The Economy

HC Deb 13 December 2000 vol 359 cc658-708

Mr. Speaker

I have selected the amendment in the name of the Leader of the Opposition. Standing Order No.33 gives me the power on the last day of debate on the Loyal Address to select a second amendment, which will be moved formally and disposed of after 10 o'clock. I have selected the amendment in the name of the leader of the Liberal Democrats.

4.30 pm

Mr. Michael Portillo (Kensington and Chelsea)

I beg to move, as an amendment to the Address, at the end of the Question to add: But humbly regret that the Gracious Speech contains no proposals to reverse the policies that have given Britain an increasing burden of taxation and regulation, that it highlights the Government's failure to carry out the reforms it promised to make Britain a competitive and dynamic nation, that it contains no proposals to reverse the decline in Britain's productivity growth or the decline in the savings ratio, that it does nothing to ensure that the public accounts are honest and open, and that it contains no evidence of Her Majesty's Government having adopted a forward-looking approach to the challenges of the modern global economy. I also draw attention to my entry in the Register of Members' Interests.

The Gracious Speech was intended to clear the decks for an election, but that was not the only reason it was so brief. It was the speech of a Government who are now entirely devoid of ideas. During the 18 years that Labour Members were in opposition, they developed only one idea, and that was to get themselves into power. Now that they are in office, they have nothing whatsoever to offer our people. So, with no vision for the next Parliament—

Mr. Geraint Davies (Croydon, Central)

Will the right hon. Gentleman give way?

Mr. Portillo

I shall give way later in my speech.

With no vision for the next Parliament, the Government will be judged on their broken promises: on higher taxes, on poorer public services, and on their betrayal of the hopes that they raised so falsely.

Mr. Chris Pond (Gravesham)

Will the right hon. Gentleman give way?

Mr. Portillo

No.

Labour has taxed more and delivered less. Before the last election, the Chancellor of the Exchequer said that he understood where previous Labour Governments had gone wrong. He said that they had been wrong to believe in tax and spend. He promised that this time it would be different, that Labour would reform the public services and would therefore be able to deliver improvements without having to raise taxes, but of course he has delivered the opposite.

The Labour manifesto proclaimed that Labour would be wise spenders, not big spenders. It said that what mattered was not how much was spent, but how well or badly it was spent. Now the Chancellor talks only one language, that of big spending—"Never mind the value or the quality", he says, "look at the quantity."

It took 18 years in opposition for the Labour party to learn wisdom and it has taken just three years for it to forget it all.

Mr. Barry Gardiner (Brent, North)

Will the right hon. Gentleman give way?

Mr. Portillo

Let me finish this passage.

The Chancellor is now committed to increasing Government spending over the next three years much faster than the growth rate of the economy, so we need to be told whether this is a policy for just three years. Is it a splurge which is announced just before an election to be followed by a painful return to reality afterwards? Is it a turning on of the taps now so that they can be turned off again in due course? Is it a bad old Labour policy of boom and bust? If it is—[Interruption.] There are many precedents of Labour spending and spending and then having to cut back. We have seen it all before. These are the lessons that the Chancellor said that he had learned, but he has not learned them. So is it a splurge? Will Departments rush to spend all the money before the closing down sale comes to an end? If so, it will produce very bad value and it will be a very bad policy.

Alternatively, does the Chancellor propose to continue raising Government spending faster than the growth rate of the economy year after year, even after that three-year period? If that is the case it will lead to a bloated public sector increasingly squeezing out the private sector and private investment. It will mean that the Government will have to go on raising taxes year after year during the coming Parliament just as they have in this Parliament, and, just as has happened in this Parliament, the poorest in society will pay the most. So the question for the Chancellor today is a very simple one. Which is it to be: will it be boom and bust—the three-year programme followed by the whole thing being switched off—or will it be a continuous increase in Government spending faster than the nation could afford, with the burden being borne by the poorest members of society?

Several hon. Members

rose—

Mr. Portillo

Why does the Chancellor not answer? It is either one or the other.

The Chancellor of the Exchequer (Mr. Gordon Brown)

I can tell the House that we will meet our fiscal rules—the golden rule and the sustainable investment rule—over the economic cycle. Will the right hon. Gentleman now give us an answer: does he propose a balanced Budget, or does he propose to support our fiscal rules? Yes or no?

Mr. Portillo

The Chancellor's fiscal rules, unfortunately, are not worth the paper they are written on. I shall come to that later in my speech. I shall dissect the Chancellor's fiscal rules and show him why they are not worth anything. I have used as the basis for my planning the same figures for surplus and deficit that the Chancellor of the Exchequer has used in planning his rules.

Mr. Gardiner

The right hon. Gentleman has said that this Government were spending over and above what the country could afford—the equivalent of £600 for every taxpayer. Does his maths extend to multiplying £600 by 27 million—the number of taxpayers in this country? Does he agree that the figure thus produced—£16 billion—is the amount that he believes the Government are spending over and above what they should be spending? What would the right hon. Gentleman cut to bring spending back to what he believed was in line with what the country could afford?

Mr. Portillo

I made all that clear in announcements that I made when I set out the proposals. With regard to the £16 billion, I shall quote Mr. Evan Davis, economics editor of the BBC's "Newsnight" programme. He said: Labour say it's a £16 billion spending cut, the Tories say it's £8 billion … on this one I think we can be definitive. The Tories are telling the truth, and only by wilfully misreading the Conservatives' spending plans can you call it £16 billion.

Mr. Frank Dobson (Holborn and St. Pancras)

He is a Tory.

Mr. Portillo

It is only wilful misreading of the figures that allows the hon. Member for Brent, North (Mr. Gardiner) to say that the cuts will amount to £16 billion. It is about time that Labour put that stupid figure to bed.

The Chancellor of the Exchequer has not answered my question about what his policy will be. However, I shall tell the House all about our policy.

Mr. Pond

I do not think the right hon. Gentleman was able to answer the question from my right hon. Friend the Chancellor about whether he was still in favour of a balanced Budget. If he is, how will he fund the tax cuts that he proposes?

Mr. Portillo

The Chancellor of the Exchequer is not in favour of a balanced Budget. He is planning to borrow. [Interruption.] It would be much better for the order of the House if the Chancellor stood up to make interventions. I have just told him that I am making my plans on the same figures for surpluses and deficits over the next three years that he is using. It is wrong for the hon. Member for Gravesham (Mr. Pond) to claim that the Chancellor is planning a balanced Budget; he is not.

Mr. Gordon Brown

For the benefit of the House, the right hon. Gentleman should confirm that he put out a press statement at the time of our spending review last July saying that our spending plans could not be afforded to the tune of £600 per taxpayer, or £16 billion. Also, will he now answer this question: if he does not accept our fiscal rules, which form the basis on which we will work, does he believe in a balanced Budget? Yes or no? If he believes in a balanced Budget, how can he fund tax cuts?

Mr. Portillo

I believe in greater prudence than the Chancellor of the Exchequer. I believe in greater rectitude and in spending what the nation can afford. I believe in much tighter constraints on me, as Chancellor of the Exchequer, than the right hon. Gentleman has been willing to accept for himself. In the second half of my speech, I shall describe our rules, as well as tear his rules apart.

Mr. John Bercow (Buckingham)

Is my right hon. Friend aware that, as a result of this Government's policy of tax, tax and tax again, tax freedom day—the day on which we cease to work for the Chancellor and start to work for ourselves—is now 30 May? That is fully 20 days worse than in the United States of America. How much more deterioration does my right hon. Friend expect if the Chancellor's tax and spend policies are continued?

Mr. Portillo

It is impossible to give my hon. Friend an accurate answer, as the Chancellor of the Exchequer will not tell us what his policy is. I have just asked him whether it is his policy to go on spending more than we can afford for three years or in perpetuity, and he would not answer. I suppose that we must assume it is his policy to go on spending more than we can afford in perpetuity. In the new year, I will produce the figure for the extra amount of taxation that would be required from every family in the country.

The Chancellor's abandoned pledge to be wise on spending is the first of five pledges on the economy that he made before the election, all of which have now been broken. He also pledged not to increase tax at all, but the burden of tax is now up by 2.6 percentage points of gross domestic product. That is £25 billion, the equivalent of 10p on the standard rate of income tax. He has taxed what people earn, what they spend and what they save. He has hit marriages, mortgages, alcohol, tobacco and petrol.

The Labour manifesto said: Labour is not about high taxes on ordinary people but that is exactly what the Labour Government have been about. Taxes have fallen most heavily on the poorest people in society, and Labour Members know the truth of that even though it is a truth that they dare not speak. The Joseph Rowntree Foundation reported this week that the Government have failed to attack the problem of poverty and inequality.

Several hon. Members

rose—

Mr. Portillo

I shall not give way.

The third Labour pledge was not to impose burdensome regulations on business, but business taxes are up by £5 billion a year according to the Confederation of British Industry. The Institute of Directors states that the burden of regulation on business represents another £5 billion a year. Our tax advantage against the rest of the European Community has been cut by two thirds according to PricewaterhouseCoopers. Theresa Graham, who heads the Government's better regulation task force, says that businesses are becoming more anti-government and are losing patience. Even the trade union boss, Ken Jackson, says that the Government need to deal more fairly with business. [Interruption.] Labour Members ought to listen.

Fourthly, the Government pledged to promote a savings culture. The savings ratio is now at a 37-year low, according to the Office for National Statistics. Information from the House of Commons Library states that the Chancellor's policies will soon have brought one half of all our pensioners into means-tested benefits. Half our retired people will now be required to give their intimate details to the Government to get benefit. However, the Chancellor is still taking £5 billion a year from the pension funds of people who are now saving for their retirement. He is attacking the people who are trying to do the right thing and want to be independent. He is impoverishing future generations of pensioners, driving more and more of them to be dependent on the state.

Fifthly, Labour promised to make Britain more competitive, but Britain has slipped behind. The Organisation for Economic Co-operation and Development says that our economy has grown by 2.6 per cent. over the past three years. That is worse than our record in the previous 15 years and a good deal less than the achievement of the countries of the eurozone, which have had growth of 2.9 per cent. and about half the figure for the United States. The OECD also states that our share of exports is down. The Chancellor promised to transform our productivity and, yes, in his own particular way he has transformed it. In the past four years, our productivity growth has averaged 1.3 per cent. a year against an average of 3.1 per cent. in the early 1990s.

Mr. Denis MacShane (Rotherham)

Will the right hon. Gentleman give way?

Mr. Portillo

No.

Thirteen OECD countries have a better record on unemployment than Britain does. We have heard today with great sadness about the job losses at Vauxhall, but the problems of the car industry will get worse next year, when the Chancellor imposes an energy tax on our business that will cost every car manufacturer £1 million a year. The manufacturers in the rest of Europe will not face that burden. Again, I give the Chancellor the opportunity to promise that he will abandon this job-destroying tax, which will make life so much more difficult for our car manufacturers.

Mr. Bercow

The Chancellor is laughing about it.

Mr. Portillo

Yes, I see that, too. The Chancellor laughs about his job-destroying tax. This is a Chancellor—

Several hon. Members

rose—

Mr. Portillo

I shall not give way. I am going to talk about the Chancellor. This is a Chancellor—[Interruption.]

Mr. Deputy Speaker (Mr. Michael Lord)

Order.

Mr. Portillo

This is a Chancellor who thinks that he is cleverer than everyone around him, and cleverer than those sitting behind him. He is the clever so-and-so who devised the stealth taxes, and they were too clever by half. Any of those hon. Members behind the Chancellor, whom he holds—[Interruption.]

Mr. Deputy Speaker

Order. I think that we have had enough sedentary interventions.

Mr. Portillo

Any of those hon. Members sitting behind the Chancellor—those people he holds in such intellectual contempt—could have told him—[HON. MEMBERS: "Oh!"] Do hon. Gentlemen deny it? I do not think so. Any of them could have told the Chancellor that the tax on petrol was not actually a stealth tax; it was displayed in blazing figures on every garage forecourt in the country. It was not so much a stealth tax as a neon-lit, 1 ft-high, you could not miss it in a blizzard tax, but the Chancellor proceeded with it. His Back Benchers could have told him—

Mr. Geraint Davies

Will the right hon. Gentleman give way?

Mr. Portillo

I will in a moment.

If the Chancellor had been listening, his Back Benchers could have told him that pensioners would not take the 75p insult lying down. Only a Chancellor who is hopelessly out of touch with the British people could have acted so, without sparing a thought for the hardships being faced by pensioners and families.

Labour's summer of discontent had just one cause and one author: the man who is sitting opposite me—the Chancellor of the Exchequer, still wholly unrepentant. Labour is never having to say one is sorry. Even now, the Chancellor still refuses to acknowledge in the House that the tax burden is up, even though his own figures—distorted as they are—prove it to be perfectly true. So, he has banned Ministers from using the expression "tax burden". First, he taxed stealthily; now he wants to tax silently. He hopes that by banishing the thought, he can banish the concept. A Government who claim to be in touch with ordinary people tell families that taxes are not a burden but some sort of opportunity.

Even if Labour was never believed by the British people about what it would do on tax, the British people at least hoped that it would deliver on public services—but how they were deceived about that. We were told that Labour would save the national health service. Three and a half years on, waiting lists are longer and the Prime Minister predicts a crisis in the health service. If it is Labour and it is winter, there must be discontent.

Labour election posters promised smaller class sizes. Three and a half years on, the Labour party's own website says that class sizes in secondary schools are rising very slowly. That passes for candour under new Labour. Teachers are leaving; they have been let down and they are voting with their feet. Even this Government cannot blame the previous Conservative Government for the fact that teachers have lost patience with the Labour Government.

The Government promised to be tough on crime, but there are fewer police officers and the number of bobbies on the beat is the lowest for a decade. Crime is rising; serious offenders are being released before their sentence has been served. Violent crime is up by a sixth—all of that, two years after the Chancellor told The Sun that they were determined to get value for every penny they spent.

Anyone who believed the Chancellor then should take a short ride on the Jubilee line. The dome is a stinking mess of incompetence and shoddy accounting. Millions of hard-working punters have bought their lottery tickets week after week merely to see Ministers squander that money. Was that money not meant to be used for good causes? Would not £800 million spent on the dome have bought another Great Ormond street hospital for sick children in Manchester and one in Leeds, one in Newcastle and another in Bristol, with money left over?

Mr. Phil Hope (Corby)

I thank the right hon. Gentleman for giving way. Do not he and his party support mixed economy funding for the health service? Will he now rule out charging patients for consulting their GP as part of Conservative policy?

Mr. Portillo

That is no part of our policy. If I may so, it is a very stupid question.

Mr. Dale Campbell-Savours (Workington)

Will the right hon. Gentleman give way?

Mr. Portillo

I have much respect for the hon. Gentleman; I happily give way.

Mr. Campbell-Savours

The right hon. Gentleman says that he would have spent the money for the dome on hospitals. I understand that all his colleagues spent the past three years arguing that they did not want lottery money to be spent on the NHS.

