HC Deb 04 December 1995 vol 268 cc24-114 3.41 pm
The Secretary of State for Health (Mr. Stephen Dorrell)

The year 1996 will be an important milestone for the national health service. It will be the 20th anniversary of the last occasion on which a Government presented spending plans that delivered a sharp, real-terms reduction in the national health service budget. I am pleased to tell the House that this year I do not need to make a similar announcement. Indeed, we are able to continue the real-terms growth of the NHS that has gone on in every year since that announcement in 1976 for the year 1977-78.

Last week, I was able to set out plans for the continued growth of the health service. First, I was able to report that, overall, real-terms growth in patient care in the NHS next year will be 1.6 per cent. In real pounds, after correcting for inflation, that is £500 million of growth in patient care—£f1.3 billion of cash growth for patient care as a result of the Budget that my right hon. and learned Friend the Chancellor announced last week. That is a substantial continued investment, and it allows us to develop a number of different and important priorities within the health service.

First, it allows us to provide for the continued and fast real-terms growth of primary care in the NHS. Within that total of 1.6 per cent. real-terms growth, I am allocating 3.9 per cent. real-terms growth to support the continued development of family health services, and particularly the family doctor service and GP-provided health care. That is building on a substantial record of success within the health service that was built up over a long time, and particularly reinforced over the past few years by the fundholding scheme. We still look forward to hearing from the hon. Member for Peckham (Ms Harman) whether Labour supports that scheme.

The continued development of family health services is an important element of this year's Budget settlement for the NHS. The second important element is continued real-terms growth of services that are secured by health authorities.

The average real-terms growth of health authority budgets next year will be 1.1 per cent. Virtually every health authority gets 0.5 per cent. real-terms growth, the rest being directed at those health authorities in which funding is below target, measured on the weighted capitation formula. The Government have repeatedly reasserted their commitment to bringing all health authorities into line on that weighted capitation formula, and I am pleased to say that the allocations to health authorities which I announced on Thursday Teflect considerable progress towards that objective.

That is good news for the people of South Essex, who will see a 4.2 per cent. growth in real terms in their health authority spending next year, and for the people of North Essex, who will see a 3.5 per cent. real-terms growth in expenditure. In Bedfordshire, the figure is 3.2 per cent., and Oxfordshire, East Sussex, West Kent and Bromley will all receive more than 2.5 per cent. real-terms growth in their health authority expenditure next year as a result of the Government's commitment to equitable funding within the NHS, as demonstrated by our commitment to the weighted capitation formula. Those two priorities have been safeguarded within this year's settlement. The third priority is our commitment to continue to develop the future of the health service, through investment both in training and in research. I have been able to allocate a total of £68 million of new money to develop the education and training commitment of the NHS. We are investing in the most precious resource of all within the NHS—the skilled and professional work force who deliver health care.

Ms Angela Eagle (Wallasey)

Will the Secretary of State say a little about the 17 per cent. cut in capital investment for the NHS? Some of us are extremely worried that the private finance initiative will not fill that gap, and that we may face a quite severe problem with capital investment in the future.

Mr. Dorrell

If the hon. Lady will contain herself and be patient, I shall certainly come to the private finance initiative and its role in the future of the NHS, and I shall be reflecting upon the sharp change in position that the hon. Member for Peckham (Ms Harman) has undertaken in the past week. It appears that the hon. Member for Wallasey (Ms Eagle) has not quite caught up with her hon. Friend's change of position, and I can understand that.

Mr. Simon Hughes (Southwark and Bermondsey)

If I am called to speak later, I shall challenge some of the Secretary of State's macro-economic figures on spend. According to a press release from the right hon. Gentleman's Department, the net increase in Government spending next year is 0.6 per cent, not 1.6 per cent. Thereafter, the figures are 0.1 per cent. for the two subsequent years. The Government's manifesto commitment to real-terms increases every year is just being achieved in the two years following the coming year, but only by 0.1 per cent. in each of those years.

Mr. Dorrell

The hon. Gentleman reads out the figures correctly, but overlooks the fact that the restructuring of the health budget allows me to deliver more than 1.5 per cent. growth in patient care in the NHS next year on those figures. There will be an increase in the real resources available for patient care next year. Labour's Front-Bench Members have argued—spasmodically, uncertainly, but reasonably consistently—-for public-private partnerships to expand the resources available to the health service for the past 12 months. I am delivering that, and I am able to increase the volume of money committed to current patient care within the health service.

Not only are we spending money on expanding today's services: we are also ensuring that we are committing money to support tomorrow's services through the development of education and training programmes, and through the development of the research programme of the health service. When my right hon. Friend the Chief Secretary was doing my job, he quite rightly committed the health service to develop that programme.

It is extraordinary that it took 40 years for a science-based service—as the health service should be—to appoint its first director of research and development. We now have that function, and we are committing real resources to making certain that we have available to the health service a proper research function to ensure that clinical practice within the NHS reflects the latest understanding of the people operating at the leading edge of clinical services. That is why I am committing an extra £27 million of new money to the research function of the health service next year—an amount which represents a real-terms growth rate in the commitment to research of nearly 4 per cent.

Mr. Sam Galbraith (Strathkelvin and Bearsden)

The Secretary of State referred to a director of science and research. On a point of information, is that science and research based on clinical, scientific analysis of treatment, or on the management and structure of the national health service?

Mr. Dorrell

I hope that the hon. Gentleman, as someone who has previously been interested in the health service, would want me to answer to that question, "Both." That is what it is. Those who are interested in the development of efficient health care within the health service should surely consider every aspect of the functioning of the health service to ensure that the care that is delivered reflects an efficient use of resources within the health service. That is what we have committed resources to doing.

Mr. Simon Hughes

I do not dissent from what the Secretary of State has said, but I want everyone to be absolutely clear. In the years after next year, the resources that come from the public purse will be increased by 0.1 per cent. The increase in other resources will come entirely from the private sector, which the Secretary of State will deal with. The substantial increase will come from the private sector, not the public purse.

Mr. Dorrell

I have already answered the hon. Gentleman's question. He reads out numbers which he says are from the press release. If he wants to look for a more learned version of the same numbers, he can look in the Red Book. We are using public money as efficiently as possible to deliver growing services to patients. That is why I am placing stress on the real resource that is available to support the activities of health authorities in different parts of the country.

I have referred so far to the development of primary care, research and development and education and training. The next priority that I want to talk about for a moment is the mental health services of the NHS.

Everyone who follows the health debate knows that mental health services have been a subject of concern both inside the House and outside it for some time. I am able to announce in the context of this year's Budget settlement a real commitment to an improved delivery of mental health services throughout the country.

I believe that there is now a broad measure of agreement about what a modern mental health service should look like. It is often characterised as care in the community. In the sense that it is no longer a model of care that relies solely on the old-fashioned hospitals, that is true. However, it is not true to suggest that a modern mental health service should be based only on community-based provision. There is now broad agreement that it should deliver a spectrum of care, including acute hospital care for those who need acute mental illness services and sheltered accommodation for those whose dependency needs are greater as well as a properly developed range of community services.

That is the spectrum of care that people expect to see in a modern mental health service. People expect, furthermore, to see such a service reinforced by properly developed links between the NHS and social services departments. The debate about mental health services is less about precisely what the model of care should be, and more about the effectiveness of delivery of that service in different parts of the country. That is why my hon. Friend the Minister for Health wrote to each health authority in August asking them to deliver a quick assessment of their progress in the delivery of that type of mental health service. The replies were due in on 30 November. I inform the House this afternoon that I intend to publish the conclusions of that process early in the new year.

I also draw it to the attention of the House that the Budget carries forward the process that I have described by allowing us in two important respects to provide growing resources for the development of mental health services within the NHS. First, within the central budgets of the health service, I have set aside £10 million which will be available to above-target health authorities to allow them to develop their mental health services. I shall expect any health authority which bids for that money at least to match from its own resources the money that it claims from that central budget. I expect that to deliver at least £20 million of extra resources committed to mental health services within the NHS.

The second element of the programme for the development of mental health services reflects the growth of the resources that I have set aside for the mental illness specific grant for local authorities.

There will be £11 million of extra money next year, followed by a further £9 million the following year, to continue to operate the scheme that was established when I was Parliamentary Under-Secretary of State for Health, under my right hon. and learned Friend the present Chancellor of the Exchequer, for the development of mental illness services in local authorities. Those rules provide that the mental- illness specific grant finances a maximum of 70 per cent. of an individual local authority's spending programme, so the extra money that I am announcing today will deliver a total of £30 million of new money for the development of mental health services through local authorities.

There is £20 million from the NHS and £30 million through social services departments—a £50 million total enhancement of new money available for the development of mental health services. I hope and believe that that will be well received, both in the House and outside, as reflecting the serious commitment of the Government to seeing mental health services continue to develop.

Dr. Jeremy Bray (Motherwell, South)

The Secretary of State is aware that any additional resources for community care for the mentally ill will be extremely welcome. He is aware that the problem is not only with the budget of the Department of Health but with the treatment of the policies of the Department of Social Security and the Department for Education and Employment. Can the right hon. Gentleman say whether there will be matching developments in those fields?

Mr. Dorrell

I am not going to speak for my right hon. Friends who are in charge of other Departments. I am speaking for the two programmes for which I am directly responsible in different ways: the national health service central Government budget, and the social service departments for which I am the sponsoring Minister. Those two elements of the welfare state will provide improving provision for mental health services, based both on better management and on the extra resources that I have announced following the Budget of my right hon. and learned Friend the Chancellor.

Social services departments have a key part to play in the development of mental health services, as I have described. They are also increasingly important in delivering services for the elderly. That is why I was pleased to be able to announce last week a total of 4 per cent. real-terms growth in the provision for personal social services by local authorities. That reflects the continuing growth of the commitment of social service departments to delivering community care for elderly people. It is important to recognise the rate at which that programme has been expanding over the past 15 years.

The hon. Member for Peckham is prone on occasion to draw attention to the fact that there has been a small reduction in the number of beds available for elderly.

Ms Harriet Harman (Peckham)


Mr. Dorrell

The figure is small. There has been a total reduction of beds available for the elderly of 18,000.

The hon. Lady always overlooks the fact that, at the same time, in the private sector there has been a growth of 130,000 residential care beds, and a further 130,000 nursing home beds—a total increase of 260,000 beds in the residential and nursing home sector, which rather more than offsets the 18,000 reduction to which the hon. Lady is so fond of drawing attention. That service has developed dramatically over the past 15 years. I am pleased to say that the 4 per cent. real-terms growth that we are voting to social service departments this year will allow that continuing and developing service to continue to grow.

Mrs. Alice Mahon (Halifax)

I am sure that the Secretary of State will accept that the growth in the private sector has meant that thousands of elderly people have been institutionalised when they might not have been had the money been spent somewhere else.

While we are on topic of long-term care, has the right hon. Gentleman studied carefully the first report of the Health Select Committee, in which witness after witness, including a Minister, expressed concern that too many long-term care beds had been closed in the NHS? Will he please put a moratorium on any more closures? Is he aware that, in my constituency, a purpose-built, long-stay hospital for the mentally ill and elderly is closing with the loss of 300 beds? We cannot afford to lose any more beds in the NHS. Will he admit that the beds in the private sector are often means-tested?

Mr. Dorrell

I wonder whether the hon. Lady visited the same NHS continuing care beds in geriatric hospitals that I visited at the beginning of the 1980s. The reality is—

Mrs. Mahon

I worked for the NHS.

Mr. Dorrell

I know that the hon. Lady has taken a consistent interest in the subject, but NHS geriatric beds—

Ms Eagle

My hon. Friend used to work in the NHS.

Mr. Dorrell

In that case, she knows this better than I.

NHS geriatric beds too often fell far short of the standards that any of us would want, either for ourselves or for our elderly and dependent relatives. I agree with the hon. Lady that there has too often been a tendency to put elderly people into residential care when they and their families would have preferred domiciliary support so that they could continue to live in the community. Residential care homes may be convenient, but they may not be the best way of meeting elderly people's needs; that is why the Government introduced the community care reforms. We introduced the reforms in the National Health Service and Community Care Act 1990 to allow services to be delivered more flexibly to meet the needs of dependent elderly people.

Mrs. Mahon

The Secretary of State is right to say that I worked for a long time in long-term care in the NHS. The care provided by the NHS for people who desperately needed hospitalisation was considerably better than much of the care that I have seen in the private sector. If the Secretary of State wants to stop institutionalisation, why does he not allow local authorities to spend money as they want, instead of making them spend 85 per cent. of the transitional grant in the private sector? If local authorities did not have to do that, perhaps some good packages of domiciliary care could be provided.

Mr. Dorrell

The 85 per cent. figure does not apply to the core expenditure from social services departments' own resources. I encourage every social services department to consider the value for money it gets from its homes compared to that from private sector homes, and to operate a level playing field between the two sectors. When I am convinced that that is the position in every social services department, I might agree with the hon. Lady about withdrawing the rule. Until I am convinced that there is a level playing field, I shall remain a strong supporter of the principles that have hitherto operated.

Ms Eagle

Will the Secretary of State admit that, because of the movement into the private sector, local authority homes tend to have been left with the most dependent, and therefore the most expensive, patients, who require the most care? Does he therefore agree that it is often not meaningful to compare costs of the sectors, because of the kind of patients they now look after?

Mr. Dorrell

I do not agree with the hon. Member. Local authority homes are often more expensive, but I do not accept the assertion that that is because people in them are more dependent. The equation is more complex than that.

My right hon. and learned Friend the Chancellor not only provided extra real-terms growth for personal social services departments, but confirmed that the Government do not believe that the social care of the elderly is solely a matter for the state. That is why I welcome the steps that he announced in the Budget to encourage individuals to provide for their own social care needs in the longer term.

We must ensure that we provide domiciliary support, in the way that the hon. Member for Halifax (Mrs. Mahon) mentioned, to allow carers to look after elderly people before they need to go into residential care. The Government will also encourage individuals to set aside resources to meet their own long-term care needs.

My right and learned hon. Friend announced a consultation on partnership schemes, which will be an important incentive for improved provision by each of us for our own old age. He also announced a change in the tax rules on long-term care insurance, and an important change in the rules governing the assets that are disregarded for the assessment of means-tested benefits.

Those are all important steps towards encouraging people to set aside resources to meet their own social care needs, and they are part of a total package, including real-terms increases in public expenditure, to ensure that we provide a proper deal for care of the elderly.

Mr. Andrew Rowe (Mid-Kent)

Will my right hon. Friend take credit for the measures that he has taken to enable a number of people with disabilities to use public finance at their discretion to make arrangements for their own care? That is cost-effective, as has been shown in a number of experiments, and gives the freedom of choice that I believe the Government are all about.

Mr. Dorrell

I agree with my hon. Friend. He is drawing attention to the Community Care (Direct Payments) Bill, which was announced in the Queen's Speech. That will be an important step forward in making the system more flexible so that it can respond to the wishes of individual recipients of care, and it will also ensure that the money spent delivers better value.

Therefore, an important theme of the Budget is the Government's commitment to continue to deliver on public expenditure priorities—more than 1.5 per cent. real-terms growth in NHS current expenditure and 4 per cent. real-terms growth in personal social service expenditure.

The hon. Member for Wallasey has already drawn attention to another key theme in my right hon. and learned Friend's Budget—the improvement in the management of the Government's capital programme through the private finance initiative.

The principle of the private finance initiative is extremely straightforward. In the national health service, it means that NHS trusts continue to deliver free health care to NHS patients, and they continue, in the overwhelming majority of cases, to employ the clinicians and the clinical support workers who deliver that care. That has been made absolutely clear in all the support documentation about the private finance initiative.

We are also encouraging NHS trusts to form public-private partnerships to ensure that those dedicated professional people who work in the national health service, delivering free NHS care, will have available to them better, more modern facilities than have ever been available in the history of the NHS.

Access by the NHS to private sector capital always used to be governed— I am tempted to say "obstructed"—by what used to be called the Ryrie rules. They were an especially abstruse bit of Treasury orthodoxy. I am pleased to say that, under the enlightened chancellorship of my right hon. and learned Friend, those rules have been abolished.

There is a certain irony about hearing the Ryrie rules Voted with approval by some members of the Labour party, because Labour Members used to hold barely printable opinions about Sir William Ryrie and his rules before they were changed. We have abolished rules that, in their lifetime, found no support outside a narrow group of Treasury theologians, and we have encouraged the development of a public-private partnership between the NHS and the private sector. That causes problems for the hon. Member for Peckham. I shall take the House through the problems in their most recent manifestations.

I appeared on the "Today" radio programme on 28 November, in which the hon. Lady and I were interviewed by Sue MacGregor. Sue MacGregor interviewed me first, and I said exactly what I have just said to the House, whereupon she turned to the hon. Lady and said:

You heard Stephen Dorrell say this is a new way of building hospitals—it's not a new way of providing health care. You can't object to that, can you?"— to which the hon. Lady replied:

We certainly do, because, under this Government, this is a new trick to privatise the health service. That was the hon. Lady—[Interruption.] That was the hon. Lady's answer. The problem was that she was slapped down very soon after that from the Dispatch Box by her right hon. Friend the leader of the Labour party. Less than 12 hours after the hon. Lady had addressed the nation with those words, he came to the Dispatch Box and said:

The PFI is right in principle. We have supported it, and in many ways we have been advocating it"— whereupon Hansard, I am sure accurately, reports the right hon. Member for Kingston upon Hull, East (Mr. Prescott) as saying:

We initiated it."—[Official Report, 28 November 1995; Vol. 267, c. 1077.] There may be a few paternity disputes about that claim, but the division between the hon. Lady on the radio programme at 7 o'clock in the morning and her leader in the House at 5 o'clock in the afternoon could not have been starker and clearer.

However, no one has ever accused the hon. Lady of not being quick on her feet. In less than a week, she has issued a press release, saying that the accusation against me is no longer that I am doing too much about the PFI or that I am in danger of privatising the health service; now, the accusation is that I am doing too little about the PFI. Having stood accused of introducing a dangerous new theory that would change the nature of health care, I am now accused of not doing enough, and building, in the words of the title of her press release, "castles in the air."

The hon. Lady does not have a particularly good record on forecasts in the health service. She is the same health spokesperson who, when we introduced general practice fundholding, said that there was no support for it in the health service.

Ms Harman

indicated assent.

Mr. Dorrell

The hon. Lady indicates that she was right; but she was not quite right, because more than half the doctors in the health service have now applied for fundholding status. If she is concerned to see the quick, successful and effective development of the private finance initiative—I believe that her leader is, and I sincerely hope that she is—we can make common cause. But in terms of her forecast, I say, "Watch this space."

Mr. Eric Martlew (Carlisle)

Two years ago in my constituency, we were about to set forth on the new stage of Cumberland infirmary, which was stopped because of the PFI. That is a reflection of what has happened throughout the country: hospital building has come to a standstill because of the PFI. Now, only one company is interested in that contract. Does there have to he competition, or will the contract be given to that one company?

Mr. Dorrell

I shall give the House the response that I always give to such questions in the House: any spending programme that I approve must first pass the value-for-money test. I shall be anxious to ensure that the hospital mentioned by the hon. Gentleman, and any other projects that come up under the PFI, pass the value-for-money test.

On the subject of delay, I invite the hon. Gentleman to look at the programme that we approved under the PFI last week at Amersham hospital. It was a replacement programme for a succession of single-storey, corrugated iron huts that were erected in 1940 as a temporary measure to deliver health care to the victims of the blitz. Those huts are still delivering health care today.

That is not something of which any Government, Conservative or Labour—they have both been in power while those temporary buildings have continued to deliver health care—should be particularly proud. I am proud to have been the Secretary of State for Health responsible for changing the rules that imposed that sort off delay, not just on Amersham hospital but on hospitals all around the country.

Anyone who has looked at the history of the health service knows that it is littered with capital projects that have been stopped by the short-term actions of Chancellors of all political persuasions because of Treasury capital planning processes. We have abolished that policy, and ensured that viable projects for which there is a need within their communities can be financed and built on time. That is an important, fundamental change, which I hope the hon. Gentleman will endorse and support.

Mr. Martlew

The hospital that the right hon. Gentleman has just mentioned was built in the 1940s; the hospital that I mentioned was to replace a Victorian workhouse. Will the Secretary of State give an assurance to the House that, if the PFI fails, public money will be made available immediately to build the Cumberland infirmary?

Mr. Dorrell

I have made it clear that there remains a public capital programme as well. I hope and believe that viable projects for the development of the capital stock in the health service can be carried out in the context of public-private partnerships, which are an important source of new capital as well as new expertise in the development of the health service.

One of the key issues—indeed, the key issue—that underlies every Budget involves the choices that every society has to make about taxation and expenditure. Some people have been tempted to suggest that the present structure of our public services is insupportable. I am regularly told that the pressures on the NHS are irreconcilable—that has been a continuing story in the history of the NHS since the day it was founded. The first royal commission into the irreconcilable pressures on the NHS was set up in the early 1950s, and the theme has recurred through the history of the health service.

We have also been told that our welfare state provision—our social security expenditure provision—is too generous and, as a result, public finances are unsustainable. I am pleased to be able to tell the House that the subject has been examined, not by a Government spokesman or a friendly force that can be relied on to produce a convenient set of statistics for us, but by the Organisation for Economic Co-operation and Development.

In its report of June this year, the OECD examined exactly that issue—the services most often held responsible for the instability of public finances. Its finding was not that public finances in Britain were unstable, but quite the contrary. It reached a clear, decisive conclusion that the United Kingdom was alone among G7 countries in running a consistent financial surplus beyond 1995.

Over the period that it examined—up to 2030, a third of the way through the next century—it found that the United Kingdom and Canada were the only two G7 countries that would not only be paying off public debt, but would have paid off their entire national debts by 2030 if the continuing trends of taxation policies were followed through. Those who argue that the present balance of public expenditure is unstable and insupportable have to explain why the OECD—an independent body examining precisely that proposition—reached precisely the opposite conclusion.

That analysis is extremely good news for Britain, for two reasons. First, it gives us the assurance that the public expenditure plan set out in the Red Book this year can be followed through without a funding crisis, which was so often the experience of Labour Governments. Secondly, and more importantly, it allows to us continue doing what we did this year—making choices at the margin about how much we want to tax and how much we want to spend.

There is, of course, a precise and inevitable connection between taxation and expenditure, and this year my right hon. and learned Friend showed that, by reducing the Government's spending plans by £3 billion, he was able to take £3 billion off our tax burden. That emphasises another important conclusion that can be drawn from the Budget: stable public finances are essential, but they are not the complete answer to the questions that politicians are asked about public finance.

People are interested first to ensure that our public finances are stable, then they want to know what level of taxation, and therefore expenditure, we choose to operate. That is an important political issue, as it affects the society in which we live, but it is a more important economic issue, as high public spending means high taxes, and high taxes, even in a closed economy, blunt incentives.

It is simply wrong to look at the total share of national income accounted for by taxation and say that it does not matter that, over the past 15 years, we have cut the marginal rates of income tax from 98 per cent. to 40 per cent. and the marginal rates of corporation tax from 52 per cent. to 33 per cent.

There is no more eloquent commentary of the change in Britain in the past 15 years than the fact that when the Government came to power in 1979, a 15 per cent. additional rate of tax was imposed on savings income. This year, for the first time, my right hon. and learned Friend has introduced a special low rate of tax for savings income, reflecting the importance that we place on encouraging people to provide for themselves and invest in their own and society's future.

Mr. Chris Mullin (Sunderland, South)

At the bottom end of the scale, people on benefit lose £1 in benefit for every £1 they earn. That is a marginal tax rate of 100 per cent. Do the Government have any plans for addressing that?

Mr. Dorrell

The hon. Gentleman is wrong. Since the reforms introduced by my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) in the late 1980s, the replacement ratio no longer exceeds 100 per cent., although it is still quite high.

I am focusing on the incentive to save. It is interesting that the hon. Member for Sunderland, South (Mr. Mullin) is not interested in the incentive to save as an important part of free and functioning democracy and economy. I welcome the fact that my right hon. and learned Friend has able to substitute a lower rate of tax on savings income, whereas, under Labour, savings income used to be called "unearned income", and attracted a special rate of tax.

That is only to look at the effect of marginal tax rates in a closed economy. Our economy is not closed. I am pleased to say that it is one of the most open economies in the world. The tax rates charged by the British Government are part of the burden that any business bears if it chooses to establish or remain in the United Kingdom. It has been of significant advantage to this country that, through the end of the 1980s and in the 1990s, we maintained the lowest corporation tax rate of any industrialised nation—a key factor in attracting foreign investment to this country.

The Government are committed to applying that precedent across the whole tax system—not simply to corporation tax—to seek to lead the tax burden imposed by market economies down, to attract investment and activity to this country. That is the significance of the declining trend in terms of the share of national income taken by public expenditure that is set out in the Red Book.

Page 142 presents one of the most dramatic tables included in a Red Book for many a year—five years of public expenditure freeze while at the same time safeguarding the Government's key spending priorities, to allow us to ensure that tax rates in Britain are among the most competitive in the world. The Labour party fails to understand that proposition.

The hon. Member for Dunfermline, East (Mr. Brown) has made himself a laughing stock. On one day, he promises lower tax on investment in business through capital allowances. The next day, he promises lower tax on small businesses through value added tax relief. The day after, he promises a personal tax rate of 10 or 15 per cent. He comes in exactly on cue, but cannot quite work out which it will be. Nevertheless, there will be a personal rate of 10 or 15 per cent. at the same time as capital allowances and VAT relief.

The one thing that the hon. Member for Dunfermline, East does seem set on is a special new tax on enterprises that have had a profitable experience. The hon. Gentleman has made himself a laughing stock, particularly as he has been doing that at the same time as Labour's health spokesman, the hon. Member for Peckham, and education spokesman are hinting at more spending, and the hon. Member for Islington, South and Finsbury (Mr. Smith)—making his first appearance on the Front Bench last week to respond to a social security statement—opposed the measures being taken by my right hon. Friend the Secretary of State for Social Security to control social security spending.

If Labour is remotely serious about the interest it affects to show in controlling the growth of the tax burden and bringing it down, it cannot conceivably follow through the commitment announced by its party leader to abstain on this Budget, which starts to show how controlling public expenditure delivers control of the tax burden.

Mr. Robert Sheldon (Ashton-under-Lyne)

Before the right hon. Gentleman goes so far in condemning incentives in taxation, he should remember that there are certain disincentives. I refer particularly to capital allowances, which are not an incentive but a disincentive. One pays more as a result of capital taxation of allowances than one would with the actual depreciation of the product itself. If one examines the matter sensibly, one sees that the figure is 25 per cent., but that the depreciation is more than that. There is a capital disincentive, and that is a serious matter.

Mr. Dorrell

The right hon. Gentleman appears to be arguing a case with which I entirely agree—that there is a choice to be made between tax shelters for specific activities and high marginal tax rates, and no tax shelters and low marginal tax rates. The Government choose no tax shelters and low marginal tax rates. Labour Front Benchers consistently choose specific tax allowances that must mean high tax rates. The right hon. Gentleman appears to be taking the Government side, and I warmly welcome him in this argument.

The Budget clearly sets out the Government's priorities. We have safeguarded priorities that are important not just to the Government but to the people of this country. We have set aside growth money for health and education, and to allow us to provide a proper but maintainable welfare safety net. We have set aside growth money for the police, and for proper development of our defence forces.

