§ Motion made, and Question proposed,
- (1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
- (2) Subject to paragraphs (3) to (6) below, this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—
- (a) for zero-rating or exempting a supply, acquisition or importation;
- (b) for refunding an amount of tax;
- (c) for varying any rate at which that tax is at any time chargeable;
- (d) for any relief, other than a relief which—
- (i) so far as it is applicable to goods, applies to goods of every description, and
- (ii) so far as it is applicable to services, applies to services of every description.
- (3) Paragraph (2) above does not exclude the making of amendments with respect to value added tax—
- (a) providing for refunds of the kind specified in paragraph (4) below;
- (b) providing for that tax to be charged at a reduced rate of 5 per cent. on supplies of the descriptions specified in paragraph (5) below (and on equivalent acquisitions and importations); or
- (c) making provision of the kind authorised by paragraph (6) below.
- (4) The refunds mentioned in paragraph (3)(a) above are refunds of value added tax where—
- (a) that tax is chargeable on a supply to, or an acquisition or importation by, a museum or gallery, and
- (b) the supply, acquisition or importation is attributable to supplies of free rights of admission to the museum or gallery.
- (5) The supplies mentioned in paragraph (3)(b) above are—
- (a) supplies, in the course of a conversion of a building (or part of a building), of services related to the conversion if after the conversion the building (or part) contains living accommodation;
- (b) supplies, in the course of the renovation or alteration (including the extension) of a dwelling that has been unoccupied for at least three years, of services related to the renovation or alteration:
- (c) supplies of goods by a person making a supply of services within sub-paragraph (a) or (b) above if—
- (i) those services include the incorporation of the goods into the building concerned (or its site), and
- (ii) the goods are building materials within the meaning of Group 5 of Schedule 8 to the Value Added Tax Act 1994;
- (d) supplies of children's car seats.
- (6) The provision authorised by this paragraph is provision re-enacting, without altering any person's liability to value added tax or the amount of any such liability, provisions providing for that tax to be charged at a reduced rate of 5 per cent. on certain supplies, acquisitions and importations.—[Mr. Gordon Brown.]
§ Mr. William Hague (Richmond, Yorks)
This is the Chancellor's fifth Budget, but those of us who have observed the previous four will already know a great deal about this one. The first thing we know is that those who naively relied entirely on what the Chancellor had said for 311 their Budget information ended up being grossly misinformed. In previous years, the clobbering of the pension funds, the abolition of the 20p tax rate, the billion-pound tax on high-tech entrepreneurs and the £2 billion addition to corporation tax were all introduced in the Chancellor's Budget, but never described—and in some cases never even mentioned—in the Chancellor's speech. So he will understand that people will be suspicious about some of the claims that he has made today.
When the Chancellor says that he will simplify corporation tax for small companies, people will remember that the last time that he said he was going to simplify something for the self-employed—national insurance contributions—they ended up with a £475 million tax increase which he did not mention in his Budget.
When the Chancellor talks about helping women and children, people will remember that he abolished the married couples allowance and left a gap for a year before introducing the children's tax credit, so that, in the current financial year, families—including many women and children—have been the victims of his stealth taxes.
When the Chancellor talks about what he has done for savings, people will remember the penalising of savings in his previous Budgets. For some reason, he omitted to mention—this is at page 170 of the Red Book, which was published a few minutes ago—that the forecast for the savings ratio has been revised downwards again, and that what was going to be 6 per cent. of the national income being saved—compared with 11 per cent. under the previous Government—has now been revised down to 4.75 per cent.
On a rapid reading of the Red Book, it is quite instructive to discover, on page 473, that the Chancellor's forecast for the balance of trade is a £27 billion deficit, which is £8 billion worse than the outturn for this year; that his forecast for a manufacturing output increase has been revised down from his previous forecast; and that although he said that he was increasing his forecast for investment, his figures show that the actual outturn for fixed investment for 2000 is 2.25 per cent., against the 3.25 per cent. that he forecast in the previous Budget. Therefore, as ever with his Budgets, all is not what it seems.
We also know that so many of the claims that the Chancellor makes on Budget day turn out to be false. For example, he said today that the tax burden on the average family will fall to its lowest level for 30 years. However, in saying that, he included only direct taxes and left out all of his stealth taxes on petrol, pensions, cars, alcohol, cigarettes and council tax. His statement was watched by millions of people, and some of them may even have believed it, but it would be true only for people who never drive, never smoke, never drink and do not have a pension or even a local council. In other words, it does not apply to anyone in the country.
Based on previous experience, therefore, no rational person can sit here and believe the Chancellor's assertions. It is just as well that the Prime Minister is sitting next to him. Labour Members cheer in ignorance of the detail, which proves that one cannot fool all of the people all of the time, but one can fool all Labour Members of Parliament on Budget day.
The second thing that we know for sure about the Chancellor's Budget today is that his every pronouncement is set against the massive increases in tax 312 that he previously introduced. Taxes are £25 billion higher this year than when Labour came to office. In the four previous Budgets, the Chancellor introduced 45 stealth tax increases. Taxes have gone up on marriages, mortgages, pensions, petrol, diesel, cars, homes, medical insurance, savings, small businesses, large businesses and the self-employed.
The Chancellor turned up today with tax reductions as part of a cynical election Budget. It gives back to people for a limited period only a tiny part of what he has taken from them. He is like the thief who steals one's car and comes back the next day to return the hubcaps. That is the story of the Chancellor's five Budgets in this Parliament.
The Chancellor's extra taxes on families, drivers and businesses are already equivalent to an extra 10p on income tax. Today he announced tax reductions that would be equivalent to about 1p off income tax. It is therefore a 10p up, 1p down election Budget. What the right hon. Gentleman gives with one hand, he has already more than taken away with the other.
Because of this Chancellor's tax increases, the increase in people's real household disposable income—the amount of their own money that they can keep after taxes and inflation—has fallen to its lowest level for a generation. Under the Government of my noble Friend Baroness Thatcher, disposable household income rose at 2.9 per cent. a year. Under the Government of my right hon. Friend the Member for Huntingdon (Mr. Major), it grew at 2.5 per cent. a year. Under this Government, it has grown at 1.6 per cent. a year. The Government promised that they had no plans to increase taxes at all. The lowest increase in disposable income for a generation has been produced by a Government with the highest increase in disposable promises.
As ever, there are a variety of tax increases that the Chancellor has decided not to mention in the Budget. No doubt he thought it a minor detail, but he omitted to mention yet another stealth tax increase—the decision to impose from 1 June, for the first time ever, the full cost of VAT on the purchase of spectacles. That will add about £10 to each purchase.
Customs and Excise has written to the optical profession saying that local officers will apply that decision to all opticians businesses with effect from 1 June 2001. I received a letter from one of my constituents, Mr. Alan Brown—at least one Mr. Brown can be straight about taxation—who said about the Chancellor:The above 'TAX ON EYESIGHT' I suspect will not be mentioned in his budget speech this Wednesday, however, I feel it is of sufficient national importance for you to mention it in your budget reply as it high-lights the snide and underhand way in which the Government introduces these stealth taxes.It is typical of this Government to announce with great amounts of publicity the introduction of free sight tests for the over-60s without telling them that they will not be any better off as the VAT on their spectacles will now outweigh the saving. How is it that something that affects millions of people and thousands of businesses around the country and is a major extension of value added tax has somehow slipped out of the Budget speech?
How is it that the increases in council tax were not referred to in the Budget speech? We now know that the council tax cost for the average band D property will rise by 7 per cent. this year—three times the rate of inflation. That means £60 more in tax bills for hard-working 313 families and brings the total increase in council tax since the Government came to power to £220 on band D properties—a tax hike of a third.
Council costs are rising because of the Chancellor's other stealth taxes on fuel and pensions and because of extra regulations and bureaucracy. The right hon. Gentleman's best-value scheme has added £125 million to the cost of councils. Under this Government, council tax has become the ultimate stealth tax, piled on to taxpayers without any improvement in services. The Chancellor hopes that individual councillors will get the blame instead of him.
We also heard nothing in the Budget speech about double taxation relief—which was much vaunted in last year's Budget—by which the Chancellor was going to raise hundreds of millions of pounds. This must be somewhere in the Budget measures because the pre-Budget report said that the Government would be acting through the 2001 Finance Bill.
Today sees what should be the end of a saga of muddled thinking and failure to listen that has involved the Government in no fewer than three retreats from their original plans. They consulted on two options for changes to double taxation relief in 1998. The first retreat was when the Chancellor adopted totally different proposals in last year's Budget. So much for listening. He then slipped out those proposals in a Budget press release without mentioning them in his speech. So much for open government. When I asked the Prime Minister about the proposals at Prime Minister's Question Time, he insisted that the problems raised by PricewaterhouseCoopers were based on a misunderstanding of the tax position and that he knew more about double taxation than the accountancy profession. So much for knowing one's limitations.
Then came the second retreat. The Government admitted that they had been mistaken and changed the proposals in the Finance Bill Committee. Yet they have still not got the details right. The Chancellor is having to change them again in this Budget, but has not told us how—that is the third retreat. So, double taxation relief has turned into a triple taxation retreat and the details should have been in the Chancellor's Budget speech.
The Chancellor announced a change in income tax, widening the 10p tax band from £1,500 to £1,880. People will remember that the abolition of the married couples allowance adds £300 a year to their income tax bill. The abolition of mortgage interest relief adds £326 to their income tax bill. These more than cancel out the increases in thresholds and reductions in allowances announced in previous Budgets. The widening of the 10p tax band will produce in most cases £38 a year, or 75p a week. The right hon. Gentleman has got into trouble over 75p a week before, and I think that he might get into trouble over it again.
The Chancellor announced proposals on business taxation and said that he had to make it easier for businesses to compete. Who has been bringing about all the increases in business taxation over the past four years? The Confederation of British Industry says that the United Kingdom tax take from business has already gone up by an estimated £5 billion a year over the course of this Parliament.
314 The Government are steadily destroying Britain's competitive advantage. While they have been playing politics with the British economy, our competitors have been sharpening up their act. While other countries have been reducing their taxes—France, Germany and Italy are all proposing substantial business tax reductions—the Chancellor is going to produce a White Paper on economic reform in Europe. He will lecture other countries on what to do, when he has been increasing taxes in Britain while they have been reducing theirs.
Over the past four years, the UK's productivity growth has averaged 1.4 pr cent. and the Red Book, just published, refers on page 162 to subdued productivity growth since 1997. What a coincidence. Who came to power in 1997? Over the previous five years, productivity grew 50 per cent. more quickly. No wonder the International Monetary Fund has said that the United Kingdom's productivity performance in comparison with other major industrialised countries is an area of weakness.
We will look at that, detail of the Chancellor's business announcements, and where they reduce the tax and regulatory burden—if they do—they will be welcome. However, the right hon. Gentleman would have done better to tackle business burdens head on, to have stopped forcing businesses to act as unpaid tax and benefit administrators, and to have scrapped the IR35 tax that will drive people overseas. He should have set British business free to compete.
The Chancellor talked about simplifying tax arrangements for some businesses, but the director general of the British Chambers of Commerce has said:The CGT system is now so complex as to be almost unworkable. Many businesses say they and their accountants are just unable to work out their CGT liabilities.Three years on from the Chancellor's reform we have one taper, two whole systems and hundreds of rates of tax. If the new deal had been as successful in creating work for the unemployed as the capital gains reforms have been in creating work for accountants, we would have the lowest unemployment rate in the western world. Only this morning—[Interruption.] If Labour Members do not know that 14 OECD countries have a lower rate of unemployment than the United Kingdom, it is no wonder that they can be so easily duped by the Chancellor on Budget day.
The Chancellor talks about improving savings, while silently revising downwards his estimate for the savings ratio. Savers have borne the brunt of his stealth taxes—£5 billion a year has been raided from pension funds. In his Britain, there is no reward for people who do the right thing and save for themselves and their families. It is the double-take economy: "You take responsibility and the Government take your money." As a direct result of the right hon. Gentleman's policies, the savings ratio has fallen sharply—by more than half since he became the Chancellor of the Exchequer.
The Chancellor announced new money to increase recruitment in public services, including the national health service. When will the Government understand that such an announcement is not enough to repair the morale—so cruelly undermined over the past few years—of teachers, nurses, doctors and police officers? Why did the Government not tell people in the public services that the Government would get off their backs? Ministers 315 should realise that there is no point in spending one day a year making helpful-sounding announcements if they spend the other 364 days piling on extra regulations and extra bureaucracy.
Last week, in an open letter to general practitioners, the chairman of the general practitioners committee stated:General practice in the UK is in crisis. Morale within the profession has plunged to new depths…Quite clearly, this government's interest in the problems of general practice is superficial. It has complacently shovelled more and more work on to general practitioners…Now we are saying that we have had enough.He noted:For GPs across the UK struggling to cope with government initiative after government initiative whilst facing the daily reality of trying to deliver high quality patient carerecent Government announcements are "the final straw."
That is the reality of trying to recruit and retain people in public services. That is why the chairman said that 60 per cent. of respondents said that they werethinking of retiring early or changing career and 54 per cent stated they would not recommend general practice as a career.The Chancellor will not be able to achieve his objectives for recruitment in our public services unless he allows the professionals in those services to carry out their job without ever-increasing Government regulation and intervention.
The Chancellor announced an increase in the children's tax credit. Despite our deep misgivings about the organisation of the tax credit, we welcome that increase. But, as ever, the right hon. Gentleman did not give us the whole story. He glossed over the fact that 5 million of the married couples who lost their married couples allowance last year will not benefit from the new credit at all. The Chancellor's endless tinkering—creating a cat's cradle of overlapping benefits and credits, chock-full of inconsistencies and contradictions—means that a family with two earners, both on £30,000, earning £60,000 between them, will receive the children's tax credit in full, but that a family with one earner on £40,000 will not do so. That is the clearest example of the muddle that passes for welfare reform under the Government.
We know that we will have to sort out the mess that the Government are leaving behind, but we are not alone in having to do so—astonishingly, the Chancellor has already drawn up plans to sort out the mess that he will leave behind. He is already making new plans to change the plans that he yet to put into effect. That has been further confirmed in his statement today. What an admission of failure. He killed off the married couples allowance before he had a replacement ready, and now his new system is so full of holes that he is already planning its successor. He is creating a more and more means-tested society.
In 1993, the Chancellor said:I want the next Labour Government to achieve what in 50 years…has never been achieved. The end of the means test for our elderly people".He is nodding; he said it. In 1997, 37 per cent. of pensioners were on means-tested benefits. By 2003, more than half of pensioners will have to reveal all their personal details to the state in the hope of being granted an income sufficient to pay the Chancellor's taxes. That is not just another broken promise from the Chancellor; he has deliberately set out to do the exact opposite of what he said he would do.
316 People have to fill in an extraordinarily long form, with 323 different items of information, on which pensioners are even asked whether they are pregnant. That shows the extent of the means-testing and the information required, as the Chancellor creates a more and more means-tested society. He tries to con people into thinking that he has suddenly been converted to tax reductions, so he must think that the people of this country are stupid. He must think that families are too stupid to notice that the typical family pays £670 more tax a year since he became Chancellor. That calculation allows for increases in child benefit and the cut in income tax rates, which are more than wiped out by the abolition of the married couples allowance and MIRAS, the pensions tax and the increase in duties on tobacco and petrol. He must think that people on low incomes are too stupid to notice that his stealth taxes have hit the poorest fifth of households the hardest because they are so regressive.
The Treasury figures show that the tax burden on the richest fifth of households—the kind of people who get invited to the Lord Chancellor's dinner parties—has increased from 35 per cent., when Labour took office, to 36 per cent., but the tax burden on the poorest 20 per cent. of households has increased from 37 to 40 per cent. of their gross income. The Chancellor goes around posing as the friend of the least well-off, but he hits them even harder.
The tax reductions in the Budget are entirely motivated by the onset of a general election in the not-too-distant future. In the Chancellor's first Budget, he increased taxes left, right and centre. Tax credits were abolished, MIRAS was restricted, vehicle excise duty was increased and the fuel escalator was accelerated. In his second Budget, he had the top rate extended to travel insurance, married couples allowance restricted, gaming duties increased, company car tax increased, reinvestment relief restricted and the fuel escalator accelerated again. That has gone on, Budget after Budget, with 45 taxes, until we reach this Budget, when suddenly some taxes come down. What could be happening in the next few months that could explain that bizarre change in behaviour? What could persuade a man who is so committed to taxing people more and more to do something so utterly out of character?
We know that those election tax cuts are for a limited period only. We know that the petrol tax cut is for a limited period only because the Prime Minister himself has told us that he thinks cutting fuel tax involves cutting the money that goes to vital public services. He told me:If the right hon. Gentleman is telling us that he would cut fuel duty, that means that he would also cut the money that we are pulling into schools, hospitals and transport."—[Official Report, 28 June 2000; Vol. 352, c. 899.]If that is what he really believes, the cuts in petrol tax announced today must be for a limited period only—in other words, until the election is over.
The Prime Minister complains about cynicism in politics. Does he not think that everybody who has paid through the nose since he came into office will be cynical about a Government who raid their pockets every year until the election is in sight, decide to give a little back just in time for polling day, and then plan to take it all back after the election? The stealth tax on pensions alone raises £6 billion for the Chancellor this year, more than outweighing all the announcements that he has made today.
317 There are so many things that the Chancellor should have done in this Budget. He could have reversed the spiralling cost of running Whitehall; he could have proposed real welfare reform and tackled benefit fraud; he could have reformed legal aid and student loans; he could have made billions of pounds of savings and given the money back to the hard-working people of this country; he could have abolished taxes on savings; he could have raised the tax allowances for pensioners by more than he did and taken a million pensioners out of tax; he could have introduced a transferable married couples allowance that recognised the value of marriage, which he has removed from the tax and benefits system; he could have cut petrol tax for more than a limited period only; and he could have given the people's surplus back to the people. But he did none of those things; instead, he has produced a cynical election budget—the 10p up, 1p down Budget—that gives with one hand when far more has already been taken back with the other.
It is a Budget for a limited period only and, given the chance, we know that the Chancellor will take it all back. Only the Conservatives will give people back their money; only the Conservatives will tax less and look after people's money.
§ Mr. Charles Kennedy (Ross, Skye and Inverness, West)
To boil all that diatribe down, it seems that the leader of the Conservative party is rather upset that the Chancellor is behaving like a politician this afternoon. That was basis of the Leader of the Opposition's critique. The Chancellor is behaving like a politician and he is certainly behaving like the chairman of the Labour general election campaign—there is no doubt about that.
Let us put all that we heard from the Chancellor in a political and financial context. In terms of the expenditure that has been announced today, he is devoting five times as much financial priority to tax reductions as he is to investments in health and education. That is the truth of the matter. That comes on the back of a four-year Parliament in which, with a colossal parliamentary majority, for the first half of that Parliament he stuck to Conservative spending plans that his predecessor said on air in an interview the other day he would not have stuck to. As a result, we have had persistent underfunding in vital public services. So before the Chancellor blows his own trumpet to such a huge extent, let us remember the truth of the matter and the context against which this pre-election Budget must be judged.
Let us also consider a few facts. Secondary class sizes are at their highest since 1979; the number of people waiting to see a hospital consultant is higher now than when this Government came to office; police numbers are down by 3,000 and violent crime is up; public transport has effectively been immobilised in many areas; and last year—this is a terrible reflection on modern society—there were a record number of winter deaths among pensioners in this country. Those are the facts, and that is the backdrop against which the reality of the Budget and the looming general election should be judged.
There are measures to welcome. I do not think anyone in the House of any political party could fail to agree with the Chancellor when he rightly spoke about social policy 318 and the need to tackle the absolute evil that is the drugs problem in our society. Additional hope and help for families are important. The greater emphasis on individual savings accounts is welcome. However, we must look at the detail of the social policies so that we are clear and specific about the extent to which we might end up loading extra costs on people and organisations, not least small businesses.
As for our hospitals, schools, pensioners and the fight against crime, so much more could have been done if only the Government had not displayed such a poverty of ambition over the past four years. That is the truth of the matter. We need front-line police on the streets and in communities, preventing as well as detecting crime.
The Chancellor has succeeded in reducing the Conservative deficit and replacing it with a Labour war chest. Yet spending on all the major heads of public services has been squeezed savagely as a result. He said that it is right to choose the prudent course for Britain. I know that he is fond of the word "prudent", because he uses it often. Such has been his prudence that official figures show that spending as a proportion of national income on schools, hospitals and pensioners is lower under this Government than it was under the previous Conservative Government. That is an undeniable fact.
What was missing from the Budget? I raised the countryside and the plight of the farmers with the Prime Minister earlier, but the Chancellor did not have an extra word—far less an extra penny—for the agricultural community. Although we welcomed the additional compensation, the Government have to understand that it is not just the farmers who are suffering considerable knock-on consequences and losses because of the foot and mouth crisis. I appreciate that Governments have never paid compensation for so-called consequential losses, but these are unprecedented times and precedent must not be an excuse for inaction. I hope that the Government will reconsider that issue as a matter of urgency, because the knock-on effect goes further than our rural communities. For sad reasons, the crisis is uniting urban and rural Britain, because no one is immune from the effect of the catastrophe. The Government have to address that.
Surely the mark of a society is what sense of opportunity it gives its youngsters and how much security it offers the most elderly and vulnerable. There was nothing today about the imposition of tuition fees. Like me, the Chancellor of the Exchequer represents a Scottish constituency and is a Scot. He must know what the figures reflect. The statistics show that student applications in Scotland are increasing, which is a result of the partnership Government in Edinburgh—at the insistence of the Liberal Democrats—abolishing student tuition fees.
The story elsewhere in the United Kingdom is that such applications are decreasing. Youngsters—I spoke to some in Devon at the end of last week—tell us that they cannot envisage taking up a university or college course because they know that they will take their first step on the job ladder saddled with £12,000 to £16,000 of debt. There was not a word about that in the Budget, despite all the money that is available. It would cost £0.7 billion to get rid of student tuition fees for Britain as a whole. The Chancellor has been boasting to us of the extent of the funds at his disposal, but he has chosen not to do that.
That matter is at one end of the age spectrum; at the other end is long-term residential care for the elderly. Again as a result of Liberal Democrat insistence, 319 the Scottish Parliament and Executive have committed themselves to free provision of such care. The situation is not the same elsewhere in the country. That is what we can do when we are given the opportunity. The big choice that the country faces will provide a real chance for real change in, probably, a few weeks' time, and that chance comes not from an over-hyped pre-election Budget, but from an honest, rational and sincere Liberal Democrat alternative.
§ 5 pm
§ Ms Sally Keeble (Northampton, North)
I am grateful to have the chance to speak in this debate. I want to talk in particular about the many benefits that the Budget holds for women and families. The Liberal Democrats have tried to depict it as a purely tax-cutting Budget, instead of looking at the tangible benefits that it provides. For me, the essential point is that it redistributes wealth, including, in part, a transfer from the wallet to the purse or, to be more accurate, from the Coutts bank account to the purse.
I shall consider some of the significant changes which have already been greatly welcomed, particularly by women in my constituency. There has been criticism of the working families tax credit and the child care tax credit, but they are some of the most important benefits that the Government have already given people in my constituency. Some 3,200 families in Northampton already receive the working families tax credit, and many of them also receive the child care tax credit. I have heard stories from women who receive those benefits which leave me in no doubt that they are one of the Government's flagships and have probably done more to change the living standards and lives of women and children than almost anything else.
The Conservatives have pledged to destroy these benefits, but I do not think that they have even begun to comprehend what they plan to do. I have talked to women in my constituency who, having applied for the new deal, are better off by £60 or £65 a week because their child care is paid for and they can get out to work. Now that they have had a taste of economic independence, a threat to send them back to the kitchen spells absolute catastrophe.
The Conservatives and Liberal Democrats have not got their heads round the fact that the tax credits benefit not only traditional communities with high unemployment, but areas such as my constituency, which has long had high employment, but where many families have split up and there are lone parents who need to go back to work. I went to a reception for lone parents and met a woman whose child had been at music class with my own child two years ago. She had then been happily married with a mortgage and a car. Two years later, she had lost all that, but she was benefiting from the new deal and receiving the working families tax credit, so she had been able to get her life back on course. The Conservatives need to understand that family breakdown changes many of the dynamics in society, and we have rightly reflected that in the tax and benefits structure.
