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The Budget 2005

March 17, 2005

The Budget 2005

The spectre of an imminent general election ensures that this will not be a Budget for the economic purists?but which Budgets can be truly described as economic rather than simply political? To be honest, the combined economic horsepower of this place would perhaps be insufficient to warrant a one-day Budget debate at the best of times if that were the case. It is right, therefore, as my right hon. and hon. Friends have done, to focus on the politics of the Budget. To a large extent, it is a stand still Budget. It is a make way Budget before, presumably, a further Budget or financial statement after the general election, whatever the result of that contest.

Twelve months ago, when I last spoke in a Budget debate, I focused my comments on the emergence of China and India as economic superpowers of the future. Rather like my hon. Friend the Member for Sevenoaks (Mr. Fallon), I wonder whether we should not presume too much credit for the Chancellor’s new-found enthusiasm for taking on board a number of our own ideas. However, his enthusiasm is rather welcome. I slightly regret my party’s reluctance to embrace the much more important aspects of the global economy in considering economic and related matters over recent years.

It is right to look forward to Britain’s place in a fast-changing global economy in 20 or 30 years’ time. We should also examine the issue of relative competitiveness, where the Chancellor’s record has been considerably less positive. I would echo the comments of a number of my right hon. and hon. Friends, and particularly those of my right hon. Friends the Members for Horsham (Mr. Maude) and for Tonbridge and Malling (Sir John Stanley).

We must look back at some of the lessons that were learned in the economic management of the 1980s and the early 1990s. Regrettably, the Government and the Treasury have never fully acknowledged or recognised them.

I return to commenting on China and India. The Chancellor has only recently returned from a trip to China. It is almost impossible to go to that country now and fail to be inspired and excited by what is happening there. It is a country with 1.3 billion people. There are 23 cities that are larger by population than London. It takes up about 40 per cent. of the world’s cement and a third of the world’s steel. We have seen only this morning the profits, for the first time in almost a decade, of Corus. That is largely the result of an explosive expansion in demand for steel from China.

I was a member of a parliamentary delegation that visited China about six months ago. It was truly awesome to see in Beijing the power of the English language. I had envisaged that most of the shop signs would be in Cantonese or perhaps Mandarin. Nothing could have been further from the truth. More than two thirds of shops in Beijing had English signs all over them. All schoolchildren in those 23 cities that are larger than London learn the English language from the age of seven. We in this country have an enormous advantage, in that the native language here is the world language, and we must ensure that we maximise that advantage in relation to the growth of China in the next 20 or 30 years.

My hon. Friend the Member for Chichester (Mr. Tyrie), who is on the Front Bench today, went with me on a parliamentary delegation to India about 18 months ago. He is a great friend and fan of India from his student days, or so he told us on that visit. The sheer energy of the place is almost infectious. Our economy benefits from the institutions that were created there under British rule, including the passion for private property, the notion of the rule of law and the idea of the sanctity of contract. All those institutions, along with the power of the English language, give us an important competitive advantage over so many other countries in the G8. Above all, there is the capacity, the willingness and the ability of so many of India’s 1.1 billion people to work hard and make their way. Representing the City of London, I look with great pride on the trading links that have existed between us and China and India over recent centuries. Because of them, and because of the cultural and language links that I have described, we should be looking towards those countries as the future, and I respect the fact that the Chancellor also raises his sights in that direction.

Depressingly, we often regard the global economy as a threat, rather than focusing on the opportunities to which I have referred. I regard the emergence of China and India, and the continued dominance of the United States of America for the foreseeable future, as a great opportunity for this country, but we must also face some stark economic facts. As several of my hon. Friends have pointed out, one thing that was missing from the Budget statement was the facing of such realities. It was inevitably a stand still Budget, a vote now, pay later Budget, but it should also have been a Budget that had an eye towards the future. This country will succeed in a global economy only if we become increasingly competitive.

Our massively unfavourable cost base?compared with that of the developing world?means that manufacturing in this country will continue to decline, save only in those sectors with high value-added, highly skilled jobs. It is no use Labour Members moaning about the precipitate collapse of our manufacturing base while supporting the notion of a 35-hour week, an ever rising minimum wage, 12 months’ maternity leave and a vastly expanded public sector. They need to realise that these are different sides of the same coin.

We must assess what we need to do for the future. I appreciate that the Chancellor spoke in great detail about education yesterday, as did my hon. Friends the Members for Mid-Worcestershire (Mr. Luff) and for Sevenoaks earlier today. In looking at the whole issue of education, the focus seems to be on either school education, which is important, or higher education. There seems to be a debate about whether 35 or 50 per cent. of our late teenagers should go to university.