It addresses all these priorities within a public expenditure total which is frozen for five years. It does so at the same time as delivering tax cuts to the hard pressed taxpayers among the British people. The question for the Labour party is whether its members are for or against that strategy. The people of Britain will be watching.

4.24 pm
Ms Harriet Harman (Peckham)

As the practical operation of the rules recently endorsed by the House is still being defined, I think it right to say that I get some help with research costs from Unison.

This Budget fails to deal with the fundamental problems of the British economy. It fails to ensure the investment, the jobs and the fairness that the British people want and the economy needs. The Budget continues the failure and deception that the British people have come to expect from the Tories on health. We believe that the national health service is the best, the most cost-effective and the fairest way for this nation to provide health care for its people. We have set out in our policy document "Renewing the NHS" how this should be done.

The background to this debate are the arguments of the right-wing ideologues, now increasingly setting the pace in the Tory party, who believe that the NHS is a problem that should be got rid of. In his article in the Sunday Times a couple of weeks ago, Roy Lilley called the NHS

the problem child of the public sector—the rump of the remaining nationalised industries and an overburdened bureaucracy. But most of those who want to get rid of the NHS are not prepared to speak in such clear terms, because they know what enormous public support the health service commands. Although there are some who will openly argue against the NHS, most of the arguments against it come in code.

The anti-NHS tendency has spawned its own language for this coded message, and no doubt we shall hear some of it from Conservative Members today. We hear it continually from the Government, who talk about the bottomless pit, the infinite demand for health care, the impossible burden of the growing number of elderly people and the greedy demands of new technological developments.

The argument that there is a bottomless pit of demand for health care aims to create a self-fulfilling prophecy, so that people will come to believe that the NHS cannot cope and will thus begin to accept the inevitability of a shrinking national health service and a growing private sector. The anti-NHS brigade want the service cut back to a safety net service, used only by people who cannot afford to go private.

Mr. Dorrell

I should not like the hon. Lady to miss this opportunity to answer the arguments that have been made in this debate. I have answered all her arguments and I agree with her that they are all wrong. What I am interested to know is what she thinks about a Budget which demonstrates that the Government believe those arguments to be wrong and believe in developing the health service within a frozen public expenditure total. That is the question with which she should be dealing—not the views of Mr. Roy Lilley, who, so far as I know, has never sat on the Government Bench.

Ms Harman

The point that the Secretary of State is missing is that there are those who will argue out in the open against the NHS, and there are others, including the right hon. Gentleman, who will implement policies which undermine the NHS. That is what the Secretary of State is doing.

There is no evidence to back up the apocalyptic pronouncements that the NHS cannot cope. It has always worked against a background of steadily rising numbers of elderly people. There has been a 75 per cent. increase in the number of over-75s since 1948. Over the next 20 years, however, the number of elderly will increase by only half the rate of the past 20 years' increase. While some medical advances cost more, some cost less. New techniques can get cheaper over time. We therefore wholly reject the assumption that the NHS is doomed and cannot cope into the next century with the health care needs of the nation.

The Government are pursuing their attack on the NHS in two ways. First, they are privatising its services and blurring the distinction between the NHS and the private sector. On the other hand, they are reducing the scope of the NHS so that more people are forced to go private for more care.

I turn first to the privatisation of the supply side. The latest tool that the Government are using is the privatisation initiative—what they call the NHS private finance initiative. As with so much that they do with the NHS, the Government's position is a web of deception.

Last Tuesday—on the morning of Budget day—the Secretary of State was tearing to television and radio studios to announce the good news of huge new hospital building programmes, to be paid for with private money. During the same day, however, it became clear that that was a smokescreen to obscure the fact that there would be not more hospital building but less. Last year, the Government predicted a 1.4 per cent. cut in the NHS capital programme, but last Tuesday they announced a devastating 17 per cent. cut, with more cuts the following year and the year after that.

Mr. Dorrell

indicated dissent.

Ms Harman

The Secretary of State shakes his head. I am sure that he is not disagreeing about a 17 per cent. cut. In effect, the Secretary of State said, "Don't worry—private money will fill the gap."

Mr. Dorrell

I disagree with the hon. Lady's characterisation of what has been happening. She asserts that there will be a 17 per cent. cut in the hospital building programme. There is certainly a reallocation of NHS money to patient care, but I do not accept that there will be a cut in the building programme. I believe that the effect of the private finance initiative—I understand that the Leader of the Opposition also believes this—will be to deliver growth in the hospital capital programme.

Ms Harman

We shall come on to what the Secretary of State believes might possibly happen—I am talking about what has actually happened. In the Budget, the NHS capital building programme—our vital hospital building programme—was cut in just one year by 17 per cent. There will be more cuts in the following year and there will be more cuts during the year after that. Those are the practical facts, which the Secretary of State cannot deny.

The Secretary of State says, "Don't worry—everything will be all right because private money will come rushing in to fill the gap." Even if we see the fantastic 242 per cent. increase in private money that the Government are predicting will be available in just one year, it will amount to less than half of NHS capital cuts. We were told last year that private money would top up the NHS capital budget. We find now that that money is to replace public investment, not supplement it. The NHS capital budget is to be stripped out and replaced by private finance.

How real is the prospect of a 242 per cent. increase in private capital for the NHS in just one year? I have read the private finance panel's list of NHS initiatives, which was published by the Treasury last week. It tells a different story from what the Secretary of State would have us believe. Of the 53 NHS projects listed by the panel, only one has reached the financial close stage. The list makes it clear that 80 per cent. have not yet even reached bids in or negotiation stages. Six projects have not been formally announced to the private sector as partnership projects.

The Secretary of State is able to make announcements that he is not about to produce money to compensate for the cuts that the Government have made. If the previous so-called success rate of NHS PFI projects is maintained, we shall see not a 242 per cent. increase in private finance but one of 15 per cent. That means that the announcements made last Tuesday will spell a £303 million cut in the hospital building programme in just one year.

The Tory promises of new building are merely castles in the air. They will not lead to the building of hospitals. Indeed, the private finance panel has revealed that there is an A list of projects and a B list. The B list includes projects such as an extension at the Royal Brompton hospital. Also in the B list is a new hospital for the Hereford NHS trust. Also on the B list is a new hospital at Dartford and Gravesham. That is not a prioritisation which reflects the projects that the Government think are most important or most needed in the public interest.

Mr. Jacques Arnold (Gravesham)

Will the hon. Lady give way on that point?

Ms Harman

It is simply the private finance panel putting on the A list the projects to which it will devote most attention because they are more likely to attract private capital. It is quite wrong for the Government, who seem unable to say what their priorities are for capital building in the NHS—they are unable to answer that question—to abdicate their responsibility for deciding priorities in the private sector. That is what has happened, and all the hospitals which desperately need capital work but are on the B list will want to know why.

Mr. Arnold


Ms Harman

That highlights another problem for the NHS, because, with the capital budget slashed, the only place to which hospitals can turn for money is the private sector, and the private sector will be able to dictate the terms. We have always argued that, where private capital can serve the public interest in public services, it should do so, but we have always made it clear that the NHS must not be privatised. It is totally unacceptable that the Government are going down the path whereby not only will the private sector own the land and the buildings but it will run the hospital and employ the staff.

The Secretary of State has said—he makes this conditional, of course—that in the overwhelming majority of cases he will stop short of privatising clinical services, but that is all code and a smokescreen because he refuses to say what he means by "clinical services". It is a moving boundary. He has already made it clear that he does not think that anaesthesia, radiography, chiropody and pathology are clinical services, because he is already putting them out to market testing. In Scotland, the Stonehaven hospital contract is to include the private sector running the hospital and employing the staff.

Mr. Arnold

Will the hon. Lady give way?

Ms Harman

Those who work in our hospitals know, as we do, that the health care team needs to work together as a team. When a patient arriving at hospital finds that the receptionist, admissions officer, radiographer and blood-testing pathologist are all employed by, for example, a Swiss company and not the NHS, the Secretary of State will have destroyed the ethos of the NHS. Even where the doctor and nurse are still employed by the NHS, they will be like strangers in a private hospital.

Mr. Dorrell

The hon. Lady said that I did not define what I meant by clinical and clinical support services. I happily concede that all the services that she describes are clinical and clinical support services. I have made that clear many times before. I hope that the hon. Lady will also make it clear that the documents on market testing underline the fact that those services can be secured other than from NHS employees only where there is clinical support for such a change. That was set out clearly in the market testing documents and it is set out equally clearly in all the documents surrounding the private finance initiative.

Ms Harman

When patients arrive at the hospital and find that the receptionist, the admissions clerk and the pathologist are all employed by a private company, they will know that this is not the NHS as they want it to be or as it used to be, and that it will have been privatised. The Secretary of State constantly tries to define conditions that he can then meet so as to justify his creeping privatisation, but people in this country know precisely what he is up to, and they are not in the least fooled by it. They know that with this fragmentation, the NHS health care team will be destroyed.

Mr. Arnold

Will the hon. Lady give way?

Ms Harman

Let me make it absolutely clear that there is no difference in the position that I am taking and the one taken by my hon. Friend the shadow Chancellor or my right hon. Friend the Leader of the Opposition. Under the Tories, private finance is intended not to top up the public purse but to replace it. It is not a public-private partnership but a private takeover. It is not a private finance initiative, but a privatisation initiative. The Tories are not only privatising the supply side of the NHS—

Mr. Arnold

Will the hon. Lady give way?

Mr. Deputy Speaker (Mr. Michael Morris)

Order. The hon. Member for Gravesham (Mr. Arnold) may find it frustrating, but it is clear that the hon. Lady is not giving way to him.

Ms Harman

I would have expected the hon. Member for Gravesham (Mr. Arnold) to intervene during the speech by the Secretary of State and to ask why his hospital's private finance project was on the B list. He probably did not even know about it. The B list is secret and the hon. Gentleman will have some explaining to do.

Mr. Arnold

Will the hon. Lady give way?

Ms Harman

Not only are the Tories privatising the supply side of the NHS—

Mr. Arnold

On a point of order, Mr. Deputy Speaker. The hon. Lady referred earlier to my hospital and she has now referred to it again, yet she does not have the courage to give way.

Mr. Deputy Speaker

That is not a point of order for the Chair.

Ms Harman

If the hon. Member for Gravesham catches your eye later in the debate, Mr. Deputy Speaker, so that he can stick up for his hospital and for the patients in his constituency, his constituents will be delighted and astonished. It would certainly make a change.

The Tories are not only privatising the supply side of the NHS but pushing more and more people out of the NHS into the private sector. We have already seen what happened to NHS dentistry. First, charges were pushed up so high that one could not tell whether one was on the NHS or going private; secondly, there were fewer and fewer dentists doing NHS work so one had to go private. It has been the same story with long-term care.

Mr. Arnold

Will the hon. Lady give way?

Ms Harman

If the hon. Gentleman wants to intervene to ask me about his hospital, I will give way and then tell him about it.

Mr. Arnold

The hon. Lady referred to the replacement hospital for the Dartford and Gravesham area which is on the list for the PFI. Is she aware that four major consortiums are bidding to build that hospital? Does she support the PFI for that purpose? If not, does she have a commitment from the shadow Chancellor to put up £100 million to build the hospital in one phase, which is what all the consortiums want to do? What is more, they would build the hospital in the correct place—Darenth park—which the NHS would not have done.

Ms Harman

The hon. Gentleman does not seem to have understood what has happened in the Budget. He talks about his hopes for his hospital, but I can tell him two things today. First, the chances of any hospital getting capital work done on it are reduced as a result of the Budget and the cuts in NHS capital funding. Secondly, although the hon. Gentleman's hospital is on the private finance panel's list of NHS-PFI projects, it is not on the A list but on the B list, which means lower priority. The hon. Gentleman should complain to the Secretary of State about the fact that his hospital is on the B list in the endless search for private finance.

It has been the same story with long-term care, as my hon. Friends the Members for Halifax (Mrs. Mahon) and for Wallasey (Ms Eagle) mentioned. The Budget announcement on long-term care is an inadequate response which is designed to hide the Government's betrayal of a generation of elderly people. The Budget announcement will not stop elderly people having to sell their homes to pay for long-term residential care. Even the Secretary of State has not been able to claim that. The announcement is a quick short-term reaction to a long-term problem which the Government have helped to create and which they have failed to address.

With the average house worth £67,000, the new £16,000 capital disregard will not safeguard the homes of elderly people who believed that they had been promised care from the cradle to the grave. It will not remove elderly people's fear of losing almost everything that they have worked for a lifetime to build up and which the Prime Minister told them they could pass on to their children.

Ms Eagle

On a point of order, Mr. Deputy Speaker. Is it in order for a Back Bencher, the hon. Member for Gravesham (Mr. Arnold), to consult the civil servants' Box, presumably about his hospital?

Mr. Deputy Speaker

The Chair has no knowledge of what any hon. Member is consulting anybody about. Such consultation is, however, unusual.

Ms Harman

The hon. Member for Gravesham is trying to find out why his hospital is on the B list and why he was never told about that. I will tell him why his hospital is on the B list. The priorities are dictated not by the Government in the public interest, but by the private finance panel according to where it can most quickly find private sector money. The hon. Gentleman can save himself asking the civil servants in the Box about the Government; he should go to the private finance panel and ask it. That panel is, of course, not here.

Without clear national guidelines—[Interruption.] The hon. Member for Gravesham is clearly in some difficulty; he does not know what is going on and his right hon. Friend the Secretary of State has not told him. I undertake to talk to the hon. Gentleman afterwards and to explain fully what the private finance panel is doing with his hospital. I realise that he is a desperate man, and rightly so, but he is not so desperate as his constituents, who see him supporting a Government who have let them down.

Without clear national guidelines—

Mr. Arnold

Will the hon. Lady give way?

Ms Harman

I should be grateful if the hon. Gentleman would desist.

Without clear national guidelines, people with assets above the new threshold will still pay for care which may be free in other parts of the country. Under the Conservatives, where one lives determines the care that one gets and the price that one pays.

The Chancellor of the Exchequer (Mr. Kenneth Clarke)

The hon. Lady has just said that the doubling of the disregard for contributions to residential care is inadequate. To what level would the Opposition raise the disregard and how much would that cost?

Ms Harman

I am grateful that the Chancellor is asking me for advice; he has at least learnt something. The question on his Budget that he has to answer is how many of the elderly people who fear that the lifetime savings that they have accumulated and invested in their homes will disappear because they have to go into residential care will no longer have to worry about that. The answer is that his Budget at least recognised that there was a problem, but it failed to address it and that is what we charge the Chancellor with today. If he is asking us to produce a Budget, let him call a general election, after which we shall sit on the other side of the House and my hon. Friend the Member for Dunfermline, East (Mr. Brown) will deliver our Budget.

Mr. Clarke

I have made it clear what we would do; it is what we have done. We have doubled the disregard at considerable public expense. I stand condemned by the hon. Lady, who says that the disregard is not good enough and does not satisfy her or elderly people. It follows perfectly logically that if we had a credible Opposition the hon. Lady would say what the disregard should be. She would have calculated how much it would cost and she would have got the permission of the shadow Chancellor, who is sitting alongside her, to say how much it would cost. It is clear that the hon. Lady has no more idea than the shadow Chancellor as to what the Opposition's policy is on this or on anything else.

Ms Harman

The Chancellor is trying to make—

Mrs. Jane Kennedy (Liverpool, Broadgreen)

On a point of order, Mr. Deputy Speaker. With reference to the previous point of order, the House should note that the hon. Member for Gravesham (Mr. Arnold) has received a paper from the civil servants' Box. Surely that is an abuse of the House.

Mr. Deputy Speaker

Fortunately, this Deputy Speaker does not have eyes in the back of his head.

Ms Harman

The Chancellor has recognised that there is anger and concern throughout the country about elderly people who would previously have got long-term residential care without having to sell their homes to pay for it. The Prime Minister promised that there would be a cascade of wealth down the generations, but that promise has been broken. The Chancellor said that he would address that problem in his Budget. I am here at the Dispatch Box today to say that he has not done so and that the Government have failed to keep their promise to address the problems that they helped to create.

Mr. Simon Hughes

I understand the hon. Lady's point about seeking more resources for community care and for hospital building, but in that case why will she and her colleagues not vote tomorrow against the Government's proposal to cut the rate of basic tax by a penny in the pound?

Ms Harman

We shall vote against the Budget because it has no vision, no direction and no strategy. We have tabled an amendment, and the hon. Gentleman is welcome to vote for it. Our proposals would deliver investment, jobs and fairness. On the cut of one penny in the pound, we are saying that people have suffered enough. One of the things that they have suffered is broken promises.

The next great engine of privatisation is rationing in the national health service. When people cannot obtain what they need on the NHS, they have to go without that treatment or they are forced to pay for it and go private. It is no good protesting, as many Conservatives do, about the word "rationing", because some local health authorities are calling it that. Rationing varies from authority to authority. That is why Sandy Macara, chairman of the British Medical Association, has said that access to treatment is becoming a national lottery.

What one can get on the NHS increasingly depends on where one lives. Rationing—that is, excluding treatment under the NHS—is taking hold at local level so that one now has to be careful where one gets ill. Do not get the menopause in west Kent, as there are to be no specialist menopause services there. Do not get brittle bones in west Dorset, as there is to be no osteoporosis screening there. Do not get infected wisdom teeth in Hertfordshire or Kingston and Richmond. Do not get glue ear in the Isle of Wight, because it has declared itself a grommet-free zone.

The NHS is becoming a lottery, but there is a pattern. Rationing starts with those operations which are the most controversial, such as gender transformation, sterilisation reversal and abortion, but that is just the thin end of the wedge. The Government seek to establish the rationing process with the less popular procedures. Having gained acceptability for the inevitability of the rationing process, they can then swiftly move on to other treatments. Yesterday it was grommets and fertility treatment; today it is varicose veins and osteoporosis screening; tomorrow it will be hernias and hip replacements.

Mr. Rowe

I have often heard the hon. Lady say that what treatment one receives depends on where one lives, but most of the other members of her party's Front Bench team are hell bent on achieving local government reorganisation and devolution in varying ways, which presupposes that the various units will be allowed to choose their priorities. Therefore, in almost every other element of service, whether it be social services or whatever, the hon. Lady supports a policy that will lead to differences of provision depending on where one lives.

Ms Harman

The hon. Gentleman is muddling two distinct things. We are saying that it is wrong for managers, area by area, to issue edicts which simply chop different national health service treatments off the list of what they provide locally. When the Secretary of State defends rationing, he often tries to imply, as he did again in the House today, that the removal of treatments from the NHS is part of the drive for clinical effectiveness. It is nothing of the sort.

Of course medical practice changes and the pace of change is accelerating. That means that we must have evaluation of treatments and dissemination of information, agreeing best practice, ensuring that clinicians are properly trained and kept up to date using new technology, and monitoring practice, doctor by doctor and hospital by hospital. But the prime reason for ensuring best practice is because it is in the interests of the patients.

That is the key issue. We are arguing for best practice in the interests of patients; the Government are using the argument of clinical effectiveness as a smokescreen behind which they allow managers at local level to chop services altogether.

Sir David Mitchell (North-West Hampshire)

Is the hon. Lady not aware that fundholding doctors can choose where to send their patients, so if certain services are restricted in one region and available in another, fundholding doctors can make use of that to send their patients to such regions for their benefit?

Ms Harman

Before the Government introduced the internal market, all general practitioners were able to refer their patients to whichever hospital they thought was most convenient or would provide the treatment best suited to the patient's condition. Since the Government introduced the internal market and contract system, only GP fundholders have that freedom for referral.

On bureaucracy, it is ironic that rationing and assertions about what the national health service can no longer afford to do should come at a time when there seems to be a bottomless pit, an infinite demand for spending on bureaucracy. Earlier, the Secretary of State took some time talking about extra resources, but look where the money is going: it is going into the bottomless pit of NHS bureaucracy that the Government have created.

Three more things are driving the engine of bureaucracy into the national health service. First, if more GPs become fundholders, that is an extra £80,000 per practice on administration and every hospital will have to do more administration to deal with dozens of different purchases. Secondly, if local pay bargaining becomes a reality, as the Government wish, there will have to be new and enlarged personnel departments in every NHS trust to deal with that. Thirdly, having been told that there is no longer any money left in the NHS capital budget, NHS managers will have to spend thousands of hours trooping around different private consortia trying to obtain private money for capital projects.

The cost of the internal market is already an extra £1.5 billion per year on administration. When people see the Government pouring billions of pounds into national health service bureaucracy, why should anyone accept that the NHS cannot afford to give them the treatment that their doctor says they need?

The Secretary of State's recent conversion to what he describes as bureau-scepticism is a sham. I understand that he has announced a new efficiency scrutiny team, which I believe is a sort of quangoette. Even if he were to achieve cuts of 5 per cent. in bureaucracy, that would not even take bureaucracy spending back to where it was in 1992-93. There are more people to count the cost of treatment and fewer people to provide it. That is one of the reasons why we opposed the introduction of the internal market and why we remain committed to ending it.

Any discussion of what the NHS can or cannot afford must not proceed without being accompanied by discussion of the social and economic costs of the alternatives to the NHS.

Mr. Dorrell

The hon. Lady just said that she was committed to ending the internal market. The document that her party issued in June made it abundantly clear, first, that the purchaser-provider split would be maintained and, secondly, that purchasers would be free to choose where their supply arrangements were placed. Those are the key characteristics of the internal market. If the hon. Lady is throwing that policy document over, she had better announce what she intends to put in its place.

Ms Harman

The Secretary of State is being entirely misleading. Before the internal market was introduced, it was always the case that people had freedom of referral. We have said that there needs to be autonomy for local hospitals and a planning process, but he fails to understand that we are against the internal market not only because of its unfairness, with one purchaser having advantage over another, but because of the huge transaction costs.

Mr. Dorrell

This is an important point. That document says that we should maintain separate purchasers and providers and leave in the hands of purchasers the freedom to place their supply arrangements where they think the advantage of their local communities lies. That is what an internal market is. Is the hon. Lady for or against that?

Ms Harman

That document makes it clear—the right hon. Gentleman can buy another copy as he has not read the first one sensibly—that different roles are necessary. One is the planning role; another is running the hospital and prioritising need, patient by patient, as it arises. We are in no confusion about what we are proposing and neither are the British people, who have always been against the commercialisation and fragmentation of the NHS as they have dealt with it. Those people want us to renew it according to our plans.

The Secretary of State is having difficulty understanding our plans. Let me tell him that the British Medical Association, the Royal College of Nursing and a host of other organisations not only understand what is in those plans, but see completely the difference between the position now and our proposals. They welcome our proposals.

On the alternative to the NHS, many Tory right-wing ideologues propose that we cannot afford the NHS and that we must have more and more going into the private sector, but we are not saying that we cannot afford the NHS. On the contrary, we cannot afford to let the NHS dwindle. That would impose a massive burden on business as the demand for private health care gave rise to a demand on employers for private health insurance. If the engine of exclusion of treatments and limiting of the NHS goes ahead, employers will have to provide private health insurance and bit by bit responsibility for health care provision will pass from the state not to individuals but to employers.

Mr. Kenneth Clarke

That is why we are providing more money.

Ms Harman

The Chancellor is heckling again. He says that that is why the Government are providing more money, but that money is going straight into a bottomless pit because the Government's internal market has created an incessant and infinite demand for bureaucracy, which they are feeding.

There has been a significant increase in private provision. Over the past 15 years the number of private hospital beds has increased by 66 per cent. while over the same period the number of NHS acute hospital beds has fallen by 28 per cent. The Secretary of State has a simple defence to our charge of privatisation: he buries his head in the sand and when there is anything dreadful happening he says that he does not know about it. I am compiling a list of things that the Secretary of State does not know and I invite my hon. Friends to mention those that I have missed.

I asked the Secretary of State what clinical services he plans to protect from privatisation under the private finance initiative. He does not know, although he coined the dividing line for the PFI in the NHS. He does not know, or will not say, what is or is not a clinical service. I asked him how many NHS chief executives earn more than £100,000. He does not know, although he has said that he intends to cut spending on bureaucracy. I asked him why people waiting for hip replacements in the constituency of his Minister of State have to wait longer if their GP is not a fundholder, but he did not know that that was the case. Apparently it came to him as a complete surprise.

I asked the Secretary of State what NHS services are being rationed in each area, but he did not know anything about that either. He says that he does not know what the NHS is or is not providing. That will continue in future as the relentless engine of privatisation and cuts rolls on and as the Tory right bays for the blood of the NHS. The Secretary of State has a perfect defence: he does not know—he sees no evil and he hears no evil. But all the while the language is being groomed. I have a secret Department of Health memo from the London briefing unit which says that, in the context of Bart's hospital, some "presentational nuances" need to be addressed. It reminds everyone in the Department of Health:

The Minister of Health does not wish to see references to the closure of Bart's … maintaining that Ministers have never said that Bart's will close. It is the site that is to close. It turns out that there is a Government plan to close Bart's but that no one is to refer to it.

The Minister refuses to answer questions and to deal honestly with the issues because he fears to face the British people and admit what he is up to. We must never forget where the British people stand on these issues. The Government's agenda for change has failed because it lacks the legitimacy afforded by public support. People support the drive for clinical effectiveness, for prioritising urgent cases on waiting lists, and for planning to anticipate local demand for health care, but they do not like what the Tories are up to in the NHS and they do not trust them.

A Gallup poll in The Daily Telegraph last month showed that 84 per cent. of voters are concerned that under the Government the NHS might no longer be a good service freely available to all. A British Medical Journal survey of patients said that, when patients were asked to rank treatments in order of priority:

No interviewee was fully persuaded that the process of rationing … should happen at all. Put simply, that means that people believe that the argument about rationing is a trap. They do not want to collude in an exercise that will result in health care need not being met.

The BMJ survey also states:

In general, interviewees were more comfortable justifying their opinions on the basis of the needs of others. That highlights one of the most important aspects of the NHS in our society. It is one of the few things in this divided Tory Britain that we all still share. After a decade and a half of Tory rule, there is precious little in our society representing our shared values and concerns for one another. The NHS is a unique and extraordinary institution. Over the past 16 years the Tories have plotted to undermine it. It has not been safe in Tory hands, but it has been safe in the hands of the British people and it will remain so until Labour gets into government to renew it.

5.5 pm

Sir David Mitchell (North-West Hampshire)

The hon. Member for Peckham (Ms Harman) appears to be unable to see the benefits of the Government's reforms of the national health service. For patients these have meant that the average waiting time for non-urgent operations has come down from nine months to five months. There have been substantial benefits for my constituents and those of other hon. Members.

Front-Bench spokesmen have dealt with the health aspects of the Budget, but the Budget's provisions go much wider than that and I wish to address those wider issues. The House will know that my family includes my hon. and filial Friend the Member for Gedling (Mr. Andrew Mitchell). But this is not the first father and son sequence in Parliament in my family. My twice great grandfather represented South Northumberland from 1837 to 1841 and his son represented Newcastle from 1852 to 1856. On 25 April 1853 he spoke in the Budget debate, which at that time was sensibly held in the spring. The Hansard record states:

His constituents also regretted the postponement of the period when they might look forward to an abatement of the income tax, and especially for some alleviation of the severity with which that tax pressed upon precarious incomes. At that time, income tax was 7p in the pound for those with incomes of more than £150. If my predecessor were here today he would join me in thanking my right hon. and learned Friend the Chancellor for doing just what he asked—bringing relief to those on low incomes. That brings me to my first major point in the debate—the Budget's effect on motivation.

