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Budget Speech

March 18, 2004

Budget Speech

Mr. Mark Field (Cities of London and Westminster) (Con): Let us face facts: this is a rather dull Budget, although I hope that the Front-Bench spokesmen will agree that this debate has not been quite as dull. I shall touch on one or two education points later, but would first like to address other issues.

Among many economics experts, this will not go down as the most exciting or innovative Budget that there has ever been, although in many ways that might be regarded as a compliment to the Chancellor of the Exchequer. Certainly, there have never been so many post-Budget briefings, breakfasts or brunches prepared in vain, and never was there so little on which commentators could report.

What is there to say, then, from this side of the House? As I am very much on-message, I should refer to the third-term Labour tax rises that are on their way, or the "credit-card Budget from a credit-card Chancellor".?[Official Report, 17 March 2004; Vol. 419, c. 337.]

I hope that that shows that, some 72 hours after leaving the Whips Office?and I see that my Deputy Chief Whip is here?I am still very much on-message, at least so far as the Budget is concerned. Let us make no mistake: this is a political Budget, and a Budget that is very much on hold. It is fair to say that the Chancellor and the Treasury Front-Bench team will be saying a silent little prayer that the economy remain in much the same state as it is in now for the next 14 or 15 months. It is with that in mind that so little has been done in the Budget to change the economic outlook. The key question, now that the Chancellor has reaffirmed his growth projections and they have been proved correct during past year?although many in my party had their doubts 12 months ago?is why there has been such a gap in his revenue. That augurs badly, not, I suspect, for the period this side of a general election, but for the medium term.

As a Member representing a capital city constituency, I shall focus on one or two issues close to the hearts of Londoners, especially the proposals to spend more public money on countering terrorism, which have important implications, and the much broader issue of housing here in the capital city. I suspect that that will be the subject of a much longer future debate, but it was made clear from the introduction of Kate Barker’s paper on housing on the day of the Budget that it contained some pointers for the future of public finances.

If the Chancellor’s words are to be believed, as I suspect that they are in this instance, this is a self-styled Budget for education, science and enterprise. I am tempted to suggest that the Government were, to a certain extent, making that up as they went along, because in their last manifesto, if that was to be believed, they claimed that Labour had legislated against the introduction of top-up fees. We all know what is likely to happen on that, if they are successful in getting their Higher Education Bill on to the statute book in the months ahead. It is right for the Government to identify education and science as key. However, some complacency has been shown in a continued comparison of the UK’s economic performance with that of the other G7 nations. The reality is that the world has moved on. This side of an election, there is little doubt that our economic performance will tower above that of France and Germany, as it has done since the mid-1990s. Surely, however, we should be aiming higher and more extensively. I was interested to hear the eloquent contribution of the hon. Member for South Derbyshire (Mr. Todd). He made constant reference to the European and north American models, but economic models seem to me to go well beyond the region this side and just the other side of the Atlantic. I look far beyond Paris, Frankfurt and New York for the great competition.

For those of my age group?I am still, by a few months, in my 30s, as I am sure the Paymaster-General is. She certainly looks as though she is in that age group. I hope that I shall now get a good reception in Bristol, South the next time I am there?and for younger people entering the world of work, there is a realisation that the real economic capitals of the world will not just be those that we already know. They will also be places such as Shanghai and Bombay. Perhaps it is unfair to compare growth rates in those fast-growing young capitalist economies with those in the UK, but those economies are now the relevant competition. The growth rate in China is roughly 9 per cent.

The great debate that is taking place on outsourcing presupposes to a great extent that we have much to lose from our competitive relationships with India and China. It strikes me, however, that nothing could be further from the truth. These are our traditional longstanding trading partners, as they have been for many centuries. I represent the City of London, which has been the heart of our global trading arrangements, and I believe that we should be proud of continuing to foster those links with China and India, which will be the great economic powers of the second half of this century.

When I look at the strength of the United States of America, I feel that Europe is rapidly going downhill in the league table. I do not say that from a wildly Eurosceptic viewpoint, not least as I have European blood running through my very veins, but we as a nation must be proud to foster our longstanding links with China and India, and I hope that we shall continue to do so in the decades ahead. The relevant comparisons should not just be with the G7 nations; they must be with these other important global trading nations.