Mr. Portillo

I said no such thing. I said that £800 million is an awful lot of money. I said that everything in the lottery was meant to be for good causes—[Interruption.] The hon. Gentleman tries to make light of £800 million; he knows the truth. I do not suppose that his constituents are any happier than anyone else's that £800 million was spent on that piece of vanity when it could have been spent on much better things.

Mr. Matthew Taylor (Truro and St. Austell)

Will the shadow Chancellor clarify for the House whether, when he was in government, he urged his Cabinet colleagues not to spend money on the dome, but to spend it on hospitals? If so, that is welcome news for which I shall credit the right hon. Gentleman. However, that is certainly not what was reported.

Mr. Portillo

The disaster of the dome was the way in which it was planned by the Government. That was a disgrace. [Laughter.] The public know that, and know that it is a monument to new Labour. The dome was supposed to have been on the first page of the new Labour manifesto. It has new Labour fingerprints all over it, which is why people are so angry with the Government.

Mr. Clive Efford (Eltham)

Will the right hon. Gentleman give way?

Mr. Portillo

No, I shall keep going.

The Government have broken all their promises and have taxed more and delivered less. The Gracious Speech shows that they have no vision for the future. The Opposition have a vision, founded on a disciplined approach to macro-economic management. We will be ruled by five disciplines: first, we will have our own currency; secondly, we will increase the independence of the Bank of England; thirdly, we will set up a fiscal policy watchdog; fourthly, we will establish a national accounts commission; and fifthly, the Government will spend only what the nation can afford.

Mr. MacShane

Will the right hon. Gentleman give way?

Mr. Portillo

No, I shall keep going at this point.

My policy is to keep the pound. The Chancellor wants to scrap it, and he has devised five completely subjective tests to hide behind until the Government believe that they can get away with that. We plan our policy on the basis of Britain's having its own autonomous monetary policy. The Chancellor is unable to say whether his plans for the next Parliament are based on Britain's having such a policy. That is a glaring gap at the centre of his policies.

We shall make the Bank of England more independent. The Chancellor wants to take away its powers. His policy is to let the European central bank set interest rates. At the next election, there will be only one party fighting for Britain's interest rates to be set by an independent Bank of England, and that will be the Conservative party.

Mr. Geraint Davies

Will the right hon. Gentleman give way?

Mr. Portillo

No, I will not give way while I am going through this sequence.

Mr. Davies

What about the fiscal committee?

Mr. Portillo

I have not got to the fiscal committee yet.

I plan to put an end to the Chancellor's spin on and distortion of the making of economic policy. I will establish a committee of expert commentators to sustain an open debate about economic policy making.

The Chancellor claims to be tied by fiscal rules, but they tie him to nothing. The so-called golden rule that allows him to borrow for so-called investment would enable him to borrow between £150 billion and £300 billion over the cycle, depending on what he chose to call investment. No wonder he has to repeat the word "prudence" again and again, like a man trying to convince himself. The more he spoke of his honesty, the faster we counted the spoons.

We have had enough of the Chancellor distorting the figures and disguising his tax increases. We have had enough of Budgets that are all spin and that fail to tell the public that he has raided their savings or put petrol up by three times more than pensions. We are tired of him massaging the statistics and claiming that Government spending is not Government spending. The OECD and the ONS are fed up with him too, and have criticised him for his sleight of hand. We shall therefore appoint a national accounts commission to put the nation's accounts on a proper footing.

The Chancellor thinks that Government statistics should tell a story, but we believe that they should tell the truth. My policy is for the Government to spend what the country can afford. Having promised so much before, the Chancellor now promises the earth whether the country can afford it or not. Ours is the only genuinely sustainable policy. It allows tax cuts for hard-working families, pensioners and businesses. Those who would follow a different path should say where the money would come from. The Conservative party never forgets that it is the people's money.

Mr. Pond

rose—

Mr. Dobson

rose—

Mr. Portillo

I shall give way to the right hon. Member for Holborn and St. Pancras (Mr. Dobson).

Mr. Dobson

The right hon. Gentleman says that he would take a disciplined approach to public borrowing. He wants to be the Chancellor of the Exchequer, so I remind him that he has already been a Treasury Minister. When he was Chief Secretary to the Treasury, his disciplined approach to public borrowing resulted in a public sector borrowing requirement of £47 billion in his first year and £50 billion in his second. One of the economy measures that he pushed through to try to put that right was to reduce the number of nurses going into training to a measly 12,000. That is one reason why the national health service is so short of nurses now.

Mr. Portillo

All the right hon. Gentleman's figures are wrong for the years in which I was at the Treasury. However, I agree that there are dangers when an economy goes into recession. Consequently, any prudent Chancellor of the Exchequer would plan to grow public spending by less than the underlying trend growth rate of the economy. If that is not done, we will end up in the same difficulties again. Only a man with the arrogance of the current Chancellor could believe that the economic cycle has been abolished.

Mr. Dobson

The right hon. Gentleman said that I misled the House. He was Chief Secretary to the Treasury in 1992–93 and 1993–94. The official figures show that the borrowing total was £47 billion in 1992–93, and £50 billion in 1993–94. On top of that, the figures show that almost 3 million people were out of work at that time, compared with slightly more than 1 million today.

Mr. Portillo

I tell the right hon. Gentleman this: we have reached a state of affairs with the Labour party in which every figure is fiddled, everything is distorted, and everything is spun. It can barely surprise anyone that no Opposition Member, no Labour Member and no member of the public believes a word that it says about anything.

Mr. Efford

Will the right hon. Gentleman give way?

Mr. Portillo

No; I shall make some progress.

It is outrageous that the Chancellor of the Exchequer postures as the pensioners' friend. Before the general election, he promised to end means-testing for pensioners. Now, he has done exactly the opposite. There is more means-testing, more form filling, less dignity. We have proposals on this—[Interruption.] Yes, we do. Those who receive the state pension know that the current Chancellor will give them a pittance whenever he can get away with it, and a fiver whenever it is an election year. By increasing the mean-tested supplementary pension, the Chancellor himself drives home the point that he recognises that the retirement pension is inadequate, yet, he has no vision for the future, no plan to rectify the situation, no care for reform.

The problem is that this year's national insurance contributions pay this year's pensioners. The money is never invested and never grows, so pensioners are not able to participate in the growing wealth of the nation. We want to give young people the option of paying their contributions into a fund that would be invested and that would grow.

Ms Sally Keeble (Northampton, North)

Will the right hon. Gentleman give way?

Mr. Portillo

I shall shortly.

Such an arrangement would be much more likely to provide future generations of pensioners with much better pensions.

Ms Keeble

Will the right hon. Gentleman give way?

Mr. Portillo

Not if the hon. Lady keeps yelling at me.

Such an arrangement would also, over time, sharply reduce the burden on future generations of taxpayers. The Chancellor's policy is to discourage saving and to raid the pension funds of those who are saving for their retirement to fund his spending spree today. Our policy is to encourage the young to save, so that they can look forward to retirement free from means-testing and free from financial worry.

Mr. Matthew Taylor

Given that, under the Conservatives' plans the national insurance fund would have not only to pay pensions to current pensioners but contribute towards the pensions of a future generation, would the right hon. Gentleman cut pensions to make up the gap? If not, which tax would he increase to fund the proposed addition?

Mr. Portillo

I would not go down either route.

Ms Keeble

Will the right hon. Gentleman give way?

Mr. Deputy Speaker

Order. There is little point in the hon. Lady seeking to intervene when the shadow Chancellor is responding to an intervention that he has already received.

Mr. Portillo

I would not go down either route. However, I am shocked by the implied timidity of the question asked by the hon. Member for Truro and St. Austell (Mr. Taylor). We have a huge liability to pay pensions decades and decades ahead, and it is a real liability. The Government like to pretend that that liability does not exist, and that is why we now have national accounts that do not identify it. However, the liability exists. Are we incapable in politics today of having a mature debate about how we could remove that liability? We can do that only on the basis of national consensus and on the basis of the financial community believing that it is the right thing to do. What a contrast—the Conservative party is willing to address serious issues that will affect generations of taxpayers and pensioners; we have the imagination, whereas the Labour party and the hon. Member for Truro and St. Austell lack it.

Ms Keeble

Will the right hon. Gentleman give way?

Mr. Portillo

No, I must make progress. I have been on my feet for a long time. [HON. MEMBERS: "Are you tired?"] No, I—

Mr. Deputy Speaker

Order. The House must come to order. There have been enough sedentary interventions—consistent, organised interventions—and the shadow Chancellor should be heard with patience.

Mr. Portillo

I referred to the length of time I have been on my feet out of courtesy to right hon. and hon. Members who want to speak later in the debate.

We also propose that, in future, windfall receipts from further sales of the bandwidth spectrum should be used to endow some of our universities so that they no longer depend on a drip feed, year by year, from the state. Clearly, one effect of that would be to reduce the size of the state and the level of Government spending. Another effect would be to enable our universities to play a much more dynamic role in our economy. A university such as Stanford, in California, became the intellectual powerhouse behind Silicon valley. Some of our best universities want the same freedom to play a more dynamic role in the British economy.

When Opposition Members speak of British universities, it is to enable them to flourish. When the Chancellor of the Exchequer addresses the subject of our great universities, it is merely to attack them, playing to a gallery of envy and prejudice. The Chancellor put the proceeds of the telecom licence sales into Government bonds. We will invest the fruits of the knowledge society in the knowledge economy.

Mrs. Anne Campbell (Cambridge)

Will the right hon. Gentleman give way?

Mr. Portillo

No; I have nearly finished.

On health care, we have established a political consensus with the Labour party on providing significant additional funds for the national health service. However, Conservatives believe that that should not be the end of the discussion. Very few countries in Europe attempt, as Britain does, to bear almost the entire cost of health care on taxation alone.

Mr. Roger Casale (Wimbledon)

Will the right hon. Gentleman give way?

Mr. Portillo

If the hon. Gentleman listens, he might learn something.

Our neighbours in Europe have more mixed systems. For example, employers and trade union health care schemes play a much more significant part in the total health budget in many other countries. That has enabled such countries to spend significantly higher proportions of their national prosperity on health care than we do in Britain. Surely, except to the most blinkered and ideological individuals, that is a lesson that could help Britain have more doctors, nurses and hospitals.

Every week, the Prime Minister misrepresents our commitment to the national health service. However, the Government will pay the price. It is the Government who are blinkered. They are the ones who live in fear of change, wedded to an ideology suited to the 1940s and absolutely unsuited to the new century.

Mr. Casale

I am grateful to the right hon. Gentleman for giving way. He will remember that he made a speech in the House about the health service on 18 January. He described the setting up of the national health service as a historical accident, rather than the crowning achievement of the post-war Labour Government, and the public funding of the health service as a national disgrace, rather than something that has great popular consent. Two weeks later, he was made shadow Chancellor. Is it still his policy to try to privatise the health service by introducing charging and making patients pay for hip replacements, knee replacements and so on? If not, how does he propose to pay for the NHS?

Mr. Portillo

It is possible that there would be some respect for the hon. Gentleman if he did not distort what other people had said. He says that he can find the word "disgrace" in my speech. Will he get up now and tell me where I used the word "disgrace"?

Mr. Casale

I shall read the passage to the right hon. Gentleman. He said: Given that this country has what appears, at least on paper, to be the most socialist of all health services that I can think of—as Geoffrey Rivett would say, at least outside the old eastern bloc—it is a national disgrace that this is the country where having money makes the biggest difference—[Official Report, 18 January 2000; Vol. 342, c. 735.]

Mr. Portillo

Exactly. The hon. Gentleman is a disgrace because he comes to this place and distorts what others have said. No one will have any respect for the hon. Gentleman when he does that.

Mr. Casale

rose—

Mr. Portillo

I will give way if the hon. Gentleman is getting up to apologise. That was a complete—

Mr. Deputy Speaker

Order.

Mr. Casale

rose—

Mr. Deputy Speaker

Order. All hon. Members must sit down when I am on my feet.

Mr. Portillo

I will give way to the hon. Member for Wimbledon (Mr. Casale) only if he is going to apologise for that disgraceful misrepresentation of what I said.

Labour spent 18 years in opposition and the British people were willing to back Labour only when it committed itself to low taxes and to good value in public spending. The Government were elected to improve public services and reform the welfare state. They promised business that they would make Britain more prosperous. They talked the talk but could not walk the walk. In office, they have piled on taxes and regulations and Britain has slipped behind.

Labour has broken every promise. People have paid the tax but now they wait longer for operations; they have paid the tax but school classes have got bigger; they have paid the tax but there is not a policeman to be seen.

In the 1970s, the Chancellor wrote books. He ranted then against Thatcherism and the market economy. Now, as Chancellor, he remains trapped by dogma, unable to think new ideas. The Conservative party is different. Our policies are based on honesty and transparency—things for which, after three years of Labour Government, the people of this country hunger. We are not afraid to propose change. Our policies are shaped to make Britain competitive in the 21st century.

The Gracious Speech provided telling proof not of a Government who have run out of ideas, but of a party that never had any in the first place. The Labour manifesto was all spin and the Labour Government are all spin and no delivery.

5.7 pm

The Chancellor of the Exchequer (Mr. Gordon Brown)

I will speak about our economic agenda for the coming year, entrenching stability, improving employment and productivity, raising living standards for all and strengthening public investment in our services.

In his speech, the shadow Chancellor, the right hon. Member for Kensington and Chelsea (Mr. Portillo), could not tell us what fiscal rules a Conservative Government would operate if they were ever in government. I will happily give way now if he can tell us. Given that he does not accept our fiscal rules, does he believe in a balanced budget?

The right hon. Gentleman also outlined—I will return to this—a Conservative plan for the privatisation of the basic pension for young people, but he could not explain to the Liberal Democrat spokesman, the hon. Member for Truro and St. Austell (Mr. Taylor), how much money could be lost to the national insurance fund and therefore to pensioners for present and future pensions that have to be paid. Then the right hon. Gentleman said that he planned a mixed economy for the national health service. He ruled out charges for doctors, but refused to tell us what that involved—whether it is charges for hospitals or private medical insurance, or whether it will mean moving people out of the national health service, as the shadow health spokesman proposes, by performing what he calls non-urgent operations in private hospitals.

We will take no lectures on taxation from the right hon. Gentleman, who was at the Treasury between 1992 and 1994. He was the Chief Secretary who piloted through the House value added tax on fuel, the insurance tax, the airports tax, the freezing of the personal allowance for income tax and the allowance for top rate taxation, the national insurance rises, and the fuel duty escalator. He did so after promising at the previous general election that there would be no VAT on fuel—indeed, no tax rises at all.

Mr. Bercow

rose—

Mr. Brown

I will be happy to give way to the hon. Gentleman, but surely the shadow Chancellor should answer why he should be trusted on taxation when he broke every promise when he was Chief Secretary to the Treasury. I will give way to someone who wants to speak for him—one who is still a member of the No Turning Back group.

