Category: Debates

Mr John Redwood (Wokingham) (Con): I remind the House that, in the declaration of Members’ interests, I have revealed that I offer business advice to a global industrial company and an investment company.

In her response to my right hon. Friend the Chancellor’s Budget, the Leader of the Opposition gave one of the worst speeches I have ever heard in the House. It was intemperate and ill judged, and did not seem to be based at all on the Budget presented to us today. It is a great pity that she and her party still do not understand their culpability for the financial mess in which we find ourselves, show a little humility over the inheritance they have passed on-the worst financial and economic inheritance any Government have received since the second world war-and show a little willingness to work with us on getting out of this hole.

Many Labour Members, having been Ministers or ministerial advisers until just a few weeks ago, have a lot of information. They told us during the election, in general terms, that they would unleash substantial public spending cuts after the election, and it would be good to know from them where those cuts would have been made. They might be preferable to some of the ones we are thinking about, and it would be most useful if they would share them with us. If they are not prepared to share them with us or the country, the country is entitled to say, “These people got us into this mess, are totally unconstructive and still have not learned anything.” As other Members have said, it might be better if they got on with their leadership election, and let us get on with the serious task of debating the state of the country.

Austin Mitchell (Great Grimsby) (Lab): If the public finances are in such a mess, why did the Conservative party want to adopt Labour’s spending targets in 2008, and did it oppose the huge amounts of money put into the banks to save the banking system, which was responsible for much of the borrowing?

Mr Redwood: I was clear throughout the previous Parliament that I thought Labour’s spending targets were unaffordable, and I said so in the economic policy review that I wrote for the Conservative party at the time. I was strongly opposed to the indiscriminate subsidies and moneys flung at the banks on a scale that defied belief and which I felt was totally unnecessary. I offered an alternative way of saving what needed saving in those banks, for the sake of the general economy and at a much lower cost, so I think that the hon. Gentleman has challenged the wrong person on that issue.

I pay tribute to my hon. Friend the Member for Dewsbury (Simon Reevell). He gave an elegant, traditional and classical maiden speech that bodes well for his representation of the people of Dewsbury. It was funny and detailed; showed a great love of the territory and people he now represents; and showed that he will be a campaigning politician. I also detected just a little Conservatism in his attitudes, so I was entirely happy with it and wish him a long and successful stay with us in the House.

The Budget has been little understood by some of the people who have commented on it so far-perhaps that is not surprising because those who speak early do not necessarily manage to read the Red Book quickly enough. I praise my right hon. Friend the Chancellor for producing a Red Book half the length of the Labour Red Book-and, therefore, a lot cheaper and economical-but containing much more useful information. With a short read one can understand exactly what he is trying to do in the measures he is proposing, whereas I used to find it took more than a day to winnow out the truths from the great weight of paper that the previous Chancellors of the Exchequer used to present, because they were always trying to disguise the negatives and highlight and exaggerate the positives.

My right hon. Friend is right to say in his Budget that we can get out of this mess only with a strong and vigorous private sector-led recovery. We need to preside over the creation of a very large number of new private sector jobs, because we need to absorb many of the people languishing on benefits as a result of past policies-almost 6 million people of working age without a job, many of whom would like and need a job. We need to create a much more vibrant private sector that can take them into employment, so that the benefit costs come off the public accounts and those people can start to make a contribution through taxes.

We also need to create many more jobs because the 6 million people currently employed in the public sector are too many. I do not wish to see compulsory redundancies, but I am glad that my right hon. Friends in ministerial office are now imposing freezes on recruitment and allowing recruitment from outside only where it is really necessary. We need to reduce the number of people across the public sector, and I am pleased that we will be showing the way here as well, so that nobody can say that MPs are exempt from the process.

Chris Leslie: The right hon. Gentleman is talking about the number of people in public service employment. What sort of reduction does he feel would be acceptable? How many people should no longer be employed in the public sector?

Mr Redwood: That has to be judged case by case. I will not play the hon. Gentleman’s silly political game so that he can create a sensational press release immediately after I have given him a suitably large number, and I am not going to give him a suitably small number so that he can say it would not have the necessary impact. Suffice it to say that proper management could deliver more for less across many parts of the public sector, and we can do that without compulsory redundancies; we can do it by sensible management.

My first test for my right hon. Friend’s Budget is: how does it promote private sector-led recovery? I am pleased that he has said that he wishes to cut, through a steady process, the headline rate of corporation tax by rather more, I think, than under the plans when he was in opposition. The receipts pages-pages 40 and 41 of the Red Book-on “Budget policy decisions” show that he will be reducing the tax burden for most of business, and that not all of it will be given back in the form of reduced capital allowances in the way that Labour feared. However, if we add in the banks tax, the corporate sector as a whole will be making a bigger contribution. So the thrust of the Budget is that non-banking businesses will get a modest benefit from the changes and that overall business will have to help to pay for the large amounts of public spending still going on. However, a clear message will be sent to the outside world that we want lower taxes and that we believe in lower tax rates. The lower headline rate is the most beneficial thing that we can do to get people abroad interested in coming here with their companies, investments and new ventures, which is what we need.

I am pleased that the Chancellor has done more for small business. [Hon. Members: “Hear, hear!”] All the evidence shows that small businesses are not only politically popular with my colleagues, as we have just heard, but the main generators of new jobs during an economic recovery. They are more creative and need to take on more people. He has targeted them favourably with both the small business profits tax rate reduction and, for those outside London and the south-east, the generous national insurance reduction-as a Member for a south-east constituency, I would like him to extend that to the rest of the country as well, but I understand his argument that he wishes to concentrate the help on those parts of the country with the most unemployment and the biggest public sector problem.

Overall, the Budget judgment is not to ensure that 80% of the strain is taken by public spending reductions. The idea is that next year 57% of the strain is taken by public spending changes and 43% by tax increases. That is quite high on the tax increase side, which is a little worrying, but it reflects how my right hon. Friend is very reluctant to cut public spending in a damaging way and his understandable wish to get on with Budget deficit reduction.

Tom Blenkinsop: The right hon. Gentleman mentioned that he would like to see extra advantages for his constituents in the south-east. The Financial Times recently calculated that cuts to benefits and key Departments will have twice the detrimental impact on family incomes in Middlesbrough South and East Cleveland and other constituencies in the north-east as they will in the home counties. Given that, how can the Government talk about us all sharing the burden, and about all of us being in this together?

Mr Redwood: I was coming on to talk about the impact on incomes. The Red Book is quite explicit about that, and has some very helpful tables. I suggest that the hon. Gentleman gets a copy for his greater interests, as those tables make it very clear that the more one earns, the bigger will be the negative impact on earnings. As the Chancellor himself said, in that sense this is a very progressive Budget: he has shielded people on low incomes from part of the impact, and made those on higher incomes carry more of it. Although the hon. Gentleman represents a place with more people on lower incomes, they will be relatively protected.

Mr Nigel Dodds (Belfast North) (DUP): The right hon. Gentleman listed a number of measures that the Chancellor is taking to promote the private sector. I am sure that he will agree that one of the most welcome proposals is to reduce the volume and complexity of regulation. However, does he accept-I am sure that he will-that a lot of regulations come from the EU? How can we grapple with the extent and complexity of regulation if a lot of it emanates from somewhere other than Whitehall?

Mr Redwood: The hon. Gentleman is right to say that we have much less power to reduce or improve regulation from Brussels than we do with what is homespun. However, so much crass and foolish regulation has been put on British businesses over the past decade by the home legislators-the then Labour Government-that we can get quite a long way by removing, amending or changing that. In the meantime, we need to summon up a bit of courage and tell those in Brussels that they, too, should join in the process, as that would benefit their businesses as much as ours.

I have often said in this House that, from the point of view of running a business, reducing regulatory cost is a good way of offering something that is just like a tax cut without reducing the public revenue. Indeed, it is even better: not only is there no revenue loss, but public sector costs can be reduced, as the enforcement and monitoring costs of needless or over-the-top regulation can themselves be reduced. That means that businesses get a cash flow benefit, and that there is a reduction in the costs of Government.

The previous Government regulated too many things, and they did so too much and too often. They often regulated in a way that made things worse rather than better. We often found ourselves opposing them, even though we did not disagree with their aims. Like them, we wanted people to have nice lives and decent jobs, and to be free from risk in the workplace and so forth, but we often found that the regulation that the former Government proposed was very expensive and did not achieve the required result.

A tick-box culture means that people get very good at ticking boxes and writing memos, but that they do not manage in the proper way. A factory can be made less safe if the process is merely bureaucratic. Instead, the notion that safety comes first, second and third must be inculcated in all the senior people in that factory. They must manage safety intuitively, as ensuring that a workplace is safe cannot be achieved by tick boxes, inspectors or regulators.
Safety must be inherent in every workplace, and what we can do is to set a tone by saying that it matters above all else. We can have laws at a high level on safety but we need not go into as much detail as the previous Government did. Their approach often made things worse, and much more expensive.

The most important table in the Red Book can be found on page 45. It is one that we must discuss and understand, as it sets out the expenditure patterns for the forthcoming period of Government. The information in the table will come as a pleasant surprise to many neutral people outside the House, although it may worry Labour Members, who seem to be in denial about it. The table shows that total expenditure in the last year of the Labour Government reached £669 billion, and that expenditure will rise steadily to £737 billion by 2014-15.
Stewart Hosie: The right hon. Gentleman is accusing Labour over this cash-terms expenditure increase, but I am sure that he will remember that the Chancellor explained early in his speech that ever-increasing debt repayment costs were included. I have no doubt that, for the sake of completeness, he will want to remind the House of the gross domestic product deflators of 3.2%, 2.1%, 2.1% and 2.6% over the next four years.

Mr Redwood: I was going on to say that we are talking about a big increase in cash. If all of us in the public sector can get better at managing that cash, we should be able to do a good job for people because the amount of spending is going up. What could go wrong? Well, the hon. Gentleman has mentioned two things that could go wrong. If public sector inflation is as high as, or higher than, forecast general inflation, that will eat away at the value of the money that we are spending and make it more difficult to sustain good public services. However, Ministers tell us that they will be very tough on wage increases. That will help, as it will share the work and mean that we can keep more people doing more worthwhile things for our constituents, without all the money being eaten away by wage increases.

After all, that is what the private sector had to experience for two or three years, during the worst of the recession. In that regard, I pay tribute to the many work forces and unions in this country that did not merely accept that there would be no pay increases; instead, they often accepted pay reductions and very tough work-sharing schemes. They did so because they understood how dire the position of their industries and companies were, and they helped their managements to see their companies through.

We do not have to go that far in the public sector, but there is something that we need to tell all our public sector employees, and I think that this is a task for Opposition MPs as well as Government MPs. We need to say, “Things will be less painful and better for all of us if we can keep costs down and wages and salaries under control. More jobs will be preserved and a better service delivered to the people whom we serve, because more of that cash increase is going to go into helpful spending.”

As the hon. Gentleman says, the rising interest charges are also a worry, albeit one that makes the coalition Government’s case rather well. If we do not tackle the rising deficit now, more and more of the money will go on paying interest bills for past spending, rather than being available for paying teachers’ or nurses’ wages, which is what we would rather be doing with it. His point therefore makes the case strongly that the more action that is taken at the beginning, the better, because then more of the quite large sums of extra money that will be available will go on buying real improvements or maintaining a decent quality of public service, instead of going on the rising interest bill.

The Government have had just one piece of good fortune with their rather bleak inheritance, as well as quite a lot of bad news from outside the United Kingdom. The one piece of good fortune is that over the weekend the Chinese Government announced that they were going to allow their currency to start to move upwards against the dollar. We have had quite a long period of the yuan/renminbi being pegged to the dollar. That has meant that China has been super-competitive. China works hard, she is developing much better technology and she produces good products. With the managed exchange rate that we were experiencing, with the pound sticking around with the dollar in recent months, we discovered that China was getting more and more competitive. Indeed, there has been another huge surge in Chinese exports in recent months.

Let us hope that the Chinese will now allow their crawling peg to crawl up quite a bit. The last time they had a crawling peg, it started a bit slowly, but then there was a 20% revaluation of the currency, which was quite helpful. We need all the help that we can get, because Britain has to export more and earn more money in overseas markets. The world’s No. 1 colossus-the dominant, most competitive exporter-is China, and any currency revaluation would be helpful. We still have to work hard-we have to get smarter and control our costs-but that revaluation might take some of the pressure off.

However, the bad news is that the European market is getting worse. We had hoped that European countries would have a normal, cyclical recovery, such as that which the United States is enjoying. However, it now looks as if their recovery will be slow, with quite a number of countries going backwards this year and early next year, because of their deficit problems and difficulties with the euro. Indeed, those countries’ economies might continue to fall or start to fall again. That is difficult for Britain, because euroland is an important marketplace for our physical goods-it is not nearly so important for services or inward and outward investment, but it is important for physical goods. It is therefore in our interests that euroland starts to mend itself as soon as possible. I therefore hope that the Chancellor will continue his negotiations and work with his European partners, because it is important that we allow them to take the actions that they need to take to start mending the euro.

