Motion made, and Question proposed,
That provision may be made for imposing a tax on the amount of the windfall from which a company was benefitting on 2nd July 1997 in any case where—
- (a) an undertaking whose privatisation involved the imposition of economic regulation has been privatised by means of a flotation; and
- (b) the profits of the undertaking in the period after the flotation show that the company was benefitting on that date from a windfall from that flotation.—[Mr. Gordon Brown.]
§ Mr. William Hague (Richmond, Yorks)
On a personal level, I congratulate the Chancellor on his fortitude in delivering his speech and doing so within the space of one hour with only the assistance of water. I could congratulate him more enthusiastically if all of the contents of the Budget had been delivered to Parliament first, as we discussed earlier today.
We were told by the Prime Minister and the Leader of the House that what was printed in today's Financial Times had all been speculation. Was it not remarkable that the Chancellor opened his speech by saying that he had a five-year deficit reduction plan and the headline in the Financial Times today was:Budget 'to cut deficit over 5 years?It is extraordinary that there was such speculation and that it turned out to be so well founded. It is extraordinary, too, that the speculation referred to the abolition of the dividend tax credit and that is exactly what the Chancellor announced in the course of his Budget speech. They must be remarkable journalists at the Financial Times, who not only dreamt that a senior member of the Government had told them something, but dreamt exactly accurately what that senior member of the Government might have told them.
It is extraordinary in the view of the Opposition that Government sources revealed those measures in advance. It is to be hoped that the Government will now come to realise that Budget leaks can affect the movements of billions of pounds and the savings of millions of people. They should have a thorough investigation and they should report the results of that investigation to the House.
The Chancellor also opened his speech by saying that he would be bound by strict rules, which he would adopt for the rest of this Parliament. We could be forgiven for noting that all Labour Governments have started with strict rules with which they were going to bind themselves throughout the Parliament and all have ended up abandoning them.
There are some things in the Budget that we will certainly welcome: the cut in taxation for small companies is most certainly one of them. There are some things the details of which we will have to consider as our debates on these matters become clear. But one thing about the Budget is very clear. When the Prime Minister said before the election:We've no plans to increase tax at all.he did not mean a word of it.
319 This is a tax-raising Budget. When the Chancellor says that he is tightening fiscal policy by £5¾ billion, he means that he is introducing a tax-raising Budget; and the changes to advance corporation tax and the changes to MIRAS amount to tax rises that, before the general election, the Labour party denied it would introduce. Not only did the Prime Minister say, on 21 September last year:We've no plans to increase tax at all",but, on 2 August, he said:Our proposals do not involve raising taxes … If we have any such proposals we will make them clear before the next election".Why were these proposals not made clear before the general election? On 8 January this year, he said thatthe programme of the Labour party does not imply any tax increases at all".If that was true, why have these tax increases been announced today?
We can be relaxed about some things. Measures such as 2 per cent. on stamp duty for houses worth over half a million pounds will be of concern only to a small number of rich people such as the Prime Minister. Many people can relax about that, but other people will have to pay for the Labour party having broken its election promises in the Budget. The changes to MIRAS will add to insecurity, destroy confidence in the housing market and make people much more wary of buying and selling homes. Those are not my words—they are the words of the Prime Minister a year ago. He said that restrictions to MIRAS wouldadd to insecurity, destroy confidence in the housing market and make people much more wary of buying and selling homes".Can he honestly say that he gave the country an accurate idea of what he would do on this subject, if and when he came to power? Labour Members have never been in sympathy with home ownership, and they are clearly not going to start being in sympathy with it today.
In this Budget, the Government have broken a central election promise, trying to comfort their supporters by saying that there will be a £1.2 billion increase in health service spending. But last year there was a £1.6 billion increase in health service spending.
As we look at this and future Budgets produced by the Labour Administration, we must always remember that rarely, if ever, have a Government had such cause to be grateful to their predecessors when it comes to the economy. The previous Government, and my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) as Chancellor, left the economy thriving. The Government should note that the man who said that was Lord Healey on "The World at One" this afternoon. Every serious commentator agrees: we have bequeathed to this Government the strongest set of economic circumstances in the lifetime of my generation. We have left them the longest period of sustained low inflation for 50 years, the lowest mortgage rates for 30 years, the lowest taxes of any major European country—although Labour has now begun to increase them—the lowest unemployment of any major European country, the best record on job creation and the highest sustained growth shown by any major European economy.
Those were not accidents of the economic cycle; they were a direct result of the policies pursued by Conservative Governments—policies obstructed, denigrated and opposed by Labour.
320 The World Economic Forum has described Britain as the envy of continental Europe,with an economy reborn out of sweeping privatisation, deregulation and other structural reforms that is now well poised to compete in the global economy.That is the truth about the British economy today, and we shall hold the Government to account for their stewardship of that unrivalled inheritance.
Central to this Budget, as the Chancellor has made clear, is the so-called windfall tax. In last year's Budget debate, the current Chancellor declared:The windfall tax is not a tax on ordinary families."—[Official Report, 27 November 1996; Vol. 286, c. 366.]That would be true if ordinary families did not pay bills for gas, electricity, water or the telephone; if ordinary families did not own shares; or if ordinary families did not invest in pension schemes. If all those things were true, I suppose the right hon. Gentleman would be right.
The Chancellor has said that the windfall tax will have no impact at all on prices, investment or anything else that he could care to mention. He is looking for a free lunch from the windfall tax, and he will find that it is not available. He should make it clear in this debate that pensioners will be compensated for any increase in their fuel bills. He should make clear whether low-income families will receive an increase in income support to cover their extra costs.
I know that the Chancellor would like to think that the windfall tax will be paid by businesses, not by individuals, but he is a well-read man. He must have read the standard work on tax, "The British Tax System", which declares:There is no such thing as a tax on firms. The effective incidence of all taxes is ultimately on individuals.Surely the Chancellor agrees with that. The author, after all, is Professor John Kay, business guru to the Prime Minister himself.
The Chancellor would like to think that the windfall tax will be paid by the so-called fat cats, by stripe-shirted speculators in the City. But it will not be. Such people sold up and took their money long ago. It is the current shareholders who will foot the bill. Far from taxing excess profits, the Government are taxing the people unlucky enough to be holding the parcel when the music stops. The Chancellor says that he wants to put fairness back into the tax system, but what is fair about taxing people on a windfall that someone else made in the past?
Billions of utility shares are held by ordinary men and women through pension funds and insurance policies. Anyone with a pension, anyone with an insurance policy, anyone who is working hard to build up a nest egg for the future, will be hit by the windfall tax. It is a savings tax by another name.
The Chancellor has claimed that that change has already been discounted by the City. Up to a point it has, but that means that the prospect of billions of pounds of extra tax has already done lasting damage to the shares in which millions of people have invested for the future.
The Chancellor has made much of the electoral mandate that the Government claim for the windfall tax, but few people can have forgotten the outrage of Labour 321 spokesmen and spin doctors during the general election campaign when we exposed the £1½ billion privatisation black hole in the Labour party's finances, which the right hon. Gentleman now seeks to fill with these taxes.There's no black hole for the Labour party".said the Chancellor, during the general election campaign: Labour had changed; they would embark on a programme of privatisation. "We'll privatise everything", the Sunday Telegraph was told.
Where were those measures in today's Budget? Sure enough, as we predicted, some of the tax increases in the Budget have had to be brought out to fill the £1½ billion black hole which, indeed, was there in Labour's plans. The Chancellor may have filled the black hole in his finances, but he has blown a new black hole in the credibility of the Labour party.
The Chancellor's next tax increase was the change to dividend tax credits—advance corporation tax—on the ground that, if you do something that people do not understand very well, they will not notice it and you will get away with it. But for many people, their pension is the single biggest saving that they will ever build up, and every word that we heard today about advance corporation tax was another hammer blow against pensions and savings—another savings tax from the Government.
Pensions are one of our great success stories. The United Kingdom has built up more than £650 billion in pension funds—more than those of all the other European Union countries put together. We understand why the Chancellor has gone for ACT. It is one of the most complicated taxes known to man. It is a tax strategy which halves the blame for him, but doubles the pain for everyone else.
The change means that pension funds will be able to claim less tax back, so their revenue will be lower, their growth will be lower, pensions will be smaller and pensioners will be worse off. Taken together with the damage resulting from the windfall tax, the Budget delivers a double whammy against pensions. The bills for the decisions announced today will be paid by millions of hard-working people, many years down the line. It is a smash and grab raid on pension funds in this country, and it is a cynical betrayal of the millions who have built up pensions and now see them devalued.
I welcome the Chancellor's assurance about how charities will be affected by the changes to ACT, but how will those changes interact with the new minimum funding requirements for pension funds? What impact will they have on investment? He says that they will help investment, but if businesses are obliged to dip into their funds to top up company pension schemes, they may end up cutting the very investment that the Government want to encourage.
The Chancellor will regret the measure that he has announced on ACT—his attempt to hide his tax increases today. He is using some of the money produced by it to reduce VAT on fuel, but can he confirm during this debate that his timing of that measure means that the reduction in VAT will feed through into smaller increases in the state pension, so that he can claw back from pensioners some of what he has given away?
322 In the Chancellor's eagerness to announce new taxes, he has confirmed—although, of course, it was confirmed for him by his press office this morning—that tax relief on private health insurance for the over-60s is to be abolished. After the windfall tax and advance corporation tax, that is a savings tax in yet another form, which will affect 600,000 pensioners.
That is an utterly vindictive way in which to raise extra money for the Treasury. Moreover, it is likely to prove counter productive, because industry estimates suggest that up to 200,000 people could cancel their policies. How will that help a Government trying to meet their commitment to get 100,000 people off the waiting lists?
The Chancellor also announced his welfare-to-work scheme. We agree with the scheme's objective. Indeed, it is hard to think of a more worthy objective and we shall want to look carefully at the details of some of the proposals. I remind the Chancellor that the last Government had a welfare-to-work programme and it worked: unemployment among the under-25s has fallen by 100,000 a year every year for the past four year—400,000 in the past four years. We did that without a windfall tax, a tax on prices or a tax on pension funds.
Unemployment in Britain today is among the lowest in the major European economies. That is what a policy of flexible markets and welfare reform has already yielded. We now have a policy of subsidy and, whatever its social benefits, the Chancellor is likely to find that job subsidy schemes often cost more than they save. The reasons are obvious: first, money is spent on people who would get jobs anyway; secondly, money is spent creating jobs that are not created at all but where employers simply destroy the jobs of people who are not eligible for the subsidy; and, thirdly, money is spent creating jobs that turn out to be only temporary. Business men have admitted that they could easily use the scheme to take on the unemployed, employ them for as long as the subsidy lasts and then replace them with another round of subsidised employees.
The Chancellor is, therefore, likely to find a great deal of disappointment in the scheme that he has put before the House today. If the Labour party believes that reducing the cost of employing people by a £75 a week subsidy will increase the number of jobs, it must accept that increasing the cost of employing people with a minimum wage and a social chapter will destroy jobs.
Labour's welfare-to-work policy directly contradicts its industrial policy. The Department for Education and Employment will be busy trying to create jobs while the rest of the Government will be busy destroying them. Worse still, their make-work schemes will be temporary and limited to a certain number of jobs, while the minimum wage will be permanent and could affect millions of jobs. As the Deputy Prime Minister once admitted, any silly fool knew that a minimum wage would affect the number of jobs available. From the way in which the Government have gone about their business over the past two months, clearly not every fool knows that it will affect the number of jobs available.
What is on offer from the Government is temporary job creation but permanent job destruction—not welfare to work but work to welfare. They say that they want to put more people back to work, but they are now departing from the policies that have already put more people back to work in Britain than in the rest of Europe.
323 We welcome some aspects of the Budget. I mentioned the change to the tax rate for small companies. We also welcome the Chancellor's continued use of tax for environmental purposes, although we want to scrutinise the small print carefully. We would prefer to use environmental taxes to provide the right incentives, but to reduce the tax burden elsewhere, as we did recently with the landfill tax, the revenue from which was used to reduce the national insurance rate for employers.
The Chancellor is using environmental taxes as another vehicle by which to raise the tax burden overall, without producing compensating reductions elsewhere. He calls it a "green Budget", but it is actually still a red Budget which increases taxes on the people of this country.
The Chancellor has produced a Budget, some aspects of which we welcome, but most aspects of which we shall need to question or oppose. It is a tax-raising Budget which breaks the central promises on which the Labour party fought the last election. It flies in the face of the Prime Minister's assertion that no tax increases would be needed. Boxed in by the Prime Minister's commitment, the Chancellor has had to grub around for tax increases which he hopes nobody will understand or notice. The windfall tax is a gimmick for the short term, whereas we needed measures to serve our recovery for the long term.
The Budget is full of missed opportunities. What has it done for families who want to save or invest? What has it done for families who want to work hard and keep most of their earnings? What has it done to simplify the tax system, to help pension funds or to ensure that the strongest recovery in decades is long lasting?
The Chancellor should be warned that the real judgments on the Budget will be passed over the years to come. In future years we will want to know, and the country will want to know, what the Government have done with the best economic inheritance in decades. They had better be ready to be held to account for that.
§ Mr. Ian Bruce (South Dorset)
On a point of order, Mr. Deputy Speaker. May I put it on the record that, earlier today, I contacted my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), the shadow Chancellor of the Exchequer, and told him how much the windfall tax would be. I seek your guidance, Mr. Deputy Speaker, about how I should proceed, knowing that that information was leaked to someone who was an adviser to the electricity industry. It was available to that person before the Budget statement. Clearly, that could give rise to criminal charges. Should I write to Madam Speaker, put the matter in the hands of the police or speak to the Standards and Privileges Committee?
Mr. Deputy Speaker
Order. That is not a point of order on which the Chair can rule. The hon. Gentleman has been here long enough to know the various avenues open to him to pursue his complaint.
§ Mr. Paddy Ashdown (Yeovil)
The right hon. Member for Richmond, Yorks (Mr. Hague), who leads the Conservative party, is new to his job and has just made what is regarded as the most difficult speech in any political year. However, his speech will not be considered memorable except in one respect: the sheer brass neck 324 of a representative of the Conservative party criticising someone else for raising taxes. That will remain in my mind for a long time.
I congratulate the Chancellor of the Exchequer on his first Budget statement, which was long and detailed. It contained much with which we agree. The most welcome aspect is his abandonment of the departmental spending limits and ceilings for expenditure, over next year if not this year. We have argued for that for some time. It is worth mentioning that it is easy to spend contingency reserves in that way, which may not be wise in the long term, but we welcome the outcome, although it is offset by some of the Chancellor's decisions about rises in inflation and the consequences of that for the cash-limited budgets of those Departments.
There are two immediate aims that the Budget must achieve. It must dampen down overheating in the economy and reduce upward pressure on sterling. There are also several longer-term aims: to establish a framework for Britain's economic success, based on sustainable inflation; to invest in education as the key to that success; to incorporate environmental costs into our economy and the pattern of our lives; to begin to attack social and economic exclusion; and to reverse the neglect of key public services, especially health and education, under the Conservatives. Above all, after years of broken promises, this should have been a Budget that began to rebuild people's trust in politics and taxation.
I believe that, in framing the Budget, the Chancellor probably set out to achieve very similar aims to those that I have just outlined. The question that we must ask is to what extent he has succeeded.
I shall deal first with trust. When, in last November's Budget, the Conservatives cut income tax by 1p and Labour was not prepared to oppose them, I said:Both … know that it does not matter which of them is in government, the tax cuts that they both agreed today for the sake of the election will have to be put back some time after the election.I went on to warn that if that happens,the British electorate will feel that they have been lied to … trust … in politicians will diminish, and again everyone in the House will wonder why the people of this country do not believe a blind thing that we say."—[Official Report, 26 November 1996; Vol. 286, c. 183.]It gives me no pleasure to say that in the intervening months, that is exactly what has happened. We all knew then and throughout the election campaign that whoever was in power, this Budget would have to contain measures for fiscal tightening and for taking steam out of an economy that had become dangerously overheated.
Only the Liberal Democrats were prepared to admit that, then and during the election, and to argue for an economic approach that took money out of the economy and used it for specific, targeted improvements in education and health. The Labour and Conservative parties tried to pretend that we could have both tax cuts and better public services. Today's Budget proves them comprehensively wrong.
The Budget will mean higher taxes and almost certainly, in the next year at least, worsening public services. The Labour party told us before the election that it wanted to builda new trust on tax with the British people,I agree with that, but it cannot be done by saying one thing before and during an election, and doing exactly the opposite afterwards, even if that is necessary.
325 One cannot rebuild trust by ruling out income tax increases for press headlines, while keeping up one's sleeve hidden taxes that will hit the ordinary taxpayer just as much. One cannot rebuild trust by saying, "Enough is enough" to 22 Tory tax rises, and then adding to them in one's first Budget. We must all learn that unless we, as politicians, can get out of the ridiculous corner into which we have painted ourselves with regard to tax, we will never recreate trust in the political process.
On the broader issue of economic management and the current state of the economy, we understand the importance of ending the pattern of boom and bust that has so often occurred in Britain. We therefore welcome the Government decision to do what was in our manifesto but not in theirs, and to give the Bank of England greater control over interest rate policy. We are less keen on the Chancellor's decision to weaken the inflation target, which was in Labour's manifesto. Similarly, I welcome the more rule-based approach that the Chancellor outlined today. We have long called for that. That thinking must be followed through in the Budget.
We warned after the Budget last November that if we did not act to cool the economy then, we would have to do much more to achieve that now. Nothing would be more damaging to our economic recovery than to let the present consumer boom increase inflation, raise interest rates and boost sterling still further. To do that would undermine industry and investment and end, once again, in a return to recession and unemployment.
At first sight, the Chancellor seems to have ignored that danger, at least in part, and to have decided instead that his first priority is to reduce public borrowing. He has chosen to do so mainly through higher taxes on business. However, as public borrowing is falling quickly in any case, that is the wrong target. Instead of shackling businesses, he should have restrained the consumer, in order to prevent the higher interest rates, higher inflation and less competitive sterling that will surely follow. He had not done nearly enough to restrain consumer spending.
§ Mr. John Wilkinson (Ruislip-Northwood)
For all the faults in the Budget—and there are many—it has not increased the taxation on businesses. Clearly, the right hon. Gentleman wrote his speech before he had heard the Budget statement. Reductions in corporation tax for larger companies and smaller one are very welcome, and the doubling of tax relief on capital allowances is noteworthy. It would help the House if members of the Liberal party listened before they spoke.
§ Mr. Ashdown
The hon. Gentleman has forgotten such things as advance corporation tax and the windfall tax. He knows that those will have a substantial impact on business. That is the very case that his party has been making for months.
I understand why the Chancellor has not leant more heavily on the consumer and the ordinary citizen: it is because of his manifesto pledges. In that case, the country will again, I fear, pay a high price for foolish promises made in the heat of an election, which have painted the Government into a corner that they should not be in.
We warmly welcome some aspects of the Budget, such as the intention to depart from departmental spending limits. However, if one examines the increase in inflation 326 and the deflator to 2.75 per cent. against the cash-limited ceilings that are established, one finds that what sounds like a generous settlement for next year is in fact rather less generous. For instance, we believe that some £300 million of the £1 billion that the Chancellor announced to improve education may be lost through the effects of that increase in inflation. Similarly, we welcome the £100 disregard on child care costs and the home insulation plans that the Chancellor has announced.
We have long advocated a shift towards green taxes and we welcome Labour's conversion, however late, to that cause. We have always proposed using new environmental taxes to reduce other taxes—such as those on jobs—rather than using them to fill black holes in Government spending. It was extraordinary to hear the Leader of the Opposition complain about that when the Conservative Government used VAT rises on fuel—which they described as green taxes—to fill up the Government's coffers.
As the Chancellor knows, we have long advocated the phasing out of mortgage interest tax relief, although we have always proposed using the revenue to replace MIRAS with a fairer and more efficient system of housing finance. Unlike the Government, for seven years we have consistently advocated the phasing out of mortgage interest tax relief, although our policy was often attacked by Labour and Conservative Members. The Government, however, attacked the Tories last year and then did the same in this year's Budget.
We also support measures to help people off benefit and back to work. We set out a comprehensive range of welfare-to-work proposals in our manifesto and again in the alternative Budget that we published yesterday. However, we remain to be convinced by some of the details of the Government's plans. In particular, in concentrating on a relatively small group—those aged between 18 and 24—the Government risk letting down much larger groups of people who are also trapped in welfare dependency. They include single parents and the long-term unemployed of all ages—men and women made redundant in their 40s and 50s who see little chance of getting back into work. It is vital that in black spots where unemployment is concentrated, more is done not just to give the long-term unemployed a temporary training place, but to give businesses long-term support and incentives to create new jobs.
While we understand and support what the Government are trying to achieve in at long last tackling unemployment and exclusion, we disagree profoundly with their means of funding it—the windfall tax. I regret that the Government cannot raise money by fair, adequate and efficient taxation using the existing system—through income tax. Why do they need to hunt around for other means of raising revenue? The windfall tax is retrospective in its application, arbitrary in its effect and, in the end, I fear that it will be unfair as well.
We do not support the excess profits earned by some of the utility industries, but, if that is wrong, it should be dealt with through regulation not expropriation. If there are excess profits, they should be returned to consumers in lower prices, better services and greater investment.
It is not the Government's money; it is the customers' money, and the Government have no right to help themselves retrospectively to other people's money even for the very best of purposes.
327 The Government claim that the windfall tax is a tax on fat cats, but it will be nothing of the sort. It was the most bizarre moment in the Chancellor's otherwise well-constructed and well-delivered speech when he said that the money could be raised without anyone feeling the effect. He claimed to be able to find £4.8 billion in tax without anyone having to pay for it in the long term and that it could be plucked out of thin air. It is impossible to find billions of pounds in tax without millions of ordinary people having to pay the price. Where else will the money come from? It is not the fat cats but the 19 million ordinary people with money in pension funds and the millions of others with savings and endowment policies who will be hit as hard as anyone else.
