Budget Debate

House of Commons

Mr. Peter Luff (Mid-Worcestershire) (Con): It is a great privilege to follow my hon. Friend the Member for Tunbridge Wells (Mr. Norman), and the hon. Member for Ochil (Mr. O'Neill), who spoke a little earlier. Over the years, I have heard many maiden speeches in this Chamber, but those were the first more or less valedictory speeches that I have heard. They were both elegantly constructed, and they constitute an important contribution to the debate. Those who made them will have cause to remember them with pride if they have to leave this place in the next few weeks.

I was pretty disappointed by the Budget speech. It seemed to be an undignified shopping list of proposals, whose aim was more to upstage the Chancellor's Cabinet colleagues than to offer a serious contribution on the economy. I welcome the announcement that a memorial to the Queen Mother will be raised using funds from the sale of a commemorative coin. It is a good idea, but I am not sure that it was appropriate for a Budget speech.

In addition, the Chancellor announced the establishment of the sporting academy. That initiative will grab the sub-headlines, but the funding allocated for the academy is substantially less than the amount robbed from the sports lottery fund to pay for health and education initiatives that should be paid for by the taxpayer. Sports have been short-changed by this Government and this Chancellor, and nothing announced yesterday changes that.

I applaud what has been said by other Opposition Members about the honesty of the Chancellor and the Government. It is right and proper that the differences between the parties should be expressed robustly in this place, but those differences should not be caricatured. I do not agree with what the Government have said about Conservative policies. The impression that they have given is profoundly wrong and the exact opposite of the truth, as my hon. Friend the Member for Tunbridge Wells said. That is unhelpful for good political debate.

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It is absolutely, totally and completely wrong for the Government to claim that Conservative policies would lead to £35 billion in cuts in public services. The Government know full well that of the money we plan to save, £23 billion will be reinvested in those self-same public services. It would still be disingenuous and wrong for them to claim that £12 billion—the difference—is to be cut from front-line public services. But it is utterly, totally and completely wrong to cite the £35 billion figure. There is no intellectual, moral or political justification for that whatsoever. There are words I could use to describe what the Chancellor of the Exchequer said on the "Today" programme this morning about that, but you would not allow me to use them, Mr. Deputy Speaker. I think that the House knows what I mean. Their claim is untrue. No Labour Member who wants to earn the respect of his or her voters at the coming election should dream of using that figure.

Conservative spending plans would increase by 4 per cent. compared with Labour's 5 per cent. So we are talking about increases. The more interesting intellectual criticism by some commentators is whether the cuts are sufficiently robust to measure up to the international challenges posed by developing low-tax and low-wage economies, such as China and India. That is a much more interesting argument. I happen to think that we have got the balance right, but I would take that criticism and explore it. Instead of that, Labour Members rely on something that is simply not true.

Mr. Kevan Jones (North Durham) (Lab): Is it not a fact that the hon. Gentleman's Front-Bench spokesmen argue that real-terms spending will be down £35 billion? On "The Daily Politics" show on BBC 2 on 18 January, the shadow Chancellor said:

"Our plans provide for us to continue growing public spending a per cent. slower each year than Labour and by the end of the"

economic cycle

"we'll be spending . . . £35 billion less than Labour."

Where will the money come from if not from the health service and other services from which people in my constituency have benefited in the past eight years?

Mr. Luff: I am glad I gave way. The hon. Gentleman's comments form a natural introduction to the next section of my speech. We can happily trade quotes. The chairman of the Conservative party said this morning:

"We have made clear in our spending plans for 2007–08 we have identified £35 billion of savings, we will re-invest £23 billion in priority services, the NHS, police, schools, transport and we will save money by cutting waste. It is all very explicit."

Some services would be cut, some of which the Prime Minister often names in Prime Minister's questions. Some £666 million would be saved from the new deal. That is the right thing to do. Youth unemployment was falling faster under the Major Government than it has under this Government. The new deal is not value for money. The Small Business Service will be scrapped, saving £496 million. Good, I say. I go around manufacturing, engineering and service sector businesses in my constituency, and no one has a good word to say about most of the Department of Trade and

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Industry's services. There are a couple of exceptions to that. The manufacturing advisory service is valued and will be kept. Those services that do not deliver value for money, however, will go. We are not cutting valuable front-line public services. We are making sensible economies to ensure that taxpayers' money is spent well.

