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Budget Resolutions and Economic Situation

First, I remind the House of the interests recorded in the register. I hope that the hon. Member for Luton, North (Kelvin Hopkins) will forgive me if I do not attempt to explain to him why he might be wrong to think that neo-liberalism is on its last legs. It might be worth reminding him as well that it is still the policy of his Government in principle to join the euro. I agree with his point about tax collection, however. The Treasury Committee recently looked at the state of Her Majesty's Revenue and Customs, and morale there is not good; I certainly agree with the hon. Gentleman on that. Whichever party wins the election in May will need to take a fresh look at HMRC; an awful lot of tax is not being collected, and when the Committee last looked at it, we found a rather dispirited and poorly led service that requires urgent attention. Yesterday, we saw a very rare sight: a pre-election Chancellor who could not give an election Budget. The public finances are in such a sorry state that he could not have afforded a giveaway Budget even if he had wanted one. He called it all workmanlike, but I call it impotent: it was impotent on the public finances, and impotent on the real economy. Like my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton), I am seriously concerned about the economy's future growth prospects. The Chancellor continues to forecast growth of more than 3 per cent. for next year, but the latest independent forecasts—from the first fortnight in March, and gathered together and published by the Treasury—show an average growth forecast for next year of just 2 per cent. I therefore think the Chancellor is being optimistic. Manufacturing output is still falling, business investment has halved, and exports have fallen by 12 per cent. over the last three months, which is one of the sharpest falls on record—my hon. Friend the Member for Macclesfield gave the export figures for just last month, I think. I am not sure whether we will have a hung Parliament, but we have certainly got a hung economy; it is half in, half out of recession. I see that in my constituency: the high street continues to struggle, small businesses cannot get the credit they need, and a third of those registered as unemployed in the Sevenoaks constituency are under 25 years of age. After all the initiatives on youth unemployment and all the extra investment in education and training, that is a shocking figure, and it is worth adding that it has increased by 14 per cent. over the last 12 months. I am therefore seriously concerned about the prospects for economic growth. Turning to the public finances, only a Labour Chancellor could describe a deficit of £167 billion as some kind of improvement on his original forecast. This Government cannot escape responsibility for their appalling record in managing the public finances. They have not balanced a Budget for nine years, and seven of them were years of growth—indeed, they were years of continuous growth—when there was an explosion in the value of receipts: income tax receipts from the financial sector, stamp duty receipts from the housing sector, increased employment yielding yet more tax, and increased corporation tax coming in from a booming economy. Yet for nine long years they have failed to balance the Budget. As we all know, the deficit now stands at some 12 per cent. of GDP, but the structural deficit—which, with respect, I think the hon. Member for Luton, North was a little cavalier about—is 8 per cent. of our GDP and will not be magicked away simply by growth. Tackling that deficit will require firm action on the spending side and, almost inevitably, on the tax side too. That is why this Government have pencilled in some £19 billion of tax increases. Those are now in the pipeline, although the Government have skilfully ensured that most of them will not really kick in until April 2011. The structural deficit is some £70 billion to £80 billion. Some £19 billion is coming in from tax increases and some contribution is no doubt coming from growth, but what the Government have not told the House is the detail on the £30 billion or £40 billion that simply has to come from reductions in public spending.