Tobias Ellwood
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Tobias Ellwood Excerpts(14 years, 4 months ago)
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Mr Darling
No, I am going to make some progress.
The current context is a fragile recovery, with growth in Europe sluggish. Crucially, however, we cannot assume, as the Government seem to, that it is axiomatic that if we cut back on public expenditure, the private sector will come in and take its place. That is not guaranteed at all. We have seen that in Japan and other countries. Indeed, the private sector often relies on public sector spending in many ways, whether through investment and support or directly, because it supplies goods and services to the public sector.
As I have said, borrowing is too high and we need to get it down. As I said to the hon. Member for Bexleyheath and Crayford (Mr Evennett), our receipts from income tax and corporation tax fell, as did our stamp duty receipts when the housing market went down, but that would have happened—indeed, it did happen—to every other major economy. We are not talking about something that was confined to the United Kingdom. Of course, as unemployment goes up, social security spending goes up as well. Indeed, it is interesting that if we look at what has happened to other countries across the world, we see that the deficit this year in this country is about the same as it is in the United States. If we look at debt and the IMF comparisons that were published in 2009, we find that our debt was less than that of Japan, Italy, Germany and France, and, looking ahead to 2015, it will still be less than that of the United States, France, Italy and Japan.
The idea that we are talking about a particularly British problem simply does not stack up. It is not true, but it is used as a convenient excuse for what the Conservative party always wanted to do. The truth is that the Conservatives supported our spending plans right up until the end of 2008—the hon. Member for North West Leicestershire (Andrew Bridgen) might want to consider this point. Indeed, when the now Prime Minister was challenged—I think by some right-wing newspaper—as selling the pass, he said that those spending plans were “tight”. That was the word he used. He said:
“This is why we are sticking to Labour’s spending totals. Taken alone, these are tight.”
That is what he said in 2008, but now the Conservatives turn around and say that what happened would not have happened if they had been in power for the past five years and that things would have been completely different.
Let us be clear: we all want to see borrowing come down, and we need to ensure that that happens. It is also clear that we need to understand the consequences of what we are doing, so that we do not damage our economy or damage the social fabric of this country. However, to suggest that we should not have done anything to support our economy as we went into recession or that we should not have stepped in to prevent the banking system from collapsing—and it was hours from collapsing—is simply nonsense, frankly. Indeed, if we had not done what we did, the cost, in terms of increased borrowing and higher debt, would have been far higher even than it is today, so that argument simply does not stack up.
We need a sensible plan to get borrowing down, but if we get this wrong we will cause major problems, given the scale and speed of the Government’s action. Again, the Business Secretary said a few weeks ago that
“it would be foolish to rush in significant cuts now which take the economy down even further, which lead to an even bigger deficit problem”.
He was right when he said that, yet the view of the Government of whom he is now a member is rather different. To be fair to the Chancellor, he has been consistent. He has wanted to take this risk for some time, and he is now taking it in great style. Even better, from his point of view, is that he has got the Liberals to front it up. No wonder that, once they are out of this Chamber, Conservative Members are laughing at the very idea of getting the Chief Secretary to the Treasury fronting up the cuts last week in his boss’s constituency. That is indeed new politics; I just wonder how long it will last. All I can say is that if things get better, there is no way that the Conservatives will allow the Liberals to front up any good news when it comes.
I am concerned at this time that we run the risk of derailing the recovery, which is why I took a different view. I thought that we should halve borrowing over four years, rather than go further and faster. Looking at the Office for Budget Responsibility’s forecasts published yesterday, I am concerned that it has downrated the growth forecast for this year, which it published a week before, from 1.3% down to 1.2%, and that it has downrated growth in 2011 from 2.6% to 2.3%. The OBR therefore recognises that growth is going to be suppressed as a result of what is being done.
Mr Ellwood
I am honoured that the right hon. Gentleman has taken the time to give me tuppence-worth of his attention. Will he comment on whether he supports the creation of the Office for Budget Responsibility, bearing in mind his own predictions? In March he stated in this place that the growth forecast for 2011 was 3.25%, but now the Office for Budget Responsibility says that the forecast is 2.6%.