It is no good the Conservatives saying that the Budget measures are merely for the election. Last weekend, I was talking to people in my constituency, and one woman said that she had already switched her loyalty from the Conservatives because of the effects of the package of the working families tax credit, the child care tax credit and 320 the new deal. That is a sign of the dynamic for change that can be achieved through the proper use of the tax and benefits structure which the Government have begun.
Increases in benefits have been announced, and I shall refer especially to the child care tax credit. The increase will be a real help for women who need money to pay for child care. The expense of child care is one of the greatest barriers faced by women who wish to work, or who want to get a reasonable job instead of a small part-time job.
Yesterday—can I say Baroness Jay, Mr. Deputy Speaker, or am I not allowed to mention her in that way? I cannot remember.
§ Mr. Deputy Speaker (Sir Alan Haselhurst)
It is indeed in order to refer to Baroness Jay as a noble Lady in the other place.
§ Ms Keeble
Thank you, Mr. Deputy Speaker.
Baroness Jay visited a local nursery in my constituency. We saw—it was fantastic—an independent nursery sharing premises with a state primary school, and providing the wrap-around care that the public sector is not able to provide yet. The nursery has a full waiting list for babies—for the smallest children—until spring 2002. That is a measure of the demand for quality child care.
The increase in the child care tax credit will be important in ensuring that women can afford quality child care, which is expensive. It will be important also in giving women the chance to go to work. Given the national child care strategy, the new deal, the working families tax credit and the child care tax credit, and because of the improvements that have been announced this afternoon, many more women will have the chance of working and achieving economic independence. The Conservative party will have no chance in future if it thinks that it will take these opportunities away from women.
I welcome, as I am sure will my constituents, the increase in the children's tax credit, which will be up to £520 a year. There has been discussion of whether the tax credit has been claimed; criticism has appeared in newspapers relating to confusion. I can say from constituency experience that it is a greatly appreciated tax credit. I am sure that the improvements will be welcomed and equally appreciated.
When the tax credit was first being advertised on the radio, I knocked on doors in my constituency to ascertain whether the advertising was effective. I found that people had heard the radio advertisements, had obtained the application pack from the Inland Revenue, had completed the forms and had returned the pack. They were quick off the starting blocks. They were quick as well to understand the benefits that the tax credit would offer them. I am sure that the improvement of the child credit system, along with improved child benefit, will be much appreciated by many families in my constituency.
I welcome the improvements in maternity leave and maternity pay. They seem to have come remarkably soon after the ending of consultation on these matters, which was only yesterday. I sent a response from my constituency. I can hope only that it had some influence on today's announcement.
It was apparent from a consultation meeting and a questionnaire in my constituency that the main priority for women was to see an improvement in maternity pay 321 so that they did not have a sudden dip in income after so many weeks at 80 or 90 per cent. They wished to receive more for the whole of their maternity leave, which they wished to be longer. I am extremely pleased that both aspects have been dealt with by my right hon. Friend the Chancellor this afternoon.
§ Ms Diane Abbott (Hackney, North and Stoke Newington)
I agree with my hon. Friend's acclamation for increases in the children's tax credit and other tax credits. However, does she agree that the problem with trying to alleviate child poverty through a system of tax credits is that it leads to relatively deeper poverty for the children of women who are unable to go to work, either because they believe that their children are too young to leave or for other reasons? Although the tax credit does well by women who are able to return to work, I believe—I hope that my hon. Friend does—that women with children under five should have a choice. If it is good for middle-class women to stay at home with their toddlers, working-class women should be offered a genuine choice as well.
§ Ms Keeble
I am grateful to my hon. Friend and agree with her. Improvements to child benefit are also important, even though they are small in relation to a full income.
In my constituency, the benefits of the new deal for lone parents are particularly important. It as an area of high employment and, because there are jobs, it is possible to get women into work. A lot of my support for the new deal for lone parents in an affluent area comes from my experience of chairing a jobs and industry committee for a council in an inner-London borough, when I supported training courses with child care for women in the inner city. When I was in that position, and later as leader of the council, I found it a bitter experience to close those courses because of cuts in local government spending made by the Conservatives. They had no commitment to deal with unemployment and were not prepared to put money in on the same scale as this Government have. They were not prepared to look at the care offered by people such as personal advisers in the Employment Service, who deal with the particular difficulties that women have and the barriers that stop them getting into work.
My bitter experiences—shared, I am sure, by my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) in her local government experience then and now—have made me supportive of the Government's measures. I recognise that there are clear differences between the inner cities and seats like mine, and I hope that my hon. Friend recognises that that is a genuine sentiment.
Support for two weeks' paternity pay is strong in my constituency. There is a feeling that times are changing and that men want to get involved in the care of their children as much as women do. Parents are not always married, which is their choice. The Opposition do not approve of supporting unmarried couples, but it is right that we should support mothers and fathers in the arrangements that they make for their children. That is also important throughout the schooling system. When I went round schools in my constituency, the main reasons 322 that head teachers gave for special needs in schools included behavioural difficulties associated with repeated family breakdowns. The more we encourage stability and the involvement of fathers with their children, the more communities such as those in Northampton, North will appreciate the benefits.
Last year, the Chancellor had small items in his Budget that he did not mention. One was the cut in VAT on sanitary protection. This year, I believe, he did not mention the cut in VAT on children's car seats. That is a small thing but, for many families, it will be a welcome tax relief on something that they regard as essential for their children's well-being.
§ Mr. John Bercow (Buckingham)
I am listening closely to the hon. Lady's oration. Given the importance of preparing for the future, how is the objective of prudence compatible with the reality of a halved savings ratio?
§ Ms Keeble
That is a great issue, which the Opposition always bring up, so I always check the figures beforehand. It is true that, in the first years of the Government, the savings ratio declined. It was then projected to stabilise and start to improve again.
The hon. Member for Buckingham (Mr. Bercow) should consider two additional factors. In his speech, the Chancellor gave the figures for the number of people who have taken out individual savings accounts. I have certainly heard people in the industry say that ISAs are another of the Government's success stories.
§ Ms Keeble
We have many. ISAs have succeeded in attracting people to save, over and above those who had previously saved in TESSAs and PEPs. I have not studied the Institute for Public Policy Research publication in detail, but it refers to the number of families who have no assets. It is right that the Government should take account of that end of the market as well, and encourage saving among people who have not done so previously. I welcome the Government's emphasis on that, and not just on the earnings:savings ratio.
Pensioners are a group who have been strongly encouraged to save The consultation in my constituency on the pensioners tax credit was extremely successful. The only question front pensioners concerned why it would take so long to introduce the tax credit. Because many people in my constituency have had the good fortune to be in work for most of their adult lives, they have access to private or occupational savings schemes, and some derive their income from savings. They welcome the fact that their prudence and thrift will be rewarded by 60p in every pound of their savings above the level of the state pension.
People might say that that applies to all pensioners, which is right, but NA omen tend to live longer than men, and any measure that helps pensioners will particularly help women. For women who have experienced considerable difficulties in retirement, the introduction of the pensioners tax credit will provide substantial help. I hope that, after the announcement today, the measure will be unfolded quickly, with all the necessary publicity and simplification of the application forms, so that pensioners in Northampton, North will soon feel the benefit.
323 In summary, the Budget has huge benefits to offer to families, and will be welcomed wholeheartedly by many families in my constituency. The Budget contains particular benefits for women, and by providing extra money for hospitals and schools, it will address some of the priority services that are highly valued by the whole community, but especially by women voters, as research has shown. I commend the Budget to the House.
§ Sir Michael Spicer (West Worcestershire)
The hon. Member for Northampton, North (Ms Keeble) seemed to be saying in the last part of her speech, in answer to an intervention from my hon. Friend the Member for Buckingham (Mr. Bercow), "Don't confuse me with the figures." I feel some sympathy for the hon. Lady. Like the rest of us, she had to wait for the real figures on personal savings to come out in the Red Book. No doubt she had been told by her researcher or her Whip that she should include in her speech a picture that personal savings were going up from a very low level, but as we discovered today, they have gone down from a very low level. She cannot get around that.
§ Ms Keeble
Perhaps I can help the hon. Gentleman. I said, first, that the figures initially showed a reduction, but later showed an increase. Yes, the projected figures went down for a while, but the figures last year showed a rise. Secondly, there is a major issue in relation to families who have no assets. The publication by the IPPR shows the significance of that, and it is one of the issues that the Government are addressing.
§ Sir Michael Spicer
The hon. Lady has forgotten the end of the Mexican wave, when the figures went down again. Those figures are in the Red Book, where she can examine them.
The other figure which the hon. Lady may have been told wrongly by her Whip was the figure for productivity rates. It has been the Government's message for a long time that productivity rates are stable and rising. As has been shown again today, however, the rates have been falling since 1997. That is a great indictment of the Government, to which I should like to address much of my speech.
In the light of the explosive nature of the Government's spending plans, which, contrary to what the Liberals are saying, are massive, many commentators—most recently, the International Monetary Fund—said that it would not be prudent of the Chancellor to cut taxes at all in the Budget.
While I am on that subject, I have a question for the Minister of State. If he can answer it now, I shall be grateful. Will it be feasible or even legal under European arrangements to carry out what the Chancellor has announced in respect of VAT on derelict land? I think that a similar scheme was proposed a year ago for churches—my memory may be wrong—but that the European Commission refused permission. I imagine that that is why the arrangement announced today for churches is based on a grant rather than on VAT reduction. Is it not likely that the same European Commission ruling will apply to the reduction of VAT in respect of derelict land, and also to excise reductions?
§ The Minister of State, Foreign and Commonwealth Office (Mr. John Battle)
I seem to recall that we heard the same noises about VAT on fuel before the last election. The then Conservative Government kept telling us that we could not reduce VAT on fuel, but we did so.
§ Sir Michael Spicer
Perhaps I should slightly rephrase my question. Does the Chancellor have the European Commission's permission? Has he been to Brussels to check with his masters there that he is allowed to reduce VAT in respect of derelict land? Surely the Minister accepts that that is exactly what happened last year with regard to a VAT reduction for church renovation and that permission was not given. Will he admit that that is why assistance had to be introduced in another form?
§ Mr. Bercow
Does my hon. Friend agree that it is unfortunate that the right hand does not know what the left hand is doing? The Minister of State is obviously oblivious of something that is well known to the parliamentary spokesman for the Church Commissioners, the hon. Member for Middlesbrough (Mr. Bell), who has made the matter clear. [Interruption.]The Minister can chunter from a sedentary position, but the hon. Member for Middlesbrough made it clear that the European Commission did not give approval to the VAT reduction for church repairs. If he did not know that, it is about time that he did. [Interruption.]
§ Sir Michael Spicer
The Minister appears to be getting excited. Does he accept that I have described correctly the position regarding the attempt to reduce VAT on church renovations? A Minister went to Brussels, permission was refused and help has now been introduced in another manner. Surely it is worth asking whether permission has been sought in advance for the announcement of a VAT reduction in respect of derelict land, which has been presented as a certainty.
§ Mr. Mark Hendrick (Preston)
I think that the confusion was about whether churches could be included in the scope of suitability for VAT reductions. The 5 per cent. level at which the grant is aimed does not contravene any European Union legislation.
§ Sir Michael Spicer
I am not saying that any laws have been broken. I am suggesting merely that permission was not given for the reduction of VAT on church renovation, which had been announced previously. I was asking a simple and rather innocent question about whether such permission had been granted in advance in relation to the arrangement announced today, which has been presented as a fact and entered into the Budget calculation. I hope that the answer will be yes and that the Chancellor has permission. If not, the Government may look a little foolish on that matter as well.
325 The effect of today's speech must be that the Monetary Policy Committee will be unlikely to reduce interest rates in the near future, especially with the current tightness of labour markets. The distinction that the Chancellor makes between current spending and capital spending in his so-called golden rule appears less and less credible. As the International Monetary Fund has repeatedly said, especially recently, the growth of private finance initiative arrangements renders almost meaningless the distinction between capital and current spending. Making such a distinction is dangerous for managing the economy.
Public spending is at the centre of the debate on not only the Budget but the Government's entire economic strategy. Current public spending was planned to increase by some £77 billion in the next five years: from £370 billion in 2001–02 to £447 billion in 2005–06. If my calculations are right—Ministers are entitled to intervene and say that they are wrong—we must add another £10 billion to the £77 billion. That means a total increase on current public spending of £87 billion or approximately 25 per cent. in the next five years.
Like all socialist Governments, the Government have embarked in the past few years on a massive programme of public expenditure. That has already led to much higher taxes.
§ Mr. Ken Purchase (Wolverhampton, North-East)
Does the hon. Gentleman accept that even on his projected figures for future capital expenditure—
§ Mr. Purchase
I am sorry, I thought that the hon. Gentleman said capital expenditure. However, the same point applies. Debt repayment has made room for lowering year-on-year recurrent expenditure.
§ Sir Michael Spicer
Surpluses, if one believes in them, rely heavily on fiscal drag. They prove my point about the vast increases in taxation: they do not appear from nowhere. There is no dispute between us about the fact that public expenditure is rising fast. For a surplus to exist on top of that expenditure, there must be an even greater increase in taxation.
§ Mr. Patrick McLoughlin (West Derbyshire)
On a point of order, Mr. Deputy Speaker. I wonder whether we can have some protection from the Chair? Several documents, to which the press notices for the Budget refer and which, according to normal practice and procedure, should be made available in the Vote Office, have not been provided. We have been told that they are not likely to be made available. They are: REV BN 6, REV BN 8, REV BN 12, REV BN 13, REV BN 17, REV BN 18, REV BN 19, BN 63/01 and BN 73/01. That is a serious matter. Much of the detail of the Budget statement is hidden in the press notices. It is essential that hon. Members have an opportunity to study them.
§ Mr. Deputy Speaker
I am sure that the hon. Gentleman understands that I cannot give him an immediate answer. I have no means of knowing why documents are not available, if that is the case. However, 326 Government Front-Bench Members will have heard the hon. Gentleman's comments, and I am sure that Mr. Speaker will want to ascertain what has happened so that the matter can be remedied as quickly as possible.
§ Sir Michael Spicer
The Government are engaged on a massive expenditure programme, which is accompanied by a massive taxation increase, higher interest rates than would otherwise be necessary and, as the Red Book establishes, falling personal savings and productivity. Perhaps the missing documents would further confirm that.
The long-term effects are likely to be profound. Earlier this year, a fascinating but deeply disturbing study was produced on public expenditure in the 14 most economically advanced countries. The work was published in a book entitled "Public Spending in the 20th Century: A Global Perspective". The main work was done by two economists: Vito Tanzi, who has been director of the fiscal affairs department of the International Monetary Fund since 1981, and Ludger Schuknecht, the principal economist in the fiscal policies division of the European central bank in Frankfurt.
I want to develop for the House the analysis that those economists undertook. They began by showing that public expenditure throughout the 14 western countries rose fairly gradually during the first half of the 20th century. The massive explosion in spending started throughout those countries in the mid-1960s. For example, table 1.1 shows that the average rate of public spending in 1960 was 28 per cent. of gross national product, and that by 1980 it had risen to 41.9 per cent., which is close to a 100 per cent. increase. By the late 1990s, the rate had gone up to close to 50 per cent. That is a massive increase.
§ Ms Keeble
On the savings ratio, which the hon. Gentleman has been going on about, I have now had a chance to have a look at the new edition of the Red Book. On page 170, we see that although the ratio went down for a while, it stood at 3.75 per cent. last year, is 4.75 per cent. this year and is projected to reach 5 per cent. and 5.25 per cent. in the next two years.
§ Sir Michael Spicer
I am grateful to the hon. Lady for that intervention, because she confirms the fact that the rate has gone down It has been going down, give or take a few years, throughout this Government's term of office. The projections that are being made are a matter of hope.
§ Sir Michael Spicer
Well, the "up" bits are the projections, the forecasts, the hope, the aspirations. They have nothing to do with the facts. Governments can put any figure that they want on personal savings projections in the Red Book, it that is what they are inclined to do. 327 However, the fact is that, throughout tie period, taken on average, personal savings have been low and are going down.
§ Mr. Desmond Swayne (New Forest, West)
It might be of assistance to the hon. Lady if she realised that she needed to look at last year's Red Book to see how those forecasts have changed and been revised downwards.
§ Sir Michael Spicer
That is very helpful. The aspirations may well go down. [Interruption.] The hon. Lady keeps putting her thumb up, but she should put her thumb down, because that is the direction that personal savings have taken. As my hon. Friend has just mentioned, the revisions have gone downwards rather than upwards every time they have come out.
I was making the point that there was an explosion in public spending throughout the western world from the 1960s to the end of the 20th century. Britain followed much of that pattern, except for the fact that, during the 1980s and very early 1990s, we got our public spending under some sort of control. We left the flock and showed a downward trend in public spending relative to GDP during that period, but the rate subsequently started to increase rather rapidly.
The effect of the public expenditure increase was pretty benign in the first part of the 20th century in terms of economic growth, employment and social welfare. In all countries—I am not making a party political point here—the turning point came in the mid-1960s, just as public expenditure began to take off. The turning point came in terms of the effect of public expenditure from the mid-1960s onwards. From then on, growth rates—for instance—began substantially to slow down across the board in those countries, except, latterly, in the United States, where public expenditure is lowest, relative to other countries.
Unemployment, especially in high public expenditure countries such as France and Germany, began to rise dramatically as public expenditure began to rise dramatically. Perhaps most interestingly of all, income distribution, which, in the latter half of the past century was the primary reason for the explosion of public expenditure, especially on social services and public health, was brought virtually to a standstill. There has been almost a negative effect on income distribution as public expenditure has expanded for the precise objective of spreading income more widely.
As the authors say on page 96 of the study:When the total tax burden becomes a large share of the country's GDP, it is no longer very progressive and, equally, when public transfers become very large, they tend to be poorly targeted.That adds up to a picture that is familiar to Conservative Members. When the state takes over, everyone, after a certain point, becomes poorer, especially the poor themselves. An example of that is the virtual collapse of this country's public services. We have the worst health service, the worst transport system, the lowest state pensions and, arguably, the worst education system in the western world. Examples have already been given for education and other sectors.
In health and with respect to guaranteed pensions, we need an average percentage improvement not of 5, 10 or even 20 per cent., but one that would probably stretch into the hundreds. Given the exhaustion of the taxpayer, 328 that can be achieved only by the application of a mix of private and public resources with the taxpayer supporting those who cannot, for whatever reason, buy their own insurance policies. On health, the necessary massive injection of extra private resources would not only improve the motivation and morale of those working in the service, but achieve real accountability to the customers, which no amount of Government-run consultative bodies could ever achieve.
§ Sir Raymond Whitney (Wycombe)
Is my hon. Friend aware that, on present NHS funding, it would be possible to give every man, woman and child in this country a voucher for £800 to go towards health care and still leave an adequate reserve for national priorities at the centre?
§ Sir Michael Spicer
I thank my hon. Friend for providing that interesting figure, which very much supports my argument.
§ Ms Keeble
Does not the hon. Gentleman accept that it is nonsense to say that the health service could be funded out of private means? That £800 would not go very far. For example, a constituent of mine was having particular problems getting care and, in 15 months, he spent £6,200 on cancer treatment. In terms of treatment that is needed, £800 is nothing. The need for equity and access is what makes the NHS so crucial to our country.
§ Sir Michael Spicer
I could never expect the hon. Lady to accept what I am saying because she is a member of a socialist party and that is her philosophy, but I ask her to think about the fact that I am referring to a mixture of public and private resources and that such a mix occurs in all western countries, which have far better health services than we do.
Let us talk about France, not America. Precisely because the French are applying private as well as public resources in a way that we are not even contemplating, especially because we have a socialist Government who will never achieve that, they get far better quality and put far more resources into their health services than we can possibly put in off the back of the taxpayer, which is what is proposed here. I cannot hope that the hon. Lady or her party will ever be imaginative about the matter, but I assure her that that is what is happening in every single country in the western world. They have health services of far better quality than ours and that is the way that we shall have to go eventually.
Of course that could never happen under a socialist Government. There was a brief moment when we thought that something like it might emerge, but the sacking of the right hon. Member for Birkenhead (Mr. Field) put paid to that. It will be left to a Conservative Government to pick up the pieces and reform our public services, which we began to do with our productive industry and services in the 1980s. Today's Budget is a move in precisely the opposite direction.
§ Ms Diane Abbott (Hackney, North and Stoke Newington)
Even as we speak, my colleagues are surging through the television studios hailing a Budget that provides a marvellous election-winning platform. It is a 329 masterly Budget, presented in a masterly fashion, and it is no surprise that Opposition Members are struggling to attack it.
Having sat through at least 14 years of Budget statements, I know better than to reach a final conclusion before reading the finer print. Any more detailed comments on this Budget will have to wait until I have had time to study the Red Book. I can say, however, that some changes in principle will be welcomed by my constituents in Hackney, notably the extension of maternity pay from 18 to 26 weeks. I speak as one who was not given one day of maternity leave from the House when I had my son in 1991. As we were in the run-up to a general election, there was no time for maternity leave. I voted here three days before my son was born, and I was voting again eight days after his birth. Nevertheless, I welcome the extension.
I also welcome the principle of providing paid adoption leave, and two weeks' paid paternity leave for working fathers. The extension of the right to adoptive parents is a long-awaited change. I welcome, too, what appears to be a move towards changing the structure of value added tax to allow free access to museums.
There are many changes in principle to welcome, but I must tell my hon. Friends who will welcome—and have already welcomed—the cascade of children' s tax credits, working families tax credits, pensioners tax credits and other tax credits that, sadly, a system of relieving poverty through such credits cannot reach millions of poor people in constituencies such as mine, particularly single mothers of very young children. It is easy enough to say that those ladies—those women—should leave their children aged one, two or three and find jobs, but it is easier said than done.
As I have said in our debates since 1997, at the end of the day we want, as a Government, a structure that allows poor single mothers a choice. Of course the majority of single mothers whom I meet in Hackney want to go out to work, but they should not be driven out to work by a system of benefits and tax credits that, bit by bit, forces single mothers who have young children and cannot work into a position that makes them relatively worse off than they would be otherwise. Millions of people up and down the country did not vote Labour to see the creation of a structure widening the gulf between working single parents and single parents who choose not to work.
I note from the small print that we are introducing compulsory interviews about work for all single mothers, however young their children may be. I realise that such interviews are supposed to acquaint single mothers with the benefits of work, but people do not need to go to the dole office for an interview to find out how much better off they might be if they worked.
Practical issues, such as training, access to jobs and child care, stop very many single mothers in areas such as Hackney from working. As I have said before, underlying the thinking of my right hon. Friend the Chancellor, who is the most modern of Chancellors—he is a masterly Chancellor, who has presented a masterly Budget in a masterly fashion—there is a very old-fashioned notion. It is the belief that there are the deserving poor—those who are prepared to leave their children, however young, and go out to work—and the 330 undeserving poor, such as women who choose to stay with their children at least to school age. I tell him and my other Front-Bench colleagues that the Victorian distinction between the deserving and the undeserving poor which is embedded in the tax credit system does not reflect well on a 21st-century Labour Government. [Interruption.]
In the 14 years in which I have been an hon. Member, I have always striven to do my job. My job is not to say that which is popular—or that which will secure me advancement or the sunny smiles of the Chancellor of the Exchequer—but to speak up for my constituents in Hackney. That is what I am paid to do, and that is all that I can do. In the words of Martin Luther, I can do no better.
I should like to deal with a matter in which very many hon. Members will not be much interested, although it is a passionate concern for those of us who live in London. That matter is public transport, which is a key factor in considering economic growth, helping poor communities and looking to the future. For Londoners, the future of the London underground is a key issue.
Extraordinarily, given the range of his Budget speech, the Chancellor did not find time to touch on that issue. In the stirring passages at the beginning of his speech, he reminded us of his £23 billion surplus. However, that will make Londoners wonder why it is so difficult to find a way in which to fund properly, under proper democratic arrangements, a 21st4-century transport system for London.
