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Budget Resolutions and Economic Situation

I was referring to the tax increases in this Budget, whereas the hon. Gentleman is referring to the increase in insurance, which was signalled by the Chancellor in the previous Budget. I agree, of course, that that applies across the board. My point is that most of the additions in this Budget are concentrated, with a degree of equity that we have not seen before, on those who can afford to pay for them. As I was about to say, my only concern is why the Chancellor did not go further. Why are the 50 per cent. tax rate and the bankers' bonus taxes just a temporary one-off? Why are they not being made permanent? Why not take the cap off national insurance and make the well-off pay exactly the same proportion as the rest of the population? Why not end the loophole whereby City insiders redefine their income as capital gains so that they pay merely 18 per cent. capital gains tax rather than 40 per cent. income tax, which has made the City of London a virtual tax haven? Taking the lead from the Prime Minister, why do we not bring in a highly popular Robin Hood transaction tax on the banks, as other countries have done, without waiting for an international consensus? Yes, it would be better with such a consensus, but it can certainly be done effectively without it. If all those eminently reasonable proposals were pursued, the balance between tax increases for those who can well afford them and public expenditure cuts that hurt everyone else and begin to undermine the very core of our society could be substantially redressed. One of the paradoxes—it has already come out in our debate—is that all three parties seem to be saying, with varying degrees of panache, that the coming round of spending cuts will be more swingeing than under Margaret Thatcher. Some parties say it with relish—the Tories will always grab at a chance to shrink the state—but the Labour party is very different in that respect. It might regard the cuts as a necessary pain to be endured, but if that is the party's view I would question it on two grounds. First, if the Government are anywhere near accurate in their growth forecasts—1 to 1.5 per cent. this year; and 3 to 3.5 per cent. in the succeeding two years—the need for massive destabilising cuts is hugely reduced. If the Government are right in their predictions for the two years 2011 and 2012, gross national product will increase by about £100 billion, of which the Government's take would be roughly £40 billion. That alone would go a long way towards closing the deficit, thus significantly reducing the need for spending cuts. I would be the first to express the doubt—other hon. Members might have the same view—that Government forecasts might well be unduly optimistic, but even if growth were only 2 per cent. a year, which I think is eminently plausible for those two years in a recovery, Government revenues would still increase by nearly £30 billion, which would make for a major shrinking of the deficit, greatly reducing the need for highly damaging cuts. There is a second point, however. This is the one part of the Budget with which I take issue. In his statement, my right hon. Friend the Chancellor said:""We will not go back to the interventionism of the past, but nor can we return to the hands-off approach of the free-marketeers."—[Official Report, 24 March 2010; Vol. 508, c. 261.]" Of course no one wants a reversion to overall state planning, but the idea that the private sector is, or should be, exclusively the engine of growth, or that it is the sole or main generator of efficiency, is a Thatcherite canard that should be dispensed with rapidly, because there is simply no evidence to justify it. It cannot be asserted too often or too strongly that the present recession was caused by the dramatic collapse of private investment before the autumn of 2008. Between the preceding year and the succeeding year, there was a cataclysmic collapse in private investment amounting to, I believe, more than 35 per cent. That was hugely aggravated by the reckless excesses—again—of private banking, and the consequences of those excesses. I must tell Ministers that we have as yet been given no commitment, or even a hint, of the establishment of a committee of inquiry or royal commission to look into the causes of what happened and recommend ways of preventing it from happening again, which I believe is urgently needed. What I think is called for now is a partnership—I am not referring to interventionism—between the public and private sectors, in which at times of deep recession the public sector would take the lead. Private investment will not improve until the prospects of profitability improve substantially. Merely titillating the private sector with a range of tingling but rather small incentives—which is what the Budget does, because my right hon. Friend's room for manoeuvre was extremely small—will not generate the necessary scale of recovery within anything like the time scale that is required for a Government to deal with the still very high level of unemployment. Let us never forget that 2.5 million people remain jobless.