Mr. Bercow

That was a long-winded apologia. Why in the speech on the pre-Budget report did the right hon. Gentleman fail even to mention his 7.5 per cent. increase in the upper earnings limit on national insurance contributions, which will hit up to 1 million working people? Is he proud of the fact that, as a result of that stealth tax, 20,000 nurses, 9,000 policemen and 23,000 teachers will face a tax hike of up to £200 a year?

Mr. Brown

The hon. Gentleman should really do his research before he comes to the House of Commons. I answered all those points in detail at a meeting of the Select Committee on the Treasury, when I pointed out to him that the measure on national insurance was announced in the 1999 Budget. It was in the Red Book for 2000.

Mr. Bercow

I was not there.

Mr. Brown

If the hon. Gentleman is denying that, I shall happily give way so that he can explain why.

Mr. Bercow

There is a good reason why I was not present at the meeting of the Treasury Committee. Quite simply, I am not a member of that Committee. The right hon. Gentleman is getting confused. Will he confirm that 20,000 nurses, 9,000 policemen and 23,000 teachers will be worse off as a result of the policy that he has introduced? If not, it is about time that he explained himself.

Mr. Brown

What I said to the hon. Gentleman—again, let us have accuracy—was that, if he had done his research properly, he would have known that the measure was in the 1999 Budget. That was made clear at the time. I explained to the Treasury Committee that the allegations that the Conservatives first made in The Daily Telegraph, which they then tried to make to the Daily Mail, and subsequently, over a number of weeks, they tried to give the impression that the measure had never been announced, when it was announced in the House of Commons. The hon. Gentleman should accept that that is the case.

As for taxation, what did the hon. Gentleman say to nurses and teachers when VAT was put on fuel? What did he say when national insurance was put up for everyone? What did he say when personal allowances were frozen? What did he say when airport tax and insurance tax were introduced? What did he say then?

Mr. Bercow

I was not a Member of Parliament at the time.

Mr. Brown

Oh, there are different ways in which people try to excuse themselves from taking responsibility for the Conservative party's work in government. The hon. Gentleman, who is a Conservative Front-Bench spokesman, does not want to defend the record of the previous Conservative Government. I know that there is a split between him and the shadow Chancellor, because the hon. Gentleman has not left the No Turning Back group. He should make up his mind. Does he want to defend the Conservative party when it was in government or does he not?

We will not take any lectures from the Conservative party or the shadow Chancellor on public spending. After all, in October 1997, following the general election, the shadow Chancellor explained that the Conservative party was unpopular because of damaging cuts in public spending. In his lecture of October 1997, he said that the Tories were linked to harshness and thought to be uncaring about unemployment, about poverty, about poor housing, about disability, about single parenthood and were thought to favour greed. If the shadow Chancellor really believes that, he should think twice about proposals for privatisation or deep cuts in our public services.

We should not take any lectures from the shadow Chancellor on the running of the economy. After all, in September 1998, he said that of course, it—meaning the Conservative party—should be apologetic about the mismanagement of the economy. The shadow Chancellor now comes before us to criticise the record of the Labour Government, but he knows perfectly well that he understood the Conservative Government to have been guilty of mismanagement of the economy.

The hon. Member for West Dorset (Mr. Letwin) is here, and he recently said in the House of Commons: We made the most dreadful mistakes. It is the shadow Chief Secretary to the Treasury who said that. He went on to say: we did many things … of which we are deeply ashamed.—[Official Report, 1 March 2000; Vol. 345, c. 493.] So they should be. The idea that Conservative Members can come to the House and say that they have a manifesto on which they will go to the country, only to repeat the mistakes of the 1992 to 1997 period or the period from 1979 onwards, is something that the electorate will not accept.

Mr. Edward Davey (Kingston and Surbiton)

Does the Chancellor agree that borrowing for current expenditure is taxation deferred? Labour tax rises can therefore be considered to be Conservative tax rises.

Mr. Brown

We do not accept that. We have published forecasts on the growth of the economy and the fiscal position. It would be interesting to know the fiscal position of the Liberal Democrats, as they seem to have a rule that changes every day. Every day that we invest something, they always want more. Does the Liberal Democrat party agree with the Conservative party that there should be a balanced budget? Is that its policy? Or does it agree with the golden rule? Perhaps the Liberal Democrat spokesman on Treasury matters can tell us?

Mr. Edward Leigh (Gainsborough)

rose—

Mr. Brown

Ah, another person who was a member of the No Turning Back group.

Mr. Leigh

I do not know why the Chancellor is so interested in a Tory dining club. Obviously, we are making our point. What is the Chancellor's current estimate for the surplus over the lifetime of the next Parliament? As every economic commentator accepts that that is a large sum, thanks to the increase in stealth taxation, will he accept that there is considerable scope for tax rises and for maintaining essential public services? What is his estimate for the surplus over the lifetime of the next Parliament?

Mr. Brown

That is an interesting question. We have rules. The current budget must balance over the cycle. In other words, tax revenues must be equivalent to current public expenditure. That is a clear fiscal rule. We take the view that, given 20 years of under-investment in our social fabric, borrowing to invest in public services, such as transport, health and education, is necessary. That is why we say that, if there is a prudent and sustainable level of debt to GDP—that is the mechanism that we have chosen and which is examined by the National Audit Office—it is right in certain circumstances to borrow for investment.

Those are our two fiscal rules. Those are the rules that show that there will be a current surplus over the cycle. We will borrow if necessary for the public investment that our country needs, subject to a sustainable debt to GDP ratio. The sustainable ratio is below 40 per cent. In fact, as I reported to the House a few weeks ago, it is falling to 30 per cent.

Several hon. Members

rose—

Mr. Brown

I shall give way in a minute, but perhaps the shadow Chancellor will now answer my question. If he professes to be putting forward a more rigorous economic and fiscal policy than we are, if he does not accept those two fiscal rules, which are the discipline upon our Government—if he believes that those rules are not a proper discipline—perhaps he can say whether his rule is to go for a balanced budget. If his rule is for a balanced budget, how in the world can the Leader of the Opposition propose tax cuts at the next general election? I will give the shadow Chancellor the opportunity to answer that question, then I shall allow surrogates for him to come in if necessary. I responded to the shadow Chancellor at the beginning of the debate—

Mr. Portillo

The right hon. Gentleman did not answer my question.

Mr. Brown

I did. It is interesting that the shadow Chancellor does not want to know that we work within those two fiscal rules. They may be technical rules, but they are fiscal rules that are understood. The question that he must answer is whether he faces a balanced budget—yes or no?

Mr. Portillo

Is it the Chancellor's policy to increase Government spending faster than the growth rate of the economy for three years or beyond the three years—yes or no?

Mr. Brown

As I say, my policy is to work within our fiscal rules. It is precisely because there is under-investment in our social fabric that we are investing.

Mr. Portillo

Will the Chancellor give way?

Mr. Brown

I will give way if the right hon. Gentleman will answer the question. Does he believe in a balanced budget—yes or no?

Mr. Portillo

Why will the Chancellor not answer my question? Is his policy to go on spending faster than the growth rate of the economy for just three years or beyond the three years? A very simple question—please answer it.

Mr. Brown

We will work within our fiscal rules. Our fiscal rules are over the cycle. The right hon. Gentleman seems to have forgotten that those fiscal rules are over the cycle. The current budget must balance. In other words, current expenditure must be financed by tax revenues over the cycle. We will borrow for necessary investment, but subject to a sustainable debt to GDP ratio.

Those are the two rules. They are understood in the economic community. The shadow Chancellor may wish to attack them. They are well understood and commented on generally. The question that the shadow Chancellor must answer is what is his rule. Is it a balanced budget, in which case he has no scope for tax cuts? He is deceiving the electorate if he believes that he can go to the electorate and say that he wants a balanced budget and tax cuts. Is it a balanced budget or not? He used to believe in a balanced budget. Some Conservative Members still believe in a balanced budget.

Several hon. Members

rose—

Mr. Brown

The right hon. Member for Wokingham (Mr. Redwood) certainly believes in a balanced budget.

I have given the shadow Chancellor my two rules. He may disagree with them, but they are the two rules. Does he believe in a balanced budget—yes or no?

Mr. Portillo

The Chancellor's rules are inadequate. I will impose extra disciplines; I have set out and named five disciplines. Will the right hon. Gentleman tell us whether he will raise Government spending faster than the growth rate of the economy for only three years, or beyond? If it is beyond, that means extra taxes and he should be honest with the British people. If it is only for three years, it is boom and bust, bad spending and a bad policy. Of course, it is a bad policy anyway, as it squeezes out the private sector. Why cannot he tell us: three years or more than three years?

Mr. Brown

The House will know that I have answered the question. The fiscal rules will be observed. We have observed them over the past three and a half years and we will do so over the next period. We are investing where it is necessary to do so, subject to a debt to GDP ratio that has fallen from 40 per cent. towards 30 per cent. Those are our two fiscal rules. Does the right hon. Gentleman believe in a balanced budget? If he cannot answer that question, everything that the Leader of the Opposition is saying about tax cuts is hollow.

The shadow Chancellor denied that he had said that there was a difference of £16 billion between our spending plans and what could be afforded. I have the statement that he issued.

Sir Peter Tapsell (Louth and Horncastle)

Before the Chancellor moves on from the question of the balanced budget—

Mr. Brown

I know that there are many factions in the Conservative party, but I want to deal with one at a time. I know that the hon. Gentleman does not share the views of the shadow Chancellor.

Under the headline, "Labour Return to Tax and Spend say Conservatives", the shadow Chancellor was quoted directly as saying: What's more they are now committed to increasing spending quicker than the economy is growing. Their extra spending, over and above what the country can afford, is equivalent to £600 for every taxpayer. Worked out over the 28 million taxpayers, that is £16 billion. Does the right hon. Gentleman deny issuing that statement?

Sir Peter Tapsell

rose—

Mr. Brown

That is a question for the shadow Chancellor

Sir Peter Tapsell

If my right hon. Friend will not answer, I will have to do so.

Mr. Brown

The hon. Gentleman might wish to be the shadow Chancellor—and would, indeed, be more effective in that role—but the right hon. Gentleman has refused to answer our question: does he believe in a balanced budget or not? I thought that that was simple. It is simple for some Back Benchers.

Sir Peter Tapsell

It is too simple. I shall explain why if the right hon. Gentleman sits down.

Mr. Brown

The hon. Gentleman will get his chance. I am pleased that he is not asking a question about Europe today. Or perhaps he is.

The shadow Chancellor can now answer my question. Did he or did he not say: Their extra spending, over and above what the country afford, is equivalent to £600 for every taxpayer? That is £16 billion. Will he confirm or deny that statement? He gave the House the impression that he had never used those figures.

Sir Peter Tapsell

Has the Chancellor given way?

Mr. Deputy Speaker

Order. I must tell the Chancellor that if no hon. Member is offering to intervene, there is little point in him sitting down for a long time. If he does so, another hon. Member will inevitably fill the gap.

Mr. Brown

1 am grateful, Mr. Deputy Speaker. Let us put on record that the shadow Chancellor has refused to tell us what his fiscal rule is. The Conservatives used to say that it was a balanced budget or working towards a balanced budget, but the right hon. Gentleman has refused to tell us. We know why he cannot do so. If he gives the impression that he supports a balanced budget—1 believe that he probably does—he will be admitting that he cannot afford any tax cuts. That is the position. The right hon. Gentleman can now correct me by telling us whether he believes in a balanced budget, but I believe that this has already been a very illuminating occasion.

The right hon. Gentleman claimed that the Tories never had in mind the £16 billion figure. I have just read out the statement to which my hon. Friend the Member for Rotherham (Mr. MacShane) referred—£600 per taxpayer, or £16 billion. The Conservatives believe that £16 billion cannot be afforded above what has been allocated—properly, in their view. They would prefer cuts of £16 billion. The statement issued by the shadow Chancellor proves that to be the case.

Mr. Portillo

rose—

Mr. Brown

I shall give way if the right hon. Gentleman can confirm that statement.

Mr. Portillo

I set out very clearly the fact that we intend to vary the Government's spending plans by £8 billion, and to give tax cuts to pensioners, savers, businesses and all the people who have been clobbered by the Chancellor of the Exchequer. The independent economics editor of the BBC, Evan Davis, said: Labour say it's a £16 billion spending cut, the Tories say it's £8 billion. And on this one I think we can be definitive. The Tories are telling the truth and only by wilfully misreading the Conservatives' spending plans can you call it £16 billion. Why does the Chancellor go on with this rubbish? Is it simply because the Labour party has invested so much in posters and leaflets that will now have to be torn up? Why cannot it address reality? Why does it have to distort and spin and twist the truth in every single instance?

Mr. Brown

The shadow Chancellor seems to want to believe the economics editor of the BBC before he believes himself. The right hon. Gentleman said: That extra spending, over and above what the country can afford, is equivalent to £600 for every taxpayer. That amounts to £16 billion. That statement was issued by the shadow Chancellor; it is in his name. It states: Released by: The Rt Hon Michael Portillo MP on Tuesday 18 July 2000. It even has a time for the release of the statement.

We have established two things today that will be very significant in future months. The Conservatives cannot tell us whether they believe in a balanced budget or not. They have no fiscal rules. The shadow Chancellor made a statement about the £16 billion figure, and he is unable to deny it, other than by quoting a secondary source. Given that it was he who made the statement, it would be better if he were able to deny it himself.

Several hon. Members

rose—

Mr. Brown

I shall give way to the hon. Member for Louth and Horncastle (Sir P. Tapsell), the right hon. Member for Wokingham and the hon. Member for Stratford-on-Avon (Mr. Maples), and then I shall make some progress.

Sir Peter Tapsell

All this time-wasting waffle with which the Chancellor has been padding out his speech is nonsense. He keeps making the absurdly over-simplistic point about there being some wonderful rule based on a balanced budget, which will be for the lifetime of the cycle. The economic community does not take that very seriously because nobody knows the length of the cycle. If only the Chancellor could grasp that. We do not know how long the cycle will last, or whether it will be one of prosperity or depression. Mr. Greenspan and all of the economic community in America are locked in an intellectual argument about whether there will be a soft landing or a hard landing. The Chancellor is not addressing his mind to those serious points; he is just talking schoolboy economics.

Mr. Brown

When the previous Conservative Government said that they would balance the budget over the cycle, that should never have been believed, either.

I give way to the right hon. Member for Wokingham.

Mr. John Redwood (Wokingham)

My constituents understand that the Government have put taxes up a lot. They can see and feel that, and they are prepared to believe that this Government are spending more than the previous Government. However, what they find odd is the fact that they do not have enough policemen, teachers, doctors or nurses. They have fewer of many of them than under the previous Conservative Government. When will some of that money get through to pay the wages of the people whom we want, instead of buying an army of spin doctors and bogus advice for the Chancellor?