The Prime Minister claimed in the House on 21 May thatthe windfall tax will not harm pensioners at air.—[Official Report, 21 May 1997; Vol. 294, c. 703.]That is not true. A windfall tax that raises around £5 billion will cost the average person in a pension fund £79 or £80 a year.
I cannot put it better than the Institute for Fiscal Studies, which stated:Penalising an arbitrary group of shareholders who own utility shares in the mid-90s on account of windfall gains enjoyed by their predecessors in the 1980s is difficult to reconcile with any principles of equity in taxation".The windfall tax is one reason to oppose the Budget, but perhaps the biggest one is its failure to tackle this year's crisis in education and health.
I am delighted that the Chancellor has found an extra £1.2 billion for the national health service next year. I welcome the fact that pragmatism has replaced dogmatism and the release of the ceilings on next year's expenditure, but what will happen this year? Over the past 18 years, the average rate of growth in health spending has been 3.1 per cent. a year. This year's average planned rate of growth is 0.15 per cent. a year. That represents one twentieth of the average annual increase during the Thatcher years, when the health service was brought to its knees, and an even smaller proportion of the average Tory increase over the past few years, which has brought the NHS to its current crisis.
Is it the Chancellor's case that by giving the NHS an extra £1.2 billion next year, it will be able to borrow more to help it through this year? If so, next year's NHS budget will be further depleted. It is simply unsustainable, not next year but now. Incidentally, the Chancellor's decision to cancel tax relief on medical insurance will undoubtedly place a greater burden on the NHS.
We must address the crisis this winter when Labour Members will have considerable arguments with their constituents. Waiting lists are rising now, the number of cancelled operations is increasing and NHS trusts are sliding further into debt at a rate of £1 million a day. The crisis in our wards this winter will almost certainly be worse than in any year under the Conservatives. What will that do to the trust of millions of people who voted Labour at the general election in the belief that they had, in Labour's own words,
fourteen days to save the NHS"?The same is true in education. I welcome the extra £1.1 billion for next year. During the election campaign, the Prime Minister said:Labour will never put dogma before children's education".328 Yet that is precisely what is happening as this year the Government stick doggedly and dogmatically to the Conservative's education spending ceilings. That will mean fewer books, less equipment, more teachers sacked and larger classes in the year ahead.
Under a Labour Government, my county of Somerset will have to sack 90 teachers this year. Labour councils are having to do the same, if not more. The Budget will bring no succour to the parents, teachers, governors or pupils who looked to the new Government to make a difference after years of cuts and neglect. They will be bitterly disappointed.
The Government are right to say that education is the key to Britain's long-term economic success, but a Budget that claims to be for the long term fails if the Government fail to understand the need for immediate investment in education if they are to preserve an education service for extra investment in future. That failure, more than anything else, makes it necessary for us, however reluctantly, to vote against the Budget.
We have made it clear that we are determined to be a constructive Opposition. That was why, in an unprecedented move, we supported the Queen's Speech a few weeks ago. We shall continue to give the Government our backing when we agree with them. That will also apply to the measures in the Budget that we support. However, the mandate that we carry into the House from the last election was not just to offer a more constructive style of politics, but to light to protect and improve our schools and hospitals. We were told that the Budget would follow through the Government's manifesto pledges of lower taxes and better public services, but it is a Budget of higher taxes and, at least in the next year, worse public services.
We are told that the windfall tax is a tax on fat cats, but I fear that it will hit ordinary people with pensions and savings. In some respects, the Budget can be applauded, but in the way that it fails our children's education and the health service on which our families rely, it does not meet the immediate and urgent needs of our country. Most people will be saddened by that and we are, too.
§ Mr. Stuart Bell (Middlesbrough)
I am grateful for the opportunity to follow the right hon. Member for Yeovil (Mr. Ashdown), the leader of the Liberal Democrats. It is rather sad that he should take the view that, overall, he cannot accept the Budget and will not vote for it, although he was careful to say that there were certain elements in it for which he would vote. He said that the pension funds would pass on the cost of the windfall tax, to the tune of £79 or £80 per individual. He should note the statement by my right hon. Friend the Chancellor that the pension funds are in surplus and that there have been pension holidays. Indeed, he should congratulate my right hon. Friend on his statement that charities will have a different role.
§ Mr. Bell
I am delighted to note that the right hon. Gentleman has taken that point on board.
The right hon. Gentleman appears to resent the fact that the Government are committing themselves to fulfilling manifesto pledges. We made those pledges when we were 329 fighting the election and we are now carrying out those pledges. The Budget will equip our country for the future. It delivers on our election promises and our priorities of education and health. I should have thought that the right hon. Gentleman would he pleased—possibly delighted—that we are allocating additional spending of £2.3 billion on schools and £1.2 billion on health, while ensuring that the Government reduce their borrowings.
The Budget shows that we are on message. We were on message throughout the election campaign and we are on message in fulfilling the commitments that we made during the campaign. We are translating those commitments into action. My right hon. Friend the Chancellor should be given credit for staying on message and for putting forward a positive plan that will reduce our deficits over a five-year period.
It must be heartening for the markets in seeking stability—in the emphasis that my right hon. Friend has placed on the global marketplace and the global village in which we now all live, and the emphasis on being competitive within that global marketplace—to know that there is a deficit reduction plan that will cut our borrowing to £5.4 billion next year, so that the Government borrow only to invest and not to fund consumption. I should have thought that the whole House could agree on those principles, not just the Leader of the Opposition or the leader of the Liberal Democrats.
It is difficult—we are all in this boat—to make a Budget speech when we have not seen the Budget. Therefore, I commiserate with both the Leader of the Opposition and the leader of the Liberal Democrats. However, we must look at not only the immediate impact of the Budget as we see it in the House, but the impact on the Bank of England and the financial markets.
One of my predecessors many years ago, Bob Woof—who is still with us, but no longer the Member of Parliament for Blaydon—used to make his Budget speech based on the previous year's Budget. That was helpful on the first day of the Budget. However, he might have had some difficulty with my right hon. Friend's Budget speech today as it was so refreshing and so very different from the Budget speeches of previous years.
Another famous Budget saying came from Iain Macleod. He said that the Budget depended not on the reaction on Budget day, but on how it looked in six months' time. In this soundbite age, however, what matters is how the Bank of England and the financial markets react now. The financial markets have been betting that, following the Budget, interest rates would go up and, consequently, that the value of the pound would go up. I believe that, with his swingeing taxes on cigarettes and petrol, my right hon. Friend has sufficiently attacked consumer spending and taken enough money out of the economy to make the Bank of England carefully consider whether it should raise interest rates.
The financial markets might wish to take into account the fact that if interest rates do not go up, the value of the pound should not go up either. One of the difficulties at this time is that the pound has risen by about 27 per cent. against the deutschmark, by 26 per cent. against the French franc, and by 30 per cent. against the peseta. My right hon. Friend said that it had appreciated by 18 per cent. overall. That has had, and will continue to 330 have, some impact on our exporters, on our industry and, therefore, on those who are employed by industry. That is likely to be a difficulty which we shall face if the value of the pound continues to rise.
My right hon. Friend said, rightly, that we are within the convergence criteria of the Maastricht treaty. In fact, we shall be one of the few nation states that can meet that criteria. Therefore, the question of a single currency follows on from the Budget today. Do we enter the single currency in the first wave? If we do, when do we lift the opt-out clause? Will it be lifted in the autumn? Certainly, it will have to be lifted by the end of the year. If we do not join the single currency in the first wave, what will the exchange rate be against the new euro? Will we have a floating exchange rate? How will that impact on our exporters, our manufacturers and our industry? Those are the major questions being asked by our exporters. However, a currency that appreciates, as ours has, does bring certain benefits to the economy—for example, it plays a role in reducing inflation.
I notice that the shadow Chancellor, in a pre-Budget statement, said that interest rates rather than taxes should rise. It is an odd view to take of the economy. This Budget should keep interest rates down. There should not be a substantial rise in interest rates when the Bank of England next meets. Similarly, the Budget should not result in a higher value being placed on the pound.
As my right hon. Friend the Chancellor said, this is a people's Budget. He has placed emphasis on education, health and getting people into work. He has shifted the emphasis from that in previous Budgets. This is the 14th Budget statement to which I have listened and it is certainly the most refreshing. I like this Budget and I am sure that the people will also like it.
I want to make one final point on the Budget and place it in the context of George Orwell's "Animal Farm". In that book, the pigs took over the farm, the pigs took over the farmhouse and the pigs ended up in the beds. There must have been a great temptation for the new Ministers to take the red boxes, to take the chauffeur-driven cars—although not limousines—to take the ministerial chairs and to continue where the last Government left off. It was encouraging when my right hon. Friend the Chancellor did not don a white tie and tails to go to Mansion House. He has not used Gladstone's old tattered box for his Budget. He came to the House with a new box and a new Budget speech that will be welcomed by the people, as it will be welcomed by the House. It is a Budget which gives us a fresh start and fresh hope.
§ Sir Michael Spicer (West Worcestershire)
In straight economic terms, there is no point in the Budget. By common agreement—the Chancellor made that point several times—the British economy is in extraordinarily good shape. We have a high rate of growth, both historically and compared with other countries—3.5 per cent. and projected to go forward at that rate—and a very low inflation rate, again historically and compared with other countries. Presumably, therefore, there is only one point to the Budget—to stamp socialism back on to our economy and into our society—[Interruption.]
I think that I heard the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) say, "If only that were true" or words to that effect. I assure the 331 hon. Lady that, despite new Labour rhetoric, this is a socialist Budget: it could not have been introduced by a Conservative Government for at least two reasons. First, it is a high tax Budget. I counted six—other hon. Members may have counted more—new tax rises, which is almost a third of the way towards the 22 rises that we were meant to have introduced during our last period of office. The Labour party is on track to catch up and no doubt overtake us on the rate of tax increases.
Secondly and more particularly, it is a profligate Budget in terms of public spending. As far as I can tell, it spends the entirety of the reserves. We have a £4.5 billion reserve commitment. Far from the Budget filling any black holes or being in the tight grip of an iron Chancellor, it is the reverse. It is a classic, political somersault trick: the rhetoric has been about tight money and improving the Budget deficit, but the Government have spent the entirety of the reserves and have made specific commitments.
The Budget received great cheers from Labour Members: if I were a socialist, I would cheer a profligate Budget. The only way in which the Government try to match that profligacy is through the windfall tax. I assume that it is a one-off tax, but perhaps we should try to obtain further assurances on that. It is a massive increase in taxation: it is a one-off £4.8 billion tax on the basis of which public spending plans and trends have been developed. Anyone who has had anything to do with government knows that it is the ultimate in profligacy and irresponsibility to put public spending trends in place, as they have been in the Budget, and to back them with a one-off tax. I am sure that that is what the Budget will turn out to be.
As has been said, the British economy is in extremely good shape at the moment. The Government have inherited an economy that is moving in a strong direction and is the envy of every country in Europe. Every country in Europe thinks that we were mad to change our Government.
§ Sir Michael Spicer
Of course we were, but we did so and, as a result, we have a socialist Government who have marked out their intention to change course. The tragedy is that, as with all socialist Governments, that course will now be downhill. The Conservative Government built up a strong economy, but it is as clear as night follows day that it will now start to deteriorate. That will not happen immediately, because it is currently moving at a fast pace, and it is difficult to turn around a great economy, but it will happen in the classic way.
The Government have introduced socialist policies—they will be defined as such very quickly by commentators and by those who invest in this country and whose confidence we need to gain. As with every socialist Government we have had—the good news is that they do not last very long, but the bad news is that we have this one for four or five years—the confidence of people who bring their money to this country and who invest in jobs begins to go.
There has been much talk of subsidised jobs. My right hon. Friend the Leader of the Opposition made exactly the right point. Job creation comes through people having 332 the confidence to invest their money in this country. That confidence will quickly be sapped as a result of the dogmatic change of direction that we witnessed in the Budget. The precedents of previous socialist regimes will be repeated.
People who want to put money into this country will start to lose confidence, and that will put pressure on the pound sterling. At the moment, it is exactly the other way round, so there will be a period when the problem will be disguised, but a time will come when the Government will be concerned about pressure on our currency, as Labour Government always are. I cannot put a figure on the time that it will take, but in about 12 or 18 months the Labour Administration will start to panic as pressure is brought to bear and money is taken out of the country. They will scratch their heads and wonder what on earth to do.
The first thing the Government will do is to try to put up interest rates. The tragedy will be that that rise in interest rates—if it is in 18 months—will coincide with the point in our natural economic cycle at which it would be sensible to bring interest rates down. Because of the growing lack of confidence in our currency and our economy, interest rates will start to rise. The Government will consciously increase them: it happens every time. As a result, the pound will not strengthen. The reason why the pound will be under pressure at that point will have nothing to do with interest rates. We all saw what happened in the last days under the exchange rate mechanism. On that ghastly morning, we increased interest rates to 25 per cent. I think—I cannot remember the figure. [HON. MEMBERS: "Fifteen per cent."] They were raised to 15 per cent., but it had no effect on the value of our currency. Confidence is what counts.
§ Mr. Hilton Dawson (Lancaster and Wyre)
Will the hon. Gentleman take note of the comments of the right hon. Member for Yeovil (Mr. Ashdown) and give us his reaction to the cut in corporation tax and the assistance given to firms wanting to invest in jobs and capital development? The clear message from small and medium enterprises in my constituency is, "Give us tax relief to allow us to invest and create jobs."
§ Sir Michael Spicer
I shall come on to that point. No one disputes that it is a good idea to lower specific taxes on the industrial sector. Under a Labour Government, in the ghastly, nightmarish scenario that has precedents in history, interest rates are raised. While having no effect on the pound, that will have an impact on unemployment. An emergency Cabinet then meets and discusses the problem that is particularly painful for a Labour Government: not the falling unemployment that we had throughout the previous Conservative Administration, which will no doubt continue while our policies continue to have an effect, but a rise in unemployment.
A rise in unemployment always happens under a socialist Government as a result of a combination of high interest rates and falling confidence. It affects the economy, and at that point the Government scratch their heads and hold an emergency Cabinet meeting. They say, "We can't go on like this. We shall have to have job schemes." The Budget contains the seeds of such schemes.
Job schemes are about picking particular industries for particular treatment—in the Budget, the Government have picked the film industry—and supporting them with 333 taxpayers' money, whereas what industry requires is the maintenance of a general level of confidence. Higher taxes and less confidence means that the spiral has begun: that happens under every Labour Administration. Today, the seeds of a totally new philosophy have been planted which will set the country on a downward spiral, as opposed to the strong trend of the past four or five years that the Labour party inherited.
I suspect that, this time round, when job schemes do not work and confidence is lost, refuge will be sought in joining the single European currency. The Chancellor was happy to say that we shall meet the Maastricht criteria on debt. I have no doubt that, somewhere along the line in the next two or three years, as confidence is lost, interest rates go up, unemployment goes up and job schemes have been tried, refuge will be sought in a single currency. I am glad to say that my right hon. Friend the Leader of the Opposition has given notice that that will be vigorously opposed. For Britain, the single currency means not just economic degradation but political degradation.
§ Mr. Geoffrey Clifton-Brown (Cotswold)
My hon. Friend has already referred to the exchange rate mechanism debacle. If the scenario that he outlines continues and the pound remains at its present rate or even higher, would we not be risking a repeat of what happened before?
§ Sir Michael Spicer
As I am sure my hon. Friend knows, my view is that we should not enter the single currency as a matter of principle. There is no such thing as a right rate for the single currency. The single currency is, by law, for ever, and what is the right rate on day one might be the wrong rate on day two. The whole point about the exchange rate is that it reflects the economic circumstances at any one point. That is the essence of the argument against the single currency. However, the House will not wish me to detain it on that. No doubt, we shall have another opportunity to debate the single currency and Europe, and other wonderful things.
I simply end by saying that the Budget marks the beginnings of a tragedy for Britain. We are seeing the turning of the tide. The Labour party will no doubt cheer at this profligacy. If I were a member of the Labour party, I would, too. For Labour Members, it is a wonderful socialist Budget, but it is potentially disastrous for Britain. We are seeing the beginnings of a new trend in the way in which we are to be governed. On historical precedents, in two or three years' time, disaster will begin to befall our country. It is a terrible shame because, at last, the country was on the right track economically and other countries envied it. In two or three years' time, all that will be at nought.
§ Mr. Alan W. Williams (East Carmarthen and Dinefwr)
The Budget analysis of the hon. Member for West Worcestershire (Sir M. Spicer) is very different from my own. I want to correct him on two factual points. He said that we would be spending all the continency reserve, but in fact the majority of that £5 billion is, in the Chancellor's words, to be retained. The hon. Gentleman also said that we would be profligate with public 334 expenditure and borrowing, but the public sector borrowing requirement, as revised in today's Budget, will be £13.25 billion this financial year and £5.5 billion next year—down to less than 1 per cent. of gross domestic product.
If I have one criticism of the Budget, it is that it is far too restrictive or deflationary in its second year. I cannot quite understand why we need a PSBR to be that low. I hope that the Chancellor may have in mind that next year it will allow him some slack for additional public expenditure in the services that desperately need such spending.
My only other comment is that the hon. Gentleman seemed to anticipate a terrific run on the pound at some stage in the next 12 or 18 months. He was full of the doomsday scenario now that we have a Labour Government with a huge majority. To be honest, I wish that there would be a run on the pound, given its tremendous appreciation in value in the past year—up 26 per cent. against the deutschmark and the French franc. It is dramatically overvalued. The backdrop to today's Budget is the stupendous rise in the Financial Times index yesterday of over 100 points. That does not tally with the kind of scenario that the hon. Gentleman presents.
§ Sir Michael Spicer
So that there is no confusion here, I said clearly that, as a result of the previous Government, we now have a strong economy. What I am worried about is that being tossed away in the next two or three years.
§ Mr. Williams
I do not think that that will happen, certainly not while it is in the hands of our present Chancellor. He is extremely competent. He has shown great ability in opposition during the past live or seven years in his handling of the various economic groups. The basis that he has laid this afternoon in his Budget speech will see us very well over the next several years.
The Budget tallies with what we promised the electorate during the election campaign in April. I am particularly delighted with the windfall tax. It was worked out over many years and any complaints that the Opposition or shareholders may have about it have been discounted in share prices over many years. American companies have in no way been dissuaded from coming in and picking up the electricity companies one by one, despite their full knowledge that the windfall tax was coming.
The windfall tax will raise about £5 billion and is thoroughly justified. The electricity, water and gas industries were sold off at a terrific discount and the profits that they have made at the expense of the ordinary consumer have been a rip off. Anyone who invested £1,000 in those companies on privatisation will have seen their money treble over the years. If anything, the £5 billion is modest in terms of recouping some of the windfall gains made by investors in the privatised industries.
That money will be magnificently redistributed to the unemployed. It will pull people from welfare into work. It will reach every deprived community in Britain, whether they be in old mining valleys, as in my constituency, or in the regions, in Scotland, the north-east or wherever. The poorest parts will benefit the most because that is where unemployment is highest. Therefore, the social justification of the windfall tax is absolute.
335 I acknowledge that there are tax increases in the Budget. They are necessary because, as the hon. Member for West Worcestershire said, the economy is booming. The curious thing is that the previous Chancellor put in train a pre-election boom, but, because confidence was so low, it took two or three years for the economy to kick off in any kind of way. The pre-election boom, has landed about six months too late for the Conservative party.
There is far too much money around in that boom and it had to be taken out of the economy. House prices are up 10 or 11 per cent. in the past year and retail sales are up about 7 per cent. The building society pay-outs from demutualisation mean that about £30 billion will be coming into the economy to be spent. With such pressure, it was necessary to take money out of the economy. My hope was that this afternoon's Budget would take about £7 billion out of the economy. As I understand it, about £5 billion is being taken out. That is justified for the sake of the economy's long-term health. It will largely be used to cut borrowing.
I was pleased that the Chancellor, towards the end of his comments, told us that next year there would be more money for the health service and education—£1.2 billion to patient care, and £1 billion to schools. That £1.2 billion means an additional 3 per cent. for the NHS budget. However, I think that a crisis is coming in the NHS this winter and we may well find that, as we approach November or December, our trusts and health authorities will need some extra money.
I shall make a few comments about the value of the pound. The massive appreciation in the past year has made it unsustainable at its present level. The pound has risen 26 per cent. against the deutschmark, which means that our goods in Germany are now 26 per cent. more expensive, whereas German and French products in our market are that much cheaper.
There is a time lag between devaluation or revaluation and the economic effects working through. The pound is now at pre-Black Wednesday values, and it was the devaluation on Black Wednesday and in the following few months that brought recovery in the past two or three years. The converse of that is that if the pound stays at its present value for any sustained period, it will cause us problems two or three years down the line.
Like my hon. Friend the Member for Middlesbrough (Mr. Bell), I hope that taking out £5.5 billion from the economy today will be enough to stop interest rates rising, and the pound with them.
§ Mr. William Ross (East Londonderry)
Does the hon. Gentleman agree that all that so-called Black Wednesday did was to restore the currency to its true value on the international market?
§ Mr. Williams
I think so. That allowed us to cut interest rates dramatically, which is how the recovery got under way. The clear danger now is that, the pound having gone back up to Black Wednesday levels, at something like DM2.90, that cannot be sustained.
In general, I welcome the measures in the Budget, especially the windfall tax and what that will do to unemployment, as well as the special announcements on health and education. My only criticism is that, looking forward one or two years to a public sector borrowing requirement of only £5.5 billion, I think that our iron 336 Chancellor is proving just a bit too cautious, or too tough, with his money. I hope that, in 12 months' time, he will allow a little more laxity, especially towards our public services.
§ 6.1 pm
§ Mr. Richard Spring (West Suffolk)
I am grateful to you, Mr. Deputy Speaker, for giving me the opportunity to speak this evening. The Chancellor of the Exchequer talked about his desire for the British economy to be part of the new fast-changing global economy. Nobody could disagree with those sentiments.
However, the fact is that the Government have been bequeathed a unique dowry—probably never equalled at any time in the history of the 20th century. In contrast to what has happened time and again in previous economic recoveries, we have steady prices, our balance of payments is under control, and we have falling unemployment and a falling public sector borrowing requirement.