As some hon. Members may not use public transport in London—perhaps they drive—I should remind the House that public transport is more important to people in London than it is to those in other big cities. Public transport in London is not only a means of transporting people from place to place, but a key issue. Transport links are key to regenerating communities. No other single action could do more to regenerate my constituency in Hackney than for the Government to find the money to build the Chelsea-Hackney line, which would produce for the first time an underground station in the centre of my constituency and link us to the Jubilee line. Public transport is about regeneration. It is about people's lives—getting them to jots—and about urban redevelopment.
What action has there been? Last year, as part of fulfilling our manifesto commitments, a Labour Government restored local government to London and gave us a Mayor Although, sadly, there were a few hiccups along the way, finally, right triumphed and the people's choice, my colleague the hon. Member for Brent, East (Mr. Livingstone), became the very first duly elected Mayor.
The future of London Transport was the central policy issue in that mayoral campaign. It was at the heart of everyone's manifesto—Labour, Tory and Liberal Democrat. There can be no doubt that, in that election, the majority of Londoners, including very many Conservative-voting ones, voted emphatically against the Government's proposed system of public-private partnership for renovating and improving the underground.
Before colleagues say that I am old fashioned and stuck in the past and ask me what is wrong with private investment in these big public sector projects, I say that no one is opposed in principle to private investment, least of all my colleague the hon. Member for Brent, East. It is, after all, a flatter of new Labour, new Ken Livingstone. He is the darling of the City and of business. They are 331 wholly behind him in his opposition to the Government's PPP proposals. It is not a question of opposing private investment. The point at issue in the mayoral campaign, and in the fraught negotiations in the run-up to the general election, is how that private investment should be structured.
Treasury Ministers, as opposed to Ministers in the Department of the Environment, Transport and the Regions, have proposed the system of public-private partnership. Every commentator has said that the proposed system has all the worst characteristics of that deployed in the disastrous privatisation of British Rail. If the system is introduced, Londoners will find themselves in the same position as rail travellers before the Hatfield crash.
If a safety risk such as a broken rail arises, there will be no one in charge of transport in London able to deal with the problem immediately. The people responsible will have to talk to contractors, who will talk to subcontractors, who will perform a survey and then perhaps hire other subcontractors. In the end, the problem will be put right, but the resolution of safety risks will take an indirect and circuitous route.
The Hatfield rail crash showed that the delays, the complications, and the layers of bureaucracy introduced by privatisation can mean that safety problems are addressed too late to save lives. The Treasury advocates that London's transport system should be split up between three different companies. Unified management control will be lost, but the Treasury is trying to impose that structure on Londoners.
I do not accuse all my colleagues on the Treasury Bench of acting in bad faith. Ministers in the Department of the Environment, Transport and the Regions—and especially the Under-Secretary of State, my hon. Friend the Member for Streatham (Mr. Hill)—have negotiated with a view to cutting the best deal for Londoners. My hon. Friend is a loyal member of the Government, and a Londoner, and he negotiated in good faith with my hon. Friend the Member for Brent, East and the city's transport commissioner, Mr. Bob Kiley. The negotiations went on with the utmost energy and dispatch for many weeks. All sides believed that a deal had been reached.
Everyone wants there to be private investment in the tube, but we do not want the PPP to replicate the worst features of rail privatisation by not allowing the unified managerial control of repairs and safety precautions that will secure the safety of Londoners on the underground. Ten days or a couple of weeks ago, after weeks of negotiations, the Department thought that a deal had been reached, but then the Treasury stepped in. A few days ago, it said that the negotiations had gone on long enough and that nothing else would do but the PPP system originally proposed.
I accept that token concessions have been made.
§ Mr. Purchase
I am loth to interrupt my hon. Friend's interesting saga, and no one will feel anything but sympathy with the proposition that all possible measure must be taken to prevent fatal tragedies, but she predicated her remarks on the fact that the Treasury has a surplus of £23 billion. I may be mistaken—it would not be unusual—but that revenue has been accrued by different means. Some of the means were planned, and some were 332 accidental or fortuitous windfalls. When the £23 billion has been spent on recurring expenditure, will my hon. Friend say what we should do for an encore?
§ Ms Abbott
I shall put my hon. Friend out of his misery. I am not saying that we should spend the £23 billion on renovating transport in London. I am arguing that the Government's PPP, which so resembles that used in the privatisation of British Rail, will mean that more Government money will have to be given in subsidy to private contractors. The Government do not draw attention to the fact that the Treasury is prepared to put in more public subsidy simply to bolster its stubborn insistence that only its preferred PPP option will do. My hon. Friend may rest assured that I am not attempting to lay a finger on the £23 billion, but my remarks about the future of London Underground had to be put in the context of public spending policy as a whole.
§ Ms Abbott
As I said, successful and positive negotiations had been held between the Department of the Environment, Transport and the Regions and the mayoral representatives when the Treasury stepped in at the last minute and said, "Our way, or the highway." Some token concessions had been made: Mr. Kiley will sit on a few more boards and will have the theoretical power to remove the chiefs of some of the privately contracted infrastructure companies. Those contractors have squealed about the concessions, but the fundamental issue—of unified management control of repair and safety issues—remains.
The excitement of today's Budget speech will die away, and a general election is expected in the spring. Londoners will focus as never before on what one of the most successful Chancellors in Labour party history has chosen to do with regard to transport in London. My right hon. Friend the Chancellor appears to have obstructed a constructive conclusion to negotiations on the future of public transport in the capital.
No one is asking the Government to spend a penny more on transport in London, and no one excludes the use of private investment. However, Londoners, the Mayor and the transport commissioner are all saying that there is a better, cheaper and safer way to structure transport in London. Londoners have made their preference clear over and over again. What is the point of devolving power to Londoners if the Treasury insists on retaining power at the centre when it comes to the most important element of London's economic regeneration? The Treasury is blocking the expressed will of Londoners, and of their Mayor and transport commissioner. When the glitter of today's Budget, with its masterfully presented cascade of tax credits, has faded from Londoners' memories, people will focus on the question of transport and the Treasury's insistence on its PPP model.
I have sat through Budget speeches in this Chamber over the past 14 years, and I know better than to jump to conclusions about how a Budget will turn out until I have studied its fine print. However, I can tell hon. Friends on the Treasury Bench that Ministers must be seen to act in good faith on the future of the London underground. They must not act in a partisan and arbitrary way.
The new Ken Livingstone scoured the world to find the best public transport manager, and he found Bob Kiley. Mr. Kiley is not some terrible left winger: I understand 333 that he used to be a member of the CIA. That must surely endear him to Conservative Members, although some of us are worried that he may have seen our files. None the less, my hon. Friend the Member for Brent, East, the Mayor of London, went out of his way to find the most technically proficient, experienced and successful manager of public transport in the world.
Londoners have chosen their Mayor; he has chosen a transport commissioner. Londoners are not asking the Government for more money; they are asking them to put aside past animosities, grudges and stubbornness. They are asking the Government to put the interests of Londoners first and allow these negotiations to come to a successful conclusion—so that there is a way of financing the long-desired renovation and upgrading of the London underground that sits with the desires of Londoners and of London' s transport commissioner.
§ 6 pm
§ Sir Raymond Whitney (Wycombe)
The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) says that she speaks for herself and her constituents, and I am sure that the House would agree wholeheartedly with that. She certainly does not automatically seek the approbation of the Chancellor of the Exchequer or any other Member of her Front Bench. She talks about her details being held on file, but I suspect that the Labour party's headquarters at Millbank is more likely than the CIA to have a large file on her.
My right hon. Friend the Leader of the Opposition, in a brilliant reply to the Chancellor of the Exchequer, quoted, among other things, what the chairman of the general practitioners committee said about general practice being in crisis. We all know about the state of the health service in general from our local hospitals and consulting practices. Over the last quarter for which the figures are available, the waiting time between seeing the GP and hospital treatment has increased to 203.8 days—about seven months. Such a long waiting time would be incomprehensible and inconceivable in any equivalent industrialised country. It is on the state of the national health service, and the Government's attitude to it, that I wish to dwell.
The Chancellor of the Exchequer exultantly announced that over the next five years, health spending would increase by something like 50 per cent. However, that betrays either ignorance or a wilful determination not to understand the size of the problem. If we increased spending by 50 per cent. over the next five years, where would we be? Our health spending would still be £200 to £300 per head less than Germany's. We might just be at the level of the spending in France this year.
Over the next five years, health spending in France, Germany and all the other industrialised countries will not stand still. The gap will widen—indeed, it has been widening steadily over many years. Those countries spend so much more, and the Chancellor's proposals will not close the gap. Even those proposals, as the IMF has warned, represent a danger to our national finances. The right hon. Gentleman is sailing very close to the wind.
That issue underlines the need for new thinking in the structure of the national health service. I have been speaking about this ever since I was a junior Health 334 Minister in the mid-1980s. We must go right back to the creation of the national health service to understand the extraordinary blight on thinking that this extraordinary institution has imposed on politicians of all parties.
The creation of a national health service, with its wonderful concept of health care free at the point of delivery, was an ambition shared by all the three major parties from before the first world war. The basic structure that was adopted in 1946 and put in place in April 1948 was based on the White Paper of 1944 introduced by Henry Willink, a Conservative Health Minister in the wartime coalition Government. Sadly, the idea of having everything free at the point of delivery was a flawed one.
Aneurin Bevan has been glorified as the architect of the health service—a highly contentious proposition. Yet only months after the creation of the national health service, even he complained about thecascades of medicine pouring down British throats.In 1950, he wrote to the Cabinet:The position cannot be evaded that a nationally owned and administered hospital service will always involve a very considerable and expanding Exchequer outlay.That is precisely what happened.
In 1949, the principle of totally free health care was abandoned, with the introduction of prescription charges. Bevan, with reluctance, went along with that. Two years later, when this fundamental problem was being revealed so that no one could deny it, and the Labour Government of the day introduced charges for spectacles and dentures, Mr. Bevan resigned. That was when he described the Chancellor of the Exchequer, Mr. Gaitskell, as a desiccated calculating machine.
§ Mr. Eric Forth (Bromley and Chislehurst)
I am following my hon. Friend's analysis with fascination. I am sure that he is aware that quite recently the French health service was rated as the best in the world by a comprehensive and impartial survey. I know that he will be aware that French people pay when they go to their GP and are then refunded if appropriate, according to their level of income. In connection with his analysis of the development of charges post-Bevan, does my hon. Friend not think that that is an idea that any thinking person should consider?
§ Sir Raymond Whitney
My right hon. Friend will not be surprised to learn that that is precisely the path down which I hope to proceed, if you will allow me to, Mr. Deputy Speaker. I am sure that we shall arrive at a joint conclusion.
After that, matters were very clear. Eventually, even the British Medical Association, normally the most conservative body involved in the development of medical care, decided that something had to be done. In 1970, it set up a committee under Dr. Ivor Jones, which concluded that the wonderful ideal of 1946 was unattainable and unrealisable, given All the pressures that were growing in health care.
§ Mr. Bercow
My hon. Friend's natural generosity of spirit should not be allowed to get the better of him. I understand why he makes some favourable reference to the late Aneurin Bevan. However, will he put it on the record that in 1952 the late Iain Macleod famously denounced the Bevan approach and attacked him 335 specifically for the crude, vulgar and intemperate speech to which the House of Commons had listened? Does my hon. Friend recall that, along with another great parliamentarian and Minister, the late Enoch Powell, Macleod went on to pen a magnificent pamphlet with a radical view of the development of the health service and social services entitled "Social Services: Needs and Means"?
§ Sir Raymond Whitney
I must not allow my hon. Friend to lead me down the road of militant partisanship. I am strongly of the view that this is a national issue, although it has never been treated as one. Given the probable imminence of the general election and the fact that I shall not stand again, this is my last—I shall not say "despairing"—chance to get the matter looked at calmly, so I shall resist, up to a point, the temptation offered by my hon. Friend.
However, if my hon. Friend studies the pamphlet written by the late Enoch Powell—whose great qualities we all admire—he will find a brilliant analysis of the ills of the NHS in the mid 1960s, but no solution. Why not? Because in the first paragraph of the last chapter, Mr. Powell said, in effect, that the political situation in Britain was too difficult, so rationality had to go out of the window. That is the measure of the problem that we are dealing with. I am grateful to my hon. Friend for giving me the opportunity to make that point.
I was referring to the Jones committee, which reported in April 1970 and recommended an insurance-based system—such as those used with considerable success in several countries. However, by that time, the wind in the BMA had changed; caution was back in and Dr. Jones and his crew were out. People of equal eminence to Dr. Jones received CBEs and knighthoods—he received nothing. The issue went quiet again—it was put back in its box.
Both parties staggered on with the old system until 1982, when the Central Policy Review Staff took the papers down and looked at the problem again; 12 years on, it was much greater than in l970. The CPRS, too, produced the idea that there should be an insurance-based system that people should chip into. Again, there was horror. By that time, there NA as a Conservative Government. My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) refers to the idea with horror in his book; that dreadful cat was nearly out of the bag, but he cheerfully reports how it was safely put back into the bag. The next year the CPRS was obliterated—it was suspended. I suspect that I, too, shall be suspended soon, because the subject is dangerous.
That is where we have arrived. Is there an answer? There must be one; we have to look at what other countries do. As my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) suggested, not only in France but in all the industrialised countries people make a contribution. That is understandable. What is more important to any of us than our health and that of our families? According to our circumstances—I shall discuss the very poor in a moment—we are very ready to chip in with £100 or £200 to bolster health care, whereas we all know that a rise in our taxes, by stealth, income tax or whatever, goes into a great pot and nothing seems to come out.
That could not have happened in 1946 because the personal disposable income of the average Briton was extremely low. If it was grossed up to today's money, 336 it would be only about $5,000 a year at most—equivalent to the current national income per capita in Namibia or Gabon. In real terms, we are four or five times richer. By whatever statistical tricks one might play, we are manifestly much richer. Today's society is not the one for which the NHS was created.
We must thus ensure that the public understand what is happening. Very, very gradually, the penny is beginning to drop. In these days of speedy communication, when we all think that we know everything that happens in the world the day before yesterday—in Sierra Leone, Zimbabwe and so on—it is extraordinary that, somehow, we have kept what is going on in health care across the channel from the British people. I hope that my right hon. and hon. Friends will not engage in our other familiar debates—
§ Sir Raymond Whitney
The idea that, because of disparity in expenditure, people should wait seven months, or even 18 months, for treatment is simply not comprehended in those countries. I accept that NHS spending is not necessarily inefficient. Inevitably, in private health care there are duplications.
We have 1.64 doctors per thousand; the Germans have 3.19. We have 4.5 nurses per thousand; the Germans have nine. On life expectancy at 60, the UK ranks 19th in the world—level with Turkey. There is nothing wrong with Turkey, but we might have assumed that our health service would have given us better provision. We are 14th in the Economist Intelligence Unit health rating system for European countries. That is a measure of how far we are behind. It is difficult to understand why politicians will not recognise that.
There has been an extraordinary political no-go zone for so long. However, I hope that, especially given the dangerous high-wire act that the Chancellor seems so ready to perform over the next couple of years, it will become clear that the situation cannot continue. To achieve the expenditure of continental countries—leaving aside that of the United States—would require an unbelievable and unsustainable burden of Treasury spending, even if we called it Treasury investment. We must, therefore, calmly say that although the NHS was a great idea in 1944 when the White Paper produced it, and that for more than 50 years, we have tried hard to make it work, Aneurin Bevan was right when he said that it would mean constantly expanding pressure on the Exchequer. We must have some new thinking. I do not think that is too much to ask.
§ Mr. Ken Purchase (Wolverhampton, North-East)
I add my congratulations to those offered to my right hon. Friend the Chancellor on an extraordinarily clear and well put Budget speech. If we are to believe the newspapers, this may be the final Budget before the general election is called, so it is important to judge my right hon. Friend's speech in the context of his chancellorship in the longer term.
By any post-war reckoning, my right hon. Friend's chancellorship has been exceptional, although one would not expect the Opposition to reach that conclusion. 337 That is to be expected in the cut and thrust of politics. However, after the speech of the hon. Member for Wycombe (Sir R. Whitney), who expresses himself so moderately, it is especially appropriate to point out that the people of this country will have seen that, over the past four years, successive Budgets have benefited, by and large, not just some people—not just a few of them; not just most of them—but the whole country. The whole country has benefited from the Chancellor's stewardship of our taxes and revenues.
Budgets always take time to be fully and properly understood and to mature in their widest effects, and we shall have to suck this one and see, as we do on every occasion, but in the fulness of time, we shall find that the nation has prospered, that its taxation revenue has been spent wisely and that people have benefited from a range of services under the Budgets of my right hon. Friend's chancellorship. One of his themes today was investment in public services. People will see that services are improving, and I shall refer later to the national health service. I accept that that is vexatious, but it is not beyond our wit to improve it.
I regret that the hon. Member for West Worcestershire (Sir M. Spicer) has left the Chamber. He always makes an interesting contribution, if sometimes one that is rather eccentric and extremely right wing. He would certainly have qualified for a job as Hoover's right-hand man in the CIA and would have sorted out the liberal wets on the Conservative Benches; he would not have bothered getting round to us. The hon. Gentleman made his usual extraordinary contribution to our debate.
I must confess in the hon. Gentleman's absence that we share one thing in common—a love of the countryside around West Worcestershire. The Malvern hills are a beautiful part of the country. I sometimes think that if the hon. Gentleman admired the countryside around him as much as I do, he would spend a little less time worrying about the international monetary scene and a little more on developing his soul, which would benefit us all enormously. None the less, his was an interesting contribution. I am disappointed that the hon. Gentleman has gone because I want to deal with the savings ratio and I know that he would have interrupted me at least three or four times.
§ Mr. Purchase
I thank the hon. Gentleman.
To rehearse the point about the savings ratio, it is a matter of agreement that savings tend to rise more steeply when people are concerned about their future prospects. That is a natural and normal response to a worsening economic scenario, when people decide that they need to put money away for a rainy day. If that goes too far, the savings ratio rises steeply as a consequence and there is a fall-off in demand, so the thought that we must save for a rainy day becomes a self-fulfilling prophecy. It is, of course, vital that people save for a rainy day, because misfortunes that do not affect the population in general may fall on any family: it is always a wise precaution to try to make savings from our disposable incomes.
It is interesting that the savings ratio is now not such an important indicator as it used to be, in so far as people now have greater wealth in goods, houses and so on than 338 has ever before been known in the history of the United Kingdom. For the past 20 years or so, people have recognised that they have the opportunity to reward themselves with a plethora of consumables and white goods that make out lives so much easier, so they are investing in their lives now.
In those circumstances, the ratio of savings to expenditure clearly falls, but let me reassure hon. Members that the important point is that the money available for investment in productive industries and services has in no way fallen. Money is, in fact, available through many different sources, especially the merchant banks, to provide opportunities to borrow and invest. That is an important facet of the whole equation.
§ Mr. David Davis
The hon. Gentleman makes an interesting point. He is right to say that there has been no decrease in investment as a result of increased savings, but he must consider the source of the money, a large part of which now comes from outside the economy. If the money is not being generated within the economy, it comes from abroad, and one of the effects is that those who invest in portfolio investments in this country buy pounds, pushing up the pound's value and causing one of the problems that British industry faces today. So low savings lead to a high pound, which is a problem.
§ Mr. Purchase
I would not disagree for a moment with what the right hon. Gentleman says. That is clearly one of the dangers of the United Kingdom's current economics, and outside the eurozone it remains quite acute. The pound is strong, which is helpful and, in part, a reflection of the economy, but, without question, it is also overvalued, which reflects what the right hon. Gentleman says. I was trying to say that we have to find the balance between the savings ratio and the money available for investment coming into the country when interest rates are too high, so pushing up the pound's strength and value unacceptably.
In the circumstances, I do not believe that, in one Budget or five, the Chancellor can overcome the problems, many of which are detailed and require enormous analysis. The best arithmetical technology available must be used to understand them. I believe that we are going in broadly the right direction, given that we see around us investment in this country continuing at high levels—but other measures will no doubt have to be taken.
What we used to regard as the medium term—three to five years—is now very much the long term. We simply cannot see horizons as clearly as we did perhaps 10 or 20 years ago. The time scales involved are much shorter, and the velocity of change is absolutely incredible compared with what was happening 20 or 30 years ago. Overall, I believe that, in successive Budgets, the Chancellor has brought about an improvement in the management of the economy, which points us in the right direction, improves prosperity and decreases essential costs, such as mortgages, for our population. Generally, the moderate voice in our society would say that, on the whole, a good job has been done.
I am happy to say, as I have done before, that, towards the end, the previous Government's efforts were of considerable help. They started that movement, and we have been able to build on it. I know that hon. Members 339 would expect me to say that, but a fair analysis will show that we have done so. I am not frightened of saying that there is a continuum; we went through a very poor period when enormous improvements in productivity were achieved almost wholly at the expense of rising unemployment. People obviously understand that increases in productivity involve lets input for the same output, or the same input for greater output, depending on which way people want to dress it up.
The truth is that during the early part of the 1980s, we lost an enormous swathe of workers. To an extent, we are suffering from that in so far as there is a major shortage of highly skilled and technical people in our country. Some of that shortage was caused by the tremendous shake-out in the engineering industry at the beginning of the 1980s. This country has a long history of sons following in their fathers' footsteps and learning at their fathers' elbows, but we lost many skills, such as pattern making, tool making and print setting—all essential ingredients in a successful economy.
There has been an interregnum, and, to an extent, we are now paying the price. We are catching up, but more resources need to be put into the training and education effort in our country. That would not be altruistic but practical—without a well educated, well trained work force, any hope of improving productivity and thus world competitiveness goes out the window. A well trained and well educated work force with transferable skills will benefit us all.
Most of us have witnessed in our constituencies the tragedy that has befallen workers—usually men—who have worked for 20 or 30 years in a particular industry. The steel industry is a good example. Many of the men who work in it are highly skilled—they can roll steel and operate the furnaces—but those skills are not transferable. If a town has one major steel manufacturer and that closes, we have the pitiful sight of men of long experience and great skill being unable to transfer their skills into another enterprise without considerable help and assistance.
Often the culture among those men is such that they do not recognise as manly some of the opportunities that exist in the service industries. One of the United Kingdom's great successes has undoubtedly been the enormous growth in service industries, and financial services are an outstanding example. The boom in retailing has also provided many opportunities for good-quality work, but such jobs do not seem appropriate to those who spent many years working in trades that require great skill.
The more general mathematical skills that were required in tool making and pattern making were, to some extent, lost between 1981 and 1986 That is a great pity, because we will have to work hard to catch up. Such skills will be vital to this country's future success.
We are trying to move towards a society that is less dependent on the state. Let us confess that there is no question but that people became overly dependent on the handout; there is no other way of describing it. It is a great misfortune that what started as the wonderful idea of a safety net through which no one should fall became somehow distorted, so that people considered it a right that the state should take care of them if they were out of work, could not get work, were ill or felt ill because they 340 had not been in work. Of course, the state should take care of them, but there is a limit to the number of people in that position that a successful economy can sustain.
Changes have had to be made. Rather than an erosion of benefits of the kind that the Conservatives tried to achieve in the 1980s and early 1990s, there has been a tightening up on people's ability to claim benefits willy-nilly, and many would claim that there is room for still more tightening. Through my right hon. Friend the Chancellor's Budgets and other measures for training and education, we have initiated a structural change that has created a different understanding among people. They realise that they must begin to take care of their general needs and cannot afford to fall back ad infinitum on the state.
I was a member of a local authority for 20 years that ran important services and I have been a Member of Parliament for nine years. Many young single women of not more than 21 or 22 years of age have visited my surgery and many of them have up to four children. The times I have heard a young woman say, "Mr. Purchase, how do they expect me to manage on this?" Let me clarify what that means. For those women and for many young people, the girocheque was their only understanding of wealth and income. That was a disaster. Those young people were totally disconnected from the idea of work, wealth and looking after their own welfare.