However, the real debate should be about further education and lifelong learning. The idea of a job for life has certainly gone for ever, but for that quartile of the population who will never go to university?and who will perhaps never aspire to do so?to be safe in some sort of employment for the rest of their lives and therefore have full economic opportunities, there must be significant investment in, and a realisation of the importance of, lifelong learning and further education. I predict that it will be the norm for people to have three, four or perhaps five careers during the course of their normal working life. That will also apply to university-educated folk.

As pensions have been mentioned, I emphasise that a normal working life is likely to extend well into people’s 60s and possibly beyond. Education does not end at 18 or 21. It may well be every bit as relevant to people in their 50s, and indeed their 60s, as they retrain for a new career because their most recent career has been outsourced to a developing country.I accept that my party is equally to blame for the lack of such debate, but it should be the education debate of the future.

The debate about university education is important, because without fully fledged independence for many of our universities, we run the risk of an increasing brain drain starting at 18. My most worrying conversation in 2004 was with the warden of Dulwich college after I had spoken briefly to that highly esteemed school’s political society. He said at that juncture that a small trickle of boys leaving school at 18 was going straight to American universities. He reckoned that the trickle would become a flood in the next few years. His great worry was that the competitive advantages of the great universities?Oxford, Cambridge, Imperial college and the London School of Economics?was diminishing compared with that of the United States of America.

We need to have an open and honest debate about education if we are not to experience great disadvantage. It would be a tragedy for some of the brightest and best to leave our shores, not?as perhaps happened in the past?in their 20s and 30s, to find fortune abroad, but, in our global economy, in their teens, never to return. I hope that we will have a much more open debate on such matters. I suspect that that will not happen in the next seven weeks in the run-up to a likely general election. Whatever happens in the election, those issues are crucial for us in the decades ahead.

The watchwords for our economy should be: flexibility, dynamism and global reach. I accept that the Chancellor, at least in his words, recognises their importance. However, I fear that the Government’s policies are set to impair private sector productivity and relative competitiveness, which are so important. The great boom in competitiveness in the United States contrasts sadly with events in this country in the past three or four years. Even the decline in the relative competitiveness of the lamentable French and German economies since 1997 happened at a lesser rate than ours. My hon. Friends bandied several figures about earlier. It was said that we had slumped from fourth to 11th in the international competitiveness league.

Mr. Fallon: They are facts.

Mr. Field: My hon. Friend rightly upbraids me?they are important facts. The public sector in this country is fast expanding?there have been some 583,000 new jobs in the past seven years, according to the Office for National Statistics. I confess that I do not believe everything that I hear from the Office for National Statistics?my local authority in Westminster has fought an ongoing battle, which it has almost won, about that body’s census figures?but there is little doubt that the large-scale explosion in public sector jobs has led to an increased tax take that cannot be the right way forward. That growth of the public sector appears incompatible with the goals that the Chancellor of the Exchequer set out.

In my capacity as shadow London spokesman, I want to refer to transport, which is one of the set subjects of today’s debate. Although I have always supported the notion of Crossrail through the capital, there remains no indication about the source of the funding for it. That is all the more depressing because Second Reading of the Crossrail Bill is likely to take place before an election is called. Although I have some concerns about aspects of the route that have a constituency relevance, I have supported the idea, and it is therefore depressing that, when London is the most important economic base in the country and a global capital of which we can rightly be proud, we are starved of important investment when we desperately need it.

I appreciate that we are running out of time and that the hon. Member for North Durham (Mr. Jones) wants to say a few words, but I want briefly to mention the African economy. I know that we will expand on the subject in the months and years ahead. The Chancellor seems partly to have taken over the international development portfolio on top of all his other responsibilities. As well as emphasising the importance of aid to Africa, we need to encourage trade. We need to persuade both the United States and our partners in the European Union of the key importance of opening up our agricultural markets, among others.

Debates here make this clear, but there is a growing public consciousness, which is almost at fever pitch, that our blithe failure to put action where our will is cannot be tolerated much longer. We talk about trying to help developing countries, and about debt cancellation and aid, but we really need to build up trading links. That will be an important part of the Treasury’s function in the years ahead.
I welcome some aspects of the Budget, but I agree that it is a stand still Budget. Debt has been mentioned by several of my hon. Friends, and I think there are worrying times ahead. Growth has been on target in recent years but revenues have not, which suggests that difficult decisions will have to be made immediately after the general election, whatever the result.

I approve of the positive and international outlook that was at the heart of some of what the Chancellor said, but we must set right the direction of our own economy if that is to be more than a mere aspiration. We must look beyond the shores of not just this country but the European Union. The European debate may or may not rage on the stump over the next seven weeks, but in my book the real worry is not that there are too many little Englanders in this country but that there may be too many little Europeaners. We live in a global world, in which we should be proud to play our part as a traditional trading nation.