John Redwood

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Budget Speech

Mr. John Redwood (Wokingham) (Con): I have said in the Register of Members’ Interests that I hold non-executive directorships, and I draw that to the attention of the House, but of course I am not speaking on behalf of those companies today. It is with pleasure that I welcome a measure that the Chancellor is taking: it is excellent that he is to increase asset sales and privatisations in forthcoming years. When I was able to persuade a previous Conservative Government that that was what we needed to do, it never occurred to me that, some years later, I would stand up in the House to welcome a Labour Chancellor’s acceptance of the wisdom of privatisation. It is often better to return assets, sometimes to the families from whom they originally came, because those families can look after them and the state can have the proceeds, which relieves some of the burden on the taxpayer. I give one cheer for that part of the Budget.

I had hoped, when I listened to the bravura performance at the end of the Chancellor’s Budget, that I could also welcome him to the ranks of the tax-cutters. As many hon. Members will know, I have often had a sneaking inkling that tax-cutting is a good idea, and have had a certain preference for it. However, it is not a cut in income tax that the Chancellor is offering today, but a con. It is a small tax rise on income. If Members look at page 208 of the Red Book, they will see that what the Chancellor gives by cutting the standard rate from 22p to 20p—naturally, I welcome that—he more than takes back by seizing the 10p band and removing it, and by raising the thresholds for national insurance. Commentators outside the House who are studying the detail will have to say that most people will be worse off, once they combine the changes to income tax and national insurance.

Obviously, there will be some complicated calculations, because the Chancellor is trying to prevent some of the poorest people from being worse off by tipping some money back in through the tax credit system. However, that will mean that every family will have to spend a lot of time poring over the figures—those who are rich enough will do so with their financial advisers—to see how great a reduction in available income they will have to absorb, and to find out whether there are offsets that might make them slightly better off.

Mr. Mark Field: My right hon. Friend is a good-natured man, as we well know. I entirely agree that many of the changes are regressive, notwithstanding the tax credit situation, but will he at least give some, if only very little, credit to the Chancellor for simplifying the tax system in a small way, after 10 years of ever more complication?

Mr. Redwood: I am all heart, but I am not sure that I can go quite that far on this occasion, because although there may be simplification as a result of removing the 10p band, there is probably additional complication in the way in which the benefit system is trying partially to compensate those on lower incomes. What worries me most of all is the situation of those people who are doing well and are making a big contribution, such as senior teachers or junior head teachers, who are near or about to go above the threshold for 40 per cent. tax. Looking at the figures, I suspect that they could be particularly badly off. I think that it could be another Budget that taxes those who work hard and do not make claims on benefits, and those whose income is a bit above the level at which they get reasonable support from the complicated tax credit system.

Rob Marris: The right hon. Gentleman kindly referred the House to table A1 on page 208 of the Red Book. My reading of those figures is that the Government give up slightly more revenue by moving from 22p to 20p than they gain by abolishing the 10 per cent. starting rate, and that is contrary to what I understood the right hon. Gentleman to say. Secondly, he has not referred to the gains, set out on page 208, for those at the lower end of the scale. For example, there are increases in age allowances and child tax credit, and the threshold of the working tax credit is to be raised. [Interruption.] No, he had not referred to those gains in terms of the overall gain at the end of the scale.

Mr. Redwood: I mentioned all three things, because I am being scrupulously fair in representing what the Chancellor has put before the House in written form; he failed to present any of that in oral form, when the cameras were here and the spotlight was on. It is a disgrace that the Chancellor announces an income tax cut when it is a con trick, and when most people will be worse off in terms of income. I said that people on lower incomes would get some benefit from the changes in the benefit system. We cannot be sure from the general figures in the Red Book who will win and who will lose, but clearly some people will lose. The hon. Member for Wolverhampton, South-West (Rob Marris) is mischievous, because he has left out the very big increase in tax that will result from raising the threshold on national insurance. If he adds the increase in the threshold to the loss of the 10p band, he will see that that raises an extra £8.4 billion, but only £8 billion of that is given back by cutting the rate from 22p to 20p.

Ms Sally Keeble (Northampton, North) (Lab): Will the right hon. Gentleman give way?

Mr. Redwood: I will deal with the previous point first, and then I will be happy to hear the hon. Lady’s point.