The euro is a single currency in search of a single country, and that has been its tragedy ever since it was first created. Those of us who warned that we could not have a single currency without a single economy, a single budget and a single Government were told that we were quite wrong and that we had misunderstood things. Apparently all that history that we had read was a waste of time. However, all the history of currency unions that I have ever read shows that they work only if there is control of the borrowing and spending levels through a central power, which is what we are now told our friends and colleagues in euroland are learning. They have discovered that they cannot allow Ireland, Greece, Portugal and Spain to free-ride at the expense of the rather more prudent core. Those in euroland are learning that, if they allow those countries to borrow and borrow at the lower common interest rate that Germany has granted them, there comes a point when the markets no longer believe in those countries and they start to blow their debt markets apart.

Sammy Wilson: Is the right hon. Gentleman not a bit concerned that the Government now accept that the European Union perhaps has the right to scrutinise the budgets of euro countries before those budgets are implemented? Does he not believe that that could be the thin end of the wedge, and that such scrutiny might eventually extend to all members of the European Union?

Mr Redwood: I am very strongly of the view that countries have to do that, and more, in euroland. As Members might guess, I am passionately of the view that that has nothing to do with Britain. The deal I want my right hon. Friends to offer our European partners is that we will accept more or less any kind of treaty change to give them proper control over the budgets of euroland as long as we get some powers back and it is made very clear that we are not part of this new machine to try to create an economic Government of Europe.

There need to be changes. The system is not at all stable, and I do not think that the much advertised trillion dollar package of loans and guarantees, and possible facilities, is necessarily going to see all these countries through the future threats to their stability. Given the rather damaged states of their private sector economies in many cases, there is a danger that, if all they do in response to the financial market pressures is to cut public spending to try to get their borrowing down, they will not succeed. If they are cutting their public spending, but there is no growth coming through in the private sector to take up the slack, or if they are cutting their public spending while their tax revenues are falling, the gloomy pundits will be right and the medicine will not work. Just cutting expenditure does not create a strong economy.

It is important to cut spending sufficiently to allow the private sector to grow and it is important to cut spending sufficiently so that the deficit does not get out of control and produce too much pressure on interest rates, but that needs to be done against the background of the beginning of a recovery-as we have in the United Kingdom. For a country in turmoil with a deeply damaged economy, as some of the southern states seem to have, simply cutting expenditure might make the problem worse, not better, without taking other action to try to get the economy’s private sector going.

The proof of the Budget will be in what happens to the private sector recovery over the next year or so. I hope that the Office for Budget Responsibility will turn out to have been too gloomy. It says that the impact of the Budget in the first two years will be to lower the growth rate slightly; it says the growth rate will be better in the following years when the full benefits of deficit reduction and private enterprise promotion kick in.

It need not be like that; we could do better than that. If the Chancellor wishes to do better than that, as I trust he does, he needs to turn his attention urgently to the state of the British banking industry and the capability of British banks to finance the private sector-led recovery that we clearly need. I do not believe that the current regulators of the British banks have got it right, and although I fully support centralising the regulation of money markets and banks in the Bank of England-I advocated it myself and I am happy that that is going to be done-that in itself is not enough. That is a structural change, but what we also need is an attitude change.

The sad truth of life is that we have just lived through the worst five years I have ever seen in terms of mismanagement of money and banking in this country. Labour Members will want to blame just the private sector banks, and I agree that some directors of those banks got it horribly wrong and they deserve to be dealt with in the appropriate way by their shareholders and by others. However, I hope that sensible Opposition Members would agree with me that it does not speak well of the monetary control system and the regulatory system that that happened. Why do we have financial regulators? We have them to stop that kind of thing happening. They are meant to stop runs on banks, even if banks have directors who are likely to produce a run. They are meant to stop systemic collapse, even if directors get a bit carried away.

Mr Binley: Is it not right to point out to the Opposition that the then Chancellor of the Exchequer, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), asked the Financial Services Authority to apply a light touch in order to sustain his myth that he had done away with bust? Is that not one of the reasons that Labour Members should apologise?

Mr Redwood: If one interprets light touch as meaning regulating the wrong things, I would agree with my hon. Friend. There was a huge increase in the amount of regulation during the Labour years, as one would expect, as Labour Members believe in regulation, but I think that they have demonstrated that it does not work. Our old friend the box ticker is relevant. There were many more box tickers in the City at the end of the Labour period than at the beginning: lots of nice, neat forms were duly filed; and people got into trouble if they put the wrong figure in the wrong box, which was apparently a great crime.
Meanwhile, the regulators simply ignored the phenomenal explosion of the banks’ balance sheets. I do not mean just hedge funds or off-balance-sheet items; the actual balance sheets ballooned in a crazy and unreal way. As I recall, the main banks went from 20 times to 34 times leverage, and not once did the regulators ask, “What is going on here? Is this not a bit excessive?” Why did the banks have only 20 times leverage in Lady Thatcher’s day? She was not known for being too shy about promoting private sector recovery. Perhaps there was a reason why banks were only allowed to gear that much in those days, and perhaps we should think again about the degree of gearing.

We then lurched from that to the opposite position. At the depth of the recession the regulators said, “We have now decided that the banks must get rid of all this leverage. They must have huge amounts of cash and capital pumped into them so that they cannot lend anything to anyone.” That made the recession 10 times worse.

Mr Graham Stuart (Beverley and Holderness) (Con): My right hon. Friend has just made the very point that I was going to make. The regulators compounded their failure to regulate at a time when they should have reduced the lending of banks by, during the bust, doing the precise opposite, and compressing lending when the economy desperately needed the banks to lend more. That was a double whammy for the British economy, it was entirely due to the behaviour of the Labour party, and it has left a terrible economic legacy which the Chancellor today set out bravely to put right.

Mr Redwood: I think that we now need to be positive, and I want to try to engage the Labour party in the process. I understand that the hon. Member for Leeds West (Rachel Reeves) used to work at the Bank of England, and we may have learnt from her speech why it is a good thing that her advice is no longer available to the Bank; I do not think that she would have helped to get us out of the mess. From now on, however, we need to ask ourselves what we should do about banking regulations, because I do not believe that the current system is right. It is all very well for us to say that it was wrong under the previous Government, as it clearly was, but it is our duty now to try to ensure that we do a better job. Unless we change the system, it will not be much better under the present Government.

I believe, and I think Treasury Ministers believe, that we should now have counter-cyclical rather than pro-cyclical regulation. What does that mean? It means that when times are tough and we are in recession, we should allow banks to lend more money on easier terms, and when times are really good-as in 2006-07-we should rein in the banks and say, “You cannot go on lending like this.” In the immortal words of the Governor of the Bank of England, we should remove the punchbowl before the party has everyone blind drunk. It is a pity that we did not do that in 2007.

Some of my critics say to me, “That is all very well, but how do we know where we are in the cycle?” We can never be sure where we are in the cycle, but I should have thought that it was fairly easy at the moment to agree that we are somewhere near the bottom of it. Heaven help us if this is not the bottom of it. I do not believe that all the figures in the Red Book about growth from this point are wrong, and I do not believe that all the independent forecasters are wrong. I think it quite likely that there will be some growth, but not as much as I would like and not as much as we will need.

The main reason that there will not be enough growth is that we do not have easy enough money for the private sector to refuel the recovery. The overall money supply figures are pretty dire, and we should bear in mind how much of the money is circulated around the system from the Bank of England to the Treasury to the spending Departments. Labour left a perfectly good money machine to put relatively low-cost money into the public sector, but at the cost of the private sector, which-particularly small and medium-sized enterprises-is still shivering in a world in which there is not enough sensible credit.

I do not want to stoke a new unsustainable boom, but there must be a judgment about whether the recovery is too fast or too slow, too hot or too cold. At present, it is most people’s judgment that in the private sector is too cold. It is not going quickly enough, and it is not easy enough. We need to make it easier for ordinary, run-of-the-mill entrepreneurs to succeed. It should not be necessary to be a complete genius who is prepared to take on all the odds in order to establish a company. We want people to be able to do that who have reasonable skills and do not want to have to fight the jungle all the time.

Nadhim Zahawi (Stratford-on-Avon) (Con): I agree with my right hon. Friend. He has heard me speak passionately about start-ups, and I was pleased that my right hon. Friend the Chancellor provided some incentives for them today, but given the reality of where we are today in the economy, the recovery will be fuelled less by start-ups than by medium-sized businesses that are already exporting to countries such as China and Brazil, where our record is currently abysmal. We export more to Ireland than to those countries. It is those type of companies that have a more mature business that are not investing at present. They are not retrenching, but they are not investing. Banks need to send a message to them that there is money available to them to make that investment and to grow their business from medium to large.

Mr Redwood: I am grateful to my hon. Friend, and I agree exactly with what he said.

My conclusion on this is that to promote a proper recovery the Government need to have words with their financial regulators to say that at this stage of the cycle they should not be demanding more cash and capital from here. The banks are now perfectly solvent. They are perfectly liquid; they are lending huge sums of money to the Government, and that counts as liquid resources because they hold it in the form of Government bonds and Treasury bills. Job done, therefore, but by all means start to tighten things again in a year or two if we have a really good recovery going on and if credit is beginning to build up.

The economy is still anaemic, however; it is still short of credit. It does not have the oomph behind it that we need, and the answer lies in the banks. So my plea to the Chancellor is that in order to make his strategy successful he needs to do something about the way we approach banks, credit and money supply in this country.

The overall Budget strategy takes the risk of doing rather more by tax and rather less by public spending reductions than the Chancellor himself was suggesting when he first looked at this problem, but I wish it well. It is very important for all of us that it works. Every Member in this House wants their constituents to have more chance of a decent job, more chance of getting off benefit if they are unemployed, and more chance of keeping good-quality schools and hospitals.

We have seen what happens in extreme situations in countries that did not take their deficit seriously. They not only end up with a worse economy; they end up with much bigger slashes in public services because they literally run out of money. The previous Government very helpfully advised us that all the money had gone. We know where it went and who took it. The Red Book today gives a pathway to get back from that, so I hope that we will get behind it and try to make it work.

Mr John Redwood (Wokingham) (Con): I should like to express my gratitude to the voters of Wokingham for renewing their confidence in me and returning me to the House. It is particularly comforting that I got more than half the vote at a time when the idea of the alternative vote is in the wind. I am sure that colleagues will think long and hard about that as they look at their own electoral positions as well as the national interest.
During the general election campaign, my electors – I am sure like those in many other constituencies – expressed their deep sorrow that the Equitable Life victims had not yet been compensated. It is extremely good news to see a Conservative pledge -and perhaps it is also a Lib Dem pledge – honoured immediately in the Queen’s Speech. The compensation is the victims’ due, owing to the bad regulation of that business, and the pledge is that it will now be paid more promptly. We look forward to the statement that is to be made.

An even larger number of my electors in Wokingham were extremely worried about the impact of the very large amount of new housing that the former Government and their regional planning authority were imposing on my constituency. I argued long, and I hope clearly, that, were a Conservative Government to be elected, they should sweep away the regional housing targets and the regional planning system. I argued that the unitary Wokingham borough council should be allowed to make more of its own planning decisions, and my hope was that the new Government would allow the council to come to a wiser judgment about how many new homes should be made available.

Some new homes must be made available, but we must avoid building on floodplains or in back gardens. We must avoid the town cramming and all the other unpleasant features of the last 13 years that my electors had come to dislike. Again, therefore, it is very good news that the coalition has come together and that it has promised in this Queen’s Speech that there will be early action to deal with such matters.

Many of my voters were also extremely worried by the lack of progress by the Environment Agency and the relevant ministry in tackling problems of flooding. These problems have been made particularly acute in my constituency by the over-building in inappropriate places that has been determined by Government inspectors in recent years. I have seen the tragic sight of new homes being completely flooded six months after they were built and sold because they were put in the wrong place by a Government inspector who did not seem to understand the nature of a floodplain. I look forward to the planning system helping with that, but I shall also be calling on my colleagues who are now Ministers to see what else we can do to right the wrongs caused by homes being built in places without adequate flood defences.

I wish to concentrate on the central thrust of the Gracious Speech – the issue of the deficit. “There is no money left”: how kind it was of an outgoing Labour Minister to make that clear. What better independent authentication of all that we said in the general election could we want than that note from the outgoing Chief Secretary to the Treasury? He should know, although I do not quite understand his taste in jokes: none of the rest of us thinks that his remark is at all funny. It is poignant and sad, and it sums up the tragic end of the long Labour Government.

From what we have heard so far in this short debate, there are still Labour Members who do not seem to be able to distinguish between the deficit and the debt. We have already heard one say that he does not think that it is right to start paying down £6 billion of the debt this early. However, we are not talking about paying down – or paying off – £6 billion of the debt. We are talking about trying to stop the debt from going up by quite as much. We are talking about a debt that, on the outgoing Labour Government’s figures, is rising by £150 billion or £160 billion a year. So far, we have come up with a welcome but modest proposal to start to reverse the trend that is our ever-climbing deficit.

