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Finance Bill

The truth is that all the tough stuff is not in this Finance Bill; it has all been put by until after the election, on the grounds that if by some miracle a Labour Government are handling it, they will worry about it when it comes; otherwise they will leave it for some other poor party to sort out, which will be us, I fear. It is very much a repetition of what we had in the period 1974 to 1979. The cuts in public expenditure implied by what I have just described, the rises in taxation, and the rise in the debt service burden, and the pain that all three will cause, are not wholly Labour's fault, but they are largely Labour's fault. That is quite simply because Labour ran a huge deficit through the boom phase of the cycle. That makes the bust far more painful than it need have been. That is the grim reality behind another statistic, hidden in the Red Book, about which there has already been quite a bit of debate this afternoon: nearly 80 per cent. of the deficit is structural, according to the Government's own figures. That is to say, on the Government's own estimate, as the economy recovers, only 20 per cent. of the deficit will be filled as spare capacity in the economy is taken up. The remainder will have to be accounted for by measures that the Government put in place, and which have turned out, over the cycle, to be unaffordable. What the country desperately needed from the Budget and its measures was honesty about the scale of the crisis. If the Chancellor had been prepared to admit that the Government underestimated the dangers of coming out with the "end to boom and bust" rhetoric; if he had been straightforward about the size of the structural deficit to which I alluded; and if he had been straightforward about the real-terms cuts in public expenditure that he believes are necessary but was not prepared to talk about after the Budget, he would have begun to rebuild public trust in economic policy. We badly need a dose of the truth if we are to restore public confidence. Without that, there will be no lasting recovery. The truth is that there never was any substance to the so-called fiscal rules. They collapsed at the first sound of fiscal gunfire. There never was much substance behind "prudence with a purpose"—remember that phrase? The plan in 1997 was probably always for a spending binge at the first opportunity. There never was much substance behind "spending to invest"—remember that phrase? The cuts in capital spending announced in the Budget, and the implications for the Finance Bill, tell their own story on that. There is no substance to the fig leaf of the so-called temporary operating rule. I hope that you will permit me to quote from the Treasury Committee report produced this morning, Madam Deputy Speaker, since it is flagged as a relevant document to the debate. It is a Committee on which I sit, and the report is unanimous. It is worth the House's hearing what the Committee said about the temporary operating rule in paragraph 56:""We do not see how the Temporary Operating Rule acts as any kind of constraint at all on the current fiscal decisions made by the Chancellor, and we struggle to imagine any course of action he might have taken in this year's Budget that would have been inconsistent with it…It is clear to us that the only real financial discipline that is currently imposed on the Chancellor is the opinion of the gilt market on the sustainability of the public finances."" That says it all. We are back to the bad old days, in which we are up against the buffers of what we can get away with in the markets, all the time. That is no way to run long-term economic policy. Fiscal rules, prudence and spending to invest were all largely rhetoric, and they were largely from the realm of gesture politics. We can see that now. Unfortunately, the spending binge was all too real, as is the bust now following it. As the dust settles, we will see that Labour Members may have learned the language of capitalism when they were was last in opposition, but they never understood—that includes the Prime Minister—what it really means to regulate and run a successful market economy.