I note, for example, that Barclays Economic Review for the second quarter of 1997 sums up the United Kingdom economy thus:
The incoming Labour Government has inherited a very favourable set of economic circumstances, with output growth strengthening steadily since the middle of last year, the unemployment rate below 6 per cent. and the underlying rate of inflation within the target range of 2½ per cent. or less. Even the public finances have been better than expected, with the Public Sector Borrowing Requirement for the last financial year coming in £3.6 billion below the Treasury's November projection.We know that the International Monetary Fund, too, has called the performance of the British economy enviable. In the latest Library research paper dated 1 July, the following comment on our Budget outlook appears:
The generally favourable set of economic indicators described in this Paper need little further explanation. The economy has continued to grow steadily with continued falls in the level of unemployment and historically low levels of inflation and interest rates.The Budget is therefore something of a fundamental irrelevance. It has nothing to do with the good management of the long-term performance of the British economy, because that was already in place. I pay tribute to my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), who engineered the remarkable economic environment that we now have. It is a precious dowry that the Labour Government are fortunate to have secured from us.
Despite all the hints that we heard in the past few weeks about budgetary black holes, we know that although the Government searched for one they discovered nothing, even when one changed the projections for economic growth rates. There are no discernible inflationary pressures, such as those that characterised earlier economic recoveries. Before the election, we heard time and again about our so-called economic failure and our inability to reduce the Budget deficit or unemployment. Now, suddenly, we hear about the risk of overheating in the economy.
I repeat that the Chancellor's Budget has precious little to do with economic management and everything to do with the politics of the Labour party in government. Those of us who are especially interested in the subject of economics must never forget that, in economics, we are dealing with flesh and blood, with human beings and their hopes and aspirations, not with some kind of abstraction.
337 When I look at what has happened in my constituency, as elsewhere, and the dramatic transformation in the lives of so many people who live there, the figures speak for themselves. Five years ago, unemployment in Haverhill was 9.5 per cent. Now, it is 4.3 per cent. and falling. In Newmarket, the rate was 6.7 per cent.; now, it is 3.5 per cent. and falling. In the Bury St. Edmunds travel-to-work area, unemployment has fallen from 5.5 to 2.7 per cent.
Those falls in unemployment mean job opportunities and the realisation of hopes and aspirations throughout our country for hundreds of thousands of people—in contrast to what has happened in the other major industrial economies of Europe. When we consider the welfare-to-work programme announced by the Chancellor, we must remember that, according to the labour force survey, since autumn 1992 youth unemployment has fallen well beyond the 250,000 figure that the Chancellor mentioned when he first spoke of his desire to reduce unemployment among young people via a windfall tax.
We must ask ourselves the simple question: why has that happened in the United Kingdom when the performance of other countries has been so poor? What a tragedy for young people under 25 who live in Spain, 42 per cent. of whom are unemployed. In France, 29 per cent. of young people are unemployed, and in Italy, the figure is one in three. Even in Germany, there is a high level of disguised unemployment because of the operation of complex training programmes.
Moreover, the Budget is moving us closer and closer to the European economic and social model, which blindingly obviously is becoming a manifest failure, unable to deliver the economic performance that would mean jobs and prosperity, and the fulfilment of the hopes and aspirations of young people.
The other side of the coin of today's Budget includes the real views and policies of the Labour party. There is stakeholding—we heard nothing about that today—there is the introduction of the minimum wage and the signing of the social chapter, and there are new rights for unions. All of those are utterly irrelevant to the operation of a modern high-technology economy.
Just as many European countries have sought to fudge the criteria for the Maastricht ratification process as we move towards a single currency in continental Europe, so today we saw a fudge in the way in which the reserves were raided to find additional sums for health and education spending. We had a clear foretaste today of Labour's move away from the economic environment that has delivered jobs so successfully in the form of the windfall tax, which clearly discriminates against those companies that have to pay it. The welfare-to-work programme fails fundamentally to address long-term youth unemployment by failing to create enduring opportunities for employment. That is the main criticism of the plan—that, at the end of the day, there is no assurance that those jobs will be secure. All the other component elements of Labour's economic policy will certainly ensure that such opportunities will not be realised over a period of time.
If we look back to the 1950s and 1960s—when the mainstream of intellectual thinking in the Labour party arose—Governments, trade unions and industry across the 338 continent of Europe were formulating macro-economic policies, and it worked. The national cake grew. In the 1970s, however, we saw the beginning of oil shocks, inflation and the inability of our economy—and those in Europe—to adjust to the new reality of technology. We are seeing a dramatic change in the way our economy and our labour market operate. Labour has totally failed to understand the job creation process or the process of creating the competitive environment which enables jobs and employment to grow.
In the past 10 years, we have seen massive downsizing in large corporations and businesses across the industrialised world. Industry now organises itself in a different way. For example, Japanese car companies have come to this country with considerable success—they have out-sourced their supplies, raised quality and spread their activities around in a different way from the monoliths which operated 20 or 30 years ago. This process of fragmentation has gone on for some time, and the Government's macro-economic, social and economic model is certainly not fitted for it.
In my rural constituency, hundreds of people who are living at home are linked to businesses through the Internet, the fax and modern communications. The fragmentation process means that the Government's proposed model for the next few years will result in a failure to adjust to the high-technology modern structures of our economy which have created jobs successfully. In the next two years, things will begin to fail in this country and the Government will start to destroy the job creation process. Of that, I am absolutely confident. The previous Government were successful in keeping corporate taxation low, creating flexible labour markets and ensuring that rights were not given in a way that meant the right to the dole queue. The result was an unparalleled tidal wave of inward investment in this country.
I welcome the cut in small business corporation tax. In the context of the downsizing in our economy, it is in the smaller and smaller business operations where the jobs of the future will be formed. The small business community feel that it is crucial that their cash flow is improved. Because of exemptions and thresholds, many small businesses do not pay corporation tax at all.
One thing that was depressingly absent from the comments of the Chancellor was any reference to the real concern of many small businesses about what will happen to business taxes under the new Labour Government. During the general election campaign, we pledged to introduce a rateable value exemption of £1,000 for the purposes of the uniform business rate, which would have had a dramatic impact on the cash flows of small businesses. Instead of which, we have been promised the true horror of local business rate taxes. In the 1980s, this meant Labour-controlled, anti-business local authorities driving up business taxes and driving people into bankruptcy and unemployment. It is a matter of regret that that key area of small business activity was not even alluded to by the Chancellor today.
Another disappointing element is the cut in private insurance tax relief for medical purposes. Many of my elderly constituents value their access to private medicine, and many say that if abolition takes place, they will cease to take out private health insurance and will become dependent on the national health service. In this country, the percentage of spending in the health service in the private sector is significantly smaller than in virtually any 339 other country in Europe. It is a matter of regret that that is the case when so many collaborative relationships are developing between the private and public parts of the health service.
§ Mr. Martin O'Neill (Ochil)
Could the hon. Gentleman advise me as to what I should say to elderly constituents who have worked in textile mills and are in receipt of small pensions on which they have to pay income tax? Why should their income tax subsidise the better-off who can afford the kind of health insurance to which he refers and for which the premiums are large?
§ Mr. Spring
I fear that the hon. Gentleman's arithmetic is a little awry. If 200,000 elderly people come off private health insurance and start using the facilities of the health service, it will be an entirely different story. That will increase the tax burden for everybody—including the hon. Gentleman's constituents.
On green taxes, we must all be aware of the importance of preserving the environment and the legacy that we will pass to our children and grandchildren. It was announced today by the Chancellor that there is to be a substantial increase in fuel taxes, and this will have an impact in rural areas. But the importance of the environment in rural areas cannot be isolated. An increase in fuel taxes, and a roads programme that effectively prevents the proper repair and care of the roads system and potentially denies bypasses around rural villages, will mean that a different kind of environment is affected—our architectural heritage, which will be damaged by heavy traffic. That is a matter of regret and I hope that it will be remedied in due course. If we are to be sensitive about the environment, let us be sensitive about the impact on our architectural heritage of increasing fuel taxes in isolation and about the need for a high environmental quality in rural areas.
I wish to refer to the reduction of MIRAS. In my view, it would be desirable to consider the possibility of allowing first-time buyers—who need most help in the housing market—to have help directed to them, rather than a general phasing down which excludes that important group. We heard from the Chancellor today of his dedication to home ownership; such a system would be a powerful incentive for young people.
There is no escape from reality. The reality of this Budget is that, unless we have an economic environment that creates the parameters for the economy to continue to grow, all the best intentions in regard to reducing unemployment will certainly fail. Having listened carefully to what the Chancellor said today, I fear that, as we move inexorably away from the policies that brought about the remarkable economic success story that is the United Kingdom today and towards a European social and economic model—I am thinking of the link with Labour's other policies—that success story will end in tears.
§ Mr. Jim Murphy (Eastwood)
Thank you, Mr. Deputy Speaker, for allowing me to make my maiden speech during the first Budget debate under a Labour Government for nearly two decades. I am delighted to have the opportunity to speak in such an important debate.
One thing that has struck me about the maiden speeches made so far by hon. Members on both sides of the House is the way in which those hon. Members have made their 340 constituencies sound like the type of place in which I would like to spend my summer recess. Although I do not promise to persuade the House that Eastwood is the tourist capital of the United Kingdom, I hope that I can at least match some of their eloquence and commitment.
Until 2 am on 2 May, Eastwood was the safest Conservative seat in Scotland, but I am glad to say that that is no longer the case. Eastwood, which I am privileged to represent, is made up of many unique and distinct villages and communities. Eaglesham is the picturesque conservation village, soon to benefit from a bypass. Neilston, Uplawmoor, Busby and Thornliebank are all distinct villages in their own right, with a distinct culture. Giffnock, Netherlee, Stamperland and Newton Mearns are prosperous suburban areas from which many people commute to Glasgow. Barrhead, an industrial town on the outskirts of the constituency, is resilient in bad times, innovative in good times and loyal to Labour throughout, and has a unique sense of local pride.
Eastwood's sense of community is added to by the number and variety of voluntary and civic organisations that are working determinedly, particularly those that are committed to working with the young, the elderly and the disabled. We are also fortunate to be served by two excellent local newspapers, the Barrhead News and the Eastwood Extra. Hundreds of small businesses in Eastwood employ more than 10,000 local people. They will welcome new Labour's new commitment to a fairer deal and lower taxes for small and medium businesses. Farmers in Eastwood will also welcome the new Government's plans for a clearer policy on agriculture, and their commitment to clearing up the BSE mess.
Like many of my colleagues, I believe that my constituency is much more than just the towns and villages that make it up. Its greatest asset is its people. Let me mention a few of them. Sir John Montgomerie, Lord of Eaglesham, fought the English at the battle of Otterburn in 1388; I am pleased to say that he was a member of the victorious army of the Earl of Douglas. John Shanks, who formed Shanks and Co. in 1852—it was based in Barrhead—is famous for the invention of the water closet.
§ Mr. Murphy
I will not respond to that sedentary intervention.
John Shanks's enduring contribution to all our lives is such that any hon. Member who visits any public convenience, even in the House of Commons, will be aware of his craftsmanship. Although Eastwood may not be the tourist centre of the United Kingdom, it is, perhaps, the most convenient area in the United Kingdom.
Other persons of note in Eastwood were the Crum brothers from Thornliebank who set up a printing company. They pre-empted by more than 100 years the current Prime Minister's commitment to the environment and ethical industries. Theirs was one of the first smoke-free factories. They employed a local doctor, and built local housing, schools and recreation facilities. Alexander Crum went on to become a Liberal Member of Parliament in 1880.
I want to pay tribute to my predecessor Allan Stewart, not simply because it is the customary thing to do but because it is the right thing to do. I often disagreed with 341 Allan Stewart's views, and in the early part of the election campaign we both rehearsed our arguments convincingly. Allan was always strong and strident in expressing his beliefs, regardless of which party they fitted and which arrangements he upset. Hon. Members will know that he has been through a difficult patch recently; I am pleased to say that he has now left hospital, and I am sure that the House will join me in sending best wishes to him and his family, and wishing him a full recovery.
Another of my predecessors, Robert Nicholl, was the only other Labour Member of Parliament for Eastwood. He was elected in 1922. A little-known fact is that he was the great-uncle of my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton), who is present this evening. He had two great passions, for which he became renowned in the House. The first was campaigning for smaller classes in primary schools. In 1923, he spoke in the House in favour of reducing classes to 65 pupils or fewer, which gives some indication of the position at the time. Perhaps we have made some progress since then.
Robert Nicholl may have failed in his second important contribution. He campaigned in favour of brevity in Members' speeches. Although we have halved the size of primary school classes, I fear that in the intervening 75 years we have doubled the length of Members' speeches, although I have no intention of following that example this evening.
Robert Nicholl's tenure in Eastwood was short. He lasted only 23 months, and died at the age of 35 a few months after leaving the House. As the first Labour Member of Parliament for Eastwood for nearly three quarters of a century, I hope and expect to remain here a great deal longer than Mr. Nicholl. In that aim, I have an unexpected but welcome ally in the shape of the Scottish Conservative party, whose members, given their antics and divisions, seem intent on keeping me here for some time.
In the Scottish Conservative party, common sense now seems like a distant relative. Scottish Conservatives seem to believe that they lost the election simply because of the constitutional issue, but that is not the case. The contents of today's Budget bear more compelling testimony to their political impotence in Scotland than any constitutional debate. The Budget statement, to which we listened with great interest, set out an agenda for the 21st century. It is an entirely different type of Budget: a Budget for the many, not the few. At its core is the plan for a windfall levy, providing new opportunities for a new generation.
Many young people in my constituency, and in constituencies throughout the United Kingdom, have known only a Conservative Government. Eastwood has more young voters than any other constituency in Scotland and, for too long, for too many young people, politics has been a source of problems. As a consequence of the Budget, politics can at last begin to become a source of solutions in those young people's lives.
There are 25,000 young unemployed Scots, many of them long-term unemployed. Some have never worked in their lives—yet we hear from Conservative Members that we should not introduce a windfall levy to alleviate the problem. Scottish Power has made a profit of £1.9 billion 342 since privatisation. Labour Members believe that we should employ those excess profits to put young people in Scotland back to work.
My right hon. Friend the Chancellor talked extensively about pensioners and a fairer deal for them. There are more than 14,000 pensioners in Eastwood, and they will welcome his announcement of a reduction in value added tax on fuel. That will bring about real change in their lives.
The people of Eastwood and of Scotland in general will welcome our core agenda of the people's priorities of health, education and jobs—those were the issues on which I fought the general election campaign—and will be pleased to know that there is to be an extra £200 million for services in Scotland next year. Already, my right hon. Friend the Secretary of State for Scotland has announced that £9 million—additional money to provide additional services and facilities—will go towards Scotland's schools this year.
I believe that the excitement and energy surrounding this Labour Budget can challenge the creeping cynicism about politics and politicians among many young people and society as a whole; it can reignite enthusiasm and belief in the political process.
I welcome my right hon. Friend's encouragement to hon. Members of all parties to become champions of welfare to work. I encourage Conservative Members not to let their ideology get in the way of opportunity for young people throughout the country. I have said that some people think that politics are irrelevant and do not matter. If Conservative Members put their ideology before the future of our young people today and in the coming months, it will be they who matter even less.
§ Mr. Shaun Woodward (Witney)
I congratulate the hon. Member for Eastwood (Mr. Murphy) on his maiden speech. I feel for you, Mr. Deputy Speaker, as I too am about to engage on that task. I am grateful to you for calling me to speak, but even more grateful to the electors of Witney who gave me the opportunity to do so.
I am aware that my remarks must be in the spirit and practice of the House in being uncontroversial. I must confess that, looking back on speeches not only by hon. Members in this Parliament but by Labour Members on previous occasions, the definition of uncontroversial seems to be increasingly relaxed.
I am fortunate to be able to pay tribute to two of my predecessors. Colonel Dodds-Parker is still very much with us, and I am extremely grateful to him for his kindness and encouragement. He was both a distinguished politician and a man of enormous courage and conviction, not least in the way he served his country for special operations during the war.
It is an especial pleasure for me to pay tribute to Douglas Hurd, who represented Witney for 23 years before standing down at the general election. Lloyd George said:A politician is a person with whose politics you don't agree. If you agree with him, he is a statesman.I am sure that no one in the House would have difficulty in recognising my predecessor, now Lord Hurd of Westwell, as a statesman.
343 It is difficult to praise too highly a man who has been a notable servant not only of the House but of the country. Tested in the highest offices—Northern Ireland Secretary, Home Secretary, Foreign Secretary—Douglas Hurd relentlessly demonstrated the skills of a diplomat, reformer and cunning negotiator. To paraphrase some remarks made recently about Colin Cowdrey, he has style and elegance at the crease and humility and concern for others off the field.
Douglas Hurd's crease has been not only the Dispatch Box but the forum of international negotiation. We are all aware of his humility off the field, and it is a considerable tribute to him that his concern and care for constituency responsibilities have played centre stage throughout his life. At a time when politics and politicians are not always held in the highest regard, he gives renewed definition to the concept of public service. It is not by chance that he has been a mentor to so many in the House.
Speaking of public service, I want to pay a special tribute to Chris Patten, the former Governor of Hong Kong. His determination to do not what was easy or expedient but what was right has ensured that Britain has discharged its responsibilities to the people of Hong Kong with honour, not obloquy. I am sure that all hon. Members will have been moved by the enormously high regard in which he was clearly held when he left Hong Kong on Monday. If hon. Members are able to offer a fraction of the public service that he has given, we will all be doing extremely well.
It is a tradition of the House to offer hon. Members a Cook's tour of one's constituency. I will not disappoint, but hon. Members may want to be spared an account of every one of its 82 villages and towns. The town of Witney nestles in the heart of West Oxfordshire. It is a seat marked by history, tradition and commitment to innovation: fitting themes when we consider the implications of today's Budget statement.
Many hon. Members will be familiar with the towns in my constituency, not least Burford and Woodstock. I trust that many will have visited the area; tourism is one of the most important industries in West Oxfordshire. Indeed, it was from the borough of Woodstock and Burford that the electors of 1640 returned Speaker Lenthall, who was of course a keen defender of the rights of Parliament and would surely have had strong views about the Budget leaks to the press.
Tradition and evolution, two watchwords of Conservatism, are a way of life in West Oxfordshire. The importance of the rural economy, of farming, and of those who are the stewards of our countryside, is of equal value today as it was when Speaker Lenthall was elected more than 350 years ago. The landscape has evolved as a product of a vital partnership between the land and those who care for it.
My constituents regard themselves as living in a rural community and are wary of those who would seek to impose on their way of life a set of urban values. It was Disraeli who warned of political parties that:attack the institutions of the country under the name of reform, and make war on the manners and customs of the people of this country under the pretext of progress.There is a view that recent moves in the name of progress and reform to prohibit the legitimate pursuit of country sports are not only ill considered but a reflection of those who do not understand why our countryside takes the shape and form that it does.
344 The enormous environmental, economic and employment consequences, about which the Chancellor has had so much to say today, that will, none the less, result from a ban on hunting, concern many in my constituency. I do not hunt, but I have become aware of the role that hunting plays in the life of the people of West Oxfordshire.
Our hunt keeps bridleways open, maintains hedges and fences, and plants and manages woodland. For example, on one farm alone in the Heythrop hunting country of Oxfordshire, 12 acres of covets and three miles of hedgerows have been established around arable fields. That would not have happened without hunting.
Those developments have led directly to the development of important new wildlife habitats that enhance and benefit native species. It is hard to predict how the landscape would change under the absence of hunting interests, but the risks are all too clear. Taking risks, many of them not properly calculated, is something that the Government have been prepared to do at every opportunity. I urge them to think hard before taking risks that will destroy our natural heritage.
Witney is a spirited example of the importance to our economy of innovation and enterprise. It is therefore fitting that I am able to address the House on the day of the Budget. Witney enjoys one of the lowest unemployment records in the country, at about 1½ per cent. It need not have been such a success story, but enterprise and the determination to succeed have led to an extraordinary transformation in the employment prospects for my constituents.
Amid its idyllic countryside, Witney sports some of the most advanced industries in the United Kingdom today: firms such as Oxford Instruments and Objex Electronics. Business parks abound, and scores of small and medium-sized enterprises are set up every month. It is a legitimate exercise for my constituents to ask what the Budget will do for them.
I have said that I will try to keep my remarks uncontroversial, but as the Prime Minister said in his maiden speech:You may wonder, Mr. Speaker, why, contrary to tradition, some maiden speeches have been controversial. Perhaps it is pertinent to ask in what sense they can be controversial … What impels us to speak our minds is the sense of urgency."—[Offical Report, 6 July 1983; Vol. 45, c. 315.]It is a sense of urgency that impels me to speak. This Government have three modes of procedure. The first is that of precipitate haste, demonstrated by the manner in which operational control of interest rates was gifted to the Bank of England without consultation in the House. The second is that of recurring reference to working parties and reviews. The third mode, as we have seen strikingly illustrated today, is by leaking to the press before coming to the House. It is a shame that the high moral tone adopted by Labour Members in opposition was not carried forward when they moved into government.
As for the Budget leaks today, if it is proven that they came from Treasury officials, hon. Members will undoubtedly look forward to what action the Government will take. Will they, like Dalton, recognise that theymust make full and frank admissionof their responsibility—and express … apologies to the House."?I fear that they will not.
345 Today's Budget undoubtedly falls into the category of precipitate haste. I do not know whether Labour Members have had the opportunity to read the excellent play by David Hare, "The Absence of War". The would-be Prime Minister tells his spin doctorA politician can only deal with his inheritance. With the situation as it arrives.The constituents of Witney are at a loss to understand why the Labour Government need an emergency Budget when, according to just about every economic indicator available, their inheritance demonstrates that in the past 40 years Britain has never had it so good. Unemployment is falling, taxes are down, interest rates are down, mortgage levels are down, and growth rates are being continually revised upwards.
The Chancellor may have come to the House with a brand spanking new Budget box, but it was still red, and it was a box of old Labour tricks, albeit with a hint of new Labour characteristics.
