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Finance Bill

My hon. Friend has been absolutely right to investigate in depth something that also interested me some years ago—an interest I share with the hon. Member for Wolverhampton, South-West (Rob Marris)—which is the importance of considering off-balance sheet finance in assessing the overall strains on the economy from the terrible mistakes that have been made. I completely agree with what my hon. Friend has just said. I have just read out hubristic and delusional stuff from the then Chancellor, who is now Prime Minister and who seems unable to grasp the scale and depth of the crisis with which we are faced. The origins of the calamitous fiscal crisis that we are dealing with—this year's Finance Bill will be only the first step in a decade's worth of Finance Bills that will have to address that crisis—do not lie in the collapse of Lehman Brothers, the sub-prime crisis or even the spending spree in which Labour has engaged in the past few years. The origins lie at the heart of new Labour and its rhetoric and at the translation of this rhetoric into a policy that, in a succession of big spending Budgets starting in 2000, has left the public finances in a parlous state. It should be recalled that new Labour won the public's confidence in 1997 by promising the country that it would honour Conservative spending plans. That was the origin of "prudence with a purpose". Of course, it was in 2000 that Labour felt finally able to be released from those shackles. The then Chancellor initiated what I think—although I might be contradicted by the Financial Secretary—was the biggest sustained spending binge in peacetime. Public expenditure has risen by a little under 50 per cent. over that period. In a debate on the 2000 Budget, I said:""Everybody welcomes increases in public spending, but they are only worth having provided…they are affordable over the cycle and that the higher spending in the long run does not end up lowering the long-run growth rate…Control of public spending is very difficult to manage and easy to lose. It takes only a small flicker over the business cycle…and public spending becomes extremely difficult to control.""The problem is that Labour is in a state of complete denial about the existence of cycles. The Government say that they have put an end to boom and bust and that somehow they are not in a business cycle."—[Official Report, 27 March 2000; Vol. 347, c. 96.]" What I find so interesting about those remarks is not that I said them, but that I could have read them out for any Labour Budget, more or less over the past decade, and they are as applicable now as they were when I made them in 2000. Of course, we have not just had a small flicker over the cycle; we have had a massive boom in spending, and we are now faced with an unprecedented squeeze. The question we have to address is whether this Finance Bill goes remotely far enough towards providing it. The Government are still, if the truth be told, in a state of denial about the scale of that needed squeeze and its origins. When, only a few days ago in the Treasury Committee, I asked the Chancellor whether he could confirm that the Red Book announces Labour plans to cut public expenditure in real terms, he seemed in a state of denial about it. He would not answer the question. But the Red Book does indeed confirm real-terms cuts in public expenditure over the planning period if Labour is elected. Still, the Red Book fails to provide the information directly; it requires quite a bit of addition to obtain the total managed expenditure line for the forward years, but it is in the Red Book. The Government have announced cuts in real terms in public spending. Just to be clear, this Budget and the Finance Bill are not making cuts in previously announced Labour increases; the Red Book is announcing real-terms cuts after taking account of inflation. This is a profound shift in Government economic policy. In fact, I now think it is the biggest U-turn in fiscal policy since the IMF imposed cuts in 1976.