We meet as a new Parliament in very difficult and dangerous times, and I think that people have high hopes of us. I think that it was good that there was some democratic renewal in the election: more people wanted to vote, and they took the election seriously and wanted to express an opinion. However, Parliament must understand – as those of us who were in the previous one surely do – that we are on probation. It is up to us to prove to the public that this Parliament can be so much better than the last one, and that we can tackle the serious issues in a sensible way.

Of course, there must be robust debate and challenge to the Executive – and I suspect that that must come not only from those on the Opposition Benches. Of course, there will be periods of humour and light-hearted relief, and the speeches made at the start of this debate were notably good and humorous. However, we must restore the trust of the British people and ensure that they feel proud of their Parliament again. To do that, this Parliament must engage more actively with the Executive, thank and reward them when they get something right and make sure that they understand when they get something wrong. We must press and press the Executive until they get things right, for the sake of the wider public good and the wider national interest.

The country has very warm feelings towards the coalition. I welcome the coalition, as it was the only way we could go forward, given the nature of the election result. It is not for us to criticise the electorate for the judgment they made. Each individual made his or her judgment for good reasons, in good conscience. It is up to us to make the best of the result that they have produced. Looking at the arithmetic, even sensible Labour Members would agree that the only conceivable way of offering this country some stable government for a reasonable period was for the Liberal Democrats and the Conservatives to find how many things they could agree about, and to agree to disagree about the other things and not to highlight them for a period while we offer stable government.

I am sure that Labour Members will play endless games suggesting that a Liberal Democrat said one thing and a Conservative said another before the election, but they should move on. It is not interesting. We all know that – we were fighting each other in an election. We still disagree about some fundamental issues – we have been open and honest about that – and that has not suddenly changed. But what we agree about is very important. We agree that this country is in a huge mess. We agree that this country needs stable government to start to turn it round, and we agree that the only conceivable combination that has the numbers to work is the Liberal Democrats and the Conservatives working together. We also agree that the prime task is to start to tackle the deficit before it overwhelms us.

Many Labour Members still think that it is wrong to reduce public spending to reduce the deficit. Some of them mistakenly tell us that if we cut public spending – by £6.2 billion, to pluck a recent figure out of the air – it will take £6.2 billion out of the economy and will therefore help to collapse the economy further. The Labour party should understand that every £1 that is spent and borrowed by the Government has to come from the private sector. We are not printing money any more – that was the Labour idea for a year and even they agree that we cannot continue to do that. So every £1 that we need to borrow this year has to come from the private sector – from a company or individual who will lend it to the Government, but if they lend it to the Government, they cannot spend it or use it themselves. So it is not taking money out of the economy: it is just saying that we need a better balance in the economy.

If we do not get a private sector-led recovery, we will not cure the deficit, we will not prop up and develop the public services, and we will not have the increase in the tax revenues that we need to make a success of our large and expensive public sector. The only way out of this deficit crisis is a strong, private sector-led recovery.

Mr Edward Leigh (Gainsborough) (Con): My right hon. Friend has spent many years in the private sector. Having also studied efficiency savings in the public sector, does he agree that £6 billion – or 1% – is just a start, and that huge gains could possibly be made, especially in IT projects and the general management of Whitehall?

Mr Redwood: I entirely agree. I have in the past been actively involved in British industry, and 3% per annum efficiency gains is a normal target. It is not done by undermining the product, reducing its quality or providing the customer with a worse service: it is done while giving customers a better service and raising the quality of the product, through technology, training and energising and motivating the work force through reward and incentive. We need to do that in the public sector now, on a large scale, because we have had 10 wasted years in which the Government made no progress and put too much money in without asking for enough back – doing too little for too much. We now need to create a public sector that does more for less in the important areas such as health and education, and does less for less in areas such as ID cards and the authoritarian state that Labour introduced.

We are meeting at a time of grave crisis for our European neighbours in the euro area. As one who campaigned strenuously and volubly against the United Kingdom joining the euro, I take no great pleasure in saying that all the things that we thought could go wrong with the euro are now unfortunately doing so, even without this country. I am very proud of all those who joined us in that campaign and kept sterling out. It is the one thing that the Government most recently ejected from office got right-they managed to stay out of the euro. That was a very sensible judgment on which I always congratulated them and backed them at the time. Had Britain gone into the euro, the state of British public finances and the different nature of the British economy and its founder currency, sterling, would by now have shattered the euro. Our great contribution to euroland unity was keeping our currency out, and I think that I could now find many German and French people and experts who would agree that we have made their problem a lot easier by not being in the euro.

When we used to say, “Beware of Greece! That is why we need to control our deficit”, the previous Government were always keen to tell us, “Oh, but Greece is in a totally different position.” Well they were wrong in this sense: if we do the figures properly, we see that total borrowing in Greece, in relation to its economy, is no bigger than total borrowing by the UK Government in relation to our economy. Colleagues have set out endlessly that the true debt and liability of the state in Britain is £3 trillion, not just under £1 trillion, as the previous Government used to say. Furthermore, our deficit is every bit as big as Greece’s, as we know from the awful figures that we have seen. So in that sense, we are just like Greece, and if the markets have got to the point with Greece where they are saying, “We will not carry on lending you money, because we think that you have over-borrowed”, we could get to that point in the United Kingdom too. It is that argument that has brought several Liberal Democrats round to our way of thinking, which is that we need urgent action. During the election we saw the Greek crisis being enacted at the same time as we were talking to electors, making it clear how dangerous the situation was.

Keith Vaz (Leicester East) (Lab): Of course, the right hon. Gentleman has held these views for as long as I have been in the House, but the Prime Minister made it clear, after he met Chancellor Merkel, that it is in this country’s interests that the euro succeeds. It might well be that we do not join in the next five years, but we want it to succeed. Does he agree?

Mr Redwood: Of course, and I said that it came as no pleasure to me to say that unfortunately what we saw as the failings of the euro are now coming true. I was going to deal with the right hon. Gentleman’s point: it is in Britain’s interest to try to tackle the problems with our eurozone friends in a way that does not penalise this country. They are, of course, an important trading bloc in the world and an important market for ourselves.

I would like to finish my earlier point, however. There is a very important difference between the United Kingdom and Greece: whereas when Greece needs to borrow a lot of money, it cannot print the money to do so, and whereas when Greece wants, or has, to repay the money, it cannot devalue the currency to do so, the United Kingdom can do, and has done, both on a heroic scale. The reason we have not yet got into the Greek situation is that the whole of last year’s massive borrowing requirement was simply printed. The money was printed and injected through the banks into the public sector, so that we avoided the market pressures that Greece experienced. Greece could not do that because she shares a currency managed by the European Central Bank. The previous Government presided over a devaluation of the currency of about a quarter, so, although we will obviously not renege on our debts, the previous Government reneged on them by the back door, saying to all the foreign holders of those debts, “You will only get back three quarters of your money or interest.”

David Tredinnick (Bosworth) (Con): Surely if the Greeks had the drachma, which was valued at much less than the overvalued – from their point of view – euro, they would be able to stimulate the economy, and many of us could perhaps go there in the summer and help them to do it.

Mr Redwood: Indeed, and even in this new possible age of austerity, and even with a September sitting, I am sure that it would be possible to fit in a visit to Greece. That is exactly the kind of help that the Greek economy needs, and it would be much more attractive if they had a devaluing drachma – so that we could buy ouzo rather more cheaply. So my hon. Friend’s point is, of course, absolutely correct.

There are these very important differences, therefore, but the message to Britain has to be that we cannot go on printing and devaluing ad infinitum. There comes a point where the markets pull the rug from under us and say, “This is extreme – you cannot do this anymore.” There comes a point where we will be effectively reneging on our debts, because we will be devaluing the currency in which we are repaying them by so much.

That is why I so strongly welcome the clear response of the coalition Government to put at the top of the Queen’s Speech the need to take action to tackle the deficit, and why I think that they are right to have three phases. We saw the first phase on Monday – the down payment of £5.7 billion net – and we will then have the emergency Budget, which I hope will include some guidance on how we are going to get the deficit down in the medium term. We will then have the really important work, in the autumn, when the Government have had time to do the full-scale public spending review that the previous Government ducked out of and declined to do at the appropriate time. We will then be able see the proper trajectory for spending, which will be important for curbing the deficit.

I want to see the euro stabilised. However, it will be difficult to do that, because it was not wise, as many of us said at the time, to include Portugal, Spain, Ireland and Greece in the euro area. The euro works fine for France, Germany, Benelux and Austria, but it is difficult to get it to work for such a diverse grouping. However, the United Kingdom Government have to allow the euroland members to take more direct power over the euroland economies, because a single currency cannot work unless there is a single budgetary policy and controls over the amount that those countries borrow. They are all borrowing in the same currency. It is like sharing a bank account with the neighbours, where we need to control how much the neighbours spend, otherwise there will be an awful shock when we see how they have flexed the credit card and the overdraft. We need to let those countries have such power, so I hope that the Government will offer advice and assistance.

I would like us to get some powers back for ourselves, at the same time that more powers are being taken for the centre. However, it would be quite wrong of Britain to be obstinate and say that the centre should not have those powers. It is in our interests that the euro should work, and the only way that a currency union can work is if there is centrally controlled budgetary discipline and central agreement on how many euros are printed-some more will probably need to be printed now-in order to get out of this mess and get reflation going in those economies.

However, I am, of course, much more concerned about the prosperity of this country. I am conscious that although we need to control the deficit and take the measures that I and others have often argued for, we are not going to get out of this mess unless we have the strong private sector recovery that I and others are now referring to. I would therefore say to the coalition Government that they need to spend as much time on regulation, tax and other matters that affect the rate of growth of the private sector economy as they spend on curbing the spending problems in the public sector. The two need to go together. It is not a good idea simply to cut the public sector, if we do not create the conditions for strong and good growth in the private sector.

Let us take the sensitive issue of tax. I have been doing a little research on the topic of capital gains tax. I share the Liberal Democrat and Conservative coalition Members’ wish to raise more money from capital gains tax. That might come as a shock to many of my parliamentary colleagues, but in this situation we need to tax the rich more. They have more money and we need more money to come into the Treasury; we need to tax the rich more. However, the result of my researches shows that the way to get more money out of capital gains tax is to lower the rate. The figures are quite dramatic, although it is easier to see the effect in the United States of America than in the United Kingdom, because there have not been so many fiddles and changes in the way that capital gains tax is levied there as we have had here. We have had indexation, business relief and all sorts of complications, although the British series, as adjusted, seems to bear out the same case.

In America in the early 1980s, there was a period of cutting capital gains tax rates, down to 20%. Capital gains tax revenues hit a massive high in 1986, on the back of the lower, 20% rate. The Americans spent the next part of the 1980s hiking up capital gains tax, from 20% to, I think, 33%, and the revenues collapsed, but they did not get the idea. However, in the ’90s they returned to a more common-sense policy and the revenues picked up again. By the 2000s, the Americans decided that even 20% was a bit high for maximising the revenue, so they took the rate down to 15%, which is where it is now, and revenue surged. The 15% rate seems to be much nearer the optimum, producing far more tax from the rich in the United States than 20, 28 or 34% produced.

Mr Graham Stuart (Beverley and Holderness) (Con): My right hon. Friend is giving a master class in economics that, sadly, the Opposition failed to listen to in all their years of taking us to this current low ebb. Is he sure, however, that when the rates of capital gains tax are lowered, people will not simply manufacture a way of turning income into a capital gain, in order to avoid taxation elsewhere? If that were to happen, the gain might not be entirely real.

Mr Redwood: Those periods were also periods of surging income tax receipts, which demonstrates that this is good for enterprise, profits and jobs. We need more profits, more savings, more investment and more jobs. If we tax things more lightly, we get more of them. If we tax them more heavily, we get less of them. The enthusiasts for high taxes in this House have always said, “We must put up the taxes on petrol to stop people driving so much, and we must put up the taxes on smoking to stop people smoking so much.” So, presumably, putting up the taxes on enterprise will stop people being so enterprising. That must be the logic.

Mr Nigel Evans (Ribble Valley) (Con): I am enjoying my right hon. Friend’s contribution. Did not Margaret Thatcher prove this point when she was Prime Minister? By reducing the level of tax on the top earners, she increased the amount of money that flew into the Exchequer.

Mr Redwood: I am grateful to my hon. Friend for reminding us of the great lady; she was a great Prime Minister. I not sure, however, that that is quite the model we need to persuade those on the Front Bench of a coalition Government. That is why I am drawing on more modern and foreign examples. My right hon. and hon. Friends will understand that we need good friends, because we must win this argument for the sake of our country’s prosperity.