Mr Darling
I am glad that I gave way to the hon. Gentleman, because the last time we touched on whether I supported the creation of the OBR, I think that the Chancellor said that I had always opposed it. However, I was careful before the election, and I think that I am right in saying that I did not oppose it as a matter of principle. The present Government decided to set up the OBR. If it works, it is worthy of support, so we will support the legislation in principle, but we will look at the detail. One interesting question is whether the OBR should be responsible to the Treasury or to Parliament—to this House in particular.
Mr Darling
Let me come to the forecasts. Forecasting, as I am sure the hon. Gentleman knows, is an art rather than a science. Let us just see, because as I understand it, the OBR is being advised by exactly the same civil servants who advise the Chancellor, and who advised me a few months ago. However, I note that when Sir Alan Budd announced the OBR pre-Budget report a week last Monday, he said that one of the reasons why he had changed his estimate was recent developments, including what is happening in Europe. As I said earlier, I am less optimistic now than I was three months ago about what is likely to happen to growth.
Mr Darling
No, I think I have dealt with that point.
There will be some people who argue that the private sector would see faster growth and job creation if there was a swift consolidation that supported looser monetary policy. However, with inflation down, interest rates at 0.5% and bond yields coming down—they were coming down before the election, as well as after it—there is no evidence of suppressed private sector demand, so that argument does not stack up. I am concerned that we may see a situation when there are not the right conditions or the right confidence to bring forward business investment. I am happy to welcome the proposed reduction in corporation tax rates and other business help, but what governs whether businesses come forward with investment is whether they are confident that the economy is going to be growing so that people will buy their goods and services. That is what I am concerned about.
I am also concerned that the Office for Budget Responsibility forecast shows employment taking a hit of about 100,000 compared with what we had forecast previously. The Chartered Institute of Personnel and Development foresees unemployment rising and sticking around 3 million for this entire Parliament. The history of Japan in the 1990s—and, indeed, our own history back in the 1930s—provides a lesson in what happens if we get all this wrong. Wherever we sit in this House, we should all be concerned about rising and persistent unemployment. Not only is it an economic waste; it is also a social catastrophe, as we have seen on many occasions.
Diana R. Johnson
That is absolutely right. We have seen a political blind date, but we should not worry because it is clear that Dave agrees with Nick, and that Nick agrees with Dave, so perhaps it will be okay in the end.
There are a few measures in the Budget that I can support, such as the change to capital gains tax and the bankers levy, although I am surprised that the levy will raise only about £2 billion because I think we could raise much more. However, the broad thrust of the Budget is very bad news for my constituents. Hull North will see more individuals out of work, with people’s opportunities wrecked and a decline in their quality of life. The programme of fighting child poverty and inequality will go backwards, not forwards, and there will be big problems in health and housing. Most importantly, wealth creation and enterprise will suffer in Yorkshire.
I want to talk about four things in particular: the rewriting of the history of the economic situation by the Conservatives and Lib Dems; the dogma that drives the Budget; my constituency, and Yorkshire and the Humber; and Labour’s approach to dealing with the economic situation in which we find ourselves.
I am worried by the rewriting of the economic history of the recession and the falsification of the cause of the deficit. We know that the Prime Minister is familiar with airbrushing, and his deputy routinely airbrushes away more than 100 years of his party’s history when it suits him. The deficit was caused not by big government, but by big greed. Bankers and international speculators are at its root.
In 2006 and 2007, I was fortunate to be the Parliamentary Private Secretary to the then Chief Secretary to the Treasury, my right hon. Friend the Member for East Ham (Stephen Timms), whom I was pleased to see back in the Chamber today. During that time, early work was being carried out on the current 2008 to 2011 public spending period. We had enjoyed a decade of low inflation, steady growth and falling unemployment, and there was no serious deficit problem. At that time, the present Prime Minister and Chancellor used a soundbite about sharing the proceeds of growth. They also said that they wanted to match the Labour Government’s spending plans up to 2011, as they kept saying until the end of 2008.