There is a paucity of ambition at the core of the Budget. The Chancellor’s idea of enterprise seems all too often to be an academic exercise, rather than a practical one. Let us face it, compared with many G7 nations, our economy is in a good state. There seem to be few direct problems on the horizon, at least this side of May 2005.

What do businessmen in small or growing enterprises want? I was in that position before I entered the House less than three years ago. I was a businessman in an enterprise that I had set up from scratch in the mid-1990s and built up to a £2 million turnover and a dozen staff. That is a standard size for a small business. I personally have to thank the electoral deluge of 1997 for delaying my entry to this place. Had that not happened, I would not have had the benefit of seeing a business growing in that way. Let us be honest, a lot of the changes that have been introduced, particularly in regard to capital gains tax for owner-managers, are greatly to be welcomed. I admit that I personally benefited from those changes, as have many businessmen across the UK.
There are real problems ahead, however. There is more and more regulation and red tape. I know that that is a fanciful thing to say, and that we have to look at the specifics. I was a smallish businessman?as I have said, we had a dozen staff?and my co-director and I bore much of the burden on a day-to-day basis. We did not have a large human resources department or a payroll department. We had a lot of very young employees, many of whom had had graduate loans and therefore came within the scope of our payroll arrangements. I remember getting all kinds of literature on a daily basis from the local authority which had to be filled in. We also had bits of paper from the Office for National Statistics. There were more and more burdens. Obviously, the filling in of a VAT return was something that filled our hearts with great gloom, not just because of the sums of money that we had to pay but because of the sheer logistics of filling in the return during the last week of every quarter.

There are more and more burdens, and if we are going to rely on smaller businesses getting larger?realistically, they have to be the vehicle for employment growth?there needs to be a lighter touch. I have a great fear that the Government, in following what the hon. Member for South Derbyshire might describe as the European model, have succeeded at times only in placing more burdens on small businessmen.

There seems little doubt that we will see and hear a lot more about the notion of light-touch regulation, and I think all of us were in the Chamber only a week or so ago when the Penrose report was introduced by the Financial Secretary. At least, we had her spin on the conclusions of that report in relation to the near collapse of Equitable Life, which was that an over-light regulatory regime before 1999 was responsible for some of its travails.

I suspect that the story is much more complicated than the one which even I am presenting at this juncture, but we could learn some wrong lessons and I fear that, in the run-up to the next general election, we will hear much more from Conservative Members about too much red tape and too much regulation, while Lord Penrose’s report on Equitable Life will be cited in opposition to that notion. Indeed, we are perhaps already starting that debate.

It is fair to say that the Chancellor has been a significant political figure in view not only of his longevity, but of how he has managed the economy. Many Conservative Members had great fears immediately after the 1997 election that have not come to pass, but I fear for the economy in the medium term and there are problems that will probably be for us to fix when we are in government. Above all, there seems to be little sign of the end of the great borrowing. Today’s borrowing is, almost inevitably, tomorrow’s taxes. That augers ill for the future.
There has been a particular rise in personal borrowing, whether it is to do with housing equity release or credit cards, and even the Chancellor accepts in the Red Book that the savings ratio cannot be expected to rise over the next year or two, so one has to ask just how sustainable the borrowing is, especially if interest rates go up.

My great fear is for my younger constituents?people in their 20s or 30s?many of whom are relatively well paid. They perhaps work in financial services in the City of London, but very few see any value in investing for the future, at least in a pension. Many will perhaps invest in property, which might help only to ratchet up a property boom, especially in London and the south-east. There has to be a great fear that that will end in tears.

If consumer and Government-led consumption are the only means to continue the expansion of the economy, which seems to be suggested by many of the figures that we see, there is a real risk of overheating, not least, as has rightly been pointed out, because we have near full employment. There must therefore be worrying signs ahead, were there to be a reliance on raising interest rates rapidly to prevent that overheating.

I also have a concern, which a number of my hon. Friends have expressed and I guess will continue to express during our debates over the next few days, about the vast growth in public sector employment over the last two years. It is always rather invidious for those of us who have spent our working lives in the private sector suddenly to berate the public sector in such a way when we enter it. However, there are great concerns that much of the job growth of the last two years, even if not necessarily of the last six or seven, has been in the public rather than the private sector.

