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AMENDMENT OF THE LAW

My right hon. Friend the Chancellor should be congratulated on a solid, sensible, workmanlike and utterly unexciting Budget, which was exactly what we wanted from him. We should warmly welcome what he has done for children and for education. Had I been Chancellor—in a parallel happy land—I would have splashed out more as I am a generous Yorkshireman, not an ungenerous Scot. I would certainly have agreed with the points of my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) on the tax on strong cider. That retails for about £1.70 a litre in Grimsby—I should know, because I drink a lot of it—and threpence a bottle on that will make no difference at all. The highlight and most interesting part of the Budget was its reception by the Opposition parties. The Conservatives, who have demanded tax cuts and opposed youth training expenditure and much of the expenditure on education for years, suddenly started saying that we should have put aside a nest egg to face a difficult future. They started telling us that we should have built a roof, but they did not tell us exactly what kind of roof. The speech made from the Conservative Front Bench was frankly vacuous, rendered better only by the contrast with the speech made by the leader of the Liberal Democrats—it was even worse. The Liberal Democrats have the advantage of retrospective infallibility. The essence of their argument was that what Labour had done was wrong, but what we have taken up from the Liberal Democrats was right and good. They have taken up and discarded a range of ideas in their lifetime, so we are bound eventually to stumble on something that they have advocated some years back. Thank heavens the right hon. Member for Sheffield, Hallam (Mr. Clegg) did not mention the euro and the benefits it would have brought us had we joined. The hallmark of the speeches by both Front Bench spokesmen for the Opposition parties was that one can turn abuse into an economic strategy. That is the essence of what was being said. Interestingly, those who have done best out of our Labour Government—the wealthy, the City, finance and the rich—are now the most critical and most demanding of change from our Labour Government. I thought it was ill advised of my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform to sign the praises—the Mandelson song—of the virtues of wealth and high earnings, because I would certainly complain about obscene wealth. The demand made of wealth is that it fulfils its obligations to society, and it is not doing so on the necessary scale. The TUC booklet ““The Missing Billions”” tells us that £12.9 billion of personal tax and £11.8 billion of corporate tax is not paid to the Treasury because of avoidance schemes. As a result, the burden of taxation presses more heavily on the rest of society, in particular on the personal taxpayers and the lower range of taxpayers. Tax is now pressing too far down the scale in this country. It is ridiculous that people on the minimum wage are paying income tax—that is clearly wrong. We should make it one of our concerns to relieve the multitude who labour, as they used to be called—it is the multitude who struggle now—because income tax is pressing too heavily on them. That tax is coupled with the burden of increased food, fuel and utility prices and increased council tax, and those people need some relief from those burdens. We should either raise the limit at which tax comes in or double the personal allowances to give everybody some relief and some money to spend to boost demand. We could pay for that next year by increasing the taxation on wealth—on earnings of more than £100,000—to 50 per cent. We could splash out more money by doubling the winter fuel allowance. We need to put money into people’s pockets to spend and thus boost demand, and we need to direct that money to the less well-off. Above all, we need a cut in interest rates. We have the highest interest rates in the world. Why? It is because we put finance in control of them. When we put the Bank of England in control, it meant that the interests of finance—having dear money and a high and stable exchange rate—became dominant in our national policy. It would have been far more sensible to have had not just a single rubric for the Bank of England, to keep inflation to 2 per cent, but a second rubric, like the US Fed, to maximise employment too. The result is that I must praise what I call Bushnomics—what they are doing in the United States, as opposed to what we are doing here. They have suffered from similar problems: the dollar is overvalued, although it is coming down, and they have a balance of payments deficit, as we do. Ours is slightly smaller, but it is now approaching 5 per cent. of GDP. In that situation, the markets will bring both the dollar and the pound down. The Americans are welcoming that with benign neglect and letting the dollar fall, as they did in the 1980s and again in the 1990s, with beneficial effects on the exporting sector of the American economy. We should do the same, but the Bank of England will feel obliged to keep interest rates high—it is already saying that—to stop any slide in the pound. The pound has been the main instrument for defeating inflation, by making imports cheap and compelling manufacturing to discipline itself and cut costs to stay competitive, so the result of the high pound policy is that we have lost more than 1 million jobs in manufacturing. We live by manufacturing, but it is now a much smaller part of the economy. We may contrast that with the situation in Germany, where there have been far fewer labour-shedding cuts than here. German industry has reinvested, re-equipped and absorbed the skilled labour force from the east, and would have put itself in a very powerful position were it not shackled by the overvaluation of the euro. We need a powerful industrial base, and the Americans will get one as the dollar comes down because they have a much more powerful economy. Unfortunately, we have put all our eggs in the basket of finance. Finance has flourished under this Government, and indeed under the previous Government, but it cannot provide the jobs. What are we to live on when the oil contribution finally fades away? Finance is the dominant part of our economy now, and it is inherently risky. It takes risks for profit; hence the sub-prime crisis, the special purpose vehicles and the liquidity crisis. Those are the risks implicit in having finance as the dominant sector of the economy. The Labour party and the Labour Government need growth, because how can we improve the lot of the people except by increasing taxes, public spending and borrowing or by economic growth? Economic growth is the better, more straightforward way, but it is now threatened by contractionary tides both from outside and created in our economy. We are much exposed to those tides, which is why we needed a more expansionary Budget. It was disappointing in that respect. We need a touch of Keynes and a touch of Bushnomics.