On tax, if we consider the combination of national insurance and income tax, on average people will clearly be worse off.
Ms Keeble: Does the right hon. Gentleman accept that because of the big increase in pensioners’ personal tax allowances, pensioners, particularly those who pay tax, will be better off, and will be taken out of tax altogether? Forget about the 10p rate—they will not pay any tax at all.

Mr. Redwood: It is quite possible that some pensioners will be better off, but as the hon. Lady indicates, they will not all be better off. It is a complicated Budget. The Chancellor would clearly love to give some money back, because he knows that he is rightly being criticised for over-taxing everybody, but he does not have any money to give back, as he is spending so much in his other public budgets, and he is reluctant to bring those budgets under proper control.

I would like to put this Budget in the context of the past 10 years, because there is a “farewell” feeling to the Chancellor’s performance today; at least, it is farewell to one job. We were reassured to learn from him that he is not planning to combine being Prime Minister and Chancellor of the Exchequer—in name, at least. We will wait and see how it works out in practice. Pity the poor right hon. Lady or Gentleman who is Chancellor when he is Prime Minister. However, that is a story for another day.

If we look at the 10 years during which he has been Chancellor, we can see that he, like Gaul, has been divided into three parts. In the first part, from 1997 to about 2000, he was happily married to Prudence. I was upset to see him make such a big increase in tax on pension funds in that period; he began the damage that has characterised his 10 years. We now have much more enfeebled final salary pension schemes, and many people no longer have access to them. However, in fairness I confess that the rest of the Chancellor’s work from 1997 to 2000, while he was married to Prudence, was not too bad. He started to bring down deficits and he kept public expenditure under reasonable control. He did not increase the relatively attractive tax rates that he inherited from the outgoing Conservative Government, and the economy performed reasonably well during that period.

In the Chancellor’s second phase from 2000 to about the middle of 2006, we saw the tax-and-waste Chancellor, who tried to reassure all his Labour colleagues that he believed in tax and spend. He took a phenomenal personal interest in all the details of public spending in many of his colleagues’ Departments, which they did not always welcome, because he wished to associate himself with the Treasury’s largesse to different departmental budgets. So big was the tax and waste under the Chancellor that he did quite a lot of damage to what had been a fundamentally strong economic position. In those six years, Britain started to fall further and further behind our international competitors, whom we outshone in the last decade of the previous century. He introduced a large number of stealth taxes—those are the 99 tax increases to which my right hon. Friend the Leader of the Opposition sensibly referred. Britain fell down the competitiveness league tables, losing about 11 places. In particular, we fell down the tax competitiveness league table, because the Chancellor needed to keep tax rates up and find back-door ways of increasing the tax take from companies and individuals as he went about his task of tax and spend.

Sir Nicholas Winterton (Macclesfield) (Con): I am deeply concerned about fiscal drag and the indexation of tax allowances. Will my right hon. Friend indicate in his splendid speech just how much additional taxation the Chancellor has raised by failing to increase tax allowances in line with inflation, and tell us what the Chancellor has done this year, as it appears to be nothing?

Mr. Redwood: My hon. Friend makes an extremely good point, which I endorse. Off the top of my head, I do not have the numbers about how much fiscal drag amounted to, but the overall totals were colossal, and we know that the average family pays £1,300 a year more in tax than they did when the process began. Quite a bit of that is the result of fiscal drag, but some is the result of policy decisions made by the Chancellor.

That period also illustrate that all clouds can have silver linings, because over the Conservative years, we had been driven deaf by Labour spokesmen and Labour Back Benchers telling us that there was very little wrong with Britain that a big increase in public spending would not put right. We also were led to believe that there was somehow something in us that made it impossible for us to shower enough money on public services, and if only Labour could take over from us, it would shower enough money on public services and all our problems would miraculously vanish.

The Chancellor has conducted a bold and historic experiment—unfortunately, at the British taxpayer’s expense—but over the six years, he has proved conclusively that it was not Conservative parsimony that got in the way of really good public services. No one can now deny that huge sums of money have been tipped into health and education, and several other services, but nor can any fair-minded person deny that there are still real problems with those services, many of them reminiscent of the problems for which Labour used to criticise the outgoing Conservative Government in the 1990s. I hope that it is common ground across the House, at least between the Front-Bench teams, that tipping lots of extra money into those services without reform or change, and without asking for something for that money, is not the right way forward. We need to find preferably a consensus way of improving public services that absorbs less cash and delivers more for the money.