Young men and young women left school at the age of 16 and they often had very little in the way of qualifications. The thinking was, "Why should I? Our kid never got nothing". Many of the young women became pregnant and were unable to manage on what the state was able to provide. This is not a mean state, but there are practical limits to what it can do. People must reach the new understanding that they are involved in a partnership. In essence, we are talking about co-operation and about people making provision for themselves as far as they can, while leaving the safety net—and a generous one—for those who cannot make it over the high hurdles that life puts in front of them.
The girocheque became a symbol of income, but it meant that people had no understanding of wealth creation. This nation exists in its present form only because we have had a long history during which we have understood what is involved in wealth creation. People came from the countryside to the towns because they thought that they would find work and would be able to improve their lives and those of their children. Similarly, many people now invade America, Britain and Europe because they are looking for a better way to look after themselves and their families. In this country and many parts of Europe, the rural-urban drift began to take place and it became an avalanche. However, people in this country learned that they had to make provision for themselves.
In successive Budgets, our aim has been that of "making work pay", as my right hon. Friend the Chancellor would describe it. It is not a bad slogan, because people understand it. How many Members have heard their constituents—Conservative voters, Labour voters or non-voters"say, "It is all right for those who never go to work. They get everything they want and I get nothing"? I have heard that and it is still being said. However, the truth is very different. In my experience, unless they are doing something else as well, people on benefit generally just about manage. However, those who 341 work—perhaps for low wages—have the perception that the state does everything for those who do not work and nothing for those who do.
My right hon. Friend the Chancellor has started to make work pay. The methods may be difficult. I agree with my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) that there is a limit to what one can achieve with tax credits. In the end, productivity and improved performance at work will bring about the higher wages and salaries that will improve our lives and those of our families.
§ Mr. Bercow
I am greatly enjoying much of what the hon. Gentleman is saying, but can I ask him to focus on a slightly different aspect of the equation? He talks about the importance of making work pay, but does he not agree that it is also important to generate a culture in which people think it is worth while to start a business? To that end, does he not regard it as regrettable, if not deplorable, that the Government continue to refuse, even as a starting measure, to publish an annual statement of the costs of regulation on business? What possible good explanation can there be for that omission?
§ Mr. Purchase
The hon. Gentleman is pushing at an open door as far as I am concerned. I would love to see the annual costs of regulation. I do not believe that we have made a significant dent in the costs of regulation. In fact, in some sectors, we have undoubtedly added to them, but we believe in the greater good, and the administration of the minimum wage is an example of that. We can disagree about that, but I assure the hon. Gentleman that I am absolutely open to ideas and suggestions on how we can reduce regulation.
I have one such idea in my head, and I shall tell the hon. Gentleman about it. My right hon. Friend the Chancellor has taken an interesting step forward in encouraging new businesses to start up. The offer of £2,000 worth of free advice and assistance is very welcome. Without that advice and assistance, I fear that more businesses would fail than needed to. My right hon. Friend also said that we had liberalised the approach to account reporting and the rules for audited accounts have been relaxed, to some extent, for smaller companies.
My suggestion for my right hon. Friend is that we should not insist on using the European convention on accountancy—which is very good for larger companies—in smaller companies. Smaller companies with a turnover of less than £1.5 million to £2 million should perhaps be able to base their reporting unaudited, on a profit and loss account, a balance sheet and a source of application of funds. That would give them a quite a boost, and would save them a lot in accountancy fees.
§ Mr. Bercow
I confess that I am veritably put in a state of high excitement by that concession. I do not want to push my luck, but I am tempted to have a go. Consistent with what the hon. Gentleman says about encouraging the enterprise culture are two propositions. The first is that it is about time that the Government conducted a proper assessment of the United States Regulatory Flexibility Act 1980 and the Small Business Regulatory Enforcement Fairness Act 1996, because that would yield benefits. The second is that it would also help if the Government signed 342 up to the policy of sunset regulation, which applies in the United States. That would mean that a regulation would automatically expire or lapse—perhaps three or five years after its enactment—unless it is judged sufficiently worth while for Parliament to take time to renew it.
§ Mr. Purchase
I am not in an argumentative mood. However, I keep my wits about me and recognise that everything that comes from the United States is not always welcome or helpful. The adoption of chapter 11 would have been useful, but I know that the Opposition oppose it. They believe that it does not help to keep businesses afloat.
We could consider what the hon. Gentleman suggests. Indeed, I invite him to join me in admiring the concept of continuous improvement, which most of industry applies. Reconsidering, deleting and adding to legislation is the right approach to any Act that involves regulation. Continuous improvement is an important part of industry and commerce. It is right to have a lighter touch within the bounds of good health and safety practices and good labour relations.
§ Ms Abbott
I listened with great care to my hon. Friend's argument on what is usually known as welfare dependency and I agreed with much of it. I can identify individuals in my constituency who are in an advanced state of welfare dependency and whole estates that contain generations of people who are mired in welfare dependency. But moving complete communities from a state of mind that accepts welfare dependency to the more preferable state of enterprise and looking after themselves is not a simple matter of providing tax credits and making speeches. However undeserving many of those people may be, if our approach to moving them off welfare dependency is too shot-term or mechanistic, the poorest children in society might suffer. That is the danger.
§ Mr. Purchase
That is a profound point and I have no objection to it. If I wanted to pick a fight, it would be with Samuel Smiles. The concept of the deserving and undeserving poor has never served the country well. We need a more rational approach to understanding the cultures that people it habit and the way in which things develop. I welcome my hon. Friend's intervention. There is room for discussion, debate and analysis. I agree that a mechanistic approach cannot solve the cultural difficulties. However, it demonstrates that there is a way out in the shorter and medium term. It is important to give that signal. I commend the stance taken by my right hon. Friend the Chancellor, but accept that there needs to be a wider debate about the future and how we apply short-term measures in the wider context of cultural change.
The hon. Member for West Worcestershire mentioned the International Monetary Fund and the European Union institutions and criticised the funding of longer-term spending and debt. I am an absolute supporter of my right hon. Friend's golden rule on that matter. I have always believed that we should I pay for the acquisition of a capital asset over its useful lifetime. For example, a new school in a local authority area will serve successive generations. It is right, therefore, that successive generations pay for that asset. It would be unfair to front load that expenditure for capital acquisition so that today's tax burden becomes intolerable. That would be nonsense.
343 A similar case can be made for current expenditure. The golden rule, expressed many years ago by Mr. Micawber, is, "Expenditure 19s 6d, income £1—good fun; expenditure £1, income 19s 6d—not too good."
§ Mr. Purchase
It is good socialism because moneylenders are owed nothing and they cannot take their pound of flesh.
It is right that my right hon. Friend the Chancellor should balance his revenue budget over the cycle and ensure that, year on year, we can sustain desirable improvements in our society. There is no better way to organise our financial affairs than by employing the golden rules that he has set his stall by.
I welcome the improvements in exporting. I hope that I do not encourage raucous remarks when I inform the House that, with the hon. Member for Faversham and Mid—Kent (Mr. Rowe), I am joint chairman of the all-party group on exports. We have made a real effort because exports are a most important facet of British economic life. Without exports, we cannot import. We are an island economy and we are short of certain items, so we have to import them. If we do that, we must pay for them, and the only way to do that is by selling abroad.
I welcome the improved figures. I especially welcome the improvements in manufacturing. I am delighted but surprised, because there have been considerable manufacturing job losses in my constituency over the past few months. Goodyear has made 500 people redundant. Skilled tyre workers and management are finding themselves out of work. The Chubb safe company will soon send about 200 workers down the road. Some 200 jobs at the Britool factory on the border of my constituency, which employs many of my constituents, are being exported to France. About 350 jobs are going at a food processing company. All those jobs are well paid. Even the workers at the food processing factory receive hourly rates in excess of £5, which is well-paid employment in the west midlands for that industry.
Redundancies are also a major problem elsewhere. There has been a disastrous loss of employment in the steel industry. However, my right hon. Friend is able to announce that our manufacturing exports are improving. We are matching the best exporting countries in the world and we have internationally competitive companies that are doing the business for Britain. They are to be congratulated on that and we should be proud of them. We should recognise that their effort; support our way of life, because we have to import many of the things that we enjoy. The dreadful affliction in farming is bound to lead, at least in the short term, to an increase in imports. I make no comment about the disease itself or the handling of it; I merely point out that in the short term we will have to find the money to pay for increased imports—that is a fact of life.
§ Mr. Bercow
I am determined to provoke the hon. Gentleman, which has thus far not been possible. He has just made yet another interesting and valid point. Given our improving export performance, does he accept that despite his reference to the overly high exchange rate, the overall strength of our capacity to sell overseas means that the exchange rate difficulties in no way justify a decision 344 to abolish our national currency for ever and permanently to hand over to the European central bank the power to set our monetary policy, given that we do not elect that bank and cannot remove it and, under the treaty of Amsterdam, it would be illegal to seek to persuade it of the British national point of view?
§ Mr. Purchase
I am being urged to disagree—how extraordinary.
It is interesting to reflect that no country, except perhaps America, is entirely in charge of its own interest rates, for the simple reason that it has to take note of what everyone else is doing and, to an extent, reflect any changes elsewhere in its own arrangements. If we allow rates to get too high, we attract hot money; if we allow them to get too low, out that money goes. We are not independent in the way that the hon. Member for Buckingham (Mr. Bercow) would lead some of his Eurosceptic supporters to believe.
On exports, I gave the House the good news first, because I did not want to fall out about the bad news, which is that Britain's exports, as a fraction of total world exports, have been falling for many years. We are not reversing that trend even though we are increasing our exports. I am sure that the hon. Gentleman understands that we can have rising exports and a falling share of the world markets.
§ Mr. Graham Brady (Altrincham and Sale, West)
Does the hon. Gentleman accept that that damaging trend is likely to be accelerated, rather than slowed, by the imposition of the climate change levy on British manufacturing? Does he accept that the Chancellor's earlier comment seems spurious to those who represent constituencies in the north or the midlands which have many manufacturers, because although there have been offsetting reductions in tax costs for some service industries, manufacturing companies are not benefiting from those?
§ Mr. Purchase
The hon. Gentleman may know that I have been in the front line of west midlands MPs from all parties, standing shoulder to shoulder, saying to the Chancellor that the levy represents a significant challenge, especially for companies that are energy efficient and which have been careful to introduce new energy-saving technology. They run a good monitoring system to ensure that they are always on the cheapest tariff and are therefore running furnaces and heat exchanges at the lowest possible cost, and have done so for several years so that they remain competitive. We have acquainted the Chancellor with that difficulty, and he has partially responded by agreeing that there can be special dispensations where they can be shown to be beneficial.
I accept the hon. Gentleman's point, and I accept that the levy is extra expenditure. We have to weigh the good against the bad, and there is no question but that a serious crisis in the world's energy use is looming. Fossil fuels are undoubtedly running out, and we have to find ways of meeting the energy needs of a developing world so that it can keep its people in comfort.
§ Mr. Bercow
I am grateful to the hon. Gentleman for his characteristic generosity in giving way. I accept his 345 point that no nation is omnipotent, but does he accept that the experience of our forced ejection from the extended recession mechanism demonstrated that a country that is not tied to a fixed exchange rate system has some flexibility in setting its own interest rates, as we discovered when we were able to slash our rates after our ejection in September 1992? Does the hon. Gentleman further accept—I hope that he does—that increased stability within the eurozone could be bought for Britain at the damagingly high price of increased exchange rate volatility with the dollar and the yen? Is not that particularly important to this country, which trades more with north America than do other member states of the European Union?
§ Mr. Purchase
Again, the hon. Gentleman makes interesting points. I will not fall out with him because those are matters that we should discuss and analyse. I say to him and to the hon. Member for Altrincham and Sale, West (Mr. Brady) that not one single factor has a total influence on our position. We need balanced consideration of a series of indicators, including the option to join the euro, if not yet then at some time when it is appropriate to our needs. I believe that that will assist British exports, although I accept that the climate change levy and energy taxes have an impact. We must measure all those costs against the benefits of joining. If there were a sophisticated enough cost-benefit analysis model, we would be applying it and making the right decision, but much of this is a matter of judgment.
I must return to the subject of the Budget, or you, Mr. Deputy Speaker, will rule me out of order. Today's Budget, as one of a series, will broadly find a welcome in the country. It is a path towards the balance that we seek.
We have heard today that the management of pension funds is to be freed up. That matter is an important part of our lives because pretty well all of us are now dependent on the investment of our present contributions to ensure that we receive a pension in future. I am a little concerned because I am rather old fashioned when it comes to pension management. I have always understood first, that no pension fund should have too great a holding in any individual stock because one sometimes needs to make an orderly retreat without disturbing anything; and secondly, that not too many of those holdings should be in equities.
In boom times it is nice to say, "Look how well we are managing the fund; pay us our fees now", but there are difficulties when the market flattens out or goes into recession. People who depend on their pension may then find that its value has diminished. One must ensure that the investments of the pension fund as a whole are properly balanced, with not too great an amount in equities, so that pension commitments can be met and the auditors and actuaries are always satisfied that the fund is equal to the job it has to do. I sound a note of caution because it is important for people's future that they are able to rely on their pension fund managers to guarantee that the income that was promised will be paid.
As for the national health service—
§ Mr. John Hayes (South Holland and The Deepings)
Will the hon. Gentleman comment on the Chancellor's 346 abolition of dividend tax credits and the impact that that will have on pension funds? Clearly, the hon. Gentleman speaks with some authority on the matter. Does he agree with the estimate that this year the abolition has cost pension funds £5.4 billion?
§ Mr. Purchase
Yes, because I do not know other than what the hon. Gentleman has just told me. However, I would like to put the matter in context. I listened to Prime Minister's Question Time and my right hon. Friend's answers on this matter. My right hon. Friend the Prime Minister made exactly the right point. Opposition Members will be surprised to hear that. The cost of the abolition has been more than met by growth in pension funds. It is—[Interruption.] That has excited Conservative Members. I can tell that they will become argumentative—
§ Mr. Boswell
It is because I respect the hon. Gentleman that I want to make a point. Has he considered that whereas pension funds get no relief from the knock that they have suffered with the abolition of dividend tax credit, exactly the same regime applies to charities, and the Chancellor has acknowledged the potential problem by giving charities compensation?
§ Mr. Purchase
That was a fine gesture. Indeed, it was more than a gesture. My right hon. Friend the Chancellor is to be congratulated on taking such a measure.
If the loss to pens ion funds will be £5.4 billion, and if there had been no change, that sum would have been in addition to the funds. There is no question about that, if that is the figure. However, that must be seen within the balance that my right hon. Friend the Chancellor is trying to strike.
Funds have increased greatly and the cost of the change will be £5.4 billion, or whatever. That cost will be more than met by growth To a large extent, that growth has been engineered by successive Budgets together with the growth in our economy, given the way in which, for example, engineers, manufacturers and others in the service industries have performed. There is an obvious loss and it could have been greater, but we always want more. We must have a Chancellor—Labour or Conservative—who makes a judgment on what we have in our pockets and what will be needed to fund public services.
I move on to the national health service.
§ Mr. Purchase
I can tell that the right hon. Gentleman is upset.
There has been a considerable boost in expenditure. I expect Conservative Members to accept that as a fact. In real terms, there has been a real boost. I believe my local health service managers—they are honourable men and women—when they say that the difficulty is in getting the money to the front line. There must be a cultural change in the way in which the health service and other public services are managed. We must adopt in public services 347 the ethos that is widespread in high- tech industry, which is getting things right the first time and every time. We must also—
§ Sir Raymond Whitney
I understand the problem of getting the money to the front line However, does the hon. Gentleman recognise that there is a much more fundamental problem when per capita money available in Britain is about 50 or 60 per cent. less than that which is available in other continental countries?
§ Mr. Purchase
I would have to examine carefully how per capita expenditure is assessed. I would have to consider, for example, how much is the result of direct taxation in each country and how much stems from personal contributions in the from of buying private care, or a state-run system that has a mixed economy of private and public money. These are difficult issues when I have not seen the relevant figures, which the hon. Gentleman has probably carefully examined. However, I believe what he tells me. I know that he would not lead me in the wrong direction.
We must compare apples with apples, not apples with pears. We must ascertain the components of individual expenditures. My right hon. Friend the Prime Minister talked some time ago about health expenditure in the UK reaching the European average. It was necessary to analyse exactly what was meant by that—I understand that it is that our level of state spending would match European state spending nation by nation. However, a great deal of additional expenditure in other European countries, as in this country, will have been incurred by individuals.
The hon. Member for Wycombe is able to give chapter and verse on our position in the league table, but we are beginning to see some genuine improvements, which are welcomed by all and which were striven for by all. In my constituency, where the general hospital in Wolverhampton is situated at New Cross, there is a £110 million development and refurbishment programme that is ready to get moving. We heard news today of between £500,000 and £1 million that will go directly to the hospital trust rather than being brokered through the health authority. Next week, I shall have the great honour of declaring open our refurbished accident and emergency department. There is a huge programme of such refurbishments throughout the country, which are welcomed by all.
People of good will recognise that sometimes our efforts are not always rewarded by excellence in the health and education services. However, when we work together, co-operate and pull in the same direction, and when the necessary resources can be made available, we can appreciate the work that others do for us. It is always worth thanking those who work in hospitals and schools, for example. Often, they are like the neglected civil servants who look after us day and night, and sometimes for 24 hours a day. We should applaud the work that is done and encourage those who are involved. There is certainly room for further salary increases in the public sector, especially in teaching and nursing. Such increases should be introduced to bring about a revitalised NHS—a service of which we all want to be proud.
The Budget, when seen as part of a series of measures, will be good for Britain. Everyone will benefit, or has benefited. We must wait a little I anger to see the full 348 effects of the Budget, but I believe that we are on the right path and that the balance is right. That balance can be criticised—and, no doubt, it will be criticised. However, I think that the Budget will have many defenders. My right hon. Friend the Chancellor deserves our congratulations on bringing forward a Budget that is neither too prudent nor too expenditure driven.
We are in an election period. Had my right hon. Friend spent less, no doubt he would have been accused of doing a Jenkins on the Labour party; had he spent more, it would have been open season for Opposition Members.
§ 7.9 pm
§ Mr. William Ross (East Londonderry)
The hon. Member for Wolverhampton, North-East (Mr. Purchase) finished by saying that the Government may have spent less than they might have. Perhaps the Chancellor spent less because he has more lives to lose in the election than would otherwise be the case. If he has a large number to lose, he can afford to lose a few extra and still win.
By general agreement, it is a most interesting Budget. I must welcome the continuing use of tax surpluses to repay the national debt. I listened carefully to what the Chancellor said. He told us that he would repay about £34 billion this year—a vast sum. The only larger sum that I can remember being announced was, unfortunately, a £50 billion debt, which was acquired rather than being repaid. This repaying of the national debt is welcome. As the Chancellor said, it will mean a £3.5 billion saving on public debt interest. I suspect that that would go a long way to covering some of the hand-outs that we will be told tomorrow by the press the right hon. Gentleman has given us. It is a useful and tidy sum, and much can be done with it, especially if it is to be saved year on year. It is more than welcome. However, when one looks at the more detailed figures, some of which the Chancellor read out, one realises how the public sector debt will fall. It will do so only for a fairly shortly period, but it is then projected to start rising. Exactly the same is true in regard to public sector debt as a percentage of the gross national product, which drops to a minimum of 29.6 per cent. in 2000–03. After that, it is projected to rise slightly, to 30 per cent.
Of course, those are substantial figures. One aim that is a long way from the hopes that we heard about in the past, and which I thoroughly endorse, is to wipe out national debt. If we are to get £3.5 billion to spend from the repayments this year, think of the wonderful benefits to the nation, year on year, if we do not have any interest payments to make. As the House will know, I have been interested in that for a long period and I am hopeful that, as time goes on, there will be a slow reduction until we get rid of the huge burden that has hung around our necks. I have always thought it very sad that, whenever Chancellors talked about balancing the Budget over the cycle, few of them were prepared to say that they wanted to achieve more than that when the cycle had finished, and have lower national debt, both as a percentage and in real cash, until it was eliminated.
My hon. Friends and I are especially disappointed that, once again, the Chancellor has not seen fit to do rather more about reducing the duty on tobacco. If it was purely an instance of a morality tax to improve health, we might be more willing to support the Government on increasing duty or maintaining the present level of duty, as happened this year. We are all only too aware of the damage that 349 smoking causes to the nation's health and to individuals. It kills thousands every year one way or another, and costs the national health service millions annually. It is not purely an issue of morality taxation, as practicalities are also involved, which are particularly clear to me, coming from where I do.
In the past few years, the number of smokers in Britain has increased, which shows that increasing tax to limit smoking has failed. The issue is now severely complicated by the continued growth of cigarette smuggling. I mention cigarettes in particular, but the problem goes wider than that. However, cigarette smuggling has shown the largest increase in recent years and the market for that kind of tobacco is huge, with an estimated £4 billion in lost revenue each year. Those figures were given to us by trade unions in Northern Ireland, which say that a phenomenal amount of money has been lost.
§ Mr. Forth
I am looking at page 192 of the Treasury's Budget document under the heading "Public sector current receipts". To my surprise, it suggests that tobacco duties yielded £5.7 billion in 1999–2000; £7.5 billion in 2000–01; and will yield an even greater amount—£7.6 billion—next year. Is my hon. Friend as puzzled as I am by that? I thought that it was common knowledge, even in the Treasury, that the yield is falling because the tax is now too high and smuggling is rampant? Can my hon. Friend help me with those figures?
§ Mr. Ross
May I tell the right hon. Gentleman that if those figures are correct, they represent a change from past projections, which show a fall in revenue from duties, despite an increase in taxation? On the other hand, perhaps Inland Revenue officers are going to get so efficient that smuggling will be stopped altogether.
It is estimated that 30 per cent. of all the cigarettes that are consumed are purchased outside the United Kingdom's jurisdiction, thereby avoiding UK taxes. The percentage of cigarettes purchased on the black market continues to rise. I shall give vivid examples of that in a few moments.
§ Mr. Bercow
I have not smoked a cigarette since 25 June 1986 and have no desire to do so ever again. Nevertheless, in common with a small but insistent minority, I am against the social fascism that says we should continually smother people with excessive taxation for indulging in perfectly legal activities. Is my hon. Friend aware that, on 6 June 2000, when I presented the Taxation (Right to Know) Bill, I calculated that 79.3 per cent. of the cost of a packet of 20 cigarettes went directly to the Exchequer? Has my hon. Friend worked out what percentage of the cost of a packet of cigarettes goes to the Exchequer as a result of today's tax changes?
§ Mr. Ross
I have not worked that out, but later I shall give the hon. Gentleman extremely interesting figures showing the difference between the sum that people pay for a packet of fags in this country and elsewhere.
It is a fact that tobacco manufacturers and trade unions predicted a good many years ago the consequences of increased taxation on cigarettes. That prediction followed their correct forecast of the consequences for hand-rolled 350 tobacco, practically all of which is now smuggled. Quite a lot of it goes out of the Gallagher factory in Ballymena one week; then, ten days later, it is on market stalls throughout the country. All that tobacco is smuggled. It is true that the Chancellor has increased investment in Customs and Excise to counter tobacco smuggling, but those efforts have not been effective, owing to the potential rewards for Those involved in smuggling.
§ Mr. Jonathan Sayeed (Mid-Bedfordshire)
Smuggling is not necessary. The problem is that people can go to France, Holland or another country perfectly legally and buy cigarettes for their own personal consumption at such a dramatically low price that it is worth undertaking that journey. That is one of the problems with a high tax.
§ Mr. Ross
Of course, the hon. Gentleman is correct. I understand that one can now bring in 800 cigarettes for one's own use. A man, his wife and his non-smoking grown-up children can take a day trip to France and come back with enough to do them for several months and still make a considerable profit on their visit. Rather than raising the tax, the Government would be wise to freeze it at the very least. If the increased resources for the Revenue fail to prove effective against smuggling, a cut in tobacco duty must be seriously considered.
Such a cut is not unheard of, as that step has been taken in other European states and Canada to combat the type of smuggling that currently plagues the United Kingdom. The current policy of morality taxation—as it has been christened—has failed miserably to decrease the number of smokers in the United Kingdom and has damaged the moral fabric of society by precipitating general criminality—smuggling—in the population.