Of course, we welcome the cuts in corporation tax, which the Chancellor said were made to ensure that the United Kingdom was the number one destination for foreign investment. I am awfully sorry to tell him that it already is the number one destination.
There have been all kinds of pretext for the changes that have been made today. Under the pretext of stability, progress, and in the name of reform, the Budget has at its centrepiece, like all Labour Budgets before it, the desire to raise taxes. It has introduced at least 10 new taxes—if we count the windfall tax as a single tax.
At best, Labour has breached the spirit of its general election pledge not to increase the tax burden on the middle classes. The urgency, the emergency today, is one manufactured at No. 11 Downing street. There is no emergency. Such a state exists only because the Chancellor has told us that he must have an emergency Budget. There are times when one is necessary; we needed one in 1979 because the country was broke. Then, tax rates were at 83 per cent. and 33 per cent. and inflation was out of control.
Those are not the circumstances of today, so how does Labour deal with its inheritance? It deals with it by raising taxes in the name of welfare to work, which is a perfectly laudable and proper aim, but how does it plan to achieve that end? By tax—an indiscriminate and unfair tax since almost none of it will be paid by the corporate sector, because one way or another the windfall tax will be passed on to consumers, ordinary people. It will hit pensioners extremely hard. In fact, 24 million households will find themselves paying an extra £200 a year for that new tax. That will, of course, hit pensioner households harder than anyone else because their incomes tend to be lower. Many of the shares of the companies that have been taxed today are held in some form by pensioners. The logic of the tax disguises the focus of its attack—the most vulnerable in our society. It is misguided, unfair and it is ordinary people who will suffer the most. Like all tax, it will hurt.
The changes announced to advance corporation tax represent yet another step by which everyone who was led to believe that Labour would not raise taxes will now realise that he was misled. Labour's plans will create 346 instability in the pension market and see the transfer of investment out of the United Kingdom. It will undoubtedly lead to individuals picking up the bill.
Far from the Chancellor's claim that the Budget concentrates on laying the foundations of tomorrow's wealth, it lays the foundations for dismantling Britain's wealth creation. That tax change, far from encouraging a long-term perspective in business investment, as Labour maintains, will simply increase the cost of capital for investment financed by new equity and will increase the overall level of taxation. The tax, ironically, reduces the investment that the Chancellor said that he was so keen to increase.
Other new taxes were also announced. Taxes will be imposed on those who would own their own homes. People will be taxed when they buy a home, through increased stamp duty. They will be taxed when they try to pay for their home because the level of mortgage interest relief at source will also be reduced. Tax on petrol will be a particular blow to the people of Witney and all those who live in rural communities.
This political Budget is not justified by a squandered inheritance, such as we found in 1979. This Budget was, however, utterly predictable—even if it had not been leaked—and its spirit runs according to the true vein of old Labour. The public were led to believe that there would be no new taxes. Small businesses were led to believe that Labour would understand their needs. Large companies were led to believe that Labour was a safe option and would not interfere. Yet in every pore and sinew of the Budget, Labour has shown its basic instinct: to tax and tax again. Ten new taxes will raise £10 billion. That has not been done because the Government are trying to protect the country in a recession. We raised taxes to protect public services, but the Budget reveals good old Labour policies of tax and spend. If the Labour Government will put up taxes now, when the economy is doing this well, what the heck will they do when the economy meets a downturn?
The Labour party, this new Labour party, may have abandoned the heady aspirations it had when it last enjoyed such a substantial majority in 1945. It may be extremely arrogant and smug at the moment. Collectivism has been banished, but new Labour is no longer the intellectual powerhouse for socialist beliefs. Today is not the brave new world to which the electors looked forward or the new Jerusalem that they were led to expect; instead, we have witnessed the beginning of a return to the misery of tax, spend and subsidy. It is a Budget for deferred misery.
I am a Conservative because I believe that, at its best, Conservatism is the most effective way in which to create real opportunity, real jobs and a better way of life for our country. In practice, socialism, despite its virtuous ideals, has always resulted in a levelling down. In the name of reform, it undermines stability. In the name of progress, it undermines achievement.
Today's Budget does little to build on the stability that Britain has created or to enhance the achievements of our people in the past 18 years. The Chancellor says that it is a Budget for investment, work and for the future, but the train that left the platform this afternoon is inherently unstable. The Budget will create artificial jobs and throw many out of work. It institutes subsidy in place of enterprise and competition. It has at its heart the instinct of tax and tax again.
347 That the Labour party spent the election assuring the public that Britain had had enough of tax rises was like the kettle calling the pot black. Its prospectus and its statements today have revealed that that was not the case. Today, we see the value of those assurances. We can only predict that, like all houses built on sand, the economy will become inherently unstable.
§ Ms Diane Abbott (Hackney, North and Stoke Newington)
There was much to welcome in the Budget. Any remaining Conservative supporters who heard the pathetic attempts of the Conservative party in Parliament to criticise it with bogus allegations of leaks would be forced to weep. It is a sign of how low the party has sunk that it is unable to mount a sustained, serious attack on the Budget.
I want to discuss reform of the welfare state, which is probably the most important Budget theme for people who live in inner-city constituencies such as mine. My right hon. Friend the Chancellor of the Exchequer made much in his excellent speech of his aspiration to build a welfare state for the 21st century. No one who has had dealings with the welfare state, whether as a claimant or through trying to help claimants, could deny that it is creaking and in urgent need of overhaul. It is degrading, inefficient and laden with bureaucracy. We can all think of ways in which it could be reformed and of improvements in the way in which we deliver benefits. To cite one, the Benefits Agency has had a series of targets imposed on it by Government. A benefit take-up target is long overdue. How can it call itself effective if it does not ensure as near 100 per cent. take-up as possible? Some benefits have a very low take-up rate.
I want to focus on the programmes that have been heralded today. First, there are my right hon. Friend's plans for lone parents. Much of the political debate about what politicians and society should do about lone parents is based on a body of prejudice and misinformation. The prejudiced and biased way in which the media have presented the debate down the years has meant that an unnecessarily and misleadingly mechanistic model of why young women become lone parents has seeped into the political consciousness. It has almost become the accepted wisdom that women become lone parents of their own free will, to get extra benefits and a new council flat. My constituency may have the largest proportion of single parents in the country, and anyone who thinks that women become single parents to get council flats should see some of the ones that they occupy in Hackney.
The argument that women become single parents to get extra benefits—if it is not made by Conservative Members, it is often put by the tabloid press—asks us to accept that when young men and women get together on Saturday night and Sunday morning, the key factor in their decision whether to have sex is the thought that if the woman gets pregnant, she will get an extra £6.50 a week income support. Stated in those bald terms, the proposition is absurd. I make that point because if we fall prey to a mechanistic model of why women in the inner-city areas of Hackney, Manchester, Glasgow and the north-east become single parents, there is a danger that we shall fall prey to the reverse analysis that if we take away benefit, women will either not have children or will rush out to work.
348 I warn the House that I shall make this point over and over again in this Parliament. The reasons why poor young women in the inner city become single parents over and over again, often by different men, are complex and are not subject to mechanistic remedies, whether through the benefits system or through the welfare system. They have children because they are careless. Members of Parliament are not people to lecture others about being careless about sex. Single mothers have children because they believe that this time, the man will stay. A single mother may do it because she feels that if she has the child and dresses it up in the best that Mothercare can sell, she may, for the first time in her life, be someone. That may seen silly to hon. Members on the green leather Benches of this august Chamber, but unless we as legislators try genuinely to understand social conditions in the inner city and what drives young women to have, and keep having, children, we shall never address the problem.
My right hon. Friend the Chancellor's proposals include a package of help for lone parents. We are offering them special interviews, access to the Internet for more information about jobs, fast-track help with family credit and the Child Support Agency, 50,000 training places, after-school clubs funded by lottery money and more money for the CSA.
I object to none of those things in themselves, but let us be clear. It would be unfortunate if the Government got carried away by the assumption that young single-parent mothers do not go out to work because they do not know how much better off they would be if they did. A young single-parent mother has only to turn on the television or experience her child coming back from school and asking for trainers that cost the equivalent of a week's benefit to know how much better off she would be if she worked. While I do not decry or oppose giving single mothers interviews or having them sit in front of the computers so that they can find jobs on the Internet, the fundamental cause of their not going out to work is not lack of understanding of how much better off they and their children would be if they worked, but issues such as child care.
Let us consider some of the other remedies advanced by my right hon. Friend the Chancellor. The information presented with the Budget talks about giving single-parent mothers who go to special interviews fast-track help with family credit and the Child Support Agency. If it is possible to speed up such access for some single-parent mothers, we should in justice and fairness, speed it up for everyone. It is not fair to offer swift and efficient service to some people, who will go through the rigmarole of interviews sitting in front of a computer and plugging into the Internet, while offering a slow process to others.
We also talk about making 50,000 training places available for child care workers. I am not opposed to that, but again I put it to the Government that the problem with child care, and I speak with some feeling having brought up a child on my own for the past five years and nine months, is not a lack of trained child care workers, but the lack of availability of child care facilities, whether in the workplace or in the community. Training people for jobs in nurseries that have not been built or whose fees my constituents could not afford to pay will not meet the needs of my constituents. We also talk about giving extra money to the Child Support Agency. That is fine and will help some mothers, but it specifically will not help mothers on benefit.
349 There is nothing in the package that I disagree with, but until the economy or Treasury thinking reaches a point where we are prepared to put real money into a genuine national strategy to produce affordable child care, we shall still have the problem of lone mothers being out of work, not because they are lazy or want to watch daytime television rather than working, but partly because the jobs are not there and partly because of problems with child care.
My hon. Friends have talked about after-school clubs; they are all well and good, but, as I know, they do not help in the holidays. The poorest single mothers will enter the work force and find jobs in shops and service industries that involve working nights and split shifts; it is precisely those single mothers who need elaborate child care arrangements. I do not see how after-school clubs will, in themselves, meet the child care needs of women who are increasingly working in retail, cleaning and service industries in which they are required to work nights, or strange shifts involving two days one week and one day another week. No normal nursery can meet those requirements.
I should be happy to stand here today and say that the measures outlined in the Budget will meet the child care needs of my constituents this year, next year or even within the five-year parliamentary term, but meeting the child care requirements of the poorest women such as those I represent in Hackney requires more money and more thought than has been forthcoming today. As the labour market becomes more complex, so women's child care needs become more complex.
Alongside the package of measures introduced today with much fanfare are the documents that go with the Budget. As I read them, I discover that we plan to go ahead with the cut in the lone parent family premium. We also plan to go ahead and cut the special rate of child benefit for lone parents. I very much regret that we have not felt able to reverse those Tory measures, which were so widely condemned by all the voluntary groups and all the groups that work with single parents. We shall achieve nothing by allowing single parents to remain poor.
I know that Conservative Members do not agree, but the reason for the supplement for single parents on income support and the reason for the special child benefit rate for single parents is that it is more expensive to be a single parent. If we cut the special money for single parents as we plan to do, we shall be forcing single-parent mothers into poverty. It would have been better if we had allowed our positive measures for single parents to kick in before we went ahead and implemented the Tory cuts.
Conservative Members have a lot to say about the glorious way in which they handled the economy and their marvellous economic legacy. It was a marvellous legacy for some, but many people, including many of my constituents, were left out of the economic legacy. Of course, I support my right hon. Friend the Chancellor's proposals for growth and his support for business, but I do not want a society in which the gulf between my constituents in Hackney and the people who did well out of the Tory years grows wider.
I also wish to mention the welfare-to-work package as it impacts on young people. I welcome the proposals: youth unemployment is one of the most serious problems 350 facing us in Britain today. But the proposals need much thought and work. The House—certainly Labour Members—will not need me to point out that the evidence shows that when one tries to deal with unemployment by offering employers subsidies, those employers, if allowed, simply substitute existing jobs for jobs for which they can receive a subsidy. I want my hon. Friends at the Treasury to introduce concrete measures to ensure that employer subsidies do not result in job substitution.
The welfare-to-work proposals must ensure that black and ethnic minority youngsters get their fair share of jobs—that is important for inner-city areas. In inner London, two thirds of young males between the ages of 18 and 25 are unemployed. That has serious implications for the fabric of society, the breakdown of families and issues such as crime. Those youngsters will not get back into work simply by wishing it; structural measures will have to be in place so that every facet of the welfare-to-work programme—whether it is the employer base, the voluntary sector or the training element—contains justice and equal opportunities for all our young people.
As we approach the millennium, we must all agree that our welfare state needs reforming. However, we can have an effective welfare-to-work system or we can save money; we cannot have both. Occasionally I get the impression that some of my hon. Friends think that welfare to work is an easy way of containing the welfare bill. Genuine welfare to work, as demonstrated in the United States and other countries, costs more in the short term. As the months unfold and we put flesh on the measures in the Budget speech, it is important that we introduce the structural measures to meet the requirements that I have mentioned.
It would be tragic if, having been elected with the biggest majority this century, our only legacy in the area of welfare reform was to put through the cuts in expenditure that the Conservatives never had the courage to implement. I am all for genuine welfare reform, but it is not easy to implement genuine welfare reform and genuine welfare-to-work programmes. I hope that when my hon. Friends in the Treasury put the flesh on the bones of the proposals in the coming months, they will bear my comments in mind.
§ 7.6 pm
§ Mr. Brian Cotter (Weston-super-Mare)
I welcome this opportunity to make my maiden speech in today's important Budget debate and I thank you, Mr. Deputy Speaker, for calling me. I congratulate the hon. Member for Eastwood (Mr. Murphy) on his interesting maiden speech and I can assure him that there are plenty of conveniences in Weston-super-Mare.
I pay tribute to my predecessor, Sir Jerry Wiggin, who represented Weston-super-Mare for 26 years. He was notable for his strong and uncompromising views and his tenacity in representing the constituency for that length of time. I should particularly mention Sir Jerry's long service; I am always ready to rise to a challenge and it will be my aim to reach or even surpass his achievement—God willing.
Weston-super-Mare has enormous charm, and I thoroughly recommend it to my colleagues in the House. It has a mixture of old charm and modern technology. The sea front is almost without modern high-rise buildings— 351 a rare thing now. It has a pier to rival any other, and many other attractive seaside features. We soon hope to attract even more money from tourists at a new casino—perhaps colleagues might care to have a dabble. A traditional yet forward-looking resort, it is one of the first in the country to get on to the Internet.
Weston-super-Mare is full of small businesses, with hotels, guest houses, a great variety of shops—many small and privately owned—manufacturing companies, distributors, and information technology and engineering firms. That is why I am particularly glad to be the Liberal Democrat small business spokesman, especially as I have a background as managing director of a small manufacturing company.
This Budget should be about strengthening the economy and creating jobs; I should like to plead the cause of small businesses. Small businesses account for nearly 40 per cent. of total United Kingdom turnover and employ 50 per cent. of the total private sector work force. If just one job were created in every small business, it would solve the unemployment problem overnight. I am especially glad to be making my maiden speech on business matters, because the previous Liberal Member of Parliament for Weston-super-Mare, Mr. Frank Murrell, was also in business; in his maiden speech on 30 May 1924, he spoke on industrial councils and about minimising unemployment—a subject still current today.
The small business field has had a tough time and now is the time to revitalise and support it. My colleagues and I warmly welcome the Government's proposed late payment Bill and I shall do all I can to work with the Government to ensure that a sound Bill is passed. That may help to answer the concern expressed earlier about cash flow in small businesses. Another approach we have long argued for is the establishment of regional development agencies—a proposal now in consultation. I am glad that one of the agencies' main aims will be to support the small business sector.
What do small businesses need that the Government or devolved agencies can provide? They need regionally based economic development and investment plans involving local people to provide opportunities for growth. Businesses need a fairer rating system, collected locally and with the receipts used locally. In the past, many attempts have been made to give support to, or establish schemes of various sorts for, small businesses, but, in my experience as a small business man, such schemes have frequently been short term and variable throughout the country. In addition, much money has been wasted by duplication of effort and vast bureaucracies and not enough has reached the intended point of delivery. That is why the whole of the past approach to giving the support and help that businesses need must be re-examined and slimmed down—concentrated, not duplicated. We need to use the best practice, one-stop-shop approach. A serious reassessment of the whole business support system is needed and I hope that the Government will consider doing that.
The Government must now realise that we are at an economic crossroads—a moment of decision when we can either push the economy forward or take a step back. It is not a difficult decision to make. It is now that we must capitalise on our skills and go up-market into high-value-added goods and high-skilled production. That means valuing our businesses, both large and small.
352 Large firms are shifting from being conglomerate businesses to being slimline enterprises, and small businesses are playing a bigger role as suppliers of specialist services. Small firms represent the bulk of employment in Great Britain, yet we are still failing to give them the structures and support that they need. Part of that support can be achieved by giving businesses stability. We have to reduce the short-termism in Britain's economic cycle. The handing over of some responsibility to the Bank of England is a step in the right direction, but we must also allow local authorities to raise private finance for investment in local communities.
Small businesses require stable and sustainable growth in a low-inflation environment, with an independent bank and a realistic inflation target. Long-term investment in this country's productive capabilities and responsible fiscal management are needed to ensure that that comes about. We can no longer put up with politically motivated tax cuts and the continuation of the boom-bust cycle. However, I welcome the investment help for small businesses announced in the Budget.
The Budget must be about creating stability in our economy and putting more money into things that matter—education and health. Hard decisions may have to be taken, but let us take them—the interests of the people of this country come first. For the sake of our future generations, we cannot squander the opportunity to get our education system back on track and to provide everybody with high-quality care.
However, today's Budget means that, once again, taxes are being raised by the back door. The windfall tax will inevitably hit consumers and pension fund holders; in addition, there is still a likelihood of higher council taxes. With the higher inflation forecast, that is a cause of great concern. We must also be concerned about the raiding of the contingency fund. Nevertheless, many of the intentions in the Budget are good and, with my small business hat on, I welcome the measures taken in that sector today.
§ Mrs. Ann Keen (Brentford and Isleworth)
Thank you, Mr. Deputy Speaker, for giving me the privilege of making my maiden speech on such a memorable day—the new Labour Government's Budget day. I am indeed honoured. I congratulate the hon. Member for Weston-super-Mare (Mr. Cotter) on most of his comments, especially those relating to small businesses, but I disagree with the latter part of his speech.
I start by thanking all the members of staff who work within the Palace of Westminster. They have welcomed all the new Members and I thank them for their patience, their knowledge and their—at times, much-needed—sense of humour. I congratulate every one of them. My hon. Friend the Member for Crawley (Laura Moffatt) and I are the first two nurses to enter the House of Commons as Members of Parliament, but we are, of course, not the first nurses to enter the Palace. Again, I congratulate my colleagues in the nursing profession who, for many years, have worked in the House of Commons caring for hon. Members.
I thank the people of Brentford and Isleworth for giving me the privilege and honour of representing them in the House. I am proud to have been the Labour candidate for Brentford and Isleworth in the 1987 and 1992 general elections, so it is a great honour that I am now here as the elected Member of Parliament.
353 It is traditional to refer to one's predecessors in one's maiden speech. When I first fought the seat in 1987, the constituency was represented by Sir Barney Hayhoe, now Lord Hayhoe, who represented the constituency for over 20 years and was well respected both in the House and in the constituency. He retired in 1992 and was followed by Nirj Deva. Now, I welcome this opportunity to represent my constituency and I look forward to being in the House for some time.
The constituency of Brentford and Isleworth is a diverse one, both culturally and economically. We celebrate that diversity and, having been the candidate and now the Member of Parliament, I have had the privilege of being welcomed into many cultures. I have much to learn, but I have been welcomed as a member of a family. What is so good about my constituency is that we are all one.
The constituency starts at Hounslow. It contains the great international airport at Heathrow and I look forward to an integrated transport system that will get many of my colleagues out of Heathrow and into our great capital city with far greater ease than has hitherto been the case. It contains the historic town of Isleworth as well as Osterley, Brentford, where I am a resident, and Chiswick. We have many great parks—Syon park, Osterley park, Chiswick house and Gunnersbury park. They are the lungs that supply our air, and fight the pollution from the airport—one cannot have something that makes such good economic sense without suffering some disadvantages, but I hope that the new Labour Government will be looking at that.
Chiswick is, of course, famous for Hogarth, but I am extremely proud of all my constituents—they are all fairly famous. One of them has today reached the quarter finals at Wimbledon—Tim Henman. I know that the House would want me to send our congratulations to him—and, by the way, I am not doing anything in particular next Sunday!
The River Thames, the boat race, the Strand on the Green—these are all good features of the constituency which illustrate its diversity. Many companies have decided to locate their multinational headquarters in what was the golden mile of Brentford. I am fortunate also to have a brewery—my father is proud of me—known as Fuller's brewery. As a good constituency Member, I am obliged to sample the goods to make sure that they are all right for my constituents.
We also have Brentford football club, which should have gone up to the first division in May, but did not quite make it, sad to say. I think the club should be in the Premier League—I am sure that it will be one day.
The West Middlesex University hospital and its staff certainly are in the premier league. Its health workers, and those of the trust, show all the skills and commitment that entitle them to a place in the premier league.
Unfortunately, the hospital building is not so good. I look forward to an announcement soon that a start will be made on rebuilding the hospital. I first worked there in 1985; some of the patients have told me that they would sooner spend the night on a trolley than in one of the wards, which all the experts say are a disgrace.
We need to rebuild our health service. I am proud to represent the community nursing profession in the House and to be able to express my points of view about our 354 great health service, which has taken such a beating over the past 18 years. I congratulate the Chancellor on his announcements today. I am sure that all health workers, patients and families will also congratulate him on an excellent Budget which will open the door to a breath of freedom for all the people of this country.
Health care is not delivered by hospitals, doctors, nurses or paramedic teams: it is delivered by what the Budget provides for. The fact is that health is about poverty, housing, access to transport, and the safety of the working environment. It is also about incomes derived from work. There is no question but that poverty and ill health are linked. The Labour Government in 1979 commissioned the Black report which unfortunately was ignored by the Conservatives for the next 18 years. They refused to acknowledge the links between poverty and ill-health.
