Autumn Statement 2023

Lord Willetts Excerpts

Wednesday 29th November 2023 Lords Chamber

[Lord Willetts (Con)]

My Lords, it gives me great pleasure to welcome my noble friend Lady Vere to her post in the Treasury. I also draw her attention to my entry in the register of interests, especially my role as president of the Resolution Foundation, on whose analysis of the Autumn Statement I will draw.

I agree with my noble friend Lord Frost that we must not fall into the trap of miserabilism, but I could not entirely work out whether his speech was example of it or an attack on it. My view is that this budget has some excellent measures and I agree with him and the noble Lord, Lord Macpherson, in particularly welcoming the full expensing of private capital investment. If anything, we think that the OBR may underestimate the effect of that measure in promoting private investment. It will of course particularly help physical investment in stuff. We should not forget that a lot of drive and innovation comes from investment in software and softer forms of investment that may not be supported; nevertheless, it is the right thing to do.

However, it is a striking contrast with the depressing cuts in the real value of public investment, partly because it will be held flat in cash, so the real value of public capital investment will fall. That means that, over the next few years, Britain will remain a country whose public capital investment is approximately half the OECD average. Where I part company with my noble friend Lord Frost is that I think the evidence is overwhelmingly that public and private capital investment can go together. They need not be alternatives; public investment in transport links can be a precondition of successful private housebuilding. It would be great if we were capable of promoting public investment as effectively as the Government are now trying to promote private investment.

There is certainly a need for a growth agenda. Again, I agree with my noble friend Lord Frost that, since the financial crash, Britain’s growth performance has been shockingly poor. We heard from the noble Lord, Lord Macpherson, about some of the areas where we should do more. I certainly agree with him on skills. I have to say that I very much regret that the Government are in the process of defunding BTECs—a widely recognised and used vocational qualification—and investing their hopes entirely in speculative T-levels, which are simply never going to come on stream and deliver qualifications to the numbers of young vocational learners currently served by BTECs.

Our analysis at the Resolution Foundation is that the fundamental problem is that Britain has become, overall, a low-mobility economy. The speed at which business sectors grow or shrink has diminished. The likelihood of people making job moves from one business sector to another has fallen—indeed, the likelihood of them making any job moves at all has fallen. We should be promoting economic change and mobility. Unlike my noble friend Lord Frost, I think that the single market and competitive pressure across Europe was an extremely good way of promoting economic change, and the evidence is that it was strongly associated with high rates of business change in the 1980s and 1990s.

However, there are other things that can be done. I would have stamp duty high up on my list of taxes to be cut, and promoting disruptive technologies—providing we do not imagine that we have the exclusive understanding of exactly how they will play out or which will have the biggest effect—can also be a very good way of challenging incumbents and promoting innovative new companies.

It is very important that we continue to promote work. Again, I agree with the noble Lord, Lord Macpherson, and my noble friend Lord Frost that the national insurance cut is very welcome. As a cut in a tax on earnings and work—a refreshing contrast to the previous preoccupation with income tax cuts—it is aimed much more directly at people in work.

That was part of a wider package promoting incomes and earnings, especially among people on benefits. We have heard about the increase in the local housing allowance. There is a very substantial increase in spending on wider benefits, notably, of course, the pension triple lock, expenditure on which—just to register its scale—will reach £172 billion by the end of the period covered by this Treasury Statement. This means that we have now reached the position in Britain where not only do the poorest 10% of pensioners, after housing costs, enjoy a higher income than the poorest 10% of non-pensioners, and middle-income pensioners, after housing costs, enjoy a higher income than middle-income people and families, but the most affluent 10% of pensioners have a higher income after housing costs than the most affluent 10% of families.

I end, therefore, by asking the Minister to reflect a little on how the shape of the state is changing. There is a debate about the size of the state; there is also a debate about the shape of the state. There is a pattern. One pattern is that, when you have such very large increases in the value of benefits and in debt interest payments—which will be running at over £120 billion a year—and a hidden cut in expenditure on many services, you essentially become a transfer payment state, not an investment or service delivery state. You put much more of your effort into paying out the pensions, the debt interest and the wider benefits, and less and less into investing in stuff and technologies. Is that a reshaping of the state that meets my noble friend Lady Goldie’s attractive account of what made her a Conservative?

