Budget Resolutions and Economic Situation
Mr Paul Goggins (Wythenshawe and Sale East, Labour)
It is a pleasure to follow David Burnside, although I do not share entirely some of his criticisms of the Budget. Yes, we have an increase in national insurance contributions—it was announced last year and it will be implemented this month. Yes, additional borrowing is included in the Budget statement, but this borrowing is certainly prudent when compared with the borrowing that took place in the early 1990s. It is well within the rules that my right hon. Friend has already set out. Given the military action in Iraq and the difficult global economic downturn, I think that any fair analyst would say that the Budget is a fair one that was announced at a difficult time.
I shall concentrate on three particular areas. First, there is a skills gap in our economy. It is quite breathtaking that in the United Kingdom, which is the fourth largest economy in the world, one in three adults lacks basic skills or NVQ level 2. It is estimated by some that a third of the productivity gap between the United Kingdom and the United States and some of our leading European partners can be attributed to this skills deficit—yet we know that high skills represent the future for our economy.
I warmly welcome the announcement of a £130 million extension of employer training pilots. The pilots were announced last year, and about half a dozen are already under way in various locations, including Greater Manchester, which includes my constituency. The pilots mean that employees who lack basic qualifications are paid to receive basic or level 2 training, while employers are provided with a level of compensation. For small businesses, that is about one and a half times the wage costs, to make up for the loss that they incur when workers go into training.
In Manchester, where we started the pilot in September 2002, the target for the first year was to get about 2,200 people on to level 2 training. That target was exceeded after only about eight months. We already have 2,500 people into level 2 training, and 500 employers are involved. This is reinforcing the sense of partnership between training providers, businesses and business links, which is so important. In view of the Chancellor's announcements last Wednesday, we are able to revise those targets. By August 2004, we expect to have 5,000 people engaged in level 2 training, 1,000 in basic skills training and some 660 companies actively engaged in the programme. The programme will increase not only productivity and competitiveness, not least in the north-west, but the prospects and earning potential of the individuals involved. Typically, those with NVQ level 5 can expect to earn three times more in wages than those with no qualification at all.
The measure will sit alongside greater flexibility in the way in which advice and benefits will be delivered, greater access to capital, particularly for small businesses that depend on the knowledge economy, and, I am pleased to say, the review of the minimum wage requirements as they apply to 16 and 17-year-olds. It will extend the legal routes for people who want to come to this country not only to earn but to contribute to the economy. All those measures are welcome.
The child trust fund has not been mentioned in today's debate, but is important. We know that the Government have already done a lot to reduce poverty, to provide greater opportunity through work and to redirect cash to the least well off in society. Many families, as a result of the working tax credit and other measures, will be substantially better off, but tackling poverty is about not just income distribution and redistribution, but building the asset base and the capacity of individuals and the wider community, particularly those people who have been excluded from society and the wider economy.
We are told that there will be a £250 injection of cash into the fund when a child is born. The amount will be £500 where the family is entitled to the full amount of child tax credit. The state will, at certain key points, perhaps at the age of five, 11, 16 or whenever, add to the fund. Family and friends can make additional payments up to a maximum of £1,000 a year.
The Chancellor said on Wednesday that he would announce further details in the summer, but I was pleased that, in a recent survey, 83 per cent. of parents said that they would consider making additional payments into the child trust fund. They thought that it was worth while. I have looked at reports from Virgin Money and PricewaterhouseCoopers. It is interesting that they say that the fund could produce massive benefits for children in the long term. Virgin Money says that if an additional £10 a month were paid during the 18 years of the fund following the initial £500 outlay to a child in a family entitled to full child tax credit, it would be worth more than £5,000 when the young person became 18. PricewaterhouseCoopers has estimated that, if every year the maximum £1,000 were contributed, that fund could be worth £26,000 by the time the young person became 18.
We all know that wealth is concentrated far too much in the hands of the very rich. Meantime, one in 10 households in our country have no assets whatever. I believe that the child trust fund could begin to change that, promote saving as a good thing—a necessary thing—for people, provide something that young people moving into adulthood can draw on, and reinforce personal responsibility.
There is a balance to be struck between personal responsibility and collective responsibility. Perhaps in the 1960s and 1970s, we tended to veer too much towards the collective approach. Certainly in the 1980s and 1990s, we veered far too much towards the individual approach and failed to give people the resources that they needed to find a way through. I believe that the measure will be a significant development in providing opportunity for self-help and self-reliance, which is a good thing and vital to healthy communities.
I want to make one final point about international development, which my right hon. Friend the Secretary of State for Trade and Industry mentioned. It is interesting to note that international development was once barely a footnote in Budget speeches, yet now it is a central feature as we strive—