My football team did not nearly get to the first division by luck; it nearly got there by investment. Its manager, David Webb, invested in the youth side. Today, our Chancellor is investing in our youth. I welcome the opportunity to go to my constituency tomorrow and see the young people there.
As a district nurse during the past 18 years, I have sometimes felt ashamed when I have gone into people's homes in the winter. There have been times when it has been so cold that I have not even managed to get the car engine hot enough to feel warm in my car, yet I know that when people see me get out of the car they put on their gas heaters. Their houses are still cold when I go in, though, and I have been embarrassed and ashamed to learn that elderly people, who gave my generation everything that we have, have had to live in such conditions. Today marks the start—it is long overdue—of caring for that generation with dignity. These people have told me that they face a choice between eating and heating. "Old and cold" is not just a slogan. We must quickly begin to tackle the problem. We have the highest incidence of hypothermia in Europe, and that must end soon.
There is an air of freedom about everything that we have been doing since 1 May, and I am proud to be part of it. Caring makes economic sense. The first duty of a nurse is to be the patient's advocate. I have always striven to be that, regardless of people's age, race, religion, sexuality or disability. The first duty of a Member of Parliament is to be an advocate for one's constituents; similarly, I intend to be that, regardless of their race, age, religion, sexuality or disability. I look forward to learning much from, and contributing much to, the House of Commons.
§ Mr. William Ross (East Londonderry)
This has been an interesting day—not just the speech by the Chancellor on the first Labour Budget for 18 years, but four maiden speeches, too. I have enjoyed all of them. Each new Member has shown a commitment not just to constituents but to serving the House.
I came here first in February 1974. I looked around me at the time and wondered how long I would be here for. I am rather surprised to find myself still in possession of a seat in 1997. They seem to keep altering the boundaries in a serious effort to ensure that I always win. In any case, I hope that the maiden speakers will enjoy their time here 355 as much as I have. It is a wonderful place to be, not just a great honour but a great burden. Anyone who comes here as a Member of Parliament must speak up for constituents and seek their welfare. Each and every one of us came here because we believed in something, and we do not fulfil our role if we do not pursue the belief which brought us here in the first place.
Those who have been here for some time will know exactly what my views are. Whether or not they are popular, they are always enunciated in the House to any hon. Member who cares to listen.
I listened with interest to the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) talking about child care. I was rather surprised that she neglected to draw attention to the 16-hour rule relaxation, and even more surprised that she did not draw attention to the real problems experienced by nursery teachers, whose contracts of employment with schools mean that they are employed only in term time. Many other workers, mainly women, are similarly affected. Once the term is over, they find themselves denied social security benefits.
I understand that the social security commissioners have looked into the matter, and some cases are under consideration at the moment. Although the previous Government were not prepared to deal with the problem, I hope that this Administration will try to reach a resolution that takes into account the needs of these women, many of whom are qualified in child care. When summer comes round, they find themselves turfed out the door and they do not get a penny until school resumes. I hope that the woman Minister whom I see on the Front Bench, the hon. Member for Bristol, South (Dawn Primarolo), will take note of what I have said.
I also listened with considerable interest to the Chancellor's speech. It was interesting and wide ranging, and it was designed to endear him to some of his Back Benchers. I am sure that he will be aware that economics is the dismal science, and that if a Chancellor is popular with his own lot when he sits down, he is almost certain to have done something wrong.
I well recall sitting on this Bench—Ulster Unionist Members do not cross the Floor when Governments change, so we are a permanent fixture on the Opposition side—the last time that the House echoed with cheers after a Chancellor delivered a Budget. I hope that the present Chancellor recalls that. I believe that it was the 1986 or 1987 Budget—that Budget in which income tax was cut by 2p and cohabiting couples were allowed to buy their houses and obtain the full benefit of the tax relief until August. The result was not quite what the cheers suggested on the day.
I hope, therefore, that the present Chancellor keeps a fairly dismal eye on the economy as his policy develops, taking a properly sceptical view of the cheers and doing in time what he feels needs to be done. It would be in the interests of no hon. Member or constituent if the economy went wrong.
I have listened with interest to the debate on the windfall tax—a tax which seems to find so much favour in some quarters. We are told that the windfall tax is a one-off, but it seems to me to be spread over a few years. Therefore, like most taxes, it will have downstream consequences and an ever-growing tail of expenditure, which will cause considerable difficulties for the Chancellor and other Ministers in future years.
356 I believe that the only honest way to raise tax to tackle a difficult situation is by means of income tax. It is immediate, quick and effective. I am not sure that to grab a windfall tax just because it is handy is the best way to proceed and I fear that, in the long term, it will be proven not to have been a wise way to proceed.
However, I do welcome the policy that the Chancellor set out today on the public sector borrowing requirement. He pointed out a problem that for many years has worried those who take an interest in these matters—that the interest on the public debt is now the enormous sum of £25 billion a year. The idea that we are paying out that money year after year and getting nothing back has always horrified me.
The Chancellor seemed, almost for the first time I think, to hint that he intended so to control expenditure and raise revenues that he would be able to repay national debt, and that the interest charges would eventually disappear. Whether he is doing that just to keep within the Maastricht criteria is of no great importance to me. That debate is under way and is bound to lead to ferocious arguments in the House.
If the Chancellor can do what he is setting out to do—keep inflation low—there is merit in that in itself. We should keep all our financial affairs under firm control because, when those controls are removed, we always find it much easier to open Pandora's box than to get it closed again. In my time in the House, I have been through two major recessions. I do not believe that any hon. Member wants another—I certainly do not.
I confess that I have a very real problem whenever I hear a Chancellor say that he wants to borrow only to invest. I find it difficult to grasp the concept of borrowing or tax revenues being targeted at a particular element, given the global nature of our taxation system, tied in with borrowing and the way in which we spend revenues. The Chancellor will find it very difficult to convince anyone that if he raises £10 billion, £15 billion or £20 billion a year, that money will go into investment, which will pay for itself in a few years. He is going down a road that could lead to inflation, and I hope that he will carefully reconsider the words that he used.
When Budgets were moved from spring to autumn, some hon. Members drew attention to potential problems, and we are interested to note that the wheel has turned full circle. The present Chancellor has done what the Conservatives could not have brought themselves to do—he has admitted that it was a mistake, and we are now returning to a spring Budget. We were not told—I hope that we shall be told at the end of the debate—whether it is intended that there will also be a financial statement in the autumn, so that we may have a full-blown debate in the autumn, as used to be the case. That would give us not one, but two bites of the financial cherry a year, enabling us to hold the Government to account for the way in which they handle the revenues and expenditures of the nation during the year.
Interestingly, this time we shall have two Budgets within a year. In the 1970s, we had two, or even three, Budgets in a year. I hope that the change is not a precursor to returning to that mode of conducting our affairs. One Budget a year is quite sufficient. Although, understandably, this will be a short year, I hope that the Government will restrict themselves to one Budget a year for the remainder of this Parliament.
357 I welcome the expenditure on education, the national health service and housing, but I point out to the Minister that, in the present year's expenditure plans, planned housing expenditure for Northern Ireland—the part of the kingdom which I represent—has received a substantial reduction on last year's figure. Do the Government intend to reverse that trend? Great need exists, especially for the refurbishment and repair of dwellings, and for housing grants for those purposes.
Ulster Unionist Members welcome the help for small businesses on capital investment allowances and we welcome the reduction of VAT on fuel. However, I hope that the Government will examine the other burdens that are carried by retail businesses especially. In this case, I am referring to Northern Ireland, in that we have just had a complete rates revaluation, which is bearing very heavily on many businesses. There is a very short tapering-in period and it is limited to relatively low valuations.
The revaluation is bearing especially heavily on small businesses in town centres, for a variety of reasons. I hope that in future we shall have a longer tapering-in period and that rates revaluations will take place at intervals of five years, not 10 years, as previously. Ten years is far too long an interval.
I hope that valuation officers will remember that the increase in rental values that we are witnessing is very largely due not to the building or its situation, but to the capacity of the people who run the business. We all know of rundown businesses in small towns or villages that have improved when a sharp, capable business man has been brought in to run them. The quality of the shopping improves, but, five or 10 years later, they find themselves clobbered by the rates, whereas less able business men get away with a much smaller increase. That trend should be reversed.
In Northern Ireland, we have car parks controlled by the Department of the Environment. We are told that full-cost recovery is necessary. I have never been able to understand what elements the Department of the Environment was taking into account in calculating the full-cost recovery for the economic return, but there must be a scale laid down somewhere. A car park needs to be built only once and I cannot see why car park charges must increase.
The experience of retailers immediately adjacent to car parks is that even a relatively small increase in car parking charges can have an immense effect on those retailers' turnover because, within a week, people move to shopping centres outside towns. Very often, those customers do not return for a long time.
I hope that the Government will consider that problem, because we want to keep the commercial centres of many small towns, villages and, indeed, the larger towns in Northern Ireland as vibrant and thriving as they currently are. I have travelled through many towns in England, Wales and Scotland, and I know that, where there are out-of-town shopping malls, the town centre dies and the entire trade of the area passes into the hands of national multiples, which drain money away from the local area in large quantities. We want to preserve small local businesses and create an environment in which they can not only compete but grow and create real competition for the multiples.
358 My next point is more national in character. The Chancellor seems to be trying to increase the sum available for research and development, and for investment. I welcome the reduction in the tax burden in terms of investment, but there is another aspect of industrial regeneration—research and development in aerospace, defence and many other areas—where we invest insufficient money compared with our competitors in Europe, the far east and north America. We must act urgently to encourage our manufacturing base, especially those firms at the leading edges of technology, to invest more money in research and development.
Given the long lead times from when research and development take place until a product is sold, not only in this nation but across the world—it can take 10 or 15 years—people need tremendous encouragement if they are to invest so far ahead. The Government must keep a close eye on the matter so that the money apparently earmarked for research and development is not filched away and then given to shareholders under some pretext a year or two later. We must find a way to ensure that research and development becomes so acceptable to our major manufacturing industries that they go ahead and spend money on it. That is where the jobs will be created—not immediately, but for boys and girls who are now in their teens or at primary school. If they are to have high incomes and if this country is to have wealth-creating industries, we must look at that aspect of industrial regeneration.
There is supposed to be a two-way street with the United States in defence procurement. It might be a two-way street, but so far as I can see, five lanes seem to come from America while only half a lane goes there from the United Kingdom. The Government should exert a little more pressure to ensure that at least two lanes go back across the Atlantic so that we benefit from that.
The Chancellor spoke about the environment. In the current year, environmental services in Northern Ireland are booked for a 13.6 per cent. reduction. We shall not improve the environment by chopping off the money invested in it at that level; the Government should look at that matter again carefully.
I wish to register with the Government not only my deep concern about, but my absolute opposition to, what is happening to fuel prices. Those who live in or adjacent to large urban conurbations have alternatives to the private car, whereas those who live in Northern Ireland, Wales, Scotland or the west country have no alternative. In those areas, a car is not a luxury; it is an absolute essential. It is essential not only for the man of the house to reach his work but for the wife, mother and other people living in the dwelling so that they can get out, because they are often miles from anywhere.
I live a mile from my nearest village and we rarely walk there. Nowadays, few people walk that far to do their shopping, let alone carry it home; they use a car. A car is essential. People who live on the outskirts of London can hop on the underground or train and be in the west end in half an hour; shopping is much easier. The Government are far too willing to behave as though the whole country were urban and to close their eyes to the real dangers and problems of people in rural areas.
§ Mr. John Hayes (South Holland and The Deepings)
Does the hon. Gentleman agree that, before the car, 359 people in those types of communities were restricted to their communities? To increase the cost of car travel for people in rural areas would limit people to travelling only short distances to hamlets and villages, which would be sad. Today was a bad step in that direction.
§ Mr. Ross
Moreover, the shopping facilities enjoyed by the pre-car population no longer exist. They have disappeared as a result of the car, so this is a two-edged sword to some extent. People now want choice and they must go to large towns to get it.
I am also deeply concerned about the effect of steadily increasing taxes on tobacco. I do not smoke—thank God. Last year, Customs and Excise admitted—the Chancellor gave a similar figure today—a loss of some £560 million in tobacco tax due to smuggling and cross-border shopping. In the Budget debate earlier this year, Northern Ireland Members drew attention to the fact that hand-rolling tobacco can leave Gallaher's factory in Ballymena in Northern Ireland, go to the continent and, within two weeks, be sold on stalls in Northern Ireland for little or nothing. That happens to many other tobacco products, too. The Tobacco Alliance believes that the lost revenue is not less than £600 million but nearer £1.6 billion a year.
Raising taxes on tobacco can be counterproductive. I wonder whether we are trying to raise money from tobacco for the Exchequer or whether we are raising taxes, as some would allege, for health purposes. I should be happy if nobody smoked because it is a dangerous occupation. We know that it causes lung cancer and all sorts of problems, but it is legal and people do it. If we want to reduce smoking on health grounds, we should try other ways of doing it rather than constantly raising revenue from tobacco, which simply proves counterproductive.
We must also consider whether the concept of green taxes—taxing petrol, for example—is counterproductive. We now have a tax on the dumping of waste. Northern Ireland has a problem with certain types of waste. We have no facility to treat it because there is not enough of it, so it is not economical and must be shifted out of the country to be treated and recycled. Taxes raise the cost of doing that enormously and put an inordinate burden on certain industries in Northern Ireland. I therefore hope that the Government will look carefully at that matter.
Northern Ireland has another problem because it has a land frontier. The Chancellor said that he was looking at the environmental implications of quarrying, the extraction industries and the pollution of water supplies. If we start to pile more burdens on that large industry in Northern Ireland, it will close down and move across the frontier where there is no environmental tax. A whole industry and the manufacturing capacity in building products will be wrecked as a result.
Before the Chancellor goes too far down that road, will he look at the implications for the Province of an environmental tax? People in England will not face that problem—they will have to carry the burden—but folk in Northern Ireland will avoid it and, given the common market, nothing can be done about it.
The Chancellor also touched on the conversion of building societies. I understand that that means an injection into the economy this year of some £35 billion. I have often wondered what the effect of the repayment of public debt was the last time that we got round to it, 360 when quite large sums were repaid. Some was repaid to people overseas and some into our own economy. When I ask economists in the House what effect that has, they simply look blank and say, "I don't know, Willie." May I ask the Minister whether the Treasury knows what the effect was. Has the effect of that input of money into the economy finally been determined? Did it lead to inflation? Was it part of the problems that we encountered in the late 1980s and early 1990s, or did it have no effect whatever? Was that money invested elsewhere?
What will be the effect of the injection into the economy of the present windfall from building societies? It is not going into the pockets of a few people or into a few companies. It is going into the pockets of millions of people, many of whom will go out and spend it, so we can expect a rise in retail sales. Given the present state of the economy, those will be sales of imported goods, so we could be adding to our problems, unless the Government find some way of making it attractive for people to keep that money in savings.
Today, we saw the first instalment of the Chancellor's programme—a programme which I think will be comprehensive and far reaching. No doubt some aspects of it will have merit and, as with all Chancellors, other aspects will go horribly wrong. Some measures may be based not on the sound principles of financial prudence that he expressed today, but on other, more political considerations, and something will go wrong. As there is so much to come, we shall have to wait until his spring Budget to find out the Chancellor's final conclusion after his assessment of the financial state of the country, and where he wants to go.
Having handed to the Bank of England control over such a large part of our financial affairs, will the Chancellor be able to do what he desires to do? I think that the Bank of England does as the Bundesbank does, and that getting ourselves into that position is neither wise nor far-sighted. It will bring us grief. We should have learnt from the past that, whenever the crunch came, the central German bank did what the German Government said.
There must be a political input into national finance. Ultimately, the Government must face the electorate, as the previous Government did and lost. Some day, the present Government will have to do so. It is up to politicians—to the Government—to take political decisions as to what is best for the nation's economy and its people.
By handing control to the Bank of England, we have handed it to what might be described as a peculiar quango, which is not responsible to the electorate. I deplore that and I believe that we will live to regret it.
I wonder whether, at the end of the day, the Chancellor's figures will add up.
I said at the beginning of my remarks that Chancellors should expect to be unpopular. I hope that when this Chancellor becomes unpopular, he is unpopular for the right reasons, but I am always a sceptic on these matters.
§ Mr. Martin O'Neill (Ochil)
I begin by putting on record my appreciation of the speech of the Chancellor of the Exchequer, my right hon. Friend the Member for Dunfermline, East (Mr. Brown).
361 I remember that, when I entered the House, one of the defining moments was the speech by the then Chancellor, now Lord Howe, in his first Budget in 1979. Some of us were filled with optimism and enthusiasm. We had won seats from political opponents, and the realisation that the Labour Government had been defeated had not yet sunk in. In the space of a few short paragraphs, Lord Howe cut income tax, raised VAT and put interest rates through the roof.
I remember the sharp intake of breath in the Chamber that afternoon. We realised that power had shifted. Those of us who had not been on the other side of the House—we knew the significance, but we had not physically shifted over to the Opposition Benches—got an idea that things were on the move.
I should like to think that the Chancellor's speech today will have had a similar impact on Conservative Members. It has given great encouragement to us, which was evidenced by at least two of the maiden speeches tonight—the speeches of my hon. Friends the Members for Eastwood (Mr. Murphy) and for Brentford and Isleworth (Mrs. Keen).
My hon. Friend the Member for Eastwood, a new Scots Member, took us round his constituency and made a good, comprehensive contribution, although he omitted the other famous national drink that emanates from his constituency. He concentrated on a process a little further down the line—the toilet facilities provided by Shanks. My hon. Friend the Member for Brentford and Isleworth made a first-class speech. I hope that she will not mind my saying that she is an old hand. Many of us had been hoping since 1987 that she would get into the House. We are delighted that she is here, and we know the contributions that she has made elsewhere. I know that, from both those colleagues, there will be telling contributions in the future.
From the other side of the House, we heard contributions from the hon. Members for Witney (Mr. Woodward) and for Weston-super-Mare (Mr. Cotter). I wish them well in their endeavours. The hon. Member for Witney may find that in subsequent debates there is a 10-minutes rule and he will be constrained in the length of his speech.
I shall not detain the House unduly with such pleasantries, important as they are. I return to the boldness of the Chancellor's speech. Despite what has been said about what was or was not promised in the election campaign, no one can doubt that the windfall profits tax was to be one of the core elements in Labour's strategy. It is clear that there is no public support, political will or financial resources to return to public ownership any of the privatised utilities or companies. That is not an issue.
We have seen the movement from public ownership to privatisation to regulation and, in the case of the energy utilities, we shall see before long the process of liberalisation. In the early stages of the post-privatisation period, there was a degree of laxity on the part of the regulatory bodies in handling the prices charged by the companies and other aspects of their activity.
It is not a worthwhile exercise to try to ascribe motives to individuals. Suffice it to say that the utilities were sold too cheaply and regulated too lightly and, although the 362 capital gains that arose from their flotation were taxed, they were never properly dealt with. In the case of the energy utilities, the profits came as much from world market conditions and fairly obvious cost cutting as from management expertise, and led to the share options scandals and the fat cat syndrome. That, in turn, led to the windfall profits tax and attempts to disparage the tax on the grounds that it was the politics of envy.
In the previous Parliament, I was fortunate enough to chair the Select Committee on Trade and Industry. My colleagues and I investigated the regulation of energy utilities. Thanks to the herculean efforts of the Clerk and her staff and our superb advisers, we were able to squeeze out a report in the dying days of the Parliament, just before the election. We did not have an opportunity to debate the report, but, had we had that chance, it would have informed the discussion about the character of windfall profits taxes.
The report did not take upon itself the task of advocating a windfall profits tax. It was a unanimous report. The Committee consisted of six Conservative and five Labour members. The report showed clearly the extent of the excess capital gains and returns on investment enjoyed by shareholders, against the comparatively small cuts in electricity and gas bills over the same period. The figures given by the Department of Trade and Industry to the Select Committee showed that, between the fourth quarter of 1986 and the first quarter of 1996, average domestic prices for electricity fell by 1 per cent., and by 8.5 per cent. on a value added tax exclusive basis. Over the same period, gas prices fell by 25 per cent. At the same time, however, shareholders, before tax and year on year, were enjoying an 11 per cent. increase in their income. I am speaking of British Gas shareholdings.
Regional electricity shareholders were seeing a before-tax return of between 32 and 46 per cent. per annum over five to six years. The figures were slightly different for the Scottish and Irish companies because they were privatised at a higher price than the other electricity companies and were subject to a different basis of price regulation. In simple terms, it was the cost of living minus the X factor rather than the cost of living plus that factor that was the core of the utilities' problem in England and Wales.
It is correct that due account should be given to differing circumstances. There are complications when considering the position of Scottish Power, for example, because it is now a multi-utility. The three elements that make up the company have all been subject to different forms of regulation. I am sure, however, that my hon. Friend the Paymaster General is more than up to the task that faces him. The figures for dividend yield and capital gain have been of the order of those to which I have already referred. If anyone wants to look them up, I suggest that he or she reads pages 63 to 67 of the report of the Select Committee on Trade and Industry.
There are those who argue that all that I have said is irrelevant because many of the companies are under new owners. I have taken the trouble to talk to some of the predominantly north American owners of the companies. It might well be put to them that the companies were purchased in the knowledge that there was more than a chance of a change of Government, and that the Labour party had flagged up repeatedly that there was to be a windfall profits tax. How would the directors go to their annual general meetings, having to say, "I am sorry but 363 our profits from our UK operation are not as high as we would have hoped because, out of the blue, there has come a windfall profits tax"?
I spoke to senior managers and directors of those American utilities. They gave me an old-fashioned look and said, "We have made provision for this." They made provision in the financial structuring of the company or they discounted the price when they purchased the company in the first place.
I am aware that, in this morning's press, consideration has been given to the tactics adopted by Southern Electricity, which has been one of the most prominent opponents of the windfall profits tax. Before the election, it was talking at one stage about raising legal actions on such a tax. We have heard no more about taking the matter to the courts. I presume that Southern Electricity has been given additional legal advice to the effect that it would not be worth spending too much money on such actions. At the same time, however, the cupboards were stripped bare. There was a process of asset stripping.
