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Budget Resolutions and Economic Situation

I am only too delighted to agree with the hon. Gentleman. My love of the European Union—or lack of it—is extremely well known. Indeed, I tell the House that Europe needs us much more than we need it. There is a huge trade deficit with the countries of the EU. What is more—to add one more thing to build on what the hon. Gentleman said—before we joined the EU, we had a surplus of trade with the countries that then comprised the EU, and that has been totally reversed. The goods trade gap with non-EU countries was also wider according to the last range of figures—it increased from £3.4 billion in December to £4.8 billion—after exports to countries outside the EU dropped by 12.5 per cent. on the month and imports increased by some 1.6 per cent. What we are witnessing is the result of the fact that the UK's growth was increasingly driven by unsustainable factors such as exorbitant public spending, which if not reversed will seriously undermine our long-term potential for recovery. From 2000-01 to 2008-09, public expenditure increased from £364 billion to £617 billion. The current forecast from Her Majesty's Treasury—Ministers may wish to confirm this—is for £702 billion of spending by 2010-11. Government spending as a proportion of GDP has increased from 36.8 per cent. in 2000 to 43.2 per cent. today. That very substantial public sector pump-priming spend is both undesirable and, as one or two hon. Members have said, unsustainable. Given the recession in the private sector and continuing, accelerated public spending, Government spending is likely to be 48 per cent. of GDP by the end of this financial year. Does the Minister believe that that is sustainable? Government spending is back to levels last seen in the mid-1970s. It is estimated that pump-priming increased growth, albeit unsustainably, by 1 per cent. in the past decade. HM Treasury forecast a deficit of £175 billion for the current fiscal year—the current forecast is around £12 billion less than that—but that is almost twice as bad in percentage terms as the UK's deficit at the height of the International Monetary Fund crisis of the mid-1970s. There are effectively three ways of tackling that deficit, which were dealt with in a way by the Secretary of State for Work and Pensions, my hon. Friend the Member for Tatton (Mr. Osborne) and the hon. Member for North Southwark and Bermondsey at the beginning of the debate. One way is to allow tax receipts to erode the deficit by stimulating GDP growth. That has been the Government's main approach, and it has resulted in a 0.4 per cent. increase in growth. The choice after that is therefore unpalatable: tax increases or spending cuts. If the UK is to rebuild long-term economic growth, there is no choice but to reduce significantly the excessive spending of the last decade, most of which was based on borrowed money. Raising taxes would be counter-productive. The UK's tax advantage over most of our EU competitors has already been lost, and further tax rises, as I am sure most hon. Members agree, will further erode the UK's competitive position. Spending cuts in the short term will impact on tax revenues and Government growth assumptions, and tax increases will crowd out the private sector. Again, it was interesting that the right hon. Member for Rother Valley agreed that the site of the Orgreave coal depot has been developed by private enterprise, albeit assisted by the Government. That is what we want to see in many more parts of the country. Throughout the 2000s, the Government's economy was an unsustainable engine for growth and we are now suffering the consequences. In my view, we need to build a new economic model based on saving, investment and exports, instead of the debt-fuelled model of the last decade. We simply cannot go on with the same irresponsible economic policies, which have been followed not only by the present Government but by Conservative Governments in the past. Those policies have recently given us the biggest boom and the biggest bust, and they now threaten our recovery with higher debts, higher instability, higher taxes, higher interest rates and—sadly—a possible increase in unemployment. As the right hon. Gentleman also said, we are one of the great leaders in the world in advanced manufacturing. We have some of the greatest companies in the world operating from the UK as global players with huge strengths in new technology and innovation. I refer especially to AstraZeneca in my constituency. At its peak, it employed 7,500 people in my constituency and that of the shadow Chancellor, my hon. Friend the Member for Tatton. The importance to the local economy of that one firm cannot easily be described. When will the Government ensure that they do not place additional burdens on business, such as the increase in national insurance, fuel tax and regulations? Our manufacturing strategy should be to support all companies, and especially our large companies, in encouraging innovation so that small and medium-sized companies can be the little acorns for the future. As we know, from small acorns large oak trees ultimately grow. If the future of this country is to be built on modern manufacturing strength, when will the Government encourage industry instead of disincentivising industry and manufacturing through increased regulation and taxation—including national insurance, which is another form of taxation that is a disincentive to employment? Why is the Ministry of Defence purchasing aircraft from the United States when an adapted Nimrod MRA4 could fulfil the role, saving several hundred excellent highly skilled jobs at BAE Systems in Woodford, which has been an important part of the UK aerospace industry? Only this week, the Secretary of State for Defence notified me that the Government have finally decided to buy the Rivet Joint, a Boeing