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Budget Resolutions and Economic Situation

I refer the House to my entry in the Register of Members’ Interests. It is always a huge pleasure to follow the hon. Member for Rutland and Melton (Mr. Duncan), although his speech was somewhat less dispassionate than he had promised. He was obviously in Tiggerish mood, and somewhat less gracious than usual. I would have thought that any right hon. or hon. Member would recognise that to be able to deliver 10 Budgets in a row is a pretty remarkable achievement on the part of any Chancellor of the Exchequer. For those Budgets to have coincided with, and contributed to, our remarkably successful economic climate is without parallel in modern times. So perhaps the shadow Chancellor, the hon. Member for Tatton (Mr. Osborne) will offer a bit less criticism and a bit more credit to my right hon. Friend when he rises to speak later. The test of whether a modern Budget works consists of three things. First, we must determine whether it provides for sound economic management. Here, my right hon. Friend has again confounded the prophets of doom, including many Conservative Members, who seem to take perverse pleasure in predicting the imminent decline either of the British economy or of the public finances. I have heard much the same speech from the Conservative Front Bench over the past nine years. In the real world, however, I have yet to see any such decline. Who nowadays talks of mass unemployment, sky-high interest rates or out-of-control inflation? It is true that Britain faces many challenges in the future, and I will come to some of them in a moment. However, credit is due to my right hon. Friend the Chancellor. As the International Monetary Fund put it in December,"““macro-economic stability in the UK remains remarkable.””" When the shadow Chancellor gets to his feet later today, I hope that he will have the good sense and good grace to concur with that judgment. Secondly, however, successful Budgets must look beyond today’s achievements and face tomorrow’s challenges. In the end, politics is about the future, not the past. Political parties that are wedded to the past tend to remain stuck in it, which is precisely why the Conservatives remain in opposition. Success goes to those who have the strongest claim on the future. Again, in that regard, this Budget has much to commend it—above all, as my right hon. Friend the Secretary of State for Trade and Industry has just said, its commitment to increased funding of education and science as recognition that our country’s future competitiveness will rely increasingly on access to skills and technology. That brings me to the third test of success for any Budget—whether it works politically as well as economically. Here, my right hon. Friend the Chancellor laid down a dividing line in his Budget that caused the Conservative party—I notice that the shadow Chief Secretary has departed—some discomfort, to put it politely. The Conservatives’ adoption of a third fiscal rule might have seemed a good wheeze when it was dreamt up, but the Budget has exposed it for what it is. Going into the next election promising cuts in public expenditure, particularly in education, will leave the Conservative party no further forward than it has been at the two previous elections. I speak with some feeling on that. My party had to learn the hard way during the 1980s that when one gets the fundamentals of tax and spend wrong, one pays a very high political price. Conservative Members might note that former President Clinton is in town today, and we all welcome him. The Conservative party would do well to heed the advice of President Clinton’s famous election campaign slogan—it is the economy, stupid, not stupid economics, that wins elections. When Labour won office a decade ago, the key policy question that faced Britain was how to end the stop-go economic cycle and how to modernise public services. In both regards, although, of course, there is more to do, there is much progress to report. There are new questions today, however, which are different from the old ones. They boil down to this: how can we ensure that our response to globalisation, including increased competitive pressure from India and China, is characterised by the building of a genuinely inclusive society when there are huge pressures going in the opposite direction? As my right hon. Friend the Secretary of State for Trade and Industry indicated in his speech, globalisation demands many policy responses from Government—fiscal discipline, economic stability, open markets not economic protectionism, a limit on regulation. It also requires investment in skills, technology and infrastructure. In the end, however, important though each of those policies are, the most important policy response is none of those—instead, it is the building of a society in which every citizen gets the chance to contribute and to progress. We now live in a highly competitive world, in which every talent wasted is not just a loss to the individual but a huge economic drag on the country. Britain can succeed economically only if we are mobile socially. Here, bluntly, we have no reason for complacency and much to concern us. As my right hon. Friend the Chancellor reported, it is true that life is steadily getting better for most people—living standards are rising. We all know, however, that in recent decades birth not worth has become more and more a key determinant of life chances in our country. Social mobility has slowed down when it ought to have been speeding up.