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March 2006 Monthly Archives

Budget Debate

March 28, 2006

Nick Hurd makes a speech in the Budget debate in which he condemns the omission in the budget of any reference to the NHS and failure to tackle issues such as pensions, the collapse of the savings ratio, excessive taxation and climate change.

8.35 pm

Mr. Nick Hurd (Ruislip-Northwood) (Con): I refer hon. Members to my declaration in the Register of Members’ Interests and place on record my great pleasure at following the hon. Member for Stoke-on-Trent, North (Joan Walley), a fellow member of the Environmental Audit Committee, who spoke with her characteristic sincerity and commitment to her constituents.

I do not know about other new Members, but I was thoroughly looking forward to my first Budget. After all, they used to mean something. However, now I am not so sure. With the big decisions increasingly taken elsewhere, the annual event appears reduced to the theatre of gesture politics. As my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) observed, it is increasingly thin gruel, as last week showed.

As a new Member, I applied three tests to the Budget. First, is it relevant to my constituents? Secondly, does it recognise what is needed to shore up the competitiveness of the British economy in a changing world? I speak as someone who has experienced trying to run a business in Brazil, one of the emerging giants that is set to change the global economy. Thirdly, does the Budget demonstrate that the Treasury is showing sufficient urgency in the face of climate change? I speak as a member of the Environmental Audit Committee, which placed on record only last week our concern about the possibility of institutional inertia in the Treasury in the face of the scientific evidence.

On the first test, there are things to welcome, including more investment in reassurance policing, increased focus on youth services and increased investment in child care. There are local concerns about the long-term funding behind that package, but there are things to welcome. However, they are overwhelmed by two key omissions.

First, there is bafflement in the local community at the silence about the national health service. Our local context is that we have two, much-admired hospitals, which have performed extraordinary feats at the cutting edge of cardiac care and cancer treatment. They are Harefield hospital and Mount Vernon hospital. Both face genuine uncertainty about their long-term future against the background of an overriding strategic imperative to cut beds in north-west London. Our primary care trust has a deficit of £30 million and the community is braced for announcements about real labour cuts that will cut deep into the local health community. Hillingdon residents are gradually realising that they can no longer rely on NHS dentistry, with the news that seven out of 10 Ruislip dentists intend to quit the NHS.

Financial crisis in the NHS underlies that theme, at a time of unprecedented investment. My constituents ask where the money has gone, who is responsible for the mess, who will sort it out and how that will be done. Was it unreasonable of them to expect the Chancellor of the Exchequer, the man with his hands on the levers of power, who expects to become Prime Minister, to explain at the Dispatch Box how the problems will be solved? He was quick to take the credit but reluctant to step up to the plate when the going gets tough. It is a test of leadership for a man who aspires to be Prime Minister, and he failed it.

A second concern is a failure to tackle a growing sense of insecurity in the community, especially among elderly people. Anxiety about the value of pensions is wrapped up in that but it is linked with concern about the rising costs of living, especially those associated with people’s houses. Much has been made of the council tax, which is biting deeply, but rising utility bills and the costs of energy in the home are being talked about more loudly. Linked to that is confusion about the signals that the Government send about the need to set aside money for long-term savings. There is no more guilty agent of confusion in that mess than the Government’s system of pension credit.

I am genuinely surprised at the Government’s complacency in the face of the collapse of the savings ratio. I have even heard Treasury Ministers argue that that is a symptom of economic success. My concern arose when I visited the local headquarters of one of our main high street banks to find out what consumer attitudes were to pensions and savings products, and I was told, quite calmly, “We no longer bother to sell them. The public don’t want them. They aren’t interested, and we don’t make any money out of selling them.” That is where we have got to. That is the culture, the language and the atmosphere around savings in this country, and I would suggest that it represents a structural problem in the economy that requires more attention than simply chucking some money into child trust funds, however welcome that might be. It is in the Budget’s failure to address the two key concerns of health and attitudes towards saving that it fails the first test of relevance to the concerns of my constituents.

The second test is to determine whether the Budget recognises what is needed to shore up the competitiveness of the British economy. It is generally accepted that that competitiveness has in the past been based on low levels of tax and flexible labour markets. It is becoming increasingly clear, however, that the management of the economy is now resulting in significant risks being taken with those advantages, the effects of which we might have to live with for some time.

Other speakers have been more eloquent than I can be in pointing out the fault lines that are becoming increasingly evident: in terms of growth, we are at the bottom of the EU pack; our productivity growth rates are at their lowest levels since 1990; and our business investment is down to 9 per cent. of gross domestic product.