I calculate that about 200,000 more people will now not pay income tax as a result of the Budget. That is important to an enormous number of people who are hesitating between drawing benefit and taking employment. I am grateful to the Chancellor for taking a decisive step that will make it worth while for people to seek employment. How much will a married man with no children be able to earn before he pays income tax?

In the context of motivation, 6 million people will now pay income tax at only 20 per cent. According to my calculations that is a quarter of all taxpayers. That is a substantial achievement for which the country is greatly indebted to the Chancellor. Of course all taxpayers are also better off by 1p in the pound.

According to the media, some of my hon. Friends have fallen for leading questions asking for bigger cuts. The Chancellor was absolutely right not to go for large and startling decreases in income tax because of the effect that such cuts would have on sterling. Sterling is important for its effect on the cost of our imports. An increase in import prices is inflationary. Imports of semi-finished goods, which are completed in this country and then re-exported, are affected by a fall in sterling, making our exports less competitive.

Had my right hon. and learned Friend gone along that road of dramatic tax reductions, the weakness of sterling would have inhibited him from being able to make reductions in interest rates. Nothing is more important for small businesses at present than the Chancellor having the scope and opportunity to ease interest rates in the coming months. A reduction of 1 per cent. in interest rates would mean that a house owner with a £60,000 mortgage would save £600 a year, but that is not the point that I want to make. I wish to refer instead to small businesses.

Small and new businesses are the greatest job creators of the decade. In the past four years, some 500,000 new jobs have been created in this country. Those jobs have been created overwhelmingly by small and new businesses, not by existing large companies. More of our people in this country are in work than in any other major EC country. That is partly due to our small businesses, and I wish to cover three points of importance to such businesses.

First, the motivation for someone to start a business is that he wants to be able to a make success of it. When he has made a success of the business, he will be concerned with whether the Government are going to take away in tax an inordinate amount of his profits, and thus reduce his motivation.

Secondly, one cannot expand a business without internal finance, and I therefore welcome the reductions in corporation tax as it applies to small businesses. The reductions bring us to a point where we have the lowest corporation tax on small firms of any country in the EC.

Even more important is that we have low inflation, a point which many hon. Members have not fully appreciated. High inflation erodes the resources within a business, and I shall give one example to my hon. Friend the Financial Secretary to the Treasury. If inflation is at 20 per cent., a modest-sized engineering factory with £100,000-worth of work in progress has to pay the first £20,000 of its profits at the end of the year simply and solely to provide for the same volume of work in progress in the ensuing year. What are the company's competitors doing in countries with lower rates of inflation? They are putting that money into research, development, modernisation, expansion and investment in business and growth.

It is very important for the small business community—indeed, for the whole business community—that inflation levels do not pre-empt the money that a business has available for the useless purpose of simply providing for the same volume of stock. Low inflation enables firms to expand, and we are now seeing the effect of the best run for 50 years in terms of keeping inflation down to reasonable levels.

We should recognise the debilitating effect of inflation, which reached 26.9 per cent. during the period in office of the previous Government. The effect on the business community of that was horrific, and firms were unable to expand. We are now seeing the growth of firms, and an increase in employment which follows from that. After motivation, the second vital need for small businesses is the available resources within a business for expansion. Hence, I welcome the reduction in corporation tax.

The third thing that small businesses need is a reduction in the cost of complying with regulations. I welcome the announcement in the Budget that tax law is to be rewritten in plain English, and I look forward to seeing the benefits of that. I wish my right hon. and learned Friend the Chancellor good fortune in seeking to carry out that task. It would certainly be a valuable move. There are far too many burdens on small businesses and far too many regulations with which businesses must comply. Far too much is also churned out by Brussels, and the compliance costs for small businesses have been under-recognised.

I welcome the fact that my right hon. Friend the Secretary of State for Transport has been able to permit the Newbury bypass to go ahead unscathed on the edge of my constituency. I am sure that, if the hon. Member for Newbury (Mr. Rendel) were in the Chamber, he would join me in welcoming that decision.

I welcome the measures on police expenditure, which will provide for 5,000 extra officers, and I was delighted that the Chancellor referred to closed circuit television in terms of security. The House may be interested to know that in the City of London—which has a significant number of closed circuit television surveillance cameras—there has been a 37 per cent. fall in the level of crime. I was particularly delighted that the Chancellor announced that the number of closed circuit television surveillance cameras elsewhere would be increased by 10,000 in the coming year.

I note with pleasure that some 50 per cent. more in real terms over and above the level of inflation has been spent on education per child since the Conservative Government came to office. Hampshire county council ought to be well pleased with the Budget in that respect, since it is to receive a £22 million increase in its standard spending assessment for education during the coming year. I notice that the council will get some £30 million extra from the business rate and from the revenue support grant. That should go a long way towards finding the £22 million for education that it needs.

On health, my right hon. Friend the Secretary of State for Health referred this afternoon to the £1 billion more funding available. However, I have a serious point that I want to put to my right hon. Friend about the effects of the national lottery. The Chancellor has recognised that the lottery has some side effects, and he made some concessions to those in the gambling industry who have been adversely affected. But my right hon. and learned Friend has not recognised the effect that the lottery is having on people-caring charities, whose income has been reduced—according to a recent survey—by one third since the lottery was introduced.

The survey reports that, although there are about 800 people-caring charities, only four grants have been made by the national lottery to such charities. That leaves some 796 charities worse off. That is a very important factor in terms of health care, and I urge my right hon. Friend the Secretary of State to interest himself in the matter, which has serious implications. The voluntary aspect of NHS activities—including mental health services and a range of other activities—is backed, sustained and supported by charities, particularly smaller people-caring charities. I urge my right hon. Friend to take a close interest in the matter. When the Finance Bill is brought forward, my right hon. and learned Friend might perhaps consider an amendment to try to deal with the problem in a practical way.

Finally, I wish to refer to the help to be provided in the Bills dealing with residential and nursing homes. I understand that everyone with less than £10,000 of savings will be cared for by the state, but we have an aging population and we must ask ourselves how long we can afford to do that. There is also a problem that those who have savings of just over £10,000 may seek to blow their savings before they get to the age at which they need nursing care. I was delighted to see the proposal to exempt from tax benefits on insurance policies for long-term care. I ask my right hon. and learned Friend to consider more generous state provision for those who have undertaken insurance cover to look after themselves with nursing care for three years.

If people who have undertaken that provision happen to live longer, it might be appropriate for the Government to come in with support. Such people have demonstrated by paying into an insurance policy their determination to do something for themselves. The Government could support them for the balance of their lifetime.

I support the Budget because it improves motivation throughout the economy, helps the birth and growth of small businesses and new businesses, holds inflation down with the prospect of some cuts in interest rates, and gives the right priorities to spending on education, health and the police.

May I whimsically quote my forebear from Hansard in 1853. The record says:

Taking the Budget as a whole, he had no hesitation in saying that it was beneficial and satisfactory … and with regard to his own constituents, he believed they were almost prepared to say"— as I am—

The Budget, the whole Budget, and nothing but the Budget."'

5.20 pm
Dr. Jeremy Bray (Motherwell, South)

I cannot greet the Budget with quite the enthusiasm that the hon. Member for North-West Hampshire (Sir D. Mitchell) expressed. Before the Secretary of State leaves, I should like, as chairman of the all-party mental health group, to thank him for what he said about community care for the mentally ill. Obviously, the publication of the report on the health authorities is awaited with great interest. The Secretary of State will be aware that the Government will be examined, first, for the realism with which they describe the present situation, which is still inadequate, and, secondly, for the adequacy of the actions that they propose to take. It is against those factors that his announcement of increased resources will be judged.

As the Secretary of State said in response to my intervention, many other problems affecting the mentally ill do not fall within his departmental responsibility. I hope that we can rely on the co-operation of the Department of Health, with other Departments, to determine what overall developments are needed in the service.

I should like to examine two tasks at the extremes of the Budget debate. The first is coping with structural changes in employment, and the supply, of and demand for skills. The current levels of unemployment are intolerable. A test of any Budget is what it does about jobs. The second task is keeping the economy stable on a path of sustainable growth. Party rhetoric from both Government and Opposition suggests that doing so, is merely a matter of will, but it is a difficult task. The success that we have achieved and that is achievable is limited. Avoidable mistakes have undoubtedly been made. I should like to suggest how the likelihood of such mistakes could be reduced.

On jobs, it is not possible to shift from a situation in which only 3 per cent. of the population go to university to one in which 30 per cent. do so without a huge change in the nature of the work done by people with different types of qualifications. If the skilled operator of a most sophisticated new piece of equipment—say, a computerised DNA sequencing machine in a pharmaceutical industrial research department or a local authority public health department—requires only a four-week training course, the pattern of training for the future will not recognise the old-fashioned segmentation into craft, technician and professional grades.

It is a cop-out simply to say that those huge changes in the labour market can be taken care of by market mechanisms. We are all in the job market. Perhaps some hon. Members will return to it sooner than they would wish. As market operators, we want to know what to do. Union bashing is irrelevant—indeed, counter-productive. The unions can be and have been at times most helpful agents in assisting their members to find the information they need to become qualified and the jobs for which they are suited. It is equally a cop-out simply to say that public money should be made available to provide the resources needed to meet palpable needs, without seeing whether that strategy and the particular measures proposed take us into still more acute imbalances in local economies, in particular skills or in the wider economy. My plea is that we should look at the labour market to determine the actual demands and the resources needed to meet them.

One can take almost any source. The job advertisement section of the New Scientist this week discussed

the structural changes which are taking place—flatter organisations, the need to manage one's own career and perhaps pay for one's own training. The lead-in article says:

The certainty that a career will not be spent with one single employer or even in a single area of work, makes it essential for employees to adapt continuously to change throughout their careers. There is an increasing probability that people will be self-employed at some time. Self reliance is the key which will enable people to cope with such situations. Skills which will be paramount in the future include self-confidence and self-promotion, action planning, networking, negotiation, political awareness and coping with uncertainty. The top five skills listed by employers as in short supply among graduates were business awareness, communication skills, leadership, teamwork and problem solving. These were followed by conceptual ability, knowledge and competence in an academic discipline, foreign languages and numeracy. That is scarcely the order in which the trainers and educators of the world would rank their priorities. Perhaps that quotation is just so much management consultants' waffle, but versions of it appear in, for example, the recent observations of the Select Committee on Science and Technology when looking into human genetics and its immense impact on the future of the health service and many other matters. We noticed that the difference in the speed with which services would develop in biotechnology depended on the speed of start-up of new enterprises. That in turn is influenced by the different attitudes to entrepreneurship among biotechnologists in California and Britain.

The organisation of actual work on the ground in the construction is rapidly changing. The skills listed in the New Scientist are needed not only in supervisors but in a high proportion of labour-only contracting craftsmen, who nowadays have to manage their activity on the building site.

All that the Budget has done is adjust some of the parameters around the edges of the labour market. It has not taken the point that if the main body of the labour market functioned better, there would be fewer problems around the edge. The Chancellor proposes 100 per cent. inheritance tax relief for unquoted shares in trading companies—good for the family firm, no doubt—more favourable treatment of employee share schemes, private insurance of health and mortgage protection and workfare schemes.

Mr. Nigel Forman (Carshalton and Wallington)

The hon. Gentleman is a fair-minded and thoughtful Member. Does he accept that he perhaps seeks to attach to any Budget more weight than it can bear—that the answers to some of the important questions that he asks about the labour market require supply-side policy changes at the micro-economic level?

Dr. Bray

Indeed they do. They require supply-side changes, but in a wider sense than is customarily used by the Government and their supporters. The Government identify the supply side merely with paying more to the wealthy and less to the poor. Income distribution is not the end of supply-side measures. We see the supply side as practical investment in education and training, plant and machinery, the physical infrastructure, and so on. That is the supply side, and it certainly needs attention. A great deal of the Government's budgetary argument was directed at that. There was practically nothing about the macro-economy.

I was about to welcome the limited measures acting on the labour market in general that the Chancellor announced. On the main body of the Budget, however, the reduction in employer's national insurance contributions and tax relief for vocational training for trainees over 30 are welcome but do not begin to tackle the wider problem.

A coherent labour market strategy would consider the transitions and frictions of job and skill changes and find where the tax, benefit and grants systems need to be adjusted at points before people lose their jobs. Neither the Government nor the Opposition are opposed to such an approach in principle, but it has to be tackled more systemically if unemployment is to be reduced from its present intolerable levels and the overall productivity and competitiveness of the economy are to be raised.

I put first the argument for supply-side measures, indeed, for structural measures, to make the point that I do not believe that simply pulling the macro-economic levers of fiscal and monetary policy is sufficient as an economic policy. Nevertheless, the levers are important, and the quality of debate in the House on macro-economic policy has become quite abysmal. We heard virtually nothing of it from the Chancellor. In his Budget statement, he had nothing to say about the exchange rate. The words were not even mentioned in his statement— I checked that carefully this morning. He had nothing to say about the relationships between borrowing, debt, income and inflation, about which we used to hear so much in the 1980s from successive Conservative Chancellors.

If I may try to repair some of the omissions from the Chancellor's speech, I observe that we may or may not enter the economic and monetary union in 1999, 2002 or whenever. That is probably the most important economic question that the Government will face in the next year. The Chancellor had nothing at all to say about it, and we can guess why—because it would be acutely embarrassing to his hon. Friends on the Back Benches and to the Prime Minister. Whatever happens, and whatever are the views of hon. Members about the appropriate policy to adopt at the intergovernmental conference, we have to conduct our own monetary and fiscal policy in an international context. We have to pursue objectives on inflation, borrowing and debt and we cannot ignore the exchange rate.

As for the EMU, satisfactory convergence is not simply a matter of hitting the targets by a qualifying date or even of-establishing satisfactory progress on convergence in the real economy; it is a matter of demonstrating that we can prosper under a set of rules by which policy will respond to shocks coming from within the European economy or from outside. Whether we enter the EMU or not, we have to formulate some such rules. The Chancellor is operating with a transitional set of rules which were adopted the day after black Wednesday, and they have not been significantly developed or explained since. We remain totally vulnerable to the next major crisis and need a system to warn of the onset of such a crisis.

The recent first report of the European Monetary Institute focuses attention on the issue. On page 72, in discussing the lines of a monetary policy strategy for stage 3 of economic and monetary union, it states:

An inflation targeting strategy has been adopted by a number of EU countries in recent years … the approach is to focus directly on expected future inflation. This involves the use of a wide range of available indicators to arrive at a projection of inflation in the future. Monetary policy is then set so as to be consistent with the achievement of price stability as defined by the target. That statement clearly bears the mark of a UK draftsman, because there is a similar passage on page 16 of the "Financial Statement and Budget Report" describing the Government's inflation targeting policy. Whether one asks the Government or the European Monetary Institute, one has to ask how those projections of the expected rate of inflation are to be made and how they are to be responded to. One then gets into rather difficult territory.

When people talk about numbers, they use models of some sort. Of course, the full range of argument will be used, from chicken livers, through the backs of envelopes and the learned writings of the economic pundits in the press, to the full-blown national economy models supported by the Economic and Social Research Council. One fairly firm conclusion that emerges from the most careful studies of the latter is that there is a high degree of uncertainty and unpredictability about the process, and that the limits of the extent to which it is possible to stabilise economies are rather wide. Within those limits, severe mistakes have been made in the past which could have been avoided by better analysis and by paying more attention to the analyses that were made.

Perhaps the most important mistake made in recent years was the response of Government policy to the stock exchange crash in 1987, from which the Government and the country are still suffering—they are suffering not from the crash but from the Government's mistaken response in over-inflating the economy in the run-up to the general election.

At present, inside or outside the Treasury and the Bank of England, there is no systematic, sustained representation of fiscal or monetary policy strategies or regimes. I repeat: there is no sustained picture anywhere in the country of the monetary strategy that is pursued, yet such a description is well within the capacity of the current state of the art and of current technology. Even the exploration of possible regimes is intermittent, episodic, ad hoc, haphazard and either superficial or laborious to carry out, so the month-to-month briefings required, whether for the Chancellor's meeting with the Governor of the Bank of England, for meetings of the European Council of Ministers or for meetings elsewhere, cannot have the support of up-to-date, comprehensive analysis.

This is true in respect of UK policy instruments on their own and still more so in respect of the international game, with objectives differing between different agents, such as between central banks and Finance Ministries or between Government and the labour market—even within a country, never mind between countries.

Of all the countries in the European Union, the UK is the best equipped technically to carry such work, because of its long tradition of economic research, going back hundreds of years in Britain, which has been kept up to date by the continuing efforts of British economists. Despite the much-maligned work of those economists in their attempts to design and monitor strategies, their work has not been organised by the consortium of the ESRC, the Treasury and the Bank of England in such a way as to come up with coherent answers.

Despite the recent funding round 4 of the consortium, under which the Economic and Social Research Council, with the support of the Treasury and the Bank of England, renewed its support for the national economy models, the work is still not organised to produce coherent economic strategies of the sort needed to design and appraise—let alone implement and monitor—the policies needed as we explore the next stages of development of the European Union. That work is well within the capacity of the state of the art and the scope of available technology using the resources that the Government have already committed to the consortium directly from the Treasury and the Bank and indirectly from the ESRC.

There is an a urgent need to review the programme. That is made easier by the fact that there has been a large departure of staff from the forecasting teams. Staff are having to reappraise their work and their priorities. That turnover is not necessarily bad in itself, because that kind of economic research is a young person's game. It is hard work and technically very demanding, so a high turnover is only natural. The ESRC should be examined and organised, so that the urgent priorities of policy that underlie our economic strategies can be better addressed.

We have not made things easier by the way in which, as political workmen, we have blamed our tools. We would do better to put some effort into understanding the arguments and into debating them in the House. We should realise that uncertain forecasts are the beginning, and not the end, of an intelligent design of economic strategy. Under a good strategy, policy evolves with the passage of time in response to changing needs and circumstances. This theme is not new for me in Budget debates, nor is it one on which there has been no movement in the past, but the benefits of further movement would be great.

5.40 pm
Mr. Nigel Forman (Carshalton and Wallington)

I shall begin as I think will become customary in such debates—by declaring my interests as they appear in the Register of Members' Interests. For the avoidance of doubt, they are the Institute of Chartered Accountants, Salomon Brothers International plc and HFC Bank plc.

The debate has been notable, apart from the opening speeches, for how low-key it has become. It is becoming so low-key that it is almost off the keyboard. I wondered whether to start with a joke, as my hon. Friend the Member for City of Chester (Mr. Brandreth) did recently, before his elevation to the Front Bench, to liven things up. I heard a joke the other day that I shall share with the House; it might amuse the Gallery.

Mr. Roy Hughes (Newport, East)

On a point of order, Madam Deputy Speaker. Is the hon. Gentleman allowed to refer to the Strangers' Gallery?

Madam Deputy Speaker (Dame Janet Fookes)

Technically, probably not, but if that is the worst crime that is committed in the Chamber, I shall not be unhappy.

Mr. Forman

I am grateful for your generous protection, Madam Deputy Speaker. I thought that my joke might amuse the hon. Member for Newport, East (Mr. Hughes). The riddle is this—what is the difference between 0 J Simpson, Rosemary West and the Leader of the Opposition? The answer is that only Rosemary West has convictions.[Interruption.] It was worth a try.

The hon. Member for Motherwell, South (Dr. Bray) essentially made several points in his interesting speech. He felt that the Budget did not have sufficient leverage over the labour market, and he wished to see unemployment falling further and faster to the levels that we were used to in the 1950s and 1960s. I understood that point, but the labour market is becoming more competitive and flexible, and more open to global market forces. It is important, therefore, for any Government to concentrate on a wide definition of supply side policies.

I agree with the hon. Member for Motherwell, South that, in order for those policies to be properly and successfully implemented, they have to be defined broadly to include many of the elements that he mentioned. He was rather scathing about the lack of light that was thrown on monetary policy in the Budget statement and elsewhere. I merely refer him to paragraphs 2.05 to 2.11 of the Red Book, which, though succinct, set out the Government's monetary policy clearly.

The hon. Member will know that the arrangements on monetary policy are now far more transparent than ever before. The minutes of the monthly meetings between the Governor of the Bank of England and the Chancellor are published six weeks later. The hon. Member and others who take an intelligent and close interest in those matters are now much better served with useful information to make a sensible analysis of the progress of Government monetary policy.

Dr. Bray

The hon. Member is fair in saying that I would like greater transparency, but one consequence of that greater transparency is that we see the holes in the argument. There are some very big holes that could quite easily be filled.

Mr. Forman

If the hon. Gentleman catches your eye, Madam Deputy Speaker, in a subsequent economic debate, he will want to develop those thoughts. I shall not follow that line now.

I regret slightly that the hon. Member for Peckham (Ms Harman) has left the Chamber. I sought to intervene in her speech, but I was unsuccessful. She made some remarkably prejudiced and old-fashioned statements about the health service. The House will be aware that the Government have had a commitment, which they have meticulously honoured, to increase NHS spending in real terms year on year.

Will the hon. Member for Bristol, South (Ms Primarolo), who used to shadow health matters, give a similar commitment on behalf of the Opposition? If she is not prepared to do so, many of the Opposition's criticisms of our attitude to and behaviour on the health service remain rather hollow. Would she like to clarify the matter?

Ms Dawn Primarolo (Bristol, South)

Get on with it.

Mr. Forman

The Opposition are not prepared to put their money where their mouth is.

There was something very dated about what the hon. Member for Peckham said about the health service when she tried to argue that it was being eroded at the edges, disintegrating and collapsing—whatever her verb was. She seemed to base her whole view on the assumption that public services must be provided by public sector employees in order to be real public services. That is clearly not true, in this country or any other.

The hon. Lady also seemed to feel that capital expenditure projects in the public sector should always be magically provided by public sector employees and firms. That is obviously not true, because for years private sector firms have been responsible for tendering for public sector projects, and have done a very good job. The private finance initiative is merely a logical and sensible outgrowth of that, and is nothing more sinister.

Ms Eagle

My hon. Friend the Member for Peckham (Ms Harman) meant that' she was worried that the private finance initiative would not fill the gap caused by the huge cuts in public investment announced in the Budget. Is the hon. Member confident that the private finance initiative will not only fulfil all the capital programmes that would have been initiated without the cuts, but will do better? That is how we will judge the success of the PFI.

Mr. Forman

One never knows—this is true of all public expenditure planning—whether projects pencilled in for years two and three in any public expenditure planning exercise will actually materialise. If the hon. Lady cares to look at chart 6.5 in the Red Book, she will see that the private finance initiative has delivered rising sums of money for capital projects in the health service; £170 million in 1996-97; £200 million in 1997-98; and £300 million in 1998-99. The projections are best estimates, but they are made on the basis of commitments and indications already given. I believe that they will probably turn out to be an underestimate rather than an overestimate of what is achieved.

Mr. Kevin Hughes (Doncaster, North)

The hon. Gentleman has made the point that those figures are just estimates. Does he not agree that the Government are using the private finance initiative scheme as a form of deferred payments? They are cutting capital expenditure because they know that it takes a couple of years for the hospitals or other buildings to be built. Only then will the public purse have to pay for the rents of those buildings. The PFI is a deferred payment scheme to get the Government through to the next general election.

Mr. Forman

I do not agree.

I was just about to mention something that is relevant to what the hon. Gentleman said. If he cares to look at table 6.4 of the Red Book, which he may have in front of him, he will see that the outturn figures for total public sector capital expenditure have increased—that is in the past tense—from £17.6 billion to £20.9 billion. The Government's record over the latest period for which we have figures shows that such expenditure has increased and that the Government are committed to public sector capital expenditure. The Government merely want to supplement it, and they want the private finance initiative to play a new and growing role.

I have allowed myself to be slightly distracted by some interventions, Madam Deputy Speaker, partly in the hope of enlivening the debate for you and other people so that we may have a more interesting time. However, I wanted to focus my remarks on an important quotation from the Chancellor's Budget statement, which sets the tone for the whole of his speech and his approach to budgetary policy. He said:

In the rapidly changing world of technological advance and a more flexible labour market"— already mentioned by the hon. Member for Motherwell, South—

the British people need to be prepared and equipped to embrace change in a flexible way. They will be more willing to do that if they know that high-quality schools, health care and a safety net for the unemployed, the disabled and the old are there if and when they need them."—[Official Report, 28 November 1995; Vol. 267, c.1058.] That quotation accurately sums up the attitude of my right hon. and learned Friend the Chancellor. In my opinion, he struck a good balance between the need to cut taxes when it is prudent and sensible to do so and to increase public expenditure on the priority sectors—the sectors about which the public really care, such as education, health and the police.

I fondly hope, as did my right hon. Friend the Member for North-West Hampshire (Sir D. Mitchell), who spoke earlier, that the responsibility of the Budget will make possible further interest rate cuts in the not too distant future, especially if growth next year turns out to be as subdued as many independent forecasters believe that it will be—in other words, if, as is likely, the official Red Book forecast of 3 per cent. growth does not materialise.

The Chancellor is to be commended for what he did not do in the Budget as well as for what he did. Chancellors are always lobbied, and sometimes it is sensible for them to learn the gentle art of saying no. My right hon. and learned Friend did not give in to the cry for a windfall tax on utilities, which would have been all wrong and would have penalised success and profit.

My right hon. and learned Friend did not give in to hard lobbying for a package to help the housing and construction market. As he rightly said, a great deal more good can be done for that market by a low-interest-rate, low-inflation policy than can be done by any special package of measures, which is usually distorting and ends up in the price of the assets concerned. I commend him for that.

It is worth the House recalling, if it does not already know, that half a point off base rates is worth the equivalent of a five-point increase in mortgage tax relief to home owners, so half a point off base rates—which I confidently believe may be possible, perhaps in the first quarter of next year—will do every bit as much good for the housing sector as five points more on mortgage interest tax relief and, furthermore, will help the rest of the economy. If all business people are confident that interest rates are low and are likely to get even slightly lower, it is healthy for investment and helps to breed confidence. My right hon. and learned Friend chose the right major objectives. I remind the House—I know that last Tuesday seems a long time ago—what they were.

The first objective was security for the elderly, especially in relation to long-term care. The second objective was a boost to capital ownership. I am especially pleased about the measures taken in the Budget on employee share ownership. I pay tribute to my hon. Friend the Financial Secretary for his considerable efforts in that regard. I know that he is sympathetic to that good cause.

The third objective was the encouragement of enterprise and especially of small businesses, which are vital creators of seedcorn in our economy. Finally, there was a return to our long-run objective of a tax-cutting policy, taking 1p off the standard rate as something on account—something in earnest of our intentions and something that differentiates us from both Opposition parties.

One Opposition party, in the shape of the hon. Member for Bristol, South, dare not say yes and dare not say no, it appears, to any specific tax-cutting proposition, and it does not appear to know its own mind. The other party is the minor Liberal party, to which I pay at least the tribute that it is prepared to come clean and say exactly where it stands and to go in for a bit more honest financing. I wish that Liberal Democrat Members would apply the same principle to other sectors of public expenditure as they apply to education, because, if I remember rightly, they have often made favourable nods in the direction of different categories of public expenditure, but I understand that they have given a specific tax pledge only to cover education spending.