We all realised at that time that the spending round would need to be tighter than the one immediately after the millennium, but the adjustment was not remotely on the scale of the deficit in the public finances that opened up from 2008. The events of the two years that followed came about because of the greed-fuelled banking crisis that tipped the world into the worst recession since the 1930s. It is wrong to airbrush out what happened, to blame the problem on big government, and to be oblivious to the fact that public services are important not just for fighting poverty and inequality, and for providing opportunity, but for an efficient, growing, modern economy. Since the middle of 2007, taxpayers have had to pay to rescue the banking system—and not just in Britain—but now hard-working families and public service workers are being asked to pay again because of the greed of the bankers and the speculators.
The Budget is driven by dogma, not good housekeeping. It cuts too early and too deep, and it will hold back growth, which my party saw as the main engine for cutting the deficit. We know that further cuts will follow, including departmental cuts of up to 25%, but I think that the coalition Government will make further cuts again and again, meaning that we have a spiral of cuts and debt.
When Labour was in office, the Chancellor berated our Government for not mending the roof while the sun was shining, but it now seems that he is up the ladder removing the slates as the storm clouds of a double-dip recession gather on the horizon. In Hull, we need public services and investment. They are important to the local economy. The coalition cuts, however, will harm our quality of life. The Tories said in the past—I think that they still say this—that mass unemployment is a price worth paying. The market zealots on the Government Benches who said for years that they wanted less regulation of the markets and smaller government are now getting their way.
Mr Ellwood
I am sad to hear the hon. Lady advocate a double-dip recession so early in a new Parliament. The public do not want to hear those sorts of words. We need to get behind the Government and allow the coalition to do its job. I would like to ask her who was responsible for allowing Bradford & Bingley to give away 125% mortgages? Who was responsible for removing regulations in the banking industry in the late 1990s and thus allowing banks to lend people money in ways that they did not understand and when the payments could not be afforded?
Diana R. Johnson
I remind the hon. Gentleman that Conservative Members vociferously argued in the House year after year that there should be less regulation of the financial markets. They criticised the Labour Chancellor and Government for the regulations that they introduced. The hon. Gentleman has a rather selective memory of his party’s position in the late 1990s.
I fear that Yorkshire and the Humber will bear the brunt of the majority of cuts that come out of the Budget. I am pleased that my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) is in the Chamber. She has been a powerful advocate for her city of Sheffield and wanted to ensure that the sensible arrangements that the Labour Government put in place for Sheffield Forgemasters went ahead. It is shocking that the coalition Government have refused to continue the process. Sheffield Members are making a strong case for the assistance, so it is a shame that the Deputy Prime Minister is out of step with his city colleagues.
Mr Tobias Ellwood (Bournemouth East) (Con)
I welcome you to your place, Mr Deputy Speaker. It is 20 minutes past 3, so I am surprised—but glad—to see you in your seat, because the England game against Slovenia has now started. I know that you have been to Slovenia many times, and it is great to see you here.
I pay tribute to the hon. Member for Strangford (Jim Shannon) on his passionate and balanced speech. I served in Northern Ireland and am aware not only of many of the challenges that hon. Members face over there, but of the opportunities. It is a pleasure to follow him, and I agree very much about the opportunities in the development and working of the cadets in bringing communities closer together. It is wonderful to see that initiative moving forward.
The hon. Member for Kingston upon Hull North (Diana R. Johnson), who has just walked out the Chamber, made an entirely negative speech. Yes, whichever party won the election would have faced challenges, but how can she stand there and simply demand more money for certain projects in certain parts of the country, without saying where it should come from? Labour Members have failed to understand the consequences of the election result. It was clear that nobody won, so why continue to look back at the manifestos of individual parties and ask, “Why are you now not doing this, or that?” We had to rise to the occasion and ask, “What is needed for the country?” We have to put aside our party differences and meet the challenge, which is to bring about stable government and leadership. The Liberal Democrats and the Conservatives were able to do that, but of course it meant a certain amount of compromise. So it is wrong to harp on about aspects of the manifesto and say, “Why haven’t you included this? Why haven’t you done that? You’ve gone against the people who voted for you.”
