I welcome the opportunity of this resumed debate on the Budget to emphasise what my right hon. and learned Friend the Chancellor has made clear in each of his Budgets: that the single most important contribution that the Government can make to fostering growth and improving competitiveness—both of which are essential for business success and national prosperity—is to provide a stable macro-economic background. That means controlling public spending, achieving and sustaining low inflation and keeping Government borrowing and taxation low. Hence we have a Budget that works towards those objectives: Government borrowing falling to zero in the medium term; getting public spending to below 40 per cent. of national income; getting inflation down below 2.5 per cent. and keeping it there; and progress towards a 20 per cent. basic rate of income tax. The Budget that my right hon. and learned Friend delivered on Tuesday enshrined all of those objectives. It leaves people and business with more of what they earn and spends more on what they care about.
The Budget reaffirms our overriding commitment to providing the framework and conditions under which enterprise and wealth creation can flourish. It cannot be said too often that businesses and individuals, not Governments, create wealth. We need to encourage and reward their hard work and prudent savings, which are the foundations for future investment.
All 26 million income tax payers will gain from the income tax cuts that my right hon. and learned Friend announced on Tuesday. Savers will benefit from the reduction, from 25p to 20p, of tax on savings income. The package of help for business announced by my right hon. and learned Friend addresses business concerns directly, which is perhaps why it was so warmly welcomed by the Confederation of British Industry.
On the concerns of business, why has the right hon. Gentleman reneged on the commitment given by his predecessor to reduce the Post Office's external financing limit and instead doubled it so that an extra £400 million will be taken out of the Post Office? That will increase prices for the ordinary customer and massively restrict the Post Office's ability to modernise and invest in new sorting equipment and so forth. Is that not just another hidden tax and an example of the Government giving with one hand and taking away with the other?
My right hon. Friend the Deputy Prime Minister did not give the firm commitment that the hon. Gentleman suggests. He gave an indication of what the Government's aim would be and expressed the hope that it would be possible to make progress. We have indeed made progress with the arrangements that my right hon. Friend set out last May.
We have abolished the capital expenditure limit with its associated scrutiny of individual projects. We have a new corporate planning process. We have said that we shall consider moves by the Royal Mail into adjacent markets and that we shall continue to build on that progress. It is surely beyond reason to expect that the Post Office, a major organisation, should be entirely exempt from the sort of budgetary pressures that afflict every other public service and Government Department. That is the approach that my right hon. Friend took.
I am probably testing the right hon. Gentleman's patience, but may I remind him that his predecessor imposed an external financing limit for the coming financial year which the right hon. Gentleman has now increased by £120 million? The Post Office cannot borrow on the open market because the Government will not let it. It has to invest from its own resources. Why is the right hon. Gentleman denying it the ability to do so and therefore denying it the ability to compete in Europe and become the best Post Office in Europe, not just the best Post Office in Britain?
We have an extremely good record on the performance of the Post Office. It is certainly not being starved of investment. It is an organisation which is spending, and should have the scope to continue to spend, at double the rate that it spent when the Government came into office. At constant prices, it spent a total of £800 million in the five years Labour was in power. Between 1989 and 1994, that figure increased to £1.7 billion. We have a good record on the Post Office and I am anxious to build on it as soon as circumstances allow.
I shall now revert to the benefits for business that my right hon. and learned Friend the Chancellor announced in his Budget. We have cut employers' national insurance contributions by £500 million a year from April 1997 and we have cut the maximum real increase in business rates under the relief scheme by 2½ per cent. compared with last year's Budget, but the request that I hear most often from business is for low inflation.
All the major business organisations called for the safeguarding of the stable macro-economic environment that the Government have put in place. We have set a firm target for underlying inflation and we remain resolved to drive it down and keep it down. Inflation has now been below 4 per cent. for more than three and a half years and below 3 per cent. for much of that time. That is the best performance for 50 years. We are breaking the inflationary culture that the policies of the Labour party did so much to engender.
The stable and profitable climate for business that we are delivering is the surest way to encourage investment in our economy, but we have also been engaged in a programme of long-term structural change to the United Kingdom's economy. It involves reducing burdens on business, extending the scope of market forces, promoting competition at home and abroad and helping business to help itself.
We have at all times been concerned to create an economic climate that encourages and rewards enterprise. We recognised long ago the importance to our economy of a thriving small business sector. It is the backbone of our economy and the engine of growth and new jobs for the future. Today, there are more than 1 million more small businesses than there were in 1979.
Small business remains at the heart of our agenda, where it has always been. While the Labour party was opposing enterprise—or, as now, simply talking about it—we have, year after year, brought in measures to help small business. Through changes to PAYE, national insurance, income and corporation taxes, VAT, accounting and auditing requirements; and with loan guarantees, venture capital trusts and investment schemes and a host of other measures, we have shown our commitment to small business and we will continue to do so.
We have invited small firms representative bodies to organise a series of conferences to involve small businesses more directly in generating future policies to help them. We are participating fully in that programme, which will culminate in a national conference to be held in London next March.
We have established a new team of small firms Ministers across Whitehall. They are responsible for ensuring that the interests of the sector are taken into account in the development of all aspects of Government policy. The Budget contained a wide range of measures further to boost small businesses and enterprise. It cut taxes on profits. The reduction in the small companies rate of corporation tax will help 300,000 small companies, while the cut in the basic rate of income tax will reduce the tax burden on a very large number of unincorporated businesses.
The Budget helped small firms with the cost of business rates following revaluation. More than 800,000 smaller properties will benefit from the maximum real increase being cut from 7½ per cent. to 5 per cent. It cut the qualifying age for capital gains tax retirement relief, thereby encouraging and rewarding entrepreneurship, and significantly extended the threshold before which assets will be liable for inheritance tax. It simplified the tax system and raised the VAT threshold.
However, it is not just through the taxation system that we are helping small business. We are also putting in place the most extensive and effective infrastructure to assist small business that the country has ever had. Business Link is a central element in our strategy to help small firms. It is reaching out to companies with a will to grow by providing long-term support tailored to the needs of individual firms. For the first time, local firms have a simple route to a comprehensive range of high-quality, integrated business support services in areas such as export planning, finance, design, innovation and modern technology.
More than 70 per cent. of the Business Link network is already in place, and by next April we expect some 250 outlets to be open, covering the whole of England. Scotland and Wales are developing similar networks known as Scottish Business Shops and Business Connect Wales.
The President of the Board of Trade has been talking at some length about all the help that the Government are giving small business. Does he include in that the proposal to introduce substantial penalties on employers who employ illegal entrants? Will not the inevitable consequence of that measure be that many small business people, fearful of such penalties, will refuse to employ anyone who comes from abroad, particularly anyone from an ethnic minority?
I can assure the hon. Gentleman that, as with all the other measures that the Government introduce. the particular circumstances of small businesses will be taken into account.
Business has already given Business Link an overwhelming thumbs up. More than 4,000 businesses a week are using the network, and 95 per cent. of customers surveyed have expressed satisfaction with the service. The Budget provided funding to enable the Business Link network to be completed. The Budget has also allowed me to increase the funding for its services so that it can meet the demand from business for integrated, world-class business support services.
Bad regulation bears down disproportionately on small firms. Business men and women must be free to concentrate on creating wealth rather than filling in forms. We have sought out unnecessary regulations which raise prices, destroy jobs and stifle innovation and choice. Business has been brisk. We have found more than 1,000 such regulations and we shall have amended or repealed more than half of them by the end of the year, but we are by no means content to rest there. We are determined to continue to look positively at deregulation, particularly where regulation impinges on small business.
We shall continue to oppose the imposition of new burdens on small business. The policies of the Labour party—the national minimum wage, the social chapter and its payroll tax—would place intolerable new burdens on small business. It is clear that the needs of small business are the last thing on Labour's mind.
Deregulation and our policies to encourage enterprise have been essential elements of our long-term agenda to transform the competitiveness of the British economy.
The Government's privatisation programme is also a part of that agenda, Privatisation and liberalisation have revitalised huge swathes of the economy that lay moribund under state ownership. The success of our policies is reflected by the increasing number of countries of all political persuasions which are now following our lead. It is only in the British Labour party that abject short-termism and socialist dogma still prevail.
What is the Labour party's response to the growing success story? Its response is to seek revenge in the form of a windfall tax. At the time of the utilities' privatisation, the Labour party claimed that they were doomed to failure. Now that they have achieved greater efficiencies and success than Labour thought possible, Labour will penalise them with a windfall tax—which would be unfair, capricious and penalise success. It would also be retrospective.
Retrospective taxation destroys incentives to improve performance and make profits. If there are no profits, there are no funds for investment. If there is no investment, the quality of services in the utilities will be under threat and consumers will end up facing price increases rather than continuing to enjoy the downward trend in prices. Consumers would suffer as the quality of services fell and their cost rose.
I shall provide figures on prices in a moment. For the moment, let me continue on the topic of the windfall tax to which the Labour party is so committed. Indeed, it is one of the few identifiable commitments that we have managed to get out of the Labour party.
The Labour party implies that the windfall tax is a free tax and that no one will get hurt. There is no such thing as a free tax. I have already mentioned the cost to consumers of the tax, but it would also be a betrayal of all the investors in the privatised companies, because they would have to pay for it. It would be a tax on millions of small individual investors. It would be a tax on the pension funds and the life assurance companies on which individuals rely for their future security. They are the people who would be betrayed by the Labour party, and all because Labour needs to find money to finance its desires for higher spending. A windfall tax has nothing whatever to do with fairness.
A windfall tax is by definition a one-off tax. It cannot be used for recurring spending programmes, yet the Labour party plans to spend the proceeds of the tax not only year after year, but on 10 separate policy commitments. The Labour party's sums simply do not add up.
Let us examine the successes of the privatised industries, which Labour policies would put at risk. The regulatory system has turned the past profits of the utilities into price cuts for consumers. Telecommunications prices are down more than 35 per cent. in real terms since privatisation. With liberalisation and growing competition, customers can expect to continue to benefit from lower prices. Domestic gas prices, excluding VAT, are down more than 23 per cent., and industrial gas prices are down 40 per cent. since privatisation. The deregulation of the gas market, which comes on stream next year, will mean that customers can expect prices to fall further still. Domestic electricity is down by 7 per cent. Next year, through tighter new price controls, the flotation of the National Grid and the phasing out of the nuclear levy, customers can expect, on average, about £90 off their bills.
Our telecommunications, electricity and gas prices for industry are among the lowest in Europe, and they are helping industry in this country to win. The privatised companies are delivering not only lower prices but better services. More than 95 per cent. of British Telecom's telephone boxes now work, and there are 50 per cent. more of them. Before privatisation, 250,000 people were waiting to have a telephone installed; now there are no waiting lists. Utilities now guarantee standards of service, and their guarantees are backed up by compensation. They have codes of practice on the services that they deliver to elderly and disabled customers.
The taxpayer has also enjoyed benefits from privatisation. Under the Labour party, nationalised industries cost taxpayers £50 million a week, which was more than £120 a year for every household in the country. Today, the privatised utilities contribute £55 million a week to the Exchequer.
The President of the Board of Trade has not mentioned the privatised water companies. What would he say to Severn Trent Water which, the day before the Budget, announced an increase in profits of 75 per cent. to £160 million, but offered its customers a rebate of only £4 a year? That is not value for money for the customer.
The hon. Gentleman seems to overlook the fact that the water industry has for a long time needed increased capital investment. Like all publicly owned utilities and nationalised industries, it has been starved of resources over the years. It is now in a position to raise the necessary money through the private sector and in the market. Yorkshire Water plans to invest no less than £2.5 billion over the next 10 years. Such an upgrading of the system could not have been contemplated under the previous arrangements, but can be now.
The privatised utilities have benefited not only consumers, shareholders and the Exchequer, but the economy. The privatised industries are investing in modern infrastructure that will benefit Britain for decades to come, and they have had an unparalleled record on investment since privatisation. More than £25 billion has been invested by BT on modernising the network and installing new technologies, and more than £4.5 billion was invested in telecommunications last year. Fifteen billion pounds has been invested in water to date, which answers more specifically the question asked by the hon. Member for Sherwood (Mr. Tipping). Our water companies are now delivering some of the cleanest water in Europe. By comparison, under the Labour Government, capital investment fell in electricity, gas, telecommunications and water.
Against that background, it can be said with certainty that independent regulation of the utilities. operating at arm's length from the Government and with competition introduced wherever possible, has worked well. It provides incentives for companies to improve their performance and mechanisms to ensure that customers benefit from the improvements. The regulators have also required the utility companies to meet demanding new standards of service. As a result, customers have benefited in respect of price and quality of service.
There is never a shortage of ideas for changes to the regulatory system. Where those changes would help the regulators with their job and improve public understanding of what is being done, the regulators themselves are quick to respond.
The regulators have wide powers under existing legislation to introduce changes to regulation, but they are all putting increasing emphasis on consultation before taking major decisions. They actively encourage public debate through consultation papers, explanatory reports and discussion at conferences and other open occasions. The wider involvement of interested parties raises the quality and integrity of decision making as the regime develops.
Some of the regulators have appointed, or are considering the appointment of, groups of advisers to help with specific issues or for continuing advice. That is a sign of a flexible and responsive regulatory system. In addition, as competition develops—for example, in the telecommunications market—the regulator seeks to remove detailed interventionist rules. That will allow companies to respond more flexibly and innovatively to customer needs and market developments.
The current structure is highly adaptable, so there is at present no case for fundamental change. As I said, the regulatory system is in an evolutionary phase. The process will no doubt continue, and rightly so. The Government will certainly continue to keep the system under review to ensure that it reflects the developing market.
As the system evolves, however, it will build on a record of solid achievement. Independent regulators and increasingly tight price formulae, with an incentive element built in, have been delivering impressive results to customers and developing impressive utility companies at the same time, but competition rather than regulation is the key to even greater improvements.
There is no doubt that there is scope for more competition and, therefore, more consumer choice, especially in the energy and water sectors. Competition between suppliers is already a fact of life in telecommunications and for medium and larger users of electricity and gas. It has produced clear benefits, which are important for the international competitiveness of British industry.
We are determined to press ahead with the further opening up of the markets. The first phase of the introduction of competition to the domestic gas market will take place next year, with full competition in 1998. 'The electricity industry is also preparing for full competition in 1998. Also in 1998, all users of electricity and gas will have the opportunity to benefit from competitive choice—on top of the large reductions in energy prices which they have already experienced or which are in the pipeline.
There is also scope for extending competition in the supply of water and waste water services, in the first instance for larger users. Consequently the Government are working on proposals with the Director General of Water Services and will publish a consultation paper early next year. This all shows that, as a result of the Government's policies, we have a dynamic evolving utilities sector which is increasingly delivering, at lower cost than before, the services that customers want.
We have not restricted our efforts to deregulate and increase competition to the private sector.
Is my right hon. Friend aware that his announcement that electricity customers are likely to benefit from reductions of, on average, up to £90 in their bills next year is extremely welcome? What effect does he expect that and, in particular, the £50 National Grid rebate, to have on the retail prices index?
I can, with confidence, say that it will drive the RPI downwards. It is more difficult to calculate the precise effect that it will have on the RPI. In the long term, the price reductions that have been coming through in all the utilities that I have mentioned will undoubtedly be of great benefit in reducing the cost of living.
The public sector has also been opened up to the rigours of the marketplace through the private finance initiative. The PFI brings together the public and private sectors to the advantage of both. It brings the enterprise and discipline of the private sector into areas which have, until recently, been regarded as the domain of the public sector. The state cannot and should not try to do everything. We need to find new, innovative and more efficient ways of delivering public services and major capital investments. The PFI enables the Government to move away from being the provider of services to being an intelligent purchaser of services for the taxpayer.
The PFI will generate increased investment in infrastructure and public services. The Government are on course to let contracts worth £14 billion over the next three years—£5 billion this year alone. Substantial progress has already been made across a range of Government activities. For example, a deal was signed earlier this year with GEC Alsthom to supply a new train service for the Northern line. The first tranche of contracts for design-build-finance-operate road projects is due to be signed shortly. A further £500 million-worth of privately financed road schemes was announced by my right hon. and learned Friend the Chancellor on Tuesday. The net result will be the better and more efficient delivery of services.
I am listening carefully to what my right hon. Friend is saying about the PFI, which is a marvellous innovation that should be useful. To help it work more efficiently and speedily, will my right hon. Friend consider bringing in outside business men and women to advise Government Departments as they negotiate contracts? Experience seems to show that, generally, civil servants are not very good at negotiating. If people were brought in from the private sector, the PFI might get going much faster.
My hon. Friend makes a positive suggestion and I am glad that my right hon. and learned Friend the Chancellor is sitting on the Front Bench to hear it. We share the objective of wanting to ensure as substantial and effective a take-up of existing PFI opportunities as possible.
As for the issues that we are considering in the Budget debate, we listen and wait in vain for any sign of the Labour party's policies. The Labour party does not have a view on any issue that arises in the debate. It has no view on taxation; it has no view on the level of interest rates; it has no view on inflation.