I know a number of people whom I describe as entrepreneurs on strike. They have been very successful in business and they are now in their late 40s and 50s. Many of us would feel that they were still quite young- [ Interruption. ] They are also very energetic, as some of us are. They are on strike at the moment, however. They have loads of money in the bank or in a portfolio, but they do not want to commit it to a new business in Britain because they find the atmosphere here too hostile. They think that there are too many regulations and controls, which they find too burdensome. They also find the tax structure too uncertain. They feel that, if they are going to venture their money and work 12 to 14 hours a day to break in a new company and make it a success, they do not want to be paying 40 to 50% tax after five years if the company is working. They know that the Treasury will not be sending them half their losses if the business has not worked, and they feel that it is easier not to bother. They are saying, “I’ve got enough money, I can live quite comfortably, and I’m on strike.” Hon. Members might dislike strikes, as I do, but we have to work alongside them and with those entrepreneurs. This proves the point that if we want to stop something, we tax it. Please, Government, do not stop enterprise, venturing and new developments.

That brings me to my final main point, colleagues will be pleased to know. It relates to an excellent Bill proposed in the Queen’s Speech, which has been championed by my new friend, the Deputy Prime Minister: the great repeal Bill. I was delighted to learn that this was a Liberal Democrat idea. I cannot remember how many times I have urged that this House introduce a great repeal Bill, but Liberal Democrat ideas are not always wrong and I am delighted to give them ownership of this one, as long as they will do one thing for me. That is that they should work with us to make it a really good repeal Bill.

There are many things that we need to repeal. I shall not go on about them at huge length, because other colleagues wish to speak. I have sent the Deputy Prime Minister 27 proposals for the great repeal Bill, and they are also on that well-known website, johnredwood.com – I hope that I am permitted a commercial in this hallowed Chamber. If colleagues think it a good idea, they too should write to the Deputy Prime Minister with their pet ideas for the great repeal Bill. We do not want Ministers to come to the Dispatch Box with half a dozen perfectly good ideas, and then to say, “Well, we had a consultation, but nobody had anything else that they wanted knocked out.”

I am sure that colleagues have their own ideas, and they should please put them in. If they do not, I do not mind them borrowing all the ones from my website. I do not expect any praise or attribution. They can even put in their letters that they do not like me, or perhaps that they agree with me. They can put in whatever they wish, if they think that it will help to get their message across. We need to bombard the Government with as many ideas as possible while they are listening and trying to construct the great repeal Bill.

Mr. John Redwood (Wokingham) (Con): Before he sits down, will the Minister please supply the House with the figures showing what difference those measures will make to the revenue forecast for the immediate year?

Mr. Timms: I can give the right hon. Gentleman some of those figures, and we can perhaps return to individual figures when we consider the amendments that I have tabled. The total gain to the Exchequer from the higher rate of cider duty in a full year would be £15 million. The landline duty will start in the course of this financial year, but in a full year it is estimated to raise, from memory, £175 million, to be used in ways that he will know about. I am not sure whether there is a score against clause 58, but there is a score against clause 65 and schedule 21, which deal with furnished holiday lettings. Again from memory, if the provision was left unamended, the impact for the Exchequer in a full year would be in the order of £30 million.

Mr. Redwood: I cannot allow the Minister’s last observation to go unchallenged. How does he explain the extraordinary decisions first to starve the money markets of funds in 2007 and weaken the banks, and then to publicly demand that the banks raise more capital too late-when they could not do it-and to jeopardise them or bring them down? How can that be described as calling the shots correctly?

Mr. Timms: I refer the right hon. Gentleman to an experience that he will remember very well-that of the recessions of the 1980s and 1990s. In both those recessions, when the global circumstances were much less difficult than those that we have experienced in the last couple of years, the number of people claiming unemployment benefit rose to 3 million. At present it is a little over 1.6 million: it has fallen over the last few months. During the recession of the 1990s, business failures were running at about twice the rate at which they have been running during the current recession. At its peak, the number of home repossessions was 75,000 during the 1990s recession. At the beginning of last year, the Council of Mortgage Lenders predicted that it would be 75,000 again, but I believe it was 43,000.

I think it is clear that the approaches we have adopted to the problems encountered around the world have been the right ones, and have greatly limited the damage that would otherwise have been suffered. Indeed, much less damage has been suffered than was the case in the 1980s and 1990s. The Finance Bill keeps us firmly on the right track, and I commend it to the House.

Mr. Redwood: Will the hon. Gentleman clarify what the Liberal Democrats think about the wisdom of making cuts of £700 billion on the RBS balance sheet in a single year? The Government shrank the balance sheet by that amount-it is half of national income, judged by UK standards-so what impact will that have on tax revenue and activity levels?

Matthew Taylor: I will not go into the technicalities, but we need to be straight about the balance sheets and to tackle the underlying problems in the banking sector. We need to separate the investment and gambling side of what the banks do from the retail side, and we therefore need substantial further reform.

Mr. John Redwood (Wokingham) (Con): I remind the House that I have declared in the Register of Members’ Financial Interests the fact that I advise an industrial and an investment company.

This is a disgraceful end to a dreadful Parliament. Tonight, we are invited to hasten through the large and contentious Digital Economy Bill, which we were able to debate only briefly yesterday, revealing the degree of disagreement about it. At the same time, we are given a very short time to debate Second Reading of the Finance Bill, and several other Bills have been rushed through today.

Of course, Ministers are right to say that any Government coming to the end of their term or seeking re-election in springtime may need to put a Finance Bill through Parliament quite quickly, but the convention has always been that if they need to do that, they put through a short, basic Bill, just to keep the revenues flowing in, and they make the big decisions in a later Budget, when there is proper time for a big Bill and proper scrutiny.

It really does beggar belief that we have been placed in this invidious position yet again. Most people in this country who are interested in politics have had 6 May in their diary as the general election date for many months. It appears that the only person in the country who had not got that clarity of view was the Prime Minister, but he got there in the end, and decided that the election would indeed be on the date that everyone else had put into their grids, plans and media schedules. So why on earth did the Government not hold the Budget at the beginning rather than the end of March? Why on earth, having held a late Budget, did the Government not get on with a more rapid preparation of the Finance Bill? In the past couple of weeks, when the House has not been that busy, we could have had a stab at debating it properly.

I do not object to having a Finance Bill that keeps the revenues coming in over the election; of course I understand the need for that, given the amount that the Government are spending and having to borrow. But I do object to being given 167 pages of Finance Bill on almost the last day of serious parliamentary business, and to being told that there will be just a few hours in which to debate all its stages.

My hon. Friend the Member for Fareham (Mr. Hoban) and his Front-Bench colleagues wisely said to the Government that they must strike out three of the nasty little tax increases and new taxes that they wanted to place in the Bill, and I am delighted that the Government have agreed to do that; that is an improvement to the version of the Bill that we have in our hands for this debate. So recent was the agreement that we do not even have the right document to debate; the one that I have still does not have the necessary changes or amendments to the Government’s line. The Government must have known that the Opposition would not let through the new taxes or tax changes, which would have had adverse effects on important groups in our country, yet we are still given a text that implies that those measures will be introduced.

Like my hon. Friend the Member for Fareham, I welcome lowered bingo duty, the exemption from stamp duty and the other few crumbs in the Bill that recognise that Britain is now a grossly overtaxed country, and that high taxes are now an impediment to enterprise, growth and success-things that all Members here surely want. However, we had to listen to the Minister wandering off the subject and saying, in his opening remarks, that the Government got every economic call right, and I find that very difficult to accept.

This is the Government who said that they had abolished boom and bust, but they put the economy through the biggest boom and bust that any of us have ever seen in our lifetimes-a boom and bust far bigger than anything inflicted on this country since the great recession of the 1930s. This is the Government whose calls included building a debt mountain in the public and private sectors with easy money and low interest rates up to 2007, and who then decided to trigger an avalanche of debt collapse and collapsing asset prices by withdrawing all the money and restricting the banks too late in the cycle. That threatened the banks themselves and brought the system almost to its knees. This was the boom-and-bust Government to beat all boom-and-bust Governments. This is the Government who did unparalleled damage to our economy, yet the Minister dares to come here this evening to make party political points about how they got everything right. He should be concentrating on this mean and miserable Finance Bill, which he wishes to rush through without proper scrutiny.

Why do we need proper scrutiny of a Finance Bill? We need it because many people’s livelihoods and working futures depend on the tax legislation that this and other Governments put through Parliament. Every one of the clauses could create joblessness, difficulty for a business, or problems for someone trying to wrestle with the complexities of an economy scarcely out of recession and performing very lamely and badly.

The Bill ranges extremely widely. We are asked to agree to items on income tax, corporation tax, capital gains tax, stamp duty land lax, inheritance tax, alcohol and tobacco duties, vehicle excise duties, fuel duties, environmental taxes, gambling, new taxes, losses and capital allowances, charities, the remittance basis relating to taxation, and international tax matters-and I am not even halfway through the list that we are invited to consider.
It is an insult to the people we represent, to the House of Commons and to democracy that the Government say they wish to strengthen that we are given this very shortened time when most colleagues wish to be back in their constituencies, starting to dust down their campaign plans, or carry on with the campaigns that some have already started, for obvious reasons, particularly those who worry about how their electorate might respond to the way that the Government whom they support have been handling events.

It is difficult to allow all this to go through without proper scrutiny because it means that none of these clauses has been properly tested. We have not had the chance to consult experts outside on whether each of the clauses will do what the Government intend, and we have not been able to consult people who will experience the impact of those clauses to see whether what the Government intend is fair and reasonable, given the parlous state of the British economy as we meet here this evening.

Mr. Cash: Just to take one example, which I hope to come on to in a moment, does my right hon. Friend, or could anybody, including the Ministers, have the foggiest idea what the “appropriate pension increase” is when it is defined as (ACP x CAPARF) – (UOP x OAPARF)?

Mr. Redwood: Indeed, that has defeated me, and my hon. Friend is right to point out that that is exactly the kind of complexity that in a normal Committee stage we would ask a Minister to explain, and a good Minister would be able to explain it and a not-so-good Minister would know an official who could help to explain it, and we would also have had the chance to consult people who are experts in the field so that we could either pass over something quickly because the experts said it was perfectly reasonable, or they would say it would not work or would have unforeseen consequences. The inability to give it such attention will doubtless mean that the Government and their successor will come to regret the legislation, and will doubtless mean that some future House of Commons has to reopen these issues and put them right.

There is also a very complicated formula relating to capital allowances on page 81, similar to the pension formula that my hon. Friend read out. I will not detain the House by reading it out, because it is quite obvious that no one here today is equipped to discuss it sensibly. It means that these complicated matters will go through on the nod, not only with insufficient explanation but probably proposed by Ministers who have not teased them out and understood them fully, and certainly approved by a House of Commons that has not had the chance to do its normal job.

Voters elect to this House a variety of people with a range of experiences, talents and skills, and often individual Members have the experience needed to tease something out. But the complicated area of tax law, where the whole panoply of accumulated tax law is enormous, thanks to this Government’s legislative energy, is one area where we all feel that we need some professional advice before we can do our job of scrutinising the Finance Bill.

Mr. Cash: Does my right hon. Friend agree that part of the problem is not just the complexity, but the consequence for and the burden on the taxpayer, who then has to employ accountants, lawyers, QCs and so on, at enormous expense, which thereby reduces our ability to be an enterprising nation?

Mr. Redwood: I entirely agree. I favour lower taxes because they are fair and raise more revenue, and I think they raise more revenue for that very reason. Lower and simpler taxes impose less of a burden on people, who are then more willing to work harder and do not have to spend so much of their working time dealing with complicated tax issues to avoid falling foul of growingly complex and difficult to understand legislation.

We are now in the position where many people subject to a specialist tax in their area cannot understand the formula or the rationale and need to take on expensive tax advice to comply with the legislation. This can apply to quite small businesses that do not have that kind of resource and are not used to employing expensive accountants or lawyers but are forced into doing so by the enormous complexity.

So it is with a very heavy heart that I see that the Government’s dying wish is to go out as they came in and be remembered as the Government who did more than any other we have known to add to the volume of tax legislation and the complexity and imperfect working of the tax system. Many Governments have queued up to win that prize, but this Government have beaten the rest of them hands down with their doubling of the length and complexity of the tax provisions in this country. To slide out 167 pages, 71 clauses and attached schedules this late in the Parliament, and then to offer us no time in which to probe or examine them, is typical of them but a complete disgrace.

The time available this evening does not permit me to go through the Bill even generally, clause by clause, much as I would like to and my colleagues would be grateful if I did not. However, that illustrates what is wrong with the situation: a 71-clause Bill, tackling every major tax and quite a few minor taxes in the country, with a view to changing them in some way and often to increase the amount of money that they raise, will not be properly scrutinised because of the way the Government have decided to behave.

The Government claim to have made all the calls correctly but they need a Finance Bill to raise more money. This, of course, is not that Finance Bill, because it is the pre-election Finance Bill, and we have already heard from the Minister that it does not include one of their main tax-raising proposals, which, if they win the election, will be the national insurance tax increase. So we know that the Government would have to come back to the House with more tax-raising legislation, but we know also that, even with their limited ambitions for deficit reduction in the next year or two, there is still a big black hole in their total figures. We know that the Budget, when delivered, did not have a proper statement of spending plans and cuts. There was a global figure for many cuts, but we do not know where they will fall or how they will be handled. And we know that there was a global figure for tax increases. The Government will say that this Bill does some of the work on that, but it in no way covers all the increased tax revenue that they have forecast, because they wish a bigger share of the deficit reduction to be achieved by tax increases than the Conservative Opposition do.