We would save £18 million by scrapping the regional chambers. Not many of my constituents would cry into their beer about that, because the regional chambers are a complete waste of money. I have a list, ranging from £3 million saved from the budget for the judicial appointment commission; £45 million from the Department of Culture, Media and Sport "Culture Online" website project; £98 million from ending the over-30-month scheme; to £1 billion saved from the Office of the Deputy Prime Minister by abolishing the intrusive local government inspection regimes. Those schemes are nothing but micro-management of local government from Whitehall. They do not improve public service delivery, but harm it. They are the opposite of what we should be doing, which is driving power down to local communities. The cost of enforcing the Deputy Prime Minister's will on local authorities and overriding local will is £1 billon a year.

Mr. Mark Field: At the risk of encouraging my hon. Friend to continue his enormous list, may I tell him that one of the most important cuts for most Londoners would be at the Office of the Deputy Prime Minister? Over the past five years, there has been a ludicrous duplication of roles, with a large number of employees at the Greater London assembly considering strategic London issues under the auspices of the Mayor of London, and an increase in the number of employees and expenditure in the ODPM in the form of the Government office for London. I can assure the hon. Member for North Durham (Mr. Jones) that there will be no loss of front-line services for Londoners.

Mr. Luff: My hon. Friend's intervention speaks for itself, and I agree with him.

Mr. Kevan Jones rose—

Mr. Luff: I am happy to give way to the hon. Gentleman, although he has not been here for much of the debate. Before I do so, however, there is one serious risk for a politician—believing one's own propaganda. He should not believe the propaganda that he has brought with him to the Chamber.

Mr. Jones: I choose to believe in the fact that youth unemployment in my constituency has gone down by 85 per cent. since the Government came to power. May I tell the hon. Gentleman that I have not been in the Chamber this afternoon because I have been attending a Committee considering delegated legislation? The hon. Gentleman listed a number of organisations. My maths is not brilliant, but the total was less than £2 billion. He needs to account for about £33 billion. Can he explain how he will reach that figure?

Mr. Luff: I am tempted to do so, as I have brought the list to the Chamber. It would, however, be rather tedious to go through it, and I would prefer to dip in and out and select illustrations. I am happy to share the whole list

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with the hon. Gentleman after our debate. It is not a state secret, as it is on the party's website, so he can look at it if he wants to. I shall give a few more examples: strategic health authorities will go, saving £617 million. The role of primary care trusts will be changed radically, saving £637 million. The number of quangos at the Department of Health is a scandal, and £651 million can be saved by slimming them down. That is a saving of roughly £1.9 billion, which can be used to pay for the salaries of doctors and nurses. I therefore advise the hon. Gentleman against pursuing that argument because he will lose it if he engages in it honestly. It is only by refusing to engage in it honestly that he has a chance of winning it, but I do not think that he will succeed even then.

On the subject of honesty, I listened carefully to the Chancellor yesterday, and I was disappointed. Sometimes, he is capable of being gracious and courteous. For example, on international debt and development, he has often paid tribute to his Conservative predecessors for their role in creating consensus on those important matters, and I welcome that. However, when it comes to the golden economic legacy, he is less than generous.

When I go home in a couple of hours, I shall get off the train at Worcester Shrub Hill station and I will see a Labour party poster showing the faces of Lady Thatcher, John Major and my right hon. and learned Friend the Leader of the Opposition. Under the pictures of Lady Thatcher and John Major appears the word, "recession", and under the picture of my right hon. and learned Friend appears a simple question mark. That is about as disingenuous as it gets, because an honest Labour party poster would say under the photograph of Lady Thatcher, "Cured the sick man of Europe". Under John Major's face, it would say, "Created the golden economic legacy that the Government inherited". Under my right hon. and learned Friend's picture it would say, "Building the better Britain we deserve". That would be the correct poster to display outside Worcester Shrub Hill station. [Interruption.] Labour Members may jeer, but that is another example of them believing their own propaganda.

My right hon. and learned Friend the Leader of the Opposition, in his excellent reply to the Budget statement yesterday, cited Tom Bower's biography of Gordon Brown, which was published by HarperCollins in 2004. Mr. Bower describes a meeting in the Treasury shortly after the election:

"'These are fantastically good figures', the official concluded. 'The state of the economy is much better than predicted.' Eyes swivelled to Brown. 'What am I supposed to do with this?' he snarled. 'Write a thank-you letter?'"