aircraft that is 40 years old and has been lying in the desert for many years. Why buy that instead of the Nimrod which could provide jobs in Woodford for people in my constituency and others in south Manchester and north-east Cheshire? I give the Government credit for some of the assistance that they have given to the manufacturing sector through some additional investment allowances in the Budget. That is fully justified and one way in which industry, especially manufacturing industry, can be helped. Despite receiving unprecedented and valuable bail-outs from the taxpayer, the banks et al are providing little or no meaningful assistance to hard-pressed manufacturing via increased lending. The plight of small to medium-sized businesses is a serious one, given that the commercial banks are still—I have evidence of this in my own constituency—refusing to lend to struggling businesses, which are after all the powerhouses of the modern economy. As I have indicated, individual businesses in the Macclesfield constituency continue to find it difficult to secure the affordable credit that is so vital for their survival. So often, the difficulties that they are facing have not been of their creation. They did not, in the main, cause the credit and economic crisis that the world has experienced, and we do not want these businesses to go out of business. The problems faced in my constituency, however, are repeated throughout the north-west. There is still widespread concern about the difficulty of arranging bank loans, despite the assurances being given by the Government. There is evidently growing competition, too, from manufacturers abroad, which are also suffering from reduced orders and overcapacity, and are now therefore flooding the market in the UK with goods at less than cost price. That is affecting manufacturers in this country producing for both home trade and export. Given that about half of UK manufacturing output is exported, surely it is important that the world economy moves forward as well. It is very important to us that we work with the rest of the world. It is important that we co-operate—and that co-operation should extend beyond the European Union—so that we can achieve growth and jobs for the future. That will benefit not just the economy of this country, but, I believe, the economies of countries overseas. It came as bad news for the UK when its trade gap with the rest of the world widened unexpectedly in January to its largest since August 2008. Exports saw their sharpest drop in more than three years, according to the Office for National Statistics. The UK's trade gap in goods and services widened to £3.8 billion compared with £2.6 billion in December. I put this question to those on the Treasury Bench: when will the Chancellor recognise the value of our manufacturing industries to the stability and future success of the UK's economy? When will he reverse the crippling £16 billion in constantly changing regulations and £7 billion a year in new taxes introduced by this Government? And when will he recognise that manufacturing—I repeat this for the third time—is one of the only sources of sustainable, non-inflationary economic growth, and therefore the key to getting out of this damaging recession? With loose monetary policy and sterling, the manufacturing sector can—and, I hope and pray, will—return to positive, year-on-year growth by the later months of this year. As for the road to recovery for the wider economy, first, the huge budget deficit—I say this both to my own party and the Government—must be tackled. The next Government will, I think, continue to ignore this problem at their peril. The incoming Government must act immediately on the deficit and stabilise long-term interest rates. No areas of the Budget should be ring-fenced. Of course there will be priorities, but priority should, inevitably, be afforded to national infrastructure and defence, both of which are of long-term strategic importance to the nation. Sadly, no programme of responsible cuts, efficiency savings and restructuring can ignore social security and health care. I am sure that everyone here, including the right hon. Member for Rother Valley, who chairs the Health Committee, would agree that there is room for savings within the health service bureaucracy. I was personally opposed to having providers and purchasers in the health service. It was a very costly innovation, those many years ago, by the then Conservative Government, and I think that a lot of that money, which has been spent on management, could have gone on patient care and nursing. I declare an interest as an honorary vice-president of the Royal College of Midwives, like the hon. Member for Leyton and Wanstead (Harry Cohen), who I hope will catch your eye, Mr. Deputy Speaker, in a few minutes. I believe that we need to spend more money on what I call genuine patient care—not just treatment but care. Despite the fact that I have not been involved with the Health Committee for many years, I continue to take a considerable interest in health care in this country. As a country we urgently need to establish a medium-term plan to reduce the size of the state, which today accounts for—I say this to the hon. Member for Luton, North (Kelvin Hopkins)—almost half the UK economy. Let us not forget that progress will be dependent on growth, but no economy can successfully grow in the long term with such an over-dependence on central Government and the state. I can say with some confidence that my constituency will, I trust, play its part in that recovery. Mr. Deputy Speaker, it has been a huge honour to serve our country, my constituents in Macclesfield and this House for almost 39 years. This is my valedictory speech; I hope that it has been constructive. I have loved being in this place. I hope that the authority of Parliament can be restored, and that the authority and independence of Back Benchers can grow—