Perhaps the right hon. Member for Derby, South (Mrs. Beckett) will enlighten us all today. We know that, in general terms, the Labour party wants to raise spending and introduce more policies that would cost money but, although it generally wants lower taxes, it abstains on my right hon. and learned Friend's Budget when it comes to resolving the issue. What a wonderful posture of high-mindedness and principle the Labour party adopts to seek to persuade the electorate that it represents their interests.
We know that the Labour party wants to raise spending, but we know that it is not prepared to face up to the issues of funding; we know that it wants to reduce taxes, but when we introduce proposals to reduce taxes across the board it abstains. Its sole interest is in party political advantage instead of the national interest. Why else would it take every opportunity to talk down the country? I should like to offer it a few facts that will help it to stand up for the country for a change.
Our gross domestic product per head is 10 per cent. ahead of that of Europe as a whole. During the past 15 years, our growth has been faster than the average growth of the European Union. Our living standards have risen by 40 per cent. since 1979, whereas they rose by only 1 per cent. under the Labour Government. This year's Budget will help further to increase that figure of 40 per cent. With the fastest productivity growth rate, we have closed three quarters of the gap in manufacturing productivity with France and Germany since 1979—a gap that widened under the Labour Government.
Since 1979, total investment and total investment in the business sector have risen faster than in France, Germany or Italy. The 1980s were the first decade since the second world war in which our economy grew faster than those of Germany and France. The UK now has a higher proportion of its population of working age in work than any other major European Union country.
Those are some signs of the progress that has been made in recent years under this Government. We have achieved success through the huge structural changes that we have made to our economy—making it more competitive and freeing up enterprise. Britain is now well placed to build on the significant progress that has been achieved.
My right hon. and learned Friend the Chancellor has delivered a good Budget for business. He has delivered a Budget that furthers the competitive gains that we have made during the past 16 years. He has delivered a Budget that reinforces the Government's commitment to permanently low inflation and sustained economic growth. He has delivered a Budget that reduces taxes and provides incentives for saving.
The Budget provides support to small firms, both through taxation and through resources for practical assistance. It reflects the long-term economic strategy of the Government: low inflation; incentives for enterprise; firm control of public expenditure; and a climate for sustained growth. I commend it to the House.
Every Member of Parliament now knows that this is a dishonest Budget. We do not need a sophisticated analysis of the detail to show us that—we have a simple parliamentary litmus test. There have been six statements in two days and two Budget debates that have barely started before 6 pm. If the Government were really so proud of the Budget, they would not be trying so hard to hide it.
What we needed on Tuesday was a Budget for Britain, a Budget to secure our country's future, a Budget to promote and sustain investment in that future. What we received was, unfortunately, what we feared: a Budget, the main—probably sole—purpose of which was to secure the Conservative party's future. The Budget reinforced our criticism of the Government's lamentable record on investment.
The Budget reveals that the Conservative party is beginning to resemble a clapped-out old car. Its steering has gone and it can only lurch to the right, the tax has run out and it has been burning oil, North sea oil, for years—£128 billion worth of oil, to be exact. It is no wonder that the Tories cannot flog the old banger to the people of Britain. We can imagine the advertisement in the paper: "16 years old; one not-too-careful lady owner; split down the middle; none of the seats is safe."
The Budget shows, yet again, a Government praising themselves for their aspirations and ignoring their record. How do we judge the worth of those aspirations? First, in the light of the Government's past record and secondly, in the light of their present intentions as revealed in the Budget. The Chancellor told us several times in his speech that he wanted to make Britain the enterprise centre of Europe. This week, the Government's efforts to promote enterprise, of which the Secretary of State has just been bragging, have produced some interesting effects. I think that we would all agree that it takes enterprise and flair to run out of water in Yorkshire. It takes unbelievable acumen to be involved in a business that supplies only one product, to fail to provide that product and still to increase profits by 50 per cent. Is that what the Government mean by "the enterprise economy"?
That is not, of course, the only example of the Government's record on enterprise. The National Engineering Laboratory was recently privatised. What did the sale raise to help fund the Government's programme? It appears to have raised less than nothing—to be precise, minus £1.5 million. Far from raising money from that sale, the Government appear to have paid someone to take the NEL away.
Another money loser, as well as a vote loser, is the privatisation of Railtrack. It now appears that Railtrack, with assets estimated at £6 billion, might be sold for as little as £1.5 billion—£1 billion less than was anticipated—in the rush to get it on to the stock exchange by April 1996, a rush that almost certainly has far more to do with the need for it to contribute to the Government's accounts than with sound business management of the sale.
A recent analysis of Railtrack's accounts by the Independent suggests that the company may have set aside more than £1 billion from its investment budget to repay debt and boost the balance sheet before privatisation—yet more evidence of the Government's failure on investment, to put alongside the use of £1 billion of public money to meet the costs of privatisation, money which could have been used for investment.
Then there is the privatisation of the nuclear power stations. Some disquiet has already been expressed about the general safety aspects and implications of that privatisation, and about whether the timetable might be somewhat tight, being driven by the Government's need for funds rather than the public interest. Now, that already tight timetable is rumoured to have been further curtailed because Railtrack's privatisation will not raise the sums anticipated, thus creating fresh doubts about safety.
That is probably also the privatisation that most evidently blows out of the water the Government's claim to be, and to be uniquely, the party that understands about how business should work, because that is the privatisation in which, most evidently, the Government are selling the assets and keeping the liabilities. It also blows out of the water their claim to be good stewards on behalf of the British people, because those are liabilities that, through their electricity bills, people have already paid to cover. Thanks to the Government's business acumen, we shall end up paying, not once, not even twice, but three times.
Before the original privatisation, the Central Electricity Generating Board held assets that more than offset its liabilities.
Not at the moment. I am right in the middle of an argument. I know that the hon. Gentleman would not wish to interrupt it. The non-fossil fuel levy was invented entirely to cover those liabilities, again at the electricity customer's expense. It was in effect another tax. Nuclear Electric chose to invest much of the income from that tax, saying that it needed to ensure that it had future cash flow and assets to cover those liabilities. Those assets are now, in turn, to be sold again and the cash again used as a contribution to, and justification for, tax cuts, leaving the Magnox company once more with the unsecured liabilities.
Customers will have paid three times: first, through the earlier price levels to build up CEGB assets, secondly, through the non-fossil fuel levy used to rebuild them after privatisation and thirdly, to cover the liabilities that the Government said that those assets were twice supposed to meet.
The right hon. Lady has summarised the letter that many of us received from power unions to good effect. May I remind her, however, that when the Select Committee on Energy reported on exactly the matters to which she now refers, it pointed out clearly and with factual backing that it was not the case that the CEGB had provided for those liabilities, and that it was because the CEGB had not even calculated, let alone provided for, those liabilities that the nuclear power stations could not be included in the privatisation?
I understand that the Select Committee continues to examine those matters. I take the hon. Gentleman's point when he says that he would argue that the assets of the CEGB would not wholly have covered those liabilities, although I believe that, as it is so difficult to calculate, it is hard to say whether that is wholly true. However, that does not alter at all—as I believe that the hon. Gentleman conceded—my basic argument that the CEGB did have assets that would have contributed towards meeting those liabilities, and those assets, like the ones that replaced them, have been destroyed by the Government, leaving the liabilities in place. I repeat the main point of those observations, which is that that is a clear sign of what we should think of the Government's business acumen.
However, the Government's appalling record in protecting and advancing the interests of the people is, in its own way, wonderfully consistent. Alone among the G7 countries, alone in Europe, the Conservatives formed the Government who had the windfall benefits of North sea oil—benefits that they used to cover the consequences and costs of their failure and incompetence.
I listened today to the President of the Board of Trade going on about the Government's investment record, as Conservatives so often do—usually not very accurately, but never mind—and comparing it with the investment record of the last Labour Government, which was, of course, hit by a fourfold or fivefold increase in the price of oil, something that the present Government have not yet sustained. What I never hear the Government mention, and what the President of the Board of Trade slid over today, is the fact that the Conservatives have had benefits worth £128 billion at today's prices from the North sea alone. That is the equivalent of about £22 million a day for every single day of the 16 years that the Conservatives have been in office.
In addition, the Conservatives have had, and squandered, the proceeds of privatisation—what the late Harold Macmillan called "selling the family silver"—£80 billion in today's prices. That is the equivalent of a further £13 million a day for every single day of the 16 years that they have been in office. The Conservatives have had £35 million a day for every day that they have been in power for 16 years; £35 million a day that no British Government will ever have again because they have squandered it; £35 million a day that they could have invested in Britain's future if, for 16 years, they had not put the future of the Conservative party first.
That process of squeezing public assets and squeezing the public's purse goes on. I was very interested in the observations that my hon. Friend the Member for Neath (Mr. Hain) made about the attack on the Post Office. He drew attention to the fact that the Treasury will double the amount of cash that it will take from the Post Office—an additional £400 million during the next three years—making a total of £1 billion during that time.
The President of the Board of Trade implied that that was not especially unexpected; at least he disputed with my hon. Friend the Member for Neath the statement of the then President of the Board of Trade, the right hon. Member for Henley (Mr. Heseltine), on 11 May 1995. I just happen to have a copy of statement about my person. The then Secretary of State said:
I am prepared to agree that in future we shall aim to set the EFL at about half the Post Office's forecast post-tax profit. I hope to make progress in that direction this autumn."—[Official Report, 11 May 1995; Vol. 259, c. 885.]
The Secretary of State draws to my attention the word "hope"—and no doubt also the word "aim". I believe that it is clear to all of us that words in the mouth of Ministers in the present Government mean nothing, and that is one of many examples—as is the word "promise".
However, one thing that is also clear is that that further impost on the Post Office, taking as much from it in the next three years as the Government have taken in the past 10, will have two effects. First, it makes an early increase in postal charges almost inevitable—a Tory stamp tax on the ordinary people and the businesses of the country. Secondly, it means that much-needed investment in the Post Office will have to be shelved. It also probably renders the Post Office open to competition from elsewhere in the European Union.
Most commentators say that this year's was a neutral Budget. Some give the Chancellor a feeble cheer for not going more blatantly for cosmetic tax cuts, but it was a cheer that he did not deserve. We know that, on the latest Red Book forecasts, the total tax burden as a proportion of gross domestic product continues to be planned to increase until the end of the century. We all know that in April next year a typical family will continue to pay £670 a year more in tax than it did when the Conservatives were re-elected in 1992 on a platform that promised overall tax cuts. They did not aim, they did not hope, they promised tax cuts, and then delivered 21 tax increases, equivalent, as the Chancellor has acknowledged, to 7p in the pound on the basic rate of tax.
It is forecast that the public sector borrowing requirement, the deficit in the Government's finances, will be down to about £22 billion next year. Last year, the Chancellor said that it would be below that by now. Growth was forecast to reach 2.75 per cent. this year and 3 per cent. next year. Last year, the Chancellor promised that it would be higher than that by now. Meanwhile, back in the real world, year-on-year growth is running at around a meagre 2 per cent. Last year, the Chancellor forecast investment growth at 5.75 per cent.; now he says that it will be 1 per cent. Growth is down on his forecast, and so is investment. What is up on his forecast? Inflation, the trade deficit, the balance of payments deficit and the deficit in public finances—the public sector borrowing requirement. That is all part of the Government's record.
What are the Government's present intentions? Before the Budget, the CBI said that we needed a Budget for investment—a Budget to promote investment in industry, and to sustain investment in education and training. It also said that what we did not need was a Budget in which cuts in income tax were offered at the expense of investment in infrastructure.
The hon. Gentleman says—from a sedentary position, no doubt exercising due caution—that the CBI welcomed the Budget. Indeed, the CBI put out a very balanced press release. I think the Secretary of State said that it had given the Budget a warm welcome; that is going a bit over the top, although it does use the words "we welcome". It also says:
Public borrowing is higher than we had hoped for … We will need to see the details to assess this"—
the public capital expenditure cut, that is—
The CBI also says:
it is vital that the resources available for … transport … education and training and export support are at least maintained … the Private Finance Initiative is coming on stream too slowly to make up for the cuts in public capital spending in the Government's present plans.
I would not call that a warm welcome.
The right hon. Lady has missed out one or two points in the CBI's press release. It welcomed
the fact that the Government has broadly stuck to the prudent economic line
that it had recommended. It was
pleased that the Chancellor appears to have limited tax cuts to reductions in spending and resisted the temptation to go for excessive tax cuts.
As for public borrowing, the CBI was
satisfied that it still appears to be on a downward path.
the priority the Chancellor gave to education spending".
In the tax reductions, it was
pleased to see some specific measures such as help given to small businesses".
As for personal taxation, it stated:
we welcome the raising of thresholds and the broadening of the 20 per cent. band.
I think that that is a pretty warm welcome.
The Secretary of State is unduly defensive—perhaps revealingly defensive. I made the very point that this was a balanced press release that welcomed many elements in the Budget; I then drew attention to the reservations expressed by the CBI. The right hon. Gentleman knows perfectly well which are the most important points. I am dealing with the measures that the CBI called for—and the right hon. Gentleman is well aware that it was given none of those measures.
Last year, bodies such as the CBI, the chambers of commerce and the Engineering Employers Federation called on the Chancellor for significant capital allowances to stimulate investment in new plant and machinery. This year, those bodies called on him again for such capital investment. They got zilch. The Secretary of State was too busy telling the CBI that it was its duty to come to the rescue of the Conservative party—to remember whose side it was on, as he so gracefully put it—to worry about helping it to come to the rescue of a faltering economy.
Both the Chancellor and the President of the Board of Trade are fond of quoting figures to the effect that investment has increased substantially over the past year; but that one-year increase is quoted to disguise how low is the level to which investment has been flattened under the present Government. In fact, total investment in 1994 was more than 10 per cent. below its level in 1989, before the recession.
The share of the economy taken by investment has fallen for six years in a row. The average level of investment between 1979 and 1993 as a share of the economy has been the lowest in all the 18 countries of the G7 and the European Community. As the Bank of England pointed out this summer, investment is 20 per cent. below the level that it reached in previous recoveries. I refer to investment in general, to support for investment of the kind sought by the CBI and to investment in education. The Budget told us that funding for education would be as much as local authorities are spending this year, and that there would be cuts in funding for further and higher education and training, including funds for training and education councils.
Nor have the Government protected investment in infrastructure, as the CBI requested. They have savagely cut their own investment, public sector capital spending, with cuts amounting to £3.9 billion by 1997–98. With typical sleight of hand, they have implied that the private finance initiative will fill the gap. It has not so far, and unfortunately it probably will not do so in the future. The Government have already cut their own investment by about £2 billion, and over the same period the private finance initiative has raised only about £500 million. Already, we have a net reduction of £1.5 billion in investment in infrastructure.
It seems a long time ago, but I seem to remember that the right hon. Lady was a Minister in the last Labour Government. I believe that she was there at the time when the Labour Government cut various forms of public sector capital expenditure by more than any other post-war Government. Does she repent?
The hon. Gentleman was clearly not awake when I gave the figures for the investment funds that have been available to the present Government. Yes, I do regret the fact that the last Labour Government could not proceed with all their capital spending programmes—although what the Government say about that, like so much of what they say, is often completely untrue. The Secretary of State said, for example, that investment in water had been cut. That is not true. The plans that we hoped to implement were not entirely fulfilled, but investment was not cut; indeed, it rose under the last Labour Government. I suggest that the hon. Member for Carshalton and Wallington (Mr. Forman) check his facts.
Let me repeat a point that I am happy to repeat—a point that I intend to repeat at every opportunity that I get between now and the next general election. As the Secretary of State did, and as they all do, the hon. Member for Carshalton and Wallington compared the record of the last Labour Government, who were hit by an oil price increase—[Interruption.] As recently as Tuesday, the Chancellor said that the reason why inflation had gone up a bit this year was an increase in commodity prices. If that excuse is valid for the Chancellor, it must have some relevance to what happened to the last Labour Government. What we never had, and what no Government will ever have again—thanks to the profligacy of the present Government—is £35 million a day of investment to put into the economy.
I should like to make progress. I shall give way later if I have time.
What the Government intend is all too clear. I was not able to trace the quotation before today's debate, but I think that I am right in saying that they have implied that the private finance initiative was first introduced to promote the programme of capital investment. It would be used to supplement and extend that programme; the Government denied that it would be used to replace it, and to make up for cuts in Government capital investment. Not only has the latter happened; it has been explicitly advocated—in the Red Book, and in the Chancellor's speech on Tuesday—that the PFI should replace, rather than supplement, public capital investment. That, too, is something that business and industry have sought to avoid.
The Government claim—as they have today—that economic success is already ours, boasting about our trade performance under them. Indeed, that performance has been record-breaking. In 1983, we saw the breaking of an outstanding historical record, with the appearance of the first trade deficit in manufactured goods since the industrial revolution—a record that the Government have managed to maintain every year since then. The trade figures for October reflect another record-breaking Government economic performance—a £1.2 billion non-EC trade deficit. That is the worst figure since the series began.