That is a nice idea, but those figures have underpinned many of the good things that the Government have done. I accept that they have done good things, although they have also done monstrous things, outrageous things and silly things. The golden economic legacy, however, has enabled the Government to proceed.

The Chancellor conveys the impression—and did so again yesterday—that he inherited a dreadful economic situation in 1997. In her excellent pamphlet, "Whatever happened to the golden legacy?", Ruth Lea says that

"he likes to give the impression the country was floundering in a swamp of economic chaos prior to 1997. Nothing could have been further from the truth."

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More importantly, she goes on to say that

"the economy is not currently performing as well as it did when it was under the Major Government. This is because the current Government's policies have hindered rather than helped business and have undermined competitiveness."

That thesis underlines Ruth Lea's excellent paper. She says that there are two main reasons for the economy's strength. First, the supply-side reforms introduced in the 1980s, including trade union reform, privatisation of the utilities and the reform of the tax system under Lady Thatcher, underpin our new economic success.

The second reason, which is perhaps more interesting for Labour Members, is

"the post-ERM transformation in macro-economic policy designed to deliver low inflation and economic stability."

Many of us were wrong about that. We believed in the exchange rate mechanism and thought it was a good idea. I remember that I did—[Interruption.] My hon. Friend the Member for Sevenoaks (Mr. Fallon) is right to say, "What?". I freely confess, it is on the record, and I now admit that I was wrong. I wish the Labour party would admit that it was wrong and abandon its still lingering love affair with the single European currency, although I was interested to hear the Chancellor say yesterday that he would not be revisiting the five tests. That, at least, is something.

Growth was higher on average over the Major years than it has been under the present Government. The balance of payments was roughly in balance by 1997 and is now in catastrophic deficit. Unemployment was falling faster than it has under the present Government and productivity growth was higher than under this Government. Inflation was brought under control by the previous Government. The Chancellor was particularly outrageous on the "Today" programme this morning when he said that inflation was built into the system when he inherited it. That is simply not true.

Mr. Tom Watson (West Bromwich, East) (Lab): What about interest rates?

Mr. Luff: If the Whip on duty wants to know about interest rates, I am happy to quote from Ruth Lea's pamphlet, which states that

"interest rates were falling quickly—the official base rate was down to 6 per cent. by May 1997. And yields on long-dated gilts were already beginning to fall in response to the lower short-term interest rates and the lower inflationary expectations."

Perhaps most worrying of all is our slide down the competitiveness table. The World Economic Forum and the Institute of Management Development show that we have transformed one of the most competitive economies in the world into one that now languishes a long way down the league table. It is a scandal that that has been allowed to happen. Crucially, the public finances are nowhere near as strong as they were. It is common wisdom—we all know, on both sides of the House—that a massive black hole is opening up.

The list of bodies that believe that is enormous. The Institute for Fiscal Studies, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the ITEM Club, the National Institute of Economic and Social Research and the Centre for Economic and Business Research all say that there is a big problem with the public finances after the

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coming election. It genuinely is a vote now, pay later Budget, and it is about time the Chancellor was more honest about that.

There is one thing that the Government did right, and they will be remembered for it. When the history of the Government is written, as it will be in a few weeks, it will become clear that the independence of the Bank of England was the defining moment. By that one move the Chancellor of the Exchequer succeeded in—to use his words—locking in the legacy that he had inherited. But it is an interesting question how well the Bank of England managed the policy. We do not know. Although the Bank appears proficient at the process, it has not been the most taxing time to conduct the analysis.

Sir Alan Budd, who was a member of the Monetary Policy Committee between 1997 and 1999, judged the policy development as follows:

"After the election of May 1997 we saw the establishment of the Monetary Policy Committee with the responsibility for controlling inflation and with the power to set interest rates for that purpose. That has been a brilliant success, but I want to repeat my point it was able to build on a very good foundation."

What an important point that is.

Briefly—because at least two of my hon. Friends want to contribute to the debate, although I notice no one on the Government Benches wants to do so, which is interesting—on council tax, a £200 one-off election year bribe is not good enough. Some changes to the system to provide long-term security for pensioner households is needed. I was hugely amused by what the Chancellor said about buses in the penultimate paragraph of his peroration to the Budget. He said:

"It is now time with the resources available to legislate so that in every community of the United Kingdom there is, from next year, free local bus travel for every pensioner and every disabled person too."—[Official Report, 16 March 2005; Vol. 432, c.269.]

