Budget Resolutions and Economic Situation

Mr. David Heathcoat-Amory (Wells)

What a difference an approaching election makes to a Budget statement! In some ways, the Budget yesterday was not the worst of the Budgets presented by the Chancellor over the past four years. For instance, it was his shortest statement. The problem for the Government and for the country is that the promises that the Government may make in their last Budget cannot repair what happened as a result of the previous Budgets over their period of office.

Because the Chancellor has squeezed five Budgets into less than four years, we have already had the tax increases of four years, even before the Chancellor made another statement yesterday. Nothing can alter the fact that the Government will go down in history as the largest tax-raising Government of all time. According to their own figures, total tax receipts, which include social security contributions as well as taxes, will have risen over the past four years by a staggering —100 billion, almost exactly.

There were some welcome U-turns in the Budget yesterday—for example, on road fuel taxation—but why did it take a tax revolt, with all the shortages and disruption that accompanied it last autumn, to make the Government listen? If the Prime Minister and the Chancellor spent more time in the House, they would have heard hon. Members making the same points in debate after debate on previous Budgets. They would have been told that the relentless increase in road fuel taxation was not just socially and politically damaging to those in rural areas and others—people who must have cars to get to work—but that it was undermining the competitiveness of the haulage industry, which still faces competitors from the continent delivering goods in this country using fuel that is much cheaper than any available in Britain.

The Government have damaged the haulage industry and manufacturing industry. Although they have repented and although there is a modest cut, we still have the highest petrol prices in Europe. According to some estimates, we have the highest petrol and diesel prices in the world.

Like all Chancellors' statements, this one was better eaten cold. Once the more gullible Labour Members have had a chance to read the small print and the Budget document, as I hope they will, they will see, as we have, a parallel Budget emerging from the mist. For instance, the Chancellor persistently underestimates the tax effect of his measures in successive Budgets. The Government, and the Prime Minister in particular, used to deny that the burden of tax was rising at all.

Even though it was clearly set out in the Government's own documents that the percentage of tax as a proportion of gross domestic product was rising, the Prime Minister used to resort to any circumlocution to deny that fact. It was eventually the Prime Minister's press secretary who came clean and admitted that there was a continuing increase. All he had to do was to read some of the Budget document. In other cases, there have been problems because the Government have difficulty with their own figures. In some cases, by accident or design, they disguise the real truth.

449 Let us consider the tax burden in the current year—2000–01. In the 1999 Budget, that was predicted at 36.7 per cent. of GDP. In last year's Budget, the figure was revised upwards. In last year's pre-Budget statement in the autumn, it was revised upwards again. Yesterday in the Budget, it was increased yet again to 37.7 per cent. of GDP. That is more than a 3p in the pound increase in income tax. That is what the Government do—they will not admit at the time that they are increasing taxes; that must be discovered retrospectively by examining the documents, which show a continuing increase. The same has already happened to their estimates for the tax burden next year. That, too, has been revised up from previous years to the present level.

Mr. John Bercow (Buckingham)

My right hon. Friend eloquently describes the Government's sneaky and deceptive approach to communicating their taxation measures. Does he recall that, for 15 successive years, the previous Conservative Government published an assessment of the impact of direct and indirect taxes on the disposable income of a family on average earnings and on families in other income deciles? Does he further recall that the Chancellor's consistent and calculated failure to continue that practice was most recently denounced in a report of the Select Committee on the Treasury of March 2000 at, if my memory serves me correctly, paragraph 35?

Mr. Heathcoat-Amory

My hon. Friend rightly points to a further example of fiddled figures. I can give him yet another one. He may know that the working families tax credit is presented in the Red Book as a tax reduction, even though, in the small print at the end of the document, the Government have to admit that it should be treated as an addition to expenditure. I refer the House to page 216 where it clearly says: income tax credits…score as public expenditure under national accounting conventions", but that is not how they are treated in the document. They are not treated as expenditure; they are treated as negative taxation to flatter the Government's taxation figures. Therefore, the figures that I have just given to the House showing the constant revision upwards underestimate the true position. If, as required under national accounting conventions, we also add in the working families tax credit, the rise becomes even steeper and the tax burden becomes even heavier.

It is no wonder that people are cynical about politics and politicians. The Prime Minister complains about public cynicism about his record, but is it any wonder when the Government fiddle the figures in their own Budget document? Therefore, my first request to the Government is that they come clean and tell the truth about what is happening to people's money and the burden of taxation.

That applies not only to taxation—the same sleight of hand is now apparent on public expenditure. Again, the more impressionable Labour Members cheered the announced increases in public expenditure yesterday. I refer those same hon. Members to page 200 of the Red Book, which shows that there is no increase. There is actually an underspend in public expenditure, and only in 450 the financial year 2003–04 do the Government get back to their originally announced public expenditure profile. The Government are spending less than they have announced in previous years. They tax more than they have announced previously, but they spend less.

Mr. Christopher Leslie (Shipley)

I appreciate that the right hon. Gentleman is now trying to set out his stall and paint an awful picture of the Government, but if the Government are that bad, what did the right hon. Member for Henley (Mr. Heseltine) mean when he said that he was in a dilemma?

Mr. Heathcoat-Amory

We are in no dilemma at all; it is the Government who are in a dilemma, and not just the Government, but their figures. We cannot tell from what the Government say whether they are putting up taxes or expenditure; we have to examine the figures, and that is where the dilemma arises. It is the job of the House to find out what is happening and to tell the truth. If the hon. Gentleman is to have any chance at all of retaining his seat at the general election, which I rather doubt, I urge him to start to tell people the truth; otherwise this pervasive air of cynic ism will see the back of him as well as the Government.

Exactly the same subterfuge is apparent over borrowing and debt. Again, the Chancellor made it clear yesterday that he was reducing debt. He made a great deal of that, but it is a pity that he did not describe how it will go up again. I refer hon. Members to page 188 of the Red Book. It shows that the burden of debt will rise by —58 billion during the next four tears, but that, too, was not referred to by the Chancellor in his statement.

All that means that the Government are taking a colossal risk. They are vulnerable to any downturn in the world economy, but there is more to it than that: even if there is no hiccup or downturn in world growth, they are eroding the competitiveness—the performance—of the British economy, on which all the expenditure depends. Again, that shows up in the figures. Business investment has pretty well collapsed. [Interruption.] These are the Government's own figures. If anyone wishes to dispute them, we have a problem with the Treasury figures.

In the Conservative Government's last year in office, business investment rose by 7.75 per cent. It has now slowed to a crawl—to little more than 2 per cent. a year. The savings ratio, referred to by my right hon. Friend the Leader of the Opposition yesterday, was 11 per cent. when we left office, but it has now more than halved to 4.75 per cent. The start of that collapse coincides with the withdrawal of dividend tax credit for pension funds, which is still taking out of the private pension sector more than —5 billion a year Is it any wonder that almost mortal damage was done to the propensity to save, which is showing up in the savings ratio? That is building up serious problems for the future.

Mr. Edward Leigh (Gainsborough)

Does it not follow that it is essential to remove all taxation of savings?

Mr. Heathcoat-Amory

How right my hon. Friend is, and that just happens to be the policy on which he and I will fight the next election. Instead of gimmicky little give-aways, we will remove savings taxation at a stroke below the higher rate.

Mr. Jonathan Shaw (Chatham and Aylesford)

Is the commitment to abolish tax on savings guaranteed, or will that policy be changed tomorrow?

Mr. Heathcoat-Amory

Good Lord, cannot Labour Members do better than that? Yes, it is.

I am glad that the Secretary of State for Trade and Industry is to speak in the debate. Perhaps he can answer some of the questions about competitiveness and productivity. The Department of Trade and Industry has missed out again. During recent months, we have observed how it is usually ignored or overlooked by the Treasury, and the Budget is yet another example of that. That is not to overlook the welcome modest simplification of the VAT system and the promised—again, jam tomorrow—research and development credits for larger companies. However, set against the incredible increase—layer upon layer—in business taxes and regulation during the past four years, that brings practically no comfort for the business world.