It is also clearly a state focused on expenditure, services and benefits for older people and doing far less to invest in our future. A state that is for transfer payments and not investment, and which is for the old and not the young, is not the kind of state that I think should be an objective of government policy.

Budget Statement

Lord Willetts Excerpts

Thursday 16th March 2023 Lords Chamber

[Lord Willetts (Con)]

My Lords, I was sitting like a coiled spring about to praise the excellent maiden speech from my noble friend Lady Moyo when we had the interruption of the Urgent Question and the brief adjournment, so it is a pleasure and an honour to resume the debate and, although my noble friend is no longer in her seat, to say how excellent her maiden speech was. Her most recent book, Edge of Chaos: Why Democracy is Failing to Deliver Economic Growth, which is a fantastic contribution to economic debate, is very relevant for one of the points that has been made in several interventions already.

I begin by welcoming the Budget and will draw on some of the analysis we have done at the Resolution Foundation, of which I am president. The Chancellor has had some good news, with energy prices not as high as feared, inflation falling more rapidly than was expected and interest rates slightly lower than forecast, not least because of the stabilisation measures that he has introduced during his time as Chancellor. So there was a favourable backdrop to the Budget, shown in the good news that we are going to avoid recession and that he had some fiscal room for manoeuvre.

Nevertheless, I have to say, as president of the Resolution Foundation, that the overall picture on living standards is still very bleak indeed. Wages are not expected to return to their 2011 level in real terms until 2026. That is 18 years before we are back to the level before the financial crash. At the moment, with big falls in household disposable incomes this year and next totalling 5.7%, it is very likely that incomes will actually be lower in real terms at the time of the next election than they were at the last. So there is still a very sombre backdrop against which we have to judge this Budget.

The boldest and most ambitious measures in this Budget focus on improving participation in the labour force. It would be marvellous if the combined effect of the ambitious measures on childcare, helping disabled people and promoting older people returning to work bore fruit. They are more radical than expected and we can all hope that they have a significant effect—30 hours of free childcare and help particularly for people on universal credit. For disabled people, it is very welcome indeed that the work capacity requirement is being scrapped. Regarding older people, the Chancellor got into a little difficulty yesterday in referring to the Deputy Speaker in the other place as an older worker when she was born in 1958. She is a spring chicken in terms of your Lordships’ House, and it should not be a point of observation that someone born in 1958 is old and working.

We must hope that those measures do bring 110,000 extra people into work. It could be more. We have already had several exchanges on this, so I make just a couple of observations. First, it has been said with shock that the cost of the change in pension rules, divided by the increase in the number of people going to work because of that change, is about £80,000 per extra job. These are net extra jobs. When you look at the likely effect of the more ambitious and expensive childcare measures in the Budget on net actual increase in work, they also come in at a cost of £80,000. It looks as if that is about the going rate for creating an extra real job. To be honest, having worked over the years in various ways engaging with welfare-to-work programmes and welfare reform, spending that amount of money for a net effect, while a lot of the effects will be deadweight, does not come as a surprise. Therefore, I hope that in the exchanges across this Chamber we accept that this is the going rate for intervention. We must hope that there are greater impacts than that, but that is what the OBR is forecasting.

Incidentally, in his excellent speech my noble friend Lord Bridges asked about the difference between the OBR forecast and the Bank’s forecast. One of the reasons for it is that the OBR is factoring in a 110,000 increase in workers as a result of the Budget measures, while there is no such estimate in the Bank’s forecast.