Mr. Brown

The right hon. Gentleman is now a supporter of public spending. That is a conversion indeed. He said at lunchtime in a speech that was issued by the Press Association that the divide in the Conservative party was not really between the mods and the rockers, because there was only one rocker, namely, the shadow Home Secretary, but between the Europhiles and the Eurosceptics. I believe that that is the position from which he comes on just about everything.

On the right hon. Gentleman's question about public spending, will he support the £5 billion extra a year that we are putting into education? Will he support the 20 per cent. rise in transport spending—our £180 billion plan for transport—that we are proposing, which the shadow Chancellor refuses to support? Will he support the extra expenditure on law and order—the 6 per cent. real terms increase a year? Will he therefore now support our public spending plans? I think that he would agree with me that it is impossible to get doctors, nurses and other people to serve in our public services unless we have the money to pay their salaries. If he agrees with that, he has become a supporter of the Government's plans and will be, once again, at odds with the shadow Chancellor.

Mr. John Maples (Stratford-on-Avon)

I hope that the Chancellor can help the House to understand something about his golden rule. If current spending grows faster than GDP, is it not inevitable that taxes must grow faster than GDP as well?

Mr. Brown

I think that the hon. Gentleman has misunderstood our rule. Current spending must be balanced by current revenues. That is the point of the rule, which applies over the cycle. Current public spending over this Parliament, if he looks at the figures, is 2.25 per cent. The difference, I suspect, between him and me is that while he wants to believe in a balanced budget, he will not show disloyalty to the shadow Chancellor, at least in the Chamber, although he will disagree with me. I suspect that that is his position. He obviously does not want to respond to that point. We think that it is right, given the needs of public investment in health, education, transport and our public services generally, that we should borrow where necessary for investment, subject to the discipline that we have upheld—the debt to GDP ratio will fall from 40 per cent.

As we have repaid so much debt this year—I thought that the shadow Chancellor might have applauded us for that—the debt to GDP ratio is falling to 30 per cent. Again, he has failed to answer the question: does he support a balanced budget or not? That is at the heart of the Conservatives' campaign. They want tax cuts, but they cannot tell us whether they support a balanced budget. Indeed, because they are in such a mess, they cannot offer any fiscal rules.

Mr. Geraint Davies

Does my right hon. Friend agree that the Tories cannot suggest fiscal rules because their express policy is to establish a new independent committee of economic advisers, presumably with Evan Davis on it, to oversee fiscal policy? They have no ideas of their own and no idea of how to run the economy—they want independent ideas. The public do not trust the Tories, so they say that someone else will run their policy.

Mr. Brown

I am not sure that that is an entirely new idea. The right hon. Member for Huntingdon (Mr. Major) is here, and he would agree that the introduction of the wise men before the Bank of England became independent was an innovation that happened under his Government as they tried to meet the inflation target and sought independent advice. Far from the idea being a great innovation in economic policy, it is simply a repetition of what has been done.

Again, we come back to this straightforward issue: if the Tories believe that £16 billion is the difference between what we are spending and what we can afford, they should have the courage of their convictions to say that. That is what the debate in the No Turning Back group has been about. If the Tories believe in a balanced budget, they should tell us that that is what they believe in. If they believe in a balanced budget, they cannot tell the electorate that they promise tax cuts. The way in which the debate has developed has been very illuminating.

Mr. William Ross (East Londonderry)

Will the Chancellor give way?

Mr. Brown

Once more, then I must make progress.

Mr. Ross

I am not a member of the Conservative party, but I am interested in what the Chancellor said about the ratio of public debt to GDP. He did not make clear to the House what ratio he had in mind or whether that ratio was to total public sector debt or to central Government debt. Will he please elucidate?

Mr. Brown

The public sector debt is set out in the Red Book. We seek a figure of less than 40 per cent. Of course, in other countries debt can be a lot higher. We have reduced debt from the 44 per cent. that we inherited after national debt doubled—partly under the stewardship of the shadow Chancellor—to 33 per cent. It is falling to 30 per cent. in the next two or three years. The idea that we have not pursued a disciplined policy is completely outrageous. Again, the Conservative party cannot tell us whether it supports a balanced budget—three and a half years in opposition, four shadow Chancellors, lots of policy statements, and it cannot give us an answer to that simple question. That has been revealed this evening.

Now, the four challenges that we face as a Government are these: first, to entrench a culture of low—

Mr. Bercow

rose—

Mr. Brown

I have been very generous in giving way to the hon. Gentleman, who has exposed the fact that he does not do research for these occasions.

The first challenge is to entrench a culture of stability and low inflation. That is why I believe that the whole House should be pleased that inflation is at its lowest for 30 years. Our second challenge is to seize the opportunity to build from the record 27.9 million men and women in work to a situation in which this country can achieve the goal of full employment.

We should coach the hard to employ—the young under-25s. We should bring the number of single parents in work up to 70 per cent. over the next decade. We should give the same responsibilities and rights to the partners of the unemployed, both to seek work and to get help in doing so. We should do more to help the disabled, many of whom want the chance to get back to work, but who, over the past 20 years, were denied the right to work. We should have the same regime of rights and responsibilities for the long-term unemployed. None of that could be achieved if we did what the Opposition want to do—abolish the new deal. I hope that the Conservative party will think twice about what ought to have been a bipartisan consensus: we should have a new deal in which young people and the young unemployed have the chance to get work.

The third challenge for our country is to build family prosperity—family prosperity for not just some but all our citizens. That is why we favour the working families tax credit, and why we will introduce a new children's tax credit.

The Conservatives plan to abolish the working families tax credit. Even Ronald Reagan said that the equivalent in the United States was the best family measure for which he and his Administration had been responsible, and George W. Bush asked Republican senators and congressmen not to punish the poor by refusing to raise earned income tax credit. This, however, is a Conservative party so far to the right that the only policy on family prosperity that it is prepared to advance is a policy to abolish the working families tax credit, and the children's tax credit now also appears to be at risk.

Mr. Gardiner

Under the children's tax credit, would not the benefit received by a family with one child increase from its 1997 level of £11.50 to £24.50? Is that not what would happen under this Government come next April?

Mr. Brown

My hon. Friend is absolutely right. In the case of millions of families, support for the first child, which was just over £11 when we came to power, could be as high as £24.50—even higher if one of our Budget proposals, which is out for consultation, is accepted. That represents a doubling of support for the first child of millions of families over the time in which we have been in office. It is more than we promised in our manifesto. It means that a million children can be taken out of poverty; it also means that every family in the country, rich or poor, has benefited from our policy of giving more support to families bringing up very young children.

Those are the issues on which we hope to make progress over the next year. What would the Conservatives have done? We would have been presented with the New Deal (Abolition) Bill, and the Working Families Tax Credit (Abolition) Bill. We might have been presented with the Children's Tax Credit (Abolition) Bill. As the shadow Chancellor has made clear, we would certainly have been presented with the Winter Allowance (Abolition) Bill. We would even have been presented with the Christmas Bonus (Abolition) Bill.

What Christmas spirit would have been involved in telling pensioners that they would lose the Christmas bonus for which, in fact, a Conservative Government legislated in 1972? It is clear that the Conservatives have abandoned the Christmas spirit, and that there are no wise men around in their party.

What about the free colour television licences from which 3 million pensioners currently benefit? The shadow Chancellor says—I think I quote him correctly—that it is a gimmick that patronises pensioners. He says, "We do not think we should patronise pensioners. We are going to get rid of the free licence, instead of patronising them by saying that we will hand out little dribs and drabs."

Mr. Portillo

No, we are not.

Mr. Brown

Is the right hon. Gentleman confirming that the Conservatives would not get rid of the free licence? [Interruption.] It appears that he is not.

The shadow Chief Secretary to the Treasury has a big interest in the matter. I recall that in 1997 he was a signatory to a Bill to abolish the exemption from payment for licences. He and his colleagues did not say that it was patronising or a gimmick, however. The present shadow Economic Secretary to the Treasury, then a Back Bencher, said: For those over 75, the television is a particularly important part of life. He proposed to exempt all those aged 75 and over from having to pay anything at all. The hon. Gentleman even went to his constituency newspaper, the West Sussex Gazette, which featured the headline "MP's crusade to abolish TV licences for the over-75s". He said that his Bill would correct the unfairness, and that he had met large numbers of pensioners aged 75 and over for whom the television licence was a substantial burden and worry. He went on to say that for the over-75s, the television licence was the main conduit to communication, information and entertainment. He thought that the top priority should be a simple and tangible measure that was directed and cost-effective and which brought help to 85 per cent. of the retired population who were in real need.

Who sponsored the Bill in the House of Commons? It was the shadow Chief Secretary, the hon. Member for West Dorset; the hon. Member for South Cambridgeshire (Mr. Lansley), who is in charge of the election manifesto that will commit the Conservative party to abolishing the free television licence; the senior vice-chairman of the Conservative party, the hon. Member for Westmorland and Lonsdale (Mr. Collins); the hon. Member for Bury St. Edmunds (Mr. Ruffley), who was an adviser to the previous Chancellor and is part of the Opposition's Treasury committee; one of the Opposition's health spokesmen, the hon. Member for Meriden (Mrs. Spelman); one of their education spokesmen, the hon. Member for Altrincham and Sale, West (Mr. Brady); and another vice-chairman, the hon. Member for North Norfolk (Mr. Prior).

There were so many on the bandwagon that hardly any room was left for the band. However, having gone one way, the bandwagon is now going in the opposite direction. We said that we could not trust the Conservative party on tax, but we cannot even trust it on television licences.

A silence has descended on the Opposition Benches. To be fair to the shadow Chancellor, he could not sponsor the Bill because he was not in the House at the time.

Mr. Portillo

The Chancellor does himself no favours by promoting those distortions. He is not enhancing his credibility and does no credit to politics. He knows perfectly well that the Conservative party proposes to allow retired people to have a much higher weekly income. Single pensioners under the age of 75 would receive an extra £9.50 a week, and the payment for a couple over the age of 75 would increase to £16.10 a week. That would all be exempted from tax. [Interruption.] Yes, it would. We would adjust the tax rates and the minimum income guarantee so that pensioners lose nothing. Why is the Chancellor of the Exchequer afraid of honest debate? Why must he distort everything?

I do not wish to test your patience, Madam Deputy Speaker, but I want to make it clear that we do not propose to abolish the working families tax credit. We propose to pay it to the parent who has care. That is a much more socially responsible policy, which should commend itself to the Labour party. By the way, in the process, we shall also save business £100 million a year in administration costs.

Mr. Brown

That is the abolition of the working families tax credit. The right hon. Gentleman proposes to replace it with the old family credit, with its high marginal tax rates, its low take-up and all the work incentive problems that arose from it. The working families tax credit takes an additional 1 million people out of poverty, which in turn removes 1.2 million children from poverty. I would welcome the right hon. Gentleman saying that he would keep the working families tax credit, but he is actually saying—he should make this clear to the House—that he would abolish it and replace it with family credit, which is the old system that was paid direct to the mother and not through the employer.

Mr. Portillo

Our proposal is that the working families tax credit should be paid to the parent who has care. It is a sensible policy.

Mr. Brown

The working families tax credit is what it is because it is paid through the pay packet. That is exactly what it was designed to do and we have made it possible for many people to return to work. If the right hon. Gentleman says that he would keep the working families tax credit, that is one thing and, as I said, I would welcome it, but he is actually saying that he would replace it by returning to the old family credit system.

Many people are £50 a week better off under the working families tax credit because we have devised a system that has a minimum income guarantee, which at the moment is £214 a week. People do not have to pay tax until they receive £260. If the right hon. Gentleman is prepared to guarantee that the working families tax credit will remain in existence and be paid through the wage packet at the rates that we are outlining, that is one thing, but he seems to be describing its abolition and replacement by family credit.

Mr. Portillo

rose—

Mr. Brown

The right hon. Gentleman must answer a straight question. Would he keep the working families tax credit in the same form in which it was designed: that is, paid through the wage packet? Will he also answer a question about pensions? If he is to guarantee that people would not have to pay tax on the addition that he proposes on the basic pension, how much would that cost?

Mr. Portillo

The working families tax credit has been badly designed by the Chancellor. Many children do not get the money because it goes to the parent in work, who is not necessarily the parent with care. I believe that that is a bad system, and we will reform it. Furthermore, it is a bad system because it costs business £100 million, and business should not be the provider of benefits on the Government's behalf.

Mr. Brown

The right hon. Gentleman is wrong on the factual point, and I hope that when he gets the information he will withdraw his allegation about what has happened as a result of the creation of the working families tax credit. As for burdens on business, perhaps he will explain his proposal to privatise the industrial injuries benefit without proper compensation having been announced for businesses. He says that he wants to take a burden off business, but then he wants to put one on through the privatisation of the industrial injuries benefit.

The right hon. Gentleman has still not answered my question. If his pensions proposal is serious, and he guarantees that no pensioner would have to pay any tax on the additional money that he proposes to give, the Inland Revenue would have to make complex arrangements and that would cost a substantial sum. He should tell us what that sum is likely to be.

As we go through the Conservative party's proposals, the amount of money available is eroded from the £16 billion. The right hon. Gentleman cannot even find the £5 billion that he is talking about. We know that that money is not available for single parents. We have calculated that he would have to put every single parent with a child over 11 back to work, otherwise he could not secure the savings that he talks about.

The Conservative party will have to go back to the drawing board one day. Its proposals are vindictive towards single parents, and assume that a newly widowed mother would have to go back to work, and that mothers with sick children would be forced into work. The only way in which the Conservatives could get that level of benefit savings would be by putting every mother with a child over 11 back to work. They know perfectly well what mood they want to create in the country on that issue, and they have not calculated their figures.

Mr. Portillo

rose—

Mr. Brown

I shall give way only if the shadow Chancellor is prepared to answer some questions. He should tell us, as I have asked him to do, the tax cost of exempting pensioners. He says that he would exempt pensioners from taxation on the additional pension rights that he proposes to give presumably to both the richest and the poorest pensioners—any pensioner who pays tax. He must have a costing for that, so perhaps he will give it to the House now, because the longer this goes on, the clearer it is that the shadow Treasury Front-Bench team has not thought out its ideas or its detailed proposals.

Mr. Portillo

The cost of paying the benefit to single parents whose children are over 11 would be £725 million, and we have said that after three years we would be able to save £500 million. So the proposal is not based on everyone going to work, as the Chancellor says. It is based on a realistic assessment of what can be achieved after three years. It is a proper policy, because social research shows that children above the age of 11 and teenagers are much more likely to look for and find work if they come from a household in which the parent has looked for work and has hopefully found it.

We shall set out all our tax proposals in the new year, and we shall give the Government a good run for their money. Those tax proposals will be highly attractive to groups in society who have been vindictively punished by the Chancellor of the Exchequer.