For example, yesterday the Forum of Private Business said: On balance, the Budget is likely to make life more difficult for small firms, because of previous stealth taxes…and increased complexity in the PAYE regime. The Institute of Directors said: Insufficient has been done to simplify the ever-more complex tax regime or lessen the burden of state interference and regulation in the business environment. The London Chamber of Commerce said: the Chancellor was more interested in delivering a second term for Labour, rather than a Budget for business. It again drew attention to the problems of tax complexity and the burden that that puts on businesses of all sorts, and their resulting loss of competitiveness in world markets.

Mr. Nicholas Winterton (Macclesfield)

Does my right hon. Friend intend to refer in any detail to the climate change levy? Would he be interested to learn from me that a textile company that I know well, which employs some 300 people and has invested more than —1 million in energy saving and in reducing any output of pollution into the environment, is likely to be faced with an annual tax increase from 1 April of —60,000 to —80,000 as a result of the climate change levy? Is that a way to make British manufacturing industry more competitive?

Mr. Heathcoat-Amory

My hon. Friend is spot on. The tax is completely unnecessary and could easily have been withdrawn yesterday. The Finance Act 2000 does not require the Government to introduce it; it merely permits them to do so. They could have announced that they had recognised on mature consideration the damage that the measure would cause, especially to British manufacturing industry, and withdrawn it. Instead, as my hon. Friend said, in four weeks' time, all businesses, whatever their size, will be paying a surcharge on energy bills that are already rising. For example, gas prices have doubled for business in the past year.

For that reason, the new surcharge is likely to be entirely counter-productive in environmental terms. If businesses do not invest here or if they migrate from this country to other tax jurisdictions in countries with lower environmental standards, the global environment, which is supposed to be what the charge is all about, will suffer 452 as a result. The tax is amazingly complicated. Any reductions that are required by international conventions can be met far more easily and cheaply in other ways. That is how the Conservative party has always achieved such reductions. We met the Rio targets and we will meet those set in Kyoto, but we will do it by other means. We take seriously our environmental responsibilities, but we do not agree that it is necessary to create an industrial desert in order to fulfil them.

That is why I agree with my hon. Friend the Member for Macclesfield (Mr. Winterton). Indeed, he is in extremely good company, as the Confederation of British Industry has also drawn attention to this damaging levy. Mr. Digby Jones, its director general, said again in a press release yesterday that it is seriously damaging UK competitiveness. Furthermore, the Engineering Employers Federation said that the Climate Change Levy remains one of the most badly designed and ill-conceived economic instruments of recent times, a device for raising revenue rather than a serious attempt to encourage energy efficiency. Manufacturing will be bitterly disappointed the Chancellor has failed to address the anomalies of this tax. I entirely agree with those points. Any pretence that the Government are pro-productivity or pro-competitiveness is completely contradicted by their persistent introduction of such measures. They did the same with IR35, which, as I think the House will know by now, was the 35th press release issued by the Inland Revenue in respect of the 1999 Budget. It was never referred to in the House or announced by the Chancellor, but the measures that it set out turned out to be among the most damaging ever conceived for the IT sector.

The Government have the gall to publish a leaflet called "Productivity in the UK: Progress towards a productive economy", which contains a section about business skills, when they are driving people abroad with their policies. One of the most lively websites on the internet is called GoAbroad.com. It is used by people who will not put up with these conditions and are taking their skills elsewhere. Consequently, companies telephone the Home Office and say that they are short of skills, and the Government decide to relax immigration controls in respect of IT specialists, thus denuding the third world and poorer countries of skilled people so that they can replace people driven out by this mad measure called IR35. That is not what the Government say that they are doing, but it is what they practise in reality.

The House will remember the fiasco regarding double taxation relief, which was announced in last year's Budget and was another ill-thought-out measure. A prominent accountant from PricewaterhouseCoopers, Mr. Peter Wyman, pointed out that it was not going to work. The Chief Secretary to the Treasury insulted Mr. Wyman in the House, but he turned out to be absolutely right. Indeed, the Government have now admitted that he was right and have withdrawn all the measures. They amended them in the Finance Act 2000 and then announced more amendments in the pre-Budget statement. Now we learn from the Budget statement that there are to be even more amendments. That is three to Mr. Peter Wyman and zero to the Chief Secretary.

A little more humility is required from a Government who have been warned persistently about the damage that is done by such measures, but still they persist with them.

453 The erosion of our competitiveness is now beyond dispute and is doing much damage to our international reputation. On productivity in the United Kingdom, The Wall Street Journal reports: Real economy-wide output per worker rose at an average annual rate of 2.4% from 1992 to 1997"— the period of the previous Government— but grew by only 1.4% annually over the last three years, only half the rate achieved by the US. People reading that report in the United States and elsewhere will realise what has happened in this country: the productivity record inherited by the Government has now also collapsed.

Mr. Phil Hope (Corby)

The right hon. Gentleman quotes from various newspapers, but perhaps he should remind the House of the front page of today's edition of The Sun, which announces that it is supporting Labour at the next election.

Mr. Heathcoat-Amory

I conclude from that intervention that the hon. Gentleman is simply not interested in what is happening to the United Kingdom's productivity. He has nothing to say about that or about what people abroad who are contemplating investing in this country will now think of the Government, who have practically halved the productivity record of their predecessors. Along with the intervention made by the hon. Member for Chatham and Aylesford (Mr. Shaw), that is an eloquent testimony to the complete contempt with which the Labour party treats the real problem in this country: the production of wealth before it can be spent.

Mr. Michael Jack (Fylde)

Clearly, the hon. Member for Corby (Mr. Hope) did not read the inside page of The Sun in which Trevor Kavanagh points out that the Chancellor enjoys spending other people's money and is a true socialist—a position that is rather different from that set out on the front page.

Mr. Heathcoat-Amory

My right hon. Friend has clearly been as assiduous as ever and has read the inside pages of The Sun as well as the headlines. The House will be grateful for that. I never get very far when I read it.

On productivity, I have mentioned the Government document entitled "Productivity in the UK: Progress towards a productive economy". It is a little late to be starting to make progress—the Government should have done so by now. We are grateful for the observations of the Trade and Industry Committee on this subject. During the past four years, a blizzard of White Papers, parliamentary statements and gimmicky measures have been introduced in Budgets, supposedly to try to raise our productivity gain. They have tried hard to do something, but what have they achieved? The Labour-dominated Committee observed that not only has very little been achieved, but we cannot measure what has been done. Its January report states: The result is that it cannot be demonstrated that policies pursued over the past three years intended to narrow the productivity gap have had any measurable outcome. 454 It goes on to state: The set of enterprise society' objectives, targets and measurements is a dog's breakfast. That was the Committee's description of such arrangements even before yesterday's Budget statement. In passing, the report notes that the DTI cannot even pay its bills on time. It slates: It is an indictment of the department's ability to manage its own affairs that, having identified its failure, things should be getting worse rather than better. The report concludes:

The bleak truth is that we cannot tell whether some of the department's crucial objectives over the past three years, such as the promotion of enterprise, innovation and increased productivity, have been achieved". The Department is simply operating in a vacuum; it has no idea whether its actions are doing any good. Meanwhile, figures show the collapse in the savings ratio, business investment and productivity.

Mr. Barry Gardiner (Brent, North)

Will the right hon. Gentleman give way?

Mr. Heathcoat-Atmory

I hope that the hon. Gentleman will forgive me, but I have been generous in giving way and I wish to conclude.

The Government inherited a strong, dynamic and competitive economy, but they undermine it with layer upon layer of new regulations and extra business taxes. They bind themselves to long-term public spending commitments that surpass any conceivable growth rate for the economy. They value spin over substance, and words over deeds. They thus betray the hopes on which they were elected and break the promises that they made to get elected. Such a Government will not survive the scrutiny and verdict of the next general election.

The Secretary of State for Trade and Industry (Mr. Stephen Byers)

Yesterday, the Chancellor presented a Budget for the future, to build a Britain of opportunity and prosperity for all. It combines wealth creation with social justice, and it supports hard-working people and their families. It invests in reform of our public services, but insists on results in return. It is a forward-looking Budget, which presents change as a bringer of opportunity, not a threat. It builds on the great strengths of the British people. The foundation for the Budget is economic stability; it was our first duty in government to establish that.

