Mr. Nicholas Soames (Mid-Sussex) (Con): The hon. Member for Leicester, East (Keith Vaz) is a fluent and capable speaker, but the collective memory of the House knows that that there is something wrong with his memory. To describe the period that Nigel Lawson was Chancellor as being a background of solid crisis is to show that the hon. Gentleman wasted the first few years that he was a Member. I remember very well the time that he was talking about. Indeed, the time of the Lawson reforms was the beginning of the settling of the economy's strength, which has given the extraordinary inheritance that the Chancellor benefited from when the Labour Government came to power. I imagine that, otherwise, his constituents will be much gratified by his speech and look forward to him exerting his authority to bring the mini-Olympics to Leicester, in which we look forward to seeing him perform in white shorts.

Hearing the Secretary of State for Transport speak is, on many occasions, like a near-death experience, and today was no exception. Even by his undemanding standards, it was an absolute corker of a speech. Given the huge transport issues that effect this country-many hon. Members face serious infrastructure problems in our constituencies-it was a very mere and disappointing speech indeed.

I congratulate the Chancellor on his 10th Budget-a record achieved only by one other Chancellor, Sir Nicholas Vansittart. I do not know what the Chancellor

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has got to swank about-this is the 21st Budget that I have sat through in the House-but achieving his 10th Budget is a notable milestone. I am prepared to congratulate him, as long as he is prepared to remember that in his time-it has not been a wholly unsuccessful time-he has been able to build on the golden inheritance that he inherited from my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke).

I congratulate the Chancellor, as I have done every year since he has been Chancellor, on his decision to grant independence to the Bank of England. This time, I applaud very much the steps that the Government have taken, although belatedly, to assign more independence to the Office for National Statistics. I hope that that will enable us to bring greater integrity and accuracy to our statistics, which are so important for the assessment and forming of Government policy.

The Budget settles for the record the fact that the Chancellor is indeed a leading exponent of the old-fashioned tax-and-spend school. My right hon. Friend the Leader of the Opposition, in his admirable and energetic response yesterday, was certainly right: the Chancellor has indeed raised billions, he has spent billions and he has very little idea of where the money has gone or how effectively hard-working people's tax funds have been spent and to what ends.

Listening to the Chancellor, he rather reminded me of Christopher Columbus in that when he set off he did not know where he was going, when he got there he did not know where he was, when he came back he did not know where he had been, and he did it all on borrowed money. Listening to his rather manic presentation, one was very conscious of the fact that, as my right hon. Friend the Member for West Dorset (Mr. Letwin) pointed out, it is not necessarily how much money is spent, but the way in which it is spent that counts. Any number of taskforces and goodness knows what else will not be able to close that gap.

Whether it can be considered a triumph to achieve what the Chancellor calls sound public finances when taxation is nearing 39 per cent. of gross domestic product is in itself a question. What we do know is that his key policy mistake has been a massive transfer of resources into a largely unreformed public sector. His announcement of even larger spending increases on education and child care will, in my view, only make the situation worse. The long-term effect of the Budget will be a significantly higher tax burden, lower productivity and thus depressed growth, living standards and competitiveness, to our domestic and our international disadvantage. It is a huge disappointment that the Chancellor simply does not understand that while, of course, increased resources matter, so does a disciplined programme of expenditure matched with real reform and thus with better results. All the lessons of the past show that to be the case.

Let us take education. The decision to increase spending by £19 billion a year in real terms from taxpayer funds is extraordinary, given the record of recent years. The Government have already increased schools spending by 66 per cent. in real terms since 1999 with no discernable change whatever in the trend in examination results and the quality of the finished article leaving schools. Extra spending might be justifiable if it were preceded by a major programme of reform, but reform-that is to say, management

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autonomy and parental choice-has proceeded most slowly in education out of all the public services. The truth is that the source of the problem is the failure to deliver, even now, with all this money, a good education. That is what parents want to see and it is what the country wants to see. That needs to be tackled with real and energetic reform and not just large amounts of low-flying cash.

