« John Redwood on the "Damian McBride memorial Budget" | Main | The Government has failed on fuel poverty »

George Osborne's response to the Budget

Republished in full below, as prepared.

"Mr Deputy Speaker,

It is a great pleasure to open the second day of this debate as it gives us an opportunity to look at the detail of the Budget and then to highlight the things the Chancellor chose to omit from his speech yesterday.

And it is a pleasure to do so opposite the Energy Secretary. The Chancellor has indicted to me that he is on his way to an important meeting in Washington and I of course entirely accept that. My RHF may want to put in an important call to the IMF for any number of reasons.

But it is a pleasure to be opposite the Energy Secretary today. He is always an engaging fellow.  And he of course was one of the key economic advisers of the last ten years. One of the Members of the then Chancellor’s Council of Economic Advisers – one of the adjutants in that famous treasury bunker.

To be fair he’s always said he stuck to giving the economic advice rather than trying to run the political operation, but given what has happened to the British economy maybe in the interests of his long term ambitions he should take credit for the political operations and leave Mr McBride to give the economic advice.

This is a special debate. Normally the Government’s Budgets take a few days to unravel.

This one set a new record.  It unravelled half an hour after the Chancellor down.

At 2pm the IMF produced its growth forecasts for the world and British economy that completely contradicted the growth forecasts this House had just been given.

Instead of the economy going from a staggering 3.5% contraction to a fantastically optimistic 3.5% growth just two years later, the IMF said the recovery would be much slower – indeed Britain would still be contracting next year.

This, of course, is the same IMF that the Prime Minister wants as his new early warning system.

In a stroke they destroyed the credibility of the whole credibility upon which the whole of the Budget and its borrowing figures were built - that within the space of just two years the British economy will bounce from the deepest recession it has known since the War to the levels of economic growth and household consumption seen at the height of the boom is a complete fantasy.

No wonder one paper this morning described the whole thing as Alistair in Wonderland.

Judging by the look on his face, I guess that means the Energy Secretary is the White Rabbit and our beloved Prime Minister is the Mad Hatter on this work of fiction.

Of course, the IMF were not the only ones to question the central Budget assumption.

Almost every single business organisation and independent forecaster followed suit.

The Institute of Directors, the Engineering Employers Federation and a host of others.

This is what the chief economist at Standard Chartered said yesterday – that’s one of the few banks that hasn’t gone bust under this government.

“The Chancellor believes … recovery will be rapid, we will see growth of 1.25% in 2010 and 3.5% in 2011.  That is fantasy, as this rebound is to occur while the legacy of the borrowing binge lingers on”

And so therefore we have the extraordinary situation where the Chancellor of the Exchequer stood there yesterday and

-     announced the worst public finances ever heard in the House of Commons

-     told us he would be borrowing more in the next two years than all previous governments in British history combined

-     said he would double the national debt

and yet he was guilty of being ‘too optimistic’.

That is the scale of the mess this government has created.

And the tragedy of yesterday was that instead of being honest about that mess – taking responsibility for the mistakes made and giving us a credible plan to pull Britain through, we got that complete fantasy.

This is what the Director General of the CBI said after yesterday’s Budget.

"The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI's preliminary judgement is that it does not."

That sums up the scale of the failure yesterday.

The central task of a Budget in a recession like this is to inspire confidence in the future.

Confidence that the Government is realistic about the problems the country faces.

Confidence that it has that credible and rigorous plan to deal with those problems.

Confidence that it has the leadership and the vision to take this country forward.

Who would say in Britain today that people land families are feeling more confident about this country’s future as a result of that Budget?

Almost no one.

And that is why yesterday was not a routemap to recovery but the death rattle of a tired and discredited government that is limping on until the law of the land actually forces them to hold a general election.

Let us look at the components of what a credible and rigorous path for restoring the public finances might look like – and then we can see why the Budget failed.

First, it would involve understanding why the public finances are in such a disastrous state.

The Prime Minister is still stuck in the rut of claiming that this is the recession that came from America and hit an otherwise sound British economy. I see an Honour able member nodding his head. He must be about the only person in the world who still believes this.

From Lord Turner to the Treasury Secretary of the United States, there is a consensus that the British economy – like the American economy – went through a credit boom that fuelled an unsustainable rise in house prices, household borrowing and bank leverage.

Indeed, it was greater in the UK even than the US.

It was an illusion of economic stability built on a mountain of debt.