The balance of UK visible trade in 1994 was a deficit of £10.5 billion, and the balance of trade in manufactured goods showed a deficit of £7.5 billion. We currently have a trading deficit with France, Germany, Italy, Sweden, Denmark and Finland. Incidentally, under the last Labour Government we had an average £4 billion surplus on trade in manufactured goods.
It is hard to see how all that leads the Government to claim that they are making Britain the enterprise centre of Europe. We are down to 18th in the world prosperity league, behind our main European competitors; we are bottom of the league in growth and investment since 1979 among the G7, and 20th out of 24 OECD countries in job creation. It all flies in the face of what the Government say about our economic record, and what they say about jobs—such as the Secretary of State's comment that job insecurity is a state of mind, and that the reality is different. As we pointed out a few days ago, more than 8.5 million people or 26 per cent. of the work force have directly experienced unemployment since the last general election.
Today, we have issued a regional breakdown of those figures that shows that the highest level of unemployment for men was in Greater London at 41 per cent., followed by the northern region at 37 per cent., and then the north-west. Even the best figure, for the south-east excluding London, is 27 per cent.—more than one in four. That is a truly shocking statistic.
The denial of the existence of job insecurity, like the Government's record on tax and public spending and like the Budget, is further evidence of what people are now seeing with greater clarity than ever before. The Government's record is one of dishonesty and sleight of hand. We can see that in the way that they give a little with one hand, but take much more with the other—7p up and 1p down. We can see that in the Government's policies on investment and industry and commerce. We can also see that in what the Government have said about small businesses.
The right hon. Lady has returned to the question of taxation and public spending and she has taken the subject rather broadly. Can she give an example of a tax proposal that I have made which the Opposition intend to vote against? Is there an area of public expenditure that the right hon. Lady proposes to increase? If so, will she identify it and say by how much?
My hon. Friend the Member for Oxford, East (Mr. Smith) may be in a position at the end of the Budget debate to say how we shall vote on the different resolutions. I have not studied them myself. We shall vote against the overall impact of the Budget. [Interruption.] The Chancellor knows that decisions have to be taken on individual resolutions. [Interruption.] Does the Chancellor want to hear the answer to the question? We do not intend to vote against the cut of 1p in the rate of income tax, because we think that the public have suffered enough thanks to the Government's incompetence and deceit. We intend, however, to vote against the Budget overall.
The Chancellor asked me to identify an area of public spending that should be increased and say whether I would make a commitment to that increase. No, I will not. The Chancellor must know—he always says so himself—that such decisions can be made only in the full knowledge of the facts. The Opposition are able to judge the facts only through the prism of what the Chancellor chooses to tell us. We would be unwise to take his word for anything, as the President of the Board of Trade has demonstrated today by telling us that what his predecessor as President of the Board of Trade said in May and June was absolutely meaningless. That does not encourage anyone to rely on what a Minister says.
I have already answered the question. The hon. Gentleman is too busy heckling to listen.
The Chancellor raised the VAT threshold for small businesses by only £1,000, less than half the rise necessary to keep pace with inflation. He did not mention that that rise means that 14,000 more small businesses will be drawn into the VAT net over the next three years. He also reduced employers' national insurance contributions by 0.2 per cent., saying that that would
make it cheaper for businesses to create new jobs."—[Official Report, 28 November 1995; Vol. 267, c. 1064.]
However, the savings are so small that only a firm that employs more than 500 people will be able to employ a single extra person. The measure, therefore, does not do anything for small businesses and that is particularly sad because both sides of the House agree that small and medium-sized businesses have the most potential for job creation.
Although the capping of business rate increases for small businesses at 5 per cent. is welcome, the increases are still above the rate of inflation. As always, the best advice for small business people as for everybody else is to read the small print—the Government have a record of giving with one hand and taking back with the other.
The central boast of the Budget is that the Government will make us the enterprise centre of Europe—by cutting investment in infrastructure, and cutting investment in people. That is enough to make a cat laugh, but it will make anybody who cares about our future cry. The Government have betrayed the trust of the British people, robbed them of their inheritance, and jeopardised their future. History will not forgive them, and nor will the people whom they have betrayed.
No Budget debate would be complete without reference to Iain Macleod's most famous dictum that Budgets that are well received on the day often look different on Second Reading of the Finance Bill; conversely, those that are not well received look rather good by Second Reading. My right hon. and learned Friend's Budget may well be a classic in the second category.
I confess that I was astonished by some of the headlines about the Budget. The Budget is complex and involves many measures, so I think that the press simply did not realise what much of the Budget was about. I feel that the Budget was excellent and well balanced.
The Chancellor was severely limited in what he was able to do. The move towards the 20 per cent. rate of income tax is very important and was approached in three separate ways: by widening the band far more than necessary to keep pace with inflation; by reducing the basic rate—1p off was quite enough, and I have not received a single letter suggesting 2p off; and by the important reduction of the rate of tax to 20 per cent. for people with savings income. That is particularly important for pensioners.
If the Chancellor had gone further, the reaction in the City would have been such that he would not have been able to hold out any prospect of a cut in interest rates, which is likely to be more important to the recovery than anything that appears in the Budget. Despite the stringent attitude that he has taken on public expenditure, a further cut would have had damaging effects. In particular, if the road building programme had been chopped any more, programmes that have already advanced past the public inquiry stage would have been cut, with the consequent waste of nugatory public expenditure. That would be absurd.
The schools programme has provoked great concern in Sussex. My hon. Friend the Member for Lewes (Mr. Rathbone) referred to it earlier. I have had many letters about schools expenditure in West Sussex, rather overlooking the fact that the allocation of resources is for the county council to decide. The Chancellor said:
The Budget allows for spending on schools to rise next year. We have already increased spending per pupil by some 50 per cent. in real terms since 1979. We devote a higher proportion of our public spending to education than Japan, Germany or France.
He continued, in a crucial passage:
The plans that I am publishing today allow for an increase in spending on schools of £878 million. Within that, over £770 million will be channelled through the local authority settlement"— [Official Report, 28 November 1995; Vol. 267, c. 1058–59.]
Parents will rightly expect local authorities to carry that funding through to school budgets. They should ask their local authorities how the extra money for schools will be spent on their children. West Sussex county council, which is Liberal controlled, has been diverting money from education to its particular hobby horses and has then asked people to write to me to ask why education spending has been cut.
The expenditure side of the Budget is thus well balanced and it should be welcomed by the whole House.
When the Leader of the Opposition spoke after the Budget statement, his catch phrase was that the Government were giving with one hand and taking with the other—by contrast with the Labour party, which would take with one hand and give with the other. However, it would be a very strange Budget that took with one hand and did not give anything, or vice versa. Why the Opposition have latched on to that extraordinary catch phrase is mystifying.
I was intrigued by the emphasis that the Leader of the Opposition put on the fact that Conservatives are now writing to him. I had an extraordinary experience on my interview night the Friday before last when a constituent told me, "I wrote to the Prime Minister and got a reply from the Leader of the Opposition." I looked into the matter and that is what happened. I am still trying to get the letter back from the files of the Leader of the Opposition.
The Leader of the Opposition should look at the entire period of Conservative government and, in particular, at what has happened to the real incomes and take-home pay of various individuals in different categories. One has to look at the Government's performance and, in terms of raising living standards—allowing for tax changes, inflation and everything else—it has been a remarkably good record. If I may say so, the catch phrase that has been bandied about is rather silly.
Let me refer also to the hon. Member for Dunfermline, East (Mr. Brown). The gimmick of a 10p tax band is totally divorced from the width of the band. Would it apply to the first £1 of income or the first £60,000? The right hon. Member for Derby, South (Mrs. Beckett) is muttering to herself. Perhaps she can tell me how wide the band is. Without that information, it is a totally meaningless statement. It does not mean anything to promise a 10p band of income tax at the starting rate. In any case, that is not an efficient way of reducing tax. My right hon. and learned Friend the Chancellor has done more to help people at the bottom end of the scale by raising the basic allowance.
I happened to catch the tail end of the Budget broadcast by the hon. Member for Dunfermline, East last night. He stressed the importance of honesty in tax policies. He floated a remark about cutting VAT on fuel, but made no reference to the fact that under European legislation, the most he could cut VAT is from 8 per cent. to 5 per cent. His so-called honest broadcast gave the impression that there would be a massive cut or probably the abolition of VAT on fuel, so that did not seem very honest.
We are interested in the speech of the right hon. Gentleman as he is a former Chairman of the Treasury and Civil Service Select Committee. However, my hon. Friend the Member for Dunfermline, East (Mr. Brown) said not that he would reduce VAT from 8 per cent. to zero, but that he wished to reduce VAT on fuel from 8 per cent. to 5 per cent.
Quite so. If that is what the hon. Member for Dunfermline, East said. I accept it as I heard only the end of the broadcast. If that is so, I apologise.
Having said that, I believe that the basic arrangements that were made for pensioners and those on social security benefit when we put VAT on fuel were beneficial. Unless the hon. Gentleman wishes to go further than he went last night and promises to reduce the rate of VAT on fuel and retain the compensation that the Conservative Government gave to those on low incomes and pensioners, his proposals were not entirely clear.
I now come to that old-fashioned expression, the Budget judgment, which has not been dealt with adequately. The PSBR has declined rather more slowly than we had hoped, because there has been some slow-down in the economy and consequentially, revenues have not risen as fast as they might have done and unemployment has not fallen as fast as we had hoped. That being so, the action that my right hon. and learned Friend the Chancellor has taken in regard to the PSBR is not inappropriate at this stage in the economic cycle. The rate of growth in the economy was lower than we had expected, so there is a case for running a level of PSBR that stimulates the economy. Therefore, I view the present level of the PSBR with relative equanimity. Inflation is clearly well under control and it is important to strike the right balance between controlling inflation and economic growth. Again, my right hon. and learned Friend got that pretty well right.
I return to my earlier point about the rate of interest. Had my right hon. and learned Friend increased interest rates, as the Governor of the Bank of England appeared to advocate some while ago, the PSBR would have been larger, so my right hon. and learned Friend was right to resist that and to emphasise the rate of interest as well as fiscal policy.
We have to put the Budget in a European context. In respect of the PSBR, I am worried about the enormous pressure to meet the convergence criteria under the Maastricht treaty. 'There are some real problems as they do not take into account the stage of the economic cycle in any particular country and it seems dangerous to say that it is suddenly all right at any particular moment. If the criteria are to mean anything at all, they have to be at a sustainable level, when the PSBR is consistent with moving a further stage towards economic and monetary union.
Does my right hon. Friend agree that another difficulty is that the Maastricht criteria for borrowing take no account whatever of the national assets against which the borrowing is undertaken, so in comparing borrowing rates in different countries, they totally ignore the capacity to borrow?
Yes, indeed. It may well be that borrowing is an appropriate response at certain stages in the economic cycle, depending on the level of capital expenditure on which the Opposition are so keen.
The general pressure now being exerted in Britain and throughout Europe is extremely dangerous because it may well have a recessionary effect. Again, one has to balance the difference between the size of the deficits and the state of the cycle. I view with relative equanimity the action that my right hon. and learned Friend has taken. Of course, he is right to seek to reduce the public sector deficit. That must be appropriate, but perhaps the sense of urgency in some quarters has been somewhat overdone.
Overall, this is a well-balanced Budget, which should result in greater appreciation as the weeks go by and we debate the Finance Bill. It is a particularly good Budget from my constituency point of view. It is a good Budget for pensioners, for Worthing, for the economy and for Britain.
I shall give just a few reflections. I concede in a fairly broad-brush way on the Budget, and I hope that I follow in the spirit of the right hon. Member for Worthing (Sir T. Higgins). who is a distinguished former Treasury Minister and who gave a balanced view of the Budget speech.
Clearly, all Budgets are not simply exercises in economics, otherwise we would have simply a conclave of learned professors who would give us of their views. Different Budgets have different admixtures of economics and politics. I suspect that the fear of this year's Budget was that, as we approached a general election season, politics would he even more paramount than they' are in most Budgets. This year's Budget has to be viewed more than most in the context of its timing, the state of the country and the state of the Government.
The Budget speech. which now seems so long ago, met with rather different receptions on both sides of the House. I concede straight away that the dominant response among the Opposition, including myself, was relief because we have a keen appreciation of the Chancellor's political skills and, right until the end, we assumed that something dramatic would he pulled out of the hat, which might rescue the fortunes of his party and begin to restore a feel-good factor, even at this relatively late stage.
Our relief was expressed by, "Is that all?" There was certainly a feeling of relief on the Opposition Benches. We have, of course, respect for the Chancellor of the Exchequer as a political animal. We recognise also that he is a moderate man in a party that is becoming increasingly immoderate. The Conservative party is becoming increasingly hostile to Europe. We know that the right hon. and learned Gentleman has great experience and relative wisdom and seeks to avoid the essays in populism that the Home Secretary is wont to take.
I suspect that there was disappointment on the Government Benches. There was probably a feeling of great gloom. Drowning men and women were hoping that a lifebelt would be thrown to them. At the end of the Chancellor's statement, they realised that it would not be forthcoming.
In reality, we were presented with a relatively prudent Budget. Perhaps that was necessarily so. However great the temptation to be reckless, the Chancellor was mightily boxed in by economic realities. He was, for example, boxed in by the less buoyant revenues that he had not anticipated. He was boxed in also because the public sector borrowing requirement was greater than had been forecast and anticipated. His room for manoeuvre was far less than he would have wished at this stage of the political cycle.
It is only fair to say that there were a number of positive elements in the Budget. For example, it was relatively green in that it was to some extent environmentally friendly. Some of the key concerns of the average citizen were at least recognised, if not addressed. I am thinking of the priorities of public expenditure, including education, to which the right hon. Member for Worthing referred. On the basis of, "Now you see it, now you don't," I suspect that much of the so-called increased expenditure on education will evaporate rather rapidly when the figures are examined in detail.
We know that there is a crisis within the national health service. Only about 10 days ago the local newspaper in my constituency, which is not a traditional Labour party supporter, carried a headline to the effect that there is such a crisis. The article set out a series of major failures in health provision. The people know that and they recognise it. We know, of course, that there are some objective factors and increased pressures, which we all face. Many of the problems, however, result from the Government's ideological frolics.
Most Members recognise that law and order comes high on our constituents' agenda. We ignore the issue at our peril. It is suggested that an additional 5,000 police officers will be made available. That increase is only to be welcomed. Training will take some time, however, and there will be no immediate effect. There will be no political effect, apart from the declaratory effect, before the next election. There will he no fifth cavalry appearance out of the sunset to help the Government.
The Budget statement contained the recognition at last that something had to be done about the costs incurred by those who move into long-stay residential homes. Most of our people recognise that there is gross unfairness in the system. The Government's recognition of the problem must be welcomed.
Unfortunately, there were several regressive elements in the Budget. I have in mind the overall impact on the richest 10 per cent. of the population and on the poorest 10 per cent., and the punishing of victims in our society—for example, the swipe at single mothers and the reduction in housing benefit payments for those under 25 years of age. It is clear that the Government are labouring under a misapprehension. It seems that they think that youngsters leave their homes because they want to or because there are bosoms of families to which they can return if housing benefit is reduced.
The reality is that we live in an increasingly fragmented society. Much social distress will be caused by the reduction in housing benefit for the under-25s. I do not make the dramatic claim that we shall see a great expansion of cardboard cities. It is true, however, that young people at a vulnerable age, suffering from a lack of job opportunities, will find it increasingly difficult to find the few jobs that are available if they do not have steady addresses. The Government's action is deplorable. They may try to justify it according to their preconceptions, but their action does not tally with social and economic realities. I hope that they will reflect on the way in which the vulnerable are being penalised.
There are evasions within the Budget. It is clear that council tax will increase. The Government will seek to throw the blame for policy failures on local councils. After the previous round of local elections, councils are under the control of the Labour party or Liberal party, or in some instances there is mixed control that has resulted in Lib-Lab coalitions.
The electorate will not fall for the blame that the Government will throw on councils. The Government may wish to make local councils unpopular by causing them to increase council tax in the next settlement. That is the assumption in Wales, but there is hardly a Conservative councillor left in Wales. A few years ago, Cardiff city council had a Conservative majority. It now has only one Conservative councillor. Swansea has only one Conservative councillor, as has Newport. If, as is assumed, council tax had to be increased by about 11 per cent., it would be easy, with an unsophisticated electorate, to point the finger of blame at the councils. The Government will not succeed in that approach, however hard they try.
The Budget contains wrong priorities. I shall not repeat what I said yesterday about the World Service. It is a unique service. Its capital budget has been reduced by 20 per cent. It is clear that the Government have not appreciated the value of the service. Not too many years ago, I was sitting on a one-to-one basis with the President of a major African country. He told me that he listened to the World Service for his news. He relied on the service for that information. So many opinion formers, people whom we need to address and cultivate, rely on the quality of the service. The Government's cutting of capital provision is bound to have an adverse effect on quality of service at a time of much greater competition.