Mr. Brown

The right hon. Gentleman is revealing more and more as we go on. He says that he could save £500 million from single parents, and that the cost of benefits for single parents would be £725 million. He referred to his proposal on the working families tax credit. Either that tax credit will not exist under the Conservatives, or that money will have to be paid to single parents who are in work. His failure to include any costing for the working families tax credit shows that either he intends to abolish it completely—I do not think he would abolish it completely, because he proposes to replace it with family credit, which also has a cost—or he refuses to count it as a cost. The truth is that the average benefit saving from getting a single parent back to work is about £60 a week—just over £3,000 a year. If that is divided by £500 million, it would need more than 150,000 single parents with children over 11 to recoup that money in the year about which the right hon. Gentleman is talking. In other words, he is assuming, through his own mistakes, that every single parent will be forced back into work. He is assuming that mothers with sick children and even the 4,000 widows will be forced back to work, perhaps within only a few weeks of their husband's death.

At some time, the Conservatives will have to face up to the fact that, if they take single parents off benefit and get them into work and if they keep a form of family credit, which they say they would, they will have to pay out some money for that. Therefore, the saving would not come just by writing off the benefit cost. They would have to provide the tax credits or the family credit. The right hon. Gentleman is now giving us the impression that he has not even bothered to cost that in his figures.

Several hon. Members

rose—

Mr. Brown

I am afraid that I cannot give way any more.

The Conservatives have revealed today that they cannot tell us their fiscal rule. They cannot tell us—it was quite a simple question for previous Conservative Administrations—whether they believe in a balanced budget. I have put that straightforward and simple question to the shadow Chancellor. It was answered by previous Administrations, but he has refused to answer. In my view, the right hon. Gentleman has confirmed that he intends to abolish the working families tax credit and replace it with family credit. He has not properly costed the single parents savings and he has not costed the new deal savings, which were announced a few days ago. He has not costed properly the savings from privatising industrial injuries benefit, and, as Lord Skidelsky said in the other place, he has made huge assumptions about savings that can come from cutting bureaucracy here and there and from cutting fraud, which we are already doing far more successfully than he ever did when he was Secretary of State for Employment.

Our agenda is to entrench stability in the economy by pursuing a policy of low inflation and working with strong and disciplined fiscal rules. Our policy is to move this country towards full employment by building on the 28 million people who are now in jobs—the highest figure the country has ever achieved. We aim to build on the working families tax credit with the children's tax credit and to provide far more generous child benefit than we ever saw under the previous Government. We aim to build family prosperity, not just for some, but for all. Our policy is to build the investment that is necessary for our public services. We have had no answer today from the Conservative party about whether it would fund the necessary investment for transport and other services.

The shadow Chancellor has said that he wants a mixed economy in health care. Let us fight out this issue. We do not know about the charges. He says that he is not talking about general practitioners, but whether it is hospitals or tax relief for private medical insurance—money that could go to the health service—or whether it is the shadow Chief Secretary's plan, with the right hon. Member for Wokingham, for credits to be paid to people who use private care, let the Conservatives tell us the truth about their privatisation plans.

The Conservatives must face up to the central fact that they brought this country boom and bust in the late 1980s and early 1990s. That happened because they did not work to disciplined fiscal rules, and they have none. The Tory Government refused to invest in the supply side of the economy—education and infrastructure—which is essential to sustain growth. They did not have monetary discipline and they are now reluctant and unclear converts to the independence of the Bank of England. On the basis of one year's surplus they promised tax cuts for every year, which they knew they could not afford.

All those mistakes are being made again. The Conservative party has a black hole in its public spending figures. However, it has an even bigger problem because it was the party of boom and bust and it still is. It has no fiscal rules, no investment in the supply side of the economy and no monetary discipline. It will make the mistake of promising tax cuts every year on the basis of a surplus in one year. The Conservatives are making the same mistakes from which they should have learned. The shadow Chancellor was Chief Secretary to the Treasury when many of those mistakes were being made and he is now the shadow Chancellor presiding over a Treasury team that is repeating them. He has not been able to answer any of my questions. The Conservative party is not fit for government and it has not even begun to learn how to be an Opposition. The country will pass its verdict in due course.

5.55 pm

Mr. John Major (Huntingdon)

If I had any doubts about whether this was the last Queen's Speech debate in which I would have the privilege of speaking before leaving the House at the next election, the Chancellor has removed them over the past 40 minutes or so. The Government have been generous in allowing six days to debate a Gracious Speech with so little in it. I now know that that was because they wanted to debate the Opposition's alleged programme rather than their own policies. As we come to the end of this Parliament, the Queen's Speech, which we should have been debating, is more of a shop window than a programme for action. It contains a small number of measures, most of which every hon. Member knows will not be enacted in this Parliament.

The Government took office with a large majority and an enormous amount of public goodwill. They faced a depleted Opposition who had suffered a painful election defeat. Given all that, it is extraordinary how little of real worth has been achieved in those remarkable circumstances. In addition to all that—I will return to this later—the Chancellor inherited an economy that was in better shape than that inherited by any incoming Chancellor for a long time. In similar, although not identical, circumstances, between 1945 and 1950 Mr. Attlee did so much more with his majority. We may not agree with what he did, but he made remarkable changes, out of any comparison with what has been achieved in this Parliament. The same can be said of my right hon. and noble Friend Baroness Thatcher between 1979 and 1983 and perhaps even more so between 1983 and 1987. Although I voted positively against the Labour Government with great will, even I could see that there were attractive aspects to some of what they said they would do. They were going to think the unthinkable, but they have scarcely thought at all. The Minister who was going to think the unthinkable was soon out-thought and out of Government as well.

The Government's fondest boast is their management of the economy. With all the regularity of a man who has convinced himself and is seeking to convince everyone else, the Chancellor tells us that he has avoided boom and bust—and thus far he has—and has remained faithful to prudence. Prudence has become famous. In fact, in his last Budget he rather strayed from prudence and I suspect that, far from straying, he will be downright unfaithful to prudence when he delivers his new Budget and tells us of his plans to bribe the electorate with their own money. Poor old prudence has served her time adequately but is about to be ditched in favour of a hussy who is willing to distribute her assets in every conceivable direction.

To preserve the tattered reputation of prudence, and perhaps the Chancellor, the right hon. Gentleman has hinted at targeting tax cuts. We will have none of the crudeness of giving everybody their money back. He has said that they will be targeted, and I bet they will. They will be targeted on every voter who might be persuaded to put the Chancellor back into the Exchequer. As the Chancellor is keen to put matters on the record, let it be recorded that even he smiled at the prospect of what he might do.

I find it ironic, although perhaps not amusing, that if we believe what is said, the economy is to be at the centre of the Government's re-election campaign. That is disingenuous at best and downright dishonest at worst. Despite the earlier difficulties to which he alludes so frequently, the Chancellor knows that in 1997, he inherited a growing economy with low inflation, falling unemployment and a rapidly declining fiscal deficit.

The Government can claim accurately that, thus far, they have not yet wrecked that economy, although cause and effect in economics is often lengthy and the substantial tax increases that the Chancellor has levied will threaten our competitiveness, as will the Government's agreement to some of the anti-competitive measures from the European Union and their tendency to advocate regulation. It is difficult to get rid of regulation. I do not complain about some aspects of regulation. I acknowledge that we had great difficulty in getting rid of it, too.

Mr. Andrew Miller (Ellesmere Port and Neston)

Will the right hon. Gentleman give way?

Mr. Major

If the hon. Gentleman will forgive me, I shall make a little progress.

The Chancellor, of course, knows all that. He does not openly admit it, but he is not foolish; he knows all that. That is why he talks regularly—he talked about it again today—of his economic achievements: so as to fix in the public mind the fact that he, and he alone, may be responsible for the benign economic circumstances that currently exist. That is why boom and bust in the 1980s—he almost invariably says the 1980s, although seeing me sitting here he added the early part of the 1990s—features so much in his vocabulary. However, even the Chancellor at his most slippery, and that—I mean it as a compliment, for he is a politician—is very slippery indeed, knows that the economy has been benign and growing for eight years, which is an almost unprecedented post-war record. When in opposition, he and his colleagues opposed many of the measures that brought that about. He now advocates many of those measures as prudent for the present and the future.

Perhaps I might remind the Chancellor, as it seems to have slipped his and the Prime Minister's mind, that it was the Conservative party that created the economy that he inherited in 1997. Masters of spin he and his colleagues may be, but attempting to air brush out of history economic growth from the early 1990s onwards is pushing their talent for obfuscation just a touch too far.

Liz Blackman (Erewash)

Will the right hon. Gentleman give way?

Mr. Major

Let me make a little progress. I shall then give way to the hon. Lady.

I remind the Chancellor of where we were on 1 May 1997, as opposed to the fiction of where we were. Interest rates were at 6 per cent. GDP growth was at 3.5 per cent. Inflation was at 2.6 per cent. and unemployment was on a very sharp downward track. Thank goodness it has remained on that downward track since then. The Chancellor can take some credit for that. Over the first 18 months, the impact of what had been done before kept it on a downward track. In the past 18 months, he can take some personal credit for that.

The tax burden in 1997—we heard about the 22 Tory tax rises time and again—was only marginally above that of 1990 and substantially below that which applies now. I shall not bandy figures about. There are various ways in which one can calculate them, but, whichever way one calculates them, the tax increases between 1997 and today are larger in total than the tax increases between 1990 and 1997. The talk of 22 tax increases was entirely bogus, for it utterly neglected the parallel tax reductions, which made a substantial difference to the net position.

Perhaps the Leader of the House, who will wind up the six-day debate, will tell us—I do not know the figure and I have not yet managed to obtain it—how many tax rises have been introduced since 1997. If she is in a frank mood, and I hope that she is—I greatly admire her leadership; she is a fine Leader of the House—perhaps she can add to her reputation by telling us how many of the tax increases since 1997 were announced by the Chancellor in the House in the Budget, as opposed to being slipped out in a post-Budget press release from the Treasury. I would thank her for that and welcome it.

Several hon. Members

rose—

Mr. Major

I think that the hon. Member for Erewash (Liz Blackman) was first.

Liz Blackman

Does the right hon. Gentleman accept that, on record to the Select Committee on the Treasury, the Governor of the Bank of England clearly stated that interest rates should have risen well before the Government came into office in 1997, but for political reasons that did not happen? Does he recall that, in 1998, in the teeth of the Asian crisis, the Opposition forecast recession? It was the good management of the Government that steered the economy on a fair course.

Mr. Major

I have a feeling that the state of the world economy, notwithstanding the enormously good activities at Millbank, stretches a little further than the direct responsibilities of the Chancellor. I may be mistaken about that. It may be that Mr. Greenspan has very little to do with the American economy, that the American economy has very little to do with us and that the European economy does not affect us in the slightest, but I ask the hon. Lady to consider that it is just possible that world events interfere even with the activities of a Chancellor who inherits a benign economy.

I come a little closer to the tax point. I have said before and I repeat: we did put up taxes. We put up taxes in a recession to help to protect individuals and our national accounts from the economic downturn. I seem to recall that, at the time, the Chancellor and his colleagues demanded that the then Government did precisely that to protect people who were vulnerable in their constituencies. It was right. It was very painful. Conservative Governments do not like to put up taxes. They do not wish to. They did not intend to, but the social requirement of protecting people in that recession was necessary.

That is in some contrast to what has happened since the 1997 election. Since then, the Government, first, have increased taxes by more than we did and, secondly, have increased them in a benign economic climate rather than in a recession. That is a sharply different proposition.

Mr. Matthew Taylor

The right hon. Gentleman speaks with his usual eloquence and charm. He referred earlier to the trend in unemployment continuing on a downward path. There was another trend: the trend in projected taxation, which his Chancellor had announced and was printed in the Red Book. That showed taxation continuing to rise after the general election as a proportion of GDP—it was slightly above the present Government's projection—to close the very deficit that the Government have closed in that way.

Mr. Major

I give the hon. Gentleman exactly the same answer that the Chancellor would give him. If I had said to the Chancellor that the Red Book projections show taxation rising in future, he would have said, "These are stylised projections based on unchanged policies." Of course, they change with each successive Budget. That is why I referred to the tax burden as it is now, not as it is projected by the Chancellor in future. I am grateful to the hon. Gentleman both for his kind words and for letting me make that particular point.

Is there scope for tax reductions now? The Chancellor clearly thinks not and had much pre-election fun rehearsing his hustings speeches in village halls throughout the country, but there is clearly scope for tax reduction to reverse the Chancellor's raiding of the net personal incomes of millions over the past three years.

My right hon. Friend the Member for Kensington and Chelsea (Mr. Portillo), the shadow Chancellor, is searching for savings throughout Whitehall. Good luck to him. It is an extremely good thing for him to look for, but, although it is wise always to see where prudent savings could be made, he could justify his proposed tax cuts simply by saying that he is reversing just a part of the sheer scale of the economically damaging increases that the Chancellor has piled upon the electorate in the past three years.

Some time ago, I heard the Prime Minister—not my favourite programme, Members can understand, but I listen to him from time to time—praising our low-tax economy. Unfortunately, I must have missed the bit where he praised his predecessors for creating it, and the bit where he repented his Government's smash-and-grab raids on people's pockets. The plain truth is that the Chancellor, a very agreeable man, has had his hands in the public's pockets more often than the public have had their hands in their own pockets.

In 1997, taxes in the UK broadly, because one can calculate it in different ways, were 6 per cent. below those of our main European competitors. That gap, important for our competitiveness, has shrunk to 2 per cent. and may shrink further because Germany, France and Italy are all embarking on programmes to cut their taxes.

That is potentially important for our competitiveness, our inward investment and for our jobs, on a day when, sadly, many jobs have been lost at Luton. Tax cutting is not simply a matter of putting more money into the pockets of those who have some money already. In my judgment, and I dare say that of my right hon. Friend the Member for Kensington and Chelsea, the weight of tax reductions should be at the lower end of the scale.

It is not greed that demands tax. To a certain extent there is an economic justification for tax reductions, quite apart from the fact that we are not giving people something, but simply taking less of their money away from them.

The Chancellor's move over the past three years from fiscal Scrooge to fiscal Micawber is by no means his only policy change. Once upon a time, as I recall, he was proud to be represented as being in favour of quite early entry to the euro. I understand from his aides, that now, to judge from briefings against the Foreign Secretary and the Northern Ireland Secretary, he is not in favour. Of course, those briefings could be personal rather than policy—one never knows with the Cabinet—

Mr. MacShane

The right hon. Gentleman knows about that.

Mr. Major

Indeed I do, and that is exactly why I say it. However, it is nearly Christmas, so let us make the generous assumption that it is policy that activates the Chancellor and not a wish to undermine his colleagues, which is always an unattractive trait in senior politicians.

The Chancellor now favours delay in entry to the euro. The time is not yet right. One might perhaps characterise his position as wait and see. I think that he is right about that. When they were in opposition, the Prime Minister and the Chancellor roundly condemned that policy, but in government they have warmly embraced it. Indeed, wait and see appears now to have become a rather venerable old gent much loved by nearly all political parties.