Mr. Simon Hughes

If I am called to speak later, I shall discuss that matter, but I will send the hon. Gentleman a full and costed alternative Budget, which, unlike the Labour party, we have prepared this year, as previously.

Mr. Forman

I am grateful to the hon. Gentleman for that. I look forward to reading it.

I wish to devote the rest of my remarks to two aspects of the Budget that are especially significant and which I especially liked.

The first aspect is the range of measures that will help the elderly. I like the idea of a new, lower tax rate of 20p in the pound on savings income. That is long overdue and an excellent idea, especially bearing in mind the fact that an increasing number of people come into the category who would benefit from that measure.

I like the idea of widening the 20 per cent. lower rate band by £700, with the result that one quarter of all income tax payers will pay income tax only at 20 per cent. and no other level in 1996-97. Linked to that, I like the improved personal allowances for those over 65 and over 75. I do not yet have to declare an interest in this matter because I am still just on the right side of those numbers, but this is a good thing, because it is important that people who are living longer should retain more of the income that they have painstakingly built up as a result of their efforts over the years.

The result of all these measures in the sphere of savings and helping the elderly is that 14 million taxpayers will pay less income tax on their savings, and that will be worth on average about £75 a year to the over-65s. Nine out of 10 taxpayers will have a marginal rate of only 20p in the pound on their savings. That is all to the good.

My only caveat about this aspect of my right hon. and learned Friend's Budget is that about one third of all households pay no income tax, as Opposition Members know. I should have liked—I make an early Budget representation for next year to my hon. Friend the Financial Secretary—the Chancellor to afford a well-focused boost to the state pension for those over 75. Those over 75 have some of the greatest financial commitments, as we all know with the natural forces of longevity, and are least likely to have the benefit of occupational pensions or personal pensions or any other add-ons that younger pensioners have.

I argued strongly for that this year. I was unlucky this year, but I very much hope that my right hon. and learned Friend the Chancellor will recognise the strength of the argument for next year and will consider a focused relief which, if included in a Budget in November 1996, would give a special boost to all those born before 28 November 1921, if my arithmetic is correct, to ensure that we help the cohort of people who would be 75 and over at that time.

Aside from that, the measures to help the elderly, including measures to help the financing of long-term residential care, are excellent and go a long way to giving people greater security in their old age.

The second aspect that I wanted to discuss is support for businesses—especially for small businesses. I am sure that in your constituency, Madam Deputy Speaker, as in mine, small businesses play a vital wealth-creating and job-creating role. It is especially important, therefore, that the Chancellor should help that sector of the economy in every Budget. It is excellent that my right hon. and learned Friend the Chancellor has cut the rate of corporation tax for small businesses from 25p in the pound to 24p in the pound, which, as I understand it, will help more than 300,000 companies—indeed, more than 85 per cent. of companies that pay the tax. It is also good that the cut in the basic rate of income tax to 24p in the pound will reduce the tax burden on unincorporated businesses.

The small business men in my constituency will be pleased by the proposed cut in employers' national insurance contributions from April 1997, which will reduce their costs and make it a little easier to take on new workers. I have asked the question before: why must we wait until April 1997 for the introduction of that worthy and worthwhile change? I imagine that it has something to do with computerisation. I was always told that computerisation was supposed to speed things up, but I have an awful feeling that in this case it may slow them down.

I welcome the new, tighter limit on the growth of business rates, which will alleviate the rate bills on 870,000 smaller business properties. There are a number of such properties in my constituency and I know that the business men involved will be pleased.

I join my hon. Friend the Member for North-West Hampshire in welcoming the aspiration of introducing plainer English into the tax legislation, in which the Institute of Chartered Accountants—to which I have already declared my paid connection—has a strong interest and for which it has lobbied over some time.

The package of measures for small businesses is excellent, as is the new lower qualifying age for capital gains tax retirement relief, which has been dropped from 55 to 50. I would not, however, give that measure the prominence that some of the other provisions deserve, not least because I want successful small business men to stay in business, not simply retire and enjoy their well-earned gains elsewhere. All those measures come on top of provisions in previous Budgets that testify to the Government's determination to ensure that the small business sector is nurtured and helped to grow.

I end as I began in my intervention on the hon. Member for Motherwell, South—on the subject of the diminishing role of any national Budget in the modern global economy, of which hon. Members from both sides of the House are perhaps more aware now than they used to be. The fiscal adjustment in the Budget is the equivalent of 1 per cent. of total public expenditure and less than 0.5 per cent. of GDP. It is hard to see how one can move mountains with fiscal adjustments of that size.

I know that it was done in order to deliver the responsible Budget of which I have spoken, but the monetary adjustment for which the Budget may have paved the way is arguably more significant to the health of the economy, the working of the labour market and the creation of jobs. If the introduction of a cautious and responsible Budget has made that aim achievable, the Budget will have done an excellent job.

As I said to the hon. Member for Motherwell, South, the most important aspects of all modern economic policy are supply-side measures to enhance competitiveness and improve the flexibility of the economy. If we cannot achieve those ends, the other aspects are marginal by comparison. I commend the Government for the efforts that they have made under the general heading of competitiveness, and I urge them to do more, as that in itself will probably achieve more than any national Budget in a global economy.

6.2 pm

Mr. Simon Hughes (Southwark and Bermondsey)

The hon. Member for Sunderland, South (Mr. Mullin), who sits behind me, and I were agreeing that the hon. Member for Carshalton and Wallington (Mr. Forman) had made a thoughtful contribution that tackled relevant issues, which cannot always be said about contributions to this or any other debate.

I shall pray in aid his arguments when I next meet the Secretary of State for Social Security. When I suggested considering increasing resources for the older pensioner, the Secretary of State told me that the Government were not minded to do so, as, unlike the Liberal Democrats, they had no wish to throw money around like confetti. There is a strong case for looking again at the gradation of state help for the older citizen, for the very reasons given by the hon. Member for Carshalton and Wallington. The token 25p for those over 80 years old is insulting to them, and they think so—it is nonsense.

I have another introductory comment which I do not make as a joke, although it is slightly amusing. When the hon. Member for Carshalton and Wallington mentioned the difference between the Labour party and the Liberal Democrats on Budget matters, I undertook to give him a copy of our costed Budget, which I shall do. The hon. Member for Sunderland, South suggested that it was important that my civil servant, sitting under the Gallery, should take a note of my commitment for future reference.

Unfortunately, when I last looked, the position was unchanged from that of five minutes earlier, when I received a pager message from the aforesaid researcher telling me that he needed to go home to let in the plumber, and hoped to be back for my speech. My researcher was therefore not present to hear my undertaking. However, I have given my pledge on the record, and can assure the hon. Member for Carshalton and Wallington that we are committed to it—and also before the next general election.

I wish to comment on the place of the NHS budget in the Budget as a whole. I am sorry that the Secretary of State for Health is not present, as the debate began last week, continued on lunchtime television with the "Jonathan Dimbleby programme" yesterday, and the right hon. Gentleman sought to tackle the subject in his speech today.

There is now a strong body of argument, not just from party political opponents of the Government, that the Government's Budget claims, particularly in relation to the police, education and the health service, are little short of a con. The Government are certainly playing with mirrors. On closer examination, the Budget figures do not bear out the claims made for them.

If one takes a careful look, one sees that money being directed to the Home Office for anti-crime measures and the police is less, not more. The money being put towards education, which is allegedly additional money, is in fact only the money that is needed if the Government want to ensure that next year's allocation is the same as this year's—the money makes up what was projected and allocated as the reduction. The additional money will have to come from local authorities, whose allocated money, as confirmed last Thursday, has been cut, not increased. The health service budget from public finances is effectively being frozen, not increased.

On examination, we find that a large amount of the £3 billion, which is allegedly the tax cut that is to be handed back in one form or another—primarily by the 1p reduction in income tax, which amounts to £2 billion—is being clawed back by the Chancellor. Some £1 billion of that money will be clawed back next year, when the tax increases on petrol and tobacco that he announced last year have worked through. Nearly £1 billion—£900 million—will be added to people's bills by the council tax addition which was suggested in Thursday's announcement. Other factors, such as the reduction of £150 million to the amount directed to the Post Office, will no doubt be clawed back by extra charges on stamps.

It is not a giveaway Budget, as people will come to realise. Next year, few people will have benefited from it. As the hon. Member for Carshalton and Wallington said, there will doubtless have to be considerably more giveaways before people notice the giveaway factor at all—or think they do. The cycle of the past decade shows that that is not the case for most people.

Mr. Forman

That is not quite the point that I was making. I was saying that, in a responsible Budget, the degree of fiscal adjustment will necessarily be small. I was putting that in context. As I have the Floor, does the hon. Gentleman regard as a reality the fact that the Liberal-controlled .London borough of Sutton has gained the provision of an extra 5.2 per cent. in education for 1996–97 compared with 1995–96? I should have thought that that was a generous increase.

Mr. Hughes

I do not know, because I do not hold the figures for every authority in my head, but, if the hon. Gentleman is right, the figure is welcome. The Liberal Democrat-run borough of Sutton has been shown to have the highest satisfaction rate in opinion polls conducted independently for any local authority in the country. I pay tribute to the authority for that, and I am sure that the hon. Gentleman and the hon. Member for Sutton and Cheam (Lady Olga Maitland) are glad that they have such a well-run Liberal Democrat local council.

On the subject of health service figures, the hon. Gentleman said—the Secretary of State made the same point in answer to a question from me—that the Conservative party manifesto commitment in 1992 was explicit. It stated:

We will, year by year, increase the level of real resources committed to the NHS. That has happened. For the second and third years of the figures projected by the Chancellor, it will be true by the thinnest of margins statistically possible: 0.1 of 1 per cent. in each of the two years. The commitment exists, but the figures have clearly been arranged so that they are just the right side of the line. I hope to show that it is, however, a delusion for other reasons, which relate to the method of calculating real increases in spending and inflation in the health service.

In his Budget statement last week, the Chancellor made another extremely partial and illusory statement. He said: since 1979 spending on the NHS has increased by more than 70 per cent. in real terms". That is extremely questionable, and the proper indicators demonstrate that it is far from the truth. He continued:

We are continuing to deliver our commitment to increase spending on the NHS in real terms… Public spending on the national health service will increase by over £1 billion pounds next year."—[Official Report, 28 November 1995; Vol. 267, c. 1058.] The press release from the Department of Health and the Red Book show that that is only partially true.

The press release, which is a summary of the key issues, includes three tables. The first relates to the NHS current net spending total for England. It shows an increase of 1.6 per cent., or £1 billion, on the revised figure for 1995–96 to the projected figure for 1996–97. However, capital spending should also be taken into account, and that is set out in the second table. As mentioned earlier in the debate, the revised total for this year is £2,120 million, so the planned figure of £2,038 million for 1996–97 represents a reduction of 6.5 per cent. in real terms. Although the total estimated outturn for 1995-96 and the spending plans for 1996-97 reveal a cash increase of £1 billion, which the Department of Health press release describes as a real-terms increase at 1994–95 prices of £190 million, that represents growth of only 0.6 per cent. in real terms. The table shows the projected increase for the following two years as 0.1 per cent., giving the lie to the Government's claim that there is a £1 billion extra money. There is £1 billion extra spending in next year's budget, but it is matched by a reduction in capital spending, so the net increase is very small. Anyone who looks at the Red Book will accept what the Secretary of State for Health implied—he is more honest in that respect than other commentators—that a fixed and frozen amount of public money has been allocated for next year and every year for the foreseeable future.

The figures are clear. Table 6A on page 142 of the Red Book shows estimated outturn in the health service this year to be £32 billion, of which the NHS has £31.1 billion, and estimated health outturn for the coming year as £32 billion—the same figure—with the NHS proportion rising by only £2 million to £31.3 billion. Thereafter, the figure drops to £31.6 billion, with the NHS figure frozen at 31.3 billion for the first year and £31.4 billion for the following year.

In terms of growth, expansion and development, that means that the NHS will begin a period of greater squeeze, greater pressure and greater relative contraction than at any time in its history, excluding only the years 1975–76 and 1979–80, when there was a world oil crisis. In the next three years, the NHS is about to experience a more significant reduction in Government funding than ever before. That is unusual. Normally, in the run-up to general elections, even under Tory Governments, more money goes into the health service.

Members who take part in health service debates know that the real costs of the health service are measured not only by the GDP deflator but by two other figures that the Government accept, recognise and publish. The Government produce a specific NHS deflator figure as well as estimates of hospital and community health services inflation. When those are taken into account, the picture is extremely different and much more alarming.

If the NHS deflator is applied to the other published figures for the NHS, it is clear that, since 1979, the increase of 57 per cent. that the Government claim is actually only 27 per cent. in real terms. I would argue that that is a more accurate reflection of what people feel than any belief that there has been a massive increase of more than 50 per cent. in spending on the NHS.

If those figures are applied to the years covered by the Budget, they show that there will be a cut in resources of 2.2 per cent. over the next three years.

Mr. Forman

Does the hon. Gentleman recognise that the debate in which he is indulging is conducted in input figures, chiefly cash? I was guilty of that too, but surely it is just as important—probably more important, these days—to consider outputs, which include waiting times.

Mr. Hughes

Of course I accept that, but there are always two sides to such debates—how much we raise and how much we spend.

We should also consider the percentage of our national wealth that we spend on the health service, and the global pattern of expenditure. If the hon. Member for Carshalton and Wallington recollects the figures, which are attested to be true, he will agree with me that our expenditure is increasing as a percentage of GDP, and has reached about 7 per cent. That is still significantly below the European Union average, and the figure is considerably higher in other countries.

I accept that the balance includes private as well as public expenditure, but health expenditure is increasing as a proportion of total national budgets. That appears to be the trend, for the obvious reason that there are more elderly people living longer, and older people, however fit they are, consume more resources in the health service. The real tests are not simply how much money is put in, but also how much the service is improved at the receiving end.

I have three more important and relevant statistics. I welcome the projected reduction in administrative costs in years to come. That is certainly necessary, because the NHS administration budget grew by more than 50 per cent. between 1979–80 and 1993–94. The number of administrative and clerical staff rose from about 110,000 to about 132,000 betweem 1986 and 1993–an increase of 20 per cent.

In the same period, the number of nursing staff was slashed from about 402,000 to 366,000—a decrease of 9 per cent.—and the number of maintenance and work staff has dropped from about 25,000 to about 17,000—a reduction of a third. The almost incredible figure is that the number of general and senior managers has gone up from 500 in 1986 to 20,000 in 1993. Just for the record, that represents a increase of 3,900 per cent. which must beat all other records.

I know that the caveat is that certain jobs have been redesignated, but experience on the ground in the health service is that many more people are pen pushing, because the health service is a more complex, split operation.

The Chancellor said in his Budget statement that 70 per cent. more has been committed to the health service since 1979. That is not the case when one takes into account the aging population and the real increased costs of the health service.

I calculated that figure. More accurately, people who work with me did so, but I went through that calculation with them carefully and have the tables, which I willingly offer the hon. Member for Carshalton and Wallington and others who take an interest. The real increase since 1979 is 10.3 per cent.—about 0.5 per cent. a year. A figure of 10.3 per cent. is hugely different from 70 per cent., and the public know it.

As to the private finance initiative, neither I nor my party is opposed to using the private sector and private wealth to improve public services, because that is clearly sensible. If the private sector is willing to put money in the kitty, let us use it. However, the Government's action this year is not only unwise but unjustified.

It is unwise because the Government appear to he putting all their faith in the PFI. Although the percentage of the capital budget that is PFI is not yet equal to the public capital budget, it is intended to go in that direction fast. Paragraph 6.57 of the Red Book makes it clear that there had been £100 million of private finance by April 1995 and that there are schemes in the pipeline worth £250 million for the current year. By the end of next year it is expected that projects worth £1 billion will have come forward for approval.

Ms Eagle

They will never do it.

Mr. Hughes

I agree. The hon. Lady makes a point that I was just about to argue, based on a case that I know full well from my constituency.

In the 1980s, the then Secretary of State for Education and Science established the city technology colleges programme. It was boldly proclaimed that 80 per cent. of the money would come from the private sector, and 20 per cent. from the public sector. There were to be hundreds of CTCs. But the programme ran into the ground after about 20 had been established. The figures are clear, including for my constituency. Eighty per cent. of the money came from the public sector and 20 per cent. from the private sector, because it did not think that was the best way to spend its money.

Ms Eagle

Is the hon. Gentleman aware that the Confederation of British Industry is on record as being extremely sceptical that the Government's optimistic forecasts have even a remote chance of being met?

Mr. Hughes

That is completely correct.

The most objective test of all is in the Library research paper 95/113 on investment, which the hon. Lady may have seen. It includes a section on the private finance initiative, and in its summary of criticisms quotes the Financial Times of 10 November:

Critics of PFI—and they are everywhere—fall into two broad groups. The Treasury was not persuaded of the merits earlier this year, and there is strong evidence against the PFI, for obvious reasons.

It is clearly the case that capital expenditure not met by the public purse now is being avoided in return for payments over years to come. To the risk of an uncertain outcome—the NHS, for example, may not inherit a hospital—the PFI adds the costs over 50 years. There is no guarantee that those costs will be less for those of us who pay than capital funding now.

We are not stupid. The reason for the private finance initiative—apart from the Government's belief in such a partnership, which we share—is so that the Budget can show a holding down of public expenditure and there can be tax cuts. That is not an illusion—it is obvious—but the Chancellor ought to be honest.

There has never been a manifesto commitment that the NHS hospital building programme will be put out to the private sector. The British people have never endorsed such a proposal, and it has never been formally endorsed even by the House. That policy has never been tested by the British people. If it were tested and the public agreed, that would be one thing—but effectively putting the hospital building programme entirely in the private sector, which looks like happening, is something to which I and my colleagues cannot subscribe without qualification.

That proposition has never been put to the nation, and I am sure that the public would have all sorts of doubts, quite apart from those of the CBI and the Financial Times. We would want convincing evidence that the risks of the PFI are not considerably greater than the benefits.

As to community care, the Secretary of State, referring to Thursday's announcement, said that there will be a 4 per cent. increase in special transitional grant for community care funding, which is the additional cost to local authorities of funding the threshold of £16,000, instead of £8,000, before which people pay a contribution. I welcome that increase, and ask the Secretary of State to confirm that the figure required by local authorities is £60 million, and that it will be met in full.

The hon. Member for Carshalton and Wallington was accurate and generous enough to say that we are at least being straightforward with people. We have said that we will vote against the tax reduction tomorrow night—unlike Labour, which apparently will abstain. We believe that the additional money being put into the health service should be used in a different way. We are committed to restoring free eyesight tests and dental checks, and to freezing prescription charges for those people who pay them. Labour should commit itself to the same. The public want those changes, but the Government did nothing to respond.

If we favour a national health service from the cradle to the grave, and if the Chancellor is making a great point about putting additional money into the NHS, I cannot understand why the Government continue with policies that prevent people taking their own preventive health care steps, by charging for eyesight and dental checks and increasing prescription charges whatever the individual's ability to pay.

That policy is unnecessary. The Chancellor and the Secretary of State for Health should have changed it. That policy indicates again that the public's real concerns about the NHS have not been addressed by the Budget. The Budget is an illusion and a con. There is not a great deal more public money. Health service expenditure will be reduced in real terms, and the public will not be deceived.

6.27 pm
Mrs. Jacqui Lait (Hastings and Rye)

I am pleased to take part in the debate, which has been dominated by the national health service—but not one that I recognise. I was a health authority chairman before entering the House, and the vision of today's health service offered by Opposition Members is very much that of the NHS as it was before 1991, when it was inefficient and incapable of making decisions. Patients were treated as lumps of meat and not as people. [HON. MEMBERS: "No."] Patients were required to turn up en masse for bulk appointments instead of being given specific times. They were pushed from pillar to post and not given information. [HON. MEMBERS: "Not true. Believe me—I was a health authority chairman and I had specific and clear evidence of that happening in the east end of London.

Even in those days, we were debating priorities and the need to ration services. One area that we felt we could begin by approaching was whether the NHS should provide cosmetic operations for varicose veins and tattoo removal. That clearly shows how priorities and requirements have changed to meet the needs of the patient. The NHS today is a patient-oriented service and no longer a producer-oriented service.

My constituency has a brand new hospital—a hospital that was cancelled under the 1976 cuts and which was only built because of Conservative investment in health. The turf was turned for phase 2 of the hospital by the Minister for Health in the summer. Moreover, my right hon. Friend has allocated extra money to East Sussex so that our much-needed mental health strategy can go ahead. So as we move into phase 3 in Hastings and Rye, a comprehensive pattern of health care which has been missing until now is emerging. Hitherto the system had always been ad hoc; doctors and nurses worked under extreme pressure and were unable to deliver the health services that my constituents deserve. All of that has now changed and we are approaching a health service, provided by the taxpayer, of the highest quality.

I for one do not disagree with the need to increase the number of managers in the health service. To deliver the service that people require we need to manage it more efficiently and effectively. The lack of such management was the fundamental flaw before we brought in the purchaser-provider split. Some of the managers, however, are still not of the quality needed to develop the service further. I therefore look forward to more reform of the management of the service, to bring in many more highly skilled people. I should also like medical schools and nursing schools to train doctors and nurses in management techniques so that they, too, can bring those techniques to the treatment of patients.

Today we have also been discussing the Budget in broader terms. Like all other Members, I am sure, I spent the past weekend in my constituency being apprised of the views of my constituents, going around Christmas fairs run by charities and other worthy organisations—and thank goodness I did, as it was the only way I could have done my Christmas shopping this year. The message from my constituents is that, once the changes come into effect in April, they will feel considerably better off and more in control of their own spending. The cumulative effect of the increased allowances, the widening of the 20p band, the reduction in tax on savings to 20p in the pound, and the 1p cut in the basic rate of income tax, will give them more money in their pockets which they can choose how to spend. That is a basic tenet of Conservative party policy, which I should not need to repeat here.

On Friday I also met some local industrialists and found them appreciative of the tax changes and the changes in the uniform business rate. Like many others, they commend the idea of introducing plain English to taxation law. I look forward to the first legislation to be written in plain English.

I consulted many local businesses before the Budget to find out what their owners wanted included in it. Broadly speaking, the Chancellor delivered what they were looking for. They are still hoping for a further reduction in interest rates, because, like most home owners, they will enjoy a distinct improvement in their cash flows when interest rates come down. I believe that the Chancellor's Budget was geared to such a reduction even if he could not say so at the time.

There has been some debate about the private finance initiative. At the risk of boring hon. Members again on the subject of our road communications, I should point out that it gives me pleasure to welcome the inclusion in the PFI of a number of crucial sections of the A21. Unlike Opposition Members who are deeply sceptical about the PFI, I am enthusiastic about it. It provides one way for the construction industry to invest, to help it out of its current difficulties, which have to do with the long-term changes in the housing market. Right across the construction industry, the PFI will come as a tremendous fillip. I look forward to speedy applications by a number of companies to build sections of the A21.

Like one of my colleagues last week, I also urge on the Government the idea that the PFI panel should include as many private sector members as possible, with minimal civil service influence. Civil servants' writing of specifications and contracts often seems more geared to ensuring that those contracts are not met or tendered for, rather than encouraging people to tender for them. I note that the Financial Secretary to the Treasury appears to agree with me, and I hope to hear confirmation of that later.

My travels around my constituency at the weekend brought me into contact with a number of farmers. This time last year they were warning me about possible changes to vehicle excise duty for tractors. I am glad that that problem has been solved, but farmers are becoming increasingly worried about large increases in the duty on gasoil. Last year's Budget and, I am told, this year's both increased the duty. I should be most grateful if the Treasury would stop increasing the duty on gasoil excessively. Such increases constitute a deterrent to farming and an additional cost for an industry which, although recovering, is still not so profitable as it might be.

A constituency such as mine contains a large number of pensioners, many in straitened circumstances. In the context of long-term care, they therefore welcome the increase in the allowance ceiling from £3,000 to £10,000. I am worried, however, that the floodgates will be opened to applications for services provided and paid for by social services departments. I still entertain strong doubts about the ability of social services departments, not just in East Sussex but in other areas, effectively to deliver services at competitive cost.

I have long complained, for instance, that East Sussex pays itself £100 per week more for rest home and nursing home care than it pays the private sector, even though the latter provides similar if not better care. That is a waste of about £4 million a year. I am also conscious that some of the assessment and reassessment services are, to say the least, extremely slow. Sometimes doctors need to admit emergency cases but social services will not speed up their processes, and poor souls in deep distress find themselves caught between medical requirements and social services bureaucracy.

An enormous amount still needs to be done, and it will be done only when we introduce the purchaser-provider split to social services as well. At present, social services are judge, jury and prosecutor. Until we allow them either only to provide or only to purchase we shall not be able to introduce to the provision of long-term care for the elderly the sensible services that people need and pay for through their taxes.

I am pleased that longer-term changes will be introduced to ensure that the increasing number of retired people with substantial occupational pensions and savings will be able themselves to provide for any care that they may need in their later years, while at the same time retaining capital to pass from one generation to the next.

I welcome the increased provision that will be made available to the counties for education, including the one in which my constituency is placed. I am sure that many of my right hon. and hon. Friends would join me in deploring the campaign that was waged to terrify parents, governors and teachers. Threats of cuts were based on the economics of the madhouse as opposed to those of reality. We must ensure that the increased moneys pass straight to the schools. I believe that the campaign of misinformation may backfire. So many people were distressed by it. I would not be surprised if parents did not start to demand ballots for schools to go grant-maintained to ensure that they never again have to face such an appallingly political and distressing campaign.

It would not be a speech on the Budget from me if I did not mention smuggling. I am delighted that my hon. Friend the Paymaster General is on the Government Front Bench because one of his responsibilities is excise duty. I never believed that in the Budget we would see, in effect a freeze on excise duty on most forms of tobacco and alcohol. I thought that if we were lucky we might see a minor increase. Instead, we have seen a reduction in the duty on whisky, while excise duties on beer and wine remain the same. The freezing of the duty on hand-rolling tobacco is a bonus for small businesses, breweries, tobacconists, restaurants and cafes, which have all suffered dramatically from bootlegging.

I am concerned that the increase in tax in the Budget will make it more profitable to smuggle cigarettes. It is a fact, however, that the most profitable area of bootlegging is still hand-rolling tobacco. There is a potential profit of about £5 for a 50g bag. I understand that the small-time smuggler who would bring in seven to 10 kg of cannabis now finds it more profitable to bring in a car boot full of hand-rolling tobacco. The Treasury must take more seriously yet the difficulties that businesses find as a result of the differentials in excise duty rates between those in the United Kingdom and those elsewhere in Europe.

We must take seriously the threat to health faced by youngsters who have access to cheap tobacco. More and more young people will be encouraged to take up the pernicious weed. Our high-tax policy has deterred them from doing so for so long, but as access to cheap tobacco becomes easier, our policy is no longer a deterrent.

I ask my hon. Friend the Minister to give us an idea of what happened in Lisbon on 13 and 14 November. I understand that the meeting was to discuss excise duties throughout the European Union. It would be useful to know whether any progress has been made.

Deterrence is costly, which I suspect is causing concern to excise officials. Given the low cost of tobacco and alcohol throughout the rest of the Community, bootlegging is not something with which excise officials should be concerned. We are a single market. At the same time, huge hauls of cannabis, cocaine and other drugs are coming into the United Kingdom. Excise officials should be concentrating on that area.