Sir Nicholas Winterton (Macclesfield) (Con): My right hon. Friend has just mentioned the imminent increase in national insurance, although it is not part of the Finance Bill. Surely, however, that must be part of our debate, because it will affect employment in manufacturing and commerce. At Prime Minister’s questions today, the Prime Minister made great play saying that the increase was necessary to provide for education and the health service, but what is more important: increasing our manufacturing capacity and output, and thereby increasing our tax revenues; or harming manufacturing industry merely to sustain what are, I accept, important-education and the health service?

Mr. Redwood: Madam Deputy Speaker, I do not think my hon. Friend was in the Chamber for your very wise advice to others in this debate-that we must stick to the contents of the Finance Bill, or to the things we would like to see in it, because some of us would have liked to move amendments to improve it, but we will not be able to do so owing to the restricted time. I fear that, because national insurance will be legislated for differently, it does not strictly fall within that remit. However, I think my hon. Friend stayed in order, because he wisely said that the national insurance increase could have such a damaging impact on the general state of the economy-it will definitely restrict growth and it is a tax on jobs, as even Ministers admit-that it could damage the revenues for which the Bill makes provision.

At the beginning of the debate, I tried to tease out of the Minister by way of an intervention what he thought the revenue loss would be on his figures if we struck out or modified the four clauses to which Opposition Front Benchers object. He said that in a full year he thought it would cost £220 million. However, other measures in the Bill and more generally could lose the Government rather more revenue than that, because they have made such an assault on enterprise, business, growth and development that they might find that higher tax rates, far from yielding the increased revenue that their models predict, yield rather less or, in some cases, even lead to a drop. We may well find that there are timing differences on tax payments and that there is a change in the place of residence to which businesses and rich individuals might relocate. The Government might find that they have gone over the top with the rates and will have a problem filling part of their budget black hole through the tax revenue that they will collect if they stay in office.

On all those grounds, this is a very bad Bill. It is not a Bill for recovery, because it does not offer the tax incentives for growth that one would expect to see. It confirms the pattern of taxing more and subsidising more that has characterised the more recent years of this Government’s lack of progress. It greatly increases the complexity and detail of the tax code in a way that is wholly inimical to the wish of honest people to get on with earning a good living and running a good business, as my hon. Friends and I have sought to set out. Above all, it misses the main points because it does not tackle the spending side of the equation, which is being kept secret until after the election, or bring in some of the biggest tax rises that the Government are planning, which have to be introduced in another way.

The Government are now attempting to drive the car of the economy with one foot flat on the accelerator pedal, trying to create as much easy money as possible, and the other flat on the brake because they are trying to restrict the banks as much as possible. That is, of course, the way to go absolutely nowhere. It surprises me that they can present a Finance Bill such as this and say that it is part of a package of recovery, when we have experienced the longest recession of any of the major economies and had about the feeblest signs up upturn. The Government say that that means we have done very well, but it clearly means that we have done very badly. It is quite obvious why-they chose the wrong point of the cycle at which to clobber and restrict the banks. They should have restricted, managed and regulated them properly on the way up and not brought them juddering to a halt as they did in 2007-08.

The Government are still doing that to the banks, as I have been trying to illustrate to Members on the Treasury Bench, by taking £700 billion out of the balance sheet of our leading bank, the Royal Bank of Scotland, which they happen to own. No Treasury Minister has ever explained why they are doing that. This Bill contains provisions for another tax on banks-I understand how popular that is-but does not make provisions for expanding banks. Surely what we need, if we are to have a positive and strong recovery, is banks that can expand their lending to British business and individuals sensibly, so that there is an increase in private sector demand as well as the limited increases in public sector spending that the Government think represent the way to a recovery.

Driving with one foot on the accelerator and one on the brake is the way to go absolutely nowhere. The Government are creating a lop-sided economy with fast-expanding public spending and fast-contracting private sector debt and activity in many areas. That is the way to national bankruptcy. This Finance Bill will not raise anything like enough revenue to pay for the huge amount of spending that they are proposing. Their model of running the economy will not lead to a rapid recovery of the kind that we desperately need, and it will not create the jobs that we need to get people off benefit. That is the type of public spending cut that I would like to see-really big cuts in the social security programme because people have gone back to work or got a job for the first time and do not need benefit any more. Surely that is a cut that we can all agree on, but the Bill will not deliver it because it does not provide the friendly tax environment for business and enterprise that must be required if we are to get a decent recovery.

My right hon. Friend the Member for Witney (Mr. Cameron) made an excellent response to the Budget and reminded the House that, under this Government’s lack of tender care, the UK has gone from being the fourth best tax regime for business in the free world to being the 84th best, which is a dreadful reduction in our tax competitiveness as a result of the measures in this and other recent Finance Bills. That is why our economy is not going anywhere-because of an anti-enterprise Finance Bill and because the Government will not sort the banks out properly. Until Ministers can explain to the House why they have pursued a boom and bust policy towards the banks, we will not have a proper explanation of the mess we are in, and until they come forward with a Finance Bill that is pro-enterprise, we are not going anywhere fast.

I hope that this farce of a Finance Bill will end as soon as is humanely possible. We need a new Budget that does the spending and taxation together and is honest with the British people about both sides of the equation. We need a new Budget that leads to a proper Finance Bill that has rates of tax that might support and promote growth.

Mr. Redwood: I agree with the hon. Gentleman, but can he confirm that while tax is now two thirds of the pump price-the Government’s imposition is a big reason why the price has gone up so much-the huge devaluation of the pound also means that the sterling price of oil has gone up far more than the dollar price?

Stewart Hosie: The right hon. Gentleman is right about the impact of currency fluctuations. He is right that duty and tax amount to approximately two thirds of the price of a litre, but the real killer is in wholesale diesel. Before tax, our diesel is among the cheapest in Europe; after tax, it is possibly the most expensive. From my point of view, as a Scot in an oil-rich nation, I find that quite abhorrent, especially when people are struggling to make ends meet and when we are seeing six rises-a 17 per cent. hike-in fuel duty over two years.

Mr. Redwood: Does my hon. Friend, like me, wonder who the Government think they are fooling? The markets are already making this Government pay a lot more to borrow than the German Government do, because they know that this Government have borrowed an awful lot more than the German Government have.

Mr. Cash: Indeed, that is completely true. I do not claim to be an expert economist by any means, but I am certainly trying to be analytical about the figures that I can see. I sometimes wonder whether the economists are quite as good as they are cracked up to be, because they quite frequently seem to get these things wrong. I acknowledge my right hon. Friend’s point in relation to the veracity that can be attributed to the figures that we are given. As we saw only yesterday, in Greece there is a massive shortfall-

Mr. Redwood: I wonder whether my hon. Friend will be able to catch the eye of the Exchequer Secretary, because I am sure that she would love to intervene to explain this.

Mr. Cash: I do not want to embarrass the Exchequer Secretary. I am sure that she does not have the foggiest idea what I am talking about. I find that slightly alarming, given that we are about to have a general election and all the birds have flown-there is not a single person standing or sitting behind her. They have all flown back to their constituencies and landed the British people with this nonsense, which we are debating.

Mr Redwood: I congratulate my hon. Friends on getting those unpleasant taxes out of the Bill. Will my hon. Friend confirm that, as this is a Finance Bill, the Government, who have a majority in this place, can still do what they like, because the other place cannot stop the Bill?

Mr. Gauke: Of course, the other place does not have a view on the Bill. It is a matter of timing, and I am pleased that those of my hon. Friends who were engaged in negotiations on the wash-up were able to achieve three measures that prevented tax rises. Of course, they are only temporary measures. Stopping them properly is not in our hands or the Government’s; it is in the hands of the British people.

Mr. Redwood: Will the Minister explain why not a single Labour Back Bencher has attended most of the debate? No single Labour Back Bencher has thought it worth speaking on this very wide-ranging Finance Bill.

Sarah McCarthy-Fry: I am sure that our Back Benchers can speak for themselves on why they were not here. They have certainly been involved in the Budget process, and I am sure that they have confidence in those on the Treasury Bench to put the Finance Bill forward.

Mr. John Redwood (Wokingham) (Con): It is a disgrace that the House is not treated with courtesy by the Government. It is quite wrong that a Bill of such importance and magnitude was not tabled earlier. It is quite wrong that there is an attempt to rush through all parts of the Bill without proper scrutiny and debate.

Not so long ago there was general agreement on both sides of the House that the House had not done a serious enough job of scrutinising legislation and providing the kind of commentary and critique of draft legislation that it should. The House was right to understand that there is a concern out in the country that this Parliament, of all Parliaments that I have had anything to do with, has let down the public by not getting sufficiently involved, and not finding a way of making the Government give it enough time to do the job properly.

We have heard from Members on both sides of the House why we need time to discuss the Bill. There may be quite a lot of agreement about some of the important things in the Bill. I am sure that no one in the House begrudges a great artist or creator of music or words fair return for their labour, but many complicated issues are involved in determining how we secure that return without impeding too much on everyone else’s freedoms. It is difficult to do it in the rather clumsy way that the Government have come up with so far in the relevant early clauses of the Bill.

We need scrutiny not just of the things that cause disagreement across the Chamber-there are several of those, as we heard from Front-Bench speakers on both sides of the House at the opening of the debate. We also need scrutiny of the things that the Chamber largely agrees about, because it is in those areas that it is more likely that mistakes will be made-that the language will be wrong and that the Bill will not carry into effect what the House wishes, because the Bill will have got through without the challenge that we need.

It was for good reason that our predecessors in this place said that there should be a Second Reading of Bills to discuss the principles-“Is it a good idea to have a Bill on this at all?” “Broadly, how do we go about doing it?”-then a little pause to reflect on the Bill, and then a Committee stage, on the Floor of the House for important Bills or upstairs for others. Members of the House most interested in the legislation could go through the Bill line by line, mainly asking the question, “Will this particular phrase, clause or line help us achieve the aim of the Government?”-or the common aim where there is general agreement.
This Government have had 13 years to introduce important legislation on the digital revolution. I cannot believe that any previous Government dared to hold a Second Reading of an extremely important Bill after they had announced the intent to dissolve the House as quickly as possible. It beggars belief that this Government could insult the Commons, and the public we represent, in that way so shortly after it was a matter of common agreement that we needed to do a better job of scrutinising, debating and discussing legislation for the sake of enacting legislation that works.

The legislation has 11 principal areas and themes. The debate in this shortened time available for Second Reading may discuss only three or four of them in detail; most will go unremarked, or will be mentioned en passant by speakers mainly interested in something else, because there is not even proper time for a full Second Reading debate, because there were questions, statements and so on before we got to Second Reading and we are all under time pressures to limit our speeches as a result. Naturally, Members are concentrating on the things that are most difficult or that matter most to them, so those of us concerned enough to be in the Chamber will only be able to discuss some elements. It is quite understandable that, now that an election has been called, some Members feel they have duties elsewhere. If they feel that they are not immediately required for a vote, they may be tidying up their affairs or communicating with their constituents. This is not a good time to be discussing something so technical, difficult and important.

One of the big issues that we have heard about so far relates to the powers that the Secretary of State should take under the legislation and the powers that should be delegated to Ofcom to tackle copyright infringement. The House will know that I am the author of johnredwood.com. Members may know that I do not seek to charge anyone for using that wonderful resource about modern British politics, and they may also know that I have received several offers from people wishing to advertise on my site for a reasonable fee and I have always turned them down because I do not want it to be a commercial site.
Like me, many people see the web as a wonderful means for creating a community of people interested in a subject that matters to them. It can create argument, discussion and debate, and provoke ideas, viewpoints and discussion, which is entirely helpful to the democratic process or whatever interest has led people to set up a site. As has been said, even under this rather crude legislation, there is nothing to stop people such as me continuing to offer a free service without worrying about infringement of copyright. I should be happy for anyone to reproduce anything I have written on the site as long as they do not libel me or lampoon it too much. It is perfectly good for people to use the site; it shows that the site is of interest and of use.

However, there are people who are trying to make a living from their creative work and they naturally want a sensible legal framework that enables them to protect their legitimate intellectual property and to continue to make a living. We know that the internet has brought great good. It has involved many more people in many more activities. It informs people much better and enables them to research much more quickly and easily topics of interest to them. It allows communities to communicate one with another and allows events to be publicised. It brings all sorts of goods to local society. I hope Members share the perception that there is much good in the internet and would not want the legislation to damage in any way the good that the internet can do.

Let us think about the comparison with protecting the copyright of an author who chooses to publish their written words not on the web but in the form of a newspaper or magazine article, or a book. In the past, many of us in the House have written articles or books for which we may have been paid small sums. We have some protection in the copyright under existing copyright laws. The House should remember, however, that there is no comprehensive protection in copyright law for the written word published in those ways. If I publish an article or a book, I am sure that people may lend the book or article to others for free, and I have no right to say, “You must not do this. I demand a royalty every time that book or article is lent to somebody.” We do not go that far. We feel that it is part of a free society to allow people to lend books or articles to their friends, family, neighbours or whoever.

