Budget Resolutions and Economic Situation

I agree with quite a bit of the analysis by the hon. Member for Dundee, East (Stewart Hosie), but not with the proposed policy response, which was, in sum, from my own English perspective, rather a good case for creating fiscal independence for the Scots. However, I will not develop that theme because I want to make some points about the Budget. This Budget, like all Budgets, should be about accomplishing at least three things. First, a Budget should ensure that the public finances are in reasonable shape and that overall financial policy is on a sound footing. Secondly, it should try to contribute to a credible framework for long-term growth. That requires clarity about the role and limits of government, and a consistency of approach, particularly on taxation, so that the private sector can take decisions in a relatively stable framework. Thirdly, it requires an underlying long-term strategy that the country can understand and accept. Without that public confidence in the policy, any Government action, even when it is right, is unlikely to succeed. I shall say a few words on each aspect, mainly the first—financial policy. More or less from the moment he arrived, this Chancellor has been forced to choose between loyalty to the Prime Minister and his party on the one hand, and the best interests of the economy and the country on the other. This Budget is the product of that conflict of loyalty—a phrase that will be familiar to a number of Conservatives in respect of the relationship between Foreign Secretaries and Prime Ministers, as well as Chancellors. The struggle between what the economy needs and what we have, as between the Chancellor's view and the demands that his Prime Minister has been making, were on display today. Everybody in the House—there are not many of us, mind you—knows that Labour's huge structural deficit has to be closed. If it is not closed, then, frankly, financial ruin awaits Britain—a Greek experience. Everybody knows that that can only be done by cutting public spending, among other things. That, in turn, requires a spending review, with announcements of where the cuts will be made and how the most vulnerable in our society will be protected from them. However, this Budget has persisted with the opposite strategy. The spending review remains postponed, and little extra work has been done to plug the gaping hole in the credibility gap of Labour's financial strategy. This has all happened despite the fact that, even over the past six months, the Chancellor could at least have conducted an internal review and given us some idea of where he is going, which a number of Labour Ministers privately think would have been a preferable strategy. He could have bolstered economic confidence by at least beginning the process of rebuilding the Government's shattered reputation for fiscal management. However, that would have meant going to the electorate with many unpalatable spending cuts out in the open, while confirming an unpalatable truth: that much of the spending binge that we have experienced over the past decade, which took public expenditure from 36 or 37 per cent. of GDP to 48 per cent.—a colossal rise—was a profound mistake. To spell out a reversal of policy, even one which everybody knows that the country needs, would have meant confirming that the Prime Minister's record of economic management was also a ghastly mistake.