Finally, I am grateful to my right hon. and learned Friend the Chancellor of the Exchequer for producing a Budget which will, in the long run, be successful. It has kept the City in good heart and at the same time has ensured that businesses in my constituency feel confident that they can invest and go forward, and I and my constituents support it.

6.45 pm
Mr. Sam Galbraith (Strathkelvin and Bearsden)

I was rather saddened by the nasty little introduction of the hon. Member for Hastings and Rye (Mrs. Lait). She attacked those who are working within the national health service and their professional standards. She seemed to imply that everyone in the NHS is in it for themselves.

That never struck me when, after operating all day—I would probably finish at 7 or 8 o'clock and nip home for a bite to eat—I would return at about midnight to check on the folk on whom I had operated. I would be back on during the middle of the night and then in again next morning for another large clinic. The idea that it was great personal fun is the opposite of the truth.

All my colleagues had the appointments system for out-patients. We had diaries, and patients were given a date for their operations if that was the treatment they needed. Never a day passed without my spending a considerable time talking to patients and relatives. I hope that the hon. Lady will reflect on what she said, and perhaps consider not making the same attack again.

Mrs. Lait

I would never impugn the work that is undertaken by doctors and nurses. I merely said that, in the past, they were not working as efficiently as they could have been if they had been properly managed.

Mr. Galbraith

I think that the hon. Lady is having second thoughts and backtracking. She is qualifying her response by using the term "properly managed". All that she has said about arrangements for appointment times and other provisions were in place, or were being introduced, long before the Government's reforms. The problem was that a great deal of time had to be used to deal with other matters. The introduction of the Government's reforms was delayed. That is the reality.

Whenever I have spoken in debates on Budgets or on health service funding, I have made the speech which we heard today from the hon. Member for Southwark and Bermondsey (Mr. Hughes). I would explain how the increase was not what it seemed to be, once account had been taken of various factors and deflators. I would explain that there would be no increase in funding, or only a slight increase.

Since 1979, the real increase in health care has been only 1 per cent. That increase is lower than that achieved by any other Government since the inception of the NHS. I shall not make the same speech again. First, it has been well made by the hon. Member for Southwark and Bermondsey. Secondly, I shall refrain from doing so, because, as the hon. Gentleman said, the public do not recognise what the Government say as reality. They trust their senses. They realise that funding is a problem that has further to be considered, and that it is not as the Government suggest.

I shall refer to some of the issues that are related to funding in the light of the private finance initiative. It should not be necessary to say too much about rationing within the health service. When I last spoke in the Chamber about the health service, I discussed the issue at great length, and analysed it in some depth. I hope that it is not something to which we shall have to return.

The debate about these matters continues in a somewhat confused manner. We find that we talk at cross purposes. I shall make just a few short but important points.

The first thing to get right in the debate is the definition of rationing. It is the denial of care to a patient when he or she wants it, when the doctor wants to give it, and when it is beneficial to the patient's physical and mental health, other than by placebo effect. We should be clear about that.

That does not, of course, include the provision of ineffective treatments. Stopping ineffective treatment is not rationing; it is good clinical practice, and we must learn to separate one from the other.

The commonest example of ineffective treatment that people know about is the use of antibiotics in upper respiratory tract infections, the majority of which are viral. As long as one does not put a blanket ban on their use but realises that, in most cases, they are ineffective in stopping such infections, that is not rationing but good clinical practice. In that way, one can fund the health service, because, as my hon. Friend the Member for Peckham (Ms Harman) says, it means that there is no bottomless pit. The bottomless pit does not exist. It is a myth, and any justification for basing the health service on it is false. There may be other reasons why one does want to fund it.

When responding to funding, it is important to separate need and demand. That, again, is another area that gets confused in the debate. Demand can be generated by many areas and by many individuals—drug companies, Government policy, doctors and so on—but we should respond not to demand, only to need. We can work out what the need is. We know the number of people who require hip replacements or cholecystectomies. We know the number of people who will get carcinoma of the bronchus and require an operation. It is not endless. It is not a bottomless pit.

As long as we respond simply to the need, and providing we have the political will, we can indeed fulfil all the necessary expenditure. That requires some tough decisions, of that there is no doubt, to which some people might object, but as long as we ensure that we base those decisions on the clinical necessity and effectiveness of the treatment, we should be strong, and take them.

The other phrase that creeps up nowadays when talking about rationing is "priority setting", which I am sure the hon. Member for Hastings and Rye knows about. I always worry when we move to other phrases, because we generally think that there is a bit of sophistry going on. I admit, however, that there is a system of priority setting within the NHS. There always has been.

I take as an example renal dialysis, which was not always available to everyone. In effect, it was rationed. Heart transplantation was also not available to everyone. Priorities were set, but it was a different type of priority setting, because the decision was taken that it would be necessary in the future and that we would work to fund it. Indeed, it was delivered, as in the case of renal dialysis and heart transplantation.

The trouble is that priority setting is now defined as stopping funding for a procedure, and never funding it again with money from the NHS. That is the difference. That is why priority setting as defined by the Government is just the same as rationing.

I was recently talking to a manager about priority setting, and he mentioned a case in which a treatment might be beneficial to someone but not everyone, and said that therefore it could be stopped—for example, patients with head injury or coma.

For patients with a head injury, one can predict with reasonable certainty that, in certain comas, 95 per cent. will die and 2 or 3 per cent. will survive but be severely disabled. Some 2 or 3 per cent. will do well. He said, "We waste all this money in saving a small percentage, so we should stop doing it." That case can be argued. I would not disagree that decisions are made on that, but no absolutes can be drawn from it. It has to be left to the judgment of the individuals concerned.

The decision relates, of course, to the age, the clinical practice, who they are, and various other issues. It is not a matter that is simply open to the statistical analysis that is available and on which one can then make a judgment. It is a very difficult one, as anyone who followed the recent case of a young girl who had a leukaemic disease will know. Someone said, "Well, the chances of recovery are small, so we won't fund it." Beware anyone who denies that treatment. Even in a small number of cases, it would be beneficial.

The manager also told me that the great advantage was that they could use evidence-based medicine. When I first heard the phrase "evidence-based medicine", I thought, "Splendid—here's a new tool for me to use." But I wonder what it is. I always thought that I had been using evidence-based medicine, reading five or six journals a week, as I still do. All my colleagues were doing the same—studying what they were doing, analysing the statistical analysis. We thought that we were using evidence-based medicine, but here was a new tool.

I looked at it and, after a while, came to the conclusion that there was nothing new. It was just a new phrase that some people had discovered. They found that medicine was a science, and that they could use that phrase to make such decisions. The decisions are quite difficult, but they had found the answer.

The Government have spoken a lot recently about evidence-based medicine, but it is not easy or simple. Sometimes the evidence is poor. Sometimes it is almost impossible to collect. I have often thought about how we could set up studies to find some absolute statistically significant result in the end that did not prove their case, but even when one has the evidence, sometimes it is such that one has to make a judgment, and one cannot escape the political, social and medical judgments.

Again I am reminded of a case. If the evidence were that treatment X resulted in death in the majority—let us say that 5 per cent. survive but are disabled and 5 per cent. do well—what does the evidence tell us about what we should do? That is the evidence of the outcome, but one has to make a political, medical and social judgment about what to do in such cases. So beware of the glib phrase "evidence-based medicine".

I now come briefly to the private finance initiative, because we have some experience of it in Scotland. I realise that the Secretary of State has no responsibility for the Scottish health service, but I shall use these examples, so that everyone appreciates some of the problems.

With the PFI, one loses flexibility in the health service, because one is locked into long-term contracts, from which it is impossible to get out. In Glasgow, some of the care of the elderly was taken over by a private company, Takare. Contracts were signed and systems were set up. Now we discover that that model is not the most appropriate model and we would like to move to a different one. The problem is that we are locked- into a long-term contract with that company, and we cannot change it. Medicine changes—it moves with the times. One requires that flexibility. In Glasgow, we have lost that, particularly in the case of the demented elderly. That is one of its problems.

The other problem is simply the cost. The Greater Glasgow health board took out a lease on an office building for its headquarters under the PFI—use now, pay later, no need for the capital spend. It has discovered that its needs have changed, and it has moved to other offices. But it is left with the building on a huge lease, which it cannot get rid of, despite the fact that it has tried time and again. The real aim of the PFI is that it is privatising the health service. It is not as though it is the thin end of the wedge. The wedge is rammed in tight, and it will be difficult to get it out.

The Secretary of State spoke at great length today, as he has done in the past, about how the PFI does not apply to clinical services, and how it applies only to buildings. That is not the case in Scotland. As has been mentioned, at Stonehaven hospital, every aspect comes under the PFI, including the provision and delivery of clinical services. Every part of that hospital comes under the private finance initiative. I dare say that the Secretary of State does not wish that to be the case, but his Government are actively involved in the programme. I have given three examples from my own area, which give us grave concern about the private finance initiative.

As my hon. Friend the Member for Peckham said, the NHS is a fine example of the community in action. We believe that the only way in which individuals can realise their full potential is by working together. That is one of the reasons why we favour the NHS so strongly, and that is why we shall continue to defend it.

7 pm

Mr. Piers Merchant (Beckenham)

This year, the hype and hot air that are part of the build-up to the Budget reached record proportions. Alongside that, there has been the increased drama that has accompanied Budget statements in recent years as a result of simultaneous television and radio transmissions and the almost neurotic scramble of the various media organisations to be the first to judge and to comment on the Budget, even before my right hon. and learned Friend has sat down. It is, perhaps, not surprising that the initial analysis of the Budget is hardly balanced, fair or logical; indeed, that has been the case this year.

Nearly a week after the Budget statement, we are in a much better position to judge the Budget's real impact on ordinary people. While the hon. Member for Peckham (Ms Harman) no doubt spent the weekend feverishly working out her great fictional piece on the health service, to which she treated us this afternoon, I, like most of my hon. Friends, was in my constituency meeting and talking to ordinary constituents to see what they felt about the Budget and what impact it had on them.

I started my weekend by attending a meeting of the Abbeyfield Society which looks after older people. Most of the people there were pensioners and I talked to them at some length. There was universal praise for the Budget among those people and some real enthusiasm. They will gain from tax cuts, and their standard of living and their security will improve. The Opposition may be surprised to know that those people were talking not about the national health service deflator or about macro-economic policy but about how they would be affected by the Budget.

I talked to one elderly lady who was a retired teacher—not a fat cat or a person who had huge inherited wealth but someone who was past the age at which she felt she could live on her 'own in her home and who had sold it and moved into residential care. That lady had invested the proceeds from her house sale in a building society and was using the interest to pay for her care. She told me that she had calculated that she would be £550 a year better off as a result of the Budget.

The Budget had made a great deal of difference to her, because it had made it possible for her not only to pay for her residential care but to have money left over to enable her to have a relaxed style of life. It also enabled her to know that she would have the security of such a life as long as she wished. She knew that, when she eventually passed on, she would be able to leave money to her next of kin, which made her happy.

Ms Eagle

Does the hon. Gentleman think that his constituent will be happy when interest rates go down in the next few days? There are always checks and balances in these issues.

Mr. Merchant

I am glad that the hon. Lady is so confident that interest rates will come down; I hope they will, because that will benefit the economy. However, my constituent's tax savings will outstrip the likely reduction in interest rates, so the hon. Lady's point is a bogus diversion from the real benefits that people will have.

I also talked to an elderly couple who were still living in their own home. They were benefiting by more than£1,000 a year from the Budget and they, too, were very pleased. However, they were concerned about what might happen if one of them had the misfortune to fall ill and to require long-term nursing care, a problem that affects many elderly people. It is as much the worry of that possibility, with its financial consequences, as the actuality that upsets people. That possibility worries not just elderly people but younger people who see it as a possibility for their later years, and those who have elderly relatives and who are concerned about their future care.

The people to whom I talked were pleased and optimistic about the changes that have come from the Budget, such as the tripling of the basic threshold below which they will face no charge for their long-term care, however long it is, and the doubling to £16,000 of the figure under which they will have to contribute only a small amount. People with average savings of £14,000 would previously have had to pay some charge for an average-priced nursing home and would have expected their capital to be reduced by £280 or £290 a week. Now their capital will not be reduced, which means a great deal to them. The Opposition, far from rubbishing the changes, should recognise that they will help many people, and should welcome them for that reason.

Elderly people will also welcome the raising of the age allowance by £280 and the reduction in the basic rate of tax by 1 per cent. They will welcome the extension of the inheritance tax threshold to £200,000, which will benefit many who hold property. All those measures will help elderly people, so I was not surprised to hear so many people expressing pleasure at the Budget and its implications for them.

People's concern about moving into residential care is exaggerated by many. There is a myth that, if one has to move into long-term nursing care, one automatically loses one's house. It is often said that people will lose their house even if they have a spouse living there. That is entirely incorrect, because as long as a spouse remains in the family home, it cannot be treated as an asset in the calculation. There are other cases in which the house will not be lost even if only one person lives in it and then moves into nursing home care. It is advisable for people in that situation, their relatives or their advisers to take good financial advice in advance. They will then find that the impact of the charges is far less than many mischievously suggest Another group of my constituents who are concerned about the impact of the Budget are those at the Wellcome research laboratories in Beckenham who, unfortunately, are facing redundancy following the takeover of Wellcome by Glaxo. They were extremely concerned in the run-up to the Budget because it was suggested that those receiving redundancy pay would have to pay tax on the first £30,000 of it, which had not previously been the case. I was sure that that would not happen and my right hon. and learned Friend the Chancellor made it perfectly clear in his Budget statement not only that it would not happen but that it had never been contemplated. In other words, those people were quite unnecessarily alarmed by a rumour that had no basis.

I understand, however, that a small matter affecting redundancy pay is still being considered. It does not, I believe, affect any of my constituents, but it has affected some people in other parts of country. It involves a redundancy payment being made and the person concerned signing an agreement either to do or not to do something—for example, not to work for a rival company—as part of the redundancy deal. Some tax inspectors in some parts of the country who have narrowly interpreted the law have suggested that, in those cases, the whole of the £30,000 that is, at present, tax-free would be taxed. I understand that that matter is being examined by the Treasury, but I would be grateful if my hon. Friend the Minister would refer to it when he sums up, so that further reassurance can be given.

Those constituents who are facing redundancy are also intimately concerned with the region's future economic health and with other possibilities that might come their way, so the Budget measures affecting small businesses are of particular interest both to them and to me. My constituency is perhaps unusual in that, other than the Wellcome research laboratories, it has no major employer, but it has an extraordinary number of small employers. There are literally hundreds of retail outlets on dozens of streets and in small shopping areas. Alongside those, there are many small businesses running service industries and some small manufacturing and engineering companies. They will all benefit from the reduction in small companies tax to 24 per cent., down from 42 per cent. in 1979.

Those companies will benefit too from the reduction to 10 per cent. in employers' national insurance contributions. As an added incentive to those people, who often work extremely long hours and hard in the early part of their lives, they have the prospect of retiring at the lower age of 50 and of obtaining capital gains tax exemption when they pass their business on to others. Some will be able to benefit from the extension of inheritance tax relief to non-quoted shares.

Business, especially small business, will therefore benefit considerably from the Budget, which will do all those firms in my constituency—employers and employees— a great deal of good, but the effects of Budget will also flow through to people who wish to set up in business, who will be encouraged by the extra incentives that are included.

Over the weekend, I met a group of my constituents who are vintage car enthusiasts. That is a surprisingly widespread hobby and an attractive one. In the past, I have attended vintage car rallies. Those people were not only extremely delighted that the original Green Paper proposals for continuous licensing had been effectively withdrawn as a result of the Government's listening to their representations—and to my representations as well, as I had strongly supported them—but delighted and surprised that continuous licensing would be operated in a way that produced no charge for those who were not using their cars on the road. For anyone owning a car that was more than 20 years old, there was also the added and surprising bonanza that no vehicle excise duty had to be paid.

I am on the verge of declaring an interest in that matter, as the car that I own and run is more than 20 years old and I may benefit from that measure in three or four years, if my car lasts that long. I sincerely hope that it will. If it does not, I intend to show my appreciation for that Budget measure by buying a car that is even older. Some of my constituents will benefit, however, and are genuinely pleased about that Budget measure, which I welcome.

I should like to move on to four sectors of expenditure that affect my constituency. Much has been said today about the health service. Much of it, however, has been theoretical and a great deal of it has been fictional or fantastic. The truth is that real resources for my constituents who need the health service will increase by more than 2.5 per cent. as some £3 million extra money flows to Bromley health authority. That will trickle down to the vital facilities that are offered to my constituents.

I expect Bromley health authority to make good use of that money to reduce waiting lists still further, on top of its great successes in the past 12 to 18 months. I also expect that that will work through to a further improvement in accident and emergency services locally. The casualty service at Bromley hospital needs improving, but a great deal has already been done, to which I pay tribute. That money will enable more to be done, and I look to forward to that happening.

I, too, welcome the private finance initiative. It will especially benefit my region, as Bromley Hospitals NHS, trust has advanced plans to build a new district general hospital that is needed in the region. For historic reasons, the present structure is haphazard and inefficient. Doctors and clinicians working in the hospitals, Bromley health authority and local people want a new district general hospital to provide a better, more efficient and more up-to-date service. I look forward to that materialising with the help of the measures announced in the Budget.

Another concern of my constituents is the fight against crime. It is encouraging that the Metropolitan police will receive an enhanced budget that will enable the Commissioner of Police of the Metropolis to employ a further 180 policemen in the coming year in the region. That will help to reduce the crime level still further. The number of recorded crimes dropped by 60,000 in the year to June 1995. It is important that that is continued. The extra police that the Commissioner promised will now be able to be put on station. We will do that, along with extending the innovative closed circuit television schemes.

The CCTV scheme in the centre of Bromley has been a great success. It has been up and running for a few months and has already resulted in a reduction—

Mr. Simon Hughes

Why did you get the funding for that?

Mr. Merchant

Because we lobbied so effectively. It has resulted in a reduction in the number of crimes committed in that region. I should like that scheme. however, to be extended to Beckenham town centre and to the other town centres in my constituency. The large extension of some 10,000 schemes will enable us to have a fair share of new CCTV schemes.

All those measures will enable the security that people need to feel in the region to be extended in the face of what, in the past, have been serious crime levels. I regularly attend local police community liaison meetings. It is interesting to note that attitudes have changed in the past six months as the crime level has fallen considerably, across the country, in the Greater London area and specifically in my constituency. People are aware of that, and they are pleased to see it. They want the successful measures that have been used to bring the crime level down to be continued. The Budget will enable that to happen.

There will be an increase in the local education standard spending assessment of some £4.2 million—an increase of 4.3 per cent. That, too, will feed through to the benefit of local people, as will the local government settlement. Calculated through its SSA of £203 million, this year Bromley will receive a distinct increase. Its SSA is up by some 2.7 per cent., or £5.4 million, and it is considerably more than was predicted even by optimists in the borough. The pessimists were talking about £196 million, the optimists of £199 million. The figure of £203 million is considerably in excess of that.

It should enable the borough not only to continue providing a high level of good basic services, for which in any case it receives much praise, but to keep the council tax low. Bromley has one of the lowest council tax rates in London. After the rhetoric and fiction and the reinterpretation of reality, ordinary people will see how the Budget affects them and their locality and will appreciate its success. It is wise and well measured and will allow extra spending on things that people want, while allowing them to keep more of what they save and earn.

7.20 pm
Mr. Roy Hughes (Newport, East)

The focus of the debate is the national health service. I have always appreciated the importance of that great service, but I shall concentrate on the need to build a successful economy that can provide the resources for an expanding and efficient health service. That would certainly have been the aim of Aneurin Bevan, who founded the NHS. He, too, would have deplored the creeping privatisation of the service.

The Budget was not a giveaway at all. The most that can be said about it is that it amply meets the charge that is often made by the shadow Chancellor: that the Chancellor is giving with one hand and taking with the other. Whatever our political persuasion, none of us likes paying tax. I welcome the 1p off income tax, but I emphasise that it will be paid for in many ways.

There is already considerable worry in Wales about the Government's plans to increase council tax. The Secretary of State for Wales has confirmed that there will be increases. The revealing fact is that it is widely anticipated that the rise will be 11 per cent. on current tax levels in Wales, whereas in England the corresponding rise will be 5 per cent. and in Scotland it will be 8 per cent. I can safely predict that when the suggested 11 per cent. increase in council tax is added to the 14p increase on petrol and the £5 increase in the road fund licence, the people of Newport, of Gwent and, indeed, of Wales will hardly be better off.

On Sunday nights over recent weeks, BBC Wales has been running a series of programmes about the state of Wales after 16 years of Conservative government. It is known as the "Kane" programme, because that is the name of its distinguished presenter, Mr. Vincent Kane, who has not exactly made a reputation for himself as a Labour supporter. A fortnight ago, the programme dealt with poverty and made a convincing case for Wales to be described as the most poverty stricken area in western Europe, certainly on a par with some of western Europe's most devastated areas such as are found in Greece, Portugal, southern Spain, Sardinia and the former East Germany.

Once vibrant communities in Wales have been totally decimated. In addition to massive unemployment, officially registered and otherwise, wages are deplorably low. If ever there was a case for a minimum wage, it could certainly he made for Wales.

From time to time, the Government boast about overseas investment in Wales. I do not wish to detract from the Government's efforts in that respect, but I am bound to say that local authorities have also given considerable help. However, such investment has much to do with the low wages in Wales and confirms the belief that Wales can be classified as equivalent to a third-world country. We certainly need more investment, both public and private, and it is abundantly clear that a massive increase in industrial training is called for. Successful UK companies should be told that charity begins at home and that they should invest here.

What are the investment percentages among our principal competitors? Japan invests 28 per cent. of its gross domestic product, Germany invests 23 per cent. and France invests 19 per cent. However, the United Kingdom is down to 15 per cent. No wonder we have dropped from 13th to 18th in the world prosperity league.

At a dinner that I attended last week organised by a major trade organisation, I sat next to a leading figure in a company that once had strong links with south Wales. He talked about his company's plans in Germany, Belgium and India, in countries of the Pacific rim and in Brazil in south America. When I asked what was left of his company in south Wales, he shook his head, because the answer was nothing. Surely our Government should be exhorting our major companies and giving them financial incentives to invest here so that our people can get back to work.

I applaud the shadow Chancellor's plans to put the £1 billion collected from a windfall tax into ending unemployment for the 600,000 young people who are out of work. The only alternative is for them to continue to turn to drugs and crime, because they have no stake in society. They are merely adding to the gigantic social security bill that is doing so much harm to our economy. Unemployment is a scourge that must be eliminated. That is why I support Labour's plan for a £75 a week tax rebate for employers who take on people from among the 800,000 long-term jobless.

Mr. Llew Smith (Blaenau Gwent)

Over the weekend the hon. Member for Beckenham (Mr. Merchant) met a considerable number of people. Unfortunately, he did not seem to bump into anyone who was unemployed. My hon. Friend also met a considerable number of people. Were the unemployed dancing in the streets of Newport after the Budget?

Mr. Hughes

They were not exactly enthused.

It is not only the unemployed but those in work who feel uneasy in these difficult times. The President of the Board of Trade has described job insecurity as an attitude of mind. He can say that again. A job is basic and a person's whole future depends on it. People who have been made redundant often have their homes repossessed. Many thousands regularly suffer that fate, and in such a climate there can be no feel-good factor.

A boost for the housing industry could do much for the economy as a whole, and local authority assets from the sale of council houses should certainly be released. The construction industry is in a parlous condition at present. A recent survey by the Royal Institute of Chartered Surveyors showed that 21 per cent. more firms were expecting their work load to decline in the next three months. Many firms are moving out of housebuilding altogether. What a sad situation that is.

The construction industry working flat out could have such a good effect on employment, as the industry embraces the professional classes—architects, quantity surveyors and accountants—and unskilled labourers. In addition to the people involved, there is the multiplier effect in other areas of industry.

My final point is that I deplore the cynical attitude of the Government to road transport. The Budget will impose a massive increase in fuel duty of approximately 14p a gallon, with a further £5 going on vehicle excise duty. The roads programme has been drastically slashed, and the green lobby is clapping its hands. But surely even those dedicated warriors-slim in number though they may be-realise that they are being conned by the Government. None of the expenditure saved will be spent on long-overdue improvements in our rail, bus, tram, cycling and walking networks.

Some 22 bypasses have been deleted from the Government's programme and that will cause a lot of heartache, and certainly pollution, in the years ahead. I pity all the people in Witney, which is simply snarled up at present. In addition, two bypasses on the borders of mid-Wales have been deleted from the Government's programme. Those bypasses could have done so much for the environment, besides reducing travel times and improving overall efficiency.

I support the principle of getting more freight and passengers on to rail, but for the foreseeable future we shall be essentially a road-based economy. What is more, when one puts up the price of transport-as the Government have-one puts up the price of just about everything. As a result, our goods and services becomes less competitive in the marketplace, and ultimately jobs are threatened. What a shortsighted policy that is.

In conclusion, the Budget has done little to bring down the high unemployment that has persisted for so long. Bringing down the burgeoning social security bill to get our young people into work would have helped to curb the drug-related crime and muggings that have become such a feature of our society. The impoverished of Wales will be further hit by savage increases in council tax. Our transport infrastructure will be allowed to continue to deteriorate. It is obvious that the time has come for change. Britain needs an early general election, so that this worn-out Government can be replaced by a Labour Government who will put our people back to work and restore our economic fortunes.

7.33 pm
Lady Olga Maitland (Sutton and Cheam)

I am not sure whether it is a pleasure to follow the hon. Member for Newport, East (Mr. Hughes) or not, because I cannot believe that a single man or woman in his constituency or in Wales would thank him for describing their home as equivalent to a third-world country. I cannot believe that they would thank the hon. Gentleman for describing them as living in an impoverished state and equating them with some grossly chaotic country overseas. I would be furious to be put into such a category, and I hope that the hon. Gentleman will later apologise to the people whom he represents. The hon. Gentleman does not represent those people in a way worthy of them.

Mr. Roy Hughes


Mr. Gordon Prentice (Pendle)


Lady Olga Maitland

I am not going to give way. It might be helpful to the House if I pointed out one or two facts relating to unemployment which seem to have escaped the attention of the hon. Member for Newport, East.

The latest published figures show that, since 1992, unemployment in the hon. Gentleman's constituency alone is down by 23 per cent. Since 1994, unemployment in Newport, East has fallen by 12.7 per cent. That is a success story, and is an example of the Government's commitment to bringing increased prosperity to our country and giving dignity back to our people so that they can provide themselves with homes and jobs. I hope that the hon. Gentleman will apologise to the House for having exaggerated the situation in his constituency.

Several hon. Members


Lady Olga Maitland

Opposition Members will have plenty of time later to make their own remarks.

I wish to welcome my right hon. and learned Friend the Chancellor's Budget, which has something in it for all my constituents. I was out in the streets the other day, and I asked an elderly man what he thought of the Budget. He replied that it meant he was able to pass on more to his sons when he dies. He was delighted by the lifting of the threshold on inheritance tax from £160,000 to £200,000, as more of his life savings will now go to the next generation. That will fulfil the Government's commitment to allowing the rewards for a man's life's work to cascade down through the generations. There are those for whom it is important to be able to keep as much of their life savings as possible. I welcome the Government's recognition of that. The amount of personal wealth that people can now keep after they have provided for residential care has been raised from £8,000 to £16,000. Those figures are important, and that is a significant measure for the people concerned.