Mr. Love: Does the hon. Gentleman accept that the biggest factor in the competitiveness of the economy is the exchange rate? Given that we are running an enormous trade deficit at the moment, and that the exchange rate has not depreciated, would that not appear to be a reflection of international confidence in our economy?

Mr. Hurd: I accept that exchange rates are a factor in the competitiveness of an economy, but I would suggest that the more important factors are the levels of taxation and the flexibility of the labour markets. That has been proven over time.

When the hon. Gentleman intervened on me, I was going through a checklist of the fault lines in the economy. We must recognise the indisputable fact that we are now living with the highest burden of taxation for 20 years. It is not only the scale of the taxation but its incredible complexity that concerns my constituents. I understand-my Front-Bench colleagues may correct me on this-that some 3,500 pages have been added to the Yellow Book since 1997, which is the clearest possible evidence of the instinct to tinker and to add to complexity. The bottom line is that, when I hear the Chancellor speak, I do not believe that I am listening to someone with any real understanding of what it is like to run a business or to take risks in the pursuit of prosperity and the creation of wealth. That is also the growing view of businesses in my constituency. Another test failed.

The third test involves examining the sense of urgency, and the sense of ambition, shown by the Treasury in the face of climate change risk. This ought not to be in doubt, because I do not think that anyone doubts the Chancellor’s sincerity in his mission to reduce poverty in Africa. He must therefore be aware that the biggest risk to that agenda will be the impact of climate change on the poorer regions of this earth. As I have said, the Environmental Audit Committee is concerned about the institutional inertia and lack of momentum at the Treasury, particularly in recent years.

The Budget has not won the Chancellor any new friends among the green movement. Friends of the Earth called it “utterly inadequate”, adding that its measures would

“collectively only make a small impact on emissions”.

I happen to think that that judgment might be a little harsh, but I have no doubt that we are right to be concerned about the Treasury’s lack of urgency and momentum, set against the backdrop of rising carbon emissions in this country.

Climate change presents an immense challenge, and the attitude of the British Government is enormously important, not least in regard to the international process that is key to finding a solution. The problem with that incredibly complex process is that it is going too slowly, and that it is being held back by concerns about the cost of mitigating climate change. In order to accelerate that dialogue, progress and momentum, we need proof that we can grow our economy and reduce carbon emissions at the same time-that we can green and grow. That is the key for harnessing support for these measures in the developing world.

Britain continues to have an historic opportunity to take the lead in making that case, but we need the will to accelerate the technology to deliver a sustainable low-carbon future. A modern, forward-looking, digital Government would be alive to the prospect of being in the vanguard of economic opportunity. They would recognise that the twin concerns of energy security-now very real-and the trend of fossil fuel prices reinforce that imperative. That requires real leadership and clear policy making to send the long-term signals that business men and our fellow citizens need.

Mr. Des Browne: I am listening carefully to the hon. Gentleman, who clearly has an extensive knowledge, no doubt developed from his Select Committee membership. Given the demonstrative leadership role that he wishes the Government to take, can he indicate to the House how he personally will be voting tonight in relation to the revalorisation of the climate change levy?

Mr. Hurd: Personally, I am a supporter of the revalorisation of the climate change levy-

Mr. George Osborne (Tatton) (Con): The answer is no.

Mr. Hurd: I know what the answer is. I happen to believe that the climate change levy has played a role. The Government are deluding themselves, however, if they think that that is the main piece on the chessboard and the bellwether with regard to climate change.

In the context of real leadership and clear policy making, we need long-term signals. Instead, we get muddled reviews-the climate change review announced today, an energy review over the next few months and, perhaps most importantly, the Stern review on the economics of climate change at the end of the year. We get incompetent management of key processes such as the definition of the national allocation plan in the first phase of the European emissions trading system. We get tolerance of inefficient taxation such as air passenger duty and a drift from the impressive momentum that the Government showed in terms of developing environmental taxation in their first Parliament between 1997 and 2001. All that drift, muddle and incompetence has served to undermine the credibility of the Government, who are increasingly seen as being good at words but having real problems, and struggling, with delivery. The test is not words but action. To be fair, the test is not the Budget but the reaction of the Treasury to the Stern review later in the year, which will set out what is possible for a brave Government prepared to show real leadership.

The second test is the inevitable row over the national allocation plan for the second phase of the EU emissions trading system and the age-old dialogue between the priority given to sustainability and the priority given to the arguments of competitiveness. That will tell us the reality of this Chancellor and his aspiration and commitment to preserving and enhancing our natural resources-the natural capital, which is an indispensable pillar of our global system of capitalism, and which we can no longer take for granted. Whether he passes that test or not, the Chancellor and I are at least agreed on one thing-we both hope that last week’s Budget was his last.

8.47 pm