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AMENDMENT OF THE LAW

It is always a great pleasure to speak in a Budget debate, representing as I do the City of London, as well as the city of Westminster. In many ways, this Budget has not involved that much economics. Bearing in mind the contribution of the hon. Member for Burnley (Kitty Ussher), I am always a tad sceptical when people suggest that the economic cycle has ended or that this Government’s economic record in the past 10 years is beyond any norm. I am afraid that it is always the way that, on thinking that one has reached a new paradigm, reality comes back to bite before too long. The hon. Lady raised a number of issues that I, too, wish to discuss, but I am less convinced than she is that there has been a turnaround in all economic fortunes and that it is entirely down to the current Chancellor. To a large extent, this Budget will be remembered as a great political Budget. For those who were here, the first 48 minutes or so perhaps did not seem terribly exciting. Then, the Chancellor pulled the rabbit out of the hat in the last 30 seconds with a cut in the level of income tax, but it has to be said that it will not come into play until some 13 months’ time—from 5 April 2008. This Budget reminded me of one that seemed to go down very well with the press—as I suspect this one initially will, on the television tonight and in the headlines tomorrow—that of March 1992, which was presented by the now ennobled Norman Lamont. As Chancellor, he introduced the lower, 10 per cent. tax rate, which has now been abolished. I suspect that it will reappear before too long, when a future Chancellor wants to pull such a rabbit out of the hat. There are similarities between the two Budgets, and as I say, I suspect that this one will also go down quite well. People will then begin to unravel its fiscal and economic sense in the weeks and months ahead. Today’s Budget is also politically quite clever. Its income tax and corporation tax cuts could drive a wedge between members of my party, and bring the tax cuts debate nearer to the surface in a party that considers itself—rightly—as a potential Government in waiting. Like one or two other contributors to today’s debate, I feel it appropriate to take a broad overview of the past decade. It might well be the Prime Minister’s last Budget, but—who knows?—it might not necessarily be the Chancellor’s last. We assume that he is going to make the move from No. 11 Downing street to No. 10. He may yet produce further Budgets—perhaps not—but presumably, this 11th Budget will indeed be his last. It is only fair to give credit where credit is due: there has been a tremendous record of economic stability. As someone who used to be in business, I wanted stability, and most incumbents in business do. However, one problem with a somewhat flat level of stability—I am not suggesting that we have that now—is that it is often a big disincentive to innovation. So we should not look upon stability itself as being a tremendous goal, but it must be recognised that we have had great stability in the past decade, and most people in business would give the Government credit for that. It has been remarked that one of the most important early developments was giving independence to the Bank of England. However, it is less well remembered that in transferring responsibility for interest rates to the Bank, the Government took away its regulatory role. As a result, the Treasury’s role within the City and economic affairs has been enhanced, compared with that of the Bank. There is no doubt that growth has been maintained and that is partly as a result of global expansion. The economic power of India and China, which are the great super-powers of all of our lifetimes—I suspect that we will see accelerated evidence of that in the decade to come, let alone in the generation to come—has had a great deflationary effect and will continue to do so. There is an enormous amount of spare capacity in both India and China, assuming that neither has any political upheavals. I recognise that there has been some skilful management of the economy, both here and in the US. One looks at Alan Greenspan’s actions, especially in relation to the downturn in the fourth quarter of 1998 in south-east Asia, but also in the aftermath of 9/11. We also had a terrorist attack, on a much smaller scale, less than two years ago, which might have had a negative effect on the City and tourism in London, and we have to give credit where it is due to the Chancellor and the Treasury for the skilful management after that event. That management stands in contrast to what has happened with many of our European neighbours, but as I said in an earlier intervention, it smacks of a paucity of aspiration for us to talk endlessly about our record in relation to Germany, France or Italy over the past 10 or 12 years. In many ways, those countries have not succeeded to any great extent and we should aspire higher.