I wish to speak on a subject that is close to my heart—health. I welcome the fact that the Government have made a commitment to spend an extra £1.3 billion on health. Health is an emotional topic that has been tossed around like a political football, and sometimes the very people we are trying to help become anxious, concerned and distressed as they wonder whether they are getting the care that they deserve. The truth is that they have been getting that care. Health spending today stands at £41 billion—twice the amount that we spend on the defence of our country. Nobody can ever say that the Government do not have a total commitment to health.

The sum spent represents £697 for every man, woman and child in the United Kingdom. It is interesting to compare what is spent in real terms now with what was spent in 1978 when this country had a Labour Government. In those days, the Government spent £433 per person on health, at today's prices. So the increase in spending on health has been dramatic and the results are there for us all to see.

However, I have a word of caution. I should like to make sure that every penny of that £1.3 billion goes to patient care and is not siphoned off into administration. I welcome the fact that the Government are working extremely hard in urging all the health authorities and health trusts to look into the money that they spend on red tape and bureaucrats to make sure that we get it down and the money goes to the areas where it is most needed.

We have a record of which we should be proud. We do not have to be defensive one jot about our health programme. At times it gets forgotten that on average a multi-million pound project is completed for the health service almost every week. The number of people working in our health care services has increased by a tremendous number. Between 1983 and 1993 the number of hospital doctors and dentists rose by 8,000. The number of qualified nurses and midwives has risen by a colossal 18,000. That is on top of the fact that we now have more GPs than ever before and that today they number 29,000. All this is funded by the health service.

Of course, as a result of the increase in staff, more patients are treated than ever before. In the debate on the health service, it is right that sometimes we should reflect back to the days when the health service was first instituted after the war and look at the changes in our demands and expectations. In the late 1940s, the level of sophistication that was available was much lower than it is today. Hospitals did not have the high technology that we have. They did not have the expertise or the knowledge; it was a different world; it was a time when people went into hospital for minor operations and spent days occupying a hospital bed. Today that is no longer necessary, but that does not represent a cut in the number of hospital beds. What we have done is increase services to patients.

Today people can have hip operations when they are as old as 95. A leading patient in this country, Her Majesty the Queen Mother, has had such an operation. I welcome the excellent news that she is making a good recovery and will be able to be back with her family at Christmas. What is remarkable is that Her Majesty's operation was unthinkable way back after the war. Her operation is available to everyone on the national health service.

Ms Eagle

Will the hon. Lady give way?

Lady Olga Maitland

No. I do not plan to give way to the hon. Lady because she is quite capable of making her own speeches, and she does.

We must make sure that our hospitals produce not only quantity of care but quality of care. In this, I am going to blow very proudly the trumpet of my local hospital trust, St. Helier NHS trust, which comes out extremely well in all the hospital league tables in terms of performance. May I just give one example?

Waiting times are a topic much beloved by the Labour party. It tries to give the impression that the whole country is queuing up for unreasonable and unbearable times for operations. I can only say that if any patients in their constituencies are having to wait for unreasonable lengths of time, they had better send them to Sutton. In Sutton they would get five-star treatment. Five-star treatment in waiting times is now applicable in urology, ear nose and throat, ophthalmology, oral surgery, gynaecology, general medicine and dermatology. We have a track record to be proud of—fine quality services.

Another hospital in my constituency which will benefit from the increase in health service funding is the Royal Marsden. It has a reputation across the world. It is second to none. People travel far and wide to Sutton for treatment. It now has NHS trust status. It has been doing extremely well in the past two years. The Royal Marsden dovetails its work closely with the Institute of Cancer Research. The purpose is to integrate their research, education, training of medical students and the development of patient care.

As a result of the close harmony between those two important institutions, they have not only become world leaders together in quality care but have improved no end man's knowledge and understanding of how to cope and live with cancer, how to make it more bearable for the patients and how to improve the quality of life, not only of those who will make a good recovery, but of those who may not. They can still have a quality of life which was denied to their peer group years ago.

The Labour party seems to have a fixation about the private finance initiative. I suppose that it is the latest buzz word in what to attack as a Government project. We are proud of our progress with the private finance initiative; it is making great inroads; it is of great benefit to projects; it provides an opportunity for projects to expand at a faster rate than they might otherwise have been able to do.

In my constituency a programme is now being put together to build a massive Sutton medical campus. Such a project is possible only by working through the PFI. The programme is being drawn up. Bankers have been consulted. There is no shortage of people willing to invest. When this wonderful new hospital comes to be built in my constituency in the next century, the end result will be to the benefit of all around.

The hospital will be able to bring into my constituency and provide for the community expert services in all the different disciplines. It will have a medical training school and research facilities. It will become an academic centre of excellence. It will be an opportunity to create a major trauma centre from which everyone will undoubtedly benefit. In short, people are planning to build for the future. Surely if we are building for the future it is absolutely right that we should look at all possible alternatives for funding. That is the only way in which we can provide effectively for the next generation.

Although so far I have been talking about hospitals, I should like to devote a moment or two to GP fundholders. Fundholding practices have been a colossal success across the land. They have created a revolution. Indeed, 41 per cent. of all GPs are fundholders. The patients benefit. They have wider access to services. The GPs can now apply their professional skills right the way through into decisions about how the hard cash is spent. They can summon hospital consultants to give consultations in their own surgeries. Patients can only benefit from that. I trust that some of the money that has been earmarked in the increased health budget will go down to expand further the services that GPs can deliver.

What a pity it is that the Labour party carps and criticises and tries to undermine the whole concept of GP fundholders—those wonderful, dedicated people who are there to serve the community. What a pity it was to hear the right hon. Member for Derby, South (Mrs. Beckett) say that GP fundholding is, as it currently stands, unacceptable. The truth is that the Labour party wants to intervene at every level of the profession and if it can intervene politically and control and dictate to GP fundholders, it will—much in the same way as it would, if it could, control the NHS trusts.

Of course, there would be a price to pay for such interference, because, if the Labour party had its way and brought in the minimum wage and the social chapter, valuable resources would be denied to patients; they would go to pay for increased wages for others in the NHS. I know who I think should get the fairer share of the pot.

I welcome the fact that the Government have committed more resources to education. Sutton alone will benefit from an extra £3.3 million for our schools. I hope that the local education authority in Sutton, which is Liberal-controlled, will, for once, heed the advice of my right hon. and learned Friend the Chancellor, who said that he wanted the money to go directly to schools, and parents to ask where the money is being spent and for the schools or local education authorities to be accountable. If parents do not get the answers, we should find out why.

The trouble is that local education authorities, especially those under Liberal Democrat control, tend to spend money on other things. I for one regret that important services are not ring-fenced. The local authority in Sutton has earmarked £48,000 to create mini-town halls, as in Tower Hamlets. If I were a parent, I would want that money to go to education. It has spent £105,000 refurbishing the entrance hall of the civic offices—what a waste of money. It should go to essential services such as education and social services. Indeed, just the other day, the authority had to inflate its vanity by spending £21,000 on a MORI poll to try to show how green it is.

The Budget is a wide and important subject; it affects our lives in every possible way. It is a welcome Budget. The Chancellor is not trying to buy people's votes, which is to his credit. It shows him to be a man of integrity, as the Government are a Government of integrity. We would never stoop so low. The Budget makes sure that there is something for everybody but it does not throw away the careful prudence that we have built up over all these years. I therefore give the Budget a hearty welcome.

7.53 pm
Mr. Chris Mullin (Sunderland, South)

I am glad to hear that all is well in Sutton and Cheam, Bromley and Hastings. In Sunderland, we tend to take more a more sceptical view of Government policy, but I do not plan to dwell on that.

I welcome the hon. Member for Wolverhampton, South-West (Mr. Budgen) to our deliberations. Let the record show that he first set foot in the Chamber at 6.55 pm, remained on the premises for 30 seconds, and returned 30 minutes later clutching a copy of the Red Book. He is one of the most original thinkers on the Conservative side of the House and is always entertaining, with something interesting to say. However, Mr. Deputy Speaker, I hope that you will look kindly upon those of my hon. Friends who have been waiting since 3.30 pm to catch your attention.

Mr. Deputy Speaker (Mr. Michael Morris)

Order. If the hon. Gentleman wishes to take over the Chair, he should volunteer for the Chairmen's Panel. In the meantime, he should take advantage of the fact that he has Floor now, and note further that the shortest speech so far has been 14 minutes. I hope that I can record his as even shorter.

Mr. Mullin

I do not think that they would have me on the Chairmen's Panel, Mr. Deputy Speaker.

I do not intend to follow the line on the health service taken by the two Front-Bench speakers, except to say that the Secretary of State made the usual claim about spending on the national health service having increased substantially since 1979. In 1979, it was a darn sight easier to get a bed in Sunderland general hospital than it is today.

The Financial Secretary to the Treasury (Mr. Michael Jack)

indicated dissent.

Mr. Mullin

The Minister shakes his head, but only last month, someone telephoned me from Sunderland general hospital to say that there were six geriatric patients aged between 60-something and 90 in the gynaecology ward because of the shortage of beds. That sort of thing did not happen in 1979.

The huge cuts in the local health budget were sold to us on the basis that all sorts of primary health care would be put in place to take up the slack. That has not so far happened. Within the time allotted me, Mr. Deputy Speaker, I should like to address a slightly wider issue.

As other hon. Members have said, this is an irresponsible Budget. It is not as irresponsible as I feared, nor, to judge from the glum looks on the faces of Tory Back Benchers on Budget day, as irresponsible as they had hoped it would be, nor as irresponsible as the next one is likely to be. It is based on the entirely cynical belief that votes can be purchased; the only argument between the Chancellor and his Back Benchers is over the price.

The large cuts in social security spending that arise from the Budget will place still further strains on our damaged social fabric. If the Government really want to do something about the burgeoning housing benefit bill, they could start by regulating landlords. They will not, of course, because they are the party of the landlords.

It is surely one of life's richest ironies that, after 17 years of Governments that have never ceased to proclaim their commitment to low taxes, the overall tax burden is as great today as it was 16 or 17 years ago. Even with the benefit of North sea oil and the massive one-off revenues from the sale of public assets, this Government of so-called tax cutters still cannot get taxation down to the level that they inherited from the wicked socialist Government that preceded them. [Interruption.]

Tory Members may huff puff about that, but it is an uncomfortable fact of life. There is no great mystery about why that is so. To keep 2 million to 3 million people out of work permanently is extremely expensive. There is not only the cost of benefit—vast though that is—but the cost to the Exchequer of lost taxation, and the additional cost of maintaining our disintegrating social fabric.

As we all know, the Thatcher decade gave rise to the birth of an underclass, the like of which we have not seen since the 1930s. To cope with it, there has had to be a massive increase in the law and order budget. While Conservative Members may deny any connection—indeed, I heard the Home Secretary making just such a denial only last Thursday—most sensible people, of all political persuasions, know that there is a clear link between permanent mass unemployment and the tidal wave of yobbery that accompanied the Thatcher decade.

Not only law and order are affected. The burden on schools, the health service and just about every other social agency is increasing. A psychiatrist in my constituency told me the other day that she was having to deal increasingly with chronically depressed men in their 40s and 50s from the former mining towns of Murton and Seaham, who had no hope of working again and no purpose in life.

When the Government closed the mines and shipyards, and encouraged the privatised utilities to unleash a war of attrition against their employees, they may have thought that they were choosing the cheap option. The truth is that, for everyone except the shareholders, privatisation was a very expensive option, and Muggins the taxpayer has to pick up the tab. The bills are now coming in for the Thatcher decade.

That is why, whether they like it or not, the Tories are a party of high taxation. Margaret Thatcher came to power, cheered by most Conservative Members, promising to end the benefit culture. Is it not ironic that she and her heirs ended up creating a benefit culture on a scale hitherto unknown? I recall that she promised to end to what she used to call "pretend" jobs. The irony is that she ended up doing away with real jobs, and creating pretend jobs on a vast scale. Wt have all been paying the price of that ever since.

To be fair—although I do not see why I should be—the doubling and trebling of the unemployment rate over which successive Conservative Governments have presided is not entirely their own fault. New technology means that capital no longer requires so many human beings to make it function. Monetarist economics means that capital is particularly ruthless about disposing of those human beings who are surplus to requirements. Mass unemployment is happening across the developed world; we just got there first, and embraced it with more enthusiasm than our neighbours. There is no easy solution. The genie is out of the bottle, and it will be difficult to put it back.

We have created a generation, particularly of unskilled young men, who are entirely alienated from society. Even if, by some miracle, work became available tomorrow, they would not be capable of doing it. In the long term, there is only one way in which to cut taxes—either by creating new jobs or by sharing out existing work more equitably. That is the only way we will reduce the huge benefit bill—anything else is just tinkering.

When we reduce unemployment, we not only reduce the soaring cost of welfare; we will also find that we are spending less on shoring up our disintegrating social fabric. In addition, the Treasury would gain more in extra tax revenue. In every respect, we will be a healthier society. For those reasons, the Labour party gives a high priority to job creation, especially for the young.

The job creation programme recently proposed by my hon. Friend the shadow Chancellor may not be a panacea, but it is a serious attempt to address the most important issue facing our society, besides which short-term gimmicks of the sort that we saw in the Budget pale into insignificance. If anyone has better ideas, let us hear them, but let us not mock those who are at least addressing what is surely the greatest threat to the stability of our society.

There is one issue, however, that we should not duck: the cost. A job creation programme on anything like the scale needed to make an impact on the problem which any new Government will inherit will require huge public investment. That money can come only from taxation, borrowing or growth. It is not credible to suggest that it will be provided solely from growth. In an age when we are all signed up to sound money, it is not credible either to suggest that that investment can come only from borrowing. It will therefore have to come mainly from taxation.

My hon. Friend the shadow Chancellor has said that he intends to fund his initial programme through a one-off windfall tax on the utilities. I should be surprised if that is enough, given the scale of the problem we face. We must therefore leave open the possibility that further revenue will need to be raised, in the short to medium term at least, through taxation. I therefore urge my hon. Friend not to rule out that possibility. We should not get involved in an auction over taxes. It is one that we could never hope to win, because, in the last analysis, the Tories will simply lie, as we saw at the previous election.

There are only three promises that a responsible Labour Government should make about taxes. First, we should pledge that we will raise whatever is necessary to maintain the social fabric. Secondly, we should promise that Labour will spend taxpayers' money at least as efficiently as the Tories. That will not be hard, given the billions squandered on the poll tax, Trident missile systems and the cut-price sale of public assets.

Thirdly, we should promise that the burden of taxation will fall on those who are most able to pay. That should be the cardinal principle of our approach to taxation. By all means say that there will be no return to the ludicrous surtax levels that obtained under past Governments, Labour and Tory—that is only common sense—but let us make it quite clear that those who have done best out of the Thatcher decade will be expected to contribute most to repairing the damage.

When my hon. Friend the shadow Chancellor is challenged. as he has been and will be, to say whether he will restore the irresponsible tax cuts in the Budget, or the next one, I hope that he will give no hostages to fortune. Social stability is far more important than short-term gimmicks.

If there is one thing I most deeply resent about the Government—beside the fact that they have brought politicians lower in public esteem than estate agents—it is that they have turned taxation into a dirty word. As a result of the constant baying for tax cuts from Conservative Back Benchers, and the mass hysteria liable to be unleashed by their friends in the media at the slightest hint of a tax increase, it is no longer possible to have an honest debate about taxation.

I shall always remember one summer two or three years ago, when the hon. Member for Bridlington (Mr. Townend), who spoke in the Budget debate the other day and who represents, in my view, the meanest instincts in Tory Britain, appeared on the television news. Item one was the catastrophe then taking place in Kurdistan, and was illustrated by harrowing film of families living without shelter on freezing mountain sides. Item two was the famine in Somalia. illustrated by harrowing pictures of starving children, then dying at a rate of 1,000 a day. Item three on the news was the hon. Member for Bridlington, standing in front of an elegant period house, where he no doubt lives, calling for cuts in the overseas aid budget. He was at it again the other day.

I do not believe that the British people are as mean-spirited as the hon. Gentleman thinks they are. He may well speak for most Tory Members-I do not think that he necessarily does, but he may do-but I do not think that he speaks for most Tory voters. Such meanness should not be pandered to; it should be resisted.

It is the duty of responsible politicians in a democracy to will not only the ends but the means. It is our duty to point out that, if people want decent public services, they have to be paid for. If people want something done about crime and yobbery, they will have to spend money tackling their social causes. If people want intervention to end the unspeakable suffering in Somalia, Rwanda or anywhere else, it must be paid for. Taxation, honestly raised and efficiently spent, is the basis of a civilised society. We should not be afraid of saying so.

8.6 pm

Ms Angela Eagle (Wallasey)

I regret that we have not had a chance to hold a debate specifically on employment during the debate on the Budget. The abolition of the Department of Employment has meant that no separate press release has been issued on specific employment issues.

The Secretary of State for Education and Employment has not appeared at the Dispatch Box to talk about the Budget, but, as my hon. Friend the Member for Sunderland, South (Mr. Mullin) has just said, tackling unemployment is crucial to our ability to deal with our current economic problems.

The Budget offers tax cuts of £3 billion, which will be paid for by public expenditure cuts of £3 billion. The Budget is notable for what it did not tackle, and the questions it left unanswered.

The forecasts in the Red Book are ominous, and unrelated to reality. Some commentators have even called them heroic. They are incredibly optimistic, and we all know, unfortunately, that the Treasury's record on achieving its forecasts is dubious, to say the least.

The Government's economic strategy, based on forecasts, appears to be founded on the understanding that there will be a slowdown in manufacturing output this year, continuing into next year, and an increase in consumer spending. That will then work its way through to become an increase in growth next year. One of the structural problems with the British economy, which has been well recognised, is our inability to finance growth and recovery from recession by anything other than consumer spending. We should instead try to create a bigger manufacturing base to sustain recovery in the long run. The Government, however, seem to happy to work according to their own forecasts, which suggest that consumer spending will fuel growth.

How will that extra growth be achieved? We are now in the third year of the so-called recovery from the recession. The Red Book reveals that the Government have revised downward the estimate of investment growth from 3 per cent., as expected in last year's Red Book, to a mere 1 per cent. this year. That means that we are managing only 1 per cent. growth in investment, at a time when the economy is meant to be in recovery. That is the worst record of investment out of recession since the 1930s.

According to Treasury forecasts, next year investment is scheduled to grow by 4.5 per cent. However, the Budget strategy gives no indication of how that investment will come about. The Chancellor is paying no attention to stimulating the huge increase in investment that the Government forecast, so how will it be achieved?

I believe that the cuts in public investment are likely to lead to an opposite result. Instead of an increase in investment, we may well have a slowdown. Many City economists also predict that the Treasury's forecasts for growth are grossly optimistic, and are unlikely to reach about 1.75 per cent., let alone the 3 per cent. that the Red Book forecasts.

The swingeing cuts in public investment are likely to cause that downturn. The construction sector, where one usually witnesses the beginnings of economic recovery, is stagnant, and the cuts in public housing, the cuts in other public investment and the £4 billion of cuts in road investment are all likely to lead to continuing stagnation in the construction sector.

I do not believe that the private finance initiative will ever fill that gap. We had some discussion earlier about the likely efficacy of the private finance initiative, but obviously the initiative has failed to reach the targets that were set for it in the past, and I am aware of no reason why the rate of that failure should improve in the next few years.

Last year, £5 billion of private finance initiative so-called investment was announced, but a mere £500 million was delivered during the year. At that rate of delivery, all we are likely to see are significant cuts in public investment, and the gap created, which was meant to be filled by the private finance initiative, simply left.

We have heard many examples of the failure of the private finance initiative from both sides of the House during today's debate. I add another. The channel tunnel rail link was announced as a private finance initiative in 1986, yet here we are, almost 10 years later, not really any closer to having our high-speed link. Those of us who have been to France and seen how their high-speed rail link works are still waiting for the private finance initiative to deliver the goods in this country. So the omens for filling the gap of that investment are not good.

Why should consumer spending increase and generate growth in the year to come? The modest tax cuts that we have had have left families about £2 better off. That is not £9, as the Government first tried to claim when the Budget emerged, and we know that most of that £2 will be swallowed up in other charges as a result of the Budget. That leaves a deflationary balance of about £16 billion from the tax increases in the past two or three years-21 tax increases, 7p up and only 1p down.

Therefore, although this year's Budget was effectively neutral, I cannot imagine where the stimulus will come from for strong growth in the years to come.

Mr. Jack

May I take issue with the hon. Lady on one detail? She speaks about people being £2 a week better off as a result of the tax changes in the Budget. Does she agree that the average family would be £190 a year better off specifically as a result of the changes in tax, which I work out to be about £4 a week?

Ms Eagle

I understand—it is typical of the sleight of hand in the Budget that becomes apparent when one studies it—that initially the Government claimed that people would be £9 a week better off, but that included a Treasury assumption that there would be a 4 per cent. increase in wages next year.

I do not know how many people expect a 4 per cent. increase in wages next year, but I very much doubt that any of those in the public sector do. The Red Book, and various of the press releases that accompanied it, show that the Government have not calculated, or provided any extra finance for, public sector wages next year. Any wage increases are meant to be paid for out of efficiency savings, which have been made so often, year on year, that there is very little left to save, and certainly not 4 per cent.

On the one hand, the Treasury makes an assumption that there will be a 4 per cent. wage increase next year, and on the other, it deliberately fails to fund any of that increase in the public sector. That is a telling comment on the way in which the Government treat the public sector.

I return to my question-why will consumer spending not increase to generate growth? There is the persistence of the feel-bad factor, as I call it, or the lack of the feel-good factor, as some people call it. What did the Chancellor do to tackle that significant phenomenon, which has been with us throughout most of 1990s?

First, why is it here? It is here because of insecurity and fear in the labour market and the flat, stagnant condition of the housing market. The Chancellor had little to say about either. There was no action for the housing market. Perhaps he hopes that interest rate cuts will give some stimulus to that, but we must wait and see.

The Chancellor did nothing about the labour market and unemployment. People will not start unleashing massive spending when they do not know whether they will have a job next week and whether they will be able to pay their mortgage if they become unemployed. They expect to be thrown out of their houses if that happens. After all, we have 1,000 repossessions a week at the moment because of the effects of unemployment and job insecurity. It is impossible to tackle those issues without tackling the causes of the feel-bad factor.

The tax cuts that we have had are wrapped in a large IOU, partially because of those issues but also because of the significant cuts in public spending and public service that were revealed in the press releases that accompanied the Red Book. The £4 billion cut in the road programme, without extra investment in public transport to compensate, can only add costs to business as our roads become more and more congested.

Have the Minister or his officials estimated the increase in costs to business that will result from the decisions to abandon investment in the roads programme? I know that businesses believe that that will add to their costs.

We have cuts in housing budgets, at a time of increasing homelessness, with 1,000 families being repossessed a week. We have cuts-this is shameful-in training budgets and education, at a time when we are carrying mass unemployment and its burdens. We have a 5 per cent. cut in the colleges of further education, in spite of the fact that they are meant to provide 50,000 extra places in further education.

How are those sums to be balanced? How are we meant to preserve a public sector that we can be proud of in the face of cuts of that size? We have 3 per cent. cuts in university budgets: £4 billion of cuts in capital spending in the next three years.

It is the third year of freeze also, as I said, for public sector pay.

Mr. Jack

Let me give the hon. Lady a simple answer. By the end of the current public expenditure survey, we expect that £14,000 million of private finance initiative deals will have been signed up. That is a massive infusion of capital and provision of services for the benefit of the public.

Ms Eagle

That is the usual wish list, and it sounds as though the Minister is appealing to Father Christmas. We must wait and see whether he gets his wishes. I have already placed on record my great scepticism about that ever happening.

We have had the nasty little cuts in single-parent benefit, housing benefit for the under-25s and the lone-parent premium, which will have significant effects on individuals, especially lone parents, but save little money.

We must remember, as we contemplate the public sector, that the Government have had £120 billion of North sea oil revenues and £80 billion of revenues from privatisation sales, yet all around us, day in, day out, services for real need continue to be underfunded. It is not a record that I would be proud of.

Instead of the significant, damaging cuts in the fabric of the public sector, why on earth did the Chancellor not attack unemployment? There have been significant cuts in public expenditure, and they have saved only £3 billion, yet we spend £20 billion a year on maintaining all those people in unemployment, doing nothing. Surely that is where cuts in public expenditure could best have come, and the Chancellor did nothing about it.

I shall comment briefly on the arrangements and the agreements that were signed in Beijing by representatives of the Government at the fourth international conference on women. I quote from the platform for action, which the Government signed up to, about lone parents.

Mr. Deputy Speaker

Order. The hon. Lady may be ingenious, and perhaps the relevance of her comments to the Budget will come out. I hope that it will.

Ms Eagle

My comments are relevant, and I shall explain my train of thought. We have signed up, as a Government and a country, to the commitments that emerged from the women's conference. The platform for action contains a specific section on lone parents, which states that Governments must

provide adequate safety nets and strengthen State-based and community-based support systems …to enable women living in poverty with children to

preserve their livelihood, assets and revenues in times of crisis. We have cut support for single mothers and lone parents, to save a mere £13 million a year.

In the 1985 Green Paper on social security reform, the Government admitted that there were additional costs for lone parents bringing up children. The Green Paper described the need for the creation of the lone parents premium in income support

as a contribution to the additional costs faced by lone parents bringing children up alone. Why have the Government, in the Budget, decided to freeze that premium and announce its future abolition? They are punishing lone parents.

When the Select Committee on Employment, of which I am a member, looked at the issue, it discovered that lone parents who are women are the only group of women who, over the past 10 years, have found it harder to get out to work. Fewer of them, as a percentage of the total number, work now than they did 10 years ago, simply because of the difficulties of looking after children, going to work and the costs involved. Yet the Government, in the Budget, have deliberately made matters worse for them, just to save very little money.

The Budget contained no measures to solve unemployment; it contained nothing to increase investment; it contained nothing to repair the social fabric—indeed, it made even more attacks on it. We wait for the so-called prudent Chancellor to introduce the electoral bribes next year ahead of the general election. When he does so, we shall immediately ask him why he has had the change of heart.

8.21 pm
Mr. Nicholas Budgen (Wolverhampton, South-West)

I understand the rebuke directed towards me by the hon. Member for Sunderland, South (Mr. Mullin). I am sorry that I was held up on the motorway and I plead guilty, albeit with some mitigation, to some of his charges. You, Mr. Deputy Speaker, have rectified matters by properly calling two speakers in succession from the Opposition Benches.

Although I crave the indulgence of the hon. Member for Sunderland, South, I hope that the House will give proper attention to his significant speech. The shadow Chancellor has suggested a 10p rate of income tax and I have no doubt that it is a splendid thing. Many ordinary working people must feel tremendous pride at being led by a public school activist on the make who is anxious to gain the middle-class votes of people from Hampstead and to preserve the high earnings of those at the Bar and engaged in, similar activities. It is refreshing and interesting to hear the voice of old-fashioned, honourable socialism saying that socialism is not about creating inflation by vast deficits, but is properly financed by higher taxation and redistribution. The hon. Member for Sunderland, South spoke in unfashionable but honourable terms. I hope that the myriad spin doctors now employed by the Labour party will give proper prominence to his interesting and honourable speech.