The Government say that there will be a 20 per cent. reduction in funding, but that that may be compensated by the private finance initiative. They say that the private sector may be able to move in to fill the gap that has been left by the withdrawal of public expenditure. That is no more than a hope. It may happen or it may not. Everything depends on the private sector's response.
That same hope is found in a number of other areas, such as the NHS and the assumption that the private sector will be prepared to make up the shortfall in the public provision of capital for the NHS. That may or may not be so, but it savours of a sleight of hand.
The inheritance tax measure is another wrong priority. It may be that the threshold should have gone up marginally, but for it to go up by almost £50,000 is excessive, particularly when something in respect of VAT on fuel would have been a proper priority. Even a reduction from 8 per cent. to 5 per cent., which is permissible, would have relieved poverty, targeting those who most need the reduction.
That is the point that I was making. For pensioners and people in need, the amount of compensation in many cases, and perhaps even overall, has more than compensated for the tax.
Of course, there is a compensation scheme for certain elements, but there are those at the margins whom, in other contexts, the right hon. Gentleman and his colleagues would seek to support, who will lose out as a result of the failure to reduce the current 8 per cent. to 5 per cent.
I shall not go over the missed opportunity on the windfall tax. But the way in which the leaders of the privatised utilities, doing largely the same jobs as they did before, imagine that their saleability, their market worth, in the private sector has been so mightily enhanced, must be an embarrassment to the Government. It is an affront to the great mass of reasonable people in Britain, and the Government are, in essence, doing nothing about it.
I end on this note. Historically, the Budget will he seen largely as a non-event. The Conservative party is really two parties. It is a highly divided party. The Government have been drifting ever since they were forced out of the exchange rate mechanism. We recall the bitter speech of the then retiring Chancellor, in which he talked of a Government in office but not in power. The Government have been in office, enjoying the fruits of office and exulting in the trappings of office, since that time, but they are not in power because of those divisions. The resulting drift is bad for the country. We saw that in the Queen's Speech in 1994. Once Post Office privatisation was taken out of the equation we, as legislators, had perhaps the easiest year in my memory in the House.
This Queen's Speech, apart from the scattering of populist elements, such as the asylum Bill, is, relatively, a non-event. I can think of no historical precedent save the staleness of 1819, when Shelley, in his poem about the state of the nation, wrote about
An old, mad, blind, despised, and dying king".
That is the only precedent for a Government who have run out of steam, who are tired, who have no vision, who are drifting and who should go.
It would be nice at this stage of the Budget debate to be able to compare and contrast the proposals of my right hon. and learned Friend the Chancellor of the Exchequer with the Opposition's proposals. Unfortunately, we cannot do that, because there is none, apart from the windfall tax which, as far as I could gather from the speech of the hon. Member for Swansea, East (Mr. Anderson), was somehow a response to executive share options, and so on, in the privatised utilities, which seemed rather surprising.
I welcome the Budget although, like my right hon. Friend the Member for Worthing (Sir T. Higgins), I was rather surprised by the press reaction to it. I read in the paper that Tory Members of Parliament were disappointed and thought that the Chancellor of the Exchequer should have gone further. In many conversations with colleagues around the House since the Budget, I have not found that to be the case. It was a steady Budget and right for the economy, and will help the country to continue the steady expansion that we are enjoying.
I welcome the Budget particularly from the point of view of small businesses. They are, as my right hon. Friend the President of the Board of Trade said, crucial to the country's economy. They are the dynamic sector of the economy, they fill niches all over the marketplace, they are generally very flexible and they are, crucially, where jobs come from these days.
There are some specific measures in the Budget for small businesses, to which my right hon. Friend the President of the Board of Trade referred, which I welcome—for example, additional relief for business rates. The right hon. Member for Derby, South (Mrs. Beckett) seemed rather to dismiss that, but it is worth £300 million over three years and so should not be dismissed. There were also retirement relief and inheritance tax measures and another small lift in the VAT threshold.
I would like to see the VAT threshold higher. I am glad to say that when I was in the Treasury the threshold was considerably increased by a large jump. We are inhibited in the amount by which we can increase it further as a result of our agreements in the European Community, but that is desirable.
The most important thing for small businesses is not so much the specific measures, important as they are, but the overall effect of the Budget. Small businesses need an increase in demand, in consumers ready to spend money in order to increase their turnovers. The Budget will help with that to some extent by encouraging growth.
But the Budget also looks as though it will mean lower interest rates. I gather that at least three building societies have lowered their interest rates and more are likely to follow. That too is important.
Crucially for small businesses, my right hon. and learned Friend the Chancellor also outlined in his Budget speech several measures aimed at simplification and deregulation. They are part of an important series of initiatives to which my right hon. Friend the President of the Board of Trade referred. I know well from my experience in government how difficult simplification of the tax system and deregulation are in practice. But they are of fundamental importance and so worth the great effort that is required.
Every business has to deal not only with the Inland Revenue and Customs and Excise, which we are mainly discussing in the Budget debate, but with a series of different Government and local government departments and agencies. I counted a total of 23 regulatory agencies covering one small ordinary business, not at all in a specialist line.
The Inland Revenue and Customs and Excise are only two of those, although a business often, indeed usually, has to deal with more than one part of, for example, the Inland Revenue. It has to deal with PAYE for its employees, and with corporation tax and the calculation of profits, and so on, which involves another part of the Inland Revenue. In effect, the Inland Revenue is two bodies.
'Therefore, one of the most valuable sentences in the Budget speech occurs, appropriately enough, in column 1066. My right hon. and learned Friend the Chancellor said:
The Inland Revenue will shortly be publishing a report on tax simplification.
That was not news; it is under an obligation to do so next month, as we know from the last Finance Act. My right hon. and learned Friend added:
We shall propose that the Revenue tax code is to be rewritten in plain English".
When I was responsible for Customs and Excise, I am glad to say that it won some plain English awards for some of its leaflets, which was very good. We also started a drive to make VAT more taxpayer friendly—if that is not an impossible task. My right hon. and learned Friend went on to say:
We in the House will need to look at our procedures, to see how that tax rewrite can be sensibly handled."—[Official Report, 28 November 1995; Vol. 267, c. 1066.]
In that sentence I saw a reflection of the work that has been done by the tax law review committee of the Institute for Fiscal Studies, which published an interim report a few days ago. It is a most interesting report and it deserves the closest study. It reinforces strongly the complex web that constitutes our tax legislation now; I admit at once to having contributed to that as a Treasury Minister, with some of the longest Finance Bills that there have been. But I also know how difficult it is for the professions—let alone the small business man trying to understand what is required of him—to deal with the tax legislation. The report makes it clear how difficult the problem is, both in what it says and in the solutions that it proposes, but nevertheless that only increases its importance in my view.
The passage on parliamentary handling of such changes is of interest to us, but particularly to me because I am now on the Procedure Committee. The simplification that is required is partly of language, but it cannot he done without at least some changes to the substance of the legislation itself, and so our consolidation Bill procedures cannot be used as they are now in the Standing Orders of the House. In any case, of course, they were not designed for that purpose and would not really be appropriate. The volume of tax legislation is now so huge that to rewrite it would require a mammoth Finance Bill or, more realistically, a set of them. We need to think carefully about the parliamentary angle and desirable changes in the tax law before we get much further. The IFS report discusses it all and is most valuable, but it is important to keep up the momentum, so I welcome very much column 1066 of the Budget speech.
I wish to discuss another matter that is related in a sense. One way in which my right hon. and learned Friend might have gone—and was urged to go by many people—was down the road of reintroducing investment allowances. There was a lot of prompting for him to do that, from many sources—indeed, I passed on some of it to Treasury Ministers myself—but I believe that it would be a retrograde step and would not help investment. Investment allowances are a political flag to wave, a way to say that something is being done about investment without having a significant effect on investment itself, and with the great drawback of adding further complications to the tax system, which is something that I wish to avoid.
My generation of accountants was brought up on very elaborate capital allowances, which altered almost every year as Chancellors of the Exchequer—of all parties—tried to encourage investment in particular assets. Over the years, we had initial allowances, investment allowances, free depreciation, investment grants and so on, all coming in and out of operation in different years. They varied between different assets: industrial buildings, plant and machinery, motor cars, ships with refrigeration equipment, ships without, all that sort of thing. Drawing offices counted as industrial buildings provided that they were attached to a factory, but not if they were not. Retail premises or showrooms were not allowable as an industrial building unless they were under 10 per cent. of the square footage. The rules always varied, not only from year to year but from place to place, as Chancellors tried to help the areas of high unemployment.
All that caused a great deal of activity for junior accountancy clerks like me, but I do not believe that it made a significant difference to the total investment, although it succeeded in moving the investment around the country in some cases. I believe that it also had some unintended side effects, for example, on the sale of agricultural tractors, which, for some years, was enormous and not really justified. The fact is that businesses invest when they can afford to do so, and in projects that they think worth while. I believe that they are the best judges of whether it is better to invest in a new machine, showroom, both, or something else. Interest rates and the examination of what they will be during the life of the asset or investment concerned have a big effect on whether they can afford it, because a lot of investment is done on borrowed money. In that respect, the Budget is helpful from the investment point of view as well as otherwise.
Expectation of demand is the biggest factor in whether the proposed investment is likely to be worth while. That, too, is helped by the Budget. Both factors mean that it is a good Budget for investment, and it is far better than it would have been if we had gone back to the complicated system of investment allowances, which would have been a big step backwards in the simplification of the tax system that I want to see.
Overall, I think that it is a good Budget, which I very much welcome.
If I said that the Budget was a missed opportunity, I would mean something very different from the many Conservative Members who might share those sentiments, judging by the picture of their faces as the Chancellor sat down at the end of his speech. I noted with interest that two Conservative Members declared surprise at the reactions in the newspapers the next morning, but if they had had the advantage of viewing the body language, faces and expressions of hon. Members on the Government Benches as the Chancellor sat down, and had been able to contrast those with the expressions on the faces of hon. Members on the Opposition Benches, they would have understood only too clearly why the editors the following morning also saw it as a missed opportunity for the Conservative party.
But my meaning is rather different. The right hon. Member for Derby, South (Mrs. Beckett), who spoke for the Opposition, rightly and with great precision outlined the vast sums that have been blown by the Government in recent years. In particular, she catalogued the proceeds of the privatisations and added them to the North sea oil revenues, quoting both at current day prices and pointing out that they had not been used in a prudent way or to invest in the longer term. I find it remarkable that the Conservative party, which has often lectured us about the merits of good housekeeping, has found it fit to squander that money, not on capital expenditure, not on investment for the future, but on an orgy of current expenditure, most notably in the consumer boom of the late 1980s and also to fund tax cuts, which time and again have been reversed afterwards by one means or another.
When one looks at the overall state of the nation's finances, as quoted in the back-up figures to the Budget, one can see that public sector borrowing is vastly higher for the current year and for the next than the level that was quoted just a year ago in the Budget. The Government are borrowing more heavily, not to invest in the future, in capital expenditure, but to pay for the tax cut that they have used as a gimmick, which they had hoped would be of some political benefit and a salvation to them.
Another disappointment of the Budget is that some of the areas of expenditure that have been cut—which, perhaps, have not yet been highlighted to the extent that they deserve, but which will emerge over the coming weeks and months—will in some cases prove very damaging. I should like for a few moments to highlight new house building. It can be seen from the Budget that new house building will be cut in the coming year. The Government originally promised that there would be £1.5 billion for new homes next year. That has now been cut to less than £1.1 billion. So the number of new homes that will be started will drop by more than half—from 76,000 to 41,000. When one looks at what the Government's own figures suggest will be the need for new housing during the coming year, one can see that the total number of lettings that housing associations will be able to undertake—both the new build and the other forms of housing that they are able to make available—will be around only half of what the Government acknowledge could be needed in the coming year.
Of course, as well as the impact on housing provision, it is well known to all hon. Members that the number of people out of work in the construction industry remains alarmingly high. It is down somewhat from the high of 500,000, but is still unacceptably high. All those people have to be paid benefits and are not contributing anything back in the way of tax revenue to the Government. That is costing the nation a great deal at a time when there is a need for new housing.
In my region, the south-west, the number of houses that housing associations can start next year will fall from nearly 7,000, as the Government first promised, to about half that figure—3,500. Not only will unemployed construction workers in mine and the neighbouring constituencies not be given the opportunity to get back to work and do something useful, but many of my constituents who are in need of housing will not have that need met. That is not unique to my area or to north Devon. A survey of Members of Parliament showed that housing was singled out as the biggest issue in Members' postbags. Two thirds of Conservative Members and all Labour Members agreed that there was a shortage of available rented accommodation in their constituencies.
A heaven-sent opportunity to deal with that serious problem is being wasted so that money is available for a tax cut in the Budget. That is very nice for those who are in a position to enjoy it, but it is not of much benefit to those on low incomes who do not even pay tax and are without homes. The Budget could have done something concrete to promote house building and tackle that problem.
Much has been said about the private finance initiative. House building is one of the areas in which it has been deemed to be a success. It has been possible for housing associations to attract private funding to match pound for pound the public moneys that they have been putting into new house building. In addition to the £450 million of public funding that will be lost, a further £450 million of private funding, which could have been attracted through the PFI, will also be lost. That is nothing short of a scandal and it is one of the several stories that will emerge after time and after people have had the opportunity to look at the finer print of the Budget and see some of the real damage that is going to be done in many parts of the economy to pay for the 1p tax cut.
This afternoon, there have been discussions about measures to help businesses and small businesses. There have been some in the Budget and it would be churlish not to acknowledge them. None the less it remains a fact that all those referred to are too modest. It is welcome that employers' national insurance is down from 10.2 per cent. to 10 per cent., but this hardly seems to be the occasion to raise the flags and celebrate. It needs to go a good deal further than that.
Further relief against the increases in business rates for small businesses is welcome, but even after that many small businesses in the south-west and elsewhere will find the rate that they are expected to pay cripplingly high and a major problem as they try to steer their way out of the recession. There can be few regions of the country that have suffered quite as badly on the business rate as the south-west.
The fact that small firms will also face a lower corporation tax bill in the coming year is also welcome. While the small increase in the value added tax threshold is welcome, however, many small businesses are desperate for fundamental reform of the VAT system. I do not pretend for one moment that a magic wand can be waved to put that right automatically, but some acknowledgement by the Government that much further reform of the system is necessary would be welcome.
The right hon. Member for Worthing (Sir T. Higgins) chose to refer to the moneys which, during his speech on Tuesday, the Chancellor led everyone to believe would be available for education in the coming year. Education should be a top priority for investment because it is unquestionably investment in the future. If we are to tackle the long-term spiral of decline, there can be no better way of setting about that task than bringing about real improvements in our education system and in the facilities in which those working and learning in the system find themselves trying to cope every day.
On hearing the Chancellor's remarks, I like many others genuinely thought that he was making £878 million of new money available to education, of which £770 million would be channelled through the local authorities. Like everyone else, on studying the finer detail of the Budget, I was surprised to find that the central Government settlement to local authorities for the coming year is to increase by a mere 3.3 per cent., which is broadly in line with inflation, and that the money that was supposedly being earmarked for education does not exist.
Local authorities are invited to spend that additional money on education, but are not given the means to do so. They have to make a choice. They either cut other services that they are responsible for providing, which means that they will have to cut road repairs, libraries and personal social services, which are already strained to the limit as they struggle with the task of implementing the community care programme; or, if they cannot find any way of cutting other services, they will have to raise the council tax to pay for the education package.
It is interesting to find in the Red Book that the Government anticipate as part of this Budget that councils will have to increase council tax by three times the rate of inflation. When councils set their budgets next April and May and find themselves driven to do so, one can confidently anticipate the cries from Conservative Members who receive letters from constituents complaining about the rise. They will say, "Look at this. Liberal Democrat and Labour councils are increasing the council tax." They will not be able to point to any Conservative councils doing it because there is none left.
People must understand that that is what the Conservatives have been anticipating from the word go. The whole thing is an elaborate deception. They have given the impression that the money is there, but it is not.
The hon. Gentleman claims, with what justification I am not sure—my hon. Friend the Minister will make that clear in her reply—that it is assumed that the council tax will rise by a rate three times higher than inflation. As a citizen of Bristol, I can tell him that if the council tax were to rise by a mere three times the rate of inflation, it would be a blessed relief to the citizens of that city.
I am not sure whether other citizens of the city would, necessarily agree with the hon. Gentleman's blase attitude. I do not think that council tax payers will find it remotely acceptable that they are asked to pay three times the rate of inflation. When they remember that the Chancellor promised this great sum for education, it will be interesting to be able to tell them that the very Budget that included the supposed provision of that extra money had assumed all along that the increase in council tax would have to be three times the rate of inflation and that only by means of such a rise were the Government able to quote that notional figure in the first place.