Of course, the help with childcare for families with young children is also a more progressive measure than the help on pensions because, as well as getting several tens of thousands of extra people into work, it boosts the incomes of large numbers of low-income families. It also has an even bigger effect on the incomes of some middle-income families. To assess the effect of the pension measure, we must look beyond the immediate benefit for the extra people going into work, and this is clearly a measure to do with NHS activity and NHS employment. Therefore, you would have to factor in the benefits for those people who receive healthcare that they would not otherwise have received were it not for those measures. This is essentially a healthcare recovery measure, but it is being applied more widely because of what we are familiar with as hybridity rules. You cannot have one pensions tax rule specifically for NHS consultants and a different one for everyone else.

I welcome this very ambitious set of measures to boost the workforce and the number of people in work, and hope that they succeed. We could well see an effect greater than 110,000, and I hope that is what we secure.

I will briefly reflect on the fiscal situation. Again, several people, including my noble friend Lord Bridges, have already touched on this. The state is undoubtedly getting bigger. It is not getting bigger because a bunch of socialists have seized control of the levers of government; it is getting bigger for completely different reasons. It is getting bigger partly because we are in a much more dangerous security environment than we were, so there is a pledge to increase defence spending. It is getting bigger because we borrowed a lot of money during Covid and, with interest rates higher, the cost of debt interest has risen by 2% of GDP. It is getting bigger because of demographic changes. Those are the drivers pushing up public spending.

My noble friend Lord Bridges said that we must make offsetting savings elsewhere. We are making offsetting savings elsewhere; in fact, the state is being reshaped under our eyes because the demographic changes plus policy decisions are protecting healthcare and boosting pensions, and other services and benefits for other age groups are being cut. Our estimate at the Resolution Foundation is that the effect of benefit changes is to lower the income of working families by £816 a year below inflation and the effect of the triple lock and other measures is to boost the income of pensioners by £666 on top of inflation. That is a deliberate decision to reshape the state so it is a state for old people. It is a big healthcare, big pension-spend state, cutting back on other services and provisions. Democratic trends are being exacerbated by political decisions, and I have to say I do not like that. I think we should have a state that is fair across the generations, not one which is clearly being structured to benefit that age group.

I have one other comment, having looked at the Budget, on the increasing tendency to have time-limited measures that do not have a long-term effect on behavioural incentives. This important point was made by my noble friend Lady Moyo. The capital allowance for corporation tax, time-limited for three years, will bring forward some capital spending, but it will have no underlying effect on total business investment, when that is a clear problem. The only way it could have that effect is if it were committed to as a long-term permanent policy. That is the way we get a change in behaviour, but if that happened there would be different costings showing the long-term effect on government borrowing, debt or taxes.

I do not wish to go on at great length because I see there are many other people wishing to intervene. I would like briefly to comment on one other strand in the Budget, something which I very much welcome: the focus on growth. That is again an area where there is strong cross-party consensus. The Prime Minister set out in his Mais lecture the framework of investing, innovation and skills, and infrastructure. We have heard in the excellent interventions from the noble Lord, Lord O’Neill, and others about the importance of those three strands, particularly innovation and technology. I strongly support that. There are lots of exciting ideas about how we could promote it, but as we have a Treasury Minister sitting on the Front Bench, I point out that there are some specific things which are directly under the control of the Treasury. I have three suggestions, none of which are the exciting, real technology measures in the Budget—all of which I welcome, and perhaps on occasion I would add to. Our difficulties in innovation are partly shaped by processing and bureaucracies which ultimately can be traced to the Treasury itself, and I shall give three examples.

First, we are celebrating the arrival of ARIA, which will be an advanced research and innovation agency, free from many of the classic constraints that the Treasury imposes on spending departments. There have been previous attempts to give programmes supporting innovation some of the freedoms that ARIA is going to have but which have been withheld by the Treasury. If ARIA is such a good thing, there is absolutely no reason why some of the freedoms which it enjoys should not be available more widely to other bodies also providing public investment in innovation. I declare an interest as someone on the board of UKRI, where of course we comply with all the Treasury rules but it would be nice if we had some of the freedoms that ARIA is going to have, which would enable us to operate with the same flexibility and agility that is expected of ARIA.