Given that, not only was the claim to have abolished ‘boom and bust’ surely one of the greatest political deceits ever told the British people – but the decision to borrow during this boom at unsustainable levels, instead of fixing the roof when the sun was shining, left Britain was totally unprepared for the economic slowdown.

This is why Britain now has the worst public finances of any major economy in the developed world.

Even in the last twenty four hours, after the government forecast a budget deficit of over 12% of national income, Ministers still won’t admit it.

I welcome the Chief Secretary to the Treasury to her place. Yesterday I watched her going around on the media saying the US deficit was going to be higher.

I don’t know if she read the IMF report. It says here that with the exception of Ireland the UK has the highest budget deficit of any other countries looked at, higher even than Iceland, let alone the United States. That is the highest deficit in our peacetime history.

And let’s remember what the Prime Minister said just last year – these words were perhaps crafted by the Rt Hon Member for Doncaster.

“Look in the early 1990s, let’s look at how economies go wrong, in the early 1990s Government borrowing went up to eight per cent of GDP, that’s what happened under the Conservatives.  It went completely out of control.”

Well if he describes 8 per cent as “completely out of control” then what does he call 12 per cent of budget deficit?

What we do have in the Red Book is an admission, that we might well put on a poster in the General Election, that the current downturn is “forecast to be much deeper than that of the early 1990s” (page 200).

From the lips of Labour themselves, after all those years of lectures about the 1990s and Black Wednesday, we have that admission – and we will treasure it.

Of course, when their defence on the deficit is looking a little threadbare, the government turns to the argument about the stock of debt.

But that argument is now falling apart too – because, of course, the stock of debt is soaring too.

According to the OECD, Britain will have higher debt than 20 other developed nations. Higher than France. Higher than Germany.

The Prime Minister told us a few months ago: “The national debt, even after the difficulties that we go through, will be lower as a percentage of national income than in France, Germany”.

We will see if the Rt Hon gentleman will repeat it today.

How on earth can the Prime Minister being trusted to get the future right when he doesn’t understand the mistakes of the past or the problems of the present?

The second component of a credible and rigorous path to restoring some sanity to the public finances is a clear statement that the principal weapon in dealing with Britain’s overspending is spending restraint.

Now, let me be fair.  Labour has come off its spending plans.


At last.

We’ve been telling them to do that for months.

What we’d like to hear is an apology from every single Labour Minister who stood at that Despatch Box month after month and said that those who wanted to come off their spending plans were engaged in savage cuts.

Only a few months ago the Prime Minister was telling my Rt Hon Friend, the member for Whitney that: ‘He wants to cut public spending. He is totally on the wrong side of the argument.’

But just listen to what the Chancellor said this morning on the radio this morning:

"I have cut overall public spending in my Budget".

In fact if the Budget Red Book shows that Labour have cut their departmental current spending plans by £9 billion and their capital spending plans by £11 billion over next four years.

That is what the Labour MPs were cheering at the end of the Budget statement, not that they were cheering for long.
And that is the political tragedy of the Budget.

We have moved from the age of prosperity to an age of austerity.

But the current leadership of the Labour Party have been left behind.

There should be a sensible debate now about how this Parliament can deliver decent public services in a period of tight spending control.

We should be discussing how we get better value for money now the cupboard is bare.

We should be deciding what is the best way, and perhaps have a debate between the parties about it, about how to tackle the long term drivers of state spending growth like unproductive services, welfare dependency and family breakdown.

We should be working out what replaces the completely defunct fiscal rules and two year spending reviews that used to provide at the least appearance of some fiscal framework.

What have got from the Labour Party? A Temporary Operating Rule that turns out to be more permanent than the temporary fiscal rules.

And to be fair, there are some people in the Labour Party who want to have this debate about the politics of austerity and how deliver government to people in a time of constraint.

The RHM for Birkenhead.  The RHM for Norwich South. Even the Member for Dagenham have all called for this debate.

But their problem is that they are led by someone who still wants to reduce everything to a pathetic dividing line of ‘Labour investment versus Tory cuts’.

How on earth does he expect to achieve that when on the basis upon which they fought the last election, we have just seen 84 billions of pounds of Labour cuts.

Does he really think people won’t notice that far from seeing so called Labour investment, we’ve just seen the investment in the health service next year cut by £2.3 billion and investment in schools and universities cut by £900 million?

And the Government have got another problem.

For while this Budget accepts the principle that their spending plans are unaffordable, and while they’ve told us that billions of pounds are being wasted in Whitehall, they can’t explain why they are still planning to increase spending in 2010 by 2.9%.