If the Government had simply said that they were giving local authorities a settlement for next year of 3.3 per cent., which is broadly in line with inflation, there would have been relatively little argument or cause to demur. Of course, there would have been some proper but predictable complaints about higher pupil numbers, the extra tasks that local authorities were being asked to undertake and the fact that they had not been taken into account in a settlement that was only in line with inflation. But, broadly speaking, everybody would have found such a settlement more or less reasonable.
Apparently, however, the Government could not confine themselves to making such a statement. They had to pretend that a vast extra sum was being made available for education, which is not the case. It was an elaborate piece of deception, but I do not believe that they will succeed in pulling the wool over the eyes of council tax payers.
The Government suffered bad bruising last year in the battle over local authority finance, which resulted in many Conservative councillors losing their seats in last May's local elections. Some of those councillors had given many years' good service to their communities and did not deserve to lose their seats, but they were driven into that situation by the cavalier and tack-handed manner in which central Government administer local authority finance.
Exactly the same will happen next May. I predict with confidence that there will be massive casualties on the Conservative side in the local authority elections. And Conservative councillors will know exactly whom to blame—the Chancellor of the Exchequer and the Secretary of State for the Environment. They are the people who pulled that ridiculous scam that will fool nobody, and which will not only have a devastating effect on our education services but will result in catastrophe for the Conservatives next May.
One thing above all else distinguishes our party's position from that of the Government: we have said all along that we believe that the equivalent of 1p in the pound in income tax should be spent on education. That is real money—£2 billion, three times the sum the Government pretend they are making available.
Does the Liberal Democratic party propose to ring-fence the much vaunted 1p increase in income tax to ensure that the money is spent on education, or will it simply be paid through the block grant to local government?
It is certainly our intention that that money will be an extra grant on top of the block grant that is paid in the normal way, and that it should be available specifically for spending on education.
Polling evidence has found that that was the single most popular policy of any party at the general election. That is why we shall say again to the public next week that we have been consistent, and that we still believe that the equivalent of 1p in the pound on income tax should be spent on education. We do not believe it right or proper at this time for the Government to borrow yet more heavily in order to give out a 1p tax cut.
In the Lobby next week we shall have no hesitation in voting against that wholly irresponsible, uncalled for, unwarranted cut in income tax when there is such a demand and such a need for investment in our future, and for making our children's education a top priority. That would avoid the terrible scenes that we saw last winter as well as the situation this year, when most local authorities have had to start the autumn term with higher pupil numbers but, in many cases, with hundreds fewer teachers.
I start, as so many of my hon. Friends have done, by congratulating my right hon. and learned Friend the Chancellor and his Treasury colleagues on the prudence of the Budget.
The day before the Budget, there was great concern, largely whipped up by the media, that there would be a huge giveaway. Indeed, it was the Conservative supporters to whom I spoke who said that they hoped that the Budget would be not the sort of Budget that they were reading about in the media, but the sort of prudent Budget that they would expect from my right hon. and learned Friend—and that was what they got. Certainly a Budget that matches the necessary tax cuts with equivalent reductions in public spending cannot be described as other than prudent.
My concerns about the Budget go a little further than those of many of my hon. Friends in that, although I accept that it was the right shape, I wonder whether it was prudent enough. When a nation is borrowing more than £1 billion every fortnight to finance public spending, there is a strong argument for saying that further cuts in public spending should have been found, and that the Chancellor should at least have presented more strongly the case that the cuts that had been found should have gone directly into reducing the public sector borrowing requirement.
It is not so long since the years between 1987 and 1991—four years in which the public sector outturn was £3.5 billion, £14.7 billion, £8 billion and £0.6 billion. Having given those figures, I am afraid that I must admit to cheating a little in one respect—they were not public sector borrowing requirements but repayments of public debt.
In those four years, a Conservative Government succeeded in doing what few if any other Governments have succeeded in doing in the past 100 years—they managed public sector finances so as to repay national debt. That not only reduced the burden on future generations in terms of repayment requirements, but reduced annually the burden of interest on future annual current accounts.
I am therefore a little worried that the Chancellor's announced plans for management of the public sector balances over the next few years tend only towards a balance in the medium term. That worries me not only because I am an accountant, and practised full time as one for many years before I entered the House, but because I know that, for any business to attempt to break even, it must aim firmly at making a profit.
If the Chancellor is attempting to reach break-even on the public sector finances by 2000, I should like more strenuous attempts to be made, by reducing public expenditure further, to achieve public sector debt repayment, which the Government achieved in the late 1980s and early 1990s.
The right public sector borrowing requirement at any particular time is a matter over which economists can argue—and frequently do. It cannot be arrived at simply by comparing one country with another. It is not, perhaps, surprising that our achievement last year in terms of public sector net borrowing as a percentage of GDP was considerably worse than Germany's—I suppose that that is what one would have expected—but it was considerably better than that of Italy. That, too, is probably what one would have expected, but I was a little surprised to find that our performance was quite a bit worse than that of France.
Compared with our non-European Union competitors, the situation is a little more worrying. As a percentage of GDP, the general balance of United Kingdom finances was considerably worse than those of both the United States and Japan. Even that is only a guide, because to work out how much a country should borrow in any year, one must take into account the financial position of that country at that particular time and, as I said during the speech by my right hon. Friend the Member for Worthing (Sir T. Higgins), the asset base against which the borrowing has been made.
In the 1980s, it was frequently said—with considerable justification—that Britain's borrowing capacity, and the reason why Britain's currency was so strong during the height of our borrowing in the 1980s as well as when we were repaying the national debt, was the strength of British assets abroad, against which, effectively, the world's financial markets were judging our borrowing. I wonder whether the same would be true today. While our borrowing is coming down—and will continue to come down in the next few years—it is considerably higher than it was in the 1980s. As the mobility of international privately owned assets has become greater and as more and more of the world's economies have become market economies rather than controlled economies, the skip to and fro of assets has become easier.
I suspect that a banker running his eye over the balance sheet of United Kingdom plc would come to two conclusions. First, there is a great danger of the United Kingdom—to use an accounting phrase—over-trading at current levels in relation to its asset base. Secondly, that asset base might in any case have been significantly eroded in Government terms since the 1980s, when it was last measured.
The effect is considerable worry in two respects. First, the current plan is for the PSBR only to reach a balance. In other words, on the declared plans of my right hon. and learned Friend, not 1p of what we are now borrowing is intended to be repaid in the medium term. It is all there as a burden for future generations. Secondly, we have not abolished the world's economic cycles. We all know that what turned our public sector debt repayment of the late 1980s and early 1990s into the PSBR was the world recession, which forced us to increase public spending on cyclical items such as unemployment benefit and income support. The recession resulted in our previously sound public finances falling into the worrying position in which we now find them.
If one talks to those in the business community—they are currently enjoying reasonable growth and have been doing so for the past couple of years—there is little doubt that the next world recession will come. What frightens me is the growing consensus among economists and business men that, as the world's trading nations have increased, the vulnerability of the world economy has also increased. The economic cycles are also speeding up.
Most of the economists and business men who are being asked to put a date on the visible start of the next world recession are plumping for a date around the turn of the century. That, of course, is the period during which—under the Chancellor's present plans—it is intended that British public sector finances will get closer to balance.
My fear is that, as we approach a worse position in the public sector than we had in the 1980s, we shall enter another recession. That recession will cause us to start increasing public sector borrowing again without having had any opportunity to repay what we have borrowed. Inevitably that will have an impact not only on the vulnerability of the British economy to future world cycles, but on the debt burden and interest burden that we are leaving to subsequent generations. In the long run, it will have an impact on the expected life styles and standards of living of the generations for whom we are now providing in our management of the public sector.
The conclusion that I have reached reluctantly—which I have been considering for some time—is that, in our broad pattern of public sector spending, we have in many areas developed champagne tastes on what remains a beer income. In the next few years, we need to start putting before the public the possibility that a number of what appear to be permanent public spending programmes might need to be looked at again.
A banker looking at the British balance sheet—but not taking into account other factors such as social acceptability—would probably advise a reduction in expenditure of about £30 billion on permanent programmes over the lifetime of this business cycle. That is a far larger reduction than has been contemplated either in this Budget or in alternative budgets such as those put forward by the Conservative 2000 Foundation.
Such a measure would involve reducing many programmes which people regard as foundations of the welfare state. It would involve, for example, looking seriously at whether we can continue to pay child benefit above income support levels. It would involve looking seriously—as I believe the Government should—at the range of exemptions from prescription charges and at the level of those charges. It could be possible both to lower the level and to increase the exemptions while saving a considerable sum in public spending. It might even involve—to howls of protest—looking at whether a non-funded basic state retirement pension should be paid to those on upper incomes.
Such a measure would involve looking at the scope of the NHS to see whether it is capable of taking on the demands that are currently made of it, and the demands that will inevitably be made of it in the future in the light of shifting scientific research, the availability of medical treatments and the demands that people inevitably make once they know that such treatments are available. This and many more areas are not currently being looked at.
There is an absence of any realistic alternative from any other party in the House because—let us face it—there is no point in discussing public expenditure reductions with the Opposition because they do not even understand the meaning of the term. I believe that the British nation will, in the next few years, look to the House and the Government to consider matters of this nature. It is not sufficient simply to solve the financial problems of today by pushing them on to future generations.
Clearly it will be necessary to look at this Budget in the context of my right hon. and learned Friend's next Budget which he will deliver, in my view, in November 1996. I believe that it will be necessary to consider what scope there is in the long term for public expenditure reductions, because only if we can begin to educate the British public about the need for public expenditure reductions of the order that I have outlined will we be able to set up for the future a sound public sector financial system that does not leave unacceptable burdens for future generations.
I am very pleased to follow the hon. Member for Bristol, North-West (Mr. Stern), and I was struck by his simile "champagne tastes on a beer budget". I hope that he will forgive me if I say to the House that I think a more correct simile from him would have been "caviar on a fish and chip income". The hon. Gentleman will recall the occasion to which I am referring.
My hon. Friend the Member for Swansea, East (Mr. Anderson) touched earlier upon one aspect of the Budget that has not been given much attention—the environmental sensitivity, or greenness, of the Budget. I am struck by the Budget proposal to take the income from the landfill tax while reducing national insurance. It is a switch from a tax on labour to a tax on pollution, which is a significant move. I look forward to future Budgets, perhaps introduced by a different Government, that will treat that move as a touchstone because we could do more of this.
The Budget maintains the difference between leaded and unleaded petrol, which is an input tax. I am more interested in output taxes. I am confident that, with increasing technology, we shall soon be able to measure the pollution from vehicles. I want the pollution from vehicles to be taxed as an alternative.
VAT on fuel has been discussed tonight. Hon. Members will remember that, in the discussions and arguments on that subject in the House over recent months, one justification for VAT on fuel was that it drove down consumption and thus helped save the planet. But it does not because VAT on fuel takes no recognisance of the fact that electricity comes from different sources. We should consider that fact as another future Budget measure. I find it amazing that at Drax and Radcliffe power stations, for example, flue gas desulphurisation equipment has been fitted. The cost at Drax was £700 million. The consequence of generating electricity at those retro-fitted plants is that the cost of electricity is slightly higher. Moreover, the added costs at those stations reduce the stations' competitiveness in the pool to such an extent that, at certain times of the year, dirtier polluting stations come on line before them. That is clearly crazy. A Budget measure that we should strive for in the future is to give a green premium—a credit—for green electricity.
These are challenging and difficult arguments and I look forward to working on them and making environmental taxation a way of enhancing the environment and, as my children would say, saving the planet.
The Budget contained other environmental issues. We have been constantly challenged to say where the Opposition would make savings. Let me give one example. I note that the countryside stewardship scheme, which is designed to protect wildlife and enhance the countryside, is to be transferred to the Ministry of Agriculture, Fisheries and Food on 1 April next year. That budget will increase next year by £5 million.
I am a strong supporter of countryside stewardship as it lifts the landscape and protects the countryside, but I ant unhappy about one aspect of it: the payment to landowners for allowing public access, which is part of the scheme. I have done some research on this and I acknowledge the work that the Ramblers Association has done. It found that 44 per cent. of the sites that receive public access money already have access or a footpath running through them, so we are paying landowners for something that we already have. Those access payments amount to £6 million over 10 years. The issue should be looked at because we are not receiving value for money from the access element of countryside stewardship.
An example of where more money could be saved is the common agricultural policy. I was disturbed to see that the Budget increases our contribution to the CAP next year by £60 million. Families pay around an additional £20 a week because of CAP contributions, so we should look carefully at that budget head. We should look particularly carefully at the arable areas scheme, which pays grants to farmers for producing certain products, principally cereals. In the last year for which figures are available—1994—English farmers received £1.2 billion. As part of that, they received £189 million for set-aside—effectively doing nothing. Nobody likes set-aside. On pursuing the matter, I found that in 1994 more than 2,000 farmers received payments of more than £75,000 under the arable areas scheme. It is disturbing that such large sums of public money have been paid. We should scrutinise and perhaps cap the amount that individual farmers can receive from the scheme.
I was even more disturbed to find that, in 1994, a small group of farmers received more than £1 million each under the arable areas scheme. I am disturbed that the Government, for reasons of confidentiality, will not say how many farmers received more than £1 million. Nor will they give the top payment made in 1994 under the arable areas scheme. That is big public money, to which poor families in my constituency contribute in terms of higher food costs. They have a right to know who receives that money and how much is received. I invite members of the Treasury Bench to look at the matter.
We should have some return for such payments. We have a right to tell landowners that we want a return for the money that they receive for set aside. We want them to lift the landscape and enhance the environment by creating wildlife habitats, working on hedgerows, planting more trees, creating ponds or putting back the walls that are in disrepair all over the country. If farmers are to receive that kind of money, we have a right to expect a return—a green premium.
I shall now deal with some more familiar themes of the Budget, which other hon. Members have discussed, such as the need to create prosperity and jobs, and reduce unemployment. That is what people in north Nottinghamshire want. They pay for it and they know that they have experienced tax increases. They have had broken promises: there have been 21 tax increases, and a typical family now pays £800 more. Income tax may have gone down by 1p in the pound, but the average family is still £670 worse off under this Budget. People expect and deserve some return.
The Nottinghamshire coalfield has had a tough time and Nottingham miners feel that the Government have betrayed them. I remind the House that, in 1979, 40,000 miners worked in the coal industry in Nottinghamshire whereas today, only some 3,000 work in it. Unemployment is therefore a real problem. In October 1992, the then President of the Board of Trade announced that he would close most of this country's coal industry and unemployment went up in coalfield areas. In small pockets, against the national trend, unemployment is still increasing. In general terms, unemployment is going down.
Since October 1992, unemployment nationally has gone down by 17 per cent. In the Mansfield travel-to-work area, which covers a great deal of the Nottinghamshire coalfield, unemployment has gone down by only 7.1 per cent. That highlights the increasing gap between the affluent and the poor. Certainly that is how it is perceived in the Nottinghamshire coalfield.
I think that people in Nottinghamshire would look askance—in fact, I know it—at the Budget proposal to raise the inheritance tax threshold to £200,000. They know that they could buy a pit house in a place such as Bilsthorpe or Boughton in north Nottinghamshire for £11,000. For those people, £200,000 is beyond the moon. It rings hollow. They are also astonished that the budget for social housing has been cut—and cut severely. The Red Book makes it clear that £500 million has been taken away from housing associations and local authorities this year on top of cuts in the previous two years. For people who live in former National Coal Board houses that now belong to housing associations, there is no prospect of getting a renovation grant through moneys from the Housing Corporation because that was blocked at the time of sale. People live in intolerable circumstances. There is no prospect now of those houses being improved.
To talk about people being allowed to leave £200,000 rings hollow when we consider people who live in a pit house in Bilsthorpe. It rings hollow because the Nottinghamshire coalfield, and coalfield communities across the country, are crying out for investment in education, training, infrastructure and, most of all, in the future.
The Budget cuts investment and capital spending. The people of Nottinghamshire want to see the road to recovery—the road that we want to see is a link between the M1 and the A1 across north Nottinghamshire and, as part GC it, the Rainworth bypass.
I am pleased that the Secretary of State for Transport is on the Front Bench. I have noted the cuts that have been made in the trunk road programme. It will not be long before local transport capital expenditure is announced—before Christmas, I believe. We want that road for recovery. We want the Rainworth bypass; it will open up development land in the area and it has the potential to bring new jobs into the area. Nottinghamshire county council has bid for £10 million over the next two years for that. I hope that that bid will be considered not only in terms of traffic and highways but as a bid for a road that can regenerate part of the Nottinghamshire coalfield.
I hope that the Secretary of State for Transport will come again to the Robin Hood line—he was there recently. The county council is in active discussions about the funding shortfall of phase 2 of the line. There is a gap of £4 million. I hope that some compromise can be reached. About £1 million of that £4 million gap results directly from rail privatisation and the increased charges that Railtrack has made.
