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AMENDMENT OF THE LAW

““So what?”” says the Secretary of State for Children, Schools and Families. I know he wants to be Chancellor so badly it hurts. I have to tell him that another Budget like the one we have just heard and he will not have to wait very long. We have the highest Budget deficit in western Europe. Today, the Chancellor told us that borrowing would be up by £20 billion over the next four years. Those are truly dreadful figures; there is a £7 billion increase in the next year alone. We have the highest interest rates in the G7, which means that on top of high taxes, home owners and businesses have a higher interest rate burden, too. Today, for the second time in his very short period as Chancellor, he downgraded his growth forecast once again—not that he could bring himself to use that word. High debt, high interest rates, high taxes and now lower growth; those are the facts that this Budget cannot hide. They tell the story of just how badly prepared we are for the downturn. We all know why; because in the years of plenty, Labour Governments put nothing aside. They did not fix the roof when the sun was shining. What better metaphor could there be today, when it has started to blow off at No. 11 Downing street? What we needed in the Budget was real leadership and a serious plan to get this country out of the mess that they have made. We need a Government who help people when times are tough; instead, we have a Government who kick them when they are down. The key test of competence for any Government is not how they perform when things are going well, but how well prepared they are to cope when things get tough. The key question at these times is how much room for manoeuvre one has given oneself. The answer with the Government is, ““No room for manoeuvre at all.”” In America, they are cutting taxes by 1 per cent of national income. In Sweden, there is a 2 per cent budget surplus to help them out. [Interruption.] I am not surprised that hon. Members do not want to hear the consequences of the waste and incompetence of the last decade with their Prime Minister. In other countries, they are debating what to do with their surpluses. In this country, there is no debate because there is no surplus. In Britain, we have nothing—no room for manoeuvre on the deficit, no room for manoeuvre on interest rates and no room for manoeuvre on taxes. I want to take each of those in turn. On debt, the Government said that they would borrow £47 billion over the last five years. In fact, they have borrowed £165 billion—over £100 billion more debt than planned. Today, it is worse again. They have told us that the current Budget deficit is up another £23 billion over four years. That is the extent of the Government’s economic incompetence. This Chancellor, just like the last one, likes to read out the league tables. Let me read a list of major countries with deficits higher than Britain: Hungary, Pakistan and Egypt. That is the league of debt to which we have been relegated today. For years the Prime Minister and the Chancellor liked to tell us about their fiscal rules and how they would stop us getting into this kind of mess. The Chancellor tried today, and I do not know how he did it with a straight face. The truth is that they have forgotten the most important rule of all: in good years you put money aside for bad years, because you cannot spend money that you have not got. We are ill-prepared on fiscal policy; let us look at monetary policy. Again there is virtually no room for manoeuvre. The Chancellor boasted about low inflation, but let us listen to what the Governor of the Bank of England expects. He predicts"““inflation rising sharply alongside a marked slowing in growth””," and it says on page 139 of the Red Book that inflation—on whichever measure we take—is higher now than in May 1997. That is why the Bank of England has the highest interest rates in the G7. But the situation is in fact worse than that. Let us look at the real figures for inflation. Food inflation: 7 per cent. Housing costs: up 8 per cent. Petrol and oil: up 19 per cent. That is the real inflation paid by families in Britain. If anybody still needs proof of how little room for manoeuvre the Chancellor has, they should just take a look at what is happening to taxes. While our competitors are cutting taxes on enterprise, the Chancellor confirmed today that he is putting such taxes up. Capital gains tax: up by £700 million when we are heading for a downturn. Taxes on family businesses: up by £200 million—that is the new income-shifting rules for family businesses that he did not even mention in his speech. Corporation tax on small businesses: up £800 million as we head for a downturn. This is a crazy way to respond to a slowdown—hitting the very people who create the wealth, the jobs and the investment that this country so badly needs. However, the true extent of the Chancellor’s dreadful predicament is the fact that the Budget—[Interruption.] I am going to mention something that last year was the centrepiece of the tax-con Budget, but which this year does not get even a single mention. He