Speech in Reply to the Chancellor's Pre Budget Statement
Michael Howard, 27/11/2002
Category: Economic Policy
I begin by drawing attention to my declaration of Member's interests and expressing my gratitude to the Chancellor for giving me sight of his statement in advance.
Causes of Concern
The Chancellor laid great emphasis on what he described as the fundamental strength of the UK economy. To the extent that this is true, we all welcome it.
But does he not agree that there were some serious concerns about the UK economy, before the tragic events of September 11?
“ Concerns over the trade deficit, with Britain spending more than we earn.
“ Concerns over the long-term sustainability of spending plans which outstrip the rate at which the economy is growing.
“ And concerns over the impact of new taxes and red tape on the ability of British business to win orders and create jobs.
The Chancellor referred to the need to improve Britain's public services. But we have heard all this before. Year after year we have had promises from this Government:
“ In 1997 they said there were 24 hours to save the NHS.
“ In 1998 the Prime Minister said: `we are delivering on our promises“'.
“ In 1999 the Chancellor said this will be `New Labour's year of delivery'.
“ Last year, Government advisers said this would be the year ‘when things really started to happen'.
“ Six months ago they said they would put ‘schools and hospitals first'.
Now the year 2002 is almost upon us. And here is the Chancellor trying the same trick again. Every year they make these promises. Every year they break them.
Despite all the promises, despite all the tax increases, despite all the hype and hyperbole, services like health, education and transport have got worse over the last four years.
Did the Chancellor read the Daily Mirror's recent front-page editorial on the state of the NHS? `Things haven't got better' under Labour, it said, `they've got considerably worse'. `The Mirror's had enough of phoney pledges and promises on the NHS. Labour has been in charge for nearly five years. They can't hide behind the handy "Tory policies" excuse any longer. It is now Labour's health service policies that are failing. And failing badly'.
If this Government and this Chancellor can no longer convince the Daily Mirror with their `phoney pledges' - like those made again in his statement today - who do they think they can convince? They certainly haven't convinced the Chairman of their Party. The Rt Hon Gentleman the Member for Norwich South certainly not one of the Chancellor's best friends confessed at the week-end that the health service had indeed got worse under Labour. So I hope there will be no more argument about that.
Record on Public Services
Does the Chancellor agree that morale in all the caring professions, and in the public sector as a whole, is now worse than ever?
“ The Chairman of the BMA said ‘our morale has been driven to distressingly new depths'.
“ The new Head of Ofsted has warned that schools are facing possibly the worst ever shortage of teachers.
“ The Chairman of the Police Federation has described police morale, too, as being at an all-time low.
What has the Chancellor got to offer them? The Chancellor made great play of the Wanless Report. We shall of course study it with care. But its answers were fixed by the terms of reference the review was set. It was asked a Labour question so it gave a Labour answer.
Twelve days ago the Chancellor said the ‘central economic theme of our Pre-Budget Report will be our support for enterprise'.
But we have heard all this before. Year after year we have heard promises from this Chancellor:
“ In his 1997 Budget he said: `This Government will support the small businesses of Britain'.
“ In 1998 he said: his measures would reward ‘enterprise and entrepreneurship throughout the whole economy'.
“ Two years ago he said his Budget would encourage ‘a dynamic Britain of enterprise and fairness'.
“ Last year, he again promised to `reward enterprise and entrepreneurship'.
“ And earlier this year, he said his Budget would ‘boost enterprise'.
And what is the result of all this so-called support for enterprise and business?
“ As a result of the Chancellor's budgets, the Director General of the CBI now says ‘The reputation of the UK as a low tax economy where overseas investors“ want to invest is under serious threat'.
“ As a result of the Chancellor's budgets, the British Chambers of Commerce now say: ‘The bottom line is that the sheer quantity of red tape on business is damaging our economy, stifling enterprise, job creation and economic growth'.
Every year he makes these promises. Every year he breaks them.
New Measures for Business
Of course we welcome any measures to help business, and we will look carefully at the details of what he has announced today.
But it is under this Chancellor's stewardship of the economy that Britain has fallen from 9th to 19th in the World Competitiveness league. Is that not the real impediment to new job creation?
Is it not the case that 3,865 new regulations were introduced last year alone, the highest figure on record?