Huw Irranca-Davies
Does the hon. Gentleman accept that in the election there was a fundamental divide over the approach to the economic recovery, which was encapsulated in the manifestos of the two main parties that lost—the Labour party and the Liberal Democrats? The Tories did not win outright either, but those two significant parties both, at the time, agreed with Nick and Vince that we had to delay making the cuts until the recovery was ensured.
Mr Ellwood
I am grateful for that intervention because it gives me licence to underline the fact that, if we are to move into a coalition, there needs to be agreement, and it is a tribute to the parties and the leaders that in a short period they achieved something that, in countries such as Belgium, takes 100 days—forming a coalition grouping while all the horse-trading takes place. Yes, there are compromises and changes that were not expected during the election. However, according to the polls the country supports what we are doing.
Owen Smith
Does the hon. Gentleman think it a minor omission that, although the Conservatives’ manifesto said that they would not increase VAT, they have done exactly that and introduced an enormous, £13 billion tax? There was no mention of that before, so should we trust their manifestos in future?
Mr Ellwood
Rather than leave a curt note on the desk of the Chief Secretary to the Treasury, we have given an indication of the real situation in the UK. Again, I underline the fact that there are aspects of the coalition agreement we perhaps were not expecting—that should be understood on both sides of the House. I fear that it will remain a Labour tactic to go on about this, perhaps to try to drive a wedge into the coalition. That is dangerous, out of touch and wrong, because the nation said to us, “We don’t support any one party outright”, but it approves of a coalition and the leadership, and the stability that they and this Budget are providing.
My hon. and good Friend the Member for Harrogate and Knaresborough (Andrew Jones) made an excellent maiden speech. He mentioned Guy Fawkes wandering through his constituency, and I am sure he will make just as big a bang in this place as Guy Fawkes did. I cannot mention Harrogate without also paying tribute to Betty’s tea rooms. Those of us who have gone there for conferences will appreciate the delicacies that Betty’s provides—I only wish that could be emulated here in the House. The hon. Member for Hemsworth (Jon Trickett), who also is no longer in his place, made the most Marxist speech I have heard in this place for many years. I was waiting to see how long it would be before Maggie was blamed for what has happened over the past 13 years—and that is what we got from him. I was astonished.
This emergency Budget is tough but necessary, difficult but unavoidable. It is not the time for timid steps in the hope that we can tiptoe our way out of recession. We needed a bold statement of intent, mapping out a clear route to recovery and invigorating confidence in our businesses and markets. That is exactly what we got. Three main themes run through the Budget and Red Book. The first is one of responsibility in reducing the deficit over the next five years, mostly through spending cuts but also, yes, through some tax rises. That is the price we must pay for Labour’s incompetence and legacy.
Economic growth is the second theme. Measures taken in the Budget are designed to support businesses and stimulate growth, which will help to generate jobs as businesses are able to expand. That will mean cutting red tape, which will free businesses, because removing red tape is the same as introducing a tax cut but without reducing public revenue. It also means preventing Labour’s job tax through a rise in national insurance, reducing corporation taxes and improving our infrastructure.
The third theme is fairness. Of course, we are in a period of austerity, but every part of society must make a contribution to paying off our debts. At the same time, however, we must protect the least well-off. Listening to some of the contributions from Opposition Members, one might think that no such initiatives were part of the Budget. However, we have ensured that those earning less than £21,000 in the public sector will not be subject to the pay freeze. We will see a £1,000 increase in the personal tax allowance for low and middle-income earners; and finally we will see a re-linking of the basic state pension and earnings—well overdue and promised for years by Labour, but never acted upon. We will also see a £2 billion commitment to child tax credits for the poorest families, helping to ensure that there is no increase in measured child poverty over the next few years.
These are the tough decisions we need to take. We have to do this to secure our financial markets and ensure that credit agencies do not lose confidence in Britain. If we do not, interest rates and inflation will rise, and that is what would lead to the dreaded double-dip recession. I am glad that our triple A rating is now secured, thanks to the Budget.
