Third-term tax rises are inevitable, says Howard

Michael Howard yesterday condemned Gordon Brown as a "borrow now, tax later Chancellor", insisting that sharp increases in Government borrowing were a guarantee of substantial tax rises to come.

The Tory leader rounded on Mr Brown, arguing that tax rises would be "inevitable" if Labour wins a third term in power. "This is a credit-card Budget from a credit-card Chancellor," he said. "The borrow now, tax later, budget from the borrow now, tax later Chancellor.

"If he has his way, the country will pay for it later in Labour's third term tax rises."

Highlighting the divide between Labour and the Conservatives, Mr Howard said: "Very soon the nation will face a choice: we on this side of the House want to give patients and parents and professionals more control, to bring in real reform; that's the way to end the cycle of tax and spend.

"This Government will never deliver real reform of our public services; all it offers is more of the same: higher spending, higher borrowing and ever-higher taxes."

Vincent Cable, the Liberal Democrat Treasury spokesman, also criticised the Government, warning it had to make "tough choices" on public spending.

But Labour MPs cheered Mr Brown as he promised to increase spending on key public services. Conservative MPs cheered as Mr Howard mocked Mr Brown's upbeat assessment of the economy. He said: "The Chancellor's Budget begged the central question of his performance. If everything's going so well, why do you have to borrow so much?"

Mr Howard declared that the forecast for borrowing had risen from £30bn in 2001 to £72bn a year later and was now predicted to rise as high as £140bn. He told Mr Brown: "Today you are predicting borrowing of over £140bn and you are on course to borrow this year alone almost five times as much as you forecast at the time of the last election. And this is at a time when you claim the economy is doing well. How much would this Chancellor be borrowing if the economy went into a downturn?"

Mr Howard said that the savings rate had fallen, despite promises to create a "savings culture". He said: "The Chancellor has spoken about enterprise as he does every year. Page 225 of the Red Book shows that business investment has fallen for two years in a row.

"Page 237 shows that the trade deficit is at the highest level since the 17th century and page 240 of the Red Book makes it clear that manufacturing output is lower than in 1997 in common with manufacturing investment. And the number of people in manufacturing is falling by 6,000 a month. All this from a Chancellor who promised an industrial policy so our manufacturing industries can grow again."

Mocking Mr Brown's decision to put a judgement on entry to the Euro, Mr Howard attacked the Chancellor's failure to stay within Euro-zone rules governing budget deficits: "He's broken the rules and he hasn't even joined the club."

He added: "None of the Chancellor's bluster can disguise the fact that this is a Government which has increased taxes and increased borrowing. The borrowing he has announced today is simply unsustainable. This Budget has made it clear that if Labour get a third term, tax rises are inevitable."

Mr Cable said he did not back Conservative warnings of a fiscal crisis. But he said: "The Chancellor's finest hour was in his first week in office in 1997 when he made the Bank of England independent. Many of the problems we can now see have been building up ever since and the big decision in this Budget was not to tackle them until after the general election."

He warned of high levels of consumer debt and inflated house prices that would lead to "financial disaster" for families if interest rates rise.

Mr Cable welcomed yesterday reports into tackling housing shortages but warned: "They do not even begin to address the problem of the speculative bubble which lies behind the housing market and which could well collapse with disastrous consequences."

Frank Field, the former social security minister, welcomed the cuts in Civil Service jobs. He said: "Most of our constituents will have cheered about the real hunt down of waste and inefficiency, but for us now it is a two-edged sword.

"The Opposition and the Liberal Democrats are talking about making great cuts here. The more we start being seen to be delivering on this and we should be, it is surely going to become more difficult to say it is absurd for the Tories to say they can make similar savings."