We now come to the third and probably final phase of his Chancellor’s tenure. There again he is trying to prove an extremely important Conservative adage for us, and I admire him for doing so. He now is trying to prove that there is indeed waste in the public accounts, and that is possible for a Government to tease out that waste and redeploy the money more sensibly and profitably in the public services. He has not quite got to the point yet where he would like to share that with the taxpayer, but he has certainly got to the point where he would like to give the taxpayer better value for money. The Budget is built on the proposition that £26 billion a year by 2010—that money is currently spent wastefully and unnecessarily—can be spent more productively and sensibly by strengthening front-line services, primarily in health and education. I should be delighted if the Chancellor succeeded in doing that. I think that it is quite a modest ambition, given the scale of waste in the public sector, but I suspect that he will find it difficult to do so.

I felt that the Chancellor learned an important lesson when, in a previous Parliament, Conservatives were making the argument that we would run things better and take waste out of the public accounts. The Chancellor suddenly shifted from saying that that was impossible—that had always been his response in previous years—to saying that, yes, it was a very good idea and of course, he had thought of it first. He set up the Gershon review, which identified £22 billion a year of wasteful and unnecessary expenditure in the public accounts that the Government intended to tease out and redeploy. We now learn that Gershon underestimated a bit, and the Chancellor thinks that the sum could be at least £26 billion. We also know from the very good work of the Treasury Committee and others that the Chancellor is finding it difficult to secure all the £22 billion of the Gershon changes, but there is a simple way for him to do so, as he could strengthen his control over the public sector pay roll.

I was pleased that in the last quarter of 2006, the numbers on the public sector pay roll in aggregate fell by 22,000. That was the first time that we have seen a move in that direction after a big explosion of posts. Before Labour Members make their usual silly points, I think that we need all the nurses, doctors, teachers and police officers that we currently have, and we need to recruit more in the years ahead. The good news is that they are a tiny fraction of the huge public sector pay roll, and with efficiency and natural wastage—not by being nasty or sacking people—we could make big changes to the numbers that we need to employ across the public sector.

Stephen Hesford (Wirral, West) (Lab): I am interested in what the right hon. Gentleman is saying. When he was in government, he could not untie that particular knot, in the sense that there are 80,000 more nurses and 20,000 more doctors than there were then. Does he agree with the public spending that brought about the advance in those numbers, or does he think that there should be cuts, which would damage that complement? Those increases did not take place under his Government, but they are in evidence now. How does he unscramble that?

Mr. Redwood: I wish that the hon. Gentleman would try to listen to what I am saying. Of course, I welcome the extra teachers, nurses and doctors who have been hired on the Government’s watch. It is not the first time that that has happened. A lot of extra teachers, nurses and doctors were hired on the Conservative watch, too. It is called growth, getting richer and living in a more civilised country. I hope that Governments of all persuasions will carry on doing that, just as the Conservatives did, although Labour has always denied it, and just as Labour is doing, and we always welcome it.
Kitty Ussher (Burnley) (Lab): The right hon. Gentleman voted against it.

Mr. Redwood: The hon. Lady is being absurd. Of course, we have always welcomed the extra teachers, nurses and doctors, but we have not always approved of all the extra money, because a small fraction of that has been spent on those people, and a huge amount has gone on incredibly wasteful and unnecessary spending, such as the huge, badly handled NHS computer scheme, which is absorbing much more money than the extra nurses are absorbing, the identity cards scheme and all the other things that we would strip out and cancel when we come to office. We want to concentrate expenditure on the good things in the public services in which we believe.

Mr. Evans: We applaud the work that nurses do, but does my right hon. Friend agree that they have been met with a gross insult from the Government with the staggered pay increase that they have been given this year? When those increases are grouped together, they total 1.9 per cent. When inflation is running just below 5 per cent. that means that nurses will take a pay cut of more than £500 in any given year.

Mr. Redwood: Nurses will certainly not be amused by the Budget, because they will not receive the tax cut that they might have heard about on the headlines when the Chancellor first read out that piece at the end of his speech.

