Budget Resolutions — Amendment of the Law

Part of the debate – in the House of Commons at 5:33 pm on 9 April 2003.

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Photo of Andrew Mitchell Andrew Mitchell Conservative, Sutton Coldfield 5:33, 9 April 2003

I greatly respect the sincerity of Mr. Tynan, although he will understand that I intend to take a rather different view of the impact of the Budget. I draw the House's attention to my interests, which appear in the Register of Members' Interests.

There are aspects of the Budget that all hon. Members and indeed everyone in the country should welcome. I particularly welcome what the Chancellor has done for overseas aid, his announcement today about the United Nations fund, which will get extra support, and his attack on illiteracy and poverty in Africa. Those are good measures from a Chancellor who has consistently driven forward the frontiers on those matters and has always been good enough to pay tribute to John Major for his work when he occupied the same office. Therefore, there are many good things in this Budget. The baby bond is an interesting idea. It sounds like a bit of a gimmick but I would be interested to know from Ministers in due course whether it will be a funded baby bond in discrete accounts. Those matters will no doubt be explained and be of interest.

A lot of things were not in the Budget that should have been. Although the Chancellor made it clear that he was going to take measures to help the poorest pensioners in our society, he did not say anything about the grave pension crisis that is affecting many of our fellow citizens. I hoped that he might say something about the failure of stakeholder pensions. They are manifestly a failure now, and a bit of humble pie would have been nice—an admission that his idea had not worked, and an assurance that there would be measures to help.

We heard nothing about the chaos on the interface between state provision and private saving for pensions. We also heard nothing about the confusion caused to independent financial advisers trying to advise less well-off people how much private provision to make: they are in an impossible position.

I was amazed that the Chancellor said nothing about individual savings accounts—ISAs—as the Government rebranded the personal equity plans, or PEPs, set up by the Conservatives. What a pity that he did not double the amount that people could save, which would have sent a clear signal. ISAs were meant to be a way of allowing the Treasury to forgo tax, the profit being retained by those investing in them. During a time of falling markets, however, the Government have been saving money that they would otherwise have had to pay out in capital losses. The lack of encouragement to savers represents a big missed opportunity.

I can do no better than quote a former pensions Minister, Mr. Field. In an article in The Sunday Telegraph, he said:

"All too many families stand on the brink of financial disaster as they see their pensions snatched away from them. Failure to act will be punished by voters as surely as markets punish cuts in dividends. The Government cannot continue to hide behind the claim it is consulting; it has been doing that for the past six years. What is now desperately required is action."

That was said not by a Tory, but by a former Minister in this Government. The Government would be well advised to heed his words if they will not listen to Conservatives who are saying exactly the same.

I noted the Chancellor's full and staunch defence of expenditure on the war. Defence is undoubtedly one of the areas in which he will have to spend more. We are now spending a lower percentage of GDP on defence than we have spent at any time since the 1930s. It is the Government's first duty to defend the realm, but it is hard to believe that, in the uncertain and insecure world that we currently inhabit, we can get away with spending only 2.3 per cent. of GDP—half of what we spent in 1979. There will be no more peace dividend; we will have to spend a great deal on homeland security. The Chancellor muttered that he would increase that budget by £200 million, but we shall have to spend far more. We shall need to beef up our reserve forces to deal with new threats and uncertainties. The United States is having to spend a huge amount on the high-technology weaponry that must now be developed, and its example should be heeded. The Government must pay more attention to what is happening in our own country and economy.

Let me return briefly to my point about the omission of pension measures. It is typical of the Government that they saw fit to replace the chairman of the Labour party immediately, but have not yet seen fit to replace the Minister for Pensions. At a time when the pensions industry is in crisis, the Prime Minister cannot even be bothered to appoint a Minister. That is pretty disgraceful. I also greatly regret the Chancellor's failure to take the advice of many people, including Conservative Members, and suspend the £5 billion a year raid on pension funds. By doing that he could have sent a signal that he understood the industry's current difficulties.

We have heard many cerebral speeches, especially from my right hon. and hon. Friends. My main point is this. My constituents have paid a huge amount of extra tax. They took the Prime Minister at his word when he said "If you pay more tax, you will get world-class public services". However, my constituents have been comprehensively deceived by this Government. They have paid more tax, but the result has been no improvement at all in the quality of public services, as I shall explain.