The Budget strikes a balance between prudent long-term investment and targeted tax cuts for hard-working people pensioners and savers. It provides new opportunities and incentives for enterprise, and thus helps people with commitment to start and extend businesses. It makes work pay. Our economy is strong because of the decisions and choices that we have made.

For too long, the United Kingdom has suffered from violent swings of the economic cycle. Almost four years ago, we reformed the whole basis of economic policy making. We took tough decisions early to make the Bank of England independent, to establish a proper fiscal framework, and to repay the national debt. Consequently, inflation is now at a 30-year low, and is the lowest in 455 Europe. Long-term UK interest rates are at about their lowest for over 35 years, converging with those of Germany.

Through the new deal, which is the most ambitious welfare-to-work programme in Britain, we have cut youth unemployment. One and a half years early, and at half the planned cost, we have exceeded our goal. Not 250,000, but 270,000 young people have now moved from welfare to work.

In total, 1,100,000 more people are in work now than four years ago. Britain has the lowest unemployment since 1975, the lowest long-term unemployment since 1979, and the lowest youth unemployment since 1975. Employment rates among women are the highest ever, and today, there are 1 million vacancies spread across the country.

That clearly demonstrates that the Government are working in the interests of all our people. The economy is enjoying its longest period of uninterrupted growth since the war. As well as huge improvements in the labour market and the economy, we have put public finances on a sound footing.

In the early 1990s, the national debt doubled. Consequently, we inherited an unacceptable level of debt in 1997. The tight fiscal stance we have adopted means that we have been able to repay some of the national debt. Last year, some —9 billion was repaid, and this year —34 billion is being repaid. As we cut the costs of failure, we are able to provide money for our real priorities and those of the British people.

In 1997, more was spent on debt interest repayments than on schools. We inherited that position. In 2001–02, we will spend —10 billion more on schools than on debt interest. That is not coincidence or luck. It has happened not by chance but through the deliberate choices that the Government have made. However, it can be sustained only if we hold firm to the financial disciplines that we have imposed, and run fiscal and monetary policy in tandem.

Our recent history shows all too clearly what can go wrong when risks are taken with the economy: businesses and people suffer.

Mr. Nick Gibb (Bognor Regis and Littlehampton)

What will happen to interest payments from 2002–03 onwards, when the Government's net borrowing increases by —1 billion, and, successively, —10 billion, —11 billion and —12 billion? What will happen to the interest charges to the Exchequer in those years? Will they go up or down?

Mr. Byers

The figures are clearly stated in the Red Book. We are complying with the fiscal rules that we have established. We are therefore not taking risks with the economy. Yesterday's Budget was prudent. We will not do as the Conservative Government did in the late 1980s.

Let us consider Lord Lawson's Budgets. He had a strong economy, but what did he do with it? He cut taxes irresponsibly. Businesses and people paid the price in the early 1990s. Let us go back 10 years to February and March 1991. This week 10 years ago, inflation was more than 8 per cent; interest rates were more than 13 per cent. That is the Tory record of irresponsibility. Thousands of small business men and women were beginning to feel the consequences. There were more than 47,000 bankruptcies in 1991, and GDP fell by 1.5 per cent.

456 Businesses and millions of people suffered. At least 1 million hard-pressed home owners suffered negative equity. Approximately 250,000 homes were repossessed between 1990 and 1993. More than 1 million people lost their jobs in manufacturing in the early 1990s. That vicious circle trapped businesses and individuals. It was a traumatic period which must never be repeated.

Those are not just my views. Recently, I found on the internet the "Alan Duncan MP Westminster Zone", which I recommend to hon. Members. The website proclaims various publications and draws attention to "An End to Illusions". Some might say that that was an appropriate title. Of the late 1980s and early 1990s, when I believe a Conservative Government were in office, the book states: In the late 1980s political leaders claimed that Britain was experiencing an economic miracle. The years of decline had come to an end. Instead the 1990s began with unprecedented debt, a deep recession and a credit squeeze that destroyed thousands of businesses and caused hundreds of thousands of repossessions. That Alan Duncan is none other than the hon. Member for Rutland and Melton, who speaks for the Conservative party on trade and industry matters. I have given an example of his being right for a change. In those words, he outlined the true position in the early 1990s.

Mr. Christopher Gill (Ludlow)

During the period to which the Secretary of State refers, Britain was a member of the exchange rate mechanism. The right hon. Gentleman advocates fixed exchange rates. Does not he realise that on both occasions in the 20th century when Britain joined fixed exchange rates, unemployment soared? From 1925 to 1931, unemployment increased from 1.25 million to 2.9 million, and between 1990 and 1992, it increased from 1.65 million to 2.85 million. Does the right hon. Gentleman not realise that that is the effect on employment of going into fixed exchange rates? Does it not register with him that that is a powerful argument why we should never join the single currency?

Mr. Byers

I would like to know whether the right hon. Member for Wells (Mr. Heathcoat-Amory) agrees with that statement.

Mr. Gill

The right hon. Gentleman should answer my question.

Mr. Byers

I will answer the question, but I am interested to know whether the statement that the hon. Gentleman made represents Conservative party thinking on the single European currency. I think that it probably does, as far as the Members sitting on the Opposition Front Bench in this debate are concerned. One can tell; we know what the reality is. These are principled people sitting opposite me, and they believe strongly that the United Kingdom should never join the single European currency. [Interruption.] I am pleased to see the hon. Member for Rutland and Melton (Mr. Duncan) nodding his head in agreement with that.

Mr. Bercow

Will the right hon. Gentleman give way?

Mr. Byers

No, I want to answer the legitimate question raised by the hon. Member for Ludlow (Mr. Gill).

There is a tendency among certain members of the Conservative party to blame the rest of Europe for all the problems that have been created over a number of years.

457 The difficulties that were created in the early 1990s came about as a direct result of the irresponsibility of the Tory Budgets of 1987 and 1988. The then Chancellor faced a choice. There was a strong economy, as there is today. He chose to act in an irresponsible way, introducing swingeing tax cuts that were applauded at the time. In the Budget of 1988, the basic rate of income tax was reduced by 2p and the higher rates above 40 per cent. were abolished. The problems of the early 1990s were a result of that.

That is why we have chosen prudent tax cuts, which are targeted, and also to invest for the long term. That is the Government's approach. We have built a strong economy and we now have the foundations on which we can invest in the future to create wealth that will benefit all our people.

Mr. Bercow

rose—

Mr. Byers

I will now give way to another anti-European.

Mr. Bercow

My hon. Friend the Member for Rutland and Melton is living proof that size is not everything. He has a distinguished track record in business, unlike the right hon. Gentleman, who has never worked in a company in his life.

Given that the Secretary of State is now auditioning unconvincingly for the role of high priest of prudence, will he tell the House what assessment he has made of the impact of the change in the rules on the use of capital receipts from the sale of council houses on the size of interest repayments on local authority debt?

Mr. Byers

That is a very important question, and I know that the hon. Gentleman will receive a reply from the Paymaster General when she winds up the debate later.

Mr. Alan Duncan (Rutland and Melton)

Will the right hon. Gentleman give way?

Mr. Byers

I want to make some progress, but I will give way to the hon. Gentleman in a minute.

The situation to which I was referring obtained in the early 1990s. We have now managed to move away from the stop/go economy of those days. As a result, living standards are rising for many people. Someone with a —60,000 mortgage now is paying —315 a month less in interest payments than in 1990. Someone with a —100,000 mortgage is now paying —600 a month less than in 1990. That makes a real difference to hard-working people.

As we cut the costs of economic failure by cutting public debt, reducing unemployment and maintaining low inflation, we are freeing up the finance to invest in the infrastructure and high-quality public services that our country so badly needs. That is money that the Conservatives would simply take away.

It was interesting that the right hon. Member for Wells, in opening the debate, confirmed the Conservative position of sticking to investment of just 2.25 per cent. The Budget announced yesterday by the Chancellor means that spending will now grow by 3.7 per cent. a year 458 over the next three years. The Conservatives have stated that their spending is to be capped at 2.25 per cent. or less. We need to know how they intend to fill the spending gap that would clearly result. If 2.25 per cent. were stuck to for all three years, a gap of more than —16 billion would result. If we were to be generous and suggested that they might postpone the 2.25 per cent. restriction in the first year, limiting it to the second and third years only, they would still have to find cuts of a little more than —10 billion. That is the Conservatives' position, and they have not stated where those cuts would come from.

