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Budget Resolutions and Economic Situation

I have not studied Mr. Peston’s reports, or heard them recently, but I will take the trouble to do so when I have the time. It is not the case that a company would have to invest £50,000 before it saw any gain. As I have just been explaining, a medium company that might be faced with a £500 increase in tax would need to invest only £2,300 more to offset it. In other words, they would not pay more tax. There are many companies and sole traders who, if they use the research and development tax credits, will pay less than they do at present. The objective of the reforms of corporation tax and business taxation is to reduce the rate and to target the allowances in a way that encourages investment and research and development. I am sure that the hon. Gentleman would agree—although perhaps not in public—that some of the allowances that are claimable today were put in place after the second world war when entirely different objectives were important, such as reconstruction, for obvious reasons. It must be right that the Government take the opportunity in the 21st century to ask what is appropriate to encourage investment. Our future depends on us being able to encourage businesses to invest, especially in research and development, on which we have a good record. The Budget will encourage further investment. From a position of economic strength, we have been able to increase investment in science and in education as well as other public spending. We have been able to do more to help businesses invest in the future, as well as making sure that the tax system rewards work and at the same time helps families with children. I can also tell the House that we will continue with our reforms of the labour market, which will help parents to work more flexibly and balance their time at work and time with their families. This weekend sees further rights to request flexible working, which will be extended to more than 2 million carers, and that builds on our other reforms. On that issue, as on so many others, the Opposition are pointing in two separate directions. A few months ago, the Leader of the Opposition said that he wanted more flexible working. He presented himself as the thoroughly modern man. However, in today’s Financial Times he has briefed that he does not want to see any extension to flexible working. He has gone back to the position that we would expect from the Tories. It is not just on family friendly policies that the Tories are saying different things. On climate change, as my hon. Friend the Economic Secretary pointed out in last night’s debate, the Opposition are saying one thing and doing another. On energy, where we have to meet the twin challenges of security of supply and climate change, the Tories are against the climate change levy, but in favour of a tax on holidays. They would tax individuals who fly, but allow businesses to claim back that tax. They say that they are in favour of renewable energy, but up and down the country Tory councils are opposing the biggest single source of renewable energy—wind farms or ““bird blenders””, as the Leader of the Opposition calls them. They are also opposed to the renewables obligation. In contrast, this Budget has a range of measures that help tackle climate change, as the House debated yesterday. If it is successful, carbon capture and storage will present us with an opportunity not just to reduce the amount of carbon we produce, but to export that technology across the world. If we are to continue to remain competitive in the face of the investment being made by China, India and other developing countries, we must also recognise the key role that public expenditure plays in, for example, schools and universities. Perhaps today, the last day of the Budget debate, the Opposition will finally tell us whether they will match our spending plans. Public expenditure, which is £552 billion this year, will rise to £674 billion at the end of the spending review period. That is investment in schools, hospitals, law and order and support for business. Are they prepared to match that spending? Why cannot they tell us? The problem for the Opposition is that they are trying to convince one audience that they really want to cut spending and taxes, and another that they want to spend more on public services. I feel sorry for the shadow Chancellor and shadow Chief Secretary, because hardly a day goes by when the Tories are not promising to spend more money on extra prison places, more housing, and a new border police force. At the same time, they have already promised to cut another 1p off corporation tax. They also have a commitment to abolish stamp duty at a cost of £4 billion, as well as to introduce a transferable married couple’s allowance that would help only 1 million of the 12 million married couples. The Tories have massive spending commitments, but they want to promise tax cuts. That is why they have their third fiscal rule, which attempts to square a circle, but that cannot be done. The rule would have meant £21 billion less spending this year alone. That third rule is a rigid, inflexible approach that takes no account of what the economy needs. It would not have allowed the investment that we have made in public services over the past seven years. The Leader of the Opposition said that his policy would make a ““dramatic difference””. Indeed it would: he would have spent substantially less at the very time that our economy needed that spending over the past 10 years. It is that incoherence that led to the massive economic problems of the last Tory Government in the early 1990s, in which the Leader of the Opposition played such a central and pivotal role as a key adviser.