The Government wait and see. The Opposition wait and see—albeit for a rather longer time. Entry into the euro rightly provokes great debate. Unfortunately, for many years it has been inadequate debate. Some hon. Members see a new currency as a child of Beelzebub while others regard it as a benign inevitability. It is, in fact, neither. Personally, I disagree with both the "go in now" brigade and the "go in never" brigade. We should measure United Kingdom political and economic interests, which are not yet clear—the Chancellor is right about that—and make a decision only when they are. It could take some time. After the election I shall not be in the House to be told that I am wrong, but I do not believe that any Government will enter the euro in the next Parliament and in my view nor should they. I would actively oppose premature entry.

Mr. Nigel Beard (Bexleyheath and Crayford)

What is the difference between the policy that the right hon. Gentleman has just outlined for entry to the euro and the established policy of the present Government?

Mr. Major

The established policy of the present Government is very familiar to me for it was mine long before it was theirs, so it is hardly surprising if I have a certain degree of affection for waiting to see whether it is the right policy before deciding upon it. A more accurate question might have been to invite the Chancellor to explain why, two years after the euro came into being, he still adopts the policy that he criticised so harshly when I sat on the Government Front Bench three years before the euro.

Mr. Miller

He is not listening.

Mr. Major

Of course he is not listening; he does not want to hear this and that is perfectly all right.

Mr. Miller

Will the right hon. Gentleman give way?

Mr. Major

The hon. Gentleman will probably defend the Chancellor, but I do not think that the Chancellor needs defending. He is big enough to look after himself.

Mr. Miller

Just for completeness, so that we know exactly where the right hon. Gentleman stands, is he in favour of a referendum so that the people can decide?

Mr. Major

I actually said, in government, that there should be a referendum on the euro. Once again, the present Government gave that commitment because they inherited it from me. That is my position on a referendum, but if in the next Parliament there is concurrence that there will be no decision to enter, it is painfully evident that there will be no referendum.

The Government are allegedly preparing for entry if—and it is a big if—they judge it to be in our national interest. If that is the case, and if their position is not simply a public relations posture, they must consider some serious questions. However, they have not given us their judgment on those serious questions. I do not know the Chancellor's view on the debate. For example, how does he think that the pound will fare in future alongside the dollar, the euro and the yen? Does he worry about the very large capital outflows from the eurozone to the dollar zone? Why does he think that it is happening? What does he think is happening within the eurozone following the birth of the new currency, albeit too early and certainly in the wrong conditions—not remotely the conditions that were agreed at Maastricht some years ago?

It seems to me, as an observer, that the euro has accelerated structural change in continental Europe. If that is so, we need to consider whether the proposed tax reforms in Germany, accompanied by the proposed pension reforms there and the anticipated balanced budget there in about four years' time if the Germans hit their targets, will affect us and if so how?

We also need to consider the implication—as it is critical to the United Kingdom—of the huge growth of mergers and acquisitions in France especially, but also across Europe. If the Government are leading the debate on the euro, what do they think about all those and 50 other issues that the Chancellor and I and all my right hon. and hon. Friends could easily set out as being crucial for discussion and consideration before any rational judgment should seriously be taken to take us into a single currency?

Some oppose it on principle and others do not. Most people probably wish to know whether it will have a benign or a malign effect on the British economy. We cannot know that without a proper debate on all those issues. I wish that we were having that debate and I wish that the Chancellor of the Exchequer would lead it

The Chancellor of the Exchequer is better placed than any other politician to lead that debate, so what does he think? How does the Chancellor think the unification of the continental financial markets will impact on our own financial markets and what will it mean for future policy? Here is another illustration of an issue that is far beyond the often rather superficial arguments for and against the euro and one that we genuinely need to examine and consider before we make a decision. It is all relevant to our national interest. Where is the debate on all this so that we can make a rational judgment?

We have time. As I said earlier, I do not favour entry in the next few years. I do not think that it would be wise and I would not vote for it. In fact, I would oppose entry in the next few years, but we have to consider that the world around us may be changing and we need to look at that changing world and judge what it means for us.

Mr. MacShane

I am grateful to the right hon. Gentleman. I have been listening with great interest to what is perhaps his valedictory speech. I congratulate him on his remarks because it is rare indeed to hear from the Opposition a considered discussion of the problem of euro entry. Perhaps he should address his remarks to those on the Opposition Front Bench and to his own party leadership because until we have a rational discussion across the Chamber and the nation that is not dictated by The Sun and the Daily Mail and their venomous anti-Europeanism, we cannot have a discussion at all.

Mr. Major

When I hear the hon. Gentleman praising me, I feel the slide of a knife in my ribs.

Mr. Alex Salmond (Banff and Buchan)

Is it a familiar feeling?

Mr. Major

Of course not. It is not remotely familiar. That is a disgraceful suggestion.

The other point that I would make in response to the hon. Member for Rotherham (Mr. MacShane) is that, although I may be terribly old fashioned, I came into the Chamber today believing that the debate was to be about the Government's programme and policies. I did not think that it would be about the Opposition's programme, or about any distorted version of that programme that it may be convenient for the Chancellor to allege might be implemented in certain circumstances.

The Chancellor, rather like Fanlight Fanny, looks at our programme through the wrong end of a telescope, on a very dark night, standing on a stool, and through a clouded window. Anything that the right hon. Gentleman says about our policies we may routinely assume to be the opposite of the reality. There was much evidence of that today, and the right hon. Gentleman is very good at it. He is able to say that which is not so with such conviction that he convinces himself that it is so—but it is not. The Conservative party that I joined—I look forward to campaigning for it in the next general election, in the hope and belief that it will win—bears no relation to the party painted in such lurid colours by the Chancellor of the Exchequer.

I see that the Chancellor is smiling. He may well smile: he has done a good afternoon's work, and enjoyed himself jolly well. He has not defended his own policies, but has talked about ours instead. He did not get past page 3 of the prepared speech given to him by his advisers. He was also able to use up 49 minutes, which was necessary because not too many Labour Members are waiting to speak later on.

The Chancellor has had a really super afternoon, which he is thoroughly enjoying. He has safely moved on and ditched poor old Prudence, who was useful once but is no longer. We must continue to remind the right hon. Gentleman of Prudence, because she will yet be an embarrassment to him when, in the very near future, he comes to prepare his Budget. Prudence may be the only person in the country who will not be given a tax handout of some sort when the Chancellor addresses the House on Budget day.

I return, briefly and finally, to the question of the euro. My prediction is not shared by many people, but I stand to be judged on it. It seems to be more likely than not that, over the next year, the euro will recover in value against the dollar, the yen and sterling. It is worth noting, in passing, that that will help sustain the price stability that was the objective demanded of the European central bank by the Maastricht treaty. The treaty was often misunderstood, but that provision was absolutely clear.

All such issues, and the conclusions that follow from them, are material to our consideration of whether sterling should one day—although not in the near future—enter the eurozone. In a mature debate on the future of our economy and currency, all those issues would be aired.

I was rather disappointed that the Chancellor should have aired other issues and spoken rather intolerantly about our policies, rather than address an issue that he hopes will go away in the period before and during the next election. I can tell him that it will not go away, as it is of abiding interest to far too many people for that to be possible. However, no mature debate is being held. The current Government have enjoyed a massive majority in the House of Commons for four years and, frankly, it is time that such a debate were held.

The hon. Member for Rotherham said that this might be my valedictory speech. He may wish it to be but, unless the election is held very speedily, I promise him that it is not going to be my valediction. However, it is certainly my valedictory contribution to a debate on a Queen's Speech. With your permission, Madam Deputy Speaker, I shall use the latitude that the debate allows to say something about the House of Commons and the way in which it operates these days.

The House of Commons has always had a certain mythology about its past. I have been here for only 20-odd years, but I am in no doubt that the complexion of the House has changed in that time, to the disbenefit of democracy and of the nation at large. It is not good for the House that only a handful of enthusiasts take part even in significant debates, and that it should be so often bypassed when statements come to be made.

Moreover, although all Governments have used guillotines, it is not good for the House when placing them at the necks of innocent pieces of legislation becomes too frequent and callous. It is not in the interests of the House of Commons that we should be able to go in the No Lobby, on a day when we happen to be here, and vote on issues that we do not understand after debates that we did not attend.

None of what I have set out is in the interests of democracy. If we were really interested in re-establishing democracy, there are things that we could do. There are many ways to reform the House of Lords other than the way in which it has been reformed, and they should have been implemented. Standing Committees of both Houses should be used to examine treaties—such as Nice, for example, or the Maastricht treaty of many years ago—both before and after they are negotiated. Standing Committees could also be used to look at the creeping constitutional change that is undermining the House. Those matters are what we need to be looking at.

I shall conclude with a prediction that gives me no pleasure at all but which I fear will be realised. It is that turnout at the next general election will be very sharply down, and that it will be below the level recorded in any general election for a very long time. No hon. Member ought to want that to happen, and it is not something to be proud of. If such matters were in the forefront of the Government's mind and covered in the legislation proposed for the few weeks available before the election is called for late April or early May, perhaps the Queen's Speech would have been better and more relevant than the one that the Chancellor nearly debated this afternoon.

6.26 pm

Mr. Nigel Beard (Bexleyheath and Crayford)

In assessing the economy today, it is useful to consider the history of economic policy in Britain over the past few years.

In his great work on the English constitution, Walter Bagehot observed that civilisations ultimately decline because they fail to understand the institutions that they have created. For the whole of the 20th century and much of the 19th century, industrial economies seemed to be just such institutions, and a lack of understanding of them could indeed endanger the democracies that nurtured them.

John Maynard Keynes was the intellectual critic of the prevailing laissez-faire economics of the early 20th century. His view was that to avoid instability it was essential for central Government to regulate demand. Thus, as the trade cycle carried an economy to recession, Governments should spend to create the demand to counteract it. As the trade cycle moved up to a peak, Governments should restrain demand to avoid overheating the economy and prevent subsequent inflation as too much money chased too few goods.

Reginald Maudling, at the beginning of the 1960s, attempted to create growth in the economy simply by creating more demand. It did not work, but resulted in the economic crisis that faced the Wilson Government in the 1960s. Likewise—but even more so—in the early 1970s, Anthony Barber thought that by increasing demand he could cause the British economy to grow irrespective of its ability to supply. Supply did not follow but increased oil prices did. As a result, one inflationary pressure reinforced the other to create the appalling inflation of the 1970s. The greatest casualty of this era was Keynesian economics which was presumed—falsely, in my view—to lead automatically to inflation.

As a reaction to this excess came Thatcherism and Reaganomics, which, in essence, were a return to laissez-faire economics. The trouble was that there was a return to the overriding weakness of laissez-faire economics—a propensity to instability.

Mrs. Thatcher became Prime Minister in 1979 and, immediately, taxation was increased at a time when the economy was moving towards recession. So deep was the recession that resulted that 25 per cent. of UK manufacturing industry disappeared. That was some mistake.

The world economy recovered as oil prices declined, so much so that, in the second half of the 1980s, the then Chancellor of the Exchequer, Nigel Lawson, gave generous tax concessions. The inevitable boom in demand happened, which the economy could not satisfy. Inflation occurred, and high interest rates followed from that. The result was that the economy went bust in the early 1990s, as it had in the early 1980s, the early 1970s and the early 1960s—on all those occasions under a Conservative Administration.

The economy going bust was not just an economic abstraction; it meant that many small companies went bust. It meant that there were 3 million unemployed, in contrast to 1 million today. It meant negative equity so families could not afford to move house and were in dire distress because of their finances. It meant interest rates of 15 per cent.—and an average of 10 per cent. over the period of Conservative Government—compared with an average of 6 per cent. during this Government's period in office.

As the 1997 election drew near, an attempt was made to disguise that record with a Government spending spree. It did not work electorally, but the incoming Labour Government were left with a gap of £29 billion in the public finances that had to be made good. Had there not been a period of putting the public accounts right, even at the expense of public services, the International Monetary Fund would have been on the doorstep, and Labour's cherished five-year programme could have been vetoed by the financial markets.

It is to the great credit of my right hon. Friend the Chancellor that he had the understanding, foresight and tenacity to deal with that complex situation. Indeed, he has done more than that. He has introduced a new philosophy for managing the economy, which avoids the regular boom and bust of Conservative Administrations.

I have heard Opposition Members asking sarcastically whether Labour's claim to have abolished boom and bust means that it has abolished the trade cycle, too. Of course, it does not mean that. What has been stopped is a form of economic management that increased taxation in the trough of the cycle, which deepened recession, and reduced taxes at the top of the cycle, creating a boom.

Conservative economic policy succeeded in magnifying the undulations of the trade cycle into the familiar boom and bust.

The other characteristic of 18 years of Tory economic policy was a reckless neglect of public investment. The result is the rundown appearance of hospitals, the poor maintenance of schools and the total neglect of public transport.

The artificial Treasury impediment on public investment, known as the Ryrie rules, has been abolished in favour of new fiscal rules, namely the golden rule and the sustainable investment rule. These rules facilitate public investment while ensuring that interest payments on debt never become the millstone that this Government inherited, at a time when debt interest payments were greater than the whole education budget.

The attention of Departments to the value of capital assets and their maintenance will be focused by the recent introduction of resource accounting. That will ensure that maintenance and depreciation are properly taken into account in determining budgets.

The Opposition have made much of the fact that growth in the economy was forecast, in the July spending review, to be 2.5 per cent. in real terms, but that total Government spending will increase by 3.3 per cent. They therefore say that the spending programme is not sustainable and that they will cut it. However, the July spending review makes it clear that current spending will grow at the same rate as the growth in the economy, and that growth over and above that is capital spending, which will satisfy the golden rule and the sustainable investment rule as it doubles over the next three years.

If the Tory party were to cut the growth in public spending but not cut spending on health or education, as they propose, they would have to cut capital spending that is vital, particularly for the improvement of public transport. Tory policy can only mean continuing dilapidation of public buildings and increasing congestion in our cities, as well as likely cuts in health and education, compared with the Government's programme.

The public sector's record on controlling large capital projects is poor, partly because such projects come along only infrequently for any one part of the public sector. Consequently, experience in design and project management is not built up. Unless that problem is faced, there is a danger that too high a proportion of increased investment will not give value for money. That is a major justification for projects to be undertaken as some form of public-private partnership. The private partner should have expertise derived from experience in similar projects, and so be in a better position to ensure performance and to shoulder the risks of delay and overspending. After all, one cannot shake off the fact that the Jubilee line extension, under different project management arrangements, was £1.5 billion over budget and 18 months late.

In the past, public finance initiative projects tended to be justified because they avoided public borrowing. Under the new fiscal rules, that is no longer necessary. Now, the overwhelming argument for PFI or public-private partnership schemes is that they offer risk reduction in the capital project while leaving subsequent operational control in the public sector.