In the election campaign, the British people will know that there is a choice: prudent, long-term investment in high-quality public services, which we support, or long-term cuts in public services that would come about under the Conservatives. Without risking our hard-won stability, we are now investing in public services, increasing opportunities and prosperity for hard-working families and supporting the small firms that are the lifeblood of our economy.

Mr. Duncan

It was eight years ago that I wrote "An End to Illusions", but I am grateful to the Secretary of State for pointing out that it was at least intellectually honest and cogent, and that it covered a difficult time that needed analysis.

Will the right hon. Gentleman in return be equally intellectually honest with the House and admit that the benefits that the Government have enjoyed over the past couple of years have been that receipts have been greater than planned, and a at expenditure on welfare payments has been less? However, we are probably at the top of the economic cycle, and his plans are on schedule to outstrip the growth in the economy as a whole. Will he therefore admit that as soon as the economy turns, he will face a squeeze for which he and his Administration will have to be accountable to the general public?

Mr. Byers

I should like to make a number of points in response to that question. First, the fiscal rules are set in a very cautious way, with an in-built barrier or margin against particular difficulties equivalent to 1 per cent. of GDP. In addition, the hon. Gentleman is right to say that tax receipts have been buoyant; they have been higher owing to a number of factors, the main ones being higher earnings and increased employment. Those are the signs of a successful economy, and we make no apology for them.

Our first ambition must be to secure substantial productivity growth, as the right hon. Member for Wells mentioned in his opening speech. That is why the Budget proposed further reforms to promote competition and innovation, and to support enterprise. Competition has long been recognised as essential to an efficient economy. It creates pressure to innovate, to keep costs down and to improve the quality and choice of products available, and it ensures that resources are allocated to the most efficient firms. Competition is also the most effective way of ensuring that consumers receive a fair deal.

The Government remain anxious to ensure that all sectors of the economy are exposed to competition. The Office of Fair Trading yesterday published its report to the Government on competition in the market for professional services. Today I wish to give the Government's response to that report.

459 The Director General of Fair Trading concludes that the professions should be fully subject to competition law and that unjustified restrictions on competition should be removed. He raises questions about a number of existing restrictions, including the distinction between Queen's counsel and junior barristers, which is said to have significant effects on competition. He also questions the operation of the system as a quality mark and its value to consumers.

The director general comments on the number of rules of various professional bodies preventing or hindering the establishment of multi-disciplinary practices. Such practices could bring together accountants, lawyers and other professionals such as surveyors and estate agents. Potential benefits such as overhead cost savings, more flexible allocation of resources and more open access to the professions could be gained as a result. That could help smaller businesses in particular.

The director general noted that solicitors employed by non-solicitors can act only for their employers. Removal of that law could allow solicitors working in different business structures to compete on a broader front. He also noted that solicitors and accountants are not allowed to make payment to a third party for work that is referred to them. Such a restriction may be hampering the development of an online market place that would bring clients and professionals together.

The director general states that the Law Society prohibits seeking business by telephone from potential clients and comparative fee advertising. He draws attention to two further restrictions and believes that further implementation of sections 34 to 52 of the Courts and Legal Services Act 1990 would allow banks and building societies to provide conveyancing services. Solicitors have 95 per cent. of the market. Further implementation of sections 54 and 55 could increase competition in the market for probate services. Where lawyers compete for work with non-lawyers, perceptions of legal professional privilege can distort competition. It falls to Ministers to deal with all those restrictions.

We recognise that those are complex areas. We shall therefore consult on the report, and it seems appropriate to consider comments on the director general's analysis before taking further action. The Government will therefore issue a formal consultation paper addressing those issues and inviting comments. However, on one recommendation, I feel that action should be taken now.

Under schedule 4 of the Competition Act 1998, there is an entitlement to request that professional rules be excluded from the provision in that Act that prohibits anti-competitive agreements. The director general believes that the regime weakens the incentives not to engage in anti-competitive activity that exist elsewhere in the economy, as the threat of financial penalties and action for damages does not exist. He recommends that the provision should be removed. The Government agree that the entitlement to exclusion should be removed and that the professions, as a result, should be fully subject to competition law.

We need a tax system that supports companies large and small. We have already reduced corporation tax from 33p to 30p, but in the new, knowledge-based economy we need a tax regime that reflects the nature of that new economy. That is why we propose to introduce a new 460 tax relief for intellectual property and goodwill. We shall consult on the detail on relieving tax when companies sell substantial shareholdings.

Enhanced capital allowances since 1997 and new tax credits to encourage investment and innovation have already saved businesses more than —1 billion, with a third of a billion pounds being saved by manufacturing. We shall now consult on proposals for a new tax credit aimed at boosting research and development and innovation in larger companies. That new credit is designed to complement the R and D tax credit for small companies, which we introduced in April 2000.

Mr. Jack

The Secretary of State mentioned the policy on business tax allowances for capital investment that the Government have been pursuing. How much net extra investment has resulted from those proposals?

Mr. Byers

If the right hon. Gentleman reads the Red Book, he will see that we have record business investment compared to GDP, although that is not how the right hon. Member for Wells portrayed the situation. The figures are based on 1995 prices, so the comparison is good.

Mr. Harry Barnes (North-East Derbyshire)

My right hon. Friend the Chancellor said that, to encourage enterprise, six tax cuts will be targeted on areas that have suffered relative depression, such as coal, textile and steel communities. Presumably, my constituency will be included, as Biwater has closed. Will information be supplied as to which areas will be eligible? Obviously, I have a constituency interest in that. The proposals are distinct from ones to which he referred at a previous Question Time, when he said that tax credit provisions will relate to the best bids for help with economic regeneration. There is sometimes a problem over who has made the best bid, so targeted provision is important, as is knowing whether we are in on it.

Mr. Byers

My hon. Friend makes an important point. The six-point package, which my right hon. Friend the Chancellor mentioned yesterday and which I hope to touch on later, will be available to designated areas and communities. Work on that designation is still going on, but we can expect an announcement in the not-too-distant future as to which areas will qualify for that important package of help with regeneration and job creation in the parts of the country that need it most. The package is part of an active regional industrial policy, which is important to ensuring that our country's economic prosperity is shared round and that we enlarge the winner's circle so that more people can benefit from the success that we are making of the economy.

Extending the R and D tax credit from small companies to larger companies will be an important development resulting from the Chancellor's statement. We want to make sure that we get it right, which is why we want to consult in detail, particularly those industries that will be able to benefit from such a regime.

Since 1997, the number of small businesses has grown by 170,000. That is a response to the tax cuts that we have introduced for the sector. Small company tax has been cut from 23p to 20p and there is a new starting rate of just 10p in the pound. That means an overall cut in the typical small company tax bill of nearly 25 per cent.

461 We shall continue to improve the environment for smaller firms to create new opportunities for enterprise and to help existing firms to grow, creating new jobs and prosperity. That is why we shall introduce a new regime to simplify VAT for up to 500,000 small businesses, which will include allowing at least 100,000 more businesses to file VAT returns annually instead of quarterly and increasing the VAT threshold in line with inflation, keeping the UK threshold at the highest level in Europe.

We shall also seek views on a new optional flat rate scheme for small firms. It would be simpler to use, with VAT calculated as a percentage of their taxable turnover; and rather than small firms having to wait until they had been registered for a year, they would be allowed to enter the annual accounting regime immediately. That would achieve real practical benefits for small companies.

We are also consulting on a radical new look at the tax treatment of small companies. Those proposals would allow small companies to base their tax calculations on their statutory accounts, which would end the current administrative burden of having to submit to the Inland Revenue a tax calculation in addition to the statutory accounts.

We also intend to improve the enterprise management incentive schemes to make them easier for companies to operate, doubling the limit on the total value of shares that can be offered and removing the limit on the number of employees who can be granted those options.

