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Budget Resolutions and Economic Situation

I am grateful to my hon. Friend for that illustration. I think that we can all agree that we are talking about a pretty big debt, and there are only three ways of bringing it down: tax, raising the national growth rate, or cutting expenditure. There are no other ways of doing it, and I want to say a word on each. If the solution was taxation, we would have solved all our problems many years ago. It is a hallmark of this Government that their solution to every problem is tax and spend. That is the only consistent economic policy that I can detect from the Treasury Bench. In fact, the Chancellor is the perhaps unwitting originator of the phrase "stealth tax". When I was shadow Chief Secretary in 1997, the present Chancellor sat opposite me as Chief Secretary. I read up some of his old speeches. They were pretty heavy going, but I spotted that he had criticised taxation by stealth. I started to use the phrase and it came into common currency. We can therefore say that the Chancellor conceived the phrase. I might have been the midwife and given it currency, but we can definitely agree that the present Chancellor is the prime practitioner of stealth taxation, and there are plenty more examples in last week's Budget. I should like to dwell for a moment on a non-stealth tax: the increase in cider duty was at least declared in the Budget speech. I come from the west country, where cider making is an important local industry. It is an environmentally benign, indigenous industry, and an important employer, but it is now being subjected to a vindictive and quite unnecessary 13 per cent. tax rise that will do great damage, particularly as the industry relies on long-term planning. Cider makers plant orchards, or persuade farmers to do so, and sign contracts with the people who buy the fruit. The industry needs to be able to plan, and for the Government suddenly to announce this vicious tax rise shows that they do not understand the second component of deficit reduction, which is raising the level of economic growth. Indeed, the Government's own so-called deficit reduction plan depends crucially on the growth targets that were declared in the Budget, which I do not believe; I think that they are too optimistic. The Government's entire political philosophy—let alone their economic philosophy—is founded on their belief in tax and spend. That in turn depends on their mistaken belief that, in their 13 years in office, they have discovered a philosopher's stone of continuous, low-inflationary growth on which they can permanently depend. Well, the credit crunch happened, and that belief was cruelly exposed. The real foundations for economic growth have nothing to do with Government expenditure: growth depends on the supply-side reforms at the level of the firm that were pushed through in the face of relentless opposition during the 1980s and 1990s. Those reforms secured a competitive advantage for this country in world markets. I cannot overstate the challenge that this country faces, in the face of pitiless international competition. There is only one way to get out of this mess. It is not to spend our way out, or to borrow our way out; it is to earn our way out. That will critically depend on the national growth rate, which has been eroded over 13 years of extra taxes, of tax complexity, of a benefit system that no one understands, and of over-regulation. There is not the slightest indication that the Government understand that, or that they have learned from those mistakes. They do not understand issues of competitiveness, risk or commerce. As we read the Budget documents and listen to the Chancellor speak, we are taken back to the 1970s with all his talk of state growth funds, innovation units and a green bank. Why do the Government want to own another bank? They already own great sections of the British banking industry. Now they want to own a new one, but it will be no more successful than the discredited regional venture capital funds. They were the target of well-merited criticism by the National Audit Office, which showed that their investments are worth only a fraction of what they cost. I hope that my colleagues on the Front Bench will summon up the determination completely to abolish the regional development agencies. They are run by people who do not understand business. They give out loans and grants to the most vociferous, rather than to the most economically deserving. The one in the south-west is a byword for incompetence and waste. My message is that we must concentrate on micro-economics and on getting the conditions on the ground right for business, industry and enterprise to flourish. That is not easy. The easy part of politics is spending other people's money. As Milton Friedman told us, there are only two kinds of money in the world: your money and my money. The easiest thing for me to do is to spend your money. We need to get back to attention to detail, and away from this blundering interference by central Government and all their agencies, with their mania for regulation and taxes as a solution to our problems. The third pillar of recovery involves tackling public expenditure. The challenge there is not to make new, exaggerated claims about cutting this and that, but to show that announced reductions can really be made. I am afraid that we shall have to go well beyond that old favourite, efficiency savings. I have sat through and participated in 27 Budgets, some as a junior Minister, and I have heard references to efficiency savings in all of them. Of course they are important, but I am afraid that we shall need to go much further. We need to re-engineer government. Quite simply, we need to run official Britain at a lower cost, and that is going to require creativity, determination and flair. I see those qualities among those on my Front Bench, and I believe that they can do it, but it will not be easy, and it will require a change. Those on the Government Front Bench have not the slightest interest in this, nor do they have the talent for it. I should like to talk briefly about pensions. They are the submerged whale of the problem. They are submerged because they appear on no Government balance sheet. I have asked Ministers about this at questions. According to many independent estimates, the scale of the public deficit on pensions is more than £1 trillion. Tackling that will also require great courage and determination. I must also mention the EU budget, as I think is expected of me in these debates. It is a disgrace that our net contributions next year will rise to the new figure of £1.6 billion. There is no interest in restraint or economy in the European Union; I know that because I sit on the European Scrutiny Committee and we see a weekly blizzard of proposals for new regulations, laws and spending. Now they want an economic Government in the European Union. That, too, has to be tackled. It will be difficult, because there is no easy or legal way of challenging it—certainly not according to my Committee. Next year's EU budget is going to go up again. My Committee advises that the social policy agenda is going up by 21 per cent., and that the already enormous structural funds are going up by nearly 7 per cent. The decentralised agencies are the European quangos, and they are even less accountable than the ones we deal with. I wonder whether the House can guess by how much the expenditure on those agencies is going to go up next year. The answer is 53.3 per cent. We are in the middle of a European recession. If national Governments are having to make cuts, why cannot the European Union play its part? It is because it has a dynamic to spend taxpayers' money, and there is no countervailing force to oppose it. There is also no willingness on the Government Benches even to challenge it. All these problems need to be tackled, but, as my hon. Friend the Member for South Staffordshire said, we need hope. It can be done. We have faced such problems before, as a country. This is not a counsel of despair because we can overcome these problems. That cannot be done, however, by a Government who spend now, tax later and leave the debt to be dealt with later still.