projects, and to change the ridiculous rules that would have seen the same amount of money cut from the block, putting further pressure on other jobs and services. It has been said before that with household consumption down 1.9 per cent. last year, business investment down 24 per cent., and gross fixed capital formation down 14 per cent., it was only Government investment that propped the economy up. I cannot for the life of me understand why we are seeing cuts now, before we have sustained recovery. If the Government understood that, why would they have pressed on with national insurance increases that will take £10 billion in tax from employers and employees over the next three years? The Chancellor spoke a little about the banks and about the success of the bank bonus levy, but that tax is paid not by the bankers but by the banks. He seemed delighted to get an extra £2 billion, but that is £2 billion less to lend to real families and real businesses in the real economy. The tragedy, as I said at the beginning, is that the Budget amounts to a pretence that Labour is investing, when the plans are to cut public expenditure and investment. At least Lord Mandelson was right last year when he spoke about 10 years of austerity under Labour, but it is not austerity that Scotland needs and it is certainly not austerity that the UK economy needs. What Scotland and the UK need is help to get moving, but the Budget today, I fear, does not deliver. It is not a plan for economic renewal, but a political dividing line. It is designed not to deliver growth in the economy for years or decades ahead, but to hide the nature of the Labour cuts to get the Government through to the election in six weeks' time.