We want to go forward and extend the line right through the coalfield to Worksop and Retford. Phase 3 is covered in the council's bid and I hope that it will be considered. I hope that the railway transport element of the Department of Transport's budget will be protected, as it has been so far, and that local authorities will get their fair share, especially in the case of the Robin Hood line.
I also want fair shares for English Partnerships, a body set up to help bring regeneration to the coalfields. I note with some alarm that its budget is being cut. We need to clear up derelict sites. There are pit tips and derelict land all over north Nottinghamshire. We need derelict land grant to bring that land back to life. We need to attract factory units, create new businesses and provide homes for new businesses. I am extremely worried that with the cuts in grant aid to English Partnerships all that will be put at risk.
I also note that the training and enterprise councils are to have their budgets cut by 5 per cent., on top of the drop in coalfield money that came to TECs covering the coalfields. Most of all, people in coalfield communities need skilling and reskilling. They need to be competitive in a changing world and investment in training could be a lifeline for them.
I note, too, that the money available to colleges of further education is to be cut. Such colleges are expected to take more students but at a lower cost. I am disturbed about what is happening at some colleges of further education, not only in Nottinghamshire but across the country. The standards of teaching, of courses and of qualifications are dropping. I suggest that some of these CFEs will drop soon. Some are technically bankrupt. It will not be long before the first CFE goes into receivership. That path will be progressed and enhanced by the Budget cuts in their funding.
The windfall tax has received a good deal of criticism. I was surprised on Monday, the day before the Budget when Severn Trent Water, our local private water company, announced increased profits of 75 per cent. or £160 million. I note, too, that all it did for its customers was offer them a £4 cash-back per year. That does not seem to be a great benefit from privatisation. I would have no hesitation in examining the profits and dividends of companies such as Severn Trent and East Midlands Electricity, looking at what they have put back into their capital plans and making a judgment about a windfall tax. Young people are our future. I believe strongly that we ought to offer young people quality routes to training. Money from a windfall tax should be applied in that way.
I note, too, that the civil service is going to be cut by 12 per cent. I was staggered this week to find that European money that could come to Nottinghamshire coalfield communities is being held up because there are not enough civil servants in the Government office for the east midlands to process the application. We paid that money into Europe and we want it back. The stumbling block appears to be a lack of civil servants locally, in the office in Nottingham, to deal with those claims. It is even more astonishing that the local office should have written to local authorities asking for staff to be lent to the Government office to process the claims. Frankly, it is an insult to people in Nottinghamshire.
It is disturbing that no effort has been made in the Budget to get the construction industry going. I remember the private finance initiative being described as additional to Government capital spending. All that now seems to have gone out of the window. I suspect that it will not be long before national lottery money is used in the same way, as a substitute for Government money.
Local authorities have also faced cuts. I have looked carefully at the settlement announced today. Is it not the case that next year local authorities will receive £6.3 billion for capital projects? That is a cut of £700 million—or 0 per cent.—on this year's sum of £7 billion.
I should draw attention to the problem of crumbling schools in Nottinghamshire. Some of the money that has been cut could be used to renovate and refurbish them. There are £85 million-worth of repairs outstanding in Nottinghamshire's schools. In the Chancellor's own constituency of Rushcliffe, there is £6.7 million-worth of work outstanding. I draw attention to Rushcliffe comprehensive school, which has £1.5 million of outstanding repairs, and to Brookside primary school in East Leake, where £105,000-worth of repairs are outstanding.
I know that the governors of those schools, as well as the teachers and parents, would be delighted to see the Chancellor there. They would argue with him about the consequences of the capital cuts to local authorities. I believe that the cuts are shortsighted. We should be investing in capital projects to create jobs and to put down seedcorn for the future.
I deal briefly with the local government finance settlement that was announced today. I am delighted that the Chancellor gave an exclusive interview yesterday to our local paper, the Nottingham Evening Post. He told it that there was a "Cash bonanza for Notts". I think that the Chancellor may play it differently at home from down here in London. Back in Nottinghamshire he has been giving the impression that there is loads of money, boys. The reality, however, is quite different.
If one looks at the financial settlement and focuses especially on education, it is apparent that, this year, local education authorities are spending £797 million more than their standard spending assessment, which is the Government's yardstick. Next year, the pledge of extra money—4.5 per cent. growth in education spending—will bring in £770 million. That promised and lauded extra money does not fill this year's gap.
The people of Nottinghamshire know those figures only too well. They know that the current year's settlement was tight, as the Secretary of State said. In Nottinghamshire's schools, there are 350 fewer teachers now than there were before the summer holidays. That leads to larger class sizes. In north Nottinghamshire, three out of four primary schools have classes of more than 30 pupils, and I believe that there is worse to come. Despite the settlement and the promised cash bonanza from the Chancellor, I do not think that the gap is going to be cut.
In the current year, Nottinghamshire county council is spending £25.5 million, or 7.5 per cent., more on education than the Government yardstick. At best, the settlement announced today brings an extra £15 million into Nottinghamshire schools. That still leaves a budget gap of £10 million.
I anticipate that there will be further cuts in the number of teachers this year, possibly in the region of 300. I find it very hard to understand that, while the number of teachers is being cut and class sizes are getting larger, we, the council tax payers of Nottinghamshire, are being asked to pay more. I think that 300 teachers' posts may go and class sizes will get larger. For that privilege, I anticipate that the increase in our council tax next year will be about double the rate of inflation. We shall pay more and get less in Nottinghamshire.
I do not think that the Chancellor can hurt the people of Nottinghamshire any more. He should listen to the people he meets and respond to those who have written to him. I expect that he has had 25,000 letters about local authority cuts from his constituents. They want better and I want better.
In the future, I want a Budget that is green and clean. I want a Budget that enhances the environment and lifts the landscape. I want a Budget that puts investment for prosperity at its core—investment in education, training and infrastructure and—most important—a Budget that invests in the future of Nottinghamshire children.
I thoroughly enjoyed the speech made by my right hon. Friend the President of the Board of Trade. Unlike the relatively few contributions of Opposition Members, it was factual. The speech made by the right hon. Member for Derby, South (Mrs. Beckett), who led for the Opposition, did not contain one fact. Of course, she attacked us—I do not complain about that—but it would have been novel to hear just a little about what the Opposition propose to do to make up for what they consider that we have not done.
The right hon. Member for Derby, South also had a rattling good cheek in suggesting that the Government had arranged for so many statements to be made today to reduce the time for debate on the Budget. The irony was that, at that moment, there were hardly any faces to be seen on the Opposition Benches. Had the Government done as she suggested—of course, I do not believe for a minute that they did—then one would have to say, "Thank goodness" because we would have had precious few contributions from Opposition Members.
I was interested to hear what the Liberal Democrat spokesman had to say. He said that, on Budget day, he and his colleagues noticed how glum we—the Conservative Members—were looking. That is odd, because we were looking at them and thinking how glum they were. I think that they realised that there might be a great deal more in the Budget than they were able to take in on the day.
My hon. Friend makes a telling intervention.
I support the Budget. As I look back at various Budgets, but without mentioning one in particular, I would have to admit that I found it less easy to say that I supported some of them, but I certainly support this one. Like many of my colleagues, I have been astonished by the publicity surrounding the Budget, which implies that Conservative Members are opposed to it. That is not the case. If I achieve nothing else, I should like to say that I and many of my colleagues support the Budget. Opposition Members may be worried that it is a two-stage exercise. The Chancellor would not say that—he would say that it is merely the latest Budget, and I understand that. However, I expect it to be a two-stage exercise and I am afraid that Opposition Members will have to wait for another Budget in November 1996. The smiles on the faces of Opposition Members may be fewer then than they appear to be now.
My first reason for being enthusiastic about the Budget is that it is fiscally sound. It introduces tax cuts, but there are also cuts in expenditure. I might have wanted rather more in the way of tax cuts than were introduced and I might have wanted a few more cuts in public expenditure, but that is a matter of judgment. Whatever else might be said, there is no doubt that the Budget has impressed the marketplace. That fact was not taken into account by any of the contributions that I have heard from Opposition Members.
I like the fact that there are no gimmicks in the Budget. What is a gimmick? We can all look up the word in the dictionary, but one gimmick that we kept on hearing about from Opposition spokesmen was kick-starting the housing market. I am delighted that the Chancellor did no such thing. There are low interest rates and price discounting in the housing market, which is enough to get the market moving eventually. I invite all Opposition Members to come up to Beverley, where the housing market is beginning to move. I have the impression that that is happening in other parts of the country—therefore, there is no need for gimmicks.
I am also delighted that the Government have resumed the tax-cutting propensity—that is what Conservative Governments are rightly concerned about in the medium and long term. I am delighted at that resumption because I have always believed, and I expect I always will, that the state—even under prudent Conservative Governments—has spent too much of other people's money. That was brought home to me by the social security budget which, I well remember, stood at £37 billion when I was first elected to Parliament in 1987 and next year will be about £94 billion or £95 billion. Conservative Governments have done much to add to that total, which is why I am supportive of the present Government's efforts to examine critically what the state spends and what the individual spends. I would like that debate to be encouraged among not only Conservative Members, but Opposition Members. I do not think, however, that it is taking place among Opposition Members.
I like the Budget for another reason which was never mentioned by Opposition spokesmen—it encourages business, industry and the City. Undoubtedly, the reaction to the Budget from business generally has been better than the right hon. Member for Derby, South was prepared to admit. She merely took the tepid view of the Confederation of British Industry—an organisation that I admire less and less, even though I was once employed by it. One has to look less at what the CBI says and more at what individual business men say, which gives a different picture. Business men have given the Budget a much more enthusiastic response and if I have time I shall tell the House what one or two business men have said.
Finally, I am enthusiastic about the Budget because it encourages savers. I am not only a Scotsman but an Aberdonian and we are famous for our capacity to save money, which I do. I am delighted that the Government are now giving the community another impetus to save because the savings ratio of late has not been nearly good enough, although it is improving. Many within the community will wake up to the fact that there have been reductions in tax for those of us who save money in building societies, banks or wherever. Moreover, I note that even my hon. Friends are forecasting cuts in the interest rate. Of course, the business community wants interest rate cuts, but we must remember that what benefits industry does not benefit the saver. I shall, however, leave the Treasury team to deal with that conundrum.
Direct taxation is thankfully resuming its downward trend. The Labour party—not particularly tonight, but on radio, television and in the newspapers—states that it is now the low-tax party. My constituents in Beverley should treat that statement with extreme caution. My neighbour, the deputy leader of the Labour party, the right hon. Member for Kingston upon Hull, East (Mr. Prescott), said that such promises as the Labour party would make—we do not have the details—would be for one year only. The electors of Beverley and elsewhere had better remember that.
In addition, Opposition Members in private also tell me, "Well, you will see what happens when the boot is on the other foot." We all know what that means: the Opposition will enjoy the ability to take more money out of people's pockets. I warn the taxpayers of this country to look out. The Labour party would introduce more bands for direct tax because that would take out more money from other people's pockets. The upper rate band would undoubtedly be increased to between 50 and 60 per cent., if not more.
The other issue that I never hear mentioned by Opposition Members, except in private, is that of unearned income. I do not have any unearned income; I have had to earn all my capital—a distinction not made by the Opposition. Under a Labour Government, unearned income will undoubtedly be plundered because they will need the cash.
I am pleased about what the Government have done in relation to inheritance tax. I was delighted last June to hear my right hon. Friend the Prime Minister make a commitment to the Conservative party that inheritance tax should be progressively abolished. It is a monstrous tax. I caution Opposition Members to look at how many people in the community have to pay inheritance tax. In some cases, tax has been paid throughout the lifetime of the capital and the Treasury and the Government take the final cut on one's deathbed. That is simply monstrous and I am delighted to hear what my Government intend to do. I welcome the increase of the exempt amount to £200,000 and I look forward to the abolition of the tax.
I have mentioned reducing tax on savings. Clearly, many people have not cottoned on to the fact that they will retain more of the interest than they receive on their accounts. I applaud that measure.
I was pleased that the Budget contained very few references to VAT which, as we know, is an unpopular tax. It is not as had when it is levied on luxuries—although I never know what a luxury is these days—but it is a different matter when it is levied on essentials. It is, however, far too easy to raise VAT. It encourages spenders in Government. We must have one or two spenders on the Conservative Benches—although not too many—but there are certainly a great many on the Opposition Benches.
I warn the community again. A tax that is too easy to raise encourages spending in Government Departments. I say to my Conservative colleagues that we must be careful and recognise the public resistance to that tax. I am resistant to VAT. I have always bought new cars until now, but I have no intention of doing so in the future, as I am not prepared to pay the valued added tax on a new car. I may even reach the stage of buying second-hand suits, if I have to, to avoid that tax. However, I am idiosyncratic on that subject and I expect that the House will bear with me.
On long-term care, I am delighted that my Government have recognised what were undoubtedly the beginnings of a minor scandal, which occurred as a result of the developments in community care. I am pleased that the first step has been taken. I do not regard the first step as being especially generous, but it is a move in the right direction. I look forward to quick initiatives that will come out of my Government to ensure that we do not have the position that exists in my constituency—the same can be said of others—where people find it necessary to sell houses to pay for the fees for long-term care that they receive alongside some people who did not save, although some people were simply unfortunate and could not save. I fail to understand why I, and many of my constituents, should forgo consumption to pay for that care whereas others do not.
I finish with one or two comments about what the Budget has done for industry. Having been associated with the Confederation of British Industry, I know that industry is the boiler house of wealth creation. Industry and business create wealth. They create the cake and we divide it. Therefore what we should do, which is better done by a Conservative Government, is ensure that we encourage industry, but not with hand-outs. Too often, the Opposition say that industry needs help in the form of a hand-out. Industry wants no such thing. It wants what the present and the preceding Government have done—which is to provide a deregulated background in which it can operate. Usually, business men ask Governments to keep out of their hair. I believe that Conservative Governments have done that, in the case of inflation, and I congratulate my right hon. and learned Friend the Chancellor on the fact that he continues to bear down on that evil.
I well remember all the industrialists I used to speak to in the period 1975–79, who repeatedly mentioned the fact that the inflation rate was increasing. It reached about 26 per cent.
I am corrected, and I am happy to be so. What did that do for the competitiveness of British industry and individual companies? It completely destroyed the former, and it destroyed the prospects of many good companies. Therefore, the Chancellor is absolutely correct to bear down on inflation.
The Chancellor was equally correct not to impose a windfall tax. In that regard, I do not understand why the Opposition do not understand why a windfall tax would not be beneficial to the British economy. It would be beneficial to the extent that a Labour Government would use the proceeds in some way for one year, but what signal does that send out to inward investing companies? I venture to suggest that they would be less interested in coming to the United Kingdom than has heretofore been the case, when I believe—I am open to being corrected—that more than half the inward investment of the European Union has come to the United Kingdom. I am also delighted to notice what my Government have done on uniform business rates.
I have referred to the tepid—it is tepid—judgment of the CBI. I can therefore throw that away. However, I read in the Financial Times that the chief executive of Asda Group, Mr. Archie Norman, said:
We are delighted. It is a bullseye.
That was not mentioned by the right hon. Member for Derby, South, was it? Sir David Simpson, chairman of British Petroleum, said:
It is good to see that the Government intends to continue reducing its spend as a proportion of GDP and that it has reaffirmed its aim to balance the Budget"—
and so on. He is obviously delighted.
Sir John Banham, a former director-general of the CBI, and chairman of Tarmac, says:
The Chancellor is on the right track and the measures he has put in place provide the best prospects for the UK building industry.
The right hon. Lady should have balanced her remarks by telling us about that.
What does the City say?
He's taken the prudent path
says the head of bond research from Yamaichi international bank. I could go on, but I know that other hon. Members wish to speak. [HON. MEMBERS: "Hear, hear."] I shall therefore bring my remarks to a close—reluctantly, because I should like to say an awful lot more on that subject. However, I hope that my colleagues will allow me to ask one question. After 16 years of Conservative Governments, one would suppose that the United Kingdom was in tatters. Why, therefore, is it the case that the City of London—I just happened to pick up a document at random the other day—appears to go from strength to strength? It should not he so, if the Opposition's comments are justified.
What do I read?
London is the world's largest international insurance market"—
not the second or third, but the largest—
with net premium income of £9.9 billion … There are over 540 foreign banks in London".
Would they come if the UK was as the Opposition portray it to be? Of course they would not. Moreover,
The London foreign exchange market is the largest in the world, with a daily turnover of $464 billion—more than the turnover of New York and Tokyo combined.
I know that other hon. Members wish to speak, but they will, I know, allow me to say that London is the world's second largest fund management centre, after Tokyo, with more than $750 billion of institutional equity holdings.
I might go on and on, but I cannot. By public demand—I should say by popular demand of my colleagues—I shall sit down. I simply finish by saying, it is a rattling and a damned good Budget. It has the whole-hearted support of Conservative Members and I fear that the Opposition will live to regret what they said before the Budget. If I remember rightly, they said that it would be a giveaway and would be recognised by the British people as such. It was no such thing; and just wait for the next one.