Secondly, the Green Book is written around an assumption of conventional public procurement. It is a set of rules designed for people building a road bypass or putting up a new hospital, but they are inappropriate when applied to innovation policy. When you go to America, you see the enormous role that public procurement—particularly but not only led by the Department of Defense—plays in promoting technology and innovation in the US. I have talked to someone who had a new gadget that he was designing and prototyping in the US. I asked him how he was funding it and he answered, “I’ve already sold the first 10,000 to the DoD.” He had not yet made a single one. There they use speculative procurement expenditure to promote innovation. A British department of state could not do that under Green Book rules—you have to already have a product. One of the things that America does so successfully is currently forbidden in the UK by Green Book rules.

Thirdly, the dread words that cause me most concern whenever an innovation programme is proposed appear on page 65 of the Budget Red Book, in the context of an announcement of spending on the future of compute review:

“subject to the usual business case processes”.

The business case processes will take over a year and will involve large numbers of civil servants writing reports which will eventually confirm the decision that was announced yesterday—and this is a Government trying to cut the cost of bureaucracy. All it will mean is that, instead of getting on with the investment in exascale computing which the Chancellor announced yesterday, we will be lucky if anything happens before the election. If the Treasury wants to get on—and the Treasury has put it into its own Red Book—do we really need to waste a year on a business case process not designed to promote innovation? I can tell your Lordships that, around the rest of the world, they do not have an extra year added to every policy decision on innovation so that they can do a massive audit in advance of any spending.

I strongly support the focus of the Chancellor on growth. If it were possible to extend ARIA freedoms more widely, to have more innovative use of procurement for new products and processes, and to simplify the business case process, the Treasury itself would be doing its bit for growth.

Budget Statement

Lord Willetts Excerpts

Tuesday 14th March 2017 Lords Chamber

[Lord Willetts (Con)]

My Lords, I draw the House’s attention to my entry in the Register of Members’ Interests and particularly my post as executive chair of the Resolution Foundation. I shall draw on some of our Resolution analysis in my brief remarks.

I welcome the Budget, and we at Resolution particularly welcome the steps, however controversial, on the reform of national insurance contributions. The back-drop to this measure is an increasing tendency for companies to try to shift their employees into self-employed status so as to save on employer national insurance contributions. This is a significant and growing gap in national insurance revenues. At the beginning of this Parliament that gap was perhaps £3.2 billion. We estimate that it could be as high as £5.7 billion by the end of this Parliament. I would love to believe that this trend reflected a fantastic and sudden growth in the spirit of entrepreneurship in our country. The evidence, however, is that whereas in 2002 22% of the self-employed had employees, now that is down to 11% of the self-employed having employees.

Of course we need to promote entrepreneurship, and I would welcome any measure specifically aimed at providing incentives to entrepreneurship, but that is not the origins or the purpose of the way in which national insurance contributions are set for self-employed people. The purpose of the different national insurance contribution rate for the self-employed was supposed to reflect the fact that their benefit entitlement is more modest, as we have heard already from the noble Lord, Lord Macpherson. However, over years the entitlements to benefits of self-employed people have grown—most recently, of course, with the single tier pension. It has been calculated that, if the self-employed national insurance contribution rate were set below 12% to reflect their more modest benefit entitlement, it would be 11.8%. So the logic of this in the contributory principle is clear—the 9% rate was not justified. That is why I support the proposal. I very much hope that, in the course of the summer, when we have Matthew Taylor’s review published and the wider consultation that the Government are committed to, we will see that important reform in a wider context.

I pay tribute to the personal commitment to productivity of my noble friend Lady Neville-Rolfe. I know that throughout her ministerial career she has pressed on that; she is fortunate in having as Secretary of State Greg Clark, who is personally committed to it, and we heard an excellent intervention from the noble Lord, Lord Bhattacharyya, supporting some of the measures to boost productivity. The cliché that hangs over this debate is the remark of Paul Krugman:

“Productivity isn’t everything, but in the long run it is almost everything”.


