Budget Resolutions and Economic Situation

David Wright Excerpts

Tuesday 22nd June 2010 Commons Chamber

[Mr Dominic Raab (Esher and Walton) (Con)]

This is a crossroads Budget; it sets not just the terms of the next fiscal year, but the policy direction that will determine Britain’s economic competitiveness in the years that lie ahead.

The debt crisis was exacerbated, not created, by the banking crisis. The epic challenge we face today is the result of reckless state spending from 1997. In 1999, the OECD calculated that the British state was spending 38% of the nation’s wealth measured by gross domestic product. By 2008, before the crisis and the banking bail-out, it was 48%—an unprecedented rise of 10%. By 2009, as we all know, the state was eating up over 51% of national income. On these OECD figures, the British state spends more than Portugal, Spain and Greece, let alone Germany, and 10% more of our nation’s wealth than in the United States, Canada or Australia.

We have witnessed a seismic shift in the balance of our economy, which has blunted our economic competitiveness. On the World Economic Forum international rankings for economic competitiveness, Britain was fourth in 1998; today we are 13th. UK tax competitiveness has dropped from 11th lowest in the world to 23rd. According to The Economist rankings, the business environment in Britain has plummeted on its international rankings from seventh to 19th place.

For 13 long years, we were told that all that state spending was really investment, so amidst the shrill cry and synthetic outrage from the Opposition, let us remember precisely what their so-called investments really delivered. Britain has fallen on The Economist innovation rankings, we issue fewer patents, and the productivity gap still haunts the British economy, mainly because of the grotesque underlying inefficiencies in the public sector. In 2002, our roads were the 23rd most crowded in the world; today, they are the 17th most crowded, and our car-to-road ratio is up by 23%. Rail usage is up 17% since 2006, but we have almost 1,000 km less track.

Perhaps the greatest failure has been on Labour’s own terms. Despite unprecedented spending on schools, UK students, measured at 15, have tumbled down the OECD PISA—programme for international student assessment—rankings: from eighth to 24th in maths, from seventh to 17th in literacy, and by a similar measure in science. If social mobility remains an issue in Britain today, as Alan Milburn’s report stated last year, that reflects those basic failings in policy, not spending.

The nail in the coffin of the previous Government’s legacy must be this year’s finding by the National Equality Panel that, after their 13 years in power, inequality has just become worse. Their experiment failed, the spending spree is over, and now, in this Budget, Britain must face up to the reality of the mess that the previous Government left behind.

The OECD has predicted that this will be the last year in which developed countries account for more than half global output. The international competition has well and truly arrived, yet Europe lags well behind the United States in terms of levels of economic growth, and is ill equipped to rise to the challenge presented by new competition from Asia and Latin America.

[David Wright (Telford) (Lab)]

The hon. Gentleman mentioned the expansion of public spending over the past 13 years. One of the things that public spending does during a recession is blunt—a word that he used—the worst impacts of that recession. Can he cite three projects that he would have cut to provide an economic stimulus at the worst point of the recession?