Budget Resolutions and Economic Situation

Debate between Chris Heaton-Harris and Stewart Hosie

Tuesday 22nd June 2010 Commons Chamber

[Chris Heaton-Harris (Daventry) (Con)]

I am grateful for the opportunity to say that I am winding up for the Government side of the House in today’s debate. I shall certainly put that in my press release, and I am sure that the Daventry Express will print it word for word.

The emergency Budget was unavoidable because the previous Government’s handling of the UK economy simply failed. Labour did not understand what every business and family throughout the country knows: if money is borrowed, it must be repaid or trouble will come; and it is best for people to live within their means. My constituents and I struggle to comprehend the size of the problem that the Budget sets out to fix. Every minute that passes, the Government spend £80,000 on debt interest, so £800 million a week is spent just servicing our debt. The money that is used for interest payments cannot be spent on things such as education, health, defence or poverty eradication in Sefton.

It was pleasing that today’s measures were at least announced against the backdrop of growth in the economy, which is in spite of, not because of, the previous Government. I have been surprised to hear that Labour Members do not understand that every penny spent by the public sector was initially raised by the private sector.

[Stewart Hosie]

Will the hon. Gentleman explain what happens to public sector employees’ tax? Where does that go in this pot?

[Chris Heaton-Harris]

It certainly contributes to tax income, but if we were to rely on only the public sector, an ever diminishing circle of tax income would come into the Exchequer and, in the end, we would not be able to pay for anything.

The way out of this mess is undoubtedly to boost and revitalise the private sector, so I welcomed the announcements in the Budget on regional job creation and the measures to cut waste and unaffordable cost from the public sector. That is exactly what our European partners and competitors are doing. Jean-Claude Trichet, the president of the European Central Bank, told the European Parliament—my old place of work—that firm control of Government spending and tax policies is essential to restore the confidence of households, businesses and investors. He said:

“We are in a situation where a lack of confidence is operating against recovery. A budget policy which you”—

if he were addressing the House, I assume that he would mean Labour Members—

“might describe as restrictive from a certain point of view is in fact a policy which we would call confidence building.”

He went on to say that if public finances continue along an unsustainable path,

“households are going to be frightened. They will not spend or consume as much, companies will not prepare for the future and investors will know they are going to have difficulty getting a return.”

Those investors have choices: they do not have to choose the United Kingdom or, indeed, Europe, as other markets are becoming increasingly attractive. France and Germany—in fact, nearly all our major competitors—have taken tough measures to sort out their public finances, and make their economies strong and attractive to future investors. We would weaken the chances of prosperity for our children if we did not do the same.

As the Chancellor noted, we need to increase the incentives to work. Welfare costs under the Labour Government rose by nearly 40 per cent., but there are still more than 5 million people on out-of-work benefits. Youth unemployment is a massive problem—1.4 million people under 25 are unemployed—and Labour’s spending to alleviate poverty failed, and has fractured society. Many people thought that the previous Government built barriers based on welfare payments that disincentivised individuals from finding a job. At the same time, those who are working pay more in tax, but why should they work hard to do the right things for themselves, their communities and their families when people who choose not to do so seemingly have everything that they do? It is a terrible disincentive.

I am a bit of a supply-side economist. I do not like tax rises, but anyone who looks at our structural deficit will understand that we need to remove as much of it as we can as quickly as possible. I will swallow my pride on the capital gains tax rise, but I note that it is a voluntary tax—people can sit on their hands and not realise the value of their shares, their property or whatever it might be. I certainly welcome the cuts in corporation tax, but I accept that the cuts in departmental budgets will be tough. I suggest that there is a great deal of waste to remove, especially from middle and upper management in some Departments. I recently received a letter from a constituent who works for the Vehicle and Operator Services Agency, who said that the directors, who were all based in the Bristol headquarters, travelled to Edinburgh for meetings, for no reason other than that it was a nice place to go.