As always with the Chancellor, it is the small print that matters.

The Red Book states:

"Budget 2005"—

that rather ugly modern wording—

"continues this policy"—

that is, pensioners sharing in national policy—

"by announcing free off peak local area bus travel for those aged over 60".

The words "off peak" did not feature in the Chancellor's conclusion of his Budget, but it is an important qualification. If a pensioner's hospital appointment or doctor's appointment is at 9 am, tough. They will have to pay just the same, in the Chancellor of the Exchequer's nirvana. What does "local area" mean? Moreover, the measure does not come into effect immediately but in a year's time. Who will pay for this? A city council such as Worcester, which I know well, will find it extremely difficult to find the money to fund the scheme. It is already monstrously short-changed by the Government.

Finally, the Chancellor refers to

"every community of the United Kingdom".

I have news for the Chancellor, many communities in my constituency have no buses. What good is free bus travel if there are no buses to catch? That is the real

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scandal. The money should have been used instead to develop innovative, community-based transport schemes that would benefit all elderly people without access to cars and the young people in rural England who are caught without proper transport.

I suspect that I have spoken almost long enough—[Interruption.] I am grateful to my hon. Friends for their encouragement. Perhaps they will spare me two or three more minutes on the subject of schools. I disagree about the desirability of starting school at the age of three. Yesterday in his speech the Chancellor trumpeted a 15-year compulsory education system, but I think that he is wrong to do so. The experience of Scandinavia shows that starting school later can be better for the intellectual development of children. We should be discussing raising the school starting age to six, not lowering it to three. I accept that for working mothers proper child care provision is important, but the idea that some kind of academic process begins at a very young age is outrageous. Bribing young people to stay on at school when they want to leave and get out into the work force is equally wrong. I do not share this great love affair for the 15-year compulsory education system.

Dawn Primarolo: Will the hon. Gentleman give way?

Mr. Luff: I give way to a Minister whom I greatly admire.

Dawn Primarolo: I am speechless. The hon. Gentleman read from what he claimed was source material on the economy. Given the points that he has just made about children's access to nursery education, has he ever studied any of the British or international research showing the huge benefits of nursery education to the development of young children through their entire school education, which must be good for raising skill levels? Why does he choose to ignore that bit of evidence?

Mr. Luff: I have studied some of the evidence about which the very able and talented Minister speaks. The loss of play in the early years of children's development is a matter of great concern. Children need to go to school—playschools, playgroups and other pre-school arrangements—to learn to socialise and play, and the way in which academic pressures are being forced down to a very young age group is profoundly disruptive. Academic studies in Scandinavia show that beginning the academic process later is better for children's development. Those studies are there too and I invite the Minister to look at them.

I must conclude by making a point about school funding. The Chancellor made great play of this yesterday in his speech. He spoke about the extra money that he is giving to head teachers in primary and secondary schools, and I am glad that he is finding a bit of money here and there. How much better if he had used that money to narrow the growing monstrous and unfair funding gaps between shire counties in particular and the national average. I do not deny that Worcestershire county council has had real-terms increases in school funding, but those increases are significantly lower than those of its neighbours and significantly lower than the national average, and the gap is growing.

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My constituent Helen Donovan has written an excellent letter to the Prime Minister that he should have received by now. She met him during a visit that he made to Worcestershire. He was not terribly keen to meet her, but she persuaded him to do so using her own very particular charm, and she has written him this excellent letter since. She says:

"You quoted the increased figure of £680 per pupil per year for Worcestershire children since New Labour came to office. For the same period Warwickshire has received £910, Gloucestershire £800, Herefordshire £850 and Birmingham £1,170 per pupil per year increases. Worcestershire has again fallen further behind our neighbours as well as the Shires Average payment."

She points out:

"There are many cases of Worcestershire schools bordering their Birmingham counterparts, (some only 1 mile apart), who receive £750 per child less per year in funding, and yet who have a large percentage of their pupils who actually live in Birmingham. So they live in an LEA who receives the extra funding, but go to school in an authority that doesn't."

How much better it would have been if that money, which was used to get cheap headlines yesterday, had instead been used to address that fundamental unfairness.

There is no doubt this Budget is deeply flawed in its detail and in its strategy. It is indeed a vote now, pay later Budget.

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