Concern arose over the regulation of electricity companies when Northern Electric was to be taken over by Trafalgar House, a British firm. It appeared that £500 million was found out of nowhere to provide a fighting fund to withstand the predatory approaches of Trafalgar House. Another company was able to clean out £470 million from the accounts and shift it elsewhere.
Those companies will complain, or moan. They would not be doing their job if they did not take that approach. When it comes to increasing prices, however, a company that is regulated and operating under a licence granted by a regulator and approved by the Monopolies and Merger Commission—I am talking of increasing prices for reasons that go beyond the licence—has first to approach the regulator to convince him or her of the need for a change. The regulator then has to pass the matter to the MMC for its consideration and approval.
Before the application, as it were, can go to the MMC, it must go to the Secretary of State of the appropriate Department. At that stage in the process, I cannot envisage a Labour Secretary of State not vetoing any further movement on the renewal or review of the licence in between terms. Even at the end of the period covered by the licence, I cannot see that regulated companies would be able to make their consumers pay. The new licence that would be sought in the new round would not, I think, be acceptable to the regulator or to the MMC.
Those who talk about the consumer paying are not sufficiently aware or they are being wilfully dishonest. My right hon. Friend the Chancellor of the Exchequer referred in passing to the regulators, but it was clearly stated in evidence that my Select Committee took from regulators that the companies had the ability to make consumers pay again. It must not be forgotten that the purpose of the windfall profits tax is to take account of the fact that the people paid too much in the first place. The companies are sufficiently cash rich to deal with a windfall profits tax and I do not think that there will be a problem.
The exciting feature of the tax is that it will give us the opportunity of introducing the welfare-to-work programme, which is central to the Government's ambitions. When sitting on the Opposition Benches, my right hon. and hon. Friends became impatient in the knowledge that large sections of our communities were 364 languishing on the dole for long periods in the absence of pump-priming facilities to get people back into employment. It was the greatest frustration that we experienced in our period of opposition. That is why we place such great importance on the Budget. It is a defining moment in our political lives. My right hon. Friend the Chancellor of the Exchequer has identified the means and the objectives to achieve a reduction in unemployment and so to eliminate people from that disease.
I think that it was the hon. Member for Witney who talked about 1.5 per cent. unemployment in his constituency. There are villages in my constituency where unemployment is in excess of 40 per cent., where virtually no young people have ever worked for an employer in their lives. I am speaking of men of 22 and 23. I say to them, "Are you interested in better dole money, better social security or a job?" They say. We are sick and tired with social security. We want a job."
The tragedy of many of our people has been that as George Bernard Shaw once said, if we do not get what we like, we come to like what we get. There are far too many people whose ambitions are too low, along with their expectations. They are resigned to lives that are not anything like those that they should be enjoying in a civilised society.
Against that background, my colleagues and I see today's Budget statement as a watershed in British politics. We see not a return to the 1970s, the halcyon days of a previous Labour Government, but a means of breaking through and moving forward to a new frontier within which we shall have a strong economy and high levels of employment that will be sustained for decades ahead. That is the test that my right hon. Friend the Chancellor of the Exchequer has set himself. It is the test which the Government must pass. Given the start that has been made today, I am confident that we shall go a long way to achieving our objectives in making the United Kingdom a better, more civilised and happier country than it has been for a long time.
§ 8.9 pm
§ Mr. David Prior (North Norfolk)
Thank you very much, Mr. Deputy Speaker, for calling me to make my maiden speech this evening. There is an old adage that the opposite of talking is not listening, but waiting. I hope that the hon. Member for Ochil (Mr. O'Neill) will excuse me, on this occasion, for not having listened to his speech as carefully as I might otherwise have done. This Chamber has a great reputation for honesty, but I hope that no one will object when I go home to my constituents and say that I addressed a packed and noisy Chamber this evening.
I have the great privilege to represent North Norfolk. I am grateful for the fact that the ex-chairman of the North Norfolk Conservative Association, my hon. Friend the Member for Cotswold (Mr. CliftonBrown), is here tonight at my side. For the past 27 years, my constituency has been represented by Sir Ralph Howell, who was well known for the care that he lavished on his constituents. Ministers knew that he was the sort of man who, when he wrote letters to them, would never give up. He was the scourge of Ministers, local government officials and bureaucrats at all levels.
Sir Ralph had two great passions. First, he was a passionate believer in the European Union. When he was a young man, the first time that he saw continental Europe 365 was when he looked down on Germany through the bomb sight of a Wellington bomber. That experience made him believe that a strong European Union was vital for peace in Europe.
Sir Ralph's second abiding passion was his belief and faith in workfare. He would have been pleased to have heard some of the welfare-to-work proposals in the Budget statement. I was very much struck when the hon. Member for Ochil spoke about long-term unemployment. It was the waste and misery surrounding that which drove Sir Ralph towards workfare. I share his views about the awful waste of long-term unemployment, having seen it in much of England, Scotland and Wales when I worked for British Steel. I do not believe that welfare to work, based on Government subsidy, is the right way to cure the problem, but I share the deep concern of the hon. Member for Ochil about the tragedy of unemployment for so many people. Sir Ralph was a man of great conviction and principle and I am proud to follow in his footsteps.
When making one's maiden speech, it is tradition to refer to one's constituency. I am afraid that I shall disappoint the House and continue with that tradition, so I ask hon. Members to bear with me for a while. Agriculture remains one of the most important industries in North Norfolk. The Cokes and the Townshends, whose families were the foundation of the agricultural revolution in the 18th century, still hold land and farm in North Norfolk. A strong, profitable and competitive agriculture industry is vital to the interests of North Norfolk.
My county is still very rural. I agree with my hon. Friend the Member for Witney (Mr. Woodward) about field sports. They are a vital freedom, a tradition and a way of life in North Norfolk and our countryside would be much the poorer without them.
North Norfolk still has a local shellfish industry. The Cromer crab has a reputation that extends way beyond Norfolk. Our history of shellfish fishing shows that the best regulators are the generations of fishing families who have caught shellfish off the coast, not distant bureaucrats in Whitehall or Brussels.
Probably the most difficult issue in North Norfolk—and, indeed, in most rural areas—is the balance between keeping Norfolk special and the requirements of development. Because of the development of out-of-town supermarkets, the hearts of towns such as Fakenham and Cromer have disappeared. There has been a demise in village shops and local amenities. There is constant conflict between the need for a strong tourist industry and the pressure on the Norfolk broads and the coast. I believe strongly in the need to provide decent, affordable housing and public transport for local people, but I realise the real pressures of housing on the countryside.
Small businesses are the mainstay of employment in North Norfolk. I was disappointed to hear no reference in the Budget statement to improving the uniform business rate as it applies to small businesses. There is no doubt that it is skewed too much against small, usually retail, businesses. Some of it should be switched back to larger businesses.
North Norfolk has an elderly population. Many people have worked hard all their lives and, although they do not have great savings, they have enough to prevent them from getting any help from the state. Those people are 366 especially vulnerable and they will not welcome the news today that their pensions will be adversely affected by the abolition of the tax credit on dividends paid to pension funds. Neither will many of them be pleased to hear that they will no longer get tax relief on the premiums paid for private health insurance.
We have a very special hospital at Kelling. It is a community hospital, not a big hospital, and many of its patients are old people. I serve notice on the Secretary of State for Health that Kelling is special and that everyone in North Norfolk will fight to keep it alive.
I have spent the past 20 years working in manufacturing, mainly for British Steel. I have seen a fantastic impact on competitiveness and efficiency over the past 20 years. It has come about through deregulation, tax reduction, vastly improved industrial relations, privatisation and much less government.
My father, Jim Prior, made his maiden speech in this House in 1959, when the Japanese were about to open their first transistor radio factory in Ireland. He said then that, as a farmer, he would never again buy any Irish bullocks if the Japanese were allowed to open a factory in Ireland. Things have changed a great deal since 1959. We now live in a global economy with unrestricted capital movements and widely dispersed technology and skills. The general agreement on tariffs and trade has reduced many of our trade barriers.
My right hon. Friend the Leader of the Opposition earlier quoted from a report by the World Economic Forum. He must have had pre-knowledge of my speech. The report said:what we see in the United Kingdom is an economy reborn and the sweeping privatisation, deregulation and other structural reforms have made us well poised to compete in a global economy.That success has been recognised by companies around the world. There has been more foreign direct investment in Britain since 1979 than Germany received in Marshall aid after the war, in real terms. It is against that background that we must look at today's Budget.
The Budget contains three illusions. The first is that the windfall tax and the abolition of the advance corporation tax credit have no victims. Both have victims. The windfall tax will erode the investment potential of those on whom it is levied. The abolition of the ACT credit will hit pensioners.
The second illusion is that Government can create jobs. In fact, only competitive and strong companies and businesses can create jobs. Jobs built on short-term subsidies will have no security.
The third and last illusion is that the Government believe in the long term. They cannot and will not stop meddling in the short term. Surely one of the lessons of the past 20 years is that it is best for Governments to keep out of business as much as possible.
The Budget, combined with the Government's views on the minimum wage and the social chapter, marks a watershed. I pray that it will not bring to an end all the improvements that we have achieved in the past 20 years.
§ Mr. Barry Jones (Alyn and Deeside)
I congratulate the hon. Member for North Norfolk (Mr. Prior) on his maiden speech, which was made in the relaxed, generous and genial style of his father, Lord Prior, whom 367 I remember as a notable Minister of Agriculture, Fisheries and Food and Secretary of State for Northern Ireland. Lord Prior was a much liked House of Commons man, so if the hon. Gentleman does half as well as his father he will do very well indeed.
I also congratulate my hon. Friend the Member for Brentford and Isleworth (Mrs. Keen) on her maiden speech, which went very well. She was once my constituent and her mother still is. Her late father, who was my friend, would have been proud of her. She will be a fine Member of Parliament for her constituency.
With the Budget in mind, I should point out that between 1979 and 1981 about 2.5 million manufacturing jobs disappeared from the British economy. During that time we had a terrible trio of principals: Mrs. Thatcher was the Prime Minister, Geoffrey Howe was the Chancellor and the Secretary of State for Trade and Industry was Sir Keith Joseph. In so short a time, that trio destroyed more jobs than Adolf Hitler could have dreamt of destroying, and it led to huge and enduring unemployment queues. Thereafter, we became a divided society.
In less than one hour, the new Labour Chancellor delivered an historic reforming Budget. He was convinced of the need to relate his statistical detail to the flesh and blood of ordinary and underprivileged people. I thought that it was an innovative and compassionate Budget. The Chancellor has kept our party's promises, honoured our manifesto and not abused the mandate that the Labour party received from the electorate at the general election on 1 May. I also noted the cool authority with which he delivered that reformist Budget.
The Chancellor wants to equip the nation for the future and to rebuild the welfare state. It is the first Budget in 18 long years that seeks both economic efficiency and social justice. It will end abuses and loopholes. It is good that the Chancellor is taking a strategic view of our manufacturing capacity. He proposes to end the spending of huge sums of money on the few, and offers skill-less and workless under 24-year-olds a new deal. He has a highly planned scheme to tackle long-term unemployment, and lone parents and the disabled are not forgotten. My constituents will benefit from those measures.
From what I have seen and heard today, I can sum the Budget up as moral, practical and honourable. I judge that it will improve the fabric of our communities. I hope that it begins soon to help to heal the divisions and wounds that are so self-evident in British society. The Chancellor is to be commended on a Budget that will prepare our nation for tough, international competition in the next century.
There are more than 1 million fewer jobs in Britain than there were in 1990, one in five families have no one working, and 1 million single mothers are trapped on benefits. The gap between rich and poor is wider now than it has been for generations. Those facts—those human details that to me are grim realities—set this remarkable Budget in a serious context.
The Budget seeks social justice and maps out a strategic high road for our national recovery. I judge it to be a Budget which takes a sophisticated look at the means of achieving the much needed recovery of our former national industrial greatness. That is what I hope will be the consequence of today's Budget.
368 I am glad that the Government will get a quarter of a million under 25-year-olds off benefit and into work by using money from a windfall levy on the privatised utilities. It is clear to me that this Chancellor and this Government are determined not to continue down the road of a permanent have-not class of unemployed and disaffected people. My constituency can only benefit from the proposals that have been outlined today.
I admire the Chancellor's long-term objective of high and stable levels of employment: it has shades of Mr. Attlee's programme in 1945–50. The best way to tackle poverty is to help people into jobs. Unemployed citizens have a responsibility to take up training places or work, but they must be real job opportunities. In past years, we have had some disgraceful schemes that have led to cynicism among the young and their parents.
The Chancellor's welfare-to-work programme will attack unemployment and break the spiral of escalating spending on social security. The scheme cannot work without partnership between government and business. Partnership will best tackle the shame of long-term unemployment.
I like the positive approach to proper qualifications by 2000 for every 17 and 18-year-old. Many people in that age group have missed out. It is a forgotten army, a mighty army, a youthful army, and an army without any purpose as of now. Perhaps our colleges of further education could be centres for the operation of this programme: they could share in the challenge. Deeside college of further education is a good college and it seeks to play a role in making welfare to work a success.
I shall briefly describe the problem that we are tackling. My constituency contains large social housing estates which are the seat of intractable problems of unemployment and decay. I do not believe that my constituency is unique, because every city has a near permanent have-not class of unemployed. It cannot be right for young people under 24 years of age to remain unemployed. At last, the Government are initiating measures to tackle the problem.
If we hate and fear the growth of violence and other criminal activity in our constituencies, we should welcome the welfare-to-work Budget. Given the drug abuse, graffiti, constant harassment of families, vandalism, car crime, squalor, ugliness, disrepair and dereliction, the welfare-to-work Budget is a big step in the right direction. It just has to be. So far, nothing has been done and if we leave the problems alone, British society will face even graver problems in the near future. In the same way, the plan to release in Wales the sales receipts of municipal housing has to be good in so far as it will improve housing and generate wealth.
If a British Government do not tackle the problems, if we fail, if the have-nots remain rooted in their evident despair and continued separateness, the future for British society will be bleak. A divided, ill-educated Britain will not be able to renew her industries and cope with the growing cut-throat international competition. Without social justice and a successful welfare-to-work programme, without a clear national strategic industrial policy, our society will be ripped apart by division, resentment and envy. That might be our fate.
The windfall tax has been criticised today by the Leader of the Opposition. My right hon. Friend the Chancellor's plans for the windfall tax have been criticised for their 369 ruthlessness. I welcome the tax and its ruthlessness because it will give hope and dignity to tens of thousands of alienated young people in Britain today.
§ Mr. Geoffrey Clifton-Brown (Cotswold)
It is a great privilege to have been here this evening to hear five such excellent maiden speeches. It was a particular privilege to hear the speech made by my neighbour, my hon. Friend the Member for Witney (Mr. Woodward), from whom I am sure we shall hear many excellent speeches in the future. I was also particularly pleased to be here for the maiden speech of my hon. Friend the Member for North Norfolk (Mr. Prior). He represents a constituency I know well, having been constituency chairman of his excellent association for five years. I completely agree with his comments on his forebear, Ralph Howell, who I am sure would have been pleased to hear my hon. Friend's maiden speech this evening.
This is a Budget like the house of mirrors—what we see on first impression is the obverse of the reality. It is also premature and unnecessary. I was surprised not to hear anything today about the biggest technical revolution in the way we present public finances, which is about to occur in the next two years: the change from cash accounting to an accruals basis of accounting. That will be an extremely important change and it will, among other things, involve individual Departments' producing their individual accounts, including valuations of their assets, so we will begin to see the total assets that are used by the Government and whether they are used effectively.
The Chancellor was able to present such a glowing picture this afternoon because of the superb economic situation that he inherited. The combined picture of growth, inflation and interest rates and unemployment is probably the most favourable that Britain has seen since the second world war. It is a tribute to my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) that he has presided over such a successful economic phase in this country. His particular success has been his judgment in setting the base rate. He has been able consistently to set a rate which keeps inflation at the target level. For that, a great tribute must be paid to him.
If we have a Chancellor who can exercise that judgment, it is much better left in the hands of the Chancellor and the Treasury than in the hands of an independent panel comprising the Governor of the Bank of England and other experts. On the other hand, if we have a Chancellor who is not sure of his judgment, the decision will be handed over to the Bank and an independent panel of experts.
Another reason for today's glowing economic situation is the fact that the incoming Government have been able to rely on probably one of the tightest two-yearly rounds of public expenditure since the second world war. Tribute must be paid to the previous Member for Bristol, West, Mr. Waldegrave, and his intellectual rigour in controlling each Department's expenditure. This is a fiscal tightening Budget, which is probably correct in the current situation. It overcomes the problems that have begun to emerge of broad money expanding too fast, interest rates having to be put up, too strong a pound and the danger to our balance of payments thereby. This is probably the right sort of level of fiscal tightening and it will be marginally reduced next year.
370 However, I am much less happy with the reduction in reserves of some £2.2 billion. Whereas the previous Conservative Government managed to put an extra £1.6 billion into the schools budget without raiding reserves, the present Chancellor has been able to put in only £1.3 billion while running down the reserves, which is not particularly satisfactory.
The Chancellor referred to reducing the trend rate of growth to nearer 2.4 per cent. because, as I say, the economy shows some signs of overheating. The critical factor in that reduction will be the rate of inflation. It was a retrograde step to allow the Bank of England to set the rate of inflation to plus or minus 1 per cent. above or below the Government target rate of 2.5 per cent., which shows that the Chancellor is prepared to see the inflation rate slip up to 3.5 per cent.
The Red Book predicts growth of 3.25 per cent. in 1997 and 2.5 per cent. in 1998, with inflation at 2.5 per cent. and 2.75 per cent. in those two years. That is an excellent picture because on only two occasions since the war has growth outstripped inflation, one of which was last year. If the Chancellor manages to achieve that target this year, that will be very satisfactory. That tends to be the trend in the major industrialised nations, as shown in table 3A.1 in the Red Book.
I was also particularly pleased to see in the Red Book that the rate of debt is coming down. It is predicted to come down as a percentage of gross domestic product from 53.75 to 53 per cent. next year and 51.5 per cent. the year after. That is particularly welcome because, as the hon. Member for East Londonderry (Mr. Ross) said, we pay £25 billion a year to service that debt. That is a huge on-cost which we would do well to try to reduce in the longer term.
I am not particularly in favour of the windfall tax because it is a one-off tax and once the utilities have been taxed they cannot be taxed again. On the other hand, I am pleased with the welfare-to-work programme that the Chancellor endorsed today. As my hon. Friend the Member for North Norfolk said, it is, in essence, a form of workfare, which I have long championed. If the public purse is paying people, particularly youngsters, a benefit because they are unable to work, society should be able to request them to participate in some social scheme, education or community work. It is high time that we came round to that way of thinking.
The real betrayal of all betrayals in the Red Book is in table 4.9, which shows us that the Chancellor predicts that, over the lifetime of this Parliament, unemployment will remain at 2 million. That is a shocking admission, because throughout the five years of the previous Parliament we were constantly criticised by the Labour party for tolerating that level of unemployment. The prediction is a disgrace and if the Labour party cannot get unemployment down, they ought to resign and let us have another general election.
The trend rate of growth depends critically on three factors—on trends in the labour force and on levels of unemployment and productivity. I have already referred to the rate of unemployment and I am pleased to see that productivity and investment are likely to grow. In that respect, I pay tribute to the Chancellor for having reduced the rates of corporation tax for both larger and smaller firms.
371 That was a great surprise to me, because it was one of the great successes of the previous Administration that we managed to reduce the rate of corporation tax so much. That is especially important in today's fast-changing world. Large multinational corporations can shift great chunks of capital and even their corporate headquarters or their research and development around the world at short notice.
By keeping corporation tax at what is—as the Chancellor said—the lowest level in the G7, we shall retain such world-beating companies as Glaxo, which has both its research and development and its corporate headquarters in this country. The substantial amount of corporation tax that that company pays will therefore keep coming into the United Kingdom Treasury, and I pay tribute to the Chancellor for that shrewd move.
I also welcome the measures affecting capital allowances for small businesses. It is helpful to have a short-term boost for capital allowances and that will help to increase our investment.
However, I criticise the Chancellor for his failure to contemplate any changes in the uniform business rate. Many small businesses, especially in rural areas such as my constituency, are suffering because the rate is too high.
I visited many post offices, village shops and other, similar, small businesses during the election campaign. Their proprietors were pleased to see our proposals for reducing the uniform business rate valuation by £1,000. I urge the Labour Government to consider that idea for a future Budget. It would be most welcome and it would not be hugely expensive.
I welcome the environmental measures in the Budget, although I do not think that they are imaginative enough or go anything like far enough. One subject on which the Chancellor has listened to the environmentalists is improving the insulation of houses for the lower paid through the home energy efficiency scheme. I know that the previous Government were constantly asked to do that and I am glad that it has now happened.
I must tell the Labour party, however, that if we are to meet our international environmental targets, especially the reductions in CO2 levels, we shall have to go much further with the type of environmental and fiscal measures that have been so successful in the past. One example is the conversion to unleaded petrol. Ten years ago, unleaded petrol accounted for about 10 per cent. of the market; now, it represents about 90 per cent. Through fiscal incentives, we can do a huge amount of good for the environment.
None the less, I echo the comments made by various hon. Members to the effect that we cannot go on taxing the car out of existence, especially for poorer people in rural areas, for whom the car is a lifeline. They often live in isolated areas, or in villages without a shop or a reasonably regular bus service. If they are to have any standard of living at all, they must rely on the motor car.
I caution the Government about going too far towards taxing the car out of existence, but of course we shall have to find ways to reduce the rate of growth in the number of cars in the nation.
I was unhappy to realise that there was little really new thinking in the Budget. Given that a new Government have won an election with a big mandate, I thought that we might see some really imaginative thinking, such as the reform of capital gains tax.