As the hon. Gentleman chided me, he said that I had gone off to get the Red Book, which I did. I hope that he will note that it is a well thumbed Red Book and I have given a little thought to the balance of the Budget these last few days. I shall do something unusual: I shall commend the Chancellor's judgment over the Budget. I have known the Chancellor, man and boy, for more than 30 years. He and I were at Cambridge together; we were at the Birmingham Bar together; we ran the Birmingham Bow Group together and we have been in the House of Commons for a long time. On almost everything that is important in politics, he and I have disagreed. I read that many of my hon. Friends were almost insulted when the Chancellor said that the financial deficit was now expected to be close to the Maastricht reference level of 3 per cent., but in light of the Chancellor's views I thought that he was being remarkably reticent in containing his European federalism to but one sentence.

Those are all unnecessary and adolescent jibes at my right hon. and learned Friend and his views over the past 30 years. Contrary to the views of some of my hon. Friends, particularly my hon. Friend the Member for Bridlington (Mr. Townend), I think that the central question that the Chancellor had to decide was properly decided. Contrary to what commentators on both sides of the House say, we know that the balance between one action and another is well constrained and the arguments are finely balanced. My right hon. and learned Friend had to decide whether to take more off the standard rate and please my hon. Friend the Member for Bridlington or be cautious and hope to have a helpful effect on interest rates.

My hon. Friend the Member for Bridlington draws on many of the arguments that have been used in the Republican party in America. Roughly speaking, the Republicans said that if taxation was cut hard enough it would create a big deficit and rising interest rates, which would force the Government to cut public expenditure. I do not know whether that happens in America, but that was the argument advanced. The Americans' different political system and different federal structure may allow that policy to work there, but it would not work here. If we had a bigger deficit, it would merely create trouble in the money markets. Everyone knows that, although every Chancellor gives the impression of being in complete control of interest rates—as though he decides unilaterally on their level—he is merely the biggest player in the market. Of course he has a substantial influence on interest rates, but he does not control them.

If the Chancellor had followed the advice of my hon. Friend the Member for Bridlington, we would have had a funding crisis, higher interest rates and possibly a cut in public expenditure—although that would have happened much later. The dislocation and sense of crisis created would have been far more damaging. Those effects would have had to be balanced against the stimulus that would not occur until next year in lower rates of taxation.

I believe that we should be more helpful towards interest rates. As we debate the Budget in the autumn, we forget that its effects will not come until next April and are not immediate, whereas the effects of interest rates can be immediate and variable. Let us consider the effects on interest rates. We know that there has been a dispute between the Chancellor and the Governor of the Bank of England. At this stage, no one can say who is right. The Chancellor has been applauded and it has been said that the Governor of the Bank of England has lost authority as a result of being overruled by the Chancellor.

But the Governor may yet prove to be right. The Governor is simply saying that he, as the custodian of sound money, is told that it is the Government's objective to achieve an inflation rate no higher than 2.5 per cent. per annum and he replies, "Okay—if those are my riding instructions, we should not have lower interest rates." The Chancellor says no and that, perhaps for other reasons, we must have slightly lower interest rates. This year's cautious Budget may not result in lower interest rates immediately, but it will be a factor for lower interest rates and it will certainly prevent them from rising.

Lower interest rates are felt by all the most fragile elements in the economy. Mention has been made of the construction industry. I have in my constituency one of the largest construction companies, Tarmac, which has faced considerable troubles. It was not the company's fault, but it bought an awful lot of well priced land in the south-east hoping to build houses very profitably. The company's housing sector has had great difficulties, as has every house builder in recent years.

I am told that there are only six or seven big contractors who undertake major road building contracts, and it is said that two or three of them are in an extremely dodgy state and may either go into liquidation or be taken over. The construction industry itself is in a very dodgy state at present, and for that industry interest rates are the most crucial element in the economy.

Interest rates are also important to those entering self-employment or starting up small businesses. Companies and individuals who are not making profits, but are borrowing a bit of money because they are starting out, are not terribly interested in getting 1p, 2p or 3p off the standard rate of income tax. If they are not paying any profits or making any money, all that they want is the lowest possible interest rates to keep them going for the initial and most difficult period. So lower interest rates are good for unemployment in the sense of reducing unemployment and making it easier for people to move into self-employment.

Lower interest rates are crucial to the housing market. Of course we have had much discussion about whether something selective could be done for the housing market. I agree with my right hon. and learned Friend the Chancellor that nothing affordable would do anything selectively for the housing market, but the housing market is also important for employment.

If a chap is made redundant at 40 and wants to go into self-employment, perhaps as a consultant in the services that he was previously providing for a large firm, he borrows some money from a clearing bank and uses his house as collateral. If he is in negative equity, the house is not acceptable as collateral. Some improvement in the housing market is important to the economy and itself is dependent on the level of interest rates.

I do not believe that my right hon. and learned Friend had any great room for manoeuvre or, as some would argue from these Benches, that he was mistaken in not further cutting the standard rate of taxation. I believe that he was right to provide the way for lower interest rates, which can take effect immediately, as opposed to lower taxation, which would not take effect until some time next year. I believe that the central and most disagreeable and difficult decision that he had to take was rightly taken.

8.33 pm
Mr. Kevin Hughes (Doncaster, North)

We have heard some right royal back slapping from Conservative Back Benchers to the Chancellor and their colleagues on the Front Bench. Unfortunately, the last three Conservative Members who spoke were not even in the Chamber at the start of the debate. No doubt the Conservative Whips have been running around Chelsea and Mayfair dragging them in to speak.

This year's Budget did absolutely nothing for poor people and very little for the elderly and served further to emphasise what 80 per cent. of the country already knows—that we cannot trust the Tories to look after the national health service.

We must set the Chancellor's Budget statement against the background of £1 in every £10 being spent on NHS administration, the number of hospitals in England having been reduced by more than 200 in the past four years and two in every five hospital beds having been cut since 1979. No matter how much the Government massage the figures, there are more than 1 million people on NHS waiting lists. The NHS repair backlog has soared by 38 per cent. since the reforms and capital spending cuts, and the number of NHS nurses and midwives has declined by almost 50,000 in four years.

The Government should be ashamed of that background—and they are. Earlier this year, the Maples report admitted that the Tories wanted zero press coverage on the national health service. That is clearly not a sign that the Government are proud of their record in health and this year's Budget offers little to change that record.

The cost of bureaucracy in the NHS has more than doubled since the reforms. An extra £1.5 billion per year is spent on administration. The Tories tell us that they will cut bureaucracy, but bureaucracy, administration and the internal market are still costing the taxpayer hundreds of millions of pounds. Now the Secretary of State says that he will make 3 per cent. efficiency savings. He calls those new efficiency targets "challenging". They certainly are challenging; they are ill thought out and unrealistic.

Pay rises next year will have to be earned through those so-called efficiencies. Once again, NHS employees are being unfairly treated. Already, one in five nurses are set to leave the NHS due to low pay, increased work load and poor promotion prospects. At the same time, productivity in the NHS has increased. Department of Health data confirm that the NHS is treating more patients with fewer qualified nurses. Surely the overall funding allocation to the NHS should include fair pay awards, but unfortunately it does not. Managers of health authorities have already voiced their concern that the 3 per cent. efficiency savings will lead to job losses because they do not see how further efficiencies can be achieved without cutting jobs.

Once again, the Government are cutting the NHS capital budget. They are cutting the hospital building programme by some 16 per cent. in just one year. There will be a shortfall of more than £100 million, even after the expected revenue from the private finance initiative—that is, if the Government get the private finance that they project. Many of my hon. Friends have covered that subject. Like them, I do not believe that the private sector will produce the amount of money that the Government expect. On top of last year's cuts, that will demolish the NHS hospital building programme and may leave the private sector calling the shots. If that is the case, it is not privatisation by the back door, but privatisation by the front door. The Government are afraid to admit that to the electorate, because the electorate do not want a private health service.

Last year, the Government said that private sector investment should be in addition to capital spending, but it is being made instead of capital spending. The Government predicted capital spending cuts of 1.4 per cent. but the figure is 16 per cent. The backlog of health service repairs stands at 40 per cent. Patients are being treated in hospitals that are 30, 40 or 50 years old and desperately in need of repair and renovation. Unless private finance is forthcoming, the Government are not prepared to meet the cost. This year's shortfall is £100 million, which is equivalent to three new 700-bed hospitals. We cannot trust the Government over the shortfall next year or how long it will be before private finance overtakes public finance in the NHS capital building programme and hospitals are fully privatised—which I am sure is where the Government are heading.

I welcome the announcement that the assets threshold above which elderly people must pay for their long-term care is to be raised, but is it not a case of too little, too late? A £16,000 threshold will not help many elderly people, who will still be forced to sell their homes as a result of the current system because their assets—including their homes—are well above £16,000. The Government are trying to quieten down the outrage felt by many elderly people on realising that they will not be provided with the care that they expected in their old age.

The Government are offering the elderly a short-term solution to a problem that should be considered in the long term. Despite an increased threshold, access to care for the elderly will be a lottery, with patients in one part of the country forced to sell their homes to buy care that is provided free in another part of the country. How will the raised threshold be funded? Unless local authorities are adequately funded by the Government to meet the extra demand, the new threshold will help nobody.

The Budget has done little to make the Government proud of their national health service policies. It proves that the Tories are privatising the NHS and care more about trying to win over the electorate with token tax cuts than about funding capital expenditure on hospitals and offering fair pay deals to NHS staff. Time and again, the Tories say that the health service is safe with them and that they value the service, but it is not true. The Government have let down the ill, the elderly and the nurses, and they are letting down the people of this country.

The Government want the public to be kept in the dark about what they have done to the NHS, but the public already know the story and the Budget gives them little reason to change their minds. Their only choice now is to change the Government—and that cannot come too soon.

8.43 pm
Mr. Alan Simpson (Nottingham, South)

The most interesting part of the Budget debate is not the gloss of the Chancellor's statement but the detail to be found in the Red Book and ensuing statements. Having ploughed through them all, I can commend the Budget only for being consistent. All the things that were not in the Chancellor's statement are not to be found in the supporting documents either. The Budget did not tackle unemployment, create jobs, help the poor or solve the problems of the homeless. In many cases, the Budget will create more ill health than it will remove.

I was fortunate enough to have a much better alternative Budget published by New Statesman. I will not describe it in detail, but I commend it to the Chancellor.

I shall focus on three key aspects of the Budget and health. The first is the relationship between health and wealth. A huge burden of ill health is poverty-related—the poverty of unemployment, of the environment in which people live, of dependence on inadequate pensions or benefits and of being caught in the harshness of the means-test trap.

The Chancellor and many Conservative Members made great play of the fact that Government policy aims to give people freedom to keep or spend their money by reducing the burden of direct taxation. For the working poor, that is an unprincipled fraud. The Government's obsession with a labyrinth of means-tested benefits is such that the working poor pay the highest marginal rates of taxation in the land. A number of my hon. Friends pointed out that it amounts to about 97p in every £1 earned by the working poor. That is a combination of the interface between low pay and the benefits system, where successively the clawback from family credit, housing benefit and council tax rebate eats into the amount that the individual thinks that he or she is earning.

I was on the verge of doing the Government a disservice by suggesting, on the basis of my first calculations, that the impact of the Budget changes would be to reduce that clawback rate from 97.08p in every £1 to 97.03p. I got that figure wrong because it was calculated on the basis of the extra £1 earned. If one takes the impact on the individual's existing income, a much more generous interpretation must be made. The clawback rate is reduced to 95.5p in every £1.

For the working poor in that category, the reduction of 1p in the basic rate will deliver a net increase in spending power of 5p per week—a total of £2.78 a year. I would dearly like to see the Chancellor out on the streets trying to explain the virtues of his Budget, on the basis that he was offering to deliver to the working poor less than the cost of a Mars bar a month. I suggest that the right hon. and learned Gentleman would find no shortage of people willing to suggest to him how a Mars bar might be deployed, if only they could afford one.

The Budget will not improve the lives of the working poor. More than 600,000 households are caught in the clawback trap of paying marginal rates of tax of more than 70 per cent. That is the direct consequence of the shift in Government employment policy, which has created the facade of employment figures—with people being shifted out of full-time employment and into part-time employment and dependence on the benefits system. Any Budget must be tested against that interface.

There is a strong case for reducing the real burden of basic tax on the working poor. There may be an argument for further reductions in the basic rate, but I say to members of both Front Benches that there is no credible way of pursing that as a realistic policy unless it is underpinned by three other elements. Such a policy would have to be based first on the restoration of universal benefits and the ending of means testing. It must be done in conjunction with the raising of top rates of tax, so that the people who are £35 billion a year better off than in 1979 accept the burden of paying for that shift. It must be done also in conjunction with the introduction of a fair and progressive taxation system for industry and commerce.

It is not fair to ask industry to be taxed on the basis that firms that provide work should pay the social insurance costs for firms that do not. The structure of the taxation regime for industry is massively regressive. We ought to be looking at the approaches pursued in Germany up to 1965, involving a progressive tax regime on contributions from industry. Apart from anything else, there is a fundamental inequality in the United Kingdom's approach to contributions to the Exchequer from industry and commerce. Their contribution is well below the average of the Organisation for Economic Co-operation and Development. If we were to equal that average—7.8 per cent. of gross domestic product—that would bring in £33 billion more a year to the Exchequer.

I make no apology for saying that this country has the wealth but not the will to tackle poverty, ill health and unemployment. An incoming Labour Government should not be afraid to use our resources to deliver genuine personal growth and improved health opportunities. Those things should be our birthright.

I come secondly to hospital funding. I want to offer the example of the Queens medical centre in my constituency, one of the leading teaching hospitals in the country. It faces a huge budget crisis. The chief executive of the QMC university hospital trust says:

Because of the hospital's low costs, high productivity and efficiency, together with the need to deliver a 4.85 per cent. efficiency gain in 1995–96, there is no latitude to absorb the unexpected financial pressure which the hospital has now experienced … because those who pay the hospital for treating patients do not have the extra resources to cover the unexpected additional emergency patients … we are forced to consider measures that will manage their activity back to an affordable level". That is what the trust has told the public of Nottingham in the past month.

It is a myth that the extra funding that the Government say is going into the health service can be paid for out of retained savings. There are no retained savings to be found in the QMC in Nottingham, and I suspect there are few to be found anywhere else. In essence, Government funding for the NHS is camouflaged funding. The Secretary of State made that clear at the start of today's debate, when he confirmed that the extra money for research would not be confined to medical research but would be spent on management research. It has come to something when the only consultants to be found in hospitals these days are management consultants. That absurdity derives from the Government's obsession with money and with privatising health care.

My third point concerns the relationship between health and housing. In the UK there are 50,000 avoidable deaths every year due to fuel poverty. Eight million households live in properties that they cannot afford to heat adequately. Absurdly, the VAT regime taxes energy saving more heavily than energy use.

Against this background, the Chancellor turned his back on a series of sensible proposals from the all-party warm homes group. We said that there needs to be a programme by which the House commits itself to the improvement of the home insulation standards of 500,000 houses a year, over the next 15 years. We should do so in the clear knowledge that we are saving lives, saving energy and creating a huge number of jobs. Those who have followed the experiments done around the country know, too, that such moves have a tremendous effect on reducing neighbourhood-based crime.

These proposals must be set alongside the need—widely recognised outside the House—for 100,000 new homes a year over at least the next decade; but the Chancellor says that none of the foregoing is affordable. I point out that the warm homes initiative would cost £1.5 billion a year—the equivalent of about half the public spending cuts that the Government announced in the Budget. The same amount would be almost covered by redirecting the fossil fuel levy, and it would be more than covered by the introduction of a new tax: a public service obligation placed on the whole energy industry to bring to an end the scandal of cold homes in Britain.

The last thing that the housing market needed was a cut in the housing benefit entitlement of the under-25s. The Secretary of State spoke of reducing entitlement to the average cost of local shared accommodation. There is a certain irony in the fact that no one under 25 will be able to afford to live alone and enjoy an entitlement to housing benefit. The Tories call themselves the party of the family and frown on the idea of cohabitation, yet that is exactly what the Government will be forcing on young people.

Before the ink has dried on these Budget debates, this measure will be seen to rank alongside some of the Government's greatest follies—such as the idea of sharing a bath with a friend to save energy. This will soon be known as the bunk-up-together benefit. The under-25s will be able to find accommodation only by finding a friend to share it with them—the whole idea is farcical. It is not an answer to our housing problem, but it will contribute to worsening it.

We needed a Budget that would give a direct boost to jobs, infrastructure and investment—we did not get one. We needed a Budget to restore the value of the state pension and the status of universal benefits—we did not get one. We needed a Budget to introduce a progressive tax regime for industry—we did not get one. We needed a Budget that re-established a progressive personal taxation regime under which the richest in Britain paid at least as much as their counterparts in Europe—we did not get one. We needed a Budget that did not tax the poorest at higher marginal rates than are imposed on the rich. There should have been an honest reduction in the real impact of tax on the poor. To achieve that, we need to tackle the interface between the basic rate of tax and the benefits system.

Faced with all this, the Chancellor has simply piddled about at the margins of the economy. And this is the saddest conclusion about the whole Budget: what a way to spend a penny.

8.56 pm
Mrs. Helen Jackson (Sheffield, Hillsborough)

I had thought of saying that one of the few things for which we can thank the Government is the boost that they have given education over the past few years. I hasten to add that I am not referring to education for three and four-year-olds, who are still waiting for nursery places and whom the Budget did nothing to help. I regret that the Budget did nothing, either, for mature students, who are not taken into account in the Government's policies for student finance. The Budget did nothing but make matters worse by transferring student loans to commercial banks.

The Budget, however, together with certain other Government measures, has done a great deal to educate the general public on taxation and the Government's policies to deal with it. The average household has watched its tax burden and charges rise year on year since 1992—increases in indirect taxation and council tax, cuts in income tax allowances, and rising bus fares, rail fares, national insurance costs and water and sewerage charges. The people have learnt their lesson; they have pledged never again to be fooled by a gimmick of a penny or two off income tax just before an election. They have also learnt that the Tories cannot be trusted with their targets, and if their targets are wrong their Budgets falter.

An analysis of the difference between the Chancellor of the Exchequer's targets last year and what happened needs to be remembered. There was 14 per cent. less growth than the right hon. and learned Gentleman predicted last year. Inflation was 20 per cent. greater than was predicted. Government borrowing was 29 per cent. more than he foresaw. The balance of trade was 100 per cent. worse than he predicted. If the Chancellor's targets this year are as shaky as those that he presented to us last year, the Budget strategy has no credibility.

The story has been especially bad for lower income groups. Successive Budgets over the past few years have shifted the relative weight of taxation from direct income tax to indirect taxation and charges. Value added tax or charges are based on volume, and low-income households or families spend a much greater proportion of their income on essentials. Volume-based taxes on essentials will inevitably penalise low-income households, and that is what we have seen. Such taxes may be all right on goods that are subject to choice, but on essentials they are unfair, especially on lower-income groups in our society.

Fuel costs, for example, amount to far more of lone parents' weekly incomes than of the incomes of couples. The same applies to the costs of other essential outgoings such as water, council tax, food and housing, which take the lion's share of a lone parent's income or wealth, leaving virtually nothing for the goods that they have the so-called freedom to buy.

The freezing of one-parent benefit was especially mean. I shall quote from a letter written last week by the woman of a one-parent family to the Chancellor of the Exchequer. She did not write directly to me. She said that cutting

this benefit will greatly increase the stress and pressure in my life and the main person to suffer will be my 5 year old daughter. I am not a single parent by choice, but became one to escape a severely abusive relationship. This Government seems to have a lot of misunderstandings about single parents. I worry about the Chancellor's mean approach to lone families and the way in which that has fed through. It has also fed through in some of the other minor income-related issues in the Budget.

Essentials are important, of course, for a household that does not have much to spend. That is why I supported the Chancellor's rejection of VAT on newspapers, books and periodicals. I believe that such items are essential to people's quality of life. I would have fully supported the cutting of VAT on the cost of women's sanitary protection. It is a minor but essential and regular cost. The imposition of 17.5 per cent. VAT penalises low-income women and their families. I pay tribute to the excellent campaign by the Asda chain of supermarkets and to the many of my constituents who have signed a petition that focuses on the issue.

I endorse the comments of my hon. Friend the Member for Nottingham, South (Mr. Simpson) on the Budget's lack of effect on housing, the policy area that at present has the greatest "feel-bad" factor. Pundits throughout have recognised that feeling and the seriousness of the problem. The Government have done nothing to meet the problems of housing decay and need. The estimates made by the Department of the Environment tell us that only 60,000 new social housing lettings will be generated next year. That figure is right at the bottom of the Department's estimates of housing need.

The proposals set out in the Budget will cut by 10 per cent. the capital that is available through Housing Corporation grant for housing association new build and renovation. Shelter has told us that that expenditure alone would have provided at least 11,000 new homes over the next two years. The mean proposal to restrict housing benefits for the under-25s, on the assumption that they can simply continue to live with their parents, will do nothing to boost the housing market. I worry that it is a rather cynical wheeze to bring down the huge discrepancy in the Budget between the number of houses in the social sector—which are what people require to have independence—that are allowed to be built and the indices of housing need. It is quite right to say that it encourages dependency culture, not the opposite.

Of course we welcome the raising of the level for community care, but there is incontrovertible evidence that what elderly people really want is not to be pushed into residential care. What really gives them dignity as they become frail is adequate community care in their own homes, with their own front door, and the right, even if they are too disabled to manage it, to come and go as they please. The evidence shows that community care is underfunded, that is has been underfunded and that, tragically, local authorities find their budgets squeezed, so that the simple things—grab rails, ramps for wheelchairs and walk-in showers, rather than a bath that they are too scared to use—cannot be provided. Those things make the essential difference in determining whether somebody retains his or her independence.

Often, local authorities' discretionary funds for such services are exhausted by Christmas, so councils struggle to make ends meet and old people are pushed into the sad but cheaper option of living collectively in private residential and nursing homes. All of us have known, either in our families or through our friends, the quite sad results that can result from that exploitation.

I am being frowned at, but I make one final point, on environmental issues. I have struggled today to find from the House of Commons Library any suggestion in any of the Budget speeches that there is any money for the extra monitoring that is required for air quality standards. A clear pledge was made during the passage of the Environment Act 1995—there was no time to put it into the Act—that the Secretary of State for the Environment would be urged to make resources available in this year's Budget statement, so that local authorities could plan to do that important new work, which had cross-party approval. To my knowledge, there is nothing in it. I should be grateful if the Minister would respond on that point. There is no disagreement about the need for that work, but we are adamant that, unless resources are made available, local authorities simply will not have the staff to undertake their new duty.

On the environment, to follow the point made by my hon. Friend the Member for Nottingham, South, it is disgraceful that the home energy efficiency scheme was used in the cynical way it was, to appear to make it all right that VAT was placed on the cost of keeping people warm in their own homes, an essential need. The scheme has been cut right back by 30 per cent.; instead of £100 million being available each year, there is a mere £69 million this year. It is no wonder that Opposition Members and the people outside are saying, "You cannot trust the Tories." Words do not fool them any longer.

9.8 pm

Mr. Gordon Prentice (Pendle)

I have very little time, but I shall start with two disarmingly simple propositions, with which Conservative Members will disagree: first, that taxation should be fair; and, secondly, that it is right to tax wealth, especially inherited wealth, where vast fortunes are passed down the generations. The Duke of Westminster inherited £1,500 million, the Duke of Buccleuch £400 million and Alan Clark a more modest £41 million.

I shall start at the other end of the scale by referring to a constituent of mine, Mrs. Smith, who earned 15p an hour, possibly an all-time record. She was employed by a loathsome individual, Peter Pomgourou of Christina Fashions of Manchester. She was paid £1.75 to make up a suit which retailed for £55 and was described in the local paper as a "hard-up granny". She said:

It is definitely exploitation of the worse kind, nothing short of slave labour. The Pendle Citizen contacted the firm and asked about this employment. The owner of Christina Fashions told Stephanie Beardsworth, the reporter:

If she"— Mrs. Smith—

does not want the money she has no need to work for me. Mind your own business. I sent copies of all this stuff, including a file of cuttings from the Pendle Citizen and the Lancashire Evening Telegraph, to the then Minister for Competition and Consumer Affairs, the hon. Member for Brecon and Radnor (Mr. Evans). He wrote back:

We believe that employers should treat employees with consideration and should adopt fair personnel policies … but, of course, instances such as the case highlighted in the Lancashire Evening Telegraph will occur from time to time … The regulation of homeworking would represent an unacceptable burden on the great majority of employers … I hope this has explained the position. It does not really explain the position. It does not explain the position to my constituents who gag when they see the Government responding in that way.

People at the other end of the scale seem to be treated in a completely different way. The chairman of the National Grid Company will receive £2 million in share options, pay and special dividends from the sale of that company. We have just read about Lord Young, a former Secretary of State for Trade and Industry, who is trying to screw £2.5 million out of Cable and Wireless plc, having been sacked from that company. We read of the people in charge of National Power getting a monthly salary of £36,000. It would take more than seven years for someone on £2.50 an hour to earn that sum. In my neck of the woods, the highest paid director of NORWEB gets £19,739 per month. It would take almost four years for someone on £2.50 an hour to earn that kind of money. That is what upsets people.

It was the deputy chairman of the Conservative party who, a little over a year ago, said:

The rich are getting richer on the backs of the rest who are getting poorer. That indeed is the case. The poor are poorer and the rich are richer. The Government's own figures confirm that after housing costs, the poorest 10 per cent. are 70 per cent. worse off and the richest 10 per cent. are a staggering 62 per cent. better off. Indeed, the gap between the highest paid and the lowest paid is greater than at any time since records began in 1886.

The tax burden falls disproportionately on the low-paid. Everyone knows that since April 1992 the tax burden has increased by 7p in the pound, although we had the 1p cut in the basic rate last Tuesday. The typical family now pays 35.6 per cent. of their gross income in tax, compared with 32.2 per cent. in 1979.

My constituents would have been as intrigued as I was if they had turned on the BBC yesterday lunchtime. I watched John Humphrys, in the "On the Record" programme, quizzing the chairman of the Conservative party, the right hon. Member for Peterborough (Dr. Mawhinney). He was asked a simple question: whether the tax burden would be lighter at the time of the next general election than it was in April 1992. The right hon. Gentleman could not or was not prepared to answer the question. He came out with the fiction that people would be £9 a week better off. That answer has been blown apart because we know that, of that £9, £6.56 is accounted for by optimistic predictions about the growth in earnings. We have been told that that 9 per cent. anticipates an increase in earnings of 4 per cent. Again, the right hon. Gentleman was unable to answer that point.

What did he say yesterday? He told viewers to

trust the instincts of the Tories. Can you believe that, Madam Deputy Speaker? It is an absurd notion. After the experience of the past few years, the electorate would not trust the Conservatives to look after anything. We have had broken promises on value added tax, VAT on fuel and the infamous 21 tax rises since 1992. We hear about the growth in the economy, but the Conservatives never remind us about the devaluation in September 1992, which unleashed that growth and which is now petering out. That is from the party that in 1991 had the brass neck and effrontery to put up posters all over the country accusing the Labour party of going for broke. That is why people are so cynical about the Conservative party and why, when they hear Conservative Members talk about trust, they choke on the word.