I will give the Labour Government their due: they acted promptly and expeditiously when the Northern Rock issue broke. But then what happened? We have been left with one of the worst economic inheritances imaginable. They racked up one of the biggest budget deficits in Europe. If that is not shocking enough, our borrowing amounts to unheard sums of money. They continued to live beyond their means, borrowing £1 for every £4 they spent, which led to the doubling of the national debt. I well remember Labour’s last Budget, in March 2010. I was sitting in this Chamber waiting for the leadership, initiative and guidance to take us out of this mess. It was the Labour Government’s last opportunity before the election to get us out of the mess they created, but it was more about the political, rather than the economic, cycle. The previous Chancellor went as far as announcing £40 billion of cuts, but he did not say where the axe would fall, so he managed to ring-fence a black hole, which was a first in this House.
Significantly, the Labour party really had nothing to say yesterday. The acting leader of the Labour party was almost like a rabbit in the headlights. Labour Members rolled out the same old line, which we have heard time and again—I am sure we will hear it again in the summation today—about “the same old Tories”, thereby exhibiting an insane refusal to acknowledge the scale of the economic crisis. We have seen Labour Members attempting endlessly to promote and fight a class war with the Conservatives. That is the direction in which they are now trying to take us, avoiding any notion of mea culpa or of taking responsibility for the mistakes made in the lead-up to the current crisis. That illustrates how out of touch the Labour party has become.
Labour continues to argue that we cannot rip the money out of the economy—through the cuts, the increases, and so forth—and also achieve growth, but I believe that we can. We need to give business and the private sector the space to breathe by reducing national insurance and corporation tax. Those are the measures we need to take. That is what will help us to avoid going into a double-dip recession, allowing our businesses to thrive and employment to grow. Labour’s tactic—I am worried about this, because I understand that the unions bankroll Labour to the tune of 60%—is to fight the public sector cuts. That is what we will see as things move forward: these astonishing arguments why, unlike any other part of our society, the public sector should somehow be ring-fenced and not have to share some of the economic pain we are experiencing.
The unions are clearly looking for a fight. I pay tribute to the nurses, doctors, teachers, train drivers—all those who work hard—but let us look at who is now taking over some of the unions: Dave Prentis from Unison, who has pledged to fight the cuts; Christine Blower from the National Union of Teachers, who has enthusiasm for industrial action of some form, as she has made clear; and Paul Kenny from the GMB. Then there is the Unite leader, Len McCluskey—we have all seen what he has done to British Airways—who is seeking re-election. If he gets re-elected, the consequence will be strike after strike, because the public sector unions—not the members, but the unions—do not recognise that we are all in this together.
Labour’s tactic is to blame the global downturn. We hear this all the time: “It’s not our fault; this is because of what happened right across the world.” However, as I pointed out in an intervention, yes, we are exposed—perhaps more than other countries—because of the size of our financial services sector, which is one of the biggest in the world. That is accepted, but we cannot get away from the fact that the previous Government changed the rules, making it unclear who was responsible for the City back in the late 1990s. That is why we got into the position where banks were lending money they did not have to people who did not understand the situation, and in ways that meant that they could not pay it back. That is what led to the current position.
We cannot blame Freddie Mac, Fannie Mae or the sub-prime market for the fact that, even up to about two years ago, Bradford & Bingley was offering mortgages of more than 125% to people who clearly could not pay them back. I remember when I was at university wandering into Midland bank, as it then was, and seeking a mortgage. I was told that I had to cough up one third of the price of the house. What happened to that rule? It went, and that is why we ended up with more money than houses were worth being lent to people who could not pay it back. That is a British problem, not an international one, and that is what led to the crisis we face now.
I repeat my earlier point: I think Labour are going to adopt the tactic of trying to drive a wedge between the coalition by saying, “The Lib Dems said one thing in the election and the Tories said another.” The nation will get bored of it. People want direction—they want leadership and stability—not harping back to what happened prior to the election.