I am pleased to follow the hon. Member for Beverley (Mr. Cran) and I shall discuss some of his arguments later.
I very much enjoyed the contribution of my right hon. Friend the Member for Derby, South (Mrs. Beckett) and the speech of my hon. Friend the Member for Sherwood (Mr. Tipping), who spoke about several issues, and suggested ways in which the green tax might be developed.
In my estimation, the Budget has hit the most vulnerable people the hardest, to achieve a 1p reduction in income tax. It has hit the unemployed, single parents, the under-25s on housing benefit and disabled people on long-term hospital stays—all to achieve a reduction in income tax of only 1p.
There is little cheer for little England in the Budget, because the typical family will pay £670 more per year in tax. They certainly will not be cracking open the champagne in Barnsley. My constituency, which comes into Barnsley, has a great deal of unemployment. Calculated on a narrow base over the travel-to-work area, unemployment in Barnsley is 18.1 per cent. of males. There are pockets in some mining villages where unemployment is much greater. It is as high as 40 per cent. in some mining villages.
The Chancellor talked of an enterprising Budget that would motivate entrepreneurs and the unemployed alike. That theme was echoed by the Secretary of State today, but I do not expect the Budget to make the economy more robust.
One factor overlooked by the Secretary of State when he spoke of the advantages that deregulation was bringing is its potential to act as a drag on the economy. That is particularly true following the abolition of the wages councils. A study carried out recently by the Low Pay Network showed that Barnsley had been severely affected by that: for instance, 79 per cent. of relevant vacancies advertised in the town's jobcentre offered lower rates of pay than could have been advertised before the abolition of the councils.
The position is similar in a number of northern towns. According to a summary of the survey's findings, 69.2 per cent. of jobs advertised in Rotherham's jobcentre could not have been advertised at the same pay rates if wages councils had been in existence. In Walsall the figure was 66.1 per cent., and it was 60.7 per cent. in Halifax and Wigan. It is clear that a minimum wage should be introduced.
Opposition Members have long advocated such a move. If we are to lift people out of poverty, it is essential to give a greater stimulus to those who are looking for work. A minimum wage would also stimulate industry. It would do two things that Conservative Members never mention when they talk about the minimum wage. First, it would lead to innovative action by employers: that would boost the capital goods market, which in turn would require skilled labour. It would have a ripple effect throughout the economy. Secondly, it would free more labour for education and better training. In my view, a skills shortage is a significant barrier to competition. The availability of higher-level skills would, for example, enable manufacturing industry to use more capital-intensive processes. Taken together, those moves would nudge the United Kingdom's economy towards the higher-value end of the market—and that is where the United Kingdom must be if it is to survive in a ferociously competitive world market.
Low pay has proved to be a drag on the economy in the mining industry, for example. In 1913, before the first world war, we reached the zenith of mining production with 1,197,000 miners, but in Britain only about 13 per cent. of coal was cut by machine. In Germany, almost a third of coal was cut by that process. By the end of the war, two thirds of coal in America was cut by machine; in this country, we had hardly advanced since 1913. That was because of the availability of a glut of cheap labour. It took nationalisation after 1945 to bring technology into the mining industry. Cheap labour can hold back innovation.
Training and education—along with investment, of course—are major ingredients of prosperity, but the Government do not take that too seriously. Since 1979, the United Kingdom has slipped from 13th to 18th position in the world prosperity league table. If that statistic shows anything, it shows the Government's abject failure. It shows that we have not been directing enough money into investment, and that in that way we have allowed many of our industries to lag behind those of our competitors.
It is because education and training are so important that the Chancellor should have introduced a windfall tax. I know that the hon. Member for Beverley is opposed to that, but I believe that, since the privatisation of the utilities, local monopolies in electricity and water have made billions of pounds on the backs of their customers. As my hon. Friend the Member for Sherwood pointed out, Severn Trent admitted yesterday that its profits were up by 75 per cent. on last year. Even Yorkshire Water, whose pipe network is leaking at least a third of water supplies every day, announced that its profits were up by 50 per cent. The Secretary of State said that investment in the water industry was increasing, but over a five-year period it has fallen by £282 million. That is an enormous loss of investment as a result of privatisation.
The Chancellor should have seized the opportunity to use the excessive profits of the utilities to invest in education and training. That would have given young people a chance to acquire the skills that would help them to secure jobs. Is there any better way in which to use those excess profits than to invest them in the nation's future?
No doubt the Chancellor will have had his eye on the proceeds that are likely to result from the sale of the nuclear generating industry next summer. That, too, is a privatisation too far. It is estimated that the price will be about £2.6 billion, which is less than the cost of building the Sizewell pressurised water reactor. The Chancellor talked of competitiveness and competition, but the sale of the nuclear industry will further neither objective. Energy prices are one of the elements that increase competitiveness, but since the privatisation of the electricity industry—contrary to what the Secretary of State told us—the cost to large users has not fallen. In fact, the cost to large users in the United Kingdom is much higher than that in most of our European competitors. It is far in excess of the cost in France, for example.
The creation of the two new nuclear companies will not help competitiveness. Magco will take on the Magnox stations, and will go over to British Nuclear Fuels Ltd., and British Energy will own the five advanced gas-cooled reactors and the pressurised water reactor. Between them, they will supply between 25 per cent. and 29 per cent. of the United Kingdom's electricity needs. As all that is base-load electricity, there is bound to be a stream of revenue following privatisation. After the privatisation of the nuclear generating industry, it is more likely to diversify into gas. Once the gas stations are on stream they will not compete with nuclear capacity, whose base-load electricity is bid into the pool at zero. So the new gas capacity will compete with other gas stations or with coal. It is therefore likely that the coal stations will be pushed off the grid.
Privatising the nuclear industry is folly. It will not help to diversify our fuel mix, and it will not improve our competitiveness. Indeed, prices in the energy market may rise thereafter.
It is accepted even by Conservatives that we invest much less than do our competitors. Japan invests twice as much as we do; America invests £863 per person more; and Switzerland a massive £2,766 more. Conservative Members like to talk about 1979. In 1979, Portugal invested £177 per head less than did the United Kingdom. Now it invests £312 more than we do.
Furthermore, the Budget, besides not increasing investment as required, did not sufficiently encourage investment in the areas that need it. The Government had the opportunity to create an arms diversification agency to harness expertise and capital from the armaments industry as it adapts to civil production. But Conservative Members seem to find that idea anathema.
What is more, this country needs more research and development. We have cut back dramatically our investment in clean coal technology, an area in which we once led the world. The danger is that the same could happen to the nuclear industry after privatisation. Research and development are the seedcorn for the future, and the Chancellor should have provided much more encouragement for them—but chose not to.
Research and development need to be focused on civil, not military production. That would allow spin-offs from civil R and D to the military, instead of the other way round. Germany and Japan have shown what can be achieved when research and development are focused on civil production, with spin-offs for military production.
Overall, the Budget did nothing for unemployment. The Government have put taxes up by 7p and lowered them by 1p, still leaving the typical family paying £670 more in tax. The Chancellor has failed to come up with a Budget for investment, to increase prosperity and to ensure the UK's competitiveness in world markets.
Thank you, Madam Deputy Speaker, for giving me the chance to say a few words.
I agree with my right hon. Friend the Member for Worthing (Sir T. Higgins) that a Budget that is cheered to the rafters often looks less appetising six months on. The headline in The Sun confirmed for me that this Budget will be the opposite sort, in which my right hon. and learned Friend the Chancellor has introduced some sensible tax cuts, targeting key spending areas and producing a number of important innovations.
Bryan Gould, who has now left us for New Zealand, used to talk about the Labour party's lack of any sort of macro-economic policy in the key areas of interest rates, exchange rates, taxation and monetary policy. He said that Labour had no such policies. It was thoroughly disappointing again this evening to hear the speech of the right hon. Member for Derby, South (Mrs. Beckett), which contained no policies, ideas or opinions: just criticisms. Her performance served to show the vacuum in Labour party policy.
My right hon. and learned Friend sought to deal with many challenges in his Budget. I should like to examine two of them, the first of which is not essentially a party political issue. Ours is an aging population. An ever smaller percentage of the population works to support an ever larger element in retirement. There is no escaping that fact. The implications for fiscal policy and for public borrowing are critical. I am pleased that my right hon. Friend the Secretary of State for Social Security is paring back the increases in the billowing social security budget from 3 per cent. to 1 per cent. a year.
It has become something of a cliché to talk about global markets and communications, but the fact is that Governments' ability to control events outside their borders, if markets do not like the policies that they are pursuing, is strictly limited. We live in a time of open markets and of ferocious attacks on currencies. As an older, mature economy, it is our duty to ensure that we run a low-inflation, low-tax economy if we are to compete with the emerging economies in the far east and elsewhere. We have no option in the matter if we are to face up to the changing demographic balance in this country and in other industrialised nations.
In this respect I welcome the announcements affecting the problem of long-term health care for the elderly. Many elderly people have been very worried about the thresholds, which have now been raised from £3,000 to £10,000 and from £8,000 to £16,000. That represents a serious move on the part of the Government, who, like Governments in all industrialised countries, have had to face up to the problem and to lay the foundations for long-term care provision. That involves creating the right sort of fiscal programme.
The Government and the Chancellor have sought successfully to encourage savings, with the introduction of PEPs and TESSAs and the extraordinary increase in the number of personal pension arrangements that help people sensibly to plan for major demographic change—in this country and across the industrialised world. In that respect this Budget marks a watershed.
Investment is crucial to our survival in this competitive world. There has been a huge improvement in manufacturing productivity and in inward investment to the UK from outside Europe. That has enabled us to compete well by attracting scarce capital. It is creating jobs, new technologies and industries that are extremely beneficial.
Since the end of the second world war, every time there has been economic recovery, we have had a sterling or balance of payments crisis. So many of the nationalised industries that were damp hands on the economy in the 1970s are now leading our export effort and showing the rest of British industry the way forward by creating employment, producing taxes and helping to ensure that our export performance is excellent by the standards of the past 30 or 40 years. It is interesting to see the transformation that has taken place in that respect.
To achieve our aim of being the enterprise centre of Europe, we have to continue to cut tax as a percentage of GDP. I am pleased that Government expenditure as a percentage of GDP is projected to fall to 40 per cent. in 1997–98 and to 38 per cent. two years later. Let us aim for 35 per cent.—the levels that apply in Japan and the United States. If we continue to reduce that percentage, we shall bequeath a vibrant and dynamic environment in which business will prosper.
I very much welcome the private finance initiative, which will address the enormous pressures on the social and transport infrastructure of Britain and all other mature industrialised countries.
I welcome the further expansion of the 20p tax band, which means that 200,000 lower-paid people will be taken out of taxation altogether and one quarter of all taxpayers will now pay only 20p. I applaud the fact that my right hon. and learned Friend set a clear marker to a 20p tax rate. There are no gimmicks; we are on our way to achieve that.
Those policies have produced quite exceptional results in Britain. Unlike the other industrialised countries in Europe where unemployment is growing, in Britain it has fallen by 700,000 in the past three years. In my own constituency, the unemployment rate is now 4.3 per cent, having dropped by 8.4 per cent. in one year and 35 per cent. in three years. That success is reflected in the lives and aspirations of my constituents and I look with pleasure at the effect of Government policy in the part of west Suffolk that I represent.
I should tell my hon. Friend the Economic Secretary that I personally welcome the vehicle tax exemption on 25-year-old cars. I have a 1973 Rover 3.5 litre coupé. The car looks forward to being two or three years older and escaping that taxation.
I thank my right hon. and learned Friend and the other Treasury Ministers for addressing the problem of general betting duty. I have the great pleasure of representing the world's headquarters of racing in Newmarket. The national lottery has had a serious impact on prize money in the racing industry. The cut of 1 per cent. in general betting duty will stimulate the employment gains that are already developing in the industry as a result of the VAT registration concessions given in the Budget three years ago. On behalf of my constituents, as the racing industry is the largest employer in my constituency, I thank the Treasury team for that important concession which will be highly valued in even further reducing the already low rate of unemployment in Bury St. Edmunds.
Finally, my right hon. and learned Friend has produced a coherent, sensible and restrained Budget. In 12 months' time it will be possible further to extend tax cuts to produce a lower rate of inflation in a growing economy. The Budget is a watershed as we have turned the corner from a recessionary era into a period of sustained growth and low inflation. I welcome it and congratulate my right hon. and learned Friend on presenting it so well.
It is a pleasure to be able to take up the remarks of my hon. Friend the Member for Bury St. Edmunds (Mr. Spring), who serves with me as a member of the Select Committee on Health. I echo his comments about the growth of the elderly population and the proposals in the Budget, which I welcome, that are designed as a first stage to deal with the difficult problem of providing long-term care for the elderly.
I warmly welcome the Budget as a whole. I think that my right hon. and learned Friend the Chancellor of the Exchequer got it right. Some difficult decisions had to be taken, especially given the state of public finances.
The key to economic success is the achievement of sustainable growth. There is no doubt that in 1994–95 and beyond we have and will achieve that growth. One of the judgments of the Budget is whether we shall continue to achieve sustainable growth. I believe that we shall do so, and I think that most economists would share that judgment.
What do businesses ask of the Government in managing the economy? The answer is that they want stability. They do not want the old days of stop-go, when they boosted their production only to find that it had to come to a halt as the economy went into recession as a result of overheating. Businesses want stability. They want stable inflation, stable growth and stable interest rates so that they can plan sensibly. The Budget is prudent in its judgment on public finances because tax cuts are balanced by reductions in public spending. Surely that is the way in which to proceed.
It is important that tax cuts put money back into the pockets of the public. The cuts will have a significant impact on consumer expenditure. Despite the comments of Opposition Members, the public know better than the Government how to spend their money.
There is a danger that Budgets can be over-hyped. We heard so much nonsense before the Budget about the level of tax cuts that would be achieved. As I have said, my right hon. and learned Friend the Chancellor got it right with cuts of £3.25 billion, which were balanced by cuts in public spending. More important, does the Budget pave the way for reductions in interest rates, which would be much appreciated by businesses and mortgagees throughout the country? I believe that it does, and I urge my right hon. and learned Friend, in his meetings with Eddie George, to adhere to the tough line that he has adopted and go for interest rate cuts.
It is my view that the Governor of the Bank of England has been wrong about interest rates over the past year. The issue is crucial to understanding why my right hon. and learned Friend the Chancellor had limited room for manoeuvre this year. I spoke in the Budget debate last year, when none of us knew what growth rate would be achieved in 1994. We now know that we achieved a growth rate of 3.9 per cent. There was concern about whether the economy would overheat and whether inflation would get out of control. We have seen some increases in interest rates. If my right hon. and learned Friend had followed the Governor's lead, we would have higher interest rates.
What have we seen? In the Red Book, growth for 1995 was predicted to be 3.25 per cent. That was only a forecast. In the summer forecast it was scaled down to 3 per cent. It is now forecast to be 2.75 per cent. We know that in the third quarter it was down to 2.1 per cent. In other words, interest rate cuts have had an effect, along with the slow-down in the world economy, on the growth rate of our economy.
What has been the effect of that slow-down? Tax revenue has been reduced significantly. I understand the exact reasons for the reduction in tax revenues. It is a problem that affects other countries. We know for certain, however, that a slow-down in growth will have an impact on tax revenues. We know also that £7.5 billion is an enormous sum. The Government have had to face difficulties with the public sector borrowing requirement, but we have been extremely successful in keeping spending under control. That is a key achievement.
What better position would we have been in if tax revenues had held up? My right hon. and learned Friend the Chancellor might have been able to introduce further tax cuts. My message and plea to the Treasury Bench is that we should not be too cautious over the next 12 months. Let us see growth in the real economy. There is little sign of inflation taking off. Wage increases, for about the first time in our history, are below the rate of inflation. That is extremely good news.
At the same time, the slow-down in wage increases has had an effect on growth. In other words, there are some difficult balances. We must ensure that we achieve at least the levels of growth that are predicted in the Red Book. I would hate to have to say next year that we achieved not 3 per cent. but 2.5 per cent. I do not accept the argument that the underlying trend rate of the economy, which some say is 2.75 per cent., while others claim that it is 2.5 per cent., is fixed in stone for ever and a day. It depends on the improvements in productivity that industry is achieving, and there is no doubt that in recent years industry has become much more productive and successful. That should be borne in mind.
The debate has been fascinating. We hear a lot about new Labour and how the party has changed its ways, but listening tonight, particularly to the hon. Member for Barnsley, West and Penistone (Mr. Clapham), I thought that I must be in a time warp. The hon. Gentleman had some quaint ideas about a minimum wage encouraging investment in capital equipment. It might well do. That is not quaint. But it would have a disastrous effect on unemployment.
We also had a revelation that I have heard on previous occasions, again from the hon. Gentleman but also from other hon. Members, about Government directing investment. What a disaster it would be for Britain if the Government were to decide where investment should go. Government would never get it right when it came to deciding in which industries to invest. The only people who can judge where to invest are those in the businesses themselves.