And why did a survey of 4,000 firms across Europe just last week say that companies run into more problems trading with the UK than anywhere else? Is not that, alone, a damning indictment of this Government's record?
Is it any wonder that last quarter saw the sharpest fall in manufacturing investment since the 1970s?
And is it any wonder that the burden on business is growing, when the Secretary of State for Trade and Industry says that her Department suffers from `lack of focus, confusion for the customer, too many schemes, and inadequate leadership within the department and by the department across Whitehall'. What a kick in the face for the Secretary of State for Transport; the Secretary of State for Environment; and the Rt Hon Gentleman the Member for Hartlepool, all of whom held her post in the last Parliament.
Nothing the Chancellor has announced today goes anywhere near addressing the £10 billion a year burden of extra taxes and red tape imposed on businesses by this Chancellor.
Record on Enterprise
And what about the benchmarks of success which he himself has set up in the past?
He makes promises about productivity.
But we have heard all this before. Year after year we have heard promises from this Chancellor:
“ In his first Pre-Budget Report, four years ago, he said: ‘the first challenge is to increase our productivity'.
“ In his second PBR, a year later, he even said productivity was `a fundamental yardstick of economic performance', and that he would ‘set in place measures to improve productivity'.
“ Two years ago he said: `Britain can now aspire to a new economic ambition for the next decade: a faster rise in productivity than our main competitors'.
“ Last year he said Britain had the ‘opportunity to achieve high levels of productivity growth'.
And all the while, while he has been making all these statements, Britain's productivity growth has been falling.
It has fallen from 2.2 per cent in the last four years of Conservative Government to 1.5 per cent in the first four years of Labour Government. Under the Conservatives we had productivity growth above the G7 and OECD average. Under Labour we've had it below the G7 and OECD average.
On productivity as well, every year the Chancellor makes these promises. Every year he breaks them.
Let's take a look at growth figures, too.
The Chancellor points to UK growth in comparison with the rest of the G7. I very much hope that we are, indeed, going to grow more quickly than our competitors.
But if that is to be his new indicator of success, you can't take one year alone. Why has he not mentioned the fact that in the first four years of Labour Government the UK economy grew at a slower rate than that of the G7, or the OECD, or the UK economy itself in the last four years of the last Government?
Measures to Address Problems the Chancellor has created
One of the many problems the Chancellor faces is the extent to which he has to clear up the mess he himself has made.
“ He boasts, for example, that Capital Gains Tax is now to be simplified. But who introduced the current complicated structure in the first place? It was the Chancellor himself.
“ He says that payroll services for small firms are to be made more effective and less costly. Of course we all welcome that. But who introduced the additional burdens on small business payrolls in the first place? It was the Chancellor himself, asking them to administer schemes like the working families tax credit and stakeholder pensions.
Other New Measures
Of course some of the other measures he outlined today are welcome.
“ We welcome the extra spending for the armed forces and the security services.
“ We welcome the measures to alleviate world poverty
“ The Chancellor gave more details of the Pension Credit. He didn't say much on th eother credits. I hope he will say how much they will cost, and how he will pay for them.
And will he now spell out clearly how he intends to pay for Government spending after 2003-4? After his prevarication during the general election campaign, will he now tell us one way or another whether he intends to increase National Insurance Contributions?
Of course we welcome the increase announced today in the retirement pension and the winter fuel payment. But what about tomorrow's pensioners, cruelly hit by the Chancellor's pensions tax. When he first introduced it in July 1997 he tried to justify it by saying that pension funds were in surplus and companies were enjoying pension holidays. Well he's helped to destroy the surpluses and put an end to the holidays. How does he now justify his savage attack on pensions?
Last week we challenged the Chancellor to deliver a Pre-Budget Report with a difference.
We said it was time to acknowledge the serious causes of concern about the UK economy, and the burdens he has imposed on British business.
And we said it was time for the Government to act on the state of crisis in our public services.
He has failed those challenges.
The burdens on business remain.
Public services will continue to get worse, to the growing distress of patients, passengers and parents.
It is not only patients on the waiting list.
It is not only passengers and parents on the waiting list.
Now the whole nation is on the waiting list waiting in vain for this Government to deliver on its promises."