372 Speaking on the previous Conservative Budget, I advocated different rates for short and long-term capital gains. It seems to me that if people hold a gain on an asset for more than five years, they should pay a rate of capital gains tax lower than their marginal tax rate. That is only reasonable. As things are, many people are locked in to long-term gains, which does not benefit their business or their savings. Some good research has been carried out in America on this subject, showing that the business increase by a fiscal reform of this kind over five years is almost neutral. I urge the Government seriously to consider that.
I add a note of caution to the middle classes who, by and large, have not been hit today. I do not think that they have seen anything yet. They will find in future Budgets that there will be increases in national insurance and in the marginal rates of income tax and that there will be reform of inheritance tax to make it more like the old capital transfer tax by abolishing the seven-year rules—the so-called potentially exempt transfers. It did not happen today, but the Government will introduce these measures next year or the year after.
This Budget was unnecessary and it will not help jobs, growth or savings. It points the way to increases in interest rates—which will have a disastrous effect on an already too high pound and our balance of payments—and to higher inflation and personal taxes. Economic growth will decline over the next five years and the Budget will reverse all the economic gains that we have made so painstakingly in the past five. Each time after a socialist Government have been in office, a Conservative Government have come in and taken over an economic mess. I hope that we will not be doing the same thing in five years' time.
§ Mr. Ken Livingstone (Brent, East)
I hope that the five hon. Members who made their maiden speeches will not be offended if I do not spend time praising them, but know that other hon. Members wish to make maiden speeches this evening. I hope also that my right hon. Friend the Chancellor will not be too offended if I do not lavish much praise on him. He has had far too much praise from my hon. Friends today than is good for any human being to take in one day. Clearly, after 18 years of horrendous Budgets, it would have been a relief even if he had come here and said nothing. Many of the measures are particularly welcome, and the relief for education and the NHS will be welcomed throughout the country.
I want to focus on two or three points that cause me concern. First, I would have been happier if the relief were coming more rapidly. The crisis in the NHS this autumn and the fact that many schools need more money mean that the relief should have been provided immediately. I was particularly disappointed by the small amount of money available for council housing and modernisation. Even if we build very cheap houses, the entire sum of £900,000 means that we will be hard put to build 15,000 new homes. I know of a dozen London boroughs with waiting lists longer than that, and this matter must be looked at again. We must bear in mind the fact that even in the worst days of the last Labour Government—when the IMF was at our necks—we were building more than 100,000 council houses a year.
I am worried about my right hon. Friend the Chancellor's underlying assumptions about the global economy. In every one of the assumptions on which my 373 right hon. Friend has based his Budget, he has taken the most optimistic projection. That is unwise—certainly for someone who has gone out of his way to create such a dour iron Chancellor image. Life just does not work out that way—all assumptions do not come up on the sunny side. In particular, the assumptions about the global economy are optimistic. We are told in the Red Book that we expect the American economy to slow down but still grow, and that growth will pick up in Japan and in Europe.
The American economy is coming close to the end of seven years of growth—a long business cycle. The issue is how rapidly the American economy turns down and how severe that will be. It could turn out that very little good news comes out of the American economy. As long as the European Governments continue to force their economies into the Maastricht corset, I see little prospect of sustained growth in Europe to assist us. The underlying assumptions about the global economy must mean that some problems will emerge for the Chancellor as the projections become reality in the next year or two.
We are having a consumer boom in this country. It may not be on the scale of Nigel Lawson's boom in the 1980s, but it is beginning to look horrendously like it—particularly its concentration in the south-east and on those who have so much already.
The £35 billion of windfalls that will drop into people's pockets following the ending of building societies' mutual status and the insurance companies' sailing off into the new bright wonders of the entrepreneurial market—the Chancellor mentioned that—will have a horrifying impact. Again, that £35 billion will be largely concentrated on fairly well-off people in the southern half of Britain. If such people are able to shift money from one building society account to another, they are unlikely to have large debts to pay off. That money could fuel a massive consumer boom, sucking in imports, overheating the economy and causing inflation to rise. I deeply regret the Chancellor's failure to take firm measures to claw a substantial proportion into the state.
There is no justification for anyone today to receive the money. It is wealth that has been built up over generations, which people are cashing in because of the climate of greed that has become the norm. The Chancellor has missed a great opportunity to pull some of it into the Government's finances in order to reduce the scale of Government borrowing.
There is a real risk of a consumer boom that will cause severe damage, and we know exactly what will happen in such circumstances. If the economy has to overheat, one of two things will happen. Eddie George will bang up interest rates, which will massively depress the real economy and industry, and cause those who have not benefited from the boom either to lose their jobs or to suffer a decline in living standards; or the Chancellor himself will have to introduce, in a year or 18 months, measures to take the heat out of the economy—thus running the risk of precipitating a severe turndown in the economy that could lead to recession. We saw that happen in 1990. I believe that the lack of action to deal with overheating of consumer demand will return to haunt us, especially as it is so strongly led by the housing market.
374 Someone with half a million pounds to spend on a house will not worry about spending 1 per cent. more on stamp duty, and someone with a quarter of a million pounds to spend will not worry about another half a per cent. The measures taken by the Chancellor to take the heat out of the housing boom are entirely inadequate. I hope that those who collect their windfalls will save and invest them—that would be wonderful—but, if they cash them in and spend, we risk facing the problem experienced by the British economy at the end of the 1980s. After a recession such as that, more industries have gone, more of the real economy has been destroyed, and many people's lives are ruined.
Then there is the question of debt. For all the talk of the iron Chancellor, he strikes me as a great big cuddly toy. There is nothing threatening about what he is doing about debt. Here we are, borrowing after five years of growth. We are in the sixth year of growth, and the Government are continuing to borrow. I agree with the Chancellor about the golden rule; I just wish that he would implement it now, from day one. It is barmy to say that we will carry on borrowing for two more years, ratcheting up more debt, undermining the competitiveness of the economy and causing those who are thinking of investing in gilts to demand a higher rate of return. I am glad that the rate of return that is being demanded on long-term investment in the British economy has dropped by a few fractions of a per cent., but our level of borrowing is likely to continue to be consistently worse than the equivalent long-term borrowing rates in Germany and our other major competitors. I want much firmer action to be taken on debt.
The Opposition are making a big row about the windfall tax, but every City analyst who studied it said that the utilities could stand a tax of £10 billion without any problems, and we are taking only half that. The Tories should all be celebrating the fact that we have been so lenient. We could have taken the other £5 billion and used it to stop Government borrowing. We could have returned to the golden rule, and stopped all borrowing to cover revenue expenditure. That would have enabled us to build up the long-term strength of the British economy and to lower long-term interest rates, thus creating a better climate for investment.
I cannot believe that we are reducing corporation tax; it is almost as though the Chancellor has lived on another planet these past 18 years. Tory Governments have consistently cut the tax that the corporate sector has to pay, always saying that they were creating a climate in which people would be encouraged to invest, and it has always failed to happen. There is clearly not the slightest evidence on the basis of the past 18 years' experience to suggest that it would happen.
Mrs. Thatcher genuinely believed that, when she came to power in 1979, by slashing corporate tax, undermining trade union bargaining power, holding down wages and creating the highest profits in real terms that the corporate sector had ever had, she would unleash an entrepreneurial spirit, and British capitalists would rush out and turn us into a miniature version of America, expanding and investing; but it did not happen.
What did people do? They took the money. They paid it out in dividends, largely because our company laws leave everybody running a company in fear that Lord Hanson will come along if they do not constantly jack up dividend 375 payments, irrespective of the state of the company. There is no evidence to suggest that cutting corporate tax will encourage investment.
It would be much better to increase corporation tax and say to every company that we will give them 100 per cent. tax rebate on real investment. I am delighted that we are increasing tax relief for small and medium firms from 25 to 50 per cent. We should give 100 per cent. for every company in Britain, to increase our productive capacity and create real jobs to put people back to work. That cannot be done simply by dangling the carrot of further tax cuts; we need a bit of stick to wield over the City and Britain's corporate sector, to encourage them to invest.
I know exactly when things went wrong in investment. In 1955, investment was 15 per cent. of gross domestic product. It built up to 22 per cent. under the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), until his Government shifted our tax law: until 1973, there was a presumption in favour of investment, our tax laws were geared to that, and investment picked up virtually year by year; his Government removed the presumption and left the tax system wholly neutral, and we have declined back to 15 per cent.
The Chancellor's Budget is wanting in those areas. My worry is that if all those factors come together, if the world economy does not surge forward, if the consumer boom becomes unsustainable, if Government debt does not come down as rapidly as we would like, and if the corporate sector does not invest, we may have to make difficult and painful choices a year or 18 months ahead, and, once again, a Labour Government in mid term may struggle and become unpopular.
I remember what Iain Macleod once said about the Budget that is cheered on the day being the Budget that is cursed six months later. I sat among my colleagues and heard them cheering, and the nasty thought occurred to me: has this Budget done more to encourage the prospect of Labour's second term, which we so desperately need? If anything, I think that it has created an element of risk that has endangered that prospect. Many of my colleagues who cheered today may live to regret the fact that the Budget was not bolder and firmer in tackling our institutional problems.
§ Mr. John Wilkinson (Ruislip-Northwood)
We have had the privilege of hearing six maiden speeches today; not, I hasten to add, from the hon. Member for Brent, East (Mr. Livingstone). He is the opposite of a political innocent, but he brought to the debate the authenticity of his real-life political experiences.
When I said that we had heard six maiden speeches, I included that of my right hon. Friend the Member for Richmond, Yorks (Mr. Hague), who today made his maiden speech in debate as leader of our party. To reply to the Budget statement is one of the most demanding tasks to face any Member and I hope that my right hon. Friend will not think me condescending when I say, as a former Yorkshire Member, that, in such extraordinarily difficult circumstances, he produced a speech of great succinctness and clarity. He gave heart to many Conservatives who have looked for leadership and direction for far too long.
If one is blessed with a name that begins with the letter W, as I am, from time to time we tend to find ourselves called to speak towards the end of debates. Today is no 376 exception and perhaps it gives me the opportunity to make a winding-up speech from the Back Benches, since there will be none from the Front Benches today, and to say some nice things for the record about some particularly good maiden speeches. I include in that those made by Labour Members.
The hon. Member for Eastwood (Mr. Murphy), who is less craggy and cleaner shaven than his respected predecessor, Allan Stewart, brought a similar sense of commitment to his constituents. He will obviously make a serious contribution to our proceedings. My hon. Friend the Member for Witney (Mr. Woodward) made a fluent speech which was notable for his confident delivery. We shall certainly hear much more from him as his natural enthusiasm will be energetically deployed in criticising much that will prove worthy of criticism in Labour's programme, and possibly more.
We then heard a speech from the hon. Member for Weston-super-Mare (Mr. Cotter), who spoke with knowledge and experience of small business. He was followed by the hon. Member for Brentwood and Isleworth (Mrs. Keen), who told us that she had fought the seat three times. In her case, it was not just an example of third time lucky because she will be able to teach us all how to nurse a constituency. She brought to the debate a warm heart and professional experience in medicine which will be most appreciated in our debates on the health service.
My hon. Friend the Member for North Norfolk (Mr. Prior), who is in his place, likewise made a big-hearted contribution. How nice it was to hear him speak so well of Sir Ralph Howell. How good it is that my hon. Friend brings to the House experience of manufacturing industry. He clearly has a deep love of his constituency and the countryside. He will prove a very worthy successor to his constituency and his paternal predecessors.
At the beginning of my remarks about the Budget, I should declare an interest as the director of a small company. The Chancellor made a grandiose start when he spoke about the United Kingdom rising to the challenge of the global economy. Having heard his speech, however, I understand that he has firmly set his sights on placing the British economy within the overall European one. It is not the kind of dynamic model which we should follow.
When the right hon. Gentleman announced his much-vaunted reduction in VAT on domestic fuel—how right it is that he did achieve at least a 3 per cent. reduction in it—he also vouchsafed the admission that were it not for the European Union he would have abolished VAT on domestic fuel. This is evidence of how our sovereignty is slipping away to the European Union and how the living standards of our people are suffering. The Chancellor made no mention of the opportunity cost to the British economy that is related to our contributions to the European Union. Nor did he go in depth into the implications for the sovereign running of our economy of handing monetary policy over to the Bank of England as a precursor, potentially, to handing it over to an independent European central bank.
There were some positive measures in the Budget statement. First, there was the determination to reduce public borrowing. However, as the hon. Member for Brent, East observed, would it not have been much better to set a clear target for the elimination of public borrowing 377 and the creation of a public sector debt repayment? This could reasonably have been achieved, and is a hallmark of the tiger economies in the global economy, to which the Chancellor referred, which we badly need to emulate.
Secondly, I welcome the reduction of corporation tax by 2 per cent. for both large and small companies. I regret that no threshold was instituted for the payment of corporation tax by the smallest companies, because they grow so much from retained profits. Thirdly, there was the doubling of tax relief for a year on capital investment in plant and machinery for small and medium-sized companies.
A fundamental deficiency in the Budget statement is that the Chancellor does not recognise the important role of private savings and private investment in the generation of growth in the tiger economies. We need greatly to increase the private savings ratio. To that end, I hoped that instead of announcing a review of the operation of capital gains tax, the Chancellor would have been bold—through we could not expect this from a socialist Chancellor—and announced abolition of capital gains tax and inheritance tax.
On the global economy, none of the tiger economies would do anything so rash as to institute a windfall tax on profitable enterprises that have been recently privatised. Those enterprises are not utilities; many are already global companies competing in the global marketplace. I take an example of particular relevance to my constituency. Many of my constituents work at Heathrow airport for companies such as the British Airports Authority. BAA is par excellence an international company in that it provides services not only for British Airways and British carriers but for international airlines that wish to use British airports such as Heathrow, Stansted and Gatwick. The imposition of a windfall tax may cost jobs. It will certainly diminish BAA's profitability and its ability to invest in schemes such as the fifth terminal, which is crucial to Heathrow's long-term competitiveness against other European gateways such Frankfurt, Amsterdam and Paris. Higher landing charges may ensue. All those potential consequences are wholly negative.
The tiger economies do not have the arcane and highly complex tax system of the United Kingdom. I was deeply disappointed that the Chancellor introduced no measures to simplify our tax system, which is replete with reliefs and allowances. Even the workfare scheme and the welfare-to-work provisions are not in the spirit or the practice of the tiger economies. Those economies do not achieve their very low rates of unemployment through subsidies, but by generating enterprise across the board.
I do not wish to be parochial, but the Budget will hit my constituents particularly hard. I mentioned the British Airports Authority and the consequences of the proposed windfall tax on the privatised utilities. The reduction of mortgage interest tax relief to 10 per cent. may seem minor, but for many of my constituents in outer London, whose family budgets are stretched to the limit, it is a matter of considerable consequence.
My constituents will also be affected by the increase in duty on motor fuel. They do not all travel by public transport; many have to rely on using their cars on greatly over-congested roads and the provision will create an 378 additional burden. It is not even as if the Budget contained a commitment to higher investment in London Underground or the railway network. On the contrary, Railtrack will suffer under the windfall tax.
I heard what the hon. Member for Brent, East said about stamp duty, but there are a great many properties in my constituency worth more than £250,000. The families who are moving into them are often fully stretched. The Budget will bring higher duties on motor fuel, tobacco and alcohol; there will inevitably be higher council taxes. The Budget contained no indexation of personal allowances and no upward indexation of tax bands to take account of inflation.
The tiger economies are noteworthy in their encouragement of private provision, but this Budget penalises the most vulnerable section of the community—those who are over 60—for their thrift and for providing for their health care through private medical insurance. The impost is particularly vindictive, and one which I would not have expected from a son of the manse.
The Chancellor intends to impose environmental taxes on British industry. I am all in favour of those taxes as long as they are multilaterally applied. British industry should not be singled out. Through vigorous international action, we must ensure that taxes are imposed as uniformly as possible among our competitor nations to ensure that industrial polluters and despoilers of the environment are taxed appropriately.
To conclude, the Budget is deeply depressing. I was especially depressed by the early raid on the contingency reserve. If the Chancellor wanted to establish a reputation for fiscal rectitude, it would have been so much better had he not made that raid. It was especially depressing that public spending will not be reduced sufficiently to eliminate the budget deficit. The Budget will be particularly depressing for my constituents and for the many others whose living standards will suffer.
§ Jacqui Smith (Redditch)
Thank you, Mr. Deputy Speaker, for giving me the opportunity to make my maiden speech in this important debate on the first Budget of a new Labour Government.
It is an additional honour when one can claim to be the first Member of Parliament for a new constituency, but I shall pay tribute to the hon. Members who previously represented my constituents. The town of Redditch was previously part of the Mid-Worcestershire constituency and was therefore represented by the current right hon. Member for Bromley and Chislehurst (Mr. Forth). It has been said that, with 101 women Members on Government Benches, they will become far more colourful; however all hon. Members would agree that the former right hon. Member for Mid-Worcestershire played a significant part in bringing colour to these Benches as a Minister in the Conservative Government, with both his speeches and his ties. I am sure that he will continue to express his forthright views from the Opposition Benches.
The villages of Inkberrow and Cookhill were previously part of the constituency of Worcester and were represented by the current hon. Member for Mid-Worcestershire (Mr. Luff). He is an enthusiastic and lively Member and I know that people in Inkberrow and Cookhill appreciated his interest in their communities and related issues. I am sure that he will continue to speak up for Worcestershire.
379 I pay a special tribute to my most recent Labour predecessor in Redditch, my hon. Friend the Member for Birmingham, Hodge Hill (Mr. Davis). He won an historic by-election in the seat of Redditch and Bromsgrove in 1971. During our campaign, we were fortunate to have my hon. Friend coming to help us on several occasions. He is still widely recognised in the town and it was a particular honour for me when a gentleman we met described me as "the new Terry Davis". My aim as the new Member of Parliament for Redditch is to serve local people as diligently and effectively as my hon. Friend did—a tall order for any Member, new or old.
It will also be my duty and pleasure to put Redditch and the surrounding villages of Inkberrow, Cookhill and Feckenham firmly on the map. Although Redditch was designated as a new town in 1964, it already had a population of 29,000. That figure has more than doubled since that time to the present day, but people and buildings from the old Redditch remain. The mix of old and new gives a sense of history, linked to a vibrant and forward-looking town. Having welcomed so many newcomers, the people of Redditch are friendly and tolerant. We shall stand up for our town and its interests, but we shall embrace the opportunities offered by the new Government with enthusiasm.
I hope that hon. Members will visit Redditch, especially the site of Bordesley abbey where, in the 12th century, Cistercian monks set up home. Nearby, the Arrow brook flows through a layer of red clay, thereby giving the early derivation of the name—red ditch. Hon. Members could also visit the Forge Mill national needle museum, which tracks the development of industry in Redditch through needle-making and the production of fish hooks to spring manufacture. That is still an important industry in the town today.
The town's industry has not depended on past successes. Through the hard work and skills of local people, the innovative work of Redditch borough council in economic development and the continuing support of Redditch and Bromsgrove business link, local industry has diversified. The Chancellor's announcements on corporation tax and capital allowances will reassure the Redditch business community that the new Government will support and encourage its efforts.
In Redditch, we combine an entrepreneurial spirit with a social conscience. The town boasts two credit unions, supported by the borough council and run by volunteers. The town is also launching an innovative mutual guarantee scheme for small and medium-sized businesses, which will provide guarantees for business loans on a co-operative basis. I am sure that such initiatives will be supported by the new Government, who believe that social justice and economic prosperity are integrally linked, as we have clearly seen in the Chancellor's statement today.
As a new town, Redditch has a young population—more than one in three people are under 25. Those young people are the future of our town and our local economy. But 561 of them are without a job or training. That is a waste of lives and talents. They will form a wasted generation unless they can work and train. Those young people will welcome the announcement in the Chancellor's Budget statement that the windfall levy will be used to provide real opportunities to work and train. Young people to whom I speak in Redditch want the 380 chance to make something of their lives. Today, they have been offered that chance. The Chancellor has announced four high-quality options for work and training.
That is not just another scheme or an attempt to massage the unemployment figures. Those opportunities, and the personal support and guidance that will accompany them, will offer young people a real choice. Young people voted Labour in large numbers on 1 May in Redditch and throughout the country, and today the Chancellor is repaying their trust.
I am also honoured to represent the villages of Inkberrow, Feckenham and Cookhill. Those are excellent communities where local people often work hard to support their villages. Those areas are not always, however, a rural paradise for the people who live in them. There are important issues, to do with housing, transport, jobs and business, and the fear of crime, which I will make it my job to raise in the House. I was particularly pleased to learn that Wychavon district council, which covers the rural part of my constituency and is under new political control, is implementing an anti-poverty strategy. There is real poverty in rural areas and we must not allow it to continue to be hidden.
Hon. Members may also he interested to learn that some people believe that Inkberrow village is the model for Ambridge in "The Archers". I was intrigued to read a letter in the Radio Times the other week, complaining that Pat Archer had greeted the election of a new Labour Government with such delight. While I cannot vouch for the support for new Labour of Jack Woolley or Brian Aldridge, and I am sure that we would positively discourage any support from Simon Pemberton, I can assure hon. Members that there are many people in rural areas who welcome the election of a new, truly one-nation Government, urban and rural. It will be my pleasure to represent the common interests of all my constituents, while also recognising their distinct communities and needs.
The Chancellor has spelt out clearly the new Government's taxation principles. A tax system should encourage work and long-term investment, and should be fair and based on ability to pay. The most unfair tax imposed by the previous Government was VAT on fuel. That tax fell on 2.5 per cent. of the disposable income of the most well-off families, but it fell on 12 per cent. of the disposable income of the poorest families—a clearly regressive tax which caused distress and fear among poorer families. It would now be imposed at 17.5 per cent. were it not for the work of my hon. Friends in the previous Parliament, and the good sense of the electors of Redditch. The Chancellor's announcement today on that tax is another clear sign that the new Government will promote fair taxes.
Some people try to justify the tax on environmental grounds, but for an elderly person or a family with young children, heating the home is not a luxury which they can or should cut down on to save money. One reason why we spend so much on heating our homes is the poor state of much of our housing and insulation. How much better it is to give young people opportunities to work in the environmental task force, and local councils the opportunity to repair and insulate homes through the use of capital receipts. That is the proper way to ensure fuel efficiency—not freezing our elderly and our young families with regressive taxation measures.