We have a Chancellor who, in his early phase, taught us rightly that it is best to be married to prudence, as the economy does rather better. He has now demonstrated that just tipping lots of money into public services without targeting it on the things and people who matter is not a good idea, and he wisely says that there is a huge amount of waste on his watch that must be squeezed out. If he and his immediate successor cannot do so, it is a task that we will welcome because it will make our job so much easier because we will inherit all that waste on which we need not carry on spending.

Rob Marris: I am grateful to the right hon. Gentleman for his generosity. He is making an interesting speech, but my experience of being in business, and of observing it, is different from his. If a business expands, the initial step is often to hire more labour. As the expansion beds in and stabilises, there is a substitution of capital for labour, because new work organisations are developed because there is increased output—a Henry Ford motor car assembly line is a classic example—which is part of the cycle through which the Chancellor and the Government have gone. We have had the expansion, we have fuelled part of it by investment in buildings and hardware, and part of it by investment in people, and we are now moving to the next phase, where we will substitute some capital for labour for a more efficient operation. There is no contradiction in that.

Mr. Redwood: The business would not have survived if it had been run in the way that the Chancellor has run some of the public departments in this country. There is no way that modern businesses can go out and recruit people whom they do not need for the main function. When they are blessed with a rising work load, they recruit fewer people than proportionate to the increase in work load because they have to increase their productivity every year. A manufacturing company usually has to take price cuts because it is in an extremely competitive market, with India and China doing phenomenally well.

We have a public service which, until a few months ago, believed that any amount of money could be cascaded in and that it could hire anybody it liked. Often the people hired were management consultants, PR consultants, middle managers, administrators, form fillers—people who were needed to deal with the huge panoply of controls, requests for figures and interventions that come from the very overcentralised Treasury. I will not repeat the words of Lord Turnbull, as I am sure the Chancellor would be hurt if I did, but there is clearly a lot of centralisation in the Treasury and one can see why some people get the impression that they do about the style of management. It is that which has wasted so much of the money and got in the way of the professionals in the health service and the education service doing their job more successfully, and it has got in the way of the money getting to the places that it needs to reach.

I hope that in the next phase of the Chancellor’s odyssey he will also learn, as my right hon. Friend the Leader of the Opposition so sensibly outlined, that the Conservative policy of sharing the proceeds of growth is the right policy. When the Chancellor realises that his con trick on income tax is not quite what people wanted—they want a real tax cut, not just a cosmetic tax cut—he will see that he and his successor must reduce the tax burden on hard-working families and on businesses. He will see that the only possible course of action is sharing the proceeds of growth.

We want to share the proceeds of growth because, yes, we will need some extra money for more nurses, doctors, teachers and police people as the economy grows. As we get richer, so we need to meet the sensible demand for public service. But yes, we need to squeeze out the inefficiencies, and we need to leave some money over as the economy grows so that we can cut tax rates. Indeed, one of the advantages of cutting tax rates to a more competitive level internationally is that then the whole cake will probably grow rather more quickly.

One of the big failures on the Chancellor’s watch is that our business tax rates have become so much less competitive than they were when he started, and we are paying a high price for that. Over the period of the Chancellor’s stewardship of our economic affairs, the Republic of Ireland has grown by a stunning 76 per cent., whereas the United Kingdom has grown by 27 per cent.
Kitty Ussher: The right hon. Gentleman mentions Ireland. Does he not think that part of the astounding growth is due to its membership of the euro?

Mr. Redwood: No, of course not. If the hon. Lady studies the facts, she will see that Ireland was growing very strongly before it entered the euro. Nor was it huge quantities of European cash, which is the other bogus explanation that people sometimes come up with. Ireland was a bigger beneficiary in its years of slower growth, and most of that money went into the agricultural sector, which has not led the Irish economic recovery. The Irish economy has been buoyed up by the great success of very low corporation tax rate, so large numbers of businesses have gone there and set up there, clustered around the larger companies. That shows that lower tax rates work and generate a much bigger cake. Ireland is not skimping her public services. She can afford to have a lower percentage of total incomes taken in tax because she is now richer. People are better off in Ireland, on average.

Ms Keeble: One of the advantages of the Select Committee’s excellent trip to Ireland was that we looked at some of the economic facts, which are not as the right hon. Gentleman says. Ireland started off as a basket-case and has improved from a low base. Its level of indirect taxes has increased, which this country would not stand. Ireland considers that its spending on the health service is in crisis and that it needs to be transformed. The right hon. Gentleman’s facts are not accurate.