is abolishing the 10p starting rate of tax. That is the tax con that Labour Members all cheered so loudly last year, and soon they will find out what it means. Low-paid NHS workers will have to pay more tax. Part-time teaching assistants will have to pay more tax. [Interruption.] Is the Prime Minister shaking his head? Well, that is the Budget that he introduced. Our soldiers fighting in the heat and dust of Afghanistan will pay more tax. That is the consequence of the tax con. [Interruption.] Labour Members say, ““Shame””; well, they should be ashamed for taxing our soldiers more. The fact is that 5.3 million of the lowest paid will be worse off, and what have the Government got to say to them? They say, ““If you fill in a form, some of you can get some of the money back.”” Taking away people’s money, reducing self-reliance and increasing people’s dependence on the state: that tells us everything we need to know about this Prime Minister and this Chancellor. Let me explain what we would do differently. We would ensure that higher green taxes were paid into a family fund and were used to cut taxes on all Britain’s hard-pressed families. We would help business by sweeping away the allowances and reliefs and cutting the headline rate of corporation tax. We would target tax on binge drinkers, not on every responsible drinker in this country who wants a glass of wine or a pint of beer at the end of a hard day’s work. What was the most important thing the Chancellor should have done in this Budget? He should have set a long-term strategy for economic policy that learns the lessons of the waste and extravagance of the last decade. He should have set out how to share the proceeds of growth so we could get borrowing and tax rates down. That would help not only Britain’s families, but Britain’s businesses, too. Business knows just how bad this situation is. The CBI says it is now like a ““banana republic””. [Interruption.] Those are its words; that is the effect of the prawn cocktail offensive of all those years ago. The British Chambers of Commerce says the Government have ““lost the plot””. Nine in 10 small businesses have lost confidence in the Government. Business has fallen out of love with Labour. The very least businesses expected was competent leadership in uncertain times, but all they have got is dithering. Five months ago, the Chancellor stood at the Dispatch Box and proposed changes to capital gains tax; all the Labour Members cheered, and the policy fell apart. Five months ago, he announced his plans on non-doms; they all cheered, and the policy fell apart. Month after month, the Government said they did not want to nationalise Northern Rock, and they did. They cancelled the general election, which, unbelievably, they had planned to fight on the issue of competence, and they promptly lost half the country’s personal data in the post. Who is to blame for this? It is tempting to blame the Chancellor; after all, he has had the most disastrous start of any Chancellor in modern history. But I do not think that would be fair. Let us be in no doubt as to the real source of this Government’s problems. Ask any question about this Budget, and the answer comes back to one man: the Prime Minister. Why is the Chancellor hitting the low-paid with higher tax? Because his predecessor put it in his Budget last year. Why is the Chancellor left with the biggest Budget deficit in western Europe? Because the Prime Minister spent all the money in the last 11 Budgets. Why is the Chancellor imposing £1 billion in extra taxes on capital gains and family businesses? Because the Prime Minister got himself in a panic trying to copy our proposals on inheritance tax. This country should not be in any doubt about the source of the difficulties that Britain is now in: the Chancellor was put in a hole by the Prime Minister and they both kept digging. What is the situation now? We have the highest taxes in history, the highest deficit in western Europe, the highest interest rates in the G7—[Interruption.] I thank the Secretary of State for Children, Schools and Families for his comment; I know he is Minister for children, but he does not have to behave like one. We have all of that, and the Government are asking us to trust them to get the country out this mess. They just do not get it. The City may be having a credit crunch, but this Government have a credibility crunch. The Treasury has run out of money, and they have left Britain running on empty. All over this country, people are asking questions: ““I am paying more tax, so why is my post office closing?”” and ““I am paying more tax, so why is my maternity unit closing?”” and ““I am paying more tax, so why do I see so much waste and incompetence?”” The answer is sitting opposite me. Never has so much money been raised in taxes spent and wasted. Never again should we be so unprepared for a world downturn. Never again should there be so little room for manoeuvre when things get tough. This Budget shows the whole country the cost of living under Labour, and everyone will conclude that the Prime Minister, who got us into this mess, cannot possibly be the person to get us out of it.