That is not as straightforward as it sounds; I draw the Minister’s attention to the fact that, although compensation in total has broadly tracked productivity, it is not the case that median earnings have tracked productivity. Indeed, in the last decade or so, median pay has gradually fallen behind productivity and is now 18% lower than it should be if it had just matched productivity improvements since 2002. So we do not just have a productivity problem in this country—it is not getting through to people in their pay.

There are two main reasons for the problem. One reason is that an increasing proportion of the improvements in pay are being secured by the more affluent employees, so it is not feeding through into median pay. That is a problem that needs addressing because, if we want people to be motivated to make their contribution to improving productivity, it is reasonable to expect them to have a share in the improvements and benefits. But there is another reason as well that is even more important. We reckon that out of that 18% falling behind in median pay, 5 percentage points or so are attributable to the fact that median pay has underperformed compared with wages as a whole, but 8 percentage points are attributable to wages in general falling behind compensation. An increasing element of compensation is not coming in the form of wages at all; an increasing share of compensation has been taken in pension contributions and less is being taken in pay. For the generation to which I belong—the baby boomers—when we were at our peak earnings there were contribution holidays, because company pensions were supposed to be in surplus, so we enjoyed the period when an unusually high proportion of total compensation went in pay. Now we have discovered deficits in pension schemes and instead an unusually low proportion of compensation is being taken in pay. That means that younger workers are working hard to generate revenues that do not flow into their pay packets but go to plug deficits in pension schemes to which they do not even belong.

I draw the Minister’s attention to a consultation document produced by the Department for Work and Pensions the other week, specifically looking at company pension schemes. Among other issues, it looked at whether the generous inflation rules for uprating company pensions could be justified. The sole consideration in that document was whether or not the companies would go bankrupt if they were obliged to pay these very large sums into their pension schemes to plug deficits to enable this generous inflation protection to be delivered. There was no discussion of the wider issue of the fair distribution of economic returns between generations and no consideration of the fact that the younger workers in those companies may not be enjoying any pay increases at all, while at the same time pensioners are protected in that way. Will the Minister assure me that, as part of the consideration of that consultation document, the Treasury will look at the perspective of fairness between the generations? I wholeheartedly support her commitment to productivity improvements, and I hope that it is matched by a similar commitment to ensuring that improvements in productivity feed through into the living standards of all age groups in our country.

Budget Resolutions and Economic Situation

Lord Willetts Excerpts

Friday 20th March 2015 Commons Chamber

[Mr David Willetts (Havant) (Con)]

It gives me great pleasure to contribute to this debate towards the very end of my time as the Member of Parliament for Havant. It is an opportunity for me to welcome the Budget and to salute the Government’s record in managing the economy, with 2.5% growth this year. It is that record that leads Government Members to feel compelled to describe our long-term economic plan, and I should like to turn to that part of the long-term economic plan that the shadow Secretary of State failed to acknowledge.

[Emily Thornberry]

I am so disappointed in the right hon. Gentleman for using such a empty phrase. Of all the Members who are leaving, we will regret his loss as he is an intelligent man and can explain himself much better than in these rather silly Tory buzz phrases.

--- Later in debate ---

[Mr Willetts]

I am touched by the hon. Lady’s intervention. Let me try to explain to her the part of the long-term economic plan that I think is relevant to the comments made by the shadow Secretary of State. When the original fiscal strategy was set out, which included the forecast for economic growth set out by the OBR, the Chancellor made it clear that if growth was not as great as forecast by the OBR, he would accept that tax revenues would regrettably be less and the fall in public spending might not be as great—because of what are called the automatic stabilisers. Those automatic stabilisers were explicitly part of the plan from the beginning and, because of them, we have ended up borrowing rather more than was forecast initially. In other words, what the Opposition criticise as somehow a failure of the plan was always part of the plan. There was always a recognition that it would need that flexibility and if they are really saying that we should have cut even more or raised taxes even more as a result of the economy performing less well in the early years than had been forecast by the OBR because of the crisis in the eurozone, that would have been bad for the economy. I am grateful for this opportunity to explain a key feature of the plan.

