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Howard: A Credit Card Budget from a Credit Card Chancellor

Speech responding to the Chancellor's Budget in the House of Commons

"May I congratulate the Chancellor on the delivery of his Budget.

He's chosen to deliver his Budget on St Patrick's Day. St Patrick famously described himself as `the most humble-minded man'.

That is not an accolade for which the Chancellor is a contender.

The Chancellor's Budget begged the central question which goes to the heart of his performance. If everything's going so well, why does he have to borrow so much?

The Chancellor made great play of the fact that the Budget controls the growth of spending and borrowing. But let's look at what he means by that.

Three years ago, in his 2001 Budget, the Chancellor forecast borrowing, over five years, at £30 billion

By 2002 just a year later that forecast had risen to £72 billion

Today he's predicting borrowing of over £140 billion.

He is on course to borrow this year alone four times as much as he forecast at the time of the last election.

And this is at a time when he claims the economy is doing well! How much would this Chancellor be borrowing if the economy went into a downturn?

The truth is that this is a credit card Budget from a credit card Chancellor. The borrow now, tax later Budget from the borrow now, tax later Chancellor. If he has his way the country will pay for it later in Labour's third term tax rises.

With this Chancellor we know the importance of looking at the small print.

Page 232 of the Red Book, just published, shows that the amount people save has fallen from 10 per cent of income in 1997 to just 5 per cent this year.

That from a Party which promised a 'savings culture'.

As a senior manager at one of Britain's biggest investment companies said only two weeks ago: 'The Government's policy on savings is a mess and it will take years to repair the damage'.

The Chancellor talked about enterprise, as he does every year.

But page 225 of the Red Book shows that business investment has fallen for two years in a row.

Page 237 of the Red Book shows the trade deficit is at the highest level since the seventeenth century.

And page 240 of the Red Book makes it clear that manufacturing output is lower than it was in 1997, in common with manufacturing investment - and the number of people employed in manufacturing is falling by 6,000 a month.

All this from a Chancellor who promised 'an industrial policy so that our manufacturing industries can grow again'.

There are of course some things in the Budget which we welcome.

We welcome, as I am sure the whole House does, the fact that the Chancellor is increasing the resources available to combat terrorism.

We also welcome the potential savings that could arise from merging the Inland Revenue with Customs and Excise. But can he guarantee that there will be no political interference in the enforcement of tax law? And after the debacle that followed the transfer of responsibility for tax credits to the Inland Revenue, can the Chancellor assure us that disruption on a similar scale is not likely to happen again?

The Chancellor has also published the Barker Report into housing supply. We will scrutinise with care the implications of proposals in this area. So far, all that the Government has achieved is to hold the record for the lowest numbers of new houses built in peacetime since 1924.

We welcome the announcement made of the increase for pensioners over 70. But they should be warned: what this Chancellor gives with one hand he takes away with the other.

We welcome the Chancellor's announcement that Britain won't be joining the euro - although, to save the blushes of his Rt Hon Friend, he didn't quite put it like that.

So much for his claim in June that '[since 1997] there has been significant progress in achieving cyclical convergence'.

Last year he promised: 'we are within the Maastricht criteria on deficits'. Now we know he failed to keep that promise. He wasn't within the criteria then - and he certainly isn't now.

He's broken the rules and he hasn't even joined the club.

It would be churlish not to congratulate the Chancellor for getting one growth forecast right.

But his growth is fuelled by a public sector boom, paid for by a public sector Chancellor.

And of course growth forecasts were not the only forecasts he made.

Compared with last year's Budget, his forecasts for revenue were wrong. His forecasts for the deficit were wrong. His forecasts for borrowing were wrong.

None of the Chancellor's bluster can disguise the fact that this is a Government which has increased taxes.

And increased borrowing.

And the borrowing he announced today is simply unsustainable.

This Budget has made it clear that if Labour get a third term, tax rises are inevitable

The Prime Minister said in opposition they had no plans to increase tax at all.