Let us look at the numbers. Our focus is to try to balance the books by 2016. We will cut the structural budget deficit to zero in the next six years. That deficit represents the hole in the public finances that is not expected to be repaired by the economic recovery. That is why we need to take the initiative that we have. Let us look at what the shadow Chancellor has done. I asked him in an intervention whether he supports the Office for Budget Responsibility. I am pleased to say that for the first time, he placed it on the record that he does. However, it is difficult to take anything that he or anybody else on the Labour Front Bench says seriously, given that the OBR reviewed his figures and revised his growth forecast for 2011 from 3.25% to 2.6%.
Ms Angela Eagle (Wallasey) (Lab)
As the hon. Gentleman is talking about the Office for Budget Responsibility and its forecasts, will he have the good grace to note that its recent deficit forecasts are considerably lower than those in the March Budget because more money has been collected in taxes? The deficit that the hon. Gentleman is obsessing about is actually 2% of GDP lower than the forecast in the March Budget. Will he have the decency to recognise the other side of the coin, as well as this side of it?
Mary Macleod (Brentford and Isleworth) (Con)
The structural deficit is higher.
Mr Ellwood
As my hon. Friend the Member for Brentford and Isleworth (Mary Macleod) says from a sedentary position, the structural deficit is actually higher.
Let me deal now with total borrowing as stated by the Office for Budget Responsibility. This is now expected to fall by 2.1% of GDP by 2015, or by £37 billion, which is exactly half of what Labour were predicting, and to reach 1.1% by 2016.
Ms Eagle
I wonder whether the hon. Gentleman was listening to the question I asked him. Given that he is quoting one particular forecast from the Office for Budget Responsibility, will he have the good grace to say on the Floor of the House that the size of the current deficit is now 2% of GDP lower than we predicted in the March Budget? The situation in which we find ourselves is not a lot worse than we thought; it is better.
Mr Ellwood
The hon. Lady has put her point on the record. My argument is that it is difficult for us to take what the shadow Chancellor says seriously when he has been looking through rose-tinted glasses for the last 10 years. Time after time, either he or his predecessor, the former Prime Minister, came up with growth forecasts that were well out of touch with what was happening. That is what led us down the path of thinking that the economy was doing much better than it really was. [Interruption.] If the hon. Lady would stop talking, she would hear what I am saying. She must understand that if the previous Government had not kept on expressing the view that the economy was on the mend when it was not, they would have recognised the position and put in place corrections to stop the spending. The first point I made was the fact that her Government were living beyond their means, yet the hon. Lady still sits there and argues, without even having the grace or the courtesy to say sorry to the nation for the mess we are in.
Geoffrey Clifton-Brown
Is it not a bit rich for the hon. Member for Wallasey (Ms Eagle) to claim credit for the deficit not being as bad as we thought it would be when Labour had proposed £40 billion of cuts, but not one pound of them had been costed?
Mr Ellwood
My hon. Friend is absolutely right and makes a powerful point. Let us not forget that we are quibbling—well, not quibbling, but the hon. Lady is making an argument about pretty small sums of money if we consider that this country’s total debt is £932 billion. That is a record across Europe, it really is. It currently stands at more than 62% of GDP and is forecast to peak at 70% by 2013-14 and finally to start to fall in 2015-16. This is shocking; it is a cost to the taxpayer to the tune of £43.3 billion in borrowing alone. That is more than the defence budget—an outrageous position to be in. Any business presenting figures like that would be labelled bankrupt.
The OBR forecasts that the UK economy will grow by 1.2% this year and 2.3% in 2011—not what was predicted, as Chancellor said. Unemployment is forecast to rise to a peak of 8.1% this year, while inflation is expected to peak at 2.7% by the end of the year before falling back to the 2% target. What has happened is that we have put in the initiatives to ensure that we keep a cap on unemployment, a cap on inflation and, most importantly, a cap on interest rates. As the markets and financiers agree, if interest rates were forced to go up higher, that is what would lead to the double-dip recession.
