The news this past month has been dominated by the economic crisis with Alastair Darling, the Chancellor of the Exchequer, painting a bleak economic picture in the Budget on 22 April. The Chancellor described the worst recession, fastest rising unemployment, and the worst public finances since the War.

What is frightening about the Chancellor’s figures is that they are an optimistic interpretation of the economic situation. Labour’s growth predictions are significantly higher than the independent IMF and if the IMF is right, there will be £23bn more borrowing next year. National debt is already set to double again to £1.4 trillion. This will mean every child will be born, owing a staggering £22,500.

According to the Government’s own figures over the next two years the Government will borrow £348bn, more than all governments put together up to 1997. The country will be borrowing £703bn over the next five years, £269bn more than the £434bn announced in the Pre Budget Report. Interest costs alone on the debt will reach £43bn a year, more than the schools budget.

The Government has been inclined to suggest these shocking figures are purely a consequence of the global downturn. Although it is undoubtedly a contributing factor, the Government’s failure to save money in the good times, has made a bad situation much worse. The IMF say our budget deficit will be the worst in the G20 next year, 11% of GDP compared to 9% in United States.

The Chancellor’s main response was to announce a 50% tax rate for those earning over £150,000. The change has gained much media attention but appears to be a political move rather than an economic one. The announcement disguises that the tax rises announced in the Budget are on the many not the few.

National Insurance will be increased for workers and for firms. This jobs tax will discourage businesses from hiring staff, cut people’s pay packets, and mean anyone earning £20,000 a year or more will be worse off. Fuel duty is up 2 pence per litre, and will continue to rise by more than inflation for the next four years, increasing the cost of travelling to work, taking children to school and going shopping. Alcohol duty, which was hiked up in December, will rise again as part of the Government’s plans to increase the cost of beer, cider, spirits and wine by more than inflation every year. This punishes responsible drinkers and is putting small local pubs out of business. On average we have £1000 tax rises per family between now and 2012.

It is now essential for a change in leadership and a change to economic thinking. We need to move away from an economy built on debt to an economy that encourages savings. We should therefore favour spending restraint over tax rises, starting that spending restraint now to pay for the recession measures and start reducing borrowing in the recovery from 2010. This is the only way to encourage an earlier recovery from recession and avoid Labour’s tax rises on so many people.

On a separate matter, the Government’s extraordinary defeat in the Commons last week, on its policy of restricting the rights of Gurkhas to reside in the UK shows the shambles of the Government’s policy. I have received a huge amount of correspondence supporting Gurkhas and the moral case that those who are prepared to risk their lives for this country should be allowed to live here. It would be scandalous if the government were to now ignore the wishes of Parliament and the people.

Charles Hendry
Member of Parliament for Wealden
Shadow Minister for Energy
House of Commons
London SW1A 0AA
www.charleshendry.com

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