Other options must be considered. Decreasing duty would increase total Government revenues; as the profits from smuggling decreased, the extent of smuggling would diminish, and a far greater number of taxable products would be sold in the UK, thereby compensating for a lower percentage it duty. Consequently, additional investment to combat mass smuggling would become unnecessary, and there would be savings in the cost of Revenue officers if the incentive to smuggle were removed. The size of That incentive is evident, as has been said, in the difference in the cost of tobacco products retailed here and elsewhere.
I have, given to me by trade union visitors from the Gallagher factory in Ballymena last week, a packet of one particular brand which is sold in the United Kingdom at £4.27, in Spain at £1.47, in Luxembourg at £1.66 and in Belgium at £1.95. I also have two packets of Old Holborn which, as I do not smoke, I will eventually return to the factory of origin. One packet is printed in English and states:United Kingdom price duty paid £8.70".The other shows the Luxembourg duty paid: £1.95.
The stuff all comes out of the same factory in Ballymena, in County Antrim. It goes across to Europe and back it comes. The House will agree that, with an incentive of that size, the idea that smuggling can be stopped, other than by the harshest and most repressive measures, is nonsense. It just will not happen.
That illustrates more clearly than anything the real problem that we face. The House will be aware that with a land frontier between Northern Ireland and another 351 European state, tobacco smuggling is not the only problem that we have. We have road fuel smuggling—not only diesel, but all road fuels. Many petrol stations along the northern side of the frontier haw been closed and are derelict, and their counterparts in the Republic are thriving, as are many little stations set up along the roadside.
The grapevine tells one things which it is sometimes impossible to trace back to source, but they are revealing. I heard of one gentleman who was invited to allow some people to sell fuel on the forecourt of his closed petrol station. He refused for a few days, then he allowed it. The reasons for that I leave to the imagination of hon. Members who are listening.
Who is profiting from that trade? Who owns the closed Northern Ireland outlets? What will the situation be when the system reverts, as it inevitably will? Some time in the future, the relative value of the pound and the punt may change, and even with the difference in taxation, the trade may start to flow the other way. We will then find that many dozens of decent, hard-working people who built up their business have been ruined; they are gone, and their establishments are run on either side of the border by paramilitary organisations.
§ Mr. Forth
I am grateful, again, to my hon. Friend. Does he agree that it is highly likely that one of the reasons why the Republic of Ireland can keep its tax levels lower than ours in matters such as the one being discussed is that money is flowing from the European Union into the Republic, thus saving the Government of the Republic a great deal of money? Some of that is our money, which has gone from Britain to the European Union and thence to Ireland, thus allowing the Irish to keep their taxes lower. The position is even worse than my hon. Friend describes. Not only are the Republic's taxes lower, causing the problems described, but it is happening because of our money going via Europe to Ireland.
§ Mr. Ross
The House debated a Bill yesterday to help development in the poorer nations of the world, so I suppose we have done the same for a former part of the United Kingdom. However, the situation is changing rapidly. Instead of receiving money, the Republic of Ireland will start to have to pay it out. It has also, as the right hon. Gentleman knows, signed up to the euro, and is now being told to toe the line.
There was one blooming awful row recently between the Republic's Finance Minister and the European authorities, because the Republic refused to toe the line. It was wonderful to see that nation, which was so pro-European that it made one sick, coming to understand the consequences of being in thy euro system. Hon. Members who did not read the reports in The Irish Times, which is the best paper for such stuff, should go back a few weeks and read it. It is extremely revealing.
I digress, however. The right hon. Member for Bromley and Chislehurst (Mr. Forth) has a habit of taking me away from the subject of the debate. The night is moving on and I want to hear what he has to say, so I shall return to my own remarks.
The effectiveness of the Government's countermeasures against fuel smuggling has been, at best, questionable. In response to an oral question that I asked last year, the Minister of State, Northern Ireland Office informed me that 352 13 illegal fuel processing plants had been closed, and an estimated 40 million litres of illicit fuel had been prevented from reaching the Northern Ireland regional economy. I welcome that success, as every right-thinking person would.
I welcome any success in the war against criminality, but 40 million litres is like a drop in an oil well, compared with what is going on. A comparative analysis of the legitimate third quarter fuel deliveries into Northern Ireland since 1994 provides a far more accurate indication of how widespread and how massive the Northern Ireland fuel smuggling crisis was and continues to be. Since 1994, fuel deliveries into Northern Ireland have fallen by a staggering 55 per cent. Between 1994 and 1996, third quarter deliveries dropped slightly, by more than 10,000 tonnes—that is, 6 per cent. of the total fuel delivered. By 1997, a sharp decline had begun, and by the third quarter of last year the total fuel delivery into Northern Ireland was just over 100,000 tonnes—less than half the equivalent delivery for 1996. Unfortunately, that amazing decrease has only one possible explanation. It must be remembered that over the same period there was an increase of almost 20 per cent. in the number of vehicles licensed in Northern Ireland.
One aspect of the Chancellor's Budget today that I particularly welcome is the change in the road vehicle excise duty, which will be extremely beneficial to the road haulage industry in Northern Ireland. Some firms are transferring their vehicles to the Irish Republic because of the very much lower taxation on heavy lorries there. That incentive, at least, will now be removed.
I return to the subject of fuel. With 20 per cent. more vehicles, 50 per cent. less fuel delivered and Northern Ireland having no indigenous resources of road fuel, the figures just do not add up. The estimated revenue lost to the Treasury is astronomical, although when one starts asking questions, the Treasury keeps going round in circles and one never gets an answer. The causes of those astounding figures are simple: diesel smuggling, petrol smuggling, mass blatant smuggling across the frontier every day, plus, of course, the thousands of people who drive across every day and fill up.
The problem must be dealt with in the same way as cigarette smuggling—by reducing duty and consequently removing the incentive for smuggling. I am disappointed that a pragmatic solution to fuel smuggling has yet to be considered by Government. I admit that, unlike cigarette smuggling, fuel smuggling is primarily a regional problem for us. It should not be forgotten where the smuggling profits end up. The profits of cross-border fuel smuggling fill to overflowing the coffers of the republican terrorist organisations. They go to the IRA which, as we all know, controls the whole trade.
The scale of the smuggling, not only in fuel and cigarettes but in farm livestock, has become abundantly clear in recent days. Only recently did the public learn how foot and mouth disease reached Northern Ireland from Carlisle. In The Irish Times yesterday there was an article to the effect that some 8,000 sheep had been taken illegally from the United Kingdom into the Irish Republic over the past two months—that is a lot of sheep.
Let us remember what happened to the lorry. It went in and dumped off the sheep, some in South Armagh and some at the slaughterhouse in the Republic, then it was used to transport livestock all round the island of Ireland 353 and maybe on the mainland—heaven knows where. I hope that it was well cleaned down and disinfected. It is beginning to look as though it was, because if it had not been, there would be foot and mouth from one end of the island of Ireland to the other by this time. That could not have been avoided.
It is estimated that a third of the filling stations in Northern Ireland are now controlled by paramilitary terrorist organisations, which use these businesses to launder the proceeds of their criminality.
The fuel differential has far greater implications than merely cross-border smuggling. The taxation of aggregates is another significant matter that is impinged upon by the cost of fuel. Transportation is an important factor in the distribution of aggregates and the downstream products in which they are used. Northern Ireland's aggregates industry differs greatly in character from that of its mainland counterparts. The Province has a rural industry with a wide distribution of small quarries and sand and gravel pits. Most of those quarries process the aggregates on site into concrete and other downstream products. They generally supply them within a relatively small radius, although that could include the whole of Northern Ireland.
The tax will apply to both raw and refined aggregates and to imported aggregates, but not to imported downstream products. That means that concrete building materials—whether they are beams, pipes, bricks or anything else—can be made in the Republic of Ireland and then imported, which creates the potential to swamp the Northern Ireland market with much cheaper products. Another comparison might be pertinent in that respect. In Northern Ireland, the average value of raw aggregates is £2.60 a tonne. On the mainland, the average value is £6.50, which is a very large difference. The tax per tonne in Northern Ireland will, therefore, be 60 per cent. of the product's value; on the mainland, it is 25 per cent. of the current aggregates value. Consequently, there is a massive difference between the burden that the tax places on the quarries in each region. An unfair burden is imposed on the industry in Northern Ireland, and there is no value in taxing industry in the Province in that manner. It can only result in a substantial economic and job loss.
In 1999, total aggregates production in Northern Ireland was 23 million tonnes. With exemptions taken into account, 22 million tonnes would be taxable under the new tax, so the total revenue for the Treasury would be a mere £35 million. The estimated consequences for the industry of the new tax include the loss of up to 4,000 jobs, which is more than 70 per cent. of the total number of jobs in the industry in Northern Ireland. The estimated cost to the Treasury is some £60 million.
There was an obvious and simple solution to that potential disaster for the region's aggregates industry. The tax could have been disapplied in respect of Northern Ireland, with a saving for the Treasury. At the very least, it could have been applied to the value of the product and not per tonne. Taxing the value by 25 per cent. in Northern Ireland, as on the mainland, would provide a pragmatic solution to a salient regional problem.
Those in the industry point out that their products are heavy and not easy to transport. There is one manufacturer who manages to sell bridge beams in England. All his 354 competitors would like to know how on earth he manages to make them in Northern Ireland, put them on a boat to south-west Scotland or Heysham, cart them half way across England to be used to build a bridge—and still make a profit. He is a neighbour of mine and apparently he gets on very well. There are also certain products that are not made elsewhere in the United Kingdom, such as concrete pipes of a particular size, so Northern Ireland is the only source of supply. However, the reduction of the tax in Northern Ireland on a percentage basis would not hurt manufacturers in the mainland, as the materials are generally too heavy to transport and the cost of doing so would be too great.
§ Mr. Bercow
My hon. Friend referred to a £60 million loss to the Exchequer Does that calculation reflect merely taxation forgone and benefits paid, or does it also take into account—I fear that it probably does not—the obvious loss of purchasing power that has been experienced in the process?
§ Mr. Ross
The calculation does not take account of the second point at all.
I am disappointed that the Government have not taken the problems on board or acted on them. Their tax policy in two of the areas chat I have mentioned has failed to deliver the benefits that we hoped for. It will also fail in the third area, as it will do great damage to the Northern Ireland economy. Heavy taxation of fuel has not led to a reduction of car use in Northern Ireland, whose rural nature means that people have to use their cars. It has simply become a source of terrorist funding. Those are two very good reasons for doing something serious about it.
With regard to tobacco, taxation has greatly increased law breaking and smuggling; that is positive proof that one cannot make people good by passing laws that it pays them handsomely to break. I have demonstrated that the policy on fuel and tobacco does help pay them handsomely to break the laws. I fear that smoking reduction has become a matter of education and not of exorbitant taxation. I have also rehearsed in some detail the danger to the quarrying industry. I hope that the Chancellor will listen to my comments on that issue, as he can improve the situation without much difficulty and without causing any great damage to similar industries on this side of the Irish sea.
§ Mr. David Kidney (Stafford)
Before my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) leaves the Chamber, I should like to say that I greatly enjoyed his speech. His performance, which is best described as emollient, provided a neat counterpoint to the speech made by the hon. Member for West Worcestershire (Sir M. Spicer). I much preferred my hon. Friend's analysis of the future, as he spoke about consistent and adequate investment in core public services and targeted spending for the rest of the public services. That contrasts with the vision presented by the hon. Gentleman, who spoke of a future in which, as I understood it, even health and education services would be accessed only in accordance with the size of a person's wallet.
I want first to speak about the happy situation of my right hon. Friend the Chancellor in making his statement, perhaps in the shadow of the next general election, and 355 the strong position that enabled him to make his announcements. I should like to illustrate that position by comparing his speech to the past three speeches made by Labour Chancellors in the shadow of general elections that Labour went on to lose.
Initially, we must go back to April 1951, when the late Hugh Gaitskell, who has already been mentioned, delivered the Budget of the then Labour Government. He was wrestling with two huge problems that were exercising the minds of all hon. Members. First, there had been a huge—30 per cent.—devaluation of our currency, which had made it impossible to valance the Budget. Secondly, he had to find the finance to wage a war in Korea—which some might forget today.
Those two demands made his position hopeless. His Budget set a starting income tax rate of 3 shillings in the pound, which is 15 per cent., and an intermediate rate of 5s 6d in the pound, which is 27.5 per cent. The standard rate was 9s 6d, or 47.5 per cent. The maximum surtax was another 10 shillings in the pound for people with incomes of more than £20,000 a year. That is another 50 per cent., which makes a maxim um payable income tax rate of 97.5 per cent. It is no surprise that Mr. Gaitskell mournfully observed:I know that this budget will not be popular".—[Official Report, 10 April 1951; Vol. 486, c. 865.]Those who had to respond instantly for the Opposition—a very difficult job—were a great deal politer than today's politicians. I do not make a party political point; it is merely the passage of time. The late Sir Winston Churchill had that duty in 1951 and he was politeness embodied. He said:I pay our compliments to the Chancellor of the Exchequer upon the lucid, comprehensive statement which he has made to us this afternoon".Before he sat down, he thanked the Chancellor again for a gracious speech, but politeness did not get in the way of trenchant political criticisms. His summing up of the Government's performance reflected the difficulties that they faced at the polls shortly afterwards. He said:If we take the whole period of the rule of the Socialist Party, I think it is fair to say that the mismanagement of our finances over the whole period tells the same tale…as the mismanagement of our defences."—[Official Report, 10 April 1951; Vol. 486, c. 879–881.]
§ Mr. Hayes
I believe that, in 1951, Winston Churchill voted in half the Divisions in the House. That starkly contrasts with the current Prime Minister's performance. The hon. Gentleman should consider the difference between that Labour Government and the current Government in their methods of taxing the British people. The hon. Gentleman spoke of tax at 97p in the pound, but the 1951 Government were not to ping by stealth. He should compare the honesty of the 1951 socialist Government on tax policy with the dishonesty of the current Administration, who tax by the back door and do not tell people of their real intention.
§ Mr. Kidney
I disagree with the hon. Gentleman. On dishonesty in modern taxation, I shall shortly consider the great shift from direct to indirect taxation. I should be interested to know how taxes that are announced in a manifesto for a general election can be labelled stealth taxes. The hon. Gentleman makes an odd criticism that I reject.
§ Mr. Boswell
The hon. Gentleman claims that the Labour manifesto for the general election announces 356 several taxes. Doubtless he will tell us more shortly. However, does not he recall that, when the Prime Minister was Leader of the Opposition, he said in an article in The Sun—an authoritative publication—on 14 April 1997 that the Labour party planned no increases in taxes?
§ Mr. Kidney
That has been explained many times. The Prime Minister was referring to the rates of income tax. Let me demonstrate the inaccuracy of the hon. Gentleman's criticism. He claims that the Labour party said that there would be no new taxes. That is not true; the manifesto stated that there would be a windfall tax on the excess profits of the privatised utilities. The Opposition claim that the Labour party said that there would be no increases in taxes. Again, that is inaccurate; the manifesto stated that the fuel duty escalator would continue. I am happy to continue the debate.
§ Mr. Hayes
I do not want to test the hon. Gentleman's patience, but will he comment on some of the other taxes that have been introduced by stealth, such as the pensions tax that I mentioned earlier, the changes to national insurance contributions for the self-employed, holiday tax and insurance tax? The list is almost endless; there are 45 such taxes. How many are included in the manifesto?
§ Mr. Kidney
The hon. Gentleman makes a good point: not all the changes to which he refers appeared in the manifesto. Policy evolves; that applies to every Government.
§ Mr. Bercow
I am grateful to the hon. Gentleman, whose constituency I recently had the great pleasure of visiting. The Prime Minister specifically said that there would be no increase in taxation at all. That obviously referred to the overall level; it was not a decision to rule out the introduction of any specific tax. To argue the contrary is to argue about the number of angels dancing on the head of a pin.
Will the hon. Gentleman acknowledge that there is an innate contradiction between the Government's attitude to public finances at Government level and at local authority level? What assessment has he made of the effect of the change in the rules for the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?
§ Mr. Kidney
I am happy to stand toe to toe with the hon. Gentleman on the head of that pin, and to continue to argue that the Prime Minister referred to income tax rates. I shall not be diverted by the hon. Gentleman's second point.
Let us move on from 1951. For a long time after that Budget, there was no Labour Government. However, we were back in power in the 1960s. Let us consider 14 April 1970, when the Chancellor who delivered the Budget speech was Roy Jenkins. He perceived an improvement in his position. He said:The circumstances in which I open this Budget are, I am glad to say, more agreeable than those in which I made my last two Budget statements".357 He continued:In 1968, we were in the trough of crisis."—[Official Report, 14 April 1970; Vol. 799, c. 1212.]What were the problems with which Roy Jenkins had to wrestle? In 1970, Hansard included headings and subheadings for the Budget speech. One was, "The record since devaluation". That Labour Government were struggling with the aftermath of a devaluation and its terrible consequences in 1968, when debt had peaked. The current account debt was the largest ever, as was the country's total indebtedness. The then Chancellor found time to single out a Staffordshire Member of Parliament, the late Sir Hugh Fraser, whose tenacity of criticism of the financial position especially irritated Roy Jenkins.
People mainly remember the decision not to make the 1970 Budget a giveaway Budget. Roy Jenkins was determined to avoid blatant electioneering and to be thoroughly decent. He explained his intentions thus:I therefore conclude that it is right to give a moderate stimulus to the economy, but to spread this between monetary and fiscal measures. On both, I intend to proceed fairly cautiously. If I find that my judgment is too cautious, it is much easier to correct this later in the year than if I go too far in the other direction.Hansard then records "[Interruption.]" In my imagination, the interruption consists of Labour Members shaking their heads, gnashing their teeth, weeping into their handkerchiefs, beating their heads against the wood on the back of the seats and begging the Chancellor to go further.
Roy Jenkins also said:With my approval, therefore, the Bank of England is reducing Bank Rate to 7 per cent. with effect from tomorrow."—[Official Report, 14 April 1970; Vol. 799, c. 1231–36.]A clear difference today is the welcome decision in 1997 to give independence to the Bank of England to set interest rates without reference to the political cycle and the difficulties of the day.
What had happened to income tax rates by 1970? Roy Jenkins continued the standard rate at 41.25 per cent; he also applied surtaxes, which could total another 40 per cent. That gives a top rate of 81.25 per cent.
In 1970, Leaders of the Opposition continued to be polite in their responses. On 14 April 1970, the duty of replying to the Budget speech fell to the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), who is now Father of the House. He began by "warmly congratulating" the Chancellor on his speech and said that the Budget wasdelivered with such lucidity and fluency and in such a well-constructed speech".—[Official Report, 14 April 1970; Vol. 799, c. 1254.]
§ Mr. Michael Fabricant (Lichfield)
Does the hon. Gentleman recall that there was a selective employment tax in 1970? I believe that it was 15 per cent. of the surcharge. Not only was it a terrible tax, but it condemned, for example, hairdressers to suffer additional taxation. That was unreasonable.
§ Mr. Kidney
I do not know why the hon. Gentleman refers to hairdressers, but he is right about the existence of the selective employment tax. It was telling that, as in 1951, the Leader of the Opposition observed that the 358 Chancellor sat down to comparative silence. Labour Members probably felt that an opportunity had been missed. The Labour party went on to lose the general election.
§ Mr. Hayes
I hope that my comments will match the hon. Gentleman's expectation of politeness. Will he reflect on two matters that were relevant to the run-up to that election? The first was the publication of the balance of payments figures Many people believed that that had an impact on the result of the election. The second was the savings ratio. Both are less healthy now than they were then.
§ Mr. Kidney
The hon. Gentleman's first point is quite interesting, because the then Chancellor referred to our obsession with the balance of payments figure, and said that he looked forward to the day when people were no longer obsessed by it. At that time, people looked at the figure and thought that it was extremely worrying if it was an unhealthy one, whereas today people take a much more relaxed view of that indicator of economic well-being.
On the hon. Gentleman's point about the savings ratio, I confess that I do not recall the position in 1970. I adopt the approach of my hon. Friend the Member for Wolverhampton, North—East, who said that the savings ratio is not taken quite so seriously as it was in the past, because other economic factors are at work at the same time. Perhaps a good illustration of that is that in America, during its very successful period of growth in the 1990s, there were times when its savings ratio was negative, yet that did not impinge on its success.
§ Mr. Bercow
If published, the hon. Gentleman's brief history of Budget debates would make a racy read and a standard text book. He ought to savour that compliment, because I shall probably not volunteer many more in his direction. He made an important point about the 41.25 per cent. tax rate under the chancellorship of Lord Jenkins, as he now is. Will he now take the opportunity to acknowledge that me then Member of Parliament for Wolverhampton, South-West, the late Enoch Powell, was arguing at the time—as he did in a publication from Elliot Rightway books—for income tax at 4s 3d in the pound? The argument was developed in a legendary speech in Morecambe.
§ Mr. Kidney
I thank the hon. Gentleman for that assistance, and I shall come back to that matter in a moment, in a different context.
I shall move on to 3 April 1979, and the Budget that never was. Denis Healey—now Lord Healey—was the Chancellor, and he was due to deliver his 15th Budget in five years, believe it or not. That is a telling indicator of the difficulties with which he was wrestling in the late 1970s. The reason that he did not deliver that Budget was that, the week before, the Labour Government had suffered a defeat in a vote of no confidence and his Budget was scrapped. Instead, he came to the House to deliver a Finance Fill that would merely continue the authority to collect taxes and keep the Government in 359 funds until the next Government were formed. In his usual colourful language, he described his position at the Dispatch Box, saying:I confess that I feel a little bit like a man who turns up to play the leading role in the opera and all they want him to do is to help them hold the scenery together."—[Official Report, 3 April 1979; Vol. 965, c. 1187.]We spoke earlier of the problems of devaluation and the resulting growing debt but, my goodness, the difficulties that Lord Healey wrestled with were manifold. He had just succeeded in returning inflation to below double figures for the year. In relation to debt, he was planning the following year to finish repaying the International Monetary Fund borrowings that he had had to access. He complained of sluggish manufacturing output, wage inflation, oil price rises—although we were just starting to benefit from North sea oil production—and the uncertainty of oil supplies from Iran. So he had an enormous amount of difficulty, and perhaps the writing was on the wall for him.
To return to the story about income tax, the standard rate then was 33 per cent. There was a huge number of different rates, but the top rate was 83 per cent. I think that Lord Healey had just about had enough of the job by then, because during his speech he described the job of Chancellor asthis heavy burden, this poisoned chaliceOpposition responses were no longer polite. The Leader of the Opposition did not respond on that occasion, as the debate was on the Finance Bill, but Sir Geoffrey Howe, now Lord Howe of Aberavon, said:we celebrate the Chancellor's demise today with great enthusiasm."—[Official Report, 3 April 1979; Vol. 965, c. 1196–7.]He went on to give a clear statement of what to expect if the Conservatives won the next election, which they went on to do. He said:The nation clearly needs substantial reductions in personal taxation to restore incentives, reductions in public spending programmes so that public spending is in line with what the nation can truly afford, and a willingness to shift the balance of the tax system away from pay-as-you-earn to pay- is-you-spend."—[0fficial Report, 3 April 1979; Vol. 965, c. 1205.]That reinforces a point that I made earlier, and that is what we got in spades over the subsequent 18 years. I suggest to Opposition Members that there was a need to readjust the pendulum, but it swung massively too far in the other direction.
I am pleased that that little history lesson has entertained at least one hon. Member present. It has enabled me to make the point that today's Budget speech was delivered from a position of immense strength and power, built on four years of preps ration and the laying of proper foundations. We are in this position through choice, because of decisions that have been made, rather than by chance or happenstance.
When I listened to the leader of the Liberal Democrats make his contribution to today's debate, I was struck not only by his call—naturally—to spud more money, but by the inadvisability of spending such money before preparations have been made. That is the lesson of the previous three Labour Governments, who churned out a great deal of spending on public services at the beginning of a Parliament, hit a crisis in the middle of it, then spent the rest of it recovering their position and going to the polls saying, "We are sorry, we have made a terrible mess, 360 but we will try to do better next time." Today, we have a Chancellor who has, through choice, made good, strong decisions and who gives hope and a vision that he can do the same in the future.