Let me deal briefly with Europe. The Opposition now claim that we should not look over our shoulder at what is happening in Spain, Portugal or Greece, but I think it is wise to recognise the folly of what would have happened if Tony Blair had had his way when Labour were in power. I am still astonished that it has taken until, I think, last week to close the office of preparation for entering the euro. That is absolutely barmy. It is worth pointing out that if we had wanted to join the euro club, the maximum budget deficit would have been 3% of GDP in any year. In 2009, Greece’s budget deficit was running at 13.6%. We came in at 11.2%, so there are some similarities.
It is recognised that the eurozone is in a mess because of trading patterns. After joining the club in 1999, Germany’s exports to Greece increased by 133%, and the Germans are no doubt delighted about that. However, Greek exports to Germany increased by only 13%, so the system is one way. Not all those exports have been paid for, and that is probably why Germany feels obliged to help with the Greek debt situation. Part of the problem is also that the Mediterranean countries are not as open as they should be, and skewed the stats in order to join the club in the first place. That is why we were wise to stay out of the eurozone. With such huge fiscal disparities, the 16 economies that share the single currency face a massive reality check. In its current form, the euro could be finished.
Let me turn to specific Budget measures. I am pleased that the Office for Budget Responsibility has been created. I am also pleased by efforts to restore the pension link to earnings. My constituency has many elderly people, as does wider Dorset, and we have called for the measure for a long time. I also want to dismiss a myth from the election campaign that the Conservatives would get rid of winter fuel payments and free bus travel. Such scaremongering was completely out of order, and I am glad to say that the provisions are still in place.
Mr Ellwood
Here we go again. I give way to the hon. Member for Ogmore (Huw Irranca-Davies).
Huw Irranca-Davies
I thank the hon. Gentleman for raising that point, because I heard his party on many occasions in opposition deride winter fuel payments, child tax credits and child trust funds as a waste of money. Therefore, it was reasonable for us to scare the horses, and it was right that the Prime Minister was forced to do a dramatic U-turn.
Mr Ellwood
The hon. Gentleman makes an interesting point. We all understand that things are said in the Chamber that perhaps cannot be said outside. During the election, however, the Prime Minister, my right hon. Friend the Member for Witney (Mr Cameron), made it very clear that we had no truck with the idea of getting rid of the winter fuel allowance or free bus passes. He even said that in the debate with the then Prime Minister, and yet Labour still put out scaremongering leaflets. When we get into election mode, let us have a bit more honesty. Does the hon. Gentleman wish to intervene again or has he given up?
I also welcome the freeze on council tax, and I am pleased that Bournemouth borough council has met the rules on that. It is important that there is a relationship to encourage local councils to take more responsibility for their own matters, but to get rewarded for that by Government.
I am pleased with the initiatives on small businesses. They make up 90% of our economy, and we need to look after them. In places such as the south-west and Bournemouth, tourism is important—it is our fifth biggest industry—and we do not do enough to support it. Benefit will come from the lowest ever corporation tax—the main rate has been cut from 28% to 24%—and the cut in the tax rate for small companies from 21% to 20%. There has also been an expansion of the loans guarantee system, without which many good companies were frustrated in getting money from the banks. I am pleased that the Treasury Front-Bench team has realised that.
Fat government will also be reduced. A 25% reduction over the next four years will be very difficult, but government became bloated and far too centralised under Labour. I look forward to a much simpler set-up that gives more power to communities.
This Budget is the most dramatic and far-reaching since the war. Balancing the books must be a priority, but even in these tough times the Budget promotes a cultural shift in Britain, encouraging the individual, the family, the community and the country to take responsibility. Ensuring that the banking sector and financial services are better regulated to avoid a repeat of the economic downturn is long overdue. This Budget is an ambitious effort to reduce the nation’s borrowing and repair the damage created by the last Labour Government. Labour will no doubt claim that many of these radical measures can be avoided, while secretly knowing that, had they miraculously won the election, they would have had to implement the very same changes themselves.
Let me end by congratulating the Chancellor and his team on producing such a comprehensive and robust Budget. While recognising the difficulties that it will impose on the entire country, I believe that it is appropriate and overdue medicine to expedite Britain’s way to recovery.