Mr. Redwood: The crisis in the health service in this country is every bit as big as the one to which the hon. Lady refers, or probably bigger. She is rather unpleasant about the Republic of Ireland, saying it was a basket-case. My remarks pointed out that it had grown strongly for a long time, so by definition it started from a lower level of output and average incomes than we enjoyed, and it has overtaken us. It has overtaken us consistently, year in, year out, for 10 years, on the Chancellor’s watch. The hon. Ladies have not come up with any reason why that should be, because the true reason is that Ireland and its Finance Minister got it right and made the environment attractive to business, and the Chancellor got it wrong and did not make it attractive enough to business.

Mr. Gauke: As another member of the Treasury Committee who was on the trip to Dublin, I can tell my right hon. Friend that we were informed about how growth was very high in the early 1990s, long before Ireland joined the euro, and that public expenditure as a proportion of GDP has been substantially lower in Ireland than in the UK.

Mr. Redwood: I am grateful to my hon. Friend. To some extent I feel that I am the father of that great expedition to Ireland, because it was my questions in the House about why Ireland had grown so much faster that triggered much of the interest, and the enthusiasm of the Scottish nationalists for the subject.

Mark Durkan (Foyle) (SDLP): All hon. Members need to remember that the backdrop to the change in economic performance in the Republic of Ireland is the very strong model of social partnership, whereby multi-annual programmes are agreed between Government, business and unions. I know that some hon. Members would not be comfortable with that model, but it has provided the spine of economic growth, development and discipline in the Irish Republic. Also, it needs to be remembered that in this period of remarkable growth, the public sector in the Republic of Ireland grew by a third, so the growth was achieved not by attacking the public sector, but by properly investing in the public sector and delivering effectively alongside a growing private sector.

Mr. Redwood: How many times do I have to explain? I and my colleagues would like our public sector to have more money and more people of the right sort to provide a better service. We are arguing about the speed at which that can be achieved and how it can be best achieved. It is best achieved if the private sector is growing more rapidly than it is growing in Britain under the present Chancellor of the Exchequer.

As to the hon. Gentleman’s account of why businesses have gone to Ireland, I have spoken to a number of businesses over the years, as I do in my job as an MP and with my interest in economic competitiveness, and I must say to him that no business man who has been thinking of going to Ireland or who has gone to Ireland has ever said to me, “I must go there because of their social partnership model.”

Mark Durkan: It is the social partnership model that has underpinned economic policy, creating consistent and stable economic policy for a decade and a half. Without the social partnership model, the Irish Republic would not have achieved or sustained its growth record.

Mr. Redwood: I do not think the hon. Gentleman was any better the second time. Maybe it was the sample that I happened to meet, but the business men all said to me that the attraction of Ireland was the lower tax rate. I do not know whether the hon. Gentleman knows how business people make their forecasts and make their decisions about where to invest. They usually work out what they think will be the revenue line, then put in what they think will be the cost line, and strike something called a profit. They then look at how much the Government will take of the profit and what remains at the end. If more remains at the end in one country rather than another, they are tempted to come to that country. That has worked well for Ireland.

Mark Durkan rose—

Mr. Redwood: I will allow the hon. Gentleman a third try. Perhaps he will get better.

Mark Durkan: The right hon. Gentleman should realise that what the social partnership framework agreements did was to set discipline in terms of tax rates, they agreed the tax framework, and they also provided for wage restraint, so Government were able to negotiate that with business, trade unions and other social interests on a multi-annual basis. That provided the environment that has attracted businesses into Ireland.

Mr. Redwood: I do not think we will agree. Business people have gone to Ireland mainly because of the lower tax rates—

Mark Durkan: Where did the policy come from?

Mr. Redwood: The policy came from thinkers around the world who pointed out to Governments that that always works. The Irish Government had the common sense to do it, but the British Government have not yet had the common sense to implement it properly.

That brings me to the corporation tax rate in the United Kingdom. I am pleased that the Chancellor understands that there is a problem out there. Britain was one of the lowest tax countries in 1997. The Chancellor would say that he has already brought the headline rate of corporation tax down on his watch. That is true, but he must realise that it is a very fast moving and competitive world out there. While he has been bringing it down a little, many of our great competitors and friendly nations in the world beyond us have cut their rates much more quickly, so we have gone from being relatively good value to being relatively expensive.