§ Mr. Peter Luff (Mid-Worcestershire)
On a point of order, Madam Deputy Speaker. I apologise for disturbing the hon. Gentleman, who is making a most entertaining speech, but I wish to refer to a point of order made earlier by my hon. Friend the Member for West Derbyshire (Mr. McLoughlin) concerning information provided to hon. Members in relation to the Budget.
The original Budget bundle contained an indication of a number of additional press releases that were to be available to hon. Members, but they were not in the Vote Office when my hon. Friend raised his point of order. Since then, I have made an additional inquiry at the Vote Office and have received another bundle of documents that was not made available to hon. Members with the original Budget bundle, but is now available. It includes one important document referred to in the original bundle—"A Review of Small Business Taxation".
I have just been to the Vote Office again to inquire whether the press releases have now arrived, as they relate to important measures affecting business taxation. I was given an envelope that contains only parts of the Budget bundle. The press releases are still not available. I understand that they may be available on the internet, but I do not think that that is an adequate way of informing hon. Members of the contents of the Budget. Given the importance of the details of this Chancellor of the Exchequer's Budget statements, it would be helpful if the Ministers on the Treasury Bench could arrange for those press releases to be made available in written form in the Vote Office at the earliest possible moment.
§ Madam Deputy Speaker (Mrs. Sylvia Heal)
The supply of documents to the Vote Office is not the responsibility of the Chair. I have no doubt that Members on the Treasury Bench will have heard what the hon. Gentleman said.
§ Mr. Kidney
I am happy to excuse the hon. Gentleman for interrupting my speech. He made an important point and wherever the fault lies, it is unacceptable that we cannot have access to the documents that we need on Budget day, of all days.
I shall move on to make three brief points that will conclude my observations. The first concerns public spending. Opposition Members have raised eyebrows and expressed concerns about the Chancellor's announcement that he intends further to extend his commitment to spending money on public services over the next three years. However, the cautionary note that I would sound to the Chancellor, and to those who might think that that was a worrying thing to do, is that so far, our Departments seem to be having difficulty coping with spending the money that they have already been given.
An article in the Financial Times today points out an underspend on the working families tax credit, and there is an even greater worry about capital spending, in terms of the inability to spend the money allocated. Ten months of this financial year have passed, and we are told that about £2.2 billion, out of an allocation of £7 billion, has been spent.
361 I am sure that the position will improve by the end of the year. Nevertheless, this appears to be becoming a bit of a habit. The previous year, the Select Committee on the Treasury, on which I served, pointed out that even the more modest capital spending total for that year had not been met: it had been underspent. On that occasion, the Chancellor told us that the Departments had got so used to being starved of capital resources that they were neither used to spending money nor geared up to do so. However, I would have thought that 12 months later, we would now be ready to spend the money.
When I talk to Treasury Ministers about the matter, they point out that there is now the ability to carry forward money, and it is not lost if it is not spent in the financial year allocated. That is a welcome development, and very healthy indeed. Nevertheless, there is an urgent need to spend that money, and those with responsibility for spending it ought to consider doing so as a matter of urgency.
We want investment in law and order, roads, railways, bridges, schools and hospitals. We want good quality and good design and we also want all those to appear physically sooner rather than later—[Interruption.] The hon. Member for Somerton and Frome (Mr. Heath) urges me on, and he will like my next point, which is on fair education funding.
The hon. Gentleman knows that a number of Members are unhappy about the way in which the Government distribute money to local authorities, however generous the sum. I received a letter from a constituent, Mrs. Eunice Finney, who says:The disparity between the highest funded shire LEA and Staffordshire is now £235 for primary children and £286 for secondary children. This is totally unacceptable!!The last sentence appears in bold, which should give the House an idea of how formidable Mrs. Finney is. She is a tireless critic of that unfair system for distributing the money and has pressed me on the matter.
§ Mr. Hayes
I thank the hon. Gentleman for giving way again. Does he agree that the easiest way to address the anomalies that he describes would be through a national funding formula, which would bring greater equity. Is he aware that the base figure used to calculate education standard spending assessment in terms of cost per pupil is based not on a thorough and detailed analysis of what it costs to educate a child, but on a statistical convention?
§ Mr. Kidney
That is music to my ears, although the hon. Gentleman's remarks contrast entirely with what the hon. Member for Eastbourne (Mr. Waterson), who speaks for the Opposition on local government, said to me in the debate on this year's local government settlement. I am delighted that there is at least one Conservative Front-Bench supporter of a national minimum entitlement for funding children's education. The local government finance Green Paper proposes that very measure, and I was heartened to see the same formula repeated in the schools Green Paper.
The Government have consistently accepted that the current formula is unfair and change will come. Earlier this Parliament, they tried to make piecemeal changes to the formula, but found that there would be unintended 362 consequences. They also tried to achieve a consensus among local government representatives, but they would not play ball. The Government's own determination has led to the production of the Green Paper that will eventually lead to change, although change requires legislation and is therefore still some way off.
That is disappointing, but the good news is that the Chancellor has built on the success of last year's Budget in which, for the first time, he announced flat rate payments for every school in the country. Today he announced an enhanced rate for those payments, guaranteed for the whole of the next Parliament, which is excellent. At least no one can complain about their school getting the same amount as every other school in the country. That will go some way to alleviate the unfairness—until the unfairness itself is made a matter of history by new legislation.
Following our entertaining diversion through history, my final point is about a war. The leader of the Liberal Democrats again mentioned the war chest, which has been consistently referred to over the past 12 months or so. It was implied that it represented a lot of money that had been gathered together only to be given out on the eve of an election, but that idea has proved to be wrong. However, thanks to the Labour Government, there is a war going on in this country—a war on poverty.
At home, the war is about relieving the poverty of children, families and pensioners who struggle to survive. Overseas, it is about helping the world's poorest countries through debt relief', support for United Nations development targets for eradicating poverty, bringing primary education to all children and putting public health in reach of all citizens. That is a war that I encourage, and I urge my right hon. Friend the Chancellor to continue it in the next Parliament.
We inherited a situation in which 4 million children in this country were living in poverty. For the first time ever, a Government have announced the target of eradicating poverty, giving themselves 20 years to do it. Policies such as increasing child benefits, the national minimum wage, the working families tax credit and the children's tax credit are making an impact and during this Parliament, more than 1 million children have been raised out of poverty. If the blistering pace of the past two years is continued, we can meet the target to eradicate all poverty within 10 years, not 20.
The same is true for pensioners, and it was right for the Government to target first the poorest pensioners with the minimum income guarantee. Between 1 million and 2 million pensioners have been lifted out of poverty in that way. In the Stafford constituency, those who receive the minimum income guarantee have told me what a difference it makes to their personal circumstances. No amount of increasing the basic state pension within affordable limits could have achieved that so quickly.
Next, we must face the problem of those who do not qualify for the minimum income guarantee because of modest savings or a small occupational pension. That is what the pension credit is about. From 2003, it will help not 1 million or 2 million pensioners, but up to 5 million. The consultation on the pension credit has gone down well in the Stafford constituency. In the meantime, all pensioners appreciate the winter fuel payments and help with their bus fares. The over-75s agree that the free television licence is fair. Britain leads the world's efforts 363 to achieve meaningful poverty reduction around the globe: from debt relief and free trade to UN development targets and access to medicines, we are at the forefront of the war on poverty.
I conclude with a reference to the late Audrey Wise, my parliamentary colleague—a former Member for Preston who died last year. When Audrey was between seats, she lived in Stafford. I knew her and her family very well and I still see her husband, John, often. She contributed to the debate on the 1979 Finance Bill and was oft referred to because of the 1977 Rooker-Wise amendment, which she introduced with my right hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), who is now a Minister of State. The amendment provided for the indexation of personal allowances. Audrey said:I agree that it is not sufficient to consider taxation alone. It is necessary to consider the underlying health of the economy. The economy will only be healthy when working people dominate decision making about the use of their labour. Then, talent—rather than cunning or deviousness—will be releaed."—[Official Report,3 April 1979; Vol. 965, c. 1216.]In my view, we are all workers now. We are engaged in serious work in trying to unlock the talents of all our citizens and trying to marry economic efficiency with social justice. We have come a long way in four years, but there is yet much unfinished business, be it improving productivity, eradicating poverty or protecting the environment. There is plenty of work to keep a Labour Government busy for many years to come.
§ The Paymaster General (Dawn Primarolo)
On a point of order, Madam Deputy SpeaKer. It may help the House if I say a few words in response to concerns expressed by hon. Members about the availability of Budget documents. This year, as in previous years, packs of Budget literature, containing the main Budget document or Red Book, press notice a summary leaflet and other key papers published alongside the Budget, were readily available.
The Government have also made an increasing amount of supplementary information available on Budget day, covering more detailed and technical information. As in previous years, the Treasury ensured that all that information was available in sufficient quantities in the Vote Office shortly after the Chancellor has concluded his statement.
There is absolutely no substance in any suggestion or allegation that information is being concealed from Parliament. I give that absolute commitment to you, Madam Deputy Speaker. On the contrary, the Government are making more information alongside the Budget available than ever before.
Following the approach adopted by Customs and Excise in previous Budgets, this year the large volume of specialist technical information previously included in Inland Revenue press notices has been published in a separate series of Budget notes, as referred to in the pack, making the material issued more accessible and usable. This specialist, detailed, technical information is available on the Inland Revenue website and from Somerset house. Precisely the same amount of information is available this year as in previous years.
364 If it is convenient for Members, I will certainly require the Treasury to arrange for copies of those notes to be placed in the Vote Office before the debate resumes tomorrow. I emphasise, however, that all the information that is available, is available to Members.
§ Mr. Luff
Further to that point of order, Madam Deputy Speaker. Although the Opposition are grateful for the Minister's courtesy, I am afraid that her point of order fell well short of our expectations.
I do not think the Minister understands the exact nature of the information that has not been made available to Members. I am looking at a list of press notices that would normally have been available in a wodge about two inches thick; instead, we have a thin document from which a number of items are missing. They include "Further help for Small businesses", REV C and E 1; REV 3, "Tax boost for employee share ownership"; REV BN 8, "Stamp Duty Reserve Tax and Individual Pension Accounts"; C and E, BN82/01, "VAT: Increased turnover limits for registration and deregistration" and—what about this one?—REV BN 21, "Loophole closed in controlled foreign company rules". Then there is "VAT: Changes in fuel scale charges".
I am afraid, Madam Deputy Speaker, that information of that kind would have been made available in earlier years as part of the Budget bundle. The Minister should reflect on what she has just told the House.
§ Mr. Sayeed
Further to that point of order, Madam Deputy Speaker. I have been present for nearly five hours—certainly since 2.30 pm. I am not able to get to Somerset house, to a computer or on to the internet. I require the documents here, and I consider it an extraordinary insult to Parliament that the Government should not provide Members of Parliament with them.
§ Mr. Forth
Further to that point of order, Madam Deputy Speaker. Can you confirm, or at least reflect on, the Government's tendency to assume that putting information on to something called a website, or something called the internet, is an acceptable substitute for the provision of information directly to MPs in the House of Commons for the purposes of a House of Commons debate?
I hope you will be able to confirm, Madam Deputy Speaker, that even in this day and age we as MPs can still expect the Government to provide information in written form when it is necessary for a debate in the House of Commons. Will you confirm that until the day comes when I am forced to use the internet or a website—neither has happened yet—or when we have those ghastly appurtenances in the Chamber, we can require information in written form when necessary?
§ Madam Deputy Speaker
Order. I have heard three points of order, and I think that it is time for me to respond.
I said earlier that what is in the Vote Office is not the responsibility of the Chair. The Minister has offered Members an explanation, and will have heard the further comments that have been made. I think we should now return to the Budget debate.
§ Mr. Bottomley
Further to that point of order, Madam Deputy Speaker. Having looked at the press notices that 365 we do have—they are contained in a bound volume—I note that the page numbers are not consecutive. People who look for the press notices that they do not have will find that the first list is on page 19, the second on page 11, the third on page 3, the fourth on page 4 and so on. I have found the one I want on page 7. The point that I am trying to make—
§ Madam Deputy Speaker
Order. The hon. Gentleman is continuing to discuss an issue raised in earlier points of order. Members have heard the comments that have been made and the Minister's reply, and I hope that due note will be taken.
§ Mr. Bottomley
The point is, does the Treasury, or do Treasury officials, have any copies of these press notices in the House at present? If they do not, it is disrespectful to Parliament; if they do, we want them as well.
§ Madam Deputy Speaker
I have already explained that this is not a point of order for the Chair. The matter has been dealt with, and the issues have been raised. We must now continue with the debate.
§ Mr. Jonathan Sayeed (Mid-Bedfordshire)
I greatly enjoyed the wander through the history of past Budgets that was the speech of the hon. Member for Stafford (Mr. Kidney). I wish that it had been a little swifter, but it was very enjoyable.
I want to take up two points made by the hon. Gentleman. Halfway through his remarks—after his Budget history—he made a statement with which I must take issue: he suggested that it was as though the Chancellor had invented a strong economy. I put it to the hon. Gentleman—in fact, I am certain of this—that we are talking about a Chancellor who has taxed a strong economy. He did not invent it. He is one of the fortunate Chancellors who managed to inherit a strong economy from a previous Administration.
Towards the end of his speech, the hon. Gentleman spoke of a war on poverty. I agree that a war on poverty is important—it is important to deal with poverty abroad and at home—but let me make a point to the hon. Gentleman that I trust he will make to his colleagues. It is likely that, at the end of the current Parliament, the amount of foreign aid that we provide from this country as a percentage of gross domestic product per person will be less today than it was under the last Conservative Government.
My other point is this. We can say all the nice things about war on poverty at home, but if we have—as I intend to demonstrate that we do have—a thoroughly inefficient tax and benefits regime, we cannot send help to where it is really needed.
One of the benefits of being in opposition—and there are very few—is that it provides an opportunity for radical thinking about policy. In no area is that more necessary than in the area of taxation. The intrusiveness, the complexity and the counter-productive nature of the current tax regime, and the failure of many tax proposals to do what they are designed to do, should have persuaded 366 this Chancellor and earlier Governments to rethink the fundamentals of taxation. Successive Governments have failed to do so.
The evidence is clear. Tax legislation, even prior to this Budget, occupied more than 6,000 pages. In four years, the number of basic tax rates has risen from 15 to 38. Tolley's "Standard Tax Manual", the bible of tax accountants, has grown by more than 30 per cent. in the last three years. More tellingly, despite computerisation and companies' now being unpaid tax collectors, it costs £6 billion a year to run the Inland Revenue and the Benefits Agency. In 1950–51, when we did not have computers and companies were not unpaid tax collectors, it cost less than £1 billion in today's money to run the Inland Revenue and the equivalent of the Benefits Agency.
Things continue to get worse. Last year's Finance Act was the longest ever. Even before this Budget, a bewildering array of different rates, credits, tapers, allowances, rebates, reliefs, means tests and adjustments led us to a point at which even those with a fair degree of financial knowledge have not a clue about the true extent of their tax liabilities. An estimated 1 million people failed to return their self-assessment forms by the 31 January deadline. Because of the complexity and the weight of bureaucracy, there is clear evidence that those who are most in nee d are not receiving the help that they urgently require. Here I return to the point I made previously to the hon. Member for Stafford.
Government figures show that, although 750,000 pensioners inquired about their minimum income guarantee entitlement, only 62,000 entitled non-recipients made a successful claim. Additionally, only 2.9 million children's tax credit forms had been returned by February 2001. Consequently, 2.1 million eligible families have not applied for the tax credit. Moreover, although Ministers have repeatedly claimed that 1.5 million families would receive the working families tax credit, Department of Social Security figures show that, currently, it is going to only 1.1 million.
That situation is not right: it is the most needy who are being hurt. Yet it is a direct and unavoidable consequence of a labyrinthine tax system. It was wrong that many amendments to last year's Finance Bill became law without time for scrutiny. It is of no benefit to the nation's long-term prosperity that the cost to business of red tape and taxes introduced since May 1997 is £32.3 billion. Nor is it in anyone's interest to stifle the growth of small and micro-businesses. Yet figures from the Institute of Chartered Accountants show that, for micro-businesses, the average cost per business of implementing new legislation increased from £1,700 in 1999 to £3,600, in 2000. For small businesses, the average cost per business increased from £4,700, in 1999, to more than £8,000, in 2000.
I therefore hope that, whatever our political perspectives, we can all agree that the tax system that we have is not the tax system that we want or need, and that no amount of tinkering will remedy it. Consequently, I am drawn to the cot elusion that radical reform of the tax and benefit system is necessary. However, before we can undertake such reform, we shall have to define our objectives.
I suggest that the first and over-arching objective of any tax system is that it is simple and transparent. Such a tax system is cleary preferable to a complex and opaque 367 one. A tax system should be easy to understand. Individuals with normal numerical skills should be able, roughly and quickly, to calculate their tax bills and to make an informed decision about the effect on them of each party's fiscal policy. I also believe that entrepreneurs and companies, especially small and micro-businesses, should not have to waste considerable time and money in administering their tax and regulator affairs. I should also think that it is clearly desirable that the transition between the tax and benefit system should be seamless and promote economic activity.
More contentiously, I believe that wealth and job creators should make their expansion or diversification plans solely on the basis of business factors. Their decisions should not be skewed by tax considerations. I would hope that we can all agree that our tax system should attract inward investment. One thing that we know about large international companies that, increasingly, they are basing themselves—and paying the majority of their taxes—in the most tax and regulation-friendly environment. Therefore, our tax regime should encourage multinational companies and individuals with skills that are easily portable to base themselves here.
The consequence of the IR35 legislation was that thousands of our brightest information technology entrepreneurs moved to countries where their efforts are better rewarded. Last year's row about so-called mixer taxes showed just how quickly multinationals can rework their investment strategy.
The final objective of our tax system should be to make tax avoidance unnecessary and tax evasion easier to detect and not worth the risk. The more complex and burdensome the tax regime, the more people will avoid or evade tax. Each year, from the home owner who pays a workman in cash to large-scale international smuggling, billions of pounds worth of potential revenue is lost.
Today, my hon. Friend the Member for East Londonderry (Mr. Ross) rightly raised the issue of tobacco smuggling. The Treasury itself estimates that, between 1997 and 1999, it lost £5 billion of revenue because of smuggled tobacco products. The Treasury's forecast total, just for 2000, is £4 billion. The size of the black economy has been estimated at between 7 and 10 per cent. of recorded GDP. In money terms, that is between £66.5 billion and £95 billion. It represents an annual loss to the Treasury of between £25 billion and £35.5 billion.
So much for the deficiencies of what we have and the principles that I believe should define what we need. The question that follows is whether we can construct a system of taxation and benefits that fulfils those objectives. I believe that we not only can but must build such a system. I suggest that a flat-rate tax on income, sales and businesses is one way of constructing that system.
On personal taxation, I would argue for the abolition of all income tax allowances and the imposition of a single tax rate on all forms of income. I believe that we should aim for a flat rate of tax of 10p. All other taxes on income and savings, including inheritance tax and capital gains tax, should be abolished.
I asked the Library to compute the revenue effects of moving to such a system. Imposition of a flat 10p tax rate on all income would produce a revenue gain for the Treasury of approximately £9.6 billion per annum, which could be used to reduce national inst rance contributions. 368 In time, administrative savings, reduction in the black economy and increased revenue flow may result in the elimination of NICs.
For indirect taxes, we should restructure the current VAT system to charge one universal rate. Again, the Library estimates that a flat 10 per cent. rate on all goods and services would be revenue neutral. However, the behavioural changes that would flow from a flat-rate tax would mean that the figure could be substantially lower—or, as I would prefer, that the extra revenue could be used to reduce excise duties.
The third and final tranche of these tax-simplification proposals is for companies. We should abolish all capital allowances and different rates of corporation tax and reliefs and establish a single, flat rate of corporation tax, which again should be set at 10 per cent. Unlike the two earlier proposals, this would lead to an initial loss of revenue of around £6 billion, but I believe that the economic fillip that would follow from such a simplification—and from the reduction in the overall tax burden—would mean that we could set a 10 per cent. rate with no net loss to long-term Treasury revenues.
However, it is clear that these figures have been calculated on the basis of a static snapshot of current revenues from current economic behaviour. I am convinced that if we simplified the tax system we would increase the revenues available to Government and thus be able to lower the rates still further.
Reducing the tax and benefit system administration costs by £5 billion, and cutting the black economy by £35 billion, would produce £40 billion. This additional money could reduce significantly, without impact on spending plans, the projected tax receipts for the current year of £150 billion from income tax and corporation tax and the £100 billion from VAT and other Customs and Excise duties.
The gains, however, would not stop there. The fact that businesses would not be wasting so much of their time, strategy and resources on tax concerns would produce a boost to our economy and attract inward investment. That, in turn, would generate extra tax revenues. Moreover, a reduction in Customs and Excise duties would add another revenue gain when the incentive for legally or illegally buying alcohol, tobacco and even fuel products abroad was reduced.
§ Mr. Bercow
I have no desire to distract attention from the agenda of big-ticket items on which my hon. Friend is rightly focusing his attention, but would he agree that a modest additional point might be that increasing public information about the taxes that we pay would act as an incentive for their simplification and reduction by the Government of the day?
§ Mr. Sayeed
I understand what my hon. Friend says, but the system is so complex that I doubt that we could persuade many electors or constituents to read the detail necessary to understand the range of taxes that are levied these days, let alone the new taxes added to them. I believe that we must go for root-and-branch surgery of the tax system, for the reasons that I have suggested.
There is clear evidence that a reduction in tax rates leads to greater tax revenues for the Treasury. That effect is called the Laffer curve effect, and it happened in this 369 Country, the United States and New Zealand when the top rates of taxation were substantially reduced during the 1980s.
My proposals would clearly create winners and losers. Winners would not complain, so we would not have to worry about them, but we would have to worry about the losers. Unless ameliorating action were taken, those at the lower end of the income scale—who either pay very little tax or no tax at all—would face a significant reduction in purchasing power. However, I believe that we also need to simplify the benefits system radically. We should do so in a way that would have the overall effect of making nobody worse off than under the current system, but would also ensure the improved take-up of benefits.
My initial thoughts—and I stress that they are initial thoughts—are that we should replace all current social security benefits and state pensions. The state would then pay to each household receiving benefit a sum of money that ensured that the poorest families did not lose out because of the increased income and sales taxes that they would be liable to pay under a flat-rate tax proposal.
That payment would be tapered. It would start from a point that equals the purchasing power received from the current benefit. The next point is somewhat complicated—it is easier to draw it out on a graph than to describe it in words, but I will try. The payment would end at a "break even" point, at which losses from a flat-rate tax on currently untaxed earnings and spending equal the gains from a lower tax on already taxed earnings and spending. I assure right hon. and hon. Members that if they draw that graph, they will see that it provides a taper that gives the incentive for people to climb out of poverty.
§ Mr. David Taylor (North-West Leicestershire)
I am fascinated by the hon. Gentleman's analysis. Will he acknowledge that the introduction of a taper would create bureaucracy and difficulties not unlike those associated with the present, relatively progressive, forms of taxation in the income tax sector of the economy? Is the hon. Gentleman flagging up his first Budget in the Administration led by the hon. Member for Buckingham (Mr. Bercow) in about 2025 or 2030?
§ Mr. Sayeed
I am rather too old even to contemplate taking part in my hon. Friend's first Administration.
The hon. Gentleman has got it wrong. The proposal would reduce bureaucracy. I suggest that he gets a piece of graph paper, takes some figures and works it out—that will make my point easier to see. Clearly, bureaucracy would still exist but there would be less of it and it would be less complicated. We would not be in our current position, in which 5 million families are eligible for children's tax credit but only 2.9 million take it up.
Although the exact level of payments would be a political decision, such a transparent system would unlock wasted and uncollected resources. Administration costs would be cut and the annual social security fraud bill of £7 billion a year would also be reduced.
I do not underestimate the enormity of the task of devising or moving to a new system. However, I firmly believe that we cannot afford to lose sight of the huge opportunities that such a radical shift would offer and, 370 most importantly of all, the threats to the United Kingdom's long-term prosperity that may arise if we do not make such a move.
