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Budget Resolutions and Economic Situation

If we look back on the past 10 years, we see that the Chancellor has consistently said that the economic situation is unparalleled in our history. If we look at actual performance, however, we see the truth—that the growth rate has been approximately 2.8 per cent. If we look beyond that to the post-war rates, we see an average increase of 2.5 per cent. The performance over the past 10 years has been achieved in what is generally accepted as having been one of the most benign economic environments and world conditions imaginable. The idea that there has suddenly been a step change in the economic growth performance under this chancellorship in the last 10 years is simply not a sustainable argument. We should remind ourselves that, when the Chancellor came into office in 1997, the International Monetary Fund described the situation as a golden economic scenario. In one of the biographies of the Chancellor it is alleged that, when it was pointed out to him what a fantastic inheritance he had, he said something along the lines of, ““Am I expected to write a thank-you note?”” The difference is this. Many of the essential reforms that were vital to secure greater economic stability and better British economic performance, such as trade union reform, reform of the closed shop, dramatic cuts in personal taxation, privatisation and the big bang, were opposed by the Labour party—totally incorrectly at the time. As we look back over the last few years, we can see that much of the feel-good factor has been generated by rising house prices. As we heard the other day from the former Governor of the Bank of England, much of that arose because of concerns about a recession. The way in which the Bank of England reacted was to ensure that there would be a greater housing boom, despite the potential consequences. Looking beyond the figures that were produced in the Budget report, one of the key indicators of economic success is the improvement in living standards. Figures from the Office for National Statistics tell us that the average weekly gross income per household in 2001-02 was £600. It rose, in real terms, to £616 last year—a compounded growth rate of just 0.5 per cent. The real weekly disposable income per household rose in real terms by only 0.35 per cent. per year. So, for all the headline growth rate increases, the net effect in terms of household incomes tells a different story.