The Government's management of the economy is a triumph. It brings to an end a century of flawed or uncomprehending macro-economic policy and successfully launches us into a new century with a new political and economic understanding.

Mr. Bercow

The hon. Gentleman just referred to the Government's triumph. Does he regard it as part of that triumph that the savings ratio has been more than halved since the Government came into office?

Mr. Beard

Few people in the pubs and clubs of Bexleyheath and Crayford speak of the savings ratio. However, there are many who speak of the advantages of the new deal, of the fact that they are in jobs, of the working families tax credit and of the minimum wage.

Our future depends on our mobilising the abilities of a well-educated, highly trained and well-paid work force so that Britain can compete in the world on the basis of creative design and innovative science and technology.

As the Conservatives, driven by pseudo-nationalism and xenophobia, become the Jehovah's Witnesses of British politics, British business becomes increasingly confident about new Labour's vision of Britain's economic future.

The alternative is to compete using low wages and minimal employment conditions, to out-sweat the sweatshops of Asia. That is the Conservative vision, if such a demeaning prospect can be dignified by the word "vision". That is why they originally opposed the minimum wage, minimum holiday entitlements and legislation on fairness at work. That is why our state schools, universities, and research and development facilities were allowed to decline disastrously and why, even now, the Conservatives would abolish the new deal training scheme.

Britain has contributed immensely towards the shape and substance of the modern world through science, technology, art, literature, commerce, administration, law and democracy. Those days are not over. The frontiers of knowledge and understanding are being pushed further and further into new territory, with Britain to the fore. That is where our future lies. Britain has a distinctive culture and a resourceful people of great ingenuity and talent. We need a Government who can bring out the best in every citizen. This Government are doing that, and long may they continue.

6.39 pm

Mr. Matthew Taylor (Truro and St. Austell)

The debate opened with two speeches, the first of which showed clearly that the Chancellor of the Exchequer has every intention of remaining Chancellor after the general election, and—perhaps more important—that he has every intention of being leader of his party after that. The second—an attempt to present an alternative policy from the Conservatives—showed that, although the shadow Chancellor may have ruled out publicly that he wants to be leader of the Conservative party, he ruled out rather more clearly today any possibility that he would be the next Chancellor. Indeed, it is all too evident that he does not believe that he will be the next Chancellor; he makes no real effort to make his proposals add up. I shall return to that point.

I have some comments on the state of the economy that faces us. After something of an economic history lesson, the hon. Member for Bexleyheath and Crayford (Mr. Beard) suggested that there had been a transformation and that we were set fair for the future. It is always unwise, when considering an economy, to assume that some new vista has been reached—where all will be permanently well because the golden key to economic management has been found.

The Chancellor is doing a good job. Earlier in the debate, he asked what fiscal rules the Liberal Democrats believed that we should follow. The answer is simple: the fiscal rules that we proposed at the previous general election and which the Chancellor is following. There is thus no reason to criticise them. However, within those fiscal rules, plenty of room remains for debate about policy. The rules tell us nothing about levels of tax or of spend, and little about many of the major economic management issues that need to be tackled.

Mr. MacShane

Will the hon. Gentleman give way?

Mr. Taylor

I will in a moment; if I develop my point, it may help the hon. Gentleman.

I want to focus on an issue where there is a substantial question mark over the Government's handling of the economy: the imbalance in growth between investment and consumption. That is reflected in the serious difficulties in manufacturing and production industries, where there is growth of less than 1 per cent., while service sector growth is in excess of 3 per cent. If we take out the growth in production of mobile communications, the manufacturing figures are even worse. A further reflection of that is shown by the terrible news at Vauxhall.

At a time of so much difficulty in manufacturing, farming and many other industries, especially those that are export-related, why—in economic debate, in the recent pre-Budget report, in the March Budget and in the comprehensive spending review—has the Chancellor not addressed that imbalance in the economy, and the resulting loss of 250,000 jobs in manufacturing and farming since Labour took office? The hon. Member for Rotherham (Mr. MacShane) no longer wants to intervene.

That imbalance in the economy is a serious weakness for the Government. It is something of a surprise under a Labour Government; support for manufacturing and manufacturing export has always been regarded as one of Labour's heartland issues. Had the Labour party gone to the polls at the last general election saying that a Labour Government would pursue policies that would destroy most of the British car industry, it is hard to believe that Labour would have received the same amount of support in those heartland constituencies. We know that there is concern among Labour Back Benchers, because several of them have been brave enough to say so; at least one Labour Front Bencher resigned from office on exactly those issues.

Are there policies that the Government can pursue to tackle the problems in farming, manufacturing and tourism and the decline in household savings—down from 9.6 per cent. in 1997 to only 3 per cent. at present? Business investment growth is down from 7.5 per cent. in 1999 to only 1.75 per cent. this year. Since the launch of the euro, manufacturing investment in this country has fallen by 12 per cent. in real terms. Those issues are real; not only do they have an extremely public impact on the car industry and farming, but they affect many less high-profile businesses throughout the country. There may be less publicity for those businesses, but there is equal pain for the people who built them and for their employees. People are losing their jobs and businesses are being lost.

Mr. Miller

The hon. Gentleman knows that I have some knowledge of his constituency, because my late father-in-law farmed there, so I am well aware of many of the issues relating to remote, small farms that he describes. On manufacturing, however, I think that I may have a little more experience than him. Does he agree that an interesting challenge faces companies such as Vauxhall in my constituency? Output is growing constantly as a result of investment in technology. Whatever happens in the petrochemical industry and in other manufacturers in my constituency, output will grow while less people will be directly employed. What is the Liberal Democrat solution to that?

Mr. Taylor

The hon. Gentleman forgets that in the past Cornwall was a county where there was heavy engineering and mining. My experience is the same as that of the hon. Gentleman. In my constituency, Imerys, formerly English China Clays, employed between 8,000 and 10,000 people when I was first elected; the number is well under 3,000 at present, and that job loss is occurring in an industry that is producing more than ever before. That company is a classic example of an industry that is seriously concerned about the international competitiveness of UK production. If we consider what is happening in the car industry, in engineering and in the clay industry, we find that they are all suffering. Our country does not invite the same share of international investment as it did in the past. Hon. Members look surprised, but the share has declined. Companies operating in this country face serious decisions as to whether they can continue manufacturing here.

I have held talks with senior management at Vauxhall, Ford and other companies. They all say that the current level of the pound is a serious problem in attracting investment. That problem is the same for small businesses, such as Charlestown Engineering—now Svedela—in my constituency, which cannot obtain investment within the UK. That company manufactures across the globe, but it is not competitive here—despite the fact that production at its manufacturing centre in my constituency is of the highest quality in the whole group. However, each time that an investment decision is taken, that centre does not win.

Shortly, there may be similar investment decisions on the Nissan Micra. Honda has already taken a decision. The most price competitive sectors are those that are being most clearly hit. Luxury car production is hanging on at Jaguar—although it nearly went to America. However, each of those manufacturers took a decision not to invest in the UK at the most competitive end of the market.

Two issues drive that matter and the Government have failed to tackle them: first, interest rates; and secondly, the linked factor of the exchange rate and the lack of a clear Government policy on the euro. Nobody argues that we should join the euro at present—Liberal Democrats do not argue that, contrary to the caricature that is sometimes presented. Under current exchange rates that would be the worst possible decision.

However, there is a difference between our strategy and that of the Government: we are prepared to work towards the conditions of entry. The Government have laid out conditions, with which we agree; but they will not pronounce on the extra condition of an effective and competitive exchange rate, even though that is surely the key condition that must be met before anyone could realistically contemplate euro entry.

One wonders what is really happening behind the scenes, but as the Government will not tell us that in any parliamentary answers we shall have to take their official position. That is, in effect, that no action will be taken until the conditions are met. The Government will wait—looking up at the sky—and if at some point the Chancellor believes that a message has come from the heavens that the conditions are met, they will plump for the euro. However, they will not be proactive in achieving a competitive exchange rate or in obtaining any of the other conditions that they set.

Mr. Stephen Dorrell (Charnwood)

The hon. Gentleman develops an interesting argument. As I understand it, he says that he would not contemplate joining the euro under the present exchange rate; that is proposition one. Proposition two is that the Government should be working much harder to create circumstances whereby Britain could join the euro. That means that the hon. Gentleman must have in his mind a target exchange rate, at which that would become a realistic policy. Will he tell the House what that target is?

Mr. Taylor

I shall be glad to, and if the right hon. Gentleman is interested, I can send him the document produced with the help of a commission of very senior economists that we assembled; it sets out what we believe the position is in relation to the Government's tests, how they can work towards them, and the other conditions that will have to be met to enter the euro.

Mr. Dorrell

Answer the question.

Mr. Taylor

I shall answer the question. The document also sets out the exchange rate itself. We sought advice from experts, and I believe that those in government should do the same. In the nature of things, the position two years down the track may be a little different, but the experts suggested to us a range of 1.25 to 1.45 euros to the pound. Like me, the right hon. Gentleman probably does not find it easy to translate what that means, but we are talking about a range between DM2.44 to DM2.83— which, incidentally, is broadly the same conclusion around which all the academic studies on the subject have argued. It also agrees with the conclusion of the IKEA study of comparative pricing carried out by Barclays and published in November.

IKEA prices give us a good way of testing comparative pricing, because IKEA sells exactly the same products in every country, and the study showed clearly that within the eurozone, people can buy the same goods for about 20 per cent. less. The range of prices between one euro-country and another was very narrow, which is exactly what one would expect would be the benefit of being within a single currency. We believe that we could not join unless the exchange rate was broadly in the range that we have been advised, and that I have suggested.

Mr. Dorrell

The hon. Gentleman has developed the IKEA test, and there are many previous versions of that, such as the Mars bar test and the McDonald's test. We have all seen those purchasing power parity tests. However, in the run-up to the general election the Liberal Democrats will now have to campaign all over the country arguing the case for a 20 per cent. devaluation of sterling.

Mr. Taylor

I have set out a range for the right hon. Gentleman, and I shall not be tied to any specific figure. That range is what we were advised, and it also matches all the other advice. If the right hon. Gentleman represents farmers, or manufacturing companies, he should realise that much of the pain that they are suffering results from the current overvaluation of sterling.

The Conservatives cannot talk about all that, because they have to maintain the fiction that all is well outside the euro—and the Government cannot talk about those issues either, nor will they give any indication of where they believe we stand on their tests or how they seek to achieve results, because they are not prepared to take on the argument about the euro.

I was delighted to hear the right hon. Member for Huntingdon (Mr. Major) conduct an intelligent debate on the subject—and I believe that the right hon. Member for Charnwood (Mr. Dorrell) and I are also having a reasonable debate about it. However, we hear absolute rubbish from Conservatives who seek to pretend that they never wish to join the euro, and would save the pound, although their policy is merely to postpone a decision. The Government are frightened, which probably means that they might as well rule out entry for the next Parliament, because it is inconceivable that they could win the argument, hold a referendum and win it, unless they get on with arguing for it now.

The result of that false debate is the loss of a quarter of a million jobs, the loss of international market share since the euro was launched, and the loss of our share of international investment, which has been declining since the euro was launched. The euro economies are also growing faster than ours, and consumers throughout Europe are paying lower prices than we are. Rip-off Britain is the flip side of the Save the Pound campaign. People are paying an average of £580 a year more on their mortgages than they would if our interest rates were similar to those in the rest of Europe.

This debate urgently needs to be conducted. There are arguments for and against, but the rubbish that we hear, and the Government's avoidance of the debate, lead directly to the economic problems that we suffer—problems that the Chancellor dare not and will not mention.

Mr. Richard Livsey (Brecon and Radnorshire)

rose—

Mr. John Bercow (Buckingham)

rose—

Mr. Taylor

I shall give way to my hon. Friend first, and then to the hon. Member for Buckingham (Mr. Bercow).

Mr. Livsey

Will my hon. Friend also take into account the fact that many component manufacturers have gone abroad? I lost 1,000 jobs in my constituency, and they went to Poland, where wages were one fifth of the level in south Wales. Because of overproduction of cars, the margins have been cut, and because of the euro situation firms are looking for cheaper production. I suggest that that is the cause of the problems in Vauxhall and many other companies, which are trying to overcome the problem by compensating in different ways.

Mr. Taylor

There is a series of issues, but let us remember that Poland, like many other countries, is a candidate for membership of the European Union. The problems will grow if Britain is not prepared to be a full player in the European Union, to influence the decisions and to take a leading role. Conservative policies would deliver none of that.

Mr. Bercow

rose—

Mr. Taylor

I now turn to—

Mr. Bercow

Will the hon. Gentleman give way?

Mr. Taylor

Yes, I did say that I would give way to the hon. Gentleman.

Mr. Bercow

I thank the hon. Gentleman for giving way to me, because he has whetted my appetite to pursue another point. The governing council of the European central bank comprises three Germans, two Dutchmen, two Finns, two Frenchmen, two Italians, two Spaniards, a Belgian, an Irishman, a Luxembourger and a Portuguese, and article 108 of the treaty of Amsterdam specifically prohibits national parliaments from seeking to influence the decision-making bodies of the ECB or the national central banks in the performance of their tasks. Given that, can the hon. Gentleman enlighten the House as to how he feels able to reconcile the operation of the single currency with democratic accountability to the British people?

Mr. Taylor

One thing is sure about the European currency: there will be no accountability to the British people while we remain outside it, but it will have a huge influence on them while 60 per cent. of our manufactured exports go into the eurozone. We must simply remember how important it is to us. The hon. Gentleman has a respectable position: he would never join the euro and he never will. Unfortunately for him, those on his Front Bench believe that they might join, but not for four or five years.

Tax and spending were the main issues debated between the parties, and the debate allowed a series of mispropositions to be peddled through the House. Those mispropositions are peddled through the House so often that I suspect that most hon. Members believe them. It is time to give the lie to them.

The Government have followed a policy of bust and boom in public services. In the early years, they followed Conservative spending plans that meant cuts in health and education, and real-terms cuts in the share of national wealth that went to pensions and pensioners. That bust has now been followed by a boom designed to win the general election. Harold Macmillan once enunciated the principle that if one stands on people's heads long enough, they will be pleased when one gets off. That is precisely the position that the Chancellor has followed on spending.

Mr. Beard

Will the hon. Gentleman give way?

Mr. Taylor

I will in a moment. The cuts are now described as the starting point for the Labour Government, as though it were not the Labour Government who put them through. They cut expenditure at first and now they are putting it up—and they expect people to be grateful. In the lifetime of this Parliament, less of the national cake has been spent on all the public services—education, health and pensioners—than was spent by the previous Conservative Government.

Incidentally, there is something that I should put right. So far as I can see, the Chancellor gave misleading figures to the House in his pre-Budget report. According to the Library, even if we take not only the basic state pension but the whole package for pensioners, the Government have still managed to spend less of GDP on pensioners in this Parliament than was spent on them in the previous Parliament.