As the Chancellor announced yesterday, we accept all the recommendations of Paul Myners' review of institutional finance. We shall change the rules on life insurance companies investing in venture capital so as to provide greater incentives for insurance companies to provide equity finance for small and medium-sized enterprises. We shall also make it easier for small companies to raise equity and long-term finance.

We shall create new opportunities for businesses to support the jobs and growth of the future; but at the beginning of the 21st century, we must also invest in our children—the future of our country. We have already introduced a wide range of reforms that benefit women, families and children in particular. There are more women in work than ever before. We have introduced the national minimum wage, benefiting some 1.5 million workers, more than 70 per cent. of whom are women, and helping to reduce the pay gap between men and women to its narrowest ever.

Last year, we introduced new rights for part-time workers, 80 per cent. of whom are women, and ended discrimination on pay, pensions, training and holidays for the 5 million women and l million men who work part time. We calculate that the changes have benefited part-time workers by about —555 each. Part-time workers will no longer be treated as second-class citizens under the law. They play a valuable role in a flexible labour market, and they should be treated justly.

In introducing these regulations for part-time workers, I have paid particular attention to the needs of families. I have extended the new rights to include all workers and ensured that some of the most vulnerable groups—such as home workers and agency workers—will now receive full protection.

462 Full-time workers who start working part time will now be able to compare their new terms and conditions to their previous package. That will help women returning to work part time after maternity leave.

We have also introduced a right to time off work to deal with a family emergency, starting from day one of employment. We have introduced statutory rights to decent minimum standards—all of them opposed by the Conservative party.

In the modern economy we need to harness fully the energy and talents of our work force. In a tight labour market, employers find it increasingly difficult to recruit and retain skilled people. In this changing world, it is vital that we recognise the pressures on working parents and business, and that we look at ways to support businesses and parents in meeting the challenges of family life. That is why last December I published a Green Paper setting out proposals to give more help to new parents and greater support to the businesses employing them. Our proposals were based on the most comprehensive review of work and parents ever undertaken by a Government in Britain. In the light of that review, we set out nearly 50 options to give more support for new parents and for the businesses that employ them.

Following an extensive consultation on these options, a range of measures was announced yesterday that will radically improve the lives of working parents with a new baby. We will increase statutory maternity pay and maternity allowance from its current —60.20 a week to —75 a week next year, and to —100 in the following year. That is as big a rise in the next two years as occurred in the previous 40. We will not only improve the rate of maternity pay, but increase the period during which it is paid, raising it from 18 weeks to 26 weeks. For the first time, parents who adopt will qualify for these benefits: paid adoption leave, for the same period and at the same rate, will be available when a child is first placed with a family. To help working fathers, we will introduce a new right to two weeks paid paternity leave—at —100 a week—from 2003.

To help employers, we will increase the support that small businesses receive for the administration of maternity pay. We will double the threshold for small-employer relief, to —40,000. That means that about 60 per cent. of all firms paying maternity pay will be able to reclaim their costs in full, plus compensation.

These measures support a range of further steps in the Budget to support families and children. There will be a further increase in the sure start maternity grant, from —300 to —500, for more than 200,000 low-income families. The value of the children's tax credit will be increased from the previously announced —8.50 a week to —10 a week when it is introduced on 1 April this year—making it worth up to —520 a year for around 5 million taxpaying families.

However, we also recognise the additional costs that are incurred during the first 12 months after a child's birth. We will therefore raise the children's tax credit to —20 a week for a year from the birth of the child.

One of the issues raised in our consultation on work and parents was the need for good, affordable child care. The absence of affordable child care remains one of the main barriers to work for parents. Evidence clearly shows that an increase in the current limits for child care support 463 is crucial in order to help cover the regional variation in costs and the higher child care costs for children under five.

That is why we intend to increase the limit in the child care tax credit component of the working families tax credit and the disabled persons tax credit. That limit will be raised to —135 a week for the cost of child care for one child, and to —200 a week for the cost of child care for two or more children.

In order to claim the child care tax credit, families must use appropriate child care. However, current child care credit rules do not apply to child care provided in a person's own home. This restriction poses particular problems, especially for parents who work irregular hours. I heard that at first hand when I recently discussed these issues with a group of mothers in Bolton. They described the difficulties very clearly. A nurse working irregular hours set out graphically the problems that she encountered in finding affordable child care. The mothers said that support for child care costs in their own homes would be a significant advance.

That support would also benefit families who have a child with a disability. I am therefore pleased to be able to announce that we will now consider how we can help families who need formal child care in their own homes. One possibility being considered is extending the child care tax credit. That is a practical approach that will make a real difference to many working parents.

The changes in the Budget will benefit business, parents and, above all, children. However, we need to ensure that the changes translate into real benefits that increase prosperity in every part of the country. Now that we have economic stability, we have an opportunity to make a real difference for all our people, wherever they might live, and to make sure that all parts of Britain share in rising prosperity.

There are now more people in work in every region than there were in 1997, and average earnings have increased in every region as well. However, too many areas are still underperforming. Some regions are lagging behind in productivity growth and investment in research and development. Our next steps must be to put in place the measures that will allow all regions to fulfil their potential.

Over the past four years, we have made a start in giving the regions the tools that they need. We established regional development agencies and we are increasing their funding substantially. Tomorrow, my right hon. Friends the Chancellor of the Exchequer and the Deputy Prime Minster will announce new financial flexibilities to enable regional development agencies to fulfil their role in delivering higher productivity and balanced growth in every region.

In addition, we will introduce new fiscal incentives to extend the opportunities for enterprise in rundown areas. In total, we are introducing six new tax cuts targeted at enterprise and growth and worth —1 billion over the next five years.

To render tax free the first stages of buying property and bringing land back into use, stamp duty will be abolished in designated areas. To bring disused properties back into use, we will cut VAT on residential property conversions. There will be accelerated tax relief for cleaning up contaminated land, and to help revitalise our 464 high streets, we will provide 100 per cent. first-year capital allowances for bringing empty flats over shops back into the residential market.

Moreover, to cut the cost of small-business borrowing, we will introduce a new community investment tax credit. That was recommended by Sir Ronald Cohen and, with a capitalisation of some —40 million, it will ensure that a partnership between Government, financial institutions and the charitable sector makes a real difference to businesses growing in the designated areas.

To cut the costs of start-ups, the Small Business Service will offer one-stop support and up to —2,000 of help for any start-up company drawing up its business plan. That will make it easier than ever in the designated areas to start and sustain a business. With our active industrial and regional policy, the Government are reaching out to all parts of the country to ensure that they can benefit from our economic prosperity.

The stability that we have achieved means that we can now make the reforms that our country needs. Those reforms include increasing enterprise in every region and supporting hard-working families. The Government can do that because we have made our choice. We have chosen stability, not boom and bust; full employment, not mass unemployment; investment in future prosperity, not cuts in essential services; tax cuts that we can afford; and a commitment to strong communities, not a belief that there is no such thing as society.

This is a Budget to build a Britain of opportunity and prosperity for all. I commend it to the House.

Mr. Cohn Breed (South-East Cornwall)

First, I welcome the Budget as far as it goes. The Chancellor made a great point of saying that it should be a balanced Budget, but much of that balance is subjective. I welcome the help for low-income families, particularly in rural areas where, as the right hon. Gentleman knows, far too many families—especially those working in agriculture—are on very low incomes.

Small businesses predominate in rural areas. More than 97 per cent. of businesses in Cornwall and in my constituency are small, or even micro-businesses employing fewer than 10 people. The fact that they will have a simplified means of paying VAT and corporation tax—for those that have the good fortune to pay tax—is to be welcomed. The reduction in VAT on the renovation of property is also to be welcomed. There is a significant number of empty properties which could be used for affordable housing. I hope that the measure will be directed at that sector, not at providing even more potential second homes for other people who want to live in Cornwall.

I also welcome the raising of the minimum wage, which, for an area of very low wages, is one of the most significant measures in the Budget. I hope that that increase will help a considerable number of my constituents who take home the minimum wage.