In the global supermarket for the location of business and investment that we now live in, that means that Britain is losing out. Investments no longer come to Britain because the tax regime is not attractive. A lot of manufacturing is exiting Britain and a lot of new manufacturing investment is going elsewhere. We find a country such as the Netherlands, with quite high costs in other ways and the same EU regulations, winning rather well against us because it has a much more competitive tax regime. Shell has decided to amalgamate its headquarters in the Netherlands to save on taxes, which will be a tax loss to the Treasury. We see discussion in the press about Barclays possibly moving its head office overseas after its merger. Of course, its domestic operations will still be taxed in Britain, but that will be another tax loss.

At some point the Treasury has to take this more seriously than the Chancellor has done so far. If he wishes to preserve the tax takes that he has, he needs a competitive tax rate. There is no choice. It is absurd that so many Members have this wooden approach that says: “If we cut the tax rate, we will lose this much revenue, we cannot afford to lose that revenue, so we will keep the tax rate up.” The truth is that if our tax rates are kept at a fixed level and the rest of the world cuts, we will lose revenue because we are not responding. The other wonderful truth is that if we are bold enough to cut tax rates so that they are sufficiently competitive, we may shortly experience a big increase in revenue because we benefit and the less competitive tax jurisdictions do not.

The Chancellor told us that he is cutting the corporation tax headline rate from 30p to 28p in the pound. One cheer for that—it is very good news, because the headline rate is what people look at. The not so good news on the same page of the Red Book is that that is more than paid for by the money that he is clawing back by cancelling some of the credits and offsets allowed against the 30 per cent. rate. That will make Britain a bit more attractive for certain kinds of companies that do not benefit from the reliefs that he is removing or reducing, but other companies will be worse off, so it exacerbates rather than eases the problem. One cheer for the lower rate and one cheer for the companies that will benefit, but the Treasury should understand that it has not solved its problem, because many companies will still be worse off. The overall result is to take a little bit more from the companies sector, and a lot more in the case of some areas and some companies.

The Chancellor’s record is often defended around one central proposition. We are told that his act of genius was to make the Bank of England independent when he came into office 10 years ago and that everything else has flowed from that excellent decision. My colleagues and I are very happy to have an independent Bank of England, but we do not believe that it has been as independent as the Chancellor has advertised. Nobody can get away from the fact that at a crucial time just before the last election the Chancellor wrote a very important letter to the Monetary Policy Committee of the Bank of England saying that he wished to change the basis on which its targets and instructions rested, and he shifted it from the retail prices index to the consumer prices index. He well knew at the time that the CPI was going up much more slowly than the RPI, so he must have done that knowing that it would keep interest rates lower than would otherwise have been the case. That was very convenient ahead of a general election. Unfortunately, there has been a price for that, because after the general election, with interest rates kept down, we discovered that inflationary pressures had built up. Because of its new CPI target, the Bank of England’s committee has probably had to raise rates by more than would have been the case without the political intervention.

We can see the cost of those interventions—I am sure that there have been more than one—in that over the 10 years of an independent central bank people in Britain have had to pay more to borrow money, on average, than people in the United States of America, which has grown more quickly, in Japan, which in the early part of the period grew hardly at all but has now been growing quite respectably, or in euroland, where performances have been very patchy but where, on average, growth has been slower than in the United Kingdom. It is worrying that we have had to pay a premium over American rates when America has performed so much better. That should not necessarily tell us that an independent central bank is wrong but that our bank was perhaps not independent enough. It suggests that because the Chancellor’s fiscal policy was pulling in the opposite direction to the direction in which monetary policy had to go, the MPC had to put up interest rates more than it would have done. Because the Chancellor was not following prudence between 2000 and 2006, there was a price for all of us in higher borrowing costs—not only in mortgages for those trying to buy a house in very expensive Britain, but for those borrowing money to run successful businesses.

Over the past 10 years we have seen a big let-down on productivity. When the Chancellor came into office, he told us more or less to judge him by productivity and said that he could take a number of measures that would boost productivity. The irony is that in the area where he had most control—the public sector, where he had riches beyond most people’s dreams that he could have used to buy improvements in productivity—there has been a collapse in productivity. So bad is the position that the Government have asked for changes in the figures and have withheld a proper series of figures from us. There appears to have been no productivity growth in the public sector at all. It beggars belief that someone can perform that badly when they had so much money to spend on new technology, new people and new skills, which should have enabled things to be done in a much better way.