The election tactic is to cut first and spend later, which is the opposite of what Labour used to do—but it is no better, because it is dishonest. Hospitals are in crisis, schools have lost teachers, class sizes have risen in secondary schools and pensioners have received a 75p increase—and now, in his role as chairman of Labour's general election campaign, the Chancellor comes along pretending to be Miss Bountiful.

The problem that that raises for those on the Conservative Front Bench is simple. We shall not include social security, so we shall ignore the fact that unemployment has gone down, which is a justification that Labour sometimes gives for the figures. Even on that basis, the total managed expenditure is now lower than it was under the Conservatives. Tax of course is higher, but that is because it has replaced a deficit.

Taking the facts together, it is clear that the Labour Government are spending less of the national cake than the Conservatives did when they were in power. In fact, they are spending even less than the Conservatives planned to spend. Rather inelegantly, the former Prime Minister tried to get himself out of a hole by saying that the previous Government's announcement before the general election that they would increase tax was only a stylistic point. If that is so, perhaps his style was as bad as some of his colleagues thought, because the announcement certainly helped them to lose the general election.

Mr. Beard

Liberal Democrat spokesmen have told us many times that, in the hypothetical event of their taking office, they would not have tried to get rid of the £29 billion deficit left by the previous Government, although such an attempt should have been a given. They would have compounded that decision by spending ever more on services. It is guaranteed that, within 18 months of their taking office, there would have been a financial crisis on the foreign exchange markets, and the whole show would have closed down, as we have seen before. How does the hon. Gentleman say that he would have escaped, like Houdini, from such a situation? Some type of austerity was necessary initially to put right the public finances.

Mr. Taylor

The hon. Gentleman's question is easy to answer. First, the Government have followed the same fiscal rules that we proposed—and I do not knock them for that. Secondly, we—unlike the Labour party—proposed independence for the Bank of England. We can claim some credit for that proposal. Therefore, we would have followed the same process of building up the economy.

There is, however, one fundamental difference between the two parties' approach. We would have been able to invest more at the start of the Parliament—not by ruining the economy or spending money that was not there, but by making small, costed tax increases to guarantee the health, education and other spending increases that we outlined. Those changes would have been made at the start of the Parliament and formed a baseline for subsequent economic development. It is not difficult to understand that point. Our approach would have led to precisely the same balanced position that the Government have achieved, because we would have balanced spending and taxes.

Several hon. Members

rose—

The President of the Council and Leader of the House of Commons (Mrs. Margaret Beckett)

I do not want to impede any of my hon. Friends from intervening, but I think that someone should just remind the hon. Gentleman that he and his colleagues opposed the windfall tax. So, all this talk about everything that they would have done and all the resources available to a Labour Government being available to them is just so much nonsense.

Mr. Taylor

The right hon. Lady is wrong. We did not support the windfall tax, but we set out our spending proposals with our tax proposals, making it clear that, in the early years of this Parliament, we would have been able to spend more than the Government did. Additionally, subsequently, our proposals would have enabled a higher expenditure baseline. Consequently, our tax take would have been a little higher during this Parliament—[Interruption.] I do not deny that the tax take would have been higher than it has been under Labour.

Mr. Beard

rose—

Mr. Taylor

The hon. Gentleman should sit down, because I am not going to take another intervention now. He has asked a question and he will have an answer.

The result of our policy is that people on above-average incomes would have been paying the penny in income tax, balanced by tax cuts for those who are on low incomes. Those who are on high incomes would have been paying at the 50 per cent. rate, rather than the 40 per cent. rate that they are paying under Labour or the 60 per cent. rate that they paid under Baroness Thatcher. They would have been paying a little more tax. Consequently, we could have made the improvements for which we have argued.

The fact is that the Government, contrary to the Labour manifesto, have cut pensioners' share of the national cake. In the early days, they also cut spending on schools and health. Over this Parliament, they are spending less of the national cake on all those services than Conservative Members did when they were in office.

I return to the nonsense that we heard today from the shadow Chancellor. The fundamental point is that, by proposing those cuts, the shadow Chancellor is proposing to achieve even less than the previous Conservative Government achieved. There are only two ways in which he can implement his proposals. He will have either to cut spending on health, education and pensions below that achieved under his previous Government; to raise taxes, which he says he will not do; or—as we must suspect Conservative Members would do—run up a huge deficit, as they did when they were in office. The truth is that deficits are simply deferred taxation. Conservative Members are saying, "You can have your cake now, but pay for it later." They are proposing mortgaging the future. However, if one continues to mortgage the future, the future becomes unaffordable.

It is no wonder that the shadow Chancellor left the No Turning Back group, as it was Baroness Thatcher who spelled out the Tory philosophy that one cannot spend what one does not have. Now, rather than belonging to the No Turning Back group, the right hon. Gentleman is out there offering cake and not charging for it. He is saying, "You can have something for nothing and tax cuts without service cuts."

Look at the nonsense that Conservative Members are offering as examples. They say that the Government are spending an extra £1.8 billion on bureaucracy, and that there is a surge in bureaucracy under Labour. The cash figure, however, is simply the inflation increases paid to people. The truth is that, in real terms, the cost of bureaucracy has decreased under Labour. What are Conservative Members going to do cut people's pay? Are they going to cut the number of civil servants whom they could not be without when they were in government?

Industrial injuries benefit is another example. Conservative Members say that they want to cut tax on business, but what will they deliver? They are proposing to privatise industrial injuries benefit. Excuse me, but what does that mean, other than that businesses themselves will have to pay benefits that are currently paid for by the state?

Mr. James Clappison (Hertsmere)

The hon. Gentleman is beginning to answer the question that I was going to ask him. He started by saying that Conservative Members would cut spending on health and education. Now, he is putting his own interpretation on the items that we propose cutting—such as bureaucracy and waste. However, my right hon. Friend the shadow Chancellor has clearly stated our commitment to spending on schools and hospitals.

Mr. Taylor

The hon. Gentleman's figures on so-called waste and bureaucracy are equivalent to the cost of 10 per cent. of all United Kingdom civil servants. I do not believe that Conservative Members could possibly make such a cut. The shadow Chancellor has gone even further, however, by saying that they would not make cuts in certain parts of the bureaucracy, such as the Home Office and social security, but increase them. Those parts of the bureaucracy account for 35 per cent. of the total spent on it. It seems, therefore, that the rest of the system will have to be cut far more.

Conservative Members' proposals are built on a fundamental error in their thinking. They think that spending has increased, whereas, in real terms, it has decreased. If they cannot understand the difference between nominal and real expenditure, they really do have to go back to school.

The list goes on. On each of the Conservatives' proposed cuts, their figures do not exist, add up or work. However, we do not have to take the Liberal Democrat or Labour view on the issue; we can take the shadow Chancellor's view. The first thing he did when announcing his £8 billion tax cut package was to admit that he does not have £3 billion of the package.

Lord Skidelsky—who was a member of the Conservatives' Front-Bench team, which he left because of a disagreement on foreign policy, not economics—is reported today by The Times as suggesting that £1 billion of the £5 billion that the shadow Chancellor claims to have come up with is "bogus". Moreover, that £1 billion is composed of savings on social security fraud. However, as that is exactly the same sum that they had found before the Government announced that they too were going to cut £1 billion in such fraud, presumably they have found another £1 billion that they had not noticed before. Lord Skidelsky called such cuts the bottomless source of hypothetical savings to which all Chancellors are driven when they run out of anything else to cut. The shadow Chancellor had the cheek to say that the Conservatives were going to increase pensions by £9.50. Half of that sum is composed of increases already announced by the Government—so there is no surprise there—and the rest comes from ending the winter fuel bonus, the free television licence, the Christmas bonus and other benefits. Although those benefits are large, combining them and adding them to the basic pension will not make pensioners any better off. Pensioners were not born yesterday. They know that they are not any better off if someone takes a pound from one of their hands and puts it in the other.

The country has a choice about levels of tax and spending. The Government have taken their choices. Liberal Democrat Members have made a different set of proposals which entail asking people on above-average incomes to pay a little more, to fund better education, health pensions. The Conservatives are trying to sell a bogus policy, claiming that taxes can be cut without a corresponding cut in services. It is fatuous and it does not add up. No wonder that every time the shadow Chancellor relaunches himself, he has to withdraw the policy that he announced the previous time.

7.9 pm

Mr. Adrian Bailey (West Bromwich, West)

I make my maiden speech, conscious of the trust and responsibility placed in me by the electors of West Bromwich, West in the recent by-election.

All elections have their memorable moments. My favourite from that by-election was in Wednesbury two days before polling. The pedestrian precinct was the scene of hard campaigning by the Conservative and Labour parties. In one corner was the shadow Chancellor, surrounded by a few party faithful and an enormous number of blue and white balloons; in the other were myself and Ross Kemp, the former "Eastenders" star, surrounding by a huge throng, mainly clamouring women who wanted autographs.

The scene was far more familiar to Mr. Kemp than to me. However, I dutifully passed on the papers for Mr. Kemp to sign, until one woman took from her shopping bag a certain item of ladies underwear that she insisted on Mr. Kemp signing. Totally unfazed, he did so and handed the item over. As he did so, a television reporter thrust a microphone in the woman's face and asked, "Does this make you any more likely to vote Labour in the by-election?" She looked him in the face and said, "Yes." I wondered at that point what hope the Tories had, when their shadow Chancellor was outfaced by a combination of a soap star and an item of ladies underwear.

I follow in the distinguished footsteps of the previous Speaker of the House, Betty Boothroyd. Much has already been said in the House about Betty in tribute to her for her performance as Speaker for so many years. My own perspective of Betty is as one of her constituents for many years. I can vouch for the love, trust and respect for her in the constituency—not just for the way in which she put West Bromwich, West on the map, but for the fact that she held her surgeries, despite her onerous duties in the House, and was always available for constituents who had problems.

West Bromwich, West lies in the heart of the black country. It consists of a number of small industrial towns, principally Oldbury, Tipton and Wednesbury. All those towns have a strong sense of community and a fierce civic pride. In my constituency were the forges and foundries when Britain was the workshop of the world.

Black country people have a reputation for being plain spoken, hard working and tough. They also have fierce footballing loyalties. That presents a difficulty for me, because the geographical spread of the constituency means that one section is passionate about that erstwhile footballing giant, West Bromwich Albion, and another is equally passionate about another former footballing giant, Wolverhampton Wanderers. As a representative of the entire area, I give my support even-handedly to both, but I retain my passionate loyalty for my boyhood club, the humble Cheltenham Town. Happily, that seems to upset nobody in the constituency.

Over the past 50 years, the original population has been joined by people from India, Pakistan, Bangladesh and the Caribbean. They have brought with them their distinctive work ethic and have enriched our local culture with their cultures and traditions.

The local economy is still heavily manufacturing based. About 40 per cent. of jobs are in manufacturing—20 years ago, the figure was much higher. Then we had the 1980s and the early 1990s. Monetarism and the prevailing Government belief that manufacturing did not matter left the black country devastated. We still have a legacy of high unemployment, derelict land, deprivation and ill health.

Since 1997, low interest rates, steady economic growth and the new deal for young people have started to turn that around. Unemployment in the constituency has dropped by almost a quarter, and most significantly of all, youth unemployment by more than 60 per cent. Those are not just statistics; they represent real jobs, real income and real hope for a generation of young people.

The other great blight on our community is crime and the fear of crime. The huge majority of law-abiding citizens in my constituency demand action against the small number of yobs who disfigure our estates and cause fear totally out of proportion to their numbers. As a resident of the constituency, I share that anger. I made it clear in my campaign that I would fight to clear our streets of such fear. I welcome the Government's commitment to increase police numbers. I want to see those extra police on the streets in my constituency.

I want the police to be given backing in law to take the necessary measures to rid us of yobs. In my former capacity as deputy leader of the local council, I pushed for the use of anti-social behaviour orders. I am pleased to say that we now have nine in the borough and they are working, but they are not enough. I welcome the toolbox of measures for the police to use, as outlined in the Queen's Speech. I am sure that my constituents will welcome powers to ban drinking in public places and the option of curfews, if the local community feels that that is the most appropriate way to deal with the problems. There must be more money for crime deterrence, prevention, closed circuit television, school security and home security, particularly for pensioners. This is the message from the streets of West Bromwich, West: it is time to call time on crime.

So far, I have dwelt on the problems in my constituency, but there is another side. There is the pride and community spirit that has led to a network of tenants, residents and community groups. Those groups have enthusiastically embraced Government regeneration initiatives. The Tipton challenge partnership, which created 800 new jobs, trained 3,000 people for other jobs and built more than 600 new houses, now has the pioneering Neptune health park, which groups a wide range of medical services under one roof. The famous Tipton Harriers athletic club hosts the Tipton sports academy, which can rival any sports facility anywhere in the country.

As someone who has worked for the co-operative movement and is committed to the principles of co-operation and mutuality, I am proud of the role played by such organisations in sustaining services to the local community. In addition to the traditional range of services provided by local co-op societies, we have a food co-operative which provides healthy food to many who would otherwise not be able to access it. We have a housing co-operative that is pioneering new tenant management techniques. I want the Government to promote that form of enterprise to empower local communities.

Local building societies have played an enormous part in local regeneration. The Government must recognise that the loss of mutual organisations to economic predators can potentially deprive us and our deprived communities of some of our most vital allies in the campaign against social exclusion.

However, community spirit is not enough. We need investment in our public services to make lasting progress. The Government's commitment to raising educational standards is working in my constituency. Educational standards are improving. Investment in schools and the literacy and numeracy hours are paying dividends. Our GCSE and standard assessment test results are improving. My constituency cannot cope with the £24 million of potential cuts outlined by the shadow Chancellor.

The announcement in my constituency yesterday by the Deputy Prime Minister of funding for the new metrolink across the constituency will be a huge boost for local people. The existing line, which runs from Birmingham to Wolverhampton, has clearly demonstrated that people will switch from cars to public transport when it is available—15 per cent. of people have switched from cars. The new line from Wednesbury to Brierley Hill will liberate many people without cars and will be a huge contribution to environmentally friendly transportation.

Our local industry is diversifying. We still have many of the traditional metal-bashing companies, but we also have the companies that I visited during my campaign, such as FreeCom, which employs more than 100 people to design websites. Another such company is Advanced Electric Logistics, which is a European leader in audiovisual repairs.

A recent survey in February listed West Bromwich, West as the best area outside London to which companies should relocate. I represent a constituency where things are happening. Traditional industry is changing to meet the demands of a high-tech economy. We have a work force who are becoming better educated and trained. We have an improving transport network.

I am proud to have been elected to represent that constituency. The people of West Bromwich, West have shown a great resilience in the face of past adversities. They have shown a will to work together to overcome them. I welcome this opportunity to work in the House with the people and the Government to rid our streets of crime, create new jobs and give my constituents the quality of life that they deserve.