But—and there has to be a but—one sector of our business community has suffered considerably in the past five or six years, not only from the consequences of BSE but, in some places, from the catastrophe of swine fever, from the wet weather and the flooding of much farmland, and now from the disaster of foot and mouth disease. 465 It must have been a bitter blow for many people engaged in that industry when they listened yesterday afternoon for the sort of measure that might give them some hope, but recognised at the end of the speech that what they would get was a free tax disc for their tractor. That will be a bitter blow to many hard-working families—families of the kind who the Chancellor recognised needed assistance.

I suspect that there can be no harder-working sector of the community than those who are engaged 12 or 14 hours a day in trying to make a living on a farm. Their incomes have dropped significantly in a relatively short time, but they have not succeeded in attracting the Chancellor's attention to their plight.

The fact that the Government are going to apply for agrimonetary compensation is welcome, but if they had applied for it six months ago, some of the payments would be coming through now. I welcome the fact that the Government recognise that they must try to get it fast-tracked, but they were already depending on it to deal with the problems that we faced prior to foot and mouth disease. This morning, the Minister of Agriculture, Fisheries and Food said that the present foot and mouth crisis influenced the Government's intention to apply for agrimonetary compensation. It would not, perhaps, be wrong to deduce from that comment that, had the disease not occurred, the Government would not have applied for the compensation.

Mr. Hope

Is the hon. Gentleman aware that, in the lifetime of this Parliament, farmers have received upwards of —500 million in agrimonetary compensation, whereas under the Conservative party, they received not a penny?

Mr. Breed

I agree, although I suspect that the Opposition would say that they were only in power for three or four months during the period when they could have applied for such compensation. Nevertheless, the hon. Gentleman is right. Farmers have benefited over a long period of time. The Government have also recognised that remaining outside the euro at present has a cost not only to farmers but to tourism and manufacturing. The agrimonetary compensation scheme was set up for that purpose. That cost should be provided for.

Mr. John Townend (East Yorkshire)

Does the hon. Gentleman agree that if we went into the euro at the present exchange rate, it would not make the slightest difference? He is assuming that we would go in at a much lower rate. He cannot assume that.

Mr. Breed

If we were going in at today's rate, presumably we would be having a referendum now and deciding to do so. I do not suggest that we would go in at the present rate.

The agrimonetary compensation scheme finishes this year. At present, there is no successor scheme to provide further support while we remain outside the euro.

The timing was right and the compensation is to be welcomed. However, specific support to deal with foot and mouth disease would be unbalanced. The Chancellor's great card was that he wanted the Budget to 466 be balanced. At present, the balance is that farmers who have the misfortune of having foot and mouth disease confirmed on their farms will have their animals slaughtered and receive 100 per cent. of the market value for them, but that many more farmers who will probably be affected by the disease because they are in a restricted area and cannot market their animals will receive nothing.

I accept that the question of consequential loss is a minefield. For some time the Government have said that no Government have provided for consequential loss to be compensated, and that a decision to do so would set a precedent. However, these are unprecedented times for agriculture. We cannot ever have seen such a decline in the industry. There cannot have been a time when farmers have been subjected to so many disasters in such a short time, or when a consequential loss has rippled out to affect such a large area. We should consider measures that would be carefully targeted—a phrase that the Chancellor often uses—on areas affected by foot and mouth disease which will not receive compensation.

Mr. Bercow

The hon. Gentleman makes a lot of sense on foot and mouth disease and assistance to farmers, but was casual in his reference to the experience of this country outside the eurozone. Will he confirm that he does not think that short-term fluctuations in interest rates or the difficulties posed by an over-valuation of the exchange rate in any way constitute an argument for the permanent abolition of our national currency, given that under the terms of the treaty of Amsterdam, the European Central Bank is not merely entitled but obliged to ignore any representations from outside bodies about its conduct of monetary policy, and furthermore, that the treaty goes on to specify in article 108: governments of the Member States undertake to respect this principle and not to seek to influence the … decision-making bodies of the ECB or of the national central banks in the performance of their tasks. Is that not an affront to, and the antithesis of, democracy?

Mr. Breed

I do not agree with virtually any of that, to be honest. The situation is clear. Farmers and many people in my part of the world recognise only too well that being outside the euro has been a disaster. Many of their businesses have been affected. Had we had the opportunity to be in side the euro, they would not have been visited by quite so many disasters.

Support for those affected by foot and mouth disease is unbalanced: the present situation with respect to compensation is at best an anomaly and at worst a real injustice. So many people whose businesses are clearly affected will receive no compensation. To continue that anomaly or injustice would not be right. However difficult it may be—I suspect that it will be very difficult—the Government must decide to assist those businesses which have been affected by foot and mouth but which under the current arrangements will receive no compensation. Many of the good measures in the rural White Paper will be much more difficult to achieve if the economy in rural areas is further weakened.

There is another disappointment. The introduction of an early retirement scheme linked to a new entrants scheme could have assisted the agricultural sector. We have been promoting such an initiative for a long time. It can be no surprise to many hon. Members that a significant number of older farmers—especially tenant 467 farmers—are locked into their business. In the current circumstances, they cannot get out They are making almost no money and have no real assets to provide themselves with a decent pension fund, while other people have the skills, experience and enthusiasm—even at present—to take over some of those agricultural holdings and make a success of them.

It should not be beyond the wit of the Government—nor should it be extremely costly—to develop a scheme whereby those who are locked into a miserable situation can retire with some dignity and those who have the enthusiasm and will to get into the business can do so. Not only will that help to revitalise the industry: it will address a particular hardship, which I am sure the Chancellor wants to do.

Over the past three or four years, although I have heard much talk about venture capital for small businesses, no significant amount has gone into them. Most small businesses are undercapitalised: it is difficult for them to access affordable and sensible amounts of capital. The Government have announced several schemes—regional and national—to which the Secretary of State for Trade and Industry referred again today, but no significant progress has been made.

Small indigenous businesses, especially in rural areas, are still much in need of genuine risk, venture or even development capital, but there is no source for it. In many cases, the costs involved are small I realise that if a business needs capital of —50,000, the costs will be horrendous, but there should be some means of providing the small amounts that businesses want.

Mr. Hope

I wonder whether the hon. Gentleman has bothered to listen to any of the debates that have been held in the House during the past four years. The English rural development programme provides —600 million for rural areas, directly targeted on the small businesses which he claims have no support. Will he offer the House the facts about the support that the Government give to rural areas and small businesses, rather than misleading people by pretending that those programmes are not available?

Mr. Breed

The proof of the pudding is in the eating, and the actual number of investments is extremely low. Many of them are not much more than buy-outs, where there is an opportunity to sell out to a trading investment or to go on to the market. There are pitifully few investments of small amounts—between —50,000 and —200,000 partly because of the costs and partly because of the monitoring and the barriers around such schemes. However, small businesses offer a real opportunity for employment growth.

I want to deal with landfill tax. I support the principle of such a tax, but do the Government realise that the fly tipping that results is beginning to affect the countryside? Many landowners are subjected to indiscriminate tipping of rubble on their land. That is a direct result of landfill tax; people are not prepared to pay it, so they tip their rubbish on someone else's land. That is wholly reprehensible, and we need to ensure that it stops. Increasingly, local authorities are unable either to detect fly tipping or to pick up the rubbish. The problem is growing in rural areas.

Last year, measures were introduced on interest on late payment of debt, in order to improve cash flows for small businesses. Many of us were sceptical about exactly what 468 improvements would result; we felt that many small businesses would not charge their larger customers interest on outstanding debts. Recently, I examined the number of creditor days. It has not decreased; indeed, according to some reports, there has been a marginal increase.

Perhaps we should try another tactic: to name and shame those companies that persistently do not pay their bills—especially to small businesses. One way of doing that would be to insist that audited accounts include a note of debtors of 30 days, 60 days or more. We could then see which large companies persistently make late payments to their suppliers.

Mr. Jack

Is the hon. Gentleman aware that the exercise he describes is already undertaken by the Federation of Small Businesses? That information is already in the public domain.

Mr. Breed

The Federation of Small Businesses has produced the information, but it is not at present included in audited accounts. Accounts are audited for tax purposes, and I see no reason why they cannot provide information to allow us to identify the companies.

A pesticides tax has not yet been introduced, but it is hanging like a sword of Damocles above many people in the agriculture industry and is due to be considered in 2002. No one could possibly suggest that the industry is likely to be in good enough shape to bear a further tax by then. Would it not be more sensible—indeed, humane—to defer the tax for at least a year, or even two, so that the industry had the opportunity to recover?