It is also probably the case that, quite often in the furtherance of education, the better articles-one hopes-and the better chapters or sections of books are reproduced on copying machines and used as teaching materials that are provided to pupils and students in schools and universities. I am sure that very often the school or university does not bother to contact the author to seek permission and does not bother to ask the author whether they would like a token payment to allow them to reproduce such material. It would be a pretty odd author who got really hot under the collar about that and started to sue the schools, although they could, because they would understand that such activities are quite helpful to them in building their reputation and name in some ways-again, assuming that their work is not lampooned or completely shredded-and one has to live in a free society and we want people to be educated. We should approach any suggestion that we need tighter regulation of the internet with that in mind. We are not looking for something completely comprehensive. We need to live and let live.
Quite a large number of people outside the House are worried about our rushing through, for example, clauses 10 to 18 tonight-if that is a serious proposition between the two Front-Bench teams-because although if many of those people were challenged they would probably say, “Yes, of course, someone who has sung or written a great song should get some money for its reproduction,” they are very worried that we will criminalise people who are doing very minor things that are quite normal to do with, for example, copies of magazines and newspapers, that we will get the wrong people, or that the person who has a series of internet facilities in an organisation will be picked on when they cannot control the use of such material or cannot even establish who used it or whether it was a persistent offence.

A lot of this could be sorted out if we had time to go into the detail and if we had time to examine the language that the Government propose, to discover whether they have got the balance right. All hon. Members would agree, from whichever direction they approach this argument, that we need a balance. No one says that there should be no copyright at all for anything. No one would take the opposite extreme and say that, every time that anyone says, does, sings or whatever anything, that creates an important copyright that they should be able to defend against everyone. That would be ludicrous, and it would greatly extend our traditional copyright law on newspapers and books. We need a workable compromise.
I will not have time to consider these clauses in any detail, I am afraid, because my time will be artificially restricted by the guillotine and the proposals for today, although they are wide-ranging enabling clauses. If people are worried, such clauses lead to greater suspicion. We are invited to believe that, under the orders that will implement these wide-ranging clauses, provisions will be made that will produce such a judicious balance. We are being asked to buy a pig in a poke, or to sign a rushed cheque against an invoice that we have not been sent. That is not good practice. We need more from Ministers to persuade us that they have thought through these complicated issues about balance and that they have in mind practical orders that would not make unreasonable intrusions into the freedom of those who provide such web and internet services and would not restrict the rather minor examples of freesharing that are common in a free society and that one needs to be able to enjoy.

Richard Younger-Ross (Teignbridge) (LD): Does the right hon. Gentleman accept that any draft orders under the Bill, if it goes forward, should be amendable? My hon. Friend the Member for Bath (Mr. Foster) intends to make that proposal, and we hope that the Secretary of State will take it on board.

Mr. Redwood: That would be most unusual. I have served on a good many order-making Committees in my time, and one of the most unsatisfactory things is that it is a take-it-or-leave-it process and the Government always say to vote to take it. So we can argue an extremely fine case and say that sentence 3 should be rephrased in the Government’s interest, and they will still do absolutely nothing about it because the junior Minister does not have the power or the interest and intends to ram the order through in its current form. That naturally leads to suspicion, most obviously among hon. Members, but also outside the House. If we leave all the big judgment calls on the censorship of the web-this is really about censorship-to a set of orders that we cannot see and do not know about, it is asking too much, this close to a general election. This is extremely sloppy work, which we all find very worrying.

I am glad that my hon. Friends who sit on the Front Bench find some things in the Bill with which they profoundly disagree. I am tempted to say that the Government should take the whole thing back and do their homework properly, and it would be for the new Government to sort all this out when they are chosen by the British people on 6 May, but I understand that the mood of the House is to try to reach some kind of accommodation. I urge my hon. Friends to be extremely firm, because we have absolutely no need to take half-baked and ill thought-out legislation from the Government this late in the day, when it is their fault that we are in this position, as they had five years and a thumping great majority to put any sensible proposals through the House that could have come to the relief of the creative industries. They chose not to do that, and they are now attempting to bounce us at 5 minutes after midnight, when it is already well known that the House is closing down with the current management and all will be put out to the electorate to decide who should run it in the future.

My hon. Friend the Member for South-West Surrey (Mr. Hunt), who initiated the debate for the Opposition, very wisely said that the Government are showing their true socialist colours and that all they ever believe in is more taxes, and there is more tax in this legislation, more regulation, and there is tons more regulation for Ofcom of a kind to be specified later in orders, and more subsidy, when all else fails or when they are trying to do something that the market and the general public are not sufficiently interested in for it to be a commercial proposition. The Bill has all three elements. That is surely another reason why my hon. Friends who sit on the Front Bench should be extremely sceptical about allowing great chunks of the legislation through, when there is concern outside and a lack of precision in the legislation, when these unwelcome features will intrude into an area of business and social life that is a great success in this country under the current regime, which is perhaps a little chaotic, and when we should be proud of so much achievement in the world of the web and in the creative industries that we see outside.

Unfortunately, my time is up. I wanted to speak about half a dozen other important elements of the Bill, but I am not allowed to do so, only because the Government, once again, so hate the House of Commons that they will not give us time to consider these measures properly.

Mr. John Redwood (Wokingham) (Con): I remind the House that I have declared in the Register of Members’ Financial Interests that I provide business advice to an industrial group and an investment management company.

This was the go nowhere Budget-it was almost the do nothing Budget. It was also the dither and fiddle Budget. I sometimes think that Ministers have still not understood how big an economy they are seeking to influence and how much money and resources they command, now that about half the entire national income goes through the public accounts under their mismanagement. It is, for their information, a £1.4 trillion economy. This Budget provides, on their scoring, a stimulus of £1.4 billion for the first year and a small reduction in the amount of resource available from the public sector in the following two years. Even at the peak of the Chancellor’s proposed intervention this year, therefore, he is playing with 0.1 per cent. of the national income, so we can immediately see that this Budget is not serious. It is not trying to change anything real in this nearly moribund economy, nor is it trying to do anything big to stimulate growth or recovery.

Stewart Hosie: Have the Government’s horizons not shrunk even further, if one considers that the total managed expenditure for 2010-11 is £2.7 billion off what they forecast even in the pre-Budget report late last year?

Mr. Redwood: The hon. Gentleman is quite right.

I also agree with the hon. Member for Middlesbrough (Sir Stuart Bell) when he rather kindly said that he saw the Leader of the Opposition as a new manager coming in to take over an ailing football club. He was absolutely right that the UK Government football club, under its current management, has slipped down several divisions and is facing further relegation. He is absolutely right that there are no star players who can win matches. He is also absolutely right that the wage bill is bloated and gross, and that the club is facing bankruptcy. Indeed, the club has all the conditions, which the hon. Gentleman perhaps did not have in mind, for better and new management.

Sir Stuart Bell: And what will the right hon. Gentleman say when the club is relegated?

Mr. Redwood: What we need is new management to stop further relegation. The hon. Gentleman should understand how far this country has already been relegated, as my right hon. Friend the Leader of the Opposition said in his passionate and eloquent speech today, when he pointed out that a country that was fourth in the world for competitiveness-which means more jobs, more exports and more ability to make a decent living-has managed to sink to 84th in the world under this Government, with their too many taxes and their too many regulations.

To understand why our economy has suffered so badly and is not growing rapidly, we have to understand the nature of the national and public finances created by the disastrous mismanagement of this Government. It is now easiest to understand the national finances as being two rather large banks, under Government control and with substantial Government shareholdings, with a medium-sized Government attached. That is because the two banks that the Government partly or wholly nationalised are considerably bigger than the national income-or they were when they took them over-and we need to understand what is happening in those banks in order to understand the background to the Budget, what is happening in the national finances and why the recovery is so sluggish. Unbelievably, the Government proclaim that they have created sustainable and stabilised banking, in the Chancellor’s words, but in fact they have done exactly the opposite, by their blundering into owning so many bank shares and their inability to manage those banks properly.

Over the past year, to December 2009, the Royal Bank of Scotland slimmed its balance sheet by £700 billion. When it was taken over by the state, RBS started with a balance sheet of £2.2 trillion, or one and a half times the national income. However, at the end of last year that had fallen to £1.5 trillion only, just a little over the national income. When I asked the Prime Minister about that recently in Prime Minister’s questions, he seemed to be completely unaware of that fact. One would have thought that it was the dominant economic fact that might concern him and his colleagues. At a time when they say they want growth and expansion, their bank-the bank they took over and they say they have stabilised-has shrunk its balance sheet by £700 billion, or by the same amount as total public spending in the year.

Of course, the bank shrunk assets and liabilities and was reducing risk. Of course, some of that had to take place. Some of it involved withdrawing loans in overseas economies and not in the British economy, because RBS is a global bank. I put it to the Chancellor and to his representative, the Financial Secretary to the Treasury, who is left to hear the debate, that they will not have a vigorous and strong recovery if the biggest bank in the country, under regulatory and ministerial instructions, is all the time slimming its balance sheet that rapidly. Although a lot of that slimming took place through instruments other than loans and although some of it was not in the UK, all of it is withdrawing liquidity, risk management and financial instruments primarily from the business sector, which is bound to have an impact.

To reinforce that process, Lloyds bank was doing something similar on a more modest scale. Lloyds was a £1.1 trillion bank and by the end of last year it had fallen to a £1 trillion bank-it had taken £100 billion out. Between the two banks that the Government owned, £800 billion was withdrawn. We know from the corporate plan and from the remarks of the chief executive of RBS-approved by the Government, who are the principal owners-that another £300 billion will be taken out of the balance sheet of RBS over the current year. Again, I put it to the Government that if that is the plan, although it might make business sense-I presume that the aim is to turn the thing round into a profit-making bank by getting rid of risk-it is not good news for the British corporate sector trying to use RBS as well as Lloyds. It will make it almost impossible to meet these ministerial exhortations and targets to increase lending.

The Lloyds reduction of £100 billion was more damaging in a way, because Lloyds does rather more lending and has rather more assets in the UK relative to the size of its balance sheets, and £50 billion of the £100 billion Lloyds slimming was a reduction in loans. It does not tell us in the figures that I saw how many of those were outside the UK, but clearly quite a bit of it was UK lending. At the very time when the Government told us they had nationalised the bank to stabilise it and to allow it to lend money, it was doing the opposite and going through a severe restructuring that entailed lending less.

That is the fundamental reason why this economy is not going anywhere: the banks have been broken and they are being nursed back to health in a way that contracts rather than expands activity. I do not know why the Government cannot see that, although I can understand why they never want to talk about it. They pretend that they are not responsible for this £2.5 trillion of assets at risk and that it is somehow nothing to do with them, yet come the Budget they say, “We stabilised the banks. Job done-no problem. All is well.”

Mr. Mark Todd (South Derbyshire) (Lab): I am intrigued by the right hon. Gentleman’s analysis. I share some of his thoughts, but by extension I assume that he is suggesting that we should have a much more directive role in running RBS and Lloyds, and should perhaps seek to foster an underpricing of credit to the business sector. Is that what he is really thinking?
Mr. Redwood: I would be very happy to make a positive recommendation because I would like my country to recover quicker and for there to be more jobs and prosperity. I suggest that instead of mouthing the words “countercyclical regulation” but doing the opposite, the Government should try some countercyclical regulation. I and a few others were telling them in 2006-07 that everything was overheating and that they should have tightened the regulation of the banks. They did not; they made a big mistake. What we are now saying-those of us who have got the cycle right-is the opposite. They are now tightening too much at the bottom of the cycle. We must be somewhere near the bottom of the cycle-I hope that we are through the bottom of the cycle and have just begun to turn up. This is the point at which they should be relaxing the regulatory controls on cash and capital, particularly for the two nationalised banks, which nobody is going to worry about because they know they will just print whatever it takes to meet the obligations of those banks.

The regulator should be told to think countercyclically. The cash and capital controls should be relaxed at this stage of the cycle and tightened in a couple of years’ time when the recovery is under way.

Mr. Todd: Perhaps the right hon. Gentleman could develop this point a little further and set out his view of our obligations to the shareholders who are not the taxpayer in the two institutions he is suggesting a direction for.

Mr. Redwood: I think our prime requirement in this House is to look after the interests of the taxpayers who have funded these banks and who are principal shareholders in them. Of course, in company law there are responsibilities to minority shareholders not to oppress them. What I have suggested is to change regulation of all banks so that it does not favour or target nationalised banks in particular. That would help the banks and would be in the interests of the minority shareholders, as well as the majority shareholders, because it would be permissive and would allow the banks to have bigger balance sheets for a bit, which would allow them to make more money. This contractionary impact on the balance sheet must be bad news for the shareholders. Of course, the banks need to be more prudent than they were in 2007-08, when the Government helped force them into difficulties, but making them super-prudent now is not serving the interests of recovery or the national economy.
We were told by the Chancellor in the Budget statement that we were not going to be losing any money on these banks and that they had been a very wise investment. That is not what the Red Book says. It points out, quite accurately, that there have been £60 billion of losses so far and that when it was written-presumably very recently-we were sitting on a £12 billion loss on the shares in RBS and Lloyds. That is double the loss on the early gold sales and confirms the Prime Minister’s record as a rather bad investment manager, because he seems to sell at the wrong price and to buy at the wrong price.