Let me conclude with a quotation from Adam Smith:Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.I commend to the a ancellor the words of his compatriot.
§ Mr. Derek Twigg (Halton)
There has been some lamentable opposition to the Budget, not least from the Leader of the Opposition. We have seen what a mess the Conservative party is. The conference at the weekend set the style and showed the difference that exists between the two parties. That was confirmed today—the Conservative party wants to be a tax-cutting party for the rich, whereas we want prosperity and stability and to ensure that public services are invested in and developed.
This is a Budget for stability—we can see that in the investment in public services. It is also a Budget for families. Importantly, it is a redistributive Budget. "Redistribution" is a word that we should use more. The Budget will contribute to the continuation of the redistribution for which the Government have been responsible over the past few years.
The Budget is a further attack on poverty, of which there is a great deal in areas such as Halton. Many families suffered for many years under the Tory Government. We are at last seeing money going to the poorest, who will also receive help in terms of jobs and education.
It is clear that the Conservatives do not have a thought-out policy. Today, The Sun published an interesting editorial stating:We fear shadow chancellor Michael Portillo's economics do not stack up, however. First he scraps plans to guarantee lower taxes. Then he says his is the party of lower taxes…Then he promises more on schools, more camps for asylum seekers and more on hospitals.That sums up the Conservative party; it does not have a clue about running the economy or about paying for its so-called tax cuts. The Conservatives would be able to find that money only from education, health and other public services.
The Sun also discusses the issue of giving the country back to the people. It states:No matter what Hague says, he was allowing his new speechwriter to flirt with extremism.We have come to something when even The Sun says that the Conservative party is extreme.
Today's Budget will set the scene for the next few years. People will see that it will benefit them and improve their lives. It is clear that people do not want the Tories to get their hands on public services—they know what would happen.
Today, my right hon. Friend the Chancellor announced that the rate of inflation is the lowest since 1963. We have the lowest mortgage rates for some time. My right hon. Friend said that, between 1979 and 1997, the average mortgage rate was at out 11 per cent., but that it is 6.3 per cent. at present. That figure is important. During the late 1980s and the early 1990s, people were paying 371 tremendous mortgage rates—for many ordinary families that meant an extra £200 or £300 a month from their earnings. The rates have come down considerably, which will help and benefit families. We shall reap that benefit at election time.
Inflation is down. It is important that the Chancellor set the figure for next year at about 2.5 per cent. If the inflation rate is too low, the danger is that interest rates may be affected. I do not want interest rates to stay as they are or to rise; I want them to come down so that they benefit manufacturing industry in my area.
I especially want to refer to the Chancellor's important announcements about the regions and about help for the older industrial areas in the cities. Runcorn has a long-established chemical industry; it is very much an industrial area. The measures on tax and the help for regeneration are most welcome.
I welcome the greater flexibility in the powers of regional development agencies. That is clearly needed, because the Treasury held the reins of the RDAs too tightly. That flexibility will ensure greater investment and prosperity in the regions, and move jobs will result. However, more can and will be done to ensure such investment. Regions such as the north-west must receive a bigger slice of the cake. London and the south-east are overheating—there are jobs by the thousand and prosperity is growing much faster than elsewhere. We need that regeneration.
The Chancellor mentioned City institutions. It is time that they looked beyond London mid the south-east to ensure that investment is made in the regions. Yesterday, a report on banks noted that they do not appear to support small business start-ups or to help existing businesses to continue and to avoid bankruptcy. It is important to tackle the way that banks support business development.
I welcome the Chancellor's comments and the announcements he made on the regional agenda and about regeneration. That is especially important. I welcome the extra help for youth unemployment, especially for those young people who have difficulties in getting work because of social problems, drug problems and so on. In areas such as mine, where there is a large drug problem, the extra resources announced by the Chancellor can be used to deal with that situation. Young people can get back into the labour market only if they receive support and specialist advice on a one-to-one basis. Again, it is a Labour Government who are delivering that.
I am delighted that the Chancellor is doing more for lone parents. My constituency has a high ratio of lone-parent families, and it is good to see that my right hon. Friend is delivering for then. On the working families tax credit and the children's tax credit, I agree with my right hon. Friend that we must ensure that money gets to the families who need it most. Of course, most pressure is put on family earnings and expenditure when the children are younger, so it is right that he is targeting those families. I am especially pleased with the increases that he has mentioned today, because I reckon that, on a rough estimate, they will benefit more than 50 per cent. of the families in my constituency. That is a phenomenal figure. Thousands of families will receive extra resources, helping parents and their children. It is clear that this is a Budget for the family—we are seeing that investment.
372 I welcome what my right hon. Friend said about cars and the fact that more cars, especially new ones, will qualify for the reduced rate of vehicle excise duty. That will be most welcome for people in my constituency.
I want briefly to return to the children's tax credit. We can help families in many ways, but there is no perfect way to do so. There have been large increases in child benefit, but the children's tax credit will be especially helpful. I hope that it will be implemented as soon as possible and that it will run smoothly.
I welcome the point made today on drugs. As I have said, my constituency has a particularly difficult drug problem. There may be several reasons for that problem, but it causes crime, nuisance and concern to my constituents. It is not uncommon or irregular for constituents to visit me to complain about drug dealing, its effects and the people who tear into the houses where drugs are being sold. It is sometimes difficult for the resources to be put in place, but they clearly have an important part to play in attacking that problem. I am sure that my constituents will welcome the fact that that is happening. I am pleased that the money will go directly to the crime partnerships and police commanders in the area. That will certainly produce a more co-ordinated approach and more resources will be put into tackling the drug problem in areas such as mine. I also welcome that part of the Budget.
We have talked a great deal about savings. I asked the Library to produce a document on savings. Even with TESSAs—tax-exempt special savings accounts—new savings did not increase massively under the Conservatives. Often, with tax benefits and ways of earning better rates of return, people who tend to save anyway put their money into such schemes. I am not sure whether, in recent years, there has been a significant amount of savings. The drop in savings has gone on for a considerable time. There is no easy answer to that problem, but it would be silly to suggest that it is any worse under this Government; it is a social issue. People want to save, but they need an incentive, and my right hon. Friend has dealt with that in his Budget statement.
The Chancellor announced new expenditure for schools and hospitals. Those specific areas mark the dividing line between Labour and Conservative Members. He announced massive extra expenditure on hospitals, especially for acute services, which will be most welcome to my constituents. It is interesting that the Labour Government want to invest in and improve the health service so that it provides a better service, but the Conservative party wants to privatise the health service.
As we heard earlier, some Conservative Members think that they must go some way down the privatisation route. The leader of the Conservative party, the shadow Chancellor and the shadow health spokesman talk about extending private insurance and giving people incentives, but they do not come out and say that they want a more privatised health service, with less public provision. That is what Conservatives Members want, given the way in which they react when they talk about the issue. We all know that the poorest, the least well-off, will suffer badly as a result. The Tories are actually saying that they are abandoning any hope of providing a publicly funded health service that is free at the point of use. The electorate will not wear that; they want a party that is committed to investing in and providing a quality service, ensuring that people get the health care that they deserve.
373 It is no use pretending that changes will happen overnight, but some people might have thought that they would take place quickly. However, the investment is now being made and we are beginning to see the results. We need more nurses, so I welcome my right hon. Friend the Chancellor's decision to put more money into recruitment. It takes about three years to train nurses, so we shall see the benefits of that decision in a year or two.
The dividing line is clear: one either wants a publicly funded health service with the Labour party or a service that will gradually be privatised by stealth under the Conservatives. They should be open and honest about their policy and say exactly what they want to do. They should not hide behind their current remarks on the extension of private health insurance.
I welcome the fact that money will go directly to schools. When the money comes from bureaucracies, such as Whitehall or councils, money can be lost on the costs of administration. Schools want to use the money in whatever way they wish. They should be able to decide whether to spend it on new teachers, books, new equipment or investment in the school's infrastructure, which are all crucial.
I have spoken to head teachers recently and they have told me that never has so much money come through to the education service as has happened in the past year or two. They have been able to spend that money and, in my area, some of it has gone on two new classrooms. In addition, the building of a brand new primary school, for which we have waited 11 years, is just about to finish. It has been built under a Labour Government.
Education standards have risen. In the primary sector, Halton has had some of the best improvements in the key stage 2 results, whereas 40 or 50 per cent. of children were written off under the Conservatives. The Labour Government are willing to invest in education and to develop the service.
What is the Conservatives' panacea? They merely want to reintroduce grammar schools as a means of dealing with educational standards. However, we all know that standards are raised by having resources, quality teachers and quality leadership in schools. It is pleasing that my right hon. Friend the Chancellor is devoting more money to the recruitment of teachers. Anyone who has spoken to head teachers will know that recruitment has been a problem.
§ Mr. David Taylor
I acknowledge the warm welcome that will be given to the sums that will go directly to each school in the country. However, does my hon. Friend agree with my hon. Friend the Member for Bury, North (Mr. Chaytor), who asked my right hon. Friend the Prime Minister about the urgent need to tackle the funding formula, which is so capricious in the way in which it distributes resources? My county of Leicestershire is at the bottom of the league table under the standard spending assessment for primary and secondary school pupils. Should not the formula be a priority for the incoming Administration, whom we hope will be elected on 3 May, 7 June or whenever it might be?
§ Mr. Twigg
My hon. Friend makes an important point. However, to focus on my backyard, Halton schools have 374 done particularly well under the education SSA funding formula. In fact, people like me predicted that they would benefit when the borough broke away from Cheshire and became a unitary authority. Our predictions were borne out in a parliamentary answer that I received only last week, which shows that expenditure per head on the pre-school, primary and secondary sectors is much better than in Cheshire. The Government are ensuring that resources go to areas such as mine, which is among the top 20 most deprived boroughs in England and Wales. For years, we were neglected by both the Tory Government and the county council, but we are now seeing the benefit of the extra resources.
However, I understand my hon. Friend's point. We had a similar problem with our SSA for highways. Changes resulted in the council losing quite a lot of money. Clearly, there is a case for a fairer and better targeted SSA formula and the Government are committed to considering that. W e should not forget that the formula was used under the Conservative Government, so it ill behoves Conservatives Members to attack us on that issue. We cannot do everything at once, but the Government are committed to considering the issue. There are problems, but good results have been achieved under the Government's policy.
To return to the issue of schools, I want to comment on my right hon. Friend the Chancellor's policy for better skills. People will have better skills only if they receive a good primary and secondary education. They also need to receive high-quality post-16 further education. I am pleased that more resources will go into further education. That will improve the skills and abilities of people so that they go into the work force and attract the industries that we need into areas such as mine. It is important to put education, skills and investment together.
Manufacturing has been mentioned. The regional development agencies and the improvements to the tax system will help businesses, especially small businesses. Ineos took over ICI's operations in Runcorn and employs more than 2,000 people. Last week, it announced 450 job losses. That is one of a number of similar announcements that have been made over the past few years in the manufacturing setter of my constituency. It is clear that we need a manufacturing industry because the skills that it provides are important for the nation's economic wealth. However, there is n0t much that a company can do on its own to provide the climate for a thriving manufacturing industry, because of the global markets and so on. It is important to keep interest rates low. There is a problem with the exchange rate with the euro and the ability of, for example, the chemical industry, which is a commodity-based industry, to sell its goods abroad.
One of the biggest problems at the Runcorn site is that ICI did not invest in the industry at Daresbury for 10 years or more. The Government have to address the lack of investment in research and development, which my right hon. Friend the Chancellor mentioned. Many of our companies have not invested in new machinery, either because the banks are too short-sighted to lend or because the management is too short-sighted. British management, certainly in our top Industries, is lacking. Although there are many good people, the ability and talent of management needs to improve. We must register that. The bloke or woman on the shop floor is, of course, part of an industry's productivity, but we also need good leadership 375 and investment. Management needs to bring about productivity changes by investing and making their companies more efficient.
Last year, the Government decided not to locate the synchrotron at Daresbury. I am pleased that last week they agreed to make a large investment of possibly £180 million to secure the excellent work force of scientists, technicians and so on at Daresbury. That will become an important beacon for the north-west, especially because of the way in which the Government intend to fund it. It could involve the regional development agency, the university and others. Instead of just sustaining jobs, it could create thousands of new ones because the RDA wants to develop a science or technology park there. That is a great development and is a sign that the Government have listened to what has been a long campaign.
I want to congratulate my right I on. Friend on the Budget. He has again got it right. It is not perfect, but it hits the right buttons. It is important that we get public services right. It is not easy to introduce change overnight, but it takes a Labour Government to deliver that. People want security for their families, security of employment, security against crime and a secure environment. The Government want to provide that. It tiles investment and good management, and we must bring that about. I am pleased to support the Budget tonight. It clearly puts dividing lines between us and the Tory party.
§ Mr. David Heath (Somerton and Frome)
The hon. Member for Stafford (Mr. Kidney) took exception to the expression "the Chancellor's war chest", which Liberal Democrat Members have often used. The war chest is a reality; it has been boasted about by the Chancellor today and by other Ministers in recent weeks. We can disagree about its provenance—whether it is due to good management, good fortune or just parsimony—but it undoubtedly exists. In this Budget the, Chancellor had at his disposal a substantial amount of money to do whatever he felt was right.
Although it is difficult to judge a Budget on first hearing, and often a few days must elapse before everyone understands its complexities, many people will find this Budget a rather dull affair. There were certainly very few surprises in it. This morning's Financial Times listed almost every one of the Chancellor's proposals in black and pink.
§ Mr. Kidney
The right hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) asked earlier for three more spending commitments: money for the consequences of foot and mouth, money to fund the ambition of tuition fees for students and more money for long-term care. His argument was "spend, spend, spend". Has the hon. Gentleman read Viv Nicholson's biography, called "spend, spend, spend"? She won a lot of money on the pools, spent the lot and went broke. Should we expect a Liberal Democrat Government to feel as if they had won the lottery and to spend, spend, spend until the country went broke?
§ Mr. Heath
I say in the gentlest of ways that that intervention was not worthy of the hon. Gentleman. He was at pains to advise the House of the top rate of tax under various Labour Administrations. He did not get as far as the Administration led by Baroness Thatcher, but 376 had he done so he might have pointed out that the top rate of tax then was 50 per cent. He might then have told us whether he thought that an excessive rate for those earning over £100,000. I believe that it is not excessive, and it is entirely appropriate that the revenue raised from a top rate for those earning over £100,000 should be spent on dealing with deficiencies in our public services. I turn to that subject now.
We are used to hearing recurrent announcements of Government expenditure. That is to say that the announcement is made, repeated a few months later by the Department concerned, repeated yet again in the pre-Budget report and then again in the Budget. Eventually, a few years later, when everybody has forgotten it, it appears as new money. The Government have excelled at that practice. We had not previously witnessed to the same extent a practice that was evident today—a restatement of money that has already been spent. I refer to the continuing use of underspends in previous Budgets—so-called committed, new money at the time—for a different purpose in the following Budget, as if the Chancellor were plucking a rabbit from a hat, when he has merely failed to meet the commitment that he made the previous year. That unfortunate practice is to be regretted.
We assume that this is a pre-election Budget, perhaps intended to reassure the readers of the Daily Mail or to encourage others to swim into the new Labour net. When we analyse it, the only conclusion that we can draw is that there is a huge disparity between the tax-cutting measures and the so-called additional expenditure. A rough analysis shows that one figure is six times the other. That shows the Chancellor's priorities, if not for ever then at least for the moment, with electoral purposes in mind.
As my right hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy) said, our criticism of the Government, and that levelled by many people in the country, is that it shows a poverty of ambition. I think that Nye Bevan's phrase "a poverty of aspiration" is more apt when one considers what could be achieved with this uniquely advantageous financial and economic situation. We could put right some of the problems in the public services which have been allowed to decay for so long. The indictment is that, four years into this Government, class sizes at the top end of primary schools and in secondary schools are not smaller, but larger, and that is not what a Labour Government were elected to achieve. We still have fewer police officers on our streets than there were in 1997. A Labour Government were not elected for that, either. We still have people waiting yet longer for their hospital operations. We still have a transport system that is worse than appalling, and is in complete disintegration.
Problems have ensued as a result of adopting the Conservative Government's spending plans. The right hon. and learned Member for Rushcliffe (Mr. Clarke) described them as "eye-wateringly tight", yet the incoming Labour Government not only adopted them but underspent them. They are now running hard to catch up with what Labour promised before and during the election. The Government have clearly failed to deliver since the election.
That is why we have failed to make good. There are problems with student tuition fees in England, but progress has been made in Scotland. We have failed to come to terms with the needs of long-term care in 377 England, but again progress has been made in Scotland. We have failed to give pensioners the sort of deal that they wished for.
The hon. Member for Stafford will perhaps give a warmer welcome to my bringing to the attention of the House yet again another problem that is associated with the Government's expenditure plans, which is the uneven distribution of the funds that have been made available. Some areas have not seen the great benefit, or certainly not to an equal extent, of increased education or health spending over the past year. Much of that is to do with wretched formulae that are biased against some areas compared with others.
The hon. Gentleman knows that I agree entirely with what he has to say on the issue. We have crusaded on an entitlement for children, irrespective of where they live. He mentioned disparities between one shire county and another. I go further and draw attention to the disparity between children in Somerset—my children, attending a local education authority school—and a child who is being educated, as are the Prime Minister's children, at a publicly funded school in Hillingdon, where funding is £1,500 per child per year more as a result of Government formulae. That cannot be right.
That sort of disparity is extraordinary and wrong. It creates many other distortions, because if the local authority has decency and a commitment to education, it will move funds from other areas of spending to ensure that its schools are well provided for. That means that road maintenance will be reduced, spending on social services reduced or the council tax increased. Council tax is increasing disproportionately because of the shift from direct taxation—that is, the progressive taxation that is income tax—to the much less progressive taxation that is council tax. That shift took place under the previous Government and it continues to take place under the present Government.
It is time the Government got to grips with the basic problems of area cost adjustment and standard spending assessment and the iniquities that flow from them. It is not good enough to pretend that eventually there will be consensus among local authorities on the road ahead. Of course there will not be. Rightly, every local authority will be arguing for the needs of its own areas and will get the best possible deal for children and council tax payers in those areas.
It is impossible to reach consensus. It is important that the Government accept that there is an injustice, and deal with it. One approach, which the Government are using, is the direct funding of schools. That has merit because at least it gets some money into the schools that need it. There are also demerits. One of the difficulties is a threshold system. There are sudden, quantum shifts in funding. A family left a village in my constituency, and a school that had always had 102 pupils on its roll found overnight that it had only 99. As a result, it lost substantial moneys through the Government's distribution formula.
§ Mr. David Taylor
I certainly endorse the hon. Gentleman's point. It is not beyond the wit of civil servants in the Department for Education and Employment to create a model that will provide a per capita sum of direct payment for each child on the roll. 378 One would think that they were unaware of the existence of even simple spreadsheets to allocate the sums that the Chancellor has available to him. I agree that the situation is grossly inequitable, especially for small schools that may be one pupil short of the band width.
§ Mr. Heath
I am grateful to the hon. Gentleman. He and I are as one on this; we represent broadly similar areas and know the true state of affairs in them.
Finally on education, it is rich to hear the Chancellor talk again about the paramount need to recruit more teachers. Of course there is a desperate need to recruit more teachers; there are fewer applications now than in 1997, and there are 11,000 empty places. However, the right incentives are needed, and teachers do not believe that the Government have yet found the incentives to encourage people it to the teaching profession. It is a little tardy of the Government to wait until there are 11,000 vacancies before starting to address a problem that people have identified for several years.
Moving on to small businesses, I congratulate the Chancellor on introducing measures of advantage to them in the Budget. However, measures still need to be taken, the most important which, according to businesses with which I have dealings in my constituency, especially retail businesses, concerns the uniform business rate. That monstrous imposition by the previous Government has continued virtually unchanged under this Government; it actively militates against small shopkeepers and benefits large supermarkets the outskirts of town. It desperately needs reform or, better still, replacement by a fairer system of business taxation; at least its effects could be mitigated in the short term if the Treasury felt it appropriate to use funds to produce an allowances system for businesses with a small turnover.
The Government do not seem to have engaged with that issue—I wish that they would. I wish that they would also engage with the cost to small businesses of administering an increasingly complicated tax system. A lot of personal taxation measures have implications for small businesses and the way in which they operate. A lot more should be done by civil servants. rather than by people who are trying to run a business and administer the Government's tax system at the same time: that cannot be a sensible way to proceed.
I am worried that a Government who proclaim that the tax system needs to be simplified are constantly complicating it. There was a stretch in the Chancellor's address when I thought to myself, "Every single mother who is trying to work will need a resident chartered accountant to find her way through a system that is being devised to provide her with support." I urge the Chancellor to look ,it that again.
I shall briefly mention a couple of specific areas. First, the aggregates levy is of great importance to my constituency, which is one of the country's primary producers of limestone aggregates. Everyone accepts that there are arguments both way on that levy. However, there is a consensus that a crude levy which does not reward companies that have made the effort to put in infrastructure to do the right environmental thing, as compared with those who have done no such thing, is a bad environmental instrument. Unfortunately, that is what we have at the moment. Prolonged discussions between the Department of the Environment, Transport and the 379 Regions, the Treasury and the quarry companies have not yet reached any conclusion. I regret the fact that the levy is to be introduced and that a rebate system to encourage good environmental practice is still wishful thinking. That is however a priority if the levy is to work as we hope that it will.
With regard to rural areas more broadly, I notice that the pesticides tax has still not been removed from the agenda, despite the firmly expressed views of the Minister of Agriculture in many forums, and of the Prime Minister on at least one occasion. The rubric in the documents before us suggests that matters are proceeding on a voluntary basis, with the threat of an enforced pesticides tax on the industry. That could not happen at a less opportune time for agriculture.
There is a growing view that agrimonetary compensation is the Government's response to foot and mouth. It is not. Agrimonetary compcnsation is intended to deal with the difficulties of currency exchange and to provide farmers with the sum that they should have received in the first place. It is not an adequate substitute for doing what needs to be done to deal with the foot and mouth epidemic.
Of course, I welcome the fact that agrimonetary compensation has been drawn down. Of course, too, I recognise the difficulties caused by the Fontainebleau rebate and the way in which it operates; but agrimonetary compensation is not a substitute for other Treasury action, in conjunction with the Ministry of Agriculture, Fisheries and Food, nor does it answer the question of what is to happen next year, when there will be no agrimonetary compensation mechanism and nothing to replace it.
I know that other hon. Members wish to speak and I do not want to take their time. I conclude by quoting paragraph 5.87 of the Budget document, which is headed "Strengthening rural communities" and which states:The Government's vision for the countryside, as set out in the Rural White Paper in November 2000 is of thriving rural communities with access to high quality public services, a diverse rural economy providing high and sustainable levels of employment, an enhanced and sustainable environment which all can enjoy, and a countryside which can shape its own future with its voice heard by Government at all levels.We could all sign up to that aspiration, but the reality in Somerset and the south-west generally is far from that. I should like to have seen genuine measures in the Budget to deal with many of the problems that rural areas face. I did not find such measures in the Chancellor's statement. In that respect, if in no other, the Budget has failed the people of rural Britain.
§ Mr. Harry Barnes (North -East Derbyshire)
Economists make a fairly straightforward distinction between macro-economics and micro-economics and the problems with which they deal. A Budget deals with the macro issues, but we all analyse its micro-economic implications for our constituencies.
The hon. Member for Mid-Bedfordshire (Mr. Sayeed) made a purely macro-economic speech. He spoke of what he wanted from a Budget and about the developments that would take place. It was a strange speech, as it seemed to start from a socialist position, in which the hon. Gentleman argued for universal benefits, but as the speech developed, other peculiar ideas appeared in it, and by the 380 end it sounded poujadist, with tax rates all at 10 per cent. It was difficult to see where the revenue would come from for the provision of universal benefits.
My speech will focus on the other end of the spectrum. It will be a micro-economic speech about my constituency and its problems, and how they could be affected by one particular aspect of the Budget. Before Christmas, I spoke at length in the House about a problem at the southern end of my constituency, with the threatened closure of Biwater pipe works. I wanted the Department of Trade and Industry to refer the matter to the Competition Commission. I believed that we could make a case showing why the takeover that had led to the closure threat should not take place.