At the week-end, the former Paymaster General, the Hon Member for Coventry North West, told us why. They did discuss tax rises privately two years before the election. But, he said: 'It's very difficult to win an election if you go out saying look if you elect me I promise you I'm going to absolutely smash you with taxes you've never heard of.'

So they said they had no plans to increase tax at all. And ever since they have indeed been smashing people with taxes they'd never heard of. There have been 60 tax rises, and we're paying half as much tax again as we were in 1997.

Last year the real value of people's take home pay actually fell.

And after another inflation-busting rise in Council Tax, average bills have now risen by 70 per cent since 1997.

Business is paying more tax too. The Chancellor has burdened it with £15 billion a year in extra taxes and red tape.

As the Chief Executive of Tesco told the Chancellor: 'like a tide the level of taxes seem to be forever rising. The water is now above our waist'.

As David Frost, Director General of the British Chamber of Commerce says: 'British business cannot compete with a £30 billion millstone around its neck'.

Yet despite all these new taxes, the Chancellor still has to borrow more and more.

This is the Chancellor who said in 1996: `We will not build the new Jerusalem on a mountain of debt'. Today, a mountain of debt is exactly what he is creating.

That's why independent commentators say Third Term Tax Rises are inevitable under Labour.

The ITEM Club - who use the Treasury's own model - say 'the public finances continue to deteriorate alarmingly'.

The OECD warn of a possible 'sizeable structural deficit'.

The Financial Times says the Chancellor should be preparing options for a tax rise after the election.

And after today's Budget that black hole is still there.

That's what happens if you have a Borrow Now Tax Later Budget from a Borrow Now Tax Later Chancellor.

And it's not even as though the money that he's borrowed to spend has been spent wisely.

After all the years when the Government said it was spending the money really well, we now learn its own adviser has revealed £15 billion of waste.

This is the Chancellor who said: 'There will not be one penny more [spent on the Health Service] until we get [the] changes [that] let us make reforms and carry out the modernisation the Health Service needs'.

This is the Chancellor who said that the extra money he is spending on public services is dependent on efficiency savings being released. He said that in his 1998 spending review, his 2000 spending review and his 2002 spending review. And now he's saying it again today.

This is the Chancellor who said he was 'determined to get value for every penny we spend, to give [people] the public services [they] want'.

Every time he makes this promise. Every time he breaks this promise:

The annual cost of running central government is up by nearly £7 billion under his stewardship.

511 extra civil servants were hired every week last year.

And now we discover from the Gershon report they're secretly planning to hire over 300,000 extra public sector workers over the next three years.

And what has really been achieved? The number of children playing truant is up by 22 per cent. Waiting times are getting longer and violent crime is at its highest level ever.

A 37 per cent. rise in spending on the NHS led to a 5 per cent rise in the number of hospital treatments.

The OECD says: '...in the health sector there are few indicators showing unambiguous improvements in outcomes over and above trend improvements that were already apparent before the surge in spending...' and that in some areas 'such as numbers of patients treated and average waiting times, performance has actually deteriorated'.

And as the Minister for Energy told a conference in America - in a speech mysteriously missing from the Government website - 'Too often a lot of money has been spent but very little seems to have been achieved... In a year or so we're going to have an election in the UK, when people will say "we've paid a lot of taxes, but what has really been achieved with all that money?"'

He was telling the truth. His prospects of survival in this Government cannot be high.

A year before he became Chancellor, he said: 'I want our Labour Government to be remembered not as a big spender but as a wise spender'.

But it wasn't long before the tax and spending habit kicked in.

Very soon the nation will face a choice.

We on this side of the House want to give patients and parents and professionals more control. To bring in real reform. That is the way to end the cycle of tax and spend and fail.

But this Government will never deliver real reform of the public services.

All it offers is more of the same.

Higher spending.

Higher borrowing.

And ever higher taxes.

This Budget will go down in history as the borrow now, tax later Budget. This Chancellor will go down in history as the borrow now, tax later Chancellor. This Government will go into oblivion as the borrow now, tax later Government. And the sooner they go the better it will be for our country."

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