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Amendment of the law

I, for one, believe that the right hon. Gentleman's ambition should be higher. I think the Labour party could do a lot worse—I genuinely mean this—than make the right hon. Gentleman its leader. In fact, it is doing a lot worse, so perhaps he should consider this course sooner rather than later. This Budget is, as right hon. and hon. Members have argued in today's debate, essentially about the issue of borrowing and debt and the state of the public finances. We have seen a spectacular deterioration in our public finances. Just a year ago, in the 2008 Budget, it was anticipated that we would need to borrow £38 billion this year—a not insignificant sum in itself. Now, however, we are looking at a figure of about £175 billion—the highest level of borrowing in our peacetime history. As the IMF has made clear, we have the highest deficit in the G20. The figure for debts—an area where we were relatively better placed than many of our competitors—is also pretty frightening. In the early years of this Government or up until relatively recently, it is true that debt fell as a percentage of gross domestic product from 42 per cent. to 36 per cent. As the Institute for Fiscal Studies, and, indeed, my hon. Friend the Member for Wellingborough pointed out, it has fallen less than in than the majority of OECD countries during those years, but it is now rising more quickly. Let us not forget the sustainable investment rule, which says that debt should be no more than 40 per cent. of GDP. We have learned from the IFS today that such is the state of our public finances that the rule is unlikely to be met until 2032. In fact, we are going to see a doubling of the figure in the sustainable investment rule level up to just below 80 per cent.—overtaking in the process the debt levels of France and Germany. Those figures are based on what the Government provided yesterday, yet the real concern persists that what we heard yesterday was an underestimate. Within an hour of the revealing of the Budget figures, the International Monetary Fund predicted that growth would be worse in 2009 than the Government's projection, and that we would still be in recession in 2010. Conservatives and, I am sure, Members in all parts of the House hope that the Government's figures will be proved right and the IMF's will be proved wrong, but the Government's claim that growth in 2011 growth will be at 3.5 per cent. is clearly unsustainable. As my right hon. Friend the Leader of the Opposition said yesterday, that is a trampoline recovery. Independent forecasters whose views were published by the Treasury only a month or so ago predict growth at such levels as 2.2 per cent. and 2.6 per cent. in 2011, 2012 and 2013, not 3.5 per cent. It appears that after many years of the Prime Minister's promising that there would be no return to boom and bust, it is the Government's aspiration and hope to return to boom and bust, with another boom in 2011. Let us look at the small print of what was published yesterday. Paragraph 108 on page 26 of the National Audit Office's "Audit of Assumptions" states:""The Treasury has reduced its trend assumption further for Budget 2009, incorporating a permanent reduction in output totalling around 5 per cent, phased in between"" the third quarter of 2007 and the third quarter of 2010. What that means is that the productive potential of the United Kingdom has taken a permanent hit of 5 per cent., yet the Government still think that growth of 3.5 per cent. will be possible in 2011. As the hon. Member for Carmarthen, East and Dinefwr pointed out, there is no historic precedent for that sort of recovery from a recession. The significance of that is twofold. It makes the claim for growth in 2011 less credible, and it reveals that much of the £175 billion deficit—£140 billion, according to the Institute for Fiscal Studies—is structural. Given the current projections, we are not likely to be able to grow our way out of a recession unless serious measures are taken. The test of the Budget is whether it represents a credible route out. As we heard from my hon. Friend the Member for Sevenoaks, the Government's record on projecting the public finances is so grim that they consistently overestimate the position, yet even according to these projections we shall have to wait for many years. For the last eight years or so, the Government have tended to say that the Budget will balance in about two years' time. In last year's pre-Budget report the period was extended to six years, and, in this year's Budget, it was extended to eight. Those are hopelessly optimistic assumptions. Yesterday the Government had an opportunity to explain how to restore the public finances, and they failed to do so. What did we get? We got their proposal to alter their own spending plans in 2011. In 2010, they will still be increasing spending, although they believe that the economy will be growing. As my hon. Friend the Member for Tatton (Mr. Osborne), the shadow Chancellor pointed out, if we use the methodology that the Government have used against us for many years, any reduction of announced spending constitutes a cut. We see this as a cut of £84 billion. That is not just a pedantic point. At the last election, the Government managed to reach a figure of £35 billion on the basis of an alteration in our announced spending plans. We heard the statements made by Labour Members at the time. The current Chancellor said that it was the equivalent of sacking every teacher, doctor and nurse in the country. Over the past 10 years, the central argument has been that the Government could always afford these big increases in public spending: increases of 4, 5 or 6 per cent. We have argued against that, and in doing so have been portrayed as slashers and burners of public services. We could not afford those increases then, and we cannot afford them now. The question now is how we can deliver quality public services in an age of austerity. The Government, however, continue to search for the old dividing lines, trying to pretend that we are the party that cuts public spending while they are entirely different. What is the Government's approach to bringing down the deficit? Let us look at tax. They have tried to highlight one issue above all others: the 50p rate. That has the singular achievement of being cynical in at least four respects. First, it is a breach of a manifesto pledge. The Secretary of State for Energy and Climate Change was very keen for the shadow Chancellor to intervene on him, and I am perfectly prepared to let the Secretary of State intervene on me to say whether he denies or accepts that the Labour party's last manifesto stated that it would not raise the basic or top rates of income tax in the next Parliament and therefore that the policy announced yesterday is the clearest and most blatant breach imaginable of a manifesto pledge. Secondly, it is cynical because it is a distraction from other taxes. In truth, even before the next general election, most of the taxes imposed will apply across the board, such as the fuel duty increases, and the increases in the cost of alcohol and tobacco. However, the really big tax increase will happen after the next general election. As soon as the election is over, Labour will increase national insurance contributions, affecting everyone earning more than £20,000 a year.