Despite the arguments that were advanced, the plant has now been closed and 700 jobs have gone. Many other jobs in scrapyards and community services have also been lost because of the closure. In Clay Cross, 8.5 per cent. of males were unemployed before the closure of Biwater. Since then, although one or two of those made redundant have found jobs, unemployment among men has risen to 15 per cent. That is a fairly reasonable estimate, as the people involved in scrapyards and other services connected with the plant are obviously not finding alternative employment.
As we could not save the plant, many people, including me, have had since the closure to turn our attention to the economic and social regeneration of the devastating situation that developed in the Clay Cross area. The Budget statement contained aspects that should be teased out, as they could have great relevance to the developments that are needed. My right hon. Friend the Chancellor said that throughout Britain, whether in new towns, traditional inner cities or former coal, textile and steel communities, the way forward for regeneration is to harness both new public and private investment and to introduce new fiscal incentives to extend the opportunities for enterprise from some of the country to all of it.
Obviously, such issues worry us very much. I shall not deal with all the points made by my right hon. Friend, but I want to mention his six-point programme, which involved policies such as community investment tax credits, development of empty flats above shops, reclamation of contaminated land and so on, all of which are relevant to Clay Cross. What are the parameters of the six points contained in the Budget speech? Does my area automatically qualify, and if we do not, why not? I believe that we have the strongest case imaginable for being included. My right hon. Friend the Secretary of State for Trade and Industry recognised at the Labour party conference the particular problems of the steel, coal and textile industries and others, and referred specifically to the problems that arose in the Clay Cross area because of Biwater.
That is why we need the matters to be fully tied together. The now derelict plant was established by George Stephenson in 1837. The site is contaminated and many difficulties are associated with it, but we want to know what will happen to it. Although it was taken over and then quickly closed by Saint-Gobain, a multinational company, Biwater still owns the land and buildings.
Adrian White is the major mover in this respect, but we do not know about his plans for the area. Indeed, I know of no Government Department or local government department that knows about them. Speculation is rife and 381 people are worried that the site will be used for an environmentally unacceptable purpose. They are anxious about the possibility that it will be used for incinerators or other disposal facilities. When nothing is said, the rumour develops and as it is not contradicted, we have reason to begin to worry that that might be on the cards.
We do not want more developments such as those that have taken place in our area in the past, which would harm any future work force and the local communities. For example, before I became a Member of Parliament in 1987, the Vinatex plant at Staveley in my constituency was closed. The Vinatex research group has now been established. Serious medical problems have arisen from the plastics that Vinatex produced.
The Pollution Prevention and Control Act 1999 codifies many European Union measures, but it was also influenced by other considerations, such as a visit by the Minister for the Environment to Killamarsh, another problem area in my constituency, where two escapes of acid gas had occurred. He said that powers would be made available under the 1999 Act to make directions. Therefore, if an application is made to use the Biwater site for proposals that we perceive as environmentally dangerous, there are more measures nowadays whereby we can tackle the problem. Perhaps the position could be improved further. Some of the information that has become available through research by De Montfort university into Vinatex might help to strengthen the health and safety aspects of the legislation in future.
We must be constantly on our guard against developments being foisted upon us, and the attitude "jobs at any price", even when they could be dangerous. We want growth, and co-ordinated action by the Government to provide the necessary improvements to prosperity in an area that has been shattered by a specific development.
Some aspects of the Budget will affect Clay Cross and the surrounding areas because of their general impact throughout the country. For example, we will get our share of the money for education and health. That will have some knock-on consequences. However, perhaps it is only in the long run that they will help such a deprived area. John Maynard Keynes said:In the long run we are all dead.Many capitalists adopted that attitude to the operation of economic structures. Co-ordinated activity that brings together the different resources that begin to become available is important.
I cited the part of the Chancellor's speech that referred to new public-private investment and fiscal incentives. If I was running things, I would not necessarily propound and advocate such measures. I would press for public provision and funding, and the use of Government resources to achieve results. However, I live in the world as it is, and I am trying to fight for a large corner of my constituency that has been hammered. Public-private investment and incentive schemes will exist, and I want to ensure that we get our fair whack and are not overlooked.
Although there are many different schemes for which we can apply, sometimes in competition with other areas, we need to ensure that Government bodies, with local people, help to produce ideas for growth in the whole area. One particular body that does that is the Government office of the east midlands. Another body that is 382 responsible for co-ordination in Government—in addition to the Cabinet Office—is the Prime Minister's Office. There are connections to the Prime Minister's Office in relation to this matter, because we need to ensure that it is not only matters that have been in the pipeline for a while that are covered. For example, there are developments at Clay Cross, new business provisions at Coney Green and the Markham employment growth zone, from which there will he some feed-in. Clay Cross has assisted area status, which gives it access to regional selective assistance and enterprise grants.
However, it must be realised that wider problems affect the area of north-east Derbyshire. Its unemployment difficulties make it less easy to handle the situation, and that needs to be taken into account. Some special funding arrangements, and some central planning, need to be put in place to try to address our problems.
One such problem is an issue that other hon. Members have already mentioned: the problem of poor local government funding. In the North-East Derbyshire district and within Derbyshire county council area, ever since the Local Government Act 1988, which introduced the poll tax—the only element of that Act that was ever shifted was the change from the poll tax to the council tax—we have had ghastly funding provision in the county.
Funding has picked up recently, and there have been specific grants from the Department for Education and Employment and others in connection with education, but generally we have been at the bottom of the list for funding provision. Before the introduction of the 1988 Act, the schools in Derbyshire had the smallest class sizes in any shire county in England. By 1997, their classes were among the largest. That was the function of the formula that was being operated.
Two particular fiddles are involved. One is the area cost adjustment, which takes a great deal out of our money not only in terms of education but in other areas of funding. The effect was multiplied to cover other elements of provision in county council services. A lot of people in the county travel to work in neighbouring areas such as Chesterfield and Sheffield, and we lose massive amounts of money as a result I think that we are the third worst area in the country in that regard. According to something called the enhanced population figures, the daytime population figure is taken into account in an exaggerated way, rather than the resident population figure.
That problem will not be put right until the proposals in the Green Paper take effect—despite the pressures that have been brought bear—which could mean waiting another three years for it to be corrected. Account has to be taken in the meantime, therefore, of those who have suffered seriously over the years that the problem has existed.
We also suffer from having lost objective 2 funding, as we were near an area with objective 1 funding, which is pulling in provisions that we find it difficult to obtain. The fact that the Department of Trade and Industry did not get the position that was put to the European Union right must also be taken into account in the context of our funding provision. In certain parts of my constituency, we even do very badly in terms of lottery funding, although Killamarsh in the north has done slightly better. When the district council tries to put that right by appointing a lottery officer, it is hamstrung by not readily having the resources to run that kind of activity.
383 My constituency has specific difficulties, and the Budget contains an opening—apat from the general provisions from which everyone will benefit in the long run—for specific provision for area! that have suffered from bouts of loss of industry, particularly in manufacturing. I hope that our claims will be heard and fully considered, and that Ministers will elaborate on the measures that have been outlined briefly to us, so that we are fully involved. We need some central co-ordination to ensure that we get the type of provision required.
§ Mr. Peter Bottomley (Worthing, West)
Although Members on both sides of the Chamber hope that the hon. Member for North-East Derbyshire (Mr. Barnes) will have many other opportunities to address the House, it is right to pay tribute to the service that he has given to his constituents over the years. If I may, I shall add to his name that of his helper, Gary Kent, who, in many of the activities in which the hon. Gentleman has been involved, has contributed much for the public service that is offered through politics, whether in a party sense or otherwise.
As on other occasions, it was intresting to hear the hon. Gentleman speak about his constituency, and the House will be sympathetic over the Biwater closure. He talked positively about the need to recognise the resources within areas, which should not be taken for granted when people are considering what can be done through partnership arrangements, lottery funding or other activities, and he will agree that what appear to be less well-regarded areas containing less well-regarded people have provided, for example, thc founders of the co-operative movement, the trade unions and small businesses.
Such people also helped to create political parties and used the extension of the franchise to found mass political organisations. We ought to learn from our forefathers and, for that matter, our foremothers.
§ Mr. Bottomley
I am trying to be politically correct for the benefit of my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth).
On mass membership, the political parties probably have fewer members than they have had for a long time, although I suspect that the drop in membership of the new Labour party is even greater than that in the membership of the Conservative party.
I pay tribute to a point made by the hon. Member for Halton (Mr. Twigg), who was right to say that we need to bring the family perspective into our analysis of Budget measures and social and economic policy. That is the only nice thing that I shall say about the hon. Gentleman. He is not here, so I should not say that the rest of his speech was pretty snide and hardly worth listening to.
We must acknowledge the important point that, at times, people have family responsibilities, and I pay tribute to the Chancellor for recognising that. The right hon. Gentleman has been able to do so because he has taken advice, which I have offered after a number of Budget speeches over a number of years, that the Department of Social Security should not be involved in setting income support or benefit levels for children.
384 In the traditional system, under which the Secretary of State for Social Security is supposed to get involved in negotiations with the Chief Secretary and, thereafter, the Chancellor and probably the Prime Minister, the question can arise each year, "Do you seriously want flat rate increases in child benefit or would you prefer to get more of the available money to those below the poverty line?" The sensible answer each year is, apparently, "Help the poorest." However, if we help only the poorest, the value of child benefit may hold steady in absolute terms, one year against another, but it certainly will not rise in line with average earnings.
I am glad that the Chancellor has got rid of the fiction that the Secretary of State for Social Security in effect takes responsibility for the child benefit level. That responsibility has always, and properly, been in the hands of the Chancellor. This Chancellor has shown that to be the case and there have been significant increases, which matter. No one can claim that everyone in full-time work can earn enough to support a spouse and children. They cannot.
If ever we try to return to raising pay so that people can achieve that, we shall end up in an inflationary spiral and pensioners and those with children will be worse off. If we want to have any kind of equity in this country, we must ensure that those who look after children or who are past working age do not suffer as those of us of working age go on an illusory chase after money that is not there.
I shall refer briefly to the Chancellor giving himself a pat on the back about the level of public debt. He misleads himself, but not any Member who has bothered to study the figures, when he talks as though the previous Conservative Government did bad things with the national debt. They did not. In fact, during their 18 years in office, public debt as a proportion of gross national product roughly doubled in other European countries, rising from 37 per cent.—I think—to 74 per cent. In this country, meanwhile, it fell—depending on which years we choose as the starting and finishing points—from about 44 or 45 per cent. by about 10 per cent., to 41 per cent. or less.
The Chancellor cannot really claim credit for the first year in which he held his office, as he was carrying forward Conservative spending policies. Before his 24 stealth taxes and his 20 business stealth taxes were introduced, debt as a proportion of gross national product had dropped to 35, 36 or 37 per cent. If the right hon. Gentleman claims that national debt doubled under the Conservatives, he may be right if he is merely counting the number of pound notes, but in terms of gross national product, or gross domestic product—which is the only sensible comparison, even for someone as clever as the Chancellor—he is simply wrong, and he should stop saying things that are misleading. Indeed, I wish the whole Government would stop saying things that are misleading.
§ Mr. David Taylor
It is not clear to me whether the hon. Gentleman is about to commend or criticise the Chancellor's track record over the past four years, and his stated aim in relation to debt repayment over the next five years. Does he not agree that one of the strengths of the Chancellor's activities over the past four years has been his driving down of public debt, thus enabling interest payments to be diverted for more profitable and effective purposes?
§ Mr. Bottomley
Perhaps; but if the Chancellor continues to maintain that people must turn their pensions 385 savings into annuities, and if the repayment of Government debt means that their return from buying Government stock goes down, he will be kicking the pensioners yet again. We should remember that the biggest stealth tax introduced by the Chancellor was the £5,000 million—probably adding up to £20-odd billion over the lifetime of the Parliament—that he obtained by withdrawing dividend tax credit from pension funds and individuals. I do not think that the hon. Gentleman's intervention has helped him much.
The hon. Gentleman should look at table C23 on page 212 of the Red Book. He will see that in the last year of the last Labour Government public sector net debt was 47.3 per cent. of GDP, and that in the first year of the present Labour Government it was 39.6 per cent. That is a significant drop.
It is also worth noting that when the Chancellor and the Prime Minister make comparisons with the last Conservative Government, they are often unclear about whether they are referring to the period from 1979 onwards, when we had to sort out Labour's mess, or to the period following 1992 when, as we all remember, Labour was fortunate enough not to be elected. That enabled Labour to go into the 1997 election saying, "We are glad that you did not vote for us in 1992: we were wrong on virtually every significant policy". Labour paid the greatest possible tribute to its Conservative predecessors by adopting their spending plans during its first two years in office.
§ Dr. Lynne Jones (Birmingham, Selly Oak)
What does the hon. Gentleman consider to be the purpose of public debt? He will note that when a Conservative Government last had a similar debt ratio, public assets amounted to around £80 billion. They are now down to £17 billion. What is the purpose of public debt and public investment?
§ Mr. Bottomley
If the hon. Lady wants me to use the last 17 minutes of the debate to give a lecture in economics, I shall be happy to do so. I may be a third-rate economist, but I could certainly fill in 17 minutes. I think, however, that the Minister would prefer me not to do so.
Let me give another example of the Chancellor's not quite achieving what he was after. This is at the opposite end of the spectrum. It has been estimated that one cigarette in three smoked in this country carries no tax. The stealth tax on smoking—which does not feature much in Budgets—hurts lower socio-economic groups most, both because they tend to smoke more and because their incomes are lower: they are hit by a double whammy. The Chancellor increased the tax by £500 million a couple of times when he raised duty by more than the escalator.
I am not arguing for low taxation on tobacco. However, another consequence of very high taxation on tobacco is the type of e-mail that I saw today, which states:Hi, are you interested in making a saving of nearly 66 per cent. on your next purchase of cigarettes and handrolling tobacco? From only 17.50 Pounds per carton of 10 packs of 20 cigs each…Minimum order 3 cartons…delivery is fully guaranteed.It also lists three internet locations, which are in the Netherlands, Italy and Spain.
That e-mail is a good example of how excessive taxation can be counter-productive. I strongly support the conclusion that the Centre for Policy Studies reached in a 386 paper which it will publish in two weeks. The centre analyses the Chancellor's tax increases, including the ones that he does not deal with in his Budget statement and—I am sorry to say this in front of the Paymaster General—those that are not dealt with in the press notices that are made available to Members of Parliament.
As I said in an earlier point of order, officials serving Ministers may not have those press notices available now, but they should be available. If they are available, they should be provided to hon. Members. The Paymaster General said that, if we want them, they will be available later. I hope that, in future, everyone understands that we want them on the day of the Budget.
§ Dawn Primarolo
The hon. Gentleman made two points, the first of which was on internet cigarette sales. Although I am sure that he will already appreciate this, we should make it clear to everyone who hears or reads our proceedings that those purchases are liable to United Kingdom tax. Consequently, people will save nothing on such purchases—which work out to be more expensive than regular purchases.
Secondly, no Budget press releases are not available to hon. Members. Earlier, the hon. Gentleman asked for technical Budget notes. Customs and Excise has always made notes available on the day of the Budget, and the Inland Revenue has made those technical Budget notes—not press releases—available. As I said, if it will assist the House, I shall certainly ensure that they are in the Vote Office tomorrow morning, before we start our debate.
§ Mr. Bottomley
I am not absolutely sure that they are all technical notes. Some of them are called Budget notes and some are called Budget notices. I think that the hon. Lady may want to re-examine the expression that she has used. All I am saying to her, in the nicest possible way, is to make sure that they are in the House and in the Library and available to hon. Members. We are here to scrutinise such matters. The Government should stop treating the House with contempt. Hon. Members want to know what is going on.
The Chancellor of the Exchequer—who managed to hide IR35 and not draw any attention to it, although it has affected the United Kingdom's economic development—has shown that he cannot be trusted on these matters. Let us just put down what is gently called a marker and say, "Produce those documents in the House. Make them available to hon. Members." That is not a courtesy; Ministers should regard it as a requirement.
I pay tribute to the public servants, from many Departments, who must have worked very hard this year, as they have in previous years, in bringing together information, working through the options, discussing the options with Ministers and—as the Chancellor and other Ministers make decisions—presenting the measures in a coherent and sensible manner. If Ministers would like a suggestion on how life could be made slightly easier, it would be that they include an index in the Red Book. In the old days, it was far easier to find specific matters in the Red Book. Now, although it is more informative, it is not very easy to find specific information. I challenge any Labour Member, within two minutes, to find, for example, where the savings ratio is dealt with in the Red Book. To save time, I shall tell them that the information is on page 170.
387 A table on that page, however, contains a curious feature that I hope will not be repeated in future Red Books. It is headed "Percentage changes on previous year", and includes three items: household consumption, which lists percentage changes; real household disposable income, with percentage changes; and the savings ratio, which an accompanying note specifies as "level, per cent". Although that information has been provided, it might be missed by those who read the Red Book casually.
I also suspect that, although it might be embarrassing for the Chancellor, it would be better if the savings ratio could be dealt with separately, under I separate heading. The savings ratio does matter. A savings ratio of 3.35 per cent. is almost as low as that pertaining in the United States. I do not think that that is healthy. The Government inherited a savings ratio of about 10 or 11 per cent. Even if, in two or three years, it returns to more than 5 per cent., that would not be very comfortable.
Besides emphasising what my right hon. Friend the Leader of the Opposition said in response to the Budget announcement, I also wanted to state that the illustration of the children's tax credit does not lc-lake obvious sense to those who do not know much about it. If that credit is worth £520 a year, why does the press notice put the value at £5,200? It may be that 10 per cent of £5,200 is £520, but anyone reading the notice for the first time ought to be able to understand how one figure translates to the other.
The underlying point is that we must take into account the need of people of working age who are capable of working to be in work. I acknowledge that what happened in the final Parliament of the previous Government has continued under this Government, and that many more people on benefit who want to become taxpayers have been able to do so. To get work, they have overcome personal disabilities, or disabilities of location, or the disabilities associated with the changing industrial nature of their local environment. Most of them will have put in a great deal of effort to obtain work; I know very few people who want to remain on benefit.
We need to widen the gap between people on benefit and those who pay tax, so that thee can be a neutral position in between. However, that becomes more difficult when poverty is defined as being on benefit. Much of what the Chancellor calls uking people out of poverty means putting them on tax benefits rather than cash benefits. That is a rather odd use of language.
I have spoken about the needs of people of working age who are in work, but I return triefly to the matter of people who are above working age. I mentioned the importance of helping people with children, but my constituency of Worthing, West has the highest proportion in the country of people above retirement age, many of whom are healthy and self-reliant. When they turn to the national health service, they find that they have to wait more than a year for a 20-minute he Iring test. That may be a local curiosity, but when the it hearing aids are available they have to wait three and a half months for them to be fitted, and for instructions about the location of the on-off switch. That is not acceptable. Whatever the arguments are in favour of the way in which the NHS is funded and organised at present, people should not have to wait a year for hearing tests.
I deeply regret that the proportion of people waiting more than a year for in-patient treatment in Surrey and Sussex is more than one in eight. The postcode lottery 388 is unjustifiable, given that in the Prime Minister's health service area the proportion is only one in 78. In almost every health authority area around the country, more people are waiting more than a year for in-patient treatment than was the case in May 1997.
If I do not blame the Government totally for that, I blame them for it in large part. We must find a way to take queueing out of health care. It is all right to expect people to wait for many consumer goods, and to tell them that they cannot have what they want straight away, but people must be able to have the serious health treatments that they need when they need them, and without paying at the time of need. I do not believe that we can meet that requirement without a surplus of capacity and important quality improvements. However, the extra money promised in the Budget is welcome.
My final remarks deal with savings. Unless we encourage people to save and put money by, and reward them for doing so, we cannot expect them to be more self-reliant when they retire. If we do not encourage saving, we cannot expect more people to have control over their own housing on retirement. That is true of retired people who own their houses and are economically active, and also of those who live in communities. The latter is increasingly the case for people in their late retirement years.
That is why I welcome the alternative Budget proposals made by Conservative Front-Bench Members, which matter a lot. I believe that, like every Tory leader since the 1920s, my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) will become Prime Minister. His speech in response to the Budget embarrassed the Prime Minister and the Chancellor. The Conservatives have more to offer than the complacency and occasional arrogance of the present Government.
I do not say that everything that the Government have done is wrong, because they have implemented many of the ideas that I have put forward. However, the cross-party consensus is to give more support to people with children and those above retirement age. Unless that happens, we will not make this country what it should be for people of all ages and conditions.
§ Mr. David Taylor (North-West Leicestershire)
I declare an interest in relation to one or two of the points that I will make in my brief contribution. I am a governor of two schools in north-west Leicestershire—Ashby grammar school which, despite its name, is a comprehensive, and Ibstock community college. In the four years that I have been in this place, I have remained a member of their governing bodies and have seen the pressures that schools in Leicestershire have had to endure. Most of the problems relate to the standard spending assessment formula.
The hon. Member for Somerton and Frome (Mr. Heath) and my hon. Friends the Members for Stafford (Mr. Kidney) and for North-East Derbyshire (Mr. Barnes) have referred to the difficulties that exist in education funding in certain parts of the country. Leicestershire is at the bottom of the county league table when one expresses the SSA per primary school pupil and also per secondary school pupil. We are about 6 per cent. adrift of the average county and 13 per cent. adrift of Hertfordshire. Those are substantial sums.
389 We are immensely grateful for the extra investment put into education over the past four years and for that which is planned for the next three or four years. However, the relative position for Leicestershire, as for Derbyshire, Staffordshire and the F40 group of authorities, remains much as it was. It needs to be addressed and I am sure that it will be.
The bigger direct payment that the Chancellor announced will be most welcome. I have visited all 52 schools in north-west Leicestershire and I know how welcome they have found the extra payments and direct payments when they have been available. I endorse what the hon. Member for Somerton and Frome said. I think that the banding system is capable of significant improvement and these sums of money should be expressed on a per capita basis.
One of the greatest improvements in education in north-west Leicestershire since 1 May 1997 has been in the infrastructure of some of our older schools. At Ibstock community college, where my children were students until relatively recently, the laboratories were in a dire condition. Despite pressure over many years, through the local education authority to the then Government, little or nothing was done about them. Like every other Member of Parliament, I receive a summary of the planning applications made to the local authority and I was very pleased to see on the planning list a week or so ago the early commencement of work on the laboratories of a school that has been waiting for improved laboratories for decades. What the Government are doing for education is warmly to be welcomed.
One specific to which the Chancellor referred during his speech was the fight against crime and drugs. I have four daughters. Every parent worries about their children and wants to see them growing up safe from the scourge of drugs. My right hon. Friend's reference to the extra £300 million that will be spent in this area over the next three years was very heartening. That money will go direct to local crime and safety partnerships—a hallmark of the Budget and of recent Government decisions.
I declare an interest in that I was closely involved with the creation of the north-west Leicestershire safer communities forum. I chaired it for a number of years until 1 May 1997. I know that whatever proportion of that money is available to that organisation will be wisely and effectively used in partnership with local agencies, the police, the local authority and other groups.
This has been a positive and helpful Budget. At one end of the age spectrum, the scourge of child poverty has been addressed in a substantial way. At the other end, pensioner poverty has been tackled. Labour Members welcome that.
There are 5 million couples who have no dependent children, either because their children have left home or because they never had any. Those 5 million couples—that is about 8,000 couples in an average constituency—are pre-retirement age, and will have lost the married couples allowance, which ceased on 5 April 2001 and which in the previous tax year was worth £195. Many of those people still feel a little sore about the loss of the allowance because they see nothing to replace it. Yes, they will in many cases have had lower mortgage interest rates, a benefit that can be worth as much as £1,200 a 390 year. That, of course, is to be welcomed. However, many of those married couples will have nearly paid off their mortgages, and I think that we need to do something to compensate them for the loss of the married couples allowance almost a year ago.
In relation to peniioners—
§ It being Ten o'clock, the debate stood adjourned.
§ Debate to be resumed tomorrow.