I was truly shocked that, as my hon. Friend the Member for West Chelmsford (Mr. Burns) pointed out, in the whole of the Chancellor's one hour and one minute speech, conducted at a decent gallop, he never even mentioned the national health service-almost the most important of all the Government programmes in terms of expenditure. I suppose that that is not really surprising given that he knows what he spends, but because the Government have totally failed to grip reform in the national health service, they have no idea what it really costs. The health service in my constituency and all over Sussex and elsewhere is struggling to cope with unfunded cost pressures, inherited debts and not enough time or support to help it through. With the greatest anxiety, I await the inevitable outcome of the cuts in services that must follow on from the situation of those health authorities. The excellent think-tank Reform estimates that, at the present rate of growth in the NHS, there will be a resource gap of £7 billion in 2010. That is an enormous sum of money and I would be grateful if the Paymaster General would tell me how she thinks that the Government intend to deal with that.

After the expenditure of all this money, hard-pressed taxpayers are entitled to ask, "Where are these world-beating public services?" The Chancellor has indeed taxed too much and borrowed too much. Old Labour has got its way under this Chancellor, which is, of course, why the Labour party cannot wait, by and large, to get rid of the Prime Minister and to put in his place a more user-friendly animal. Let us face it: under the Chancellor, the pips really are squeaking. He has saddled the taxpayer with the highest tax burden in history. Families are literally groaning under the impact of the amount of money that the state takes from them.

The Chancellor has imposed on commerce records levels of bureaucracy and red tape and he has blocked vital reforms in the public service. Even with some of the reforms that he has brought in, the valuable concept of a low-regulation, low-tax and competitive economy, which came to fruition in the later years of Baroness Thatcher and under John Major, is being rapidly eroded as business men and women sink every day into a bog of regulation and higher taxes. Had the Chancellor himself had the guts, will and determination truly to set about reforming the public sector by dealing with the vast array of old Spanish practices and the like that still remain, by increasing investment and by substantially extending choice in real terms, high-quality public services would today be available to everyone.

Where exactly is this modern and efficient transport system or even its beginnings? Where is the infrastructure expenditure that is glibly promised every year? I urge the Chancellor to consider carefully a message that came from a seminar that I held in my constituency last weekend ahead of the wholly unsustainable programme of house building that is wished on Mid-Sussex and the surrounding area by the

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Deputy Prime Minister: there should be a far more even distribution of infrastructure expenditure across the growth areas. Let me give the Paymaster General an example. The Government are spending enormous sums of infrastructure money around Ashford and in Milton Keynes. Mid-Sussex, and north-west Sussex generally, are going to have willed on them by the Deputy Prime Minister an enormous number of houses-not significantly fewer than Ashford-yet there is no commensurate Government spending on public infrastructure. The Government need to acknowledge the firm feeling that they should honour their obligations for infrastructure expenditure, rather than simply passing them incontinently across to the developers who rightly already make a major contribution.

I want to consider three areas on which the Chancellor and his people have done badly. I preface that by saying that I do not pretend that everything is bad. Many of the things that have been done are good. There are bits of our economy that are doing well, although, as I said, they should be doing well because of the Chancellor's remarkable inheritance.

I will quote from a speech made in the House by the Chancellor in 1989, when he was shadow Trade and Industry Secretary, on a pensions scandal when, again, the ombudsman blamed the Government of the day for bust pension schemes. The then shadow Trade and Industry Secretary railed against the

"fecklessness, gullibility and incompetence of the Government who, for months and years, ignored all the warnings"-[Official Report, 19 December 1989; Vol. 164, c. 204–05.]

Today, the Chancellor who said that presents himself as the future leader of our country, but, frankly, he and the then Work and Pensions Secretary, who is now the Transport Secretary-I am sorry that he is not in the Chamber-debauched the public pensions system in this country.

Keith Vaz: It is disgraceful to say that.

Mr. Soames: It is not disgraceful at all.

The right hon. Member for Birkenhead (Mr. Field), the only welfare reform Minister whom the Government have had who was worth his stuff, said:

"when Labour came to office we had one of the strongest pension provisions in Europe and now probably we have . . . the weakest".

I say again that the Chancellor of the Exchequer is responsible for debauching the public pensions of this country. My hon. Friends will agree with every word of a passage from an article on pensions in The Times by Lord Rees-Mogg, who said that the Chancellor

"took all the big decisions on pensions. He has wrecked the system of private pensions. He has wrecked the system of public pensions. He has destroyed the system of savings. He has tapped pensions by deliberate stealth.

He has impoverished generations of old people, past, present and to come. The Chancellor's pension policy has been one of the great scandals of British financial history. He should be ever held responsible."

Many Conservative Members will agree entirely.