Mr. James Wray (Glasgow, Baillieston)

I come from a poor constituency. At one time, we had the highest unemployment in Britain; 40 per cent. of my constituents were recipients of social security.

It really annoys me to listen to Opposition Members in this Chamber talking about fiscal terms and Red Books. The red book that I read did not bother about tax increases as long as they were made in the right place and went in the right direction. Our Chancellor has done a great job on the economy. We must never forget—we must never let the people forget—the fragmentation, the misery and the deprivation left by the previous Government. They raided the coffers; they fell off the Front Bench like snow off a dyke because of corruption and all the consultancies they reached out for. They were not interested in the poor. We are interested in the poor.

The Tories were given plenty of advice from their bible—The Economist—about their short-term strategy and their boom and bust, but they did not heed it. They laid the foundation stones of the economy in sand and it crumbled around them. We do not forget the people who are still out there—thousands of them—who were enticed by the former Prime Minister to take out equity, but who finished up having their houses repossessed, even though wives and husbands were still working to pay the money back. That is why the people of this country will never forget and will never return a Conservative Government.

I come from a family who lived—10 of us—in one room and a kitchen. I saw some of my family die of poverty—from tuberculosis and from sleeping in damp beds. That is why we must give all that we can. The 469 Chancellor made the right decisions; he is laying his foundation stones in concrete and he is spending his money on the right people—those who deserve it.

Is there anything wrong with giving to the poor? Is there anything wrong with a working families tax credit that takes account of the family situation so that children aged between one and 15 are given an extra —15 or —25? A family of four, with children aged 16 and 18, receive a further —26. Families can also receive a child care allowance, which is especially important for lone parents, who need it most. They can receive a grant of 70 per cent. of child care costs. That could be a lot of money for big families.

If that money had been available when I was born, we would have had much better quality of life. That is what a Labour Government are here to do. We are not here to get consultancies; we are here to build the economy to ensure that we decrease the gap between the rich and the poor. Let us not worry too much about taxation, so long as it is against the rich and gives to the poor. We, as a Government, must be a Robin Hood.

Mr. Breed

Does the hon. Gentleman agree that it is reprehensible that many of the families who went through the appalling negative equity and are just getting back on their feet are being chased by the banks, which, although they are making billions of pounds profit, want to try to recoup some of the negative equity with which those families thought they had dispensed?

Mr. Wray

That is why we must pay heed, and why we should write off the debt. We should tax the banks a bit more heavily and give the money back to the poor, who were robbed in the first place. The shadow Secretary of State did not mention or apologise for the previous Government. He never talks about the —28 billion deficit or the fact that 42p in the pound was paid in interest charges because of the economic mess that they left behind. How can the Tories appeal to the nation to be the Government again? I do not think that they will ever be in government this century.

Mr. Bercow

The hon. Gentleman talks about the importance of giving help to those who most need it. Will he therefore helpfully explain the justification for the operation of the children's tax credit, whereby two parents, each of whom earns —30,000 a year, are eligible to receive the credit, but where only one parent earns —40,000 a year, he or she is not?

Mr. Wray

Sometimes we do not get the particular economics correct, but if there is any anomaly, and it is brought to our attention, we will make a change and redirect the money if we can. It is difficult to have a universal tax with low-income people, but that will be tackled in the near future. I remind the hon. Gentleman that we will not forget what the previous Government did when they took power. We cannot forgive you for the fact that 3 million people were unemployed. I do not know why you cannot understand that a Government who have created the conditions for the lowest percentage of unemployed people for 35 years must be a success.

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. The hon. Gentleman is an experienced Member and should remember that he should use the third person when referring to another hon. Member.

Mr. Wray

The Opposition should know that we went through a difficult period, and I am only telling them that unemployment was never worse than when they were in power. Surely they are not against us spending millions of pounds more on the health service. We are talking about spending about —835 million on it in three years. One reason why we are doing so is that everyone knows that 3 per cent. more must be spent on the health service just for it to stand still. We hope to double that figure. That is because of the state that the previous Government left the health service in; they were not interested in nurses or sisters, or whatever. In fact, their White Paper said that they wanted to encourage accountants and business managers. We have to change all that. A lot of nurses left the health service because of that reconstruction, and we must encourage them back. The Government have said that they will spend —135 million on recruiting hospital nurses, which cannot be a bad thing.

Not enough money was spent on education when the previous Government were in power. There was overcrowding and composite classes, and children were sharing books, but things have changed now. We have decided that about —200 million will be invested to recruit extra teachers.

One of the most important things is that the Tories left a legacy of drug abuse, and it has taken millions of pounds to try to get rid of it. All kinds of people tried to attract some of the great financial resources that were put into drug abuse. An organisation called SCODA—the Standing Conference on Drug Abuse—was more interested in starting a federation so that that could control the finances. We must win the battle. I have heard hon. Members talk about harm reduction, but that is a backward step; we should invest the money to encourage all organisations—whether those involving teachers, ministers, priests, of ordinary fathers and mothers or brothers and sisters—to fight the problem. We have to deal with it; we cannot give in. We must be the winners. We must not be beaten by the minority—the drug dealers and peddlers.

I sometimes think that we do not pay enough attention to child abuse. We should do much more. Organisations outside the House know that it takes not only a great deal of time to get the perpetrators to court, but 10 or 20 years to discover the abuse. It should not take that length of time to help those children in care and protection who have been abused by housemasters and the various other workers in homes and other institutions. It is time to put our money into the problem and to change legislation to ensure that no one gets away with child abuse. We should change the legislation so that those who committed abuse before 1964 can be prosecuted. They should be treated in the same way as anyone who commits murder. There should be no restrictions on prosecutions for child abuse; they should be possible regardless of the date.

I want to raise one or two other issues, but I know that other hon. Members want to mention the many ways that people have gained under the Budget. I shall not take too much time because I know that they want to catch their trains and planes home. Once the Chancellor has made his statement, we always find that everything goes dull in 471 the Chamber and people want to get home. I simply say that the Government's direction on the economy is right. I hope that there will be more changes and that pensioners, lone parents and unemployed people will gain. My constituents and I are grateful that the Chancellor gave consideration to the poor in the Budget.

Mr. Michael Jack (Fylde)

It is interesting to follow the hon. Member for Glasgow, Baillieston (Mr. Wray) and to hear somebody speaking on a platform of compassionate socialism. He is right to speak about his constituency and Scotland, and to remind us of some of the real problems that have beset post-war Governments for a long time. I take issue with his suggestion, however, that the Conservative Government cared nothing for the national health service. Our rate of real-terms increase in health spending was ahead of that of the early years of this Labour Government.

The hon. Gentleman was right to alert the House to the scourge of drugs. As a former Home Office Minister responsible for drugs policy I can tell him that we took that matter just as seriously as do this Government. Our expenditure of —500 million a year was an effort to tackle the problem. I share his concern that Governments of recent times have not yet got to grips with this scourge on society and, more importantly, on the individual. The effect on criminality and crime is there for all to see. I join him in wishing this Government and Ministers well in their endeavours to fight this scourge of modern living.

In the Budget there is some discussion about further measures to help the inner city. I applaud that and support anything that helps to clear up the mess that still exists in some of our great urban centres. I remind the hon. Gentleman that it was the last Conservative Government who maintained a high level of investment in Scotland. That is why Scottish industry is restructured, and Scotland has the benefits of silicon glen and the high levels of employment that go with it. It is fair to criticise the Conservative Government just as we criticise the present Government, but to say that we did not care is utterly to ignore the facts of the matter.

I was delighted to be here to listen to the Secretary of State's opening comments and his announcement of help for working families who work anti-social hours, particularly lone parents. At long last some help will be given through the various tax credit mechanisms. I am sorry that he could not announce today what that help would be. I have letters going back over the past 12 months to the Treasury and the Department for Education and Employment on this very subject. I wish him well, but ask him to speed up the consultation on his announcement. I have constituents working, for example, in the care homes sector who would much appreciate child care help during what are termed anti-social hours and who would be interested to know the outcome of the consultation exercise.