I draw the House’s attention to my entry in the Register of Members’ Financial Interests, and I want to focus on two or three aspects of the Budget. I particularly welcome the imaginative package on savings. The Help to Buy ISA is an excellent innovation. I like the new flexibilities through which savers can put money into an ISA and temporarily withdraw it. It reminds me of the work that I did in the long days of opposition on what we called a lifetime savings account. It was intended to have the flexibility of people being able to put money in and take it out because it recognised the paradox that if people know that they can take their savings out of a savings instrument, they might be willing to save more in the first place. It is like the paradox that the device in the car that enables us to drive faster is the brake—when we know that we can brake we are willing to drive faster and when we know that we can take money out we might be willing to put more in.

Alongside those measures is the extra revenue generated by restricting the lifetime allowance for pension savings to £1 million. That presents the Opposition with a dilemma, because of course it was one of the measures that they announced would help fund their policy on higher education. I would be very interested to hear from the Opposition spokesman, the hon. Member for Liverpool, Wavertree (Luciana Berger), when she winds up what the Labour party envisages as the future of that much-derided commitment on university finance. Let us be clear what we are talking about. If Labour reduces fees to £6,000, that must be financed by an increase in the public expenditure going to universities. That is of no direct benefit to students, and the most that universities might hope for is some compensation for the loss of the income from fees. The beneficiaries are solely affluent graduates in middle age who will find themselves completing the process of paying loans back rather earlier.

When I heard the shadow Secretary of State speaking so passionately about housing and the importance of investing in it, I wondered what it said about Labour’s priorities. If Labour had £5 billion or £10 billion to spend, why on earth did it decide that its priority was affluent middle-aged graduates rather than, for example, a further package on housing? Many members of the shadow Cabinet must be frustrated by the bizarre priorities reflected in that judgment.

[Gavin Shuker]

The right hon. Gentleman makes his case clearly and in a statesmanlike manner, but I was in this House when he was taking through the legislation on fees. There were 91 speakers over those two days. I did not have the opportunity to speak but I was one of only about 10 Members of Parliament who knew what it was like to graduate with a large amount of student debt. I can tell him that it is paralysing and that it puts people off going to university.

[Mr Willetts]

Fortunately, the evidence is that the number of people applying for university is at a record level and that the proportion of people from disadvantaged backgrounds applying for university under the excellent stewardship of my successor, my right hon. Friend the Minister for Universities, Science and Cities, who I see on the Front Bench, has just hit another record. It looks as though those anxieties were misplaced, thank heavens.

Investment in higher education is part of a wider theme in the Budget. I welcome the proposals to invest in our young people in other ways. We have a fantastic record of falling youth unemployment and we have yet further investment in infrastructure. One of the best ways in which we can protect the interests of future generations is by leaving them with better kit and capital investment than we found.

As the debate was opened by the Secretary of State for Communities and Local Government, I must say that one of my long-standing Whitehall battles was a belief that the fragmented structure of local authority pension schemes in this country is an obstacle to long-term investment in infrastructure and in venture capital. It is frustrating that we have such a substantial amount of money going into funded pension schemes but, as they are in a multiplicity of small schemes, they cannot aggregate their investment and take the risks that would allow them to invest in substantial venture capital or long-term infrastructure. That is work in progress and more needs to be done.

While I am refighting old battles, let me also say how much I welcome the reference in the Budget Red Book to investment in rural broadband including via satellite. The current situation has never ceased to baffle me. I went to see the launch of a satellite as part of a European Space Agency project from Guiana that was going to deliver broadband services to areas of Africa that could not necessarily get conventional mobile phone coverage. It would be perfectly possible for us to guarantee 100% broadband cover for all parts of Great Britain if we were willing to use satellites to supplement conventional delivery of those services.

Let me end with praise for the Chancellor’s innovations in science and technology. We have established a happy tradition of bold new announcements on science and technology in Budgets and autumn statements. I welcome the ingenuity that has enabled a further £30 million to be invested in the excellent Crick institute.