Let us hope that we can work our way out of it, but there is no immediate sign of the Lloyds and RBS share prices getting to the point where they are not only above the taxpayers’ purchase price, but sufficiently above it and sufficiently robust to accept dumping all those shares back on to the market to find willing buyers. If we look at these banks’ profit and loss record, that is not at all surprising. Of course, since they have been under Government influence, we have had losses of £8 billion in 2008 and £2 billion in 2009 in RBS, and of £6.7 billion in 2008 and £6.3 billion in 2009 in Lloyds.

Again, we are not told this in any public statement by Ministers; we are not even told it properly in the Red Book. When we are the majority shareholder in RBS, those RBS losses are our losses. When we are the most important minority shareholder in Lloyds, a big chunk of those losses are our losses. Ministers should do rather better than just coming to the House and saying, “We have got these lovely bank shares and we are going to sell them one day at a profit.” Lots of investment managers would like to be able to claim that about their worst investments, but what we need is proper analysis of what has gone wrong with those bank shares so far, how the Government think they will start making decent returns on capital, and how that might provide a background for getting some of the taxpayer’s money back.

It was very fortunate for the Government that Lloyds decided to give an unusual interim update on its trading position very recently, before the Budget, and I believe it is giving another briefing today, at the very point at which we are debating the Budget. It would have been a courtesy to the House if Ministers had shared those very important statements with the House-both the one updating on profits, which was positive, and the one today, which I do not know about because I have been in the House listening to this debate. Given that we have such a huge financial interest on behalf of taxpayers in these banks, surely the Government should report to us in a detailed way on what is happening. It is a matter of great public interest. We are invited to debate £1.4 billion of petty cash, but we are not allowed to debate the changes worth hundreds of billions of pounds in the balance sheets of these very large banks.

The economy is not recovering at anything like the pace that any of us would want. Most private-sector forecasts say that the recovery will be very slow and drawn out. As my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) noted, Governments of both parties trying to get out of recession have cut public spending pretty early on, and that has fuelled and helped extra growth. That is what happened in the 1970s: a Government of the Labour disposition were reluctantly forced into cuts by international bodies, and that allowed growth to take place.

The same thing happened, winningly, in 1981 and 1992, when Conservative Governments realised that controlling the public-sector deficit was an important part of freeing resources, keeping interest rates down and creating more money in the private sector. It was literally from the day when the Government announced public expenditure controls that the economies at those dates took off. They grew far more positively on those three occasions than has been the case with the fitful recovery that started in the final quarter of last year.

The Government need to understand that they have a very serious problem that all their remedies are making worse. Taxing more undermines confidence: taxing rich and successful people more means that they go abroad, and taxing businesses more means that they work less hard, or that they close down in this country and take their activity elsewhere.
Ministers must know that this is happening. It is not a scare invented for the sake of the debate by someone who believes in free enterprise; it is what is actually happening in the £1.4 trillion economy that they are trying to influence. Ministers should get out more and understand what the threat to this country is.

The Government have racked up these enormous debts, and we have got into the incredible position where £1 of every £4 spent in the public sector is now borrowed, or borrowed and printed. As my hon. Friend the Member for Chichester (Mr. Tyrie) remarked, the printing has to stop some time. It may have stopped already; the Bank of England has certainly put it on pause.
When the markets believe that there will be no more printing, reality will come home and the impact will be very negative. The Government intend to borrow £150 billion or £200 billion, but the Red Book shows that this year’s gross gilt issue amounted to £227 billion. That is because the Government have to refinance expiring debt as well as finance the extra debt being built up. When the markets realise that the Bank of England is no longer around to buy £200 billion or £227 billion of debt to help things on their way, people will want a lower price at a higher interest rate for lending money to the British Government.

That is why we are so worried. If we allow that process to happen-as Greece, Ireland and Iceland did-the interest burden can spin out of control very quickly and become extremely expensive. The Red Book shows that interest on debt, at £43 billion in the current year, is already a more expensive programme than the defence budget, which is put at £40 billion. However, the cost of the debt interest will shoot way above that-first, because the debt is increasing too rapidly, and every extra bit of debt comes with an interest burden; and secondly, because the interest rate will rise if the Government do not do anything.
The hon. Member for Middlesbrough rightly said that we have not yet been through the embarrassment of a credit rating downgrade, and I hope that we do not go through that. Credit rating agencies know how difficult politics is, from their experiences through the crisis, and it would be very surprising if they decided to downgrade an important sovereign nation like Britain just ahead of a general election. That would clearly be a very political statement, and seen as such. However, the hon. Gentleman should not be too calm in thinking that everything is well, as the markets are downgrading British sovereign debt all the time. He must understand that we are paying 1 per cent., or 100 basis points, more than Germany to borrow money for the same length of time.

Why are we having to pay 1 per cent. more, and is it important? Yes, of course it is important, because 1 per cent. extra on 3 per cent. is a 33 per cent. extra charge on the cost of borrowing money. When one wants to borrow £150 billion-or £200 billion, £500 billion or £700 billion; whatever the total will be when it is all added up-the sums involved are absolutely colossal. In four years time, the defence budget will not be the one main budget smaller than the interest burden: much bigger budgets than that will be smaller than the interest burden, because compound arithmetic will catch up.

All previous recessions have ended when Governments have got a grip on the public finances. The Labour party is of course right to say that no one comes into politics to sack teachers and nurses and make hospitals worse. None of us on this side of the House has ever wanted that, and it is quite unfair to suggest that we do. However, the state employs 6 million people, and front-line teachers, nurses and doctors are only a very small minority. That means that we have to look at the whole panoply of the state’s administration and bureaucracy, and that we have to discover ways to do more for less, as we are running out of money.

Sir Stuart Bell: I am listening to the right hon. Gentleman with great interest. He speaks with great fluency and knowledge, but when he talks about nurses, doctors and all those in the public-sector professions, he reminds me of the words of Oliver Cromwell when looking at the corpse of King Charles I. Cromwell said that what had happened had been a “cruel necessity”: is that what the Conservatives are offering public-sector workers?

Mr. Redwood: I do wish the hon. Gentleman would try to follow the debate a little-he can do better than that. I had just made it clear that Conservative Members, like Labour Members, are proud of local hospitals and schools: they wish for them to be properly financed and do not wish to see a single nurse, teacher or doctor sacked for reasons of economy. That has always been true, and we never sacked teachers, nurses or doctors, whatever the hon. Gentleman may think.

Mr. Graham Stuart (Beverley and Holderness) (Con): My right hon. Friend is coming to the nub of the point on the debt. Our point about the debt is not just about fiscal or other balances, but the fact that if the finances of this country are undermined, future public services and the jobs of teachers, nurses and doctors are put at risk. It is precisely to ensure that we can deliver sustainable public services, particularly for an ageing population, that Conservatives are so obsessed with ensuring that we behave responsibly on finances. This is not because of our fascination with finance, but because of our commitment to public services. We know that irresponsibility such as the Government’s leads to the very cuts that the hon. Member for Middlesbrough and we do not wish to see.

Mr. Redwood: I agree: a stitch in time saves nine. The policy of the hon. Member for Middlesbrough would take us in the direction that Greece followed. Instead of immediately making sensible adjustments to public spending that did not damage front-line services, that country ended up in a panic and a crisis. In the full glare of a market collapse, it had to put through hasty and perhaps ill-judged public spending reductions, probably on a bigger scale, because it was not prepared to take sensible action in advance.

The hon. Gentleman and the Government now believe that there are efficiency savings to be had, and that they can do more for less. I am glad that we have got to that point. For many years under this Government, the House was told that there were no efficiency gains to be had and that they were all will-o’-the-wisp proposals dreamt up by Conservatives; but now-at last-that is common ground. The good news is that incoming Ministers will find, in business terminology, lots of low-hanging fruit. There are many easy things to do to get more for less, because the public sector has not been through the kind of procedures and tests that the manufacturing sector in particular has been through in the past decade. Every year, manufacturing companies have to ask, “How can I get prices down and quality up? How can I serve my customers better and charge them less?” That is not impossible, but one must ask those questions to survive and have a successful and flourishing business in such a competitive business world.

It is now common ground that such things are achievable, but the public will judge who has their hearts in it more to deliver, and who is more likely to have the skills to do so. Not unreasonably, the public will ask, “Why have the Government been in office for 13 years and scattered all this money, often very wastefully, and not thought until now about treating efficiency and improvement seriously?”

Lynne Jones (Birmingham, Selly Oak) (Lab): If there are so many easy ways in which to save money, would the right hon. Gentleman like to tell us a few that he has in mind? Will the Conservatives be spelling out all the cuts that they intend to make, and if so, when?

Mr. Redwood: There are so many of them to suggest, but I do not want to take up the whole afternoon. I would certainly start with identity cards and regional government, and the panoply of controls and restrictions placed on local councils, which create a bureaucracy in Whitehall and in each council. Many of the strategies, partnerships and those kinds of things are all bureaucracy and words. The Conservatives want to spend that money on the teachers in the schools and the nurses in the hospitals; we do not need such a vast army of people to deal with regional government and with instructions, monitoring and audit from one level of government to another. If the hon. Lady wishes to see more detail, she can find it in the economic policy review that I published for the Conservative party some time ago. She will find pages and pages of quangos to cull or slim, and areas of Government work that we do not need to do.

Things have simply got out of control. The Government have put 1 million extra public employees on the payroll, most of whom are not front-line workers. We welcome the ones who mean we get better schools and hospitals, but most are not in that category, and we need to look again at that. What do the Government need to do? If they were serious about value for money, they would have a comprehensive freeze on new recruits today, instead of advertising all those non-jobs in The Guardian every week. If they were serious about controlling public spending, they would understand that they have done the job of catch-up on public sector wages-indeed, those wages, on average, far surpass private sector wages-and so would impose the pay freeze today. Surely it is better to share the work around than to get into a position later where one has to sack people because one cannot afford the wage bill. If one takes on a football club where the wages are too high, it is better to keep some of the players on while one is looking around, but to pay them realistically because that wage bill is the reason why the thing is nearly bankrupt.

I fear that this is not a Budget that will be taken seriously. Most people who are looking at it know that it is a nowhere Budget from a dying Government, and they know that it contains no serious measures that are up to the task of pulling round this extremely damaged economy. More importantly, this Budget contains no measures to tackle the problem of damaged and difficult banks. If the Government really wanted an economic recovery, they would understand that the current imbalance between the public and private sectors-between the finance supplied to the public sector and the lack of finance supplied to the private sector-is their main problem. If they were serious about recovery, they would issue new instructions to the banks that they own. If they were serious about recovery, they would change the instructions through the banking regulator, because that is the main reason why we have gone from boom to bust.

This Government’s epitaph will be that they were the Government of boom and bust. Their boom was created by incompetent banking regulation and their bust was created by even more incompetent banking regulation. They like to say that it is people like me favouring a more deregulated world in the 1980s that has caused their problems, but they should grow up and own up. They changed the entire financial regulation system in 1997 when they came into office. They heaped far more regulatory detail on to the banks and other financial companies over their 13 years in office. The problem was that it was all bureaucracy, bumf and box-ticking, and they missed exercising control of the main thing, which Conservative Governments had always controlled extremely well; we never had banks blowing up and going bust on our watch, because we had one very important set of strong regulations that controlled the banks’ cash and capital at prudent levels.

The Government thought that they knew best with their regulators. They allowed them to expand the bank balance sheets massively in a way that some of us warned against and which was clearly imprudent. Unbelievably, having done that, the Government did exactly the opposite at the wrong point. They brought on the banking collapse and they brought on the recession because they switched from allowing the banks to have far too little cash and capital to demanding that the banks had far too much cash and capital for the circumstances of the time. Even worse-this is the biggest sin of all for a regulator in such a sensitive area-was that all this was done through the media, in public, so that the banks had no opportunity to sort themselves out over any reasonable time period because they were under the pressure that comes from the Government of the day telling the media and the public that the banks were nearly bust. There could not be a more perfect way of creating a violent cycle than that. We are now into punk-monetarism, money printing and an attempt to keep the public sector afloat with cheap money by creating it for the public sector’s own uses. The other side of that coin has to be, I suppose, starving the private sector of money because that is not where the Government see their political interests lying.

If the public want to know why we have an extremely feeble recovery and a lot of worry about our economy, I can tell them that it is because the Government have completely mismanaged the banking cycle. If the public want to know the really big numbers that have mattered over the past year, they should look at what the Government have been doing to RBS and Lloyds-the Government’s policies have been very contractionary. If the public want to know what we need for recovery, I can tell them-they will understand this-that it is sorting out the public sector to give us value while protecting what matters and it is providing more incentive to the private sector through less tax and less regulation, so that we can attract and retain businesses in this country in order to grow again.