381 I welcome the Chancellor's statement today. It makes a vital start on delivering the promises that I made to the people of Redditch in the election campaign: action on jobs and opportunities for young people; tough rules on Government borrowing to maintain stability in the economy; a taxation system based on fairness; and support for our schools and hospitals. Not only did our new Chancellor hit the ground running, but today he has clearly shown that he is prepared for a record-breaking marathon.
§ Mr. David Amess (Southend, West)
It is an honour to follow any maiden speech, but it was a special honour to follow the excellent maiden speech of the hon. Member for Redditch (Jacqui Smith). She spoke with great fluency and warmth about her constituents and showed good humour. I am sure that I speak for hon. Members on both sides of the House when I say that we wish her well in the years—at least until the next general election—during which she will serve Redditch.
It would be remiss of me not to mention the other five maiden speeches. I believe that I have heard most of them from near and afar. They were made from all parts of the House, and all those Members should be congratulated on their speeches. The father of my hon. Friend the Member for North Norfolk (Mr. Prior) would be rightly proud of the way in which his son delivered his maiden speech today. I owe my hon. Friend's father a great debt of gratitude, because GEC Avionics is in my former constituency, and he did a magnificent job in attracting new jobs and investment to that firm.
There endeth the pleasantries, because I should now like to discuss the Budget. Tomorrow morning, in my constituency of Southend, West, I shall attend a Budget breakfast meeting, organised by the excellent chamber of commerce and a firm of accountants. In my Budget breakfast speech, I shall say that I believe that this will prove to be a rotten Budget, delivered by what I am sure by the end of this Parliament will prove to be a rotten Government.
Mr. Deputy Speaker
Order. Any points of order are for the Chair. That matter has been dealt with. I suggest that the hon. Gentleman gets on with his speech about the Budget.
§ Mr. Amess
With regard to the Budget, Mr. Deputy Speaker, I am very pleased to be surrounded by Conservative colleagues. I am not so pleased to be surrounded by Liberal Democrat Members. They power-share on Essex county council and on Southend-on-Sea borough council, so I have not the faintest idea why they are sitting on the Conservative side of the House. They would 382 be better placed to sit with Labour Members—they have much more in common with them than with Conservative Members.
There was an air of triumphalism among new Labour Members as the Chancellor delivered his Budget statement. Their faces lit up at each new announcement. They were watching our faces and thinking that we were being caught out in a range of measures, but it was laughable to describe today's self-indulgent, patronising Budget as the people's Budget. The Labour party manifesto said:New Labour is not about high taxes on ordinary families".As I look at the Labour Benches, I am not sure what Labour Members now know about ordinary families because, far from representing the working classes, it appears to me that they have much more common with the middle and upper classes. They have nothing in common with the working-class people whom they represent.
The Budget offers working people nothing. The posters that were deployed in the four-week general election campaign told us that there would be no tax rises, but, however they are dressed up, today we had 17 tax rises. Those 17 tax rises are equivalent to a 3p increase in the standard rate of taxation, so immediately new Labour Members have let their constituents down. They have broken their promises.
Of the 659 constituencies, Southend, West is 31st in terms of senior citizens. Pensioners in Southend, West have been badly let down by today's Budget. We are all on life's journey; no matter where we are on it, everyone's life is important. The fact that senior citizens are somewhat more advanced on that journey means that they deserve the same treatment as anyone else. All hon. Members will have received a brief from Help the Aged on pensions and income, health care and social care, housing standards, mobility and independence. Many new Members turned up at the tea party that Help the Aged gave us. Nothing in the Budget meets any of the points that that charity put to us just last week.
I note that the Economic Secretary is in her place. I understand that she worked for Mr. Robert Maxwell, so I am surprised at the direct attack that has been made on pension funds and pensioners today. It is bad news for my constituents in Southend, West.
We then heard about the employment programme. I accept that it will create some jobs temporarily, but the minimum wage and the social chapter will destroy jobs permanently. I dare say that we shall hear more on that issue tomorrow. The programme will result in work to welfare, not welfare to work.
In September, the leader of the Labour party said:We have no plans to increase tax at all.The present Chancellor said:There is no black hole for the Labour party because we have no public spending commitments that require extra taxes.There seemed to be no harmony on the Labour Benches today. The hon. Member for Brent, East (Mr. Livingstone), who has left his place, mentioned horrendous Budgets. Through his stewardship of the Greater London council, he is an expert in horrendous budgets. Neither he nor the hon. Member for Hackney, North and Stoke Newington (Ms Abbott) seemed to be in accord with anything that the Chancellor said today.
383 Even before the Budget, the Labour party gave the game away. Its manifesto did not say that it would hand over stewardship of the economy to the Governor of the Bank of England. That says it all. If the Labour party honestly believes that the British people are daft enough to allow it to get away with pushing responsibility on to the Governor of the Bank of England, it is in for a big shock. Then to humiliate the Governor in the Chancellor's Mansion House speech, by saying that if the Governor gets the inflation forecast wrong, he must write out 100 lines and apologise to the British people, is irresponsible.
The newly elected Government will parrot for the next year or two that everything is the fault of the Conservative party over the past 18 years, but it is the newly elected Labour Government's responsibility to manage the economy well, because all the hopes and aspirations of hon. Members depend on their management of the economy.
Since 1 May, we have already had two interest rate rises, which have damaged the living standards of a range of people. They have damaged small businesses and those who pay mortgages. Today, the housing market has been further damaged by the Chancellor's announcement on MIRAS. Again, we heard further hypocrisy from the Labour party. Speaking about MIRAS, the leader of the Labour party said last year:if we cut it, it will add to insecurity, destroy confidence in the housing market and make people much more wary of buying and selling homes.The cop-out from the Labour Chancellor today was that as the Conservatives had done it, it was okay for Labour to continue. That is not what the present Prime Minister said last year. The Chancellor has a short memory.
There is to be a new scheme forcing insurance companies to pay for medical services for road accident victims. That is an additional medical levy on vehicle owners. Through raised insurance premiums, all vehicle owners will be forced to pay twice for medical care. I wonder what will come next.
We heard a throw-away announcement about capital receipts. The Conservative Government said that capital receipts could not be released until local authorities had paid off their debt. No detail was given about that today. We heard about the new house building programme that everyone will apparently rejoice at, but as there has been such a furore about the green belt being destroyed in Essex, I hope that Labour county councillors there will articulate clearly where all those new houses are to be built.
I noticed two more so-called causes for joy among Labour Members. There was an announcement about the health service, which the hon. Member for Brentford and Isleworth (Mrs. Keen) touched on. Labour Members were pleased at the announcements about health spending and about education. What was announced today with regard to the health service was no more and no less than the Conservative Government were pledged to do.
When it was announced that £1.3 billion would be spent to improve the fabric of our schools, Labour Members rejoiced. However, the Chancellor said that that £1.3 billion would be spent over the lifetime of this Parliament, so about £250 million will be spent each year, which will certainly not meet the expectations of all—
§ Mrs. Ann Keen
Having worked in the health service for the past 20 years, I can assure the hon. Gentleman that 384 the contribution is welcome. It is the first time that money is being put into patient care, rather than management bureaucracy, which far exceeds any management facility that the health service needs. At last the health service is back on track. Ask any health worker—the hon. Gentleman is looking at one.
§ Mr. Amess
I respect the hon. Lady's expertise with regard to the health service. However, I was not impressed when the new Secretary of State for Health wrote to hon. Members stating that the money saved through the removal of the internal market would reduce waiting lists. I do not see how that can be delivered.
I seized on the fact that for the first time we have three Ministers of State in the Department of Health. Four of the new Ministers are based in London. Unless we tackle the London problem—the hon. Lady has a vested interest in that—none of the difficulties of the health service will be sorted out.
The Budget is extremely disappointing. It is not fair to ordinary families. The British people deserve better than they got today.
§ Ms Joan Ryan (Enfield, North)
I am grateful for the opportunity to make my maiden speech in this important debate. I congratulate all hon. Members who have made their maiden speeches today, especially my hon. Friends the Members for Redditch (Jacqui Smith) and for Brentford and Isleworth (Mrs. Keen).
I congratulate the Chancellor of the Exchequer, my right hon. Friend the Member for Dunfermline, East (Mr. Brown) on his first Budget. It is, as he promised, a Budget to serve the many and not just the few. His welfare-to-work proposals are radical, far reaching and extremely welcome. They will be welcomed across Britain, and they are particularly welcome in Enfield, North.
I shall say a word about my predecessors. The House will know that my immediate predecessor was the right hon. Tim Eggar. He served Enfield, North from 1979 and served as a Government Minister continuously for 12 years. I am sure that we all wish him well in his chosen career change, working in industry and commerce.
From 1974 to 1979, Bryan Davies served as the Member for Enfield, North. He is remembered with affection as a man of integrity who worked hard for the people of Enfield, and I hope to follow his example. I have the honour to be the first woman Member to serve Enfield, North.
I shall spend a few moments, as is traditional, telling the House a little about my constituency, which is one of contrasts. It is London's most northerly constituency and is fortunate to have much designated green-belt land. The Countryside Commission has stated that the finest landscapes in the Greater London area are generally acknowledged to be those such as Enfield Chase. I readily agree with that view. I intend to work hard with local groups, notably the Enfield Preservation Society, which has done so much over the years to safeguard the nature and character of Enfield.
Enfield Chase and areas such as Forty Hill served as royal hunting grounds for over 400 years. Both Henry VIII and Elizabeth I often hunted in the area. No hunting 385 takes place there now. Today, the unique characteristics of the area, and historic buildings such as Forty hall, are enjoyed by all members of the population and by many from further afield.
Enfield town is at heart a traditional English market town. Eastern Enfield, in contrast, is a much more urban scene. It is an area shaped by industry. It is the part of Enfield that gave the world such things as Belling cookers, Scrabble and the Lee Enfield rifle. The disappearance of much of east Enfield's old manufacturing industry has brought its problems and the area now has assisted area status. It is thanks to the efforts of our Labour Member of the European Parliament, Pauline Green, and the local authority, that regeneration is beginning to take place through the use of objective 2 funding and the single regeneration budget.
Ponders End may be known as the birthplace of Lord Norman Tebbit, or perhaps because Kenneth Horne and Kenneth Williams brought it to the nation's attention in their many references to it in the 1960s radio series entitled, "Round the Horne". Ponders End's chief landmark was the gasworks, and the area was perhaps thought graceless. That is no longer the case because these days it is a most salubrious place. Indeed, it is home to my constituency office. Like the rest of Enfield, North, it is populated with warm, welcoming and energetic people who have a strong sense of community. These are people and communities that I am privileged to represent.
Enfield, North has a diverse population. Diversity is evident in culture, ethnicity, language and religion. More than 30 languages are spoken by children attending schools in my constituency. Discrimination undoubtedly exists in employment opportunities, but the enterprise of Enfield residents has seen many new businesses come into being from the talents of people of all backgrounds.
I have spoken to many people in the Cypriot community, for example, who have made a significant contribution to the economy of Enfield and of north London generally.
Unemployment among some groups—notably youths and black and Bangladeshi groups—remains disproportionately high. The measures that my right hon. Friend the Chancellor of the Exchequer announced today will bring real hope. There will be a new future of hope for all my constituents, either as the recipients of opportunities for training and employment or as parents or grandparents, whose aspirations for their children and grandchildren will be better served by the Budget.
Enfield, North is one of the major centres of industrial activity in London. It has particular strengths, including an advantageous location, excellent communications, a manufacturing base, a reliable and skilled work force and a resilient enterprise culture with a strong small business sector. Over the past decade, however, many locally established manufacturing companies have either closed or announced major redundancies—Belling, Royal Small Arms and Ferguson, to name but a few.
Annual employment data demonstrate that in my constituency there has been a shift away from manufacturing, transport and communications into service sector industries such as financial services. Although we value and encourage those new directions, the gradually disappearing manufacturing and production base has also meant the loss of skilled apprenticeship opportunities.
386 Young people in Enfield, North are keen to get on. Participation in full-time education among 16 and 17-year-olds in Enfield is slightly higher than the level for London as a whole, and significantly higher than for England as a whole. Yet some 47 per cent. of the long-term unemployed in Enfield are in the 18 to 24 category. When they complete their education, they do not have the training and employment opportunities that they deserve. We look to the Budget proposals to break that logjam.
Unemployment is one of the major sources of instability in our society. It has a very real impact on the health and welfare of individuals. It creates stress for them and their families and can lead to a wide range of problems, including debts, homelessness and family breakdown.
The new deal offered in the Budget will raise both the education and skills level of our young people and, in doing so, will not just fulfil a social need but play a key role in improving the competitiveness of the British economy and raising the long-term growth rate. The defining characteristic of this new deal is choice—choice for young people who will be offered four high-quality options—but, rightly, no fifth option of passive reliance on benefits.
Young people—indeed, the whole community—will welcome the opportunity that the welfare-to-work Budget opens up for them. Enfield, North is well placed to take advantage of those opportunities. Middlesex university and Enfield college can offer training and day release courses. Capel Manor, Greater London's only specialist college of agriculture, has an excellent record of working with the long-term unemployed and helping people back into worthwhile employment. Enfield, North contains the Lea Valley innovation centre. Its task is to tap the financial, physical and human resources of the Lea Valley to stimulate the creation and expansion of innovative technology-based small and medium enterprises.
In terms of large enterprises, it is significant that Ford announced on 12 June, after a meeting with my right hon. Friend the Prime Minister, that it will invest £40 million in its plant in my constituency to provide new production facilities. I very much welcome that positive news. I also welcome Ford's commitment to back the Government's welfare-to-work programme and to seek further meetings with the Government to discuss what role it could play. Indeed, Ford already runs a scheme that takes on 100 young people each year. The welfare-to-work programme will succeed with such co-operation from the private sector.
Members of Parliament have a leadership role in their local areas to bring together the private sector, the Government and all other agencies to work towards the goal of getting long-term unemployed people off benefit and back to work. That is my primary objective in Enfield, North. Only through the partnership approach of welfare to work can a solution be found to the cycle of deprivation and welfare dependency that is so prevalent in Britain's towns and cities.
Other partners have an important contribution to make to the success of this new deal. In Enfield, they include the North London training and enterprise council and the very active and well-organised chamber of commerce.
The windfall levy is entirely fair. It is based on the fundamental principle of social justice. We have seen the size of the profits on which the tax will draw. Given how 387 the tax will be used, it is wholly right and wholly justified. It is a tax which will pay for a future. It is what the British people so overwhelmingly endorsed on 1 May. It is the new Labour Government delivering on their promises.
I welcome the Budget; Enfield, North welcomes the Budget; and I commend it to the House.
§ Yvette Cooper (Pontefract and Castleford)
Mr. Deputy Speaker, thank you for calling me during this historic debate. I am honoured to be uttering my very first words in the House on behalf of the people of Pontefract and Castleford on Budget day. This is Labour's first Budget for 18 years—and what a Budget. It is hard to know where to begin: resources for education and health, help for the young and for the long-term unemployed, measures to calm growth in consumption, boost for investment or help with child care.
It is also an honour to conclude the debate today, and to hear so many maiden speeches. We have had such speeches from my hon. Friends the Members for Enfield, North (Ms Ryan), for Redditch (Jacqui Smith), for Eastwood (Mr. Murphy) and for Brentford and Isleworth (Mrs. Keen), and from the hon. Members for Witney (Mr. Woodward), for Weston-super-Mare (Mr. Cotter) and for North Norfolk (Mr. Prior). We have had a tour of the country, and we have heard how the Budget will affect people across Britain. It is truly a people's Budget.
Almost 100 years ago, Lloyd George launched his people's Budget for this century. Now we have a new people's Budget to begin the next century. I congratulate my right hon. Friend the Chancellor on a wise and radical Budget. It faces up to the long-term problems of the British economy. It also takes immediate steps to tackle some of the deep-rooted inequalities faced by my constituents.
I represent a corner of West Yorkshire which is proud of its industrial heritage and its hard-working people; the liquorice fields and factories of Pontefract; the potteries of Castleford; the pits—the heart and belly of the constituency; the power station at Ferrybridge; the glassworks and the chemical works of Knottingley and Castleford; and, near the corner of Normanton that I represent, a Japanese electronics factory.
These past two decades have been hard times in my constituency. Many of the pits are now closed, jobs in traditional industries have gone and, most important, we lack new investment and help to reskill the work force to generate new jobs to replace the old ones that have gone.
I must report to the House that 2,600 people in my constituency are officially unemployed: a third of them have been unemployed for more than a year. The number of people not working, either because they have been forced into early retirement or on to sickness benefit, is much higher. Too many of my constituent have not had their fair share of opportunities to learn and to obtain the qualifications that they need to prosper in a modern economy. That matters for the future, as one generation follows in the footsteps of another. Evidence shows that the chance of the sons and daughters of miners in my constituency becoming high earners when they grow up is a mere tenth of that of the sons and daughters of well-educated and wealthy professionals. That figure is shocking.
388 The House must not misunderstand me. It is true that my constituency is plagued by unemployment, but I represent hard-working people who are proud of their strong communities and who have fought hard across generations to defend them. They are proud of their socialist traditions, and have fought for a better future for their children and their grandchildren. In the middle ages, that early egalitarian, the real Robin Hood, lived, so we maintain, in the vale of Wentbridge to the south of Pontefract. It was a great base from which to hassle the travelling fat cats on the Great North road.
Centuries later, Pontefract became home to another true fighter for social justice, Barbara Castle. In her autobiography, she describes her politicisation during the miners lock-out in 1921. Through the years, my constituency has been home to other Members who have fought hard for the working people whom they represent in nearby constituencies, including the former Member for Hemsworth, Derek Enright, and my hon. Friend the Member for Normanton (Mr. O'Brien), who has helped me so much in these early months.
The people of Pontefract and Castleford owe most to the man who represented them for the past 19 years, and who battled hard for their welfare, Sir Geoffrey Lofthouse, now Lord Lofthouse of Pontefract. I know that hon. Members will join me in paying tribute to someone who, as a former Deputy Speaker, worked hard for the House, was fair and honourable, and, above all, was a kind man. He governed the House, which can sometimes be rowdy and alarming, with a firm but fair hand.
For some, the traditional tribute to a predecessor is something to be swallowed swiftly, got over as fast as possible. For me, it is an honour and a privilege to be able to pay that tribute on behalf of the House and the people of Pontefract and Castleford to Sir Geoff, as he is known locally.
Sir Geoff was a well-loved constituency Member of Parliament. Like my grandfather, he began his working life in the pits as a teenager. The mischievous among his Pontefract friends describe him as a corner-stint man, but they would never use the same phrase to describe his commitment to his constituents. His proudest achievement was his work for the welfare of the miners with whom he served for so long, getting emphysema recognised as an industrial disease.
I pay a personal tribute to him, too, for Sir Geoff has been extremely supportive during these curious first months here. I hope that we can continue to work together for the people of Pontefract and Castleford, a partnership which I hope echoes the strength of this new Government, young and old, energy and experience, women and men, across the country and across the generations working together for common goals. The Budget gives us the chance to achieve those goals.
More important to my constituents than anything else will be the new deal for the unemployed. In Pontefract and Castleford we are raring to go. Already, the Groundwork Trust in Castleford has approached me with a proposal for an environmental task force. We hope to encourage young unemployed people in some of the highest areas of unemployment in our constituency—in Knottingley and on the Airdale estate in Castleford—to join regeneration projects that are already planned. That way, they can take their first steps into the world of work straight from their own doorstep, be part of rebuilding 389 their own troubled estates, learning transferable skills and building their own personal pride in their environment and in their work.
We think that this is such a good idea that we are not even waiting for the windfall tax money to come through. A local partnership is already drawing up a proposal for European money, and I hope that we will provide a successful model for the rest of the country to follow. At the same time, Wakefield council is itching to expand on its successful job subsidy programme, Workline, which it has been operating for the past 11 years. Employers there have a year-long subsidy of up to £40 a week to take on unemployed workers.
I asked one employer involved whether he would have taken someone on anyway. After all, his business was expanding. He told me two interesting things. The first was that the subsidy encouraged him to take on a new employee a year earlier than he would otherwise have done. The second was that, without the subsidy, he would not have considered taking on someone who was unemployed. There, in that one anecdote, was the proof that such a job subsidy can speed up job creation and help people in most danger of being locked outside the work force, trapped on the dole, into jobs.
That is important because it means that the new deal gives us a chance to tackle the long-term roots of inequality—people who are trapped on the dole in my constituency. Moreover, by helping those who find it hardest to get work, the new deal also boosts the capacity of the economy. That means that, as the economy grows, instead of running into the old inflationary buffers, as so often happens, we can have growth that creates jobs and more jobs, because we have boosted the capacity. That is 390 the Budget's greatest strength. At the same time as controlling consumer demand and stopping it expanding too fast, the Budget is boosting the supply side to try to raise Britain's long-term sustainable rate of growth.
I hope that the new deal will receive support from both sides of the House, because it is about our future. In Pontefract and Castleford, I found enthusiasm for these proposals on both sides of the political spectrum.
As recently as Monday morning, a small business man came into my surgery. He admitted to being one of the few people in the area who had voted Conservative for 30 years—until the recent election. However, he said that he was delighted with what he had seen about Labour's plans for young people. He said that he wanted to take on three young unemployed people, asked when they could start, and where should he sign. His enthusiasm was infectious, and I hope that such enthusiasm will encourage more small businesses, both in my constituency and throughout the country, to take up the challenge to provide a new deal for the unemployed. It is something which we all need to work on together.
I am sure that that man will be even more delighted now that he has heard my right hon. Friend's Budget. It truly is a people's Budget—a Budget for social justice and for Britain's future. Tough choices have to be made, but they will generate results in the long run.
Keynes said:In the long run we are all dead"—but I say, "So what?" Our children and our grandchildren will still be alive. Therefore, for the people of Pontefract and Castleford and for their children and grandchildren, I welcome the Budget.
§ It being Ten o'clock, the debate stood adjourned.
§ Debate to be resumed tomorrow.