Mr. Graham Stuart (Beverley and Holderness) (Con): Is my right hon. Friend aware that if the productivity growth under the last Conservative Government in the 1990s had been continued in the NHS through the term of this Government we would today have no waiting lists for any operations at all? [ Laughter.]

Mr. Redwood: My hon. Friend makes an extremely powerful point. Labour Members laugh, but this is their watch and it is their job to explain to the public how it is that productivity has bombed so badly when so much money and time has been spent on trying to get things right. It does not augur well.

Ms Keeble: Does the right hon. Gentleman accept that it is easy to show high productivity growth when there is the collapse in wages that happened in the public sector, particularly in relation to the compulsory competitive tendering regime, during the last stages of the Conservative Government? Of course there was higher productivity because pay rates were decimated.

Mr. Redwood: The level of productivity has nothing to do with pay rates. I am interested in output in relation to the number of people employed. If the hon. Lady wishes to have wage-related productivity, I deny her premise. There was no collapse in wage rates in the public services in the later years of the Conservative Government.

Ms Keeble rose—

Mr. Redwood: I have allowed the hon. Lady to intervene many times and she is trying my patience. She has made several foolish points, and I do not think that the House wants to hear another one.

The Chancellor has fallen behind very badly on productivity. His micromanagement from the centre has not helped British companies to become more productive and it has got in the way of the public sector.

When the Chancellor was in opposition, he used to think that a good night out was spending time poring over the balance of payments figures. He would come rushing into the House the next day if he found some bad balance of payments figures, put them to Ministers, and personally blame them for the imbalance between exports and imports. Since he took over as Chancellor, we have had enormous balance of payments deficits—I think that he has set new records—and we are not told anything about them at all. Again, they did not get a mention today; all the figures that he chose to highlight were ones that he thought were favourable. The House should remember that there is quite a price to pay for the de-industrialisation of Britain that has continued under this Government, with 1 million manufacturing jobs lost on their watch. The price is there in the visible trade balance, where there is an awful lot of red ink. We import a great deal of the products that we need from elsewhere in the world because we are not making them in Britain. Meanwhile, 5.3 million people of working age sit on benefits. I know that the Chancellor wants to do something about that, but it is getting a bit late—when is he going to do it? He should be much angrier about those 5.3 million people and find some way of getting them back into legitimate employment so that we can start to fill in some of the holes in the balance of payments.

My conclusion on the Chancellor’s 10 years is this: there has been no major disaster, and for that we are very grateful. The inheritance was strong and good. For the first three years he did not do too much damage to it apart from the huge mistake over pension funds. For the next five years, he proved beyond doubt that just spending huge sums of money does not sort out the public services sufficiently. At the same time, it damages Britain’s ability to compete, in turn damaging our ability to employ those 5.3 million people who do not have jobs and our ability to raise our living standards as quickly as America, Ireland or the other success stories around the world.

This Chancellor has put Britain at the bottom of the pack of English-speaking countries—the pack to which the Chancellor never refers—though from time to time he has put us at the top of the European pack. That has not been very difficult, as Europe has gone through a dreadful time with the wrong model, showing once again that the high-tax, high-waste, high-spend approach does not produce a happy country or even good public services.

This Budget is based on a central con on the income tax proposition. Most people will feel very let down when they read their newspapers tomorrow and see that they are not better off in the way that the Chancellor was perhaps trying to hint with his famous announcement at the end of his speech.

When it comes to the corporate sector, the Government should not run away with the idea that they have done enough. They have acknowledged the problem and will have helped some companies a little, but we need a considerably better tax package if we are to stop more Shells and Barclays either going abroad or thinking of going abroad, or if we are to bring more large companies into Britain, saying, as they do with respect to Ireland, that this is the place where they wish to come.

If Labour Members believe that we also need a social compact in order to attract them, I look forward to them setting out the details so that we can debate them. I think that most of them already know in their hearts that what will bring the punters in from around the world and from the global marketplace is a much more competitive tax system. Unfortunately, this Budget does not deliver it.