I also want to make a small but important point on the tax issue. Funnily enough, this is one of those opportune moments, as one of my constituents got in touch on the morning of the debate while I was sketching out a few notes. My constituent lives in Mayfair, which is not quite the untrammelled and affluent area that many might assume. It has a mix of accommodation. She complained that she finds herself in a higher tax band, although she works in the public sector. Of course, the number of people paying higher rate tax has increased massively over the last seven or eight years, especially here in London and the south-east, as tax bands have not risen in accordance with the relatively large increases in average pay.

That is a particular problem in London, although I accept that it is difficult to have entirely localised rules. The Chancellor, to this limited extent, should at least be congratulated in relation to the benefits system and on recognising the particular difficulties of the capital. As a result, there have been London-based allowances. In relation to much of public sector pay, I hope that there will be a more meaningful London weighting, which, I guess, will also have to apply to other hot spots in the south-east.

I want to make a couple of comments on the London issue as a whole. First and foremost, on the terrorist threat, all of us, particularly after the events exactly a week ago today in Madrid, have at the back of our minds a fear of a terrorist attack. It is important that life should go on, and as there are a number of other London Members present, we all know that we must try to instil a sense of confidence and optimism in our constituents about going about their everyday life. In many ways, failure to do so is almost allowing the terrorists to win their battle. But it is urgent that proper provision be made.

The Government have a clear understanding of the problem at stake, which has been at stake in London for the past two and a half years. Coupled with that is a clear understanding that more powers have been required. I, for one, have spoken up often in criticism of some of what appear to be the quite draconian powers introduced by the Home Office. None the less, it has recognised the threat?in my view, perhaps overstated it?and we have those powers on the statute book.

It seems to me that we need a proper civil contingency protection force in the capital city, and significantly more resource needs to be associated with that if we are to protect all our fellow citizens. For example, there are only 7,000 people in such a protection force in the UK as a whole, and London’s is woefully short of what is required and heavily reliant on Territorial Army reservists. As far as London is concerned, the great problem with the TA is that our main London regiment finds itself stationed in Iraq. Were there to be a major incident, perhaps of a far more violent nature even than that in Madrid last week, it is difficult to see how our civil contingency force would be able to cope with that.

I therefore welcome the notion from the Chancellor that he is putting more money into this area, and I hope that it will be directed urgently towards some of the key targets in the capital city. It is a depressing state of affairs when both the Mayor of London and the chief of police, Sir John Stevens, refer, as they did earlier this week, to the inevitability of a London attack. If it is so inevitable, we must act urgently.

On the issue of housing, which will be subject to much broader debate in the months ahead, Miss Barker’s watchwords seems to me to be "dictate and provide". If implemented, that has a worrying implication for much of this country. In London, however, the problem may be the converse, because the delivery of affordable housing targets in the Mayor’s recently published London plan depends on grant being made available under planning agreements by private developers under section 106. The current policy of the Housing Corporation, however, is that such section 106 agreements should be self-funding and the grants would be available only in exceptional circumstances. It seems to me that London, under this Government, has failed to meet its obligations on new homes since 1997. Certainly, the new build rate is considerably lower than it was during the first half of the 1990s. I hope that Miss Barker’s paper, although it offers little hope for London, will at least be the starting point of a debate on this important issue, which will obviously have an impact on the public finances.

The economy is likely to be in a relatively steady state this side of a general election. One of the difficulties about being in opposition is that often things need to go wrong for great advantages to flow towards one’s party for purely electoral purposes. Certainly, as I represent the Cities of London and Westminster, the last thing on earth I want to see is a sustained downturn, and in so far as there was a slowdown in the last two years there are distinct signs from the City of London that the corner has been turned. Some major mid-term problems are mounting for this Government. They will have to arrest large-scale borrowing, both public and private, and if steps are not taken to arrest that problem this side of a general election, there is potential for a much more precipitate increase in interest rates in the second half of 2005 and the risk of much higher taxes to be paid.
I look forward to hearing what the Paymaster General has to say when she winds up the debate later. No doubt we will continue to debate these issues?me with my London hat on, and more specifically, representing the City of London?in the months ahead.