Indeed, yesterday the government actually increased its spending plans for 2010 by £20 billion while at the same time forecasting a reasonable recovery.

When will they admit in their arguments, what the figures of their own Budgets tell them: their spending plans are unaffordable?

The Chancellor has admitted that there is scope for efficiency savings. He said this morning that:

"Any organisation can always have been more efficient"

"We in Government need to be more efficient"

Anyone listening to that may have been under the impression that the Government was making tough decisions.

But the Chancellor is only starting to reign in public spending in 2011. I wonder why he picked that date.

We are proposing £5 billion of spending restraint and spending that money this year on pensioners and savers and providing extra support for those leaving universities. Even with his economic understanding he must understand that isn’t fiscal tightening or fiscal loosening but fiscally neutral and is the right way to spend money.

Isn’t the most cynical trick of all Mr Deputy Speaker to pretend that you are only hitting the rich by raising their taxes before the election.

But to delay the real tax rises, and tough spending decisions, until after the election.

How courageous.

What leadership.

A move worthy of a Prime Minister who has never had the courage to submit himself to the democratic vote.

Thankfully, the public have seen straight through it.

And what we see instead is the Labour Party lurching left – off the centre ground that Tony Blair put them on all those years ago.

Gone is the language of aspiration and opportunity.  In comes the talk of ‘soak the rich’ and ‘make the pips squeak’.

Never mind that a 50% tax rate before the election clearly breaks one of their central promises from their election manifesto: “We will not raise the basic or top rates of income tax in the next Parliament”.

This is from the Prime Minister who came into office unbelievably pledging to restore trust in politics.

But it is not the rich that will bear the burden of this Labour government’s historic incompetence.

If you look closely at the Red Book, it is clear that the headline grabbing measures announced by the Chancellor will actually raise less money than the National Insurance rise on jobs and on people earning over £20,000 a year.

And so while we don’t think that higher marginal tax rates are a good idea, while we agree with all the arguments that have been advanced from that despatch box there by the Member for Kirkcaldy and the Former Member for Sedgefield that higher top rates of tax damage enterprise, our priority will be to reverse the  tax rises on the many not the few.

That national insurance tax is about the only policy they’ve got for the recovery.

Just look.

There was almost nothing in the Budget to help move Britain from an economy of borrow and spend to one where we save and invest.

The measures on unemployment were another cruel mirage on a day when we saw a record rise in unemployment.

The Chancellor made great play yesterday of his guarantee to everyone aged 18-24 who claims Job Seekers allowance for more than a year that they will be given a work placement or work-related training. That was the big promise on unemployment.

What he didn’t say was that as of today only 5,755 people are covered by that guarantee. I hope it is good help to them. But there are 1.2 million young people aged 18-24 who do not qualify and languish not in school, not in a job and not in training.

We heard much of the green recovery that would be unleashed in the Budget.

No doubt the RHG thought about it in advance and did the spinning.

What happened to it?

What about the electric car announcement?  It ran out of battery before it even made it into the Budget speech.

This is what the Friend of the Earth said about yesterday: “the government has squandered a historic opportunity to kick start a green-industrial revolution”.

The World Wildlife Fund said “what was announced is not the bold leadership we desperately need to secure a truly low-carbon future’.

And so the leadership on that future, like the leadership on so many of the other of the big challenge facing Britain today has to wait until for a new Conservative government.

That lack of leadership is the legacy of a Prime Minister who has always been more interested in the short term political dividing lines instead of long term vision for the country.

For years he said the choice was between Labour investment and Tory cuts.

Now he has cut investment in schools and hospitals, and given us the £84 billion of Labour cuts, but still lacks the courage to admit it or have a debate about it.

For years he said the choice was between the many versus the few.

Now he is raising taxes on the many AND the few – including a tax on jobs in a recovery.

For years he said the choice was between Tory ‘boom and bust’ and Labour prudence and stability.

And he has now given us the ‘prudence’ of the worst budget deficit in our history, the ‘stability’ of the deepest recession since the 2nd world war and the tragedy of the greatest boom that has turned to the biggest bust.

Mr Deputy Speaker, eighteen months ago the Prime Minister cancelled the general election, no doubt on the advice of the RHG opposite, saying he wanted more time to set out his vision.

Well, now we know, after that Budget yesterday that there is no vision to set out – and the sooner we change our government the sooner we will get the change the country so desperately needs."


You must be logged in using Intense Debate, Wordpress, Twitter or Facebook to comment.