The truth is that the Government have been spending the hard-earned money of taxpayers such as my hard-working constituents and other hard-working people throughout the country by the billions; however, there has been no improvement in public services. There have been 53 tax rises and a clear breach of faith in the raising of national insurance, which was announced last year but is coming in now. Let Ministers square that with their promise not to raise income tax. This is mere sophistry; everyone will be able to tell from this month's pay packets that this is nothing other than the equivalent of a rise in income tax. As hard-working families lugubriously study their April payslips and their greatly increased council tax charges, they will see that the rise in national insurance and council tax is the equivalent of about 7p on income tax. Tax, as a percentage of gross domestic product, has gone up: it was 34.9 per cent. under the Conservative Government, and now it is 37 per cent. Not only have taxes increased; they will continue to increase. A group of independent forecasters, blessed by the Treasury, agrees that taxes will need to increase yet further, but it also points out that tax money is being spent inefficiently—a point to which I shall return.

Business has warned the Chancellor about the impact of these measures. I listened with increasing incredulity to Mr. Plaskitt, who told us that businesses in his constituency understand the increase in national insurance and hope that the money will be spent well. I surveyed 1,200 businesses in Sutton Coldfield, and I read the results of that survey with great interest, as any Member would. Not one of the respondents said what businessmen are apparently saying in Warwick. Company profits are at their lowest point for 10 years, yet the Government are loading business with their jobs tax—a £4 billion increase in taxation. The Chancellor boasts about having fuller employment, but as my right hon. Friend Mr. Redwood said, there is every conceivable danger that as a result of this jobs tax, Britain will have a very different employment market in the next 18 months.

The CBI has spoken of the "dire consequences" of this Government's policy towards businesses, and it warns of a total cost in tax and red tape of about £15 billion. The director general said:

"Businesses gave the Chancellor the benefit of the doubt in 2001 and have withdrawn their support in droves."

The head of the Engineering Employers Federation spoke of the

"terrible mistakes by the Chancellor", and the director general of the British Chambers of Commerce warned of the terrible timing of these national insurance rises. On top of that, the International Monetary Fund has criticised the Chancellor's forecasting, and there has been criticism from the European Union. So there is no doubt that there has been a tremendous increase in the level of tax and red tape on businesses, as well as increases in tax for hard-working families.

Things might not be so bad if the Chancellor got his forecasts right. As my right hon. Friend Mr. Dorrell said, the Chancellor has a lamentable forecasting record. In 2001, he said that public sector net borrowing during this year would be £1 billion; in March 2002, his estimate had risen to £11 billion; by last November, it was £20 billion. In the 10 months to February of this year, Government revenue rose by 1.5 per cent., compared with an earlier forecast by the Chancellor of 4.2 per cent. Last March, he predicted that the FT all-share index would grow in line with money GDP—in other words, at 4 per cent. Of course, since then, as we know, it has done nothing of the sort; rather, it has lost a third of its value.

There have been massive rises in tax for hard-working families and businesses, along with huge increases in regulation and red tape, but no delivery on the Prime Minister's much-vaunted promise of world-class public services.

A relatively new, non-party-political academic think-tank called Reform, which is establishing itself as Britain's leading body in the field, set up a commission on the reform of public services under the highly respected Sir Steve Robson. The commission concluded:

"Britain has some of the worst public services of any advanced country in the world. The Government's answer is to spend more money on them and to increase taxes. In the nine years to 2005/06, public spending is being increased by £203 billion to £512 billion—equivalent to an extra £100 every week for every household. This approach is programmed to fail."

That is the conclusion, and failing it certainly is.

Let us consider the health service, whose budget is up by 20 per cent., whereas its activity is up by less than 2 per cent. For the first time in NHS history, we have more bureaucrats than beds. There is a glimmer of hope in the Government's policy on foundation hospitals. The Secretary of State for Health and the Prime Minister understand why such structural reform is essential, but their party certainly does not. It may be, as with the war, that an alliance will develop between this side of the House and the Prime Minister and some of his Blairite colleagues to help to deliver the foundation hospital policy, but if they do so, it will be without the support, or even the passive acquiescence, of Labour Back Benchers.