We have got to earn our way out of this mess. We have got to work our way out of this mess. This Budget does not do enough for people of enterprise and people in business. It will fall to the lot of a Conservative Government to understand that, after this big a mess. a lot of stimulus and incentive will need to go into the private sector, because the private sector needs to earn a lot more to pay this Government’s bills.

Mr. Redwood: The hon. Member for Nottingham, South (Alan Simpson) has made a spirited contribution. I feel equally passionate about a subject that needs more prominence in this debate-how we keep the lights on.

So far, the debate has generated a bit of heat and very little light. The danger of the way that the policy is drifting under this Government is that we may end up with a perfect regulatory system in due course, were they to stay in office, but that we will have no power stations to produce the power that we need and on the scale that we need. That will be because so many will have been retired for one reason or another-nuclear stations for technical reasons, and coal-fired stations for emissions reasons.

When I come to judge this interesting debate, I will have in mind a central question: that is, which amendment would help us to get to an answer more quickly on the provision of more capacity? Surely it is more capacity, above all else, that we need to put in the front of our minds today, so that we do not end up switching off the lights.

Of course, Energy Ministers past, present and future will tell us great things about CCS, new technologies and exciting opportunities. However, I think that any present or prospective Energy Minister will agree with me that the one thing that the Government really must not let happen on their watch-or on the watch of their successor, because we will know whom to blame-is that the lights go out.

My hon. Friend the Member for Wealden (Charles Hendry) rightly said in his opening remarks that he was very exercised by the need to see projects and plans coming forward quite soon, to ensure that replacement power stations are available after 2015 and 2016, when the old coal and nuclear stations retire. He will be worried to hear that, when I came to the debate, I was genuinely open minded about the virtues and wisdom of the amendment that he wishes us to support this evening, should it be pressed to a vote, as it may well be.

However, I have listened carefully to the debate, and am persuaded that new clause 15, proposed by the hon. Member for Nottingham, South (Alan Simpson) and supported by the Conservative and Liberal Democrat Front Benches, does make sense. I believe that it would remove just a little bit of the uncertainty that is gripping the energy market in this country and preventing people from coming forward with the projects for the new gas, coal and nuclear stations-whatever they may be-that we desperately need if elderly people are to be kept warm in the winter.

We need those new stations if this country is to have the reasonably priced power that our industry will need to have a chance to compete, and if we are to keep the lights on in the House of Commons, which we hope in due course will be a place of enlightenment generally, providing the better policies and debate that will enable us to go forward to a better future. New clause 15 could provide the clarity that we need-it has been lacking over the last decade, under successive Energy Ministers-as to what kind of performance standards the Government expect, and how they will reward investors who meet the targets and penalise those who do not.

The Government are trying to suggest to us this afternoon that requiring them to set up targets and standards now will only delay matters more, but I do not see how they can possibly believe that. Given that all CCS projects rest on levy finance, subsidy and grant, any Government seeking value for public money will surely have to say what they expect from those projects.

It would be completely nutty for the Government to say to industry, “Here is a great pot of money. Go away and play, and we will like what you come up with.”

Colin Challen: I thought that the right hon. Gentleman at one point in his career had something to do with deregulation. Now he is arguing for more regulation: is that really a convincing stance, or is it simply politically convenient for him to take it at the present time?

Mr. Redwood: The hon. Gentleman is right that I have consistently wanted far less regulation that the Government have thrust upon us. I have been the co-author of a report that set out large quantities of regulation that I would love to see removed, which I think would make Britain a better place. But I have always believed that where the Government are up to their eyes in something, as they clearly are in carbon management-this is a Government project which only they can lead; the private sector is not going to do it, and it is something that the Government want to do-where the Government are leading such a project, it would be absurd for them not to say what they expect of people who are to receive public money.

I see the Minister nodding wisely in agreement. She will have to tell the industry exactly what she wishes it to deliver for the prospective amounts of grant and money that the Government intend to offer. Similarly, Ministers have had to start to set out, in conjunction with their partner Governments in Europe and on a global scale in environmental agreements, what they expect industry generally to hit by way of targets for their various carbon trading schemes and their penalty and tax schemes.
The Government have already done that for motorists. We know what our cars must deliver by way of various outputs from the exhaust, and different levels of tax are imposed, depending whether the Government disapprove a lot or a little of the particular vehicle that we have chosen to buy and to use. The Government cannot avoid doing something similar in respect of power generation, given that they wish to live in such a highly regulated world, with complicated systems of carbon trading and of levy, finance, grant, subsidy and altering market prices in order to achieve their aims of carbon management.

I do not see why the Minister is so adamant that the one thing that could get in the way at this stage is a requirement that she sets out what she is trying to achieve. My worry about new clause 15, which was supported by my hon. Friend the Member for Wealden and first inspired by the hon. Member for Nottingham, South, is that it delays everything further. I understand that there needs to be time to consider what the targets and objectives should be, but one would have hoped that after five or 10 years of endless debate about all this, the Government might now be able to share some figures with us so that we can inform our judgments. Leaving it another six months is another unwarranted delay.

I can see that the House recognises that the Government have not done their homework and are not yet prepared to come forward with any factual basis for giving us the kind of figures that industry needs for investment, so they need another six months. Most sensible investors would say, “Until we know what the terms of trade are, we can’t respond to such initiatives.” They will say, “We know we are going to live in a very rigged and organised market. We know that the Government are going to intervene massively in this market in all sorts of ways-penalties, subsidies and incentives,” but until they know exactly what it means in pounds and pence for any given investment, they will surely be reluctant to come forward.

On such occasions Labour suddenly becomes an advocate of the free market, in a way. Labour Members look at me and say, “As somebody who supports freer markets, surely you understand that it is up to the market now to settle these issues. The market will decide how many new power stations we want, and which ones it is going to build.” The Government misunderstand that that cannot happen in this case because the market is so managed, organised and regulated. If they wish to regulate a market to such an extent, they make themselves responsible for the results.

If the Government regulate a market as much as they have already regulated it, they need to make clear the missing bits in the jigsaw in order for the private sector to be able to participate and to trade on sensible terms. It is the Government who will decide exactly how much money people make on any of these projects, because it is the Government setting the carbon levels, the emissions levels and so on and having a very bid impact on the cost base, so if the Government wish to speed these things up, they have a duty to come forward now with some figures.

I asked the Minister in an intervention, which she kindly took, whether she could share with us some of the background figures that the Government must have on the relative costs of the different ways of generating power, both before and after all the Government interventions through penalties and subsidies. In order to come to an informed view on clean coal, we need to know how it is likely to compare in terms of costs and carbon output with alternatives, with gas and with the other technologies on offer.

After so many years of Green Papers, White Papers and energy policy debates, surely there must now be some understandable figures that can be shared with intelligent Members who want to discuss the issue seriously in order to establish some idea of the pecking order. I should welcome clean coal technology that worked quickly, based on British coal, because I am worried not just about the security of supply domestically and whether we have enough power stations, but about the security of supply of the raw material.

I do not like Britain being as dependent as it is on imported oil and gas, so any technology that moves us away from that dependency is welcome. I start with a prejudice in favour of coal-based power, but I need to know whether that is realistic. There must have been enough studies now to establish some idea of the subsidy, levy intervention and support that would be needed to make those putative technologies competitive. We could then make a better judgment about whether coal can carry on providing for our existing electricity output, which it does from the older stations; whether we are talking about an expansion, which might be welcome; or whether we are talking about a sharp reduction.

If we are talking about a sharp reduction, we must be precise about our regulatory structure for the gas-fired stations that we will need in order to provide the replacement capacity; and we must get on with the nuclear debate in order to find out whether nuclear power is a safe and economic way of filling the gap after 2020, because it clearly cannot do so in time for the gap that will emerge after 2016.

I am persuaded by my hon. Friend the Member for Wealden to support amendment 15, which he supports. It makes a statement to Ministers, but I, like its mover, the hon. Member for Nottingham, South, do not think that it is the definitive answer. I urge the Government to look again at what they can publish and make available, because if they do not do so I cannot see why people would want to come forward with investment projects. If we do not start investment projects now, we will find it very difficult to provide sufficient power at sensible prices after 2016 in order to keep our economy working.

Mr. John Redwood (Wokingham) (Con): How many new power stations do we need to commence building this year to avoid the risk of the lights going out because of the incoming, much tighter emissions standards and the retirement of old plants? On how many will construction start this year?

Joan Ruddock: I am sure that the right hon. Gentleman understands that we have an energy mix and a privatised energy market. It will be up to the companies to decide what investment they make. What we endeavour to do in the Bill is make it possible and profitable for companies to invest in new coal. We believe that if it were not for the provisions of the Bill, we would not get the new coal-fired stations that we will need, because we will lose a third of existing coal-fired capacity by 2015.

Mr. Redwood: I know the Minister does not have detailed figures, but surely she must have some idea of the relative costs to the consumer and the taxpayer of cleaned-up coal power, compared with wind power, wave power and so forth. We need to know that to inform our judgment.

Joan Ruddock: I am sorry. Perhaps I did not respond sufficiently to my hon. Friend the Member for Blaydon (Mr. Anderson) who asked the question, and I am happy that it has been repeated. I say again that the design of the levy and the consultation have yet to come, but in our discussions we anticipated the cost to the householder being 2 to 3 per cent. on bills by 2020, arising specifically from these provisions. We all have to bear some burden for developing the low carbon economy. The Government will do that in a proportional way and we will try to protect the poorest.

Mr. Redwood: I am grateful to my hon. Friend the shadow Minister, who has, not surprisingly, made a much more convincing case than the Minister, and has taken seriously security of supply. Given that subsidies will be an issue in this new technology, and that penalty payments for excess carbon are also an issue, the Government must set targets for the amount of carbon in order to justify the subsidy or the penalty payments, so why are they denying it?

Charles Hendry: As always in such matters, my right hon. Friend is absolutely correct. What we have is an extremely interwoven web of a range of different issues. Complex decisions will need to be made, but given the Minister’s approach, it is less likely that we will secure investment in new coal.

Mr. Redwood: How serious do the Liberal Democrats think the possible shortage after 2016 will be, given the number of power stations being retired and the absence of new ones? What would he do about that?

Martin Horwood: The right hon. Gentleman makes an important point. That is an issue that might in the end lead to derogations from European directives to keep aged power stations online or to allow more importation of gas, which would not be a satisfactory outcome. We certainly need action now, not only to promote CCS but to promote greater seriousness about renewables. For example, we need a stronger feed-in tariff for renewable energy and many other such actions to address the issue that he is talking about.

Mr. Redwood: Does the right hon. Gentleman agree that the Government must have targets and standards in order to allocate subsidy and penalties?

Dr. Strang: That is an interesting point, but I will not respond directly to the right hon. Gentleman because I do not have time. However, I do not see the logic of the argument that setting a standard will somehow deter investment, because the reality is that companies want a rough idea and framework for the future. He is criticising the new proposals and saying that we should not support them because they do not give figures, but, obviously, their strength lies in the fact that there will be a year’s consultation and discussion, after which the Government can decide on the appropriate EPSs for our various power stations.

Mr. John Redwood (Wokingham) (Con): But cannot the Chancellor see that because he is overspending and over-borrowing in the public sector he is squeezing the private sector, which is having to pay high and rising rates of interest if it can get credit at all? What does he say to people with Skipton mortgages or small businesses that cannot borrow a single penny?

Mr. Darling: As the right hon. Gentleman will know, we have taken steps to ensure that the banks increase the amount of gross lending that they are putting into the economy. At a time when private sector investment has stopped or reduced, if it had not been for the public sector intervention, the downturn would have been much greater than it is. As it is, we can see signs of increasing confidence-he will have seen the survey of manufacturers published yesterday, which is very encouraging. Across the world, we can see the results of Governments acting together and making a real difference. To remove that support prematurely, if indeed that is the Opposition’s policy today-who knows?-would be the wrong thing to do because it would be damaging to the country.

Mr. John Redwood (Wokingham) (Con): Is my hon. Friend aware that in their latest proposals the Government talk about a £20,000 tax on prudent pensioners—if they still have a pension left. That will be a £10 billion-plus a year tax on the very people who have saved to look after their future. Is that not a disgrace, and does it not sum up the Labour approach to poverty in old age? They want more people to be poor, because they want to tax them more.

Mr. Waterson: I am grateful to my right hon. Friend, who makes a powerful point. The people who should always beware of the Government’s Green Papers and White Papers are, of course, those who have taken the precaution of saving for their old age.

Mr. John Redwood (Wokingham) (Con): When will work begin on the first new nuclear station and carbon storage plant identified in the Secretary of State’s statement? If it is not soon, the epitaph of this Government will be that they turned the lights out and left us all in the dark.

Edward Miliband: The right hon. Gentleman obviously practised that one in advance. Construction of the new nuclear stations begins in the early part of the next decade because we have to go through the consultation, the strategic siting assessments, and so on. It is a bit rich of the Conservatives to accuse us of being too slow on these questions given that they opposed our proposals right up until the last minute. We want to move forward as fast as possible on carbon capture and storage.