I particularly welcome the new freedoms for research institutes, which is a response to a real competitive challenge. My hon. Friend the Member for South Suffolk (Mr Yeo) mentioned that. Let us be clear what form the competition takes. If a Nobel prize is awarded to a scientist in the UK, the Singaporeans will be absolutely clear that he or she will be able to earn a multiple of their current salary if they go to Singapore, and other competitors will make the same offer. An offer will be made to build a completely new facility of whatever sort they want. Their entire research team will be offered double their salary if they move lock, stock and barrel. It is very important that we are able to compete with such offers.

I think of our record of nuclear R and D. When major American universities recruit for expertise in nuclear R and D, they come calling in the UK. We need to be able to respond to that, and the current regime of salary and other constraints makes that harder. The new freedoms represent an excellent opportunity for us to compete globally in science.

Finally, I welcome the bold measures to support 5G communication. We had a great lead on mobile phone technologies. We lost it, I have to tell Opposition Members, because Labour’s auction of 3G licences was too successful. It extracted too much money from the industry. We have managed to catch up to some extent in 4G. We have a real opportunity to be world leaders in 5G. I support that, and it will in turn make other technological advances, such as the internet of things, possible.

All in all, this is a Budget for the future, a Budget for future generations, and it is a great pleasure for me, in one of my last speeches in this House, to be able to support it.

[Hon. Members]

Hear, hear.

[Gavin Shuker (Luton South) (Lab/Co-op)]

I do not know whether the right hon. Member for Havant (Mr Willetts) is taking the opportunity of making a valedictory speech next Thursday.

[Mr Willetts]

indicated assent.

[Gavin Shuker]

He is. Good. In that case, I need not offer any further praise other than that which many Government Members expressed when he sat down.

Mr Deputy Speaker, as you know, for the rest of us, life goes on. I am a diligent young man, as you know, so I have done my due diligence in tidying up my office and preparing for disillusionment. [Laugher.] Not so Freudian. I very much hope and expect to return after the enforced recess, which I am sure will give lots of people lots of pleasure.

However, in the process of clearing out my office I came across an incredibly rare document—something which I suspect many people do not have in their office any more—a copy of the 2010 Budget Red Book. That sound of shredding that you heard across Whitehall in recent years has been a series of Red Books being firmly thrown away. I raise the subject with reference to this Budget debate because that volume contains hugely interesting analysis.

In the Budget 2010 Red Book, on the page marked “Responsibility: deficit reduction”, the OBR set out what would happen

“without further action to tackle the deficit”.

It predicted what would happen if the Tory-Lib Dem austerity Budget was not implemented. It predicted that in five years’ time—in other words, in the financial year that we are just coming into—public sector net borrowing would remain at 4% of gross domestic product, having been at or above 5% in six consecutive years. It predicted that the structural deficit today would be at 2.8% of GDP, with the structural current deficit at 1.6%, and that debt would be rising, in the year that we are currently in, to 74.4% of GDP, with annual debt repayments of £67 billion.

We are forced to ask ourselves a question: at the end of this Parliament, after five years of Tories and Lib Dems in control, what happened next? Well, the stark analysis is that the Chancellor’s actions were worse than doing nothing. They talked down the economy for political ends and then threw what was at that point a growing economy into neutral for three years. Our public finances have performed worse than if the emergency Tory-Lib Dem Budget of 2010 had never happened.

This year’s Budget was meant to be the reward. It was meant to be the election-setting Budget. After four years of Tory pain, this was meant to be the sunny uplands—the debt starting to be paid off, the deficit ended. But the Government failed—by their own standards, not mine but those that they laid out in this book. It is the slowest recovery for 200 years. And it is to be followed after the election, should the Tories be back in power, with a slashing twice as big as that of any previous year, or any year in this Parliament.

So where are we? Public sector net borrowing is forecast to be 5%—not 4%—in 2014-15 and 4% next year. In fact, that is the same level forecast by the OBR if no action had been taken in that emergency Budget. The structural deficit is forecast to be 4.2%—not 2.8%—in 2014-15. The structural current budget deficit is running at 2.5%—not the 1.6% predicted. That is not just the same as inaction; it is worse. The public debt is still rising this year. It is claimed that it will drop in the next year, as we know, but we know that is because of some cleverly timed asset sales. We will see what happens next year. The public debt is forecast to hit 80.4% this year—five whole percentage points higher than it would have been if no action had been taken.