Yesterday, the front page of The Sunday Times reported a national opinion poll that stated that only 26 per cent. of people now trust the Tories on taxation. Seventy-one per cent. distrust them, and I wonder why. More than anything else, we need some fairness and equity in the tax system. We need more income tax bands. It is simply not fair for someone on £25,000 a year and someone on £250,000 a year to pay the top tax rate of 40p in the pound. There are eight bands in the council tax. Property has been taken by this Government as a rough proxy for wealth. Income is perhaps a more accurate proxy for wealth, yet we have two or two and a half bands.

Inheritance tax is another example of where the Prime Minister and the Chancellor of the Exchequer are so disingenuous. The Prime Minister says that he wants to abolish it so that wealth can cascade down the generations. The £155,000 limit has gone up to £200,000, but that will affect a tiny number of people. In my constituency in north-east Lancashire, where many people are on low incomes. 36,460 households are in properties worth up to £160.000—the limit that has just been moved—and only 544 in properties above that level. When they die. most people's estates consist of the family home. People do not have expensive jewels, shares and all the other bits and pieces to hand on to their offspring. A tiny number of people live in family homes that are worth more than that level.

Recent Inland Revenue statistics. published in 1995 but based on the value of estates in 1991-92, show that. if inheritance tax were abolished on estates worth more than £2 million. in the entire country only 157 people would benefit—but to the tune of £141 million. If inheritance tax were scrapped in total. just over 16.000 people would benefit. but they would garner more than £1 billion. so let us hear no more from the Conservative party about fairness and equity. The tax policies that have been pursued since 1979 have brought great injustice and great unfairness to our tax system. which is riddled with inequities. The abolition of inheritance tax—a stated policy of the Chancellor of the Exchequer and of his right hon. Friend the Prime Minister—will do nothing to bring forward the notion of the classless society that the Prime Minister claims to want. The Budget is entirely typical of the Conservatives and it is another reason why they will soon be out of office.

9.19 pm
Mr. Peter L. Pike (Burnley)

Five minutes are available to me so I shall have to be brief. The hon. Member for Carshalton and Wallington (Mr. Forman) spoke about the possibility of a windfall tax and gave his reasons for opposing it. There is a strong argument for such a tax and I shall certainly support the Labour Government when they introduce it in a year or 18 months from now.

Almost all the privatised utilities are monopoly suppliers with protected rights to make profits because of the way in which the legislation was carried when they were privatised. For example, the profits of the water companies are assured by the formula and despite recent interventions by the regulator they cannot fail to make substantial profits. National Power and PowerGen work within the pool system and the great fluctuations in prices in the pool result in grossly inflated profits.

My hon. Friend the Member for Pendle (Mr. Prentice) asked who gets the £9 a week about which the Government, the Chancellor and the chairman of the Conservative party talk. We saw the chairman of the Conservative party on "On the Record" speaking about that yesterday. Few of my constituents will get anywhere near that amount from the Budget. Because of the single allowable maximum at the lower rate, the most that a single person who pays only the 20p tax rate can earn is £7,665. That is equivalent to about £147 a week, and in a constituency such as mine that is high pay. The majority of people in Burnley and Pendle and north-east Lancashire get well below that amount. However, the person earning that amount will be £83 a year better off as a result of the tax cut. That is equal to just over £1.50p a week.

Hon. Members have spoken about the national health service and the private finance initiative. My hon. Friend the Member for Carlisle (Mr. Martlew) intervened durinġ the speech of the Secretary of State for Health and twice asked whether the Government would guarantee the programme if the PFI did not deliver what it was expected to deliver. The Secretary of State failed to answer. We have nothing against the principle of the private finance initiative, but we think that the programme for health service provision is so crucial that we want it to be guaranteed. Much of what the Government say is ludicrous.

A fourth phase of development was planned for Burnley general hospital in my constituency and the planners were asked to see whether the private finance initiative would be appropriate. In the end it was deemed inappropriate and the programme was considerably delayed. The PFI will not deliver what is expected.

Most people think that the Government have failed to recognise not only the major need for housing investment but the fact that housing development is one of the quickest ways to get the economy going. What have the Government done to housing associations? In 1979 housing associations were the favourite sons of the incoming Tory Government. The National Federation of Housing Associations briefing states:

The Chancellor announced that … housing associations will receive less than £1.1 billion to provide affordable homes for those most in need. That is a cut of £450 million from the £1.5 billion first promised by the Government". That means that next year the housing associations will be able to provide only 41,000 new homes, compared with the 76,000 that could have been built. That reduction makes no sense when there is such a desperate need for housing investment.

Another issue is the £1 billion privatisation of the Housing Corporation's loan book. I have no particular objection to that, but if we have to move in that direction why not invest some or most of that money in housing stock? If the Government were prepared to use the £1 billion of capital receipts, they could start to tackle some of the problems in housing. They could get people back to work and get the economy moving in the right direction.

The cut in funding for the home improvement energy efficiency scheme is nonsense, and is a step in the wrong direction. Reducing the funding from £100 million to £69 million—a cut of 30 per cent.—will mean that 200,000 fewer homes are insulated.

Finally, I wish to raise the funding that councils will get for education. The rise in the standard spending assessment of 4.5 per cent. will not in itself give councils a single extra penny, because most local education authorities are already spending more than the Government said they should this year.

9.25 pm
Ms Dawn Primarolo (Bristol, South)

This has been a very long and interesting debate which—for most of the time—has concentrated on the issue of fairness and on the divided Britain. My hon. Friend the Member for Motherwell, South (Dr. Bray) concentrated his comments on the structural changes in employment, a subject to which I want to return later in my speech. He talked about the need to create jobs and the need for sustainable growth, and—in a thoughtful speech—talked about the deep-seated problems of the economy.

My hon. Friend the Member for Strathkelvin and Bearsden (Mr. Galbraith) made a precise speech on the NHS, and reinforced the points made by my hon. Friend the Member for Peckham (Ms Harman) in her opening remarks. In particular, my hon. Friend concentrated on the jargon and the way in which words are used in the NHS to disguise the denial of care to those who need it. My hon. Friend the Member for Newport, East (Mr. Hughes) characteristically defended his countrymen, and women, against the onslaught of Tory tax rises.

My hon. Friend the Member for Sunderland, South (Mr. Mullin) graphically described the lack of hope bordering on despair and the alienation of young men in particular, and referred to the Government's broken promises year in, year out. My hon. Friends the Members for Wallasey (Ms Eagle) and for Doncaster, North (Mr. Hughes) spoke eloquently about the NHS, and also referred to the need to reduce unemployment, to increase security in work and to provide investment in our economy.

My hon. Friend the Member for Nottingham, South (Mr. Simpson) highlighted the inequalities in health and in wealth, and put the case for a fair tax system. He made the point that, if the Government were interested in reducing taxes, the fairest tax cut that they could have made would to reduce VAT to 5 per cent. My hon. Friends the Members for Sheffield, Hillsborough (Mrs. Jackson), for Pendle (Mr. Prentice) and for Burnley (Mr. Pike) talked about the unfairness of our divided Britain, and referred to the hunt for the £9 that was allegedly on offer to all of our constituents. When we return to our constituencies, the burning question from our constituents will be: "Where is that £9?" Like all Tory promises, it is an illusion. It is only there for the wealthy, and is not available for the poorest and most vulnerable members of society.

The Government have failed in the Budget to tackle the real weaknesses in the British economy. They have failed to encourage new and sustained investment, and they have failed to close the investment gap with our competitors. They have failed to move people out of welfare and into work, and they have failed to bring down the crippling levels of unemployment. It is because they do not understand the relationship of the welfare state to the changing nature of work and the restructuring of work in society that they still cannot address the question which blights the lives of so many of our citizens.

Public borrowing will now be £7 billion higher next year and £10 billion higher the year after. Public finances are in such a poor state under the Government's stewardship that there will be a 17 per cent. cut in public investment and a 27 per cent. cut in the hospital building programme. Having put taxes up by the equivalent of 7p in the pound, the Government propose in this Budget to reduce them by just 1p. That is giving with one hand and taking back with the other.

As Britain slips further into despair, moving down the world prosperity league from 13th to 18th place, the Government have failed to deal with the continued economic failure and the rising social distress that accompanies that economic failure.

Even the tax cuts are distributed unfairly. The simulations by the Institute of Fiscal Studies, the figures produced by Coopers and Lybrand for The Guardian and those produced for The Times show that the better-off get more and the poorly-paid get less. The Chancellor has completely missed the fact that people now demand tax fairness, not simply tax reductions.

The Chancellor repeated in his Budget that the Conservatives wanted to abolish tax on inheritance and capital gains. Half the benefit from those tax cuts will go to the richest 5,000 people in our country. Instead of abolishing those taxes, he should use the money to introduce the new lower starting tax rate of 10p that we have proposed.

The tax giveaways announced by the Chancellor will do little to reverse his previous two packages. High indirect taxes—VAT and excise duties—have made a serious dent in families' pockets, particularly low-paid families. Unless e strengthen our economy for the long term, tax cuts will not last and public services will continue to deteriorate.

We must deal with unemployment. Changing patterns of employment mean that we have to have a strategy not only for keeping people in work but for getting them back to work. During the Government's reign we have seen a growth in insecurity in the labour market. The new jobs that are being created are insecure and poorly paid. That is why we proposed using the windfall tax of £1 billion on the public utilities to guarantee to every young man and woman under 25 a proper job with proper pay, a job that provided qualifications, or a full-time education place. In his speech last year the Chancellor said:

We must combine greater prosperity for the majority of our people with measures to prevent the emergence of a deprived underclass, excluded from the opportunity to work and dependent on welfare."—[Official Report, 29 November 1994; Vol. 250, c. 1079.] There is nothing in that Budget or this year's Budget to assist the 20 per cent. of households—one in five non-pensioner households—who have no work and no prospect of work and are trapped on benefit. The Chancellor still fails to understand that those people are caught in an unbreakable circle of high rent, poverty and benefits and are excluded from work. The Budget continues to favour a shift to the creation of a low-pay employment market. Many will find themselves less able to escape reliance on benefit. There is nothing in the Budget to create security at work.

The Government claim that they have understood the changes in the labour market and are designing policies to overcome them. Women, who are over-represented among the low-paid and under-represented in the House, and whose concerns are not spoken about by Conservative Members as they have their private conversations, still disproportionately take the burden of all the tax increases in this Chancellor's Budget. The gap between men's and women's earnings is widening and the divide is getting ever greater.

Mr. Forman

Will the hon. Lady give way?

Ms Primarolo

I promised the Minister that I would sit down by 20 minutes to 10. As Conservative Members have made so many long speeches, I shall take only 15 minutes; so, if the hon. Gentleman will forgive me, I will continue.

Lack of child care has been identified as one of the major barriers to women taking up full or part-time employment and the Government still refuse to deal with that. Not only that, they will not recognise that women are driven from the labour market by a lack of elder care. The Budget has not helped the low-paid individually and it has done nothing to attack the over-reliance of our economy on low skills. There has been no closing of the poverty trap, and benefit penalties on earnings will continue to act as a disincentive for people to go to work.

The conditions under which the Beveridge welfare state was created half a century ago have changed. Beveridge's—and the Government's—assumptions that women should not work outside the home and that the nuclear family should always exist are no longer the norm. Mothers deserve incentives to return to work rather than having their hopes that they can afford to work and still care for their children shattered.

The Women's Budget Group pointed out that, unlike an increasing number of countries, the United Kingdom does not publish an assessment of the differential effects of fiscal and public expenditure on women as distinct from men. The House and Conservative Members are so preoccupied with male-only interpretations that they do not realise that using the household as a focal economic unit is now recognised as producing gross social inequalities—inequalities which they do not challenge.

Mr. Kenneth Clarke

The hon. Lady cannot be serious.

Ms Primarolo

The low political representation of women in the UK also means that women's diverse views and needs are not heard. Yes, Chancellor, I am serious: 52 per cent. of the population are women and his Budget does nothing to assist them.

Mr. Clarke


Ms Primarolo

Let me explain. One in six people aged under 25 are unemployed; 3 million Britons earn less than £58 a week. They are not able to make contributions to their own pensions, as the Chancellor tells them to. The majority of those people are women, and while a quarter of people with occupations are women, most are unable to accumulate savings. They cannot be more thrifty, because they do not have the money in the first place and the Chancellor's Budget does nothing to assist them.

The Chancellor clearly says that lone parents need no extra help, but that flies in the face of common knowledge and understanding. It costs more to bring up children in a lone-parent family. There are no economies of scale or shared housing or fuel costs. There is less opportunity to share responsibility for caring for the children and more need to pay for child care. The shameful attack on lone parents is a piece of punitive symbolism through which the Government seek more scapegoats instead of addressing the problems that our welfare state is creating.

The Budget does nothing to help most of those in poverty in old age, women. Women cannot afford to rely on private pension schemes and they are affected by a casualised labour market. The effects of discrimination and low pay throughout their lives guarantee their poverty in old age. While the Chancellor referred to older couples, the reality is that most of the elderly and frail are women who have outlived their spouses and who are more likely to be reliant on Government benefits.

We welcome the rise of the thresholds for residential nursing homes. The majority of frail, disabled and elderly women live in their own homes and die in them. Only 5 per cent. of them are in residential care. The increase has little to do with preventing old, frail people from being insecure in their homes and everything to do with the Government trying to save their skin at the next election.

How can the Chancellor claim to be a one-nation Tory when he encourages division, privatisation and the exclusion of people from our society; when he cuts employment programmes and the hospital capital building programme, forces up council taxes and deepens the poverty trap and the divisions in our society? The Budget further divides the country. It gives with one hand and takes with the other. It fails to create jobs and security. It fails to create investment and to understand how people live their lives. It is a failed Budget from a failed Government, and it is about time they went to the country and allowed us to be the Government.

9.39 pm
The Financial Secretary to the Treasury (Mr. Michael Jack)

I was amazed by the closing remarks of the hon. Member for Bristol, South (Ms Primarolo). The Budget was for the men and women of this country. The Budget benefits men and women in work. The hon. Lady does not seem to acknowledge that under the Conservative Government we now have one of the highest proportions of women in employment anywhere in the European Union.

The Budget benefits men and women with savings. The Budget benefits men and women with children at school, who can now enjoy more resources as a result of the Budget. It will benefit men and women in their old age who need care. The Budget is for the whole of the United Kingdom, and not for the small sectional interest described by the hon. Lady.

The other Saturday night I saw the television programme "Have I Got News for You". It is little wonder that, when the hon. Member for Brent, East (Mr. Livingstone) was asked to comment on Labour's economic policy, he said:

Let me know what it is and I'll comment on it. Today's debate has left us no wiser as to what is Labour economic policy. It is therefore extremely difficult to comment on it in detail. I accept, however, that we were offered a brief glimpse of it, and I shall say something about that later.

The hon. Member for Bristol, South referred to people being "allegedly" £9 better off. She obviously was not listening to "Any Questions" on Friday, unlike her hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), when I explained clearly that had it not been for a Budget that would lead to growth, one could not have a combination of tax cuts and increases in earnings, which will deliver to the average family £9 per week. I do not recant one part of the achievements of my right hon. and learned Friend the Chancellor in producing a Budget that can deliver that money to the average family.

The hon. Member for Bristol, South and some of her hon. Friends mentioned their desire to see yet lower taxes. That leads on to the question of the so-called 10p tax. I want to talk about that tax, because I was particularly interested in what the hon. Member for Garscadden said about it at Bilston on Friday. I probed him very hard about it, and he acknowledged that he was not certain whether it would cover all those currently covered by our 20p band. He and his hon. Friend the Member for Dunfermline, East (Mr. Brown) seem to be at odds about that.

I challenged the hon. Member for Garscadden about the cost of introducing the 10ptax—£8 billion—but no answer did we get about where the money will come from. I challenge the hon. Gentleman again to say whether he is aware that just 10 per cent. of the low-paid whom he aims to assist with the 10p tax would benefit, whereas 90 per cent. of its benefit would accrue to standard and higher rate taxpayers. That proposal is supposed to be a great one for work incentives. Does any Opposition Member who cares to break the Trappist vows that the Opposition have all had to take agree with the likely cost of that tax? Do they have any figures of their own? Do they agree with anything that we have said about taxation?

I am prepared to give way, but no answer will be forthcoming, because Tribune this week—[Interruption.] The Opposition may laugh, but read what it says. The hon. Member for Oxford, East (Mr. Smith) said there could be

no commitments on levels of tax and spending beyond the existing Budget. The hon. Member for Dunfermline, East is present. He has had the figures. He knows what the Budget says, and he has read the Red Book. Will he now come clean and tell us what his targets are for inflation, growth and spending? The facts are there in the Red Book. We are not setting him the difficult question about what he would do if, God forbid, the Opposition ever became the Government. We will set the Opposition the easy question. We will supply the answers. Silence comes from the Labour Benches. We know that they are well and truly rumbled.

We heard some sane ,economic voices from my hon. Friends the Members for North-West Hampshire (Sir D. Mitchell), for Carshalton and Wallington (Mr. Forman), for Hastings and Rye (Mrs. Lait), for Beckenham (Mr. Merchant), for Sutton and Cheam (Lady Olga Maitland) and for Wolverhampton, South-West (Mr. Budgen), all of whom made a positive contribution to the debate.

My hon. Friend the Member for North-West Hampshire rightly drew the attention of the House to the effects of the reductions in taxation achieved, not only by 1p off the standard rate of income tax, but by some substantial changes in tax allowances. He asked me how much a married man may earn before he pays any tax. I will tell him. The answer is £5,108 per year—£98.23 per week.

I hope that that will help my hon. Friend in the task that he will be undertaking—to communicate to his constituents the fact that the Budget went far beyond a straightforward 1p off the standard rate of tax. It had the benefit of extending the 20p band to a quarter of all taxpayers. It took more than 200,000 people out of tax altogether. It answered in clear and unequivocal terms the question, what were we doing for work incentives—unlike the hon. Member for Dunfermline, East, who refuses to answer similar basic questions.

My hon. Friend the Member for North-West Hampshire drew our attention to the subject of small businesses, and I was glad that he did so. He mentioned the penny off the small companies rate of corporation tax. He will note also that national insurance charges have decreased, not only for smaller companies, but for larger employers. There will also be deregulation packages in relation to annual VAT accounting, and special help for the transitional arrangements with business rates. The Government take the role of small businesses seriously and have acted in their interests, as witnessed by their strong endorsement of my right hon. and learned Friend's Budget.

My hon. Friend mentioned deregulation. He knows that the Inland Revenue will shortly publish a report on that subject, arising from section 160 of the Finance Act 1995.

My hon. Friend the Member for Carshalton and Wallington, who has been a doughty campaigner on the subject of employee share ownership, paid tribute to some important changes that we are making regarding such ownership, because that is a significant way in which working people can share, not only in the success of the companies that they work for, but in the success of the growth of the economy that will surely result from my right hon. and learned Friend's Budget.

As my hon. Friend knows, we introduced in the Budget improvements to the save-as-you-earn option scheme, coupling it for the first time with the work of employee share-owning trusts. I am glad that my hon. Friend was keen in his advocacy of that change. We have opened it up to people who can save as little as £5 a week, who can invest in the success of the companies that they work for. Improvements have also been made to the profit-sharing scheme. Both those schemes incorporate a total of about 2 million people.

We listened carefully to what industry and employees told us. Sometimes little people working for multiple supermarkets wanted a share in their company. Their employees wanted to give them that. We introduced in the Budget the new company share option plan, which has been widely welcomed. I am delighted about that. My hon. Friend asked why it was not possible to put the national insurance cut into effect earlier than April 1997. It is linked with the timing of the landfill tax, which does not start until October 1996, and it was fair to employers to make the changes later, in April 1997.

A moment of rare history occurred when my hon. Friend the Member for Wolverhampton, South-West made a sage, balanced and well-judged contribution to the debate. It was such that he admitted that he was able to support my right hon. and learned Friend unequivocally. It will bring joy to the Chancellor's heart to hear that, and I am sure that a framed copy of Hansard will hang on his wall for many a long day to come.

My hon. Friend the Member for Sutton and Cheam, in a wide-ranging and helpful contribution, reminded the House that the Budget went beyond the issue of health, to which I shall return later, and would benefit education especially. She rightly drew our attention to the Chancellor's challenge in his speech, in which he threw out the words to remind every local authority in the land that they must pass on to the schools of the country the full benefit of the £778 million of additional revenue passed through the revenue support grant. My hon. Friend did the House a service in reminding us of that perspective.

My hon. Friend the Member for Beckenham reminded us that it was a good Budget for both pensioners and savers. The age allowance changes that we have made in tax help those with modest incomes or occupational pensions, and those savers within the 20p band will enjoy more of what they can earn through their savings. Pensioners are the major beneficiaries of that change. My hon. Friend also drew our attention to the benefits to communities throughout this land of the additional expenditure available for close circuit television and the police. That will find an echo in every town, city and village throughout the country.

My hon. Friend asked a question about one other welcome aspect of the Budget: my right hon. and learned Friend's repudiation of the non-story in the newspapers about redundancy. My right hon. and learned Friend confirmed that there would be no tax on the £30,000 exemption and that there was no intention to restrict that exemption's scope. The precise definition of the payments covered by the exemption was causing difficulties in practice, and discussions arc presently continuing between the Revenue and interested parties, particularly the Law Society, to clarify the details.

My hon. Friend the Member for Hastings and Rye made a useful contribution to our debate. I am delighted with her comments on the way local business has responded to the Budget, and her support for the private finance initiative.

Those were some of the saner comments during the debate. I shall now turn to the comments of those hon. Members who perhaps require some education on the benefits of my right hon. and learned Friend's Budget.

I listened to the hon. Member for Peckham (Ms Harman) with growing incredulity. I have to suffer her outbursts in my kitchen as I make my breakfast when she attempts to convince the nation, without success, that the Government want to privatise the health service. Nothing could be further from the truth. I should have thought that the Secretary of State for Health, in his polished presentation of what he is doing to advance health care, would have silenced the hon. Lady once and for all. But in case she has a thirst for more information about the facts, I shall give her some.

The view of the health service that I have heard from Opposition Members is not that of my constituents, who tell me about the quality and exceptional care that they receive. They have a different view of the health service.

Mrs. Maria Fyfe (Glasgow, Maryhill)

Will the Minister give way?

Mr. Jack

I cannot give way, as I have much information to give, which I am sure the hon. Lady wants to hear.

In spite of having to administer a tough spending round, my right hon. and learned Friend has seen spending on the health service next year grow by £1.3 billion—a 1.6 per cent. real increase. That is not an example of someone who is running down the health service. Since 1978–79, spending on the health service in real terms will have risen by 71.1 per cent. I can say that with pride, whereas the Labour party not only presided over cuts in NHS capital spending, but in cuts in nurses' pay. That is the Labour party's track record, not ours, which is one of which we can be proud.

There were comments from the Opposition and some of my hon. Friends on management costs in the NHS. Those much maligned managers have done much to try to improve the operation of the health service. My right hon. Friend the Secretary of State is right to consider that issue. The £650 million, which will be carved off administrative costs and generated through improvements in efficiency in the NHS, will go directly to patient care. I know that the Labour party finds that concept difficult to understand, but improvements in the efficiency of the NHS have helped us to be able to say truthfully that more patients are now being treated in our hospitals than ever before.

If one adds the private finance initiative to the real-terms growth in funding—I underline that it is added to the real-terms funding—one finds that there is yet more increased funding for the NHS in total. It adds to the funding; it does not take away from it. The hon. Member for Peckham has the idea that, because we have found another way to build new hospitals and new facilities in the health service, we are taking something away. I do not know where she has been, but perhaps she should reflect on what is happening in Peckham under the private finance initiative.

Ms Harman

Will the Minister give way?

Mr. Jack

The hon. Lady has enough time to entertain us with misleading columns. Let her hear it from me that in King's College hospital, which is in her constituency, the trust issued an advertisement in the Official Journal of the European Communities in August 1995 for a £70 million project to consolidate acute and specialist services on the Denmark hill site. I am sure that her constituents and the people of Peckham will be delighted with the rubbishing that she has given a project that will clearly bring improvement in health care. Far from competing for the work being a minority sport, tenderers are already shortlisted down to three, and they will be competing for a quality piece of business.

I announced in my recent action agenda that, to ensure progress in the private finance initiative, we would put before the construction industry and those providing the services for the nation good quality business projects which would be run from within Government by highly trained people, and that there would be a private finance initiative training exercise with Price Waterhouse to train between 5,000 and 10,000 civil servants in the ways of private finance.

Ms Harman

Before the Minister creates the impression that people in King's College hospital are tucked up in the beds provided by the new private finance initiative, will he confirm to the House that in one year the Government have cut 17 per cent. of the NHS capital budget? Will he confirm that the proposed 242 per cent. increase in one year in the private finance initiative is an unlikely and unachievable target?

Mr. Jack

I shall confirm neither, but in respect of the private finance initiative I can confirm that my right hon. and learned Friend pointed out that we expect some £14 billion-worth of projects to be agreed by the end of the public expenditure period, and we know that £5 billion will be signed up by the end of the financial year.

Turning to deliveries on hospitals, why cannot the hon. Lady acknowledge the success that my right hon. Friend the Secretary of State for Health announced recently in Amersham and South Buckinghamshire of £35 million-worth of real hospital? There are many more to come. I recommend that the hon. Lady spends less time on the "Today" programme and more time reading the press releases from the Department of Health, where she will receive information about what we can achieve through the private finance initiative.

Let me tell the hon. Lady about some of the other thrilling successes that are about to happen. They include projects worth £140 million in Norfolk and Norwich, £60 million in North Durham, £50 million in Swindon and Marlborough, £26 million in Bishop Auckland and £90 million in Dartford and Gravesham, as my hon. Friend the Member for Gravesham (Mr. Arnold) said in his telling intervention. Those contracts are being negotiated and represent real progress in the private finance initiative.

If the hon. Lady wants to know what the NHS really thinks, I suggest that she reads what the clinical directors of the South Buckinghamshire NHS trust said about that project. They were absolutely delighted and they could not believe that that initiative would deliver them such a remarkably good hospital.

I conclude by saying that the worst speech we heard this evening was from the hon. Member for Newport, East (Mr. Hughes). I have never heard an hon. Member run down in such unequivocal terms the part of the country that he purports to represent. He destroyed Wales in but a few telling moments, and he did not tell his constituents and the House that, as a result of the Government's excellent economic policies, unemployment in Wales is below the national average and that Wales has the highest percentage of three and four-year-olds in education compared with the rest of the country. Barclays bank tells us that confidence is growing at a faster rate in Wales than in the rest of the United Kingdom. Those are the symbols of success, not failure, and the hon. Gentleman has done a great disservice to Wales and his constituents in the way in which he has conducted himself.

The hon. Gentleman mentioned league tables. This country is the biggest European destination for direct United States of America and Japanese investment. We have the highest proportion of the population of working age in work than any other major European country. We have the best job creation record in Europe. Our level of unemployment is well below the European average. We export more per head than the USA or Japan, and we have far fewer labour disputes than the European average. We are proud to be top of those league tables, and we are a party proud to support an excellent Budget, which will bring improvements to the lives of 26 million taxpayers in this country. I commend the Budget to the House.

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.

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