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There was a great failing, too, by the Paymaster General. I am sorry to disoblige her, but the shambles of the tax credit system for which she is responsible is one of the most disgraceful episodes in the Government's history. Many people in my constituency and, indeed, throughout the country, are still paying the cost of that grotesque incompetence. The Chancellor has utterly failed to get a grip on the unfunded costs of public sector pensions and has made a unique contribution to off-balance-sheet accounting of well over £800 billion.

Before I conclude, I applaud the Chancellor's determination to try to do more to prepare Britain to compete in the great global economy. Because of the war in Iraq, which I supported at the time, and which I still support, although I deeply resent the way in which the Americans handled the post-conflict arrangements and the trouble that flowed from that, the exercise of soft power has become even more important. America's soft power has diminished like the winter snows, and the country has lost almost all credibility abroad. America has 13 carrier groups that it can deploy throughout the world, but to bomb the living daylights out of 30 people is not the most sensible way of using military power. Soft power matters. Our country has a wonderful tradition of the use of soft power, and our assets include the BBC World Service, the British Council, British art and culture, the great traditions of democracy at Westminster, the monarchy and the law. All those things command great influence overseas, so they are vital assets.

I am glad that the chapter entitled "Meeting the productivity challenge" in the Budget report includes a well-written passage about the United Kingdom as a competitive centre for global investment. However, when she deliberates on public spending I urge the Paymaster General to consider the need to deploy our soft power on an even greater scale. If we are to maximise the great opportunities afforded by the global economy, we must put more money into the great services provided by the British Council, the World Service and the Foreign Office. It is tremendously short-sighted to diminish the unbelievable expertise of the Foreign Office. Across the world, our remarkable diplomats do a wonderful job, so hacking away at the Foreign Office's overall budget is extremely short-term, bad politics and not in our national interest. It is in our national interest to make sure that those great assets are properly funded so that services do not struggle on a shoestring. A grotesque amount of money is spent ineffectively and inefficiently, and it would be spent much more efficiently and effectively by organisations such as the Foreign Office.

When travelling abroad, Ministers are always begged to provide more training places at our military establishments, not just at the Royal Military Academy Sandhurst, Cranwell or Dartmouth, but at some of the engineering and signals establishments-wonderful sources of brilliant expertise and knowledge that are acknowledged all over the world as leaders in their field. We are wonderfully good at defence diplomacy. Lord Robertson, when he was Secretary of State for Defence-and a very good one, in my view-made much of that in his White Paper. With the cuts and the huge pressure on the Ministry of Defence and on manpower, it is important to remember that defence diplomacy is a huge plus for this country. It may not be

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a great big item in the context of the health service and the education service, but it is vital to our national interest.

I had hoped that the Chancellor would announce yesterday a set of reforms to the planning system and the overweening bureaucracy and regulation that would release the energy of our economy. I am deeply depressed by what I heard from my hon. Friend the Member for Tunbridge Wells (Greg Clark) yesterday about the lack of integrity in the presentation of the Gershon figures. I hope that the Paymaster General will this evening give a truthful and accurate exposition of the Gershon figures. She may not have heard my hon. Friend say that the National Audit Office has not thought fit to sign off the Government's figures because it does not regard them as accurate.

I hope the right hon. Lady understands that the overwhelming bureaucracy and red tape are the reason that companies such as Google, Oracle and Amazon locate in Dublin, rather than London. That is very bad news for us. Those are the very companies that we want to attract and which we used to attract. We face losing not just low-skill, low-paid jobs to big emerging economies, but much more seriously, high-skill, high-paid jobs. China and India are producing 4 million university graduates a year.

The Chancellor's response to the global challenges facing Britain is to saddle this country with the highest tax burden in our history and record levels of red tape. I am glad to hear on all sides that the Chancellor has woken up to the international and domestic triumph that is the City of London. I declare my interest, which is registered in the Register of Members' Interests.

The booklet entitled, "Financial services in London: Global opportunities and challenges" is a very good document that has been warmly received in the City. Having kept the City at a distance and not having helped it at all for years, finally the Chancellor embraces it as he knows he is about to become Prime Minister. That is a good thing, because the City of London has done more for the country than anyone could possibly imagine through its expertise and its overseas earnings.

There remains tremendously important work to be done to fix a crisis in competitiveness, productivity, training and education to prepare our economy and our people of all ages for the global challenges that we face. This was not a Budget that prepares Britain for a new global economy.

Hansard vol 444

Col 466

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