On all these measures—on borrowing, on the structural deficit, on the structural current deficit, on the debt—this Tory-Lib Dem austerity programme has undermined their own plans and our public finances. While we are talking about the debt, let us not forget that this Government have borrowed more than every previous Labour Administration put together. They have doubled the debt and it is still rising today. The Government have borrowed more in just over three years than the last Labour Government borrowed in 13 years, so we will take no lectures from them on the public debt and deficit.

Let me tackle this head-on. The Secretary of State for Communities and Local Government and the right hon. Member for Havant made a case for what should be done. The Secretary of State’s response was deeply telling when he was challenged on the fact that the Government had only halved the deficit rather than eradicated it, as was their original plan. He said that Labour Members were conflicted or confused—that our saying that the deficit should be lower was a sign that we were pushing for deeper, further and harder cuts. That is so telling because it points to the fact that to this Administration, everything is a nail and all they have is a hammer. But growth is a three-legged stool as are the public finances, despite the Government’s ideology. It is not just cuts but growth. There were three lost years before the inevitable rebound—admittedly aided by lower borrowing costs owing to a lack of demand in the eurozone and aided by a low oil price, which the Chancellor, by the way, has had nothing to do with despite the fact that he has tried to claim the credit for it—and the slowest recovery in 200 years.

Living standards matter. The Government failed, at the start of this Parliament, to see living standards as a central issue, with effects on tax receipts, job security and in-work benefits. The Chancellor spent an hour on Wednesday telling us that we have never had it so good. That does not reflect real people’s experiences of this economy, of their job security, of their children’s future, and the additional prices that they are paying for this Government’s failure.

There you have it, Mr Deputy Speaker. All this pain, all this hardship, paid for not on the backs of those with the broadest shoulders, who have received significant tax cuts, but on the backs of the poor. Families hammered; debt doubled and debt rising; growth years behind; and the deficit only halfway there, with deep pain to come. We are still borrowing £90 billion a year. For all the noise, for all the bluster and for all the words exchanged over the Dispatch Boxes in five Budget statements and five autumn statements, ordinary people are taking the pain. Unbelievably, this has been worse than doing nothing. That is the great Tory tragedy, not their triumph. Wednesday’s speech should be known for the hubris that it displayed.

Autumn Statement

Lord Willetts Excerpts

Wednesday 3rd December 2014 Commons Chamber

[Mr Osborne]

In the hon. Lady’s own constituency, unemployment is down. In her own constituency, economic security has increased as people can see that the country is not in the crisis it was in four or five years ago. She has to ask her constituents this: do they want to return to the economic instability and crisis that everyone remembers under the previous Labour Government, or do they want to stay on course to prosperity? I think the British public will conclude that they want to stay on course to prosperity.

[Mr David Willetts (Havant) (Con)]

May I warmly congratulate the Chancellor on extending the new loans to postgraduates? With increasing numbers of jobs requiring a postgraduate qualification, that really does remove a significant barrier to social mobility. Does he agree that if more people are able to stay on and do masters courses, that is an opportunity to look at broadening the range of subjects that they study at early stages of their education?

[Mr Osborne]

My right hon. Friend is absolutely right. Of course, he knows that we embarked on this work on how to extend support to postgraduates when he was Minister for Universities and Science—it might have been him who first proposed the idea to me—and I am absolutely delighted that it has come to fruition. This is one of the biggest reforms I have announced today. It will provide real support for postgrads, who do not currently get any support. In almost all the reports that one reads on social mobility, including the report by Alan Milburn, that has been identified as a barrier to entry for people from low-income backgrounds into the professions. It is a really important step forward. Again, I suspect that it will not be the headline in tomorrow’s newspapers, but that does not mean that it is not going to change lots of people’s lives.