I also welcome the measures to assist families in general and small businesses in particular, especially with reference to the completion of their tax returns. I will return to the theme of tax simplification.

So far much has been made of the contrast between the good economic situation that is seen from the Government Benches and the difficulties that pervaded part of the premiership of my right hon. Friend the Member for 472 Huntingdon (Mr. Major) and his Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). The Secretary of State for Trade and Industry did not pay as much attention as he should have done to the natural economic cycle. All Governments hit difficulties from time to time. I commend to him the historic data in the Red Book which show what a mess previous Labour Governments made of their situation and the problem that the Conservative Government had in clearing up their mess before we could make progress. Yes, we had difficulties in the early 1990s, but prior to that we had got borrowing down to a very low level. We exercised properly fiscal control and imposed monetary disciplines. My right hon. and learned Friend again did that once we had the economy back in hand.

It is interesting that the Financial Times review of the Budget points out the relative luck that this Chancellor has had in having a benevolent economic situation. It points to: A seven-year run of output growth averaging 2.9 per cent a year, combined with low inflation. The Chancellor could not have had the low inflationary levels which he enjoys had it not been for the work done by my right hon. and learned Friend to put in place the foundations to give us a low inflation economy. It is said that interest rate decisions take about 18 months to come through. We hit the inflation target set by my right hon. and learned Friend at 2.5 per cent. on the nail on the month, and it is noteworthy that in this Budget this Chancellor has sustained my right hon. and learned Friend's inflation target. Equally, we have had a seven-year run of output growth, so by definition three of those years were ours. I contend that much of the benefit that the Government have put before the House in the Budget was due to my right hon. and learned Friend's prudence. Part of the benefit that this Government have enjoyed in terms of their record on public expenditure comes from the fact that they took over the former Government's spending plans and went one better: they were even meaner and did not spend the money which we had left in place. Then they turned round and criticised those plans for not providing the resources which should have been spent.

Mr. Andrew Miller (Ellesmere Port and Neston)

I appreciate the honesty and integrity of the right hon. Gentleman's remarks. Is he pressing for a change in the shadow Chancellor to bring back the sanity of the right hon. and learned Member for Rushcliffe (Mr. Clarke)?

Mr. Jack

No, my right hon. Friend the shadow Chancellor has shown in his recent remarks a proper line of intellectual activity to probe the question of the level of the inflation rate. It is right to test existing assumptions, even if at the end of the day one concludes that the existing assumptions are correct. If we are to sustain a low inflation economy, it is right to look at the underlying implications. Now is not the time to have a debate about that, but if the hon. Gentleman cares to have one in Westminster Hall, I would gladly attend.

The Financial Times article goes on to provide a further interesting insight. It states: Mr. Brown has guided the economy well in a sunny period. But he cannot control the weather—even if he would like to imply as much in the euphoria of a pre-election period. 473 That gives us an important perspective on the Budget and the substantial increase in public expenditure which is included in the Red Book. The article reminds us that total departmental expenditure limits are set to rise at an annual rate of 8 per cent a year between 1999–00 and 2003–04. If the sun shines those numbers can be sustained, but the true test of any Chancellor—and of this one if he is lucky enough still to be in office after the general election—is how he deals with the situation when the going gets tough. Any Chancellor can look good with lots of cash coming in, a self-imposed corset on public expenditure and some rather nice numbers on borrowing. Previous Conservative Chancellors have shown their metal in getting the economy back on the rails after a period of difficulty.

The Financial Times is interesting in its analysis. It states: Mr. Brown ducks the question whether such a rate of expansion is sustainable, even assuming steady economic growth. Of course it cannot be over the long term, unless taxes are to be raised. The article then rather teasingly says: That is a problem for another Budget in another parliament. It is not, in the sense that the nation is likely to have to go to the polls before another Budget. Therefore, the question of the sustainability of the Chancellor's much proffered public expenditure position is not for the next Parliament, but for here and now.

Mr. Breed

If the right hon. Gentleman is saying that the last five years of the Conservative Administration and the first four of the Labour Administration are two parts of the same economic cycle, would he have repaid —34 billion of the original debt that was run up during the Conservative period?

Mr. Jack

I counsel the hon. Gentleman to go back through the historic data in the Red Book. He will observe that towards the end of the 1980s we paid back debt because public finances were good. Whether paying back —30 billion odd is the right thing to do with the money is an interesting point. There is some conjecture. It could have been used to do more to help with savings.

The most that the Budget did for savings was to leave in place the current levels in the complex individual savings account system. Instead of examining ways to encourage improvements in the saving ratio in the way that my right hon. Friend the shadow Chancellor has done, the Chancellor ducked the issue. He ducked the issue as to whether he could have used creatively some of the fiscal surplus to encourage more private investment, in particular, in new activity in the economy. That is sad, given the amount of money that the Chancellor had and the things that he could have done with it.

In The Daily Telegraph, Ian Cowie, its personal finance editor, wrote an article under the headline, "Don't be misled, the main winner will be the taxman". He points out the massive increase in tax take that has occurred as a result of the Chancellor's activities. Since the Government took over, they have received a further —43 billion of extra receipts of one sort or another. As my right hon. Friend the Member for Richmond, Yorks (Mr. Hague) said yesterday, that is effectively the equivalent of 10p up and 1p down.

474 It is a very small people's dividend for the hard work of the hard-working families of Britain to have such a scant reward, because no Chancellor can deliver all that he claims. Given the sum total of the parts of the British economy, the peoples dividend is very limited.

I went back to look at the Red Book that I signed off when I was in the Treasury. In the years 2001–02, we pencilled in Government receipts of —370 billion, but the projection in the current Red Book for the same period is just short of —400 billion. That again shows the increase in the tax take that has occurred.

The result was even more fascinating when I searched for the table in the current Red Book to see how the Government were dealing with the increase in the personal tax burden. 'Put up taxes" are the words that the Chancellor hates to utter. I looked in our Red Book for the figures for the year 2001–02 and I noted that the figure for income tax as a percentage of gross domestic product that we had pencilled in was 9.8 per cent. The current Red Book shows that that figure has gone up to 11.3 per cent. of GDP, but what is missing is the comparator with last year's Red Book. Here the Government look seriously embarrassed. The telling point is that, for the period 2001–02, last year's predicted figure for income tax as a percentage of gross domestic product was 10.8 per cent. The burden of income tax is rising whatever those on the Treasury Bench may say.

Mr. Bercow

All my right hon. Friend's points are telling. Does he not agree that it is now becoming clear that what Labour meant when it said that it would be a people's Government was that people who are married, people who pay mortgages, people who own cars, people who have the temerity to put petrol in them, people who acquire savings, people who possess pensions and people who run businesses would all soon face significantly higher tax burdens as a result of the depredations of this Administration?

Mr. Jack

Indeed, and to build on my hon. Friend's salient point, families with children may have had some recompense, but all the married couples, who have lost the married couples allowance, home owners, who no longer receive mortgage interest relief at source, and anyone who runs a car will all know just how hard they have been hit by the Government.

I commend anyone to examine table C9 in the Red Book and compare last year's projections for the percentage of GDP taken by income tax with the current position. The figures for social security contributions may show a more level picture, but more telling is the rise in all tax receipts when compared with last year's projections for them as a percentage of GDP. The Government are condemned by their own figures as a high-tax Government.

I want also to consider the issue from a personal point of view. One of the arguments that the Government have used to explain the increased tax receipts is that more people are in work. Yes, that may be so, but the 1999 edition of the Inland Revenue statistics contains some interesting facts. In the financial year 1997–98, a fraction over 17 million people were basic rate taxpayers. The Government claim that they have created 1 million extra jobs, so one might assume that there should now be 18 million basic rate taxpayers. However, the projection 475 for 1999–2000 in the document is that there will be 20.8 million taxpayers. Not only are the Government receiving more tax receipts, but they have now put more taxpayers into the tax net.

That is equally true for higher rate taxpayers. I am sure that those on the Treasury Bench will be familiar with the contents of table 3.4 of the Inland Revenue document that points out that we already have 635,000 people paying the higher rate on incomes of only —30,000. Many middle managers pay higher rate tax already.

With the public finances in better order,