We hear a lot about underinvestment. Investment is up, but the Opposition concentrate on public sector investment, as if that constituted the greater part of investment. I looked in the Red Book earlier to see whether my understanding of investment was correct. In broad terms, investment in Britain is running at about £100 billion a year. Of that, only about 20 per cent. is public investment. The vast bulk of investment is decided by businesses and industries throughout the land. They invest only when there is a stable macro-economic framework and they can see a demand for their product. That is why the Government are so right to have the sound economic policies that they have.
Listening to Opposition Members on public expenditure, I sometimes wonder whether they are being honest with the electorate. Earlier this afternoon we were told that we had squandered our oil revenues and privatisation receipts. But what have they been "squandered" on? They have been spent on essential public services. Since 1979, an extra 70 per cent. has been spent on the health service. Spending on education is up 50 per cent. per pupil. There has been a £70 billion increase in real terms in public expenditure since 1979. I do not recall hearing Labour Members say that we should not put more money into health or education. Therefore, it is dishonest of them to try to pretend that that money has been squandered.
To return to the specifics on public spending in the Budget, I applaud strongly the fact that my right hon. and learned Friend has found room for extra spending on essential services. I am particularly pleased to see the £1.3 billion extra—1.6 per cent.—for health, as well as the £878 million for education. Surely those are the right sort of priorities to have. We should cut out waste and inefficiency and spend money on essential services.
My right hon. and learned Friend the Chancellor has the Budget strategy right. It is a prudent Budget. I urge my right hon. and learned Friend to keep an eye on the ball of interest rates in order to ensure that we have the growth that the economy needs in the coming year. We must aim to ensure that we achieve at least the 3 per cent. set out in the Budget statement so that we are on target for the sustainable growth that the country wants and demands.
When my right hon. and learned Friend the Chancellor sat down on Tuesday, we all heard a somewhat strangled cry of, "Is that all?" It came in jeering tones from the hon. Member for Bolsover (Mr. Skinner) and in anguished tones from the Press Gallery. The gentlemen of the press had already written their headlines and articles. Those headlines read, "Panic-stricken Tories wreck Government finances and shatter recovery". They went on to long articles about scorched earth and things of that sort, assuming that the Conservatives would throw in the sponge and give up on the Government.
That just proves that the gentlemen of the press do not understand the Conservative party. Not only do we intend to win, but we want to carry out our patriotic duty and, in so doing, we will regain the support of the public because they will respond with the respect that has led us to victory after victory at the polls.
The appropriate headline for the Budget is, "Boring but responsible". It is clearly tackling the deficit. It is continuing the tight control on inflation. It is tightening up the control on borrowing. Indeed, it is creating the conditions for the interest rate reductions that we want to see. I am frustrated that we have not yet seen them, and that, of course, is because we handed over the decision to the Governor of the Bank of England. I ask my right hon. and learned Friend the Chancellor to give Eddie George his marching orders and get those interest rates down, because they will accelerate growth and will cut unemployment. Indeed, in my constituency, unemployment is already down to the level of April 1991 and is continuing to drop steadily.
A drop in interest rates would also bring about a recovery in the property market. It would be good for business and for home owners, but not quite so for savers, and that was one of the more significant aspects of the Budget. It did not escape our notice that my right hon. and learned Friend created a 20 per cent. tax band on savings, which would offset the effect on savers of the reduction in interest rates that the economy, home owners and the public wish to see.
The Budget is good for education, good for health and good for the police. This afternoon, we heard that there was an extra 4 per cent. for schools in my constituency. But those very services sowed the seeds of our current conditions, because we have just been through the worst recession since the 1930s, and any financially responsible Government would have responded to a drop in revenue by cutting their expenditure. Yet the Conservative Government continued to increase expenditure on health to the extent that today it is up 70 per cent. in real terms on the figure left behind by the previous Labour Government. We continued the increase in spending on education, which is now up by 50 per cent. We protected the pensioners.
Contrast that with the Labour Government who preceded us. Let us remember the Labour Government in the recession of 1976, when they slashed the hospital building programme. They cut the pay of nurses. They cut the pensioners' Christmas bonus. But even that did not work and they carried the begging bowl of this proud country to the International Monetary Fund to queue up behind the sub-Saharan countries for a loan. We did not have to do that. Why? Because the Conservative Government have a reputation for sound finance. The trouble is that one does not keep that reputation if one continues to borrow heavily. That is precisely why, during the past three very difficult years, we had to borrow and, above all, taxes had to be increased.
No I will not, because I am short of time and the hon. Gentleman has just walked in.
I shall press on by saying that we have now got through the difficult period. We are now in the great period of getting off the backs of the taxpayers. It is interesting to note where we have done that. We have got off the backs of the less well-off. We have the 1 per cent. cut in the basic rate. The personal allowance is up by £240 and we have the extension of the 20 per cent. band, all of which will help the less well-off into jobs and help them and their families to greater prosperity.
I would argue that that it is not enough. But where are we to make the cuts? We have seen thoughtful proposals from my right hon. Friend the Member for Wokingham (Mr. Redwood), with his proposals for £5 billion of cuts, which should be handed back to the public.
The Budget is intellectually honest, but what is not, however, is the approach of the Labour party, particularly the speech of the hon. Member for Dunfermline, East (Mr. Brown) the shadow Chancellor. He was jeering over tax. Would he cut tax more? If so, what would he cut to finance it? He would not answer. His comments about the poor taxpayer of Britain are just like the devil worried about sin. What a nerve. In the debate on Wednesday, he was asked question after question. He did not answer. I asked him how he would finance the cost of his 10 per cent. rate. No answer. My hon. Friend the Member for Blackpool, South (Mr. Hawkins) asked him what would be the impact of the social chapter and a statutory minimum wage. No answer. My hon. Friend the Member for Beaconsfield (Mr. Smith) then went on to ask him about the 20 per cent. band extension at a cost of £800 million and asked whether the hon. Gentleman would support it. He did not answer then, any more than we will get an answer yes or no from the official Opposition to the Budget.
My hon. Friend the Member for Wyre Forest (Mr. Coombs) then asked the shadow Chancellor what target he had for inflation, referring to the 27 per cent. inflation that the last Labour Government achieved. Again, no answer. This is the person who would run our economy in 18 months' time, if one believed him and some of the pundits.
One of the most interesting parts of the Budget was the private finance initiative. It is thoroughly new and a great departure. Let us remember that this reforming Government progressively introduced local financial management to schools, which progressed to grant-maintained schools, which are very effective in delivering the goods. In the national health service, the Government introduced fundholding practices and NHS trusts, which again are delivering the goods. I find it a matter for great optimism that we Conservatives are still coming up with the new projects.
On the private finance initiative, I will cite the example of the NHS in my constituency. We have been waiting year after year for our brand new general hospital at Darenth park at a cost of £100 million. We have not go tit. Why? Because the Chancellor of the Exchequer cannot sign a cheque for £100 million. The Treasury keeps saying, "How about sticking the hospital on a ropey old site?" We combine the ropey old facilities with the phased development of our hospital. Now that the project has been put out to the PFI, what does the private sector opt to do? It says, "We would build it all in one go, on the better site at Darenth park and we can do it on the following financial conditions." The PFI is a major departure and will get the massive new capital projects that we need in the NHS and elsewhere.
I strongly support the Budget. It is a step on the road. At the next Budget, when we have much more scope for tax cuts, let us make it a Budget for the family.
This has been a good debate—there have been some interesting contributions from both sides of the House—and I welcome the opportunity in this, my first speech from the Opposition Front Bench, to welcome it.
I should declare an interest. I have been the parliamentary adviser to the Police Federation for the past two years. I shall cease to have that role at the end of the month, but it is right that hon. Members should be aware of it.
Perhaps I might begin on a positive note. I have always taken the view that it is not in the interests of an Opposition to criticise and oppose. We should also support and encourage a Government, where that is possible. Mere party political posturing does nothing to enhance the public's view of politicians. I want to make it clear that the Labour party welcomes aspects of this Budget.
The raising of the benefit threshold for pensioners in long-term care is a positive move. The previous levels were low and the increases from £3,000 to £8,000 and £8,000 to £16,000 respectively will spare some pensioners a bill for long-term care, especially since the Government had frozen the thresholds since 1988, thereby making the problem worse.
Nevertheless, £16,000 will not prevent the sale of the matrimonial home. Long-term care is a serious issue with enormous implications, as the hon. Members for Bury St. Edmunds (Mr. Spring) and for Croydon, North-East (Mr. Congdon) said. It is difficult for any Chancellor easily to resolve that issue, but the Government have taken a step forward. I suspect that there will be many further debates on the issue before we get it entirely right.
The Labour party also welcomes the proposals to help and clarify the position on share ownership. We too believe that employees should be encouraged to take a share in their firm. We shall consider with care the proposals that the Chancellor details in the Finance Bill and, if we can, we shall be supportive.
The call for a simpler and more coherent tax regime is also welcome. Indeed, it is something for which Labour has called for a long time. I seem to remember that, in the Standing Committee debate on the Finance Bill last year, our votes, with those of the hon. Member for Beaconsfield (Mr. Smith), pushed through a resolution. Although we must ensure that the detail of the legislation is simplified, we must also ensure that we do not create new loopholes. Nevertheless, the wording of tax law tends to be incoherent to the ordinary person at times and it is good to see a real attempt being made to come to grips with the issue.
I was amused by the confession of the right hon. Member for Northavon (Sir J. Cope) that he contributed so much towards the great detail of our tax laws, although I am not sure how advisable it was to confess it to the many small business men in his constituency who no doubt have had great trouble working out their tax bill. I bet that he will get the accountants' vote.
My Scottish colleagues have campaigned long and hard to bring the duty on whisky down, and the 4 per cent. cut in whisky duty will be helpful. The issues of cross-border sales—bootlegging—are complex, as the Treasury and Civil Service Select Committee agreed in its recent report. What the Chancellor has done is not a solution to the problem but merely an interim measure and the Treasury must now explore all the options. I hope that the Minister will be able to set out how the Government seek to achieve some of the aims and conclusions identified in the Select Committee's report.
The right hon. Member for Worthing (Sir T. Higgins), as befitted a former and much respected Chairman of the Treasury and Civil Service Select Committee, gave a balanced speech. He supported the Budget but conceded that it had not been well received, especially in the press, and hoped that it would be better appreciated in the months to come. He may live in hope—but it will be in vain, I suspect. The right hon. Gentleman was right to draw attention to the slowing of the economy and to say that unemployment had not fallen as much as the Government had hoped. I shall return to the subject of unemployment later.
My hon. Friend the Member for Sherwood (Mr. Tipping) made a valuable contribution. He expressed his concerns about some spending and questioned several spending programmes, especially the countryside stewardship programme and the arable areas scheme for set-aside. He raised the disturbing issue of the Government's refusal to answer questions about the number of farmers who receive more than £1 million, and about what was the highest sum received. I hope that the Economic Secretary to the Treasury will be able to reassure my hon. Friend on those subjects. If she cannot do so today, perhaps after she has had the opportunity to read his speech she will make inquiries about the matters that he raised and deal with them in correspondence.
My hon. Friend also made a strong plea for help in his constituency to deal with transport issues. I was pleased to see that a Minister from the Department of Transport took the trouble to listen to him, so I hope that the Secretary of State for Transport will do something about those problems.
It was interesting that the hon. Member for Beverley (Mr. Cran) described the Confederation of British Industry's response to the Budget as tepid and somewhat dismissive. That is not what the President of the Board of Trade said earlier. I wonder whether the Government are divided not only on Europe, but on the size of the tax cut and on their attitude to the CBI.
My hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham), in a strong speech, described the low wages that were on offer in his constituency as a result of the abolition of the wages councils. He said that the Government had promised much in the way of extra jobs, but that the jobs had not come.
The hon. Member for North Devon (Mr. Harvey) raised a number of issues. He called the Budget a missed opportunity, said that unemployment in the construction industry was especially high, and called for something to be done about that. He also pointed out that the increases in council tax would probably be three times the rate of inflation.
The hon. Member for Bristol, North-West (Mr. Stern) made a learned contribution, and as he is an accountant he used his considerable knowledge of balance sheets. He warned that the Government had champagne tastes but a beer income and called for more stringent cuts than those delivered in the Budget. In defence of the Chancellor, let me say that I fear that the hon. Member for Bristol, North-West sounded like the quiet cold voice of the man from a warm office who makes decisions about people's lives without balancing logic and calculation with the need for humanity.
I shall now consider the Budget as a whole. It was a give with one hand and take with the other, something and nothing, a 7p up, 1p down Budget, and it left the typical British family £670 worse off than when the Tories were returned to office in 1992. It followed news that Britain had fallen from 13th to 18th place in the league of international prosperity since 1979. After the Budget, Britain is 18th and still falling.
The Budget did nothing to tackle unemployment, to deal with job insecurity, or to heal the wounds of a divided society. It did nothing to tackle the fundamental problems of the British economy, such as the failure over 16 years to encourage long-term investment. It did nothing to provide incentives for the people in the one in five non-pensioner households with no wage earner to move from welfare to work.
My hon. Friend the Member for Sherwood also made a strong plea for Britain's young people, one in six of whom are out of work. They are Thatcher's children, and too many of them have been left disillusioned, impoverished and without prospects. What are we here for if not for them? Our young people want jobs, hope and opportunity. They want to make a contribution, but the Chancellor's message to them is that he is restricting the amount of housing benefit for single young people. His hope is poverty, his opportunity is the dole queue and his reward will be the further conviction that the Government do not care for younger people and, perhaps, their future alienation from the political process.
The Chancellor complained that housing benefit should not induce young people to leave their families before they need to. Did it not occur to him that what young people want is jobs, skills and training? If he enabled them to have those things, they would be able to support themselves sooner and would not need to look to their parents or the state to provide financial support.
It is because our young people are important to the nation that Labour made its key spending pledge a new deal for Britain's under-25s. We are not prepared to see a generation of young people abandoned. Already in our inner cities—in Glasgow, Merseyside and inner London—one in three young people are without a job. In London, six out of 10 young black men are jobless. Some 280,000 young people have been unemployed for more than six months while 200,000 young people have never had a job.
Labour proposes to give young people jobs, not schemes. We offer each young person a number of options: an employment option, with a job and a real wage; a voluntary sector option; an option to contribute to our environmental task force; and a full-time education option if the young person lacks basic educational qualifications. To pay for that programme, Labour would impose a windfall tax on the excess profits of the monopoly utilities.
We have seen the size of the profits that those companies are declaring. On Tuesday, Severn Trent admitted that its profits were up by 75 per cent. last year. Yesterday, Yorkshire Water—the company responsible for a third of the country's unplanned and unwarned interruptions in water supplies in the past two years—announced that its profits were up by 50 per cent.
Contrary to what the President of the Board of Trade said at the start of the debate, soaring profits have not encouraged the increased investment needed by those privatised utilities. In the five years since privatisation, capital investment in the water industry has fallen by a total of £282 million. In the same period, profits in the water industry have risen by some £755 million. When it was privatised, the water industry received a £6.5 billion hand-out from the taxpayer in debt write-offs and green dowries. While profits have risen, investment has fallen and, on average, the bills of customers have gone up by 40 per cent. in real terms since privatisation.
Higher water bills are just one example of how families are worse off under the Tories—higher bills, higher charges, higher taxes. That is why a windfall tax would make a contribution to putting Britain's young people back to work. Such a policy would help to reduce benefit bills in the long term and restore hope to our young people.
This Budget was never about Britain or its people, young or otherwise. It was about the Tory party and its divisions. The Chancellor is a one-nation Tory presiding over the fag end of a Government who used to believe in Thatcherite economic policies. As my hon. Friend the Member for Swansea, East (Mr. Anderson) said in a good and balanced speech, the Chancellor knows that the public services are overstretched. I do not doubt that he would like to do something about that, but he knows that he must deliver cuts in the basic rate for the right wing of the Tory party, which worries that the Thatcher legacy is going down the tubes.
Trying to balance the two, the right hon. and learned Gentleman ended up with a package with no overall strategic direction on the economy and no sense of vision for society. It was an attempt to shore up the dissipating Tory vote by scattering alternatively small token tax cuts and shifts in thresholds. Conservative Back Benchers hoped that the Chancellor would buy them votes with tax cuts, but even they know that the vote of the British people is not for sale any more.
I must confess that I have a sneaking regard for the Chancellor. I recall attending this place as a student in the early 1970s and watching the right hon. and learned Gentleman cross swords in an education debate with—if I remember rightly—Shirley Williams, and he appeared very able then. When I was elected to this place, the right hon. and learned Gentleman was Home Secretary. I was put on the Home Affairs Select Committee and I had an opportunity to see him in action. When he became Chancellor, it so happened that I was moved to the Treasury and Civil Service Select Committee. I always thought that the Chancellor was an able performer, and I told my colleagues in the shadow Treasury team that he would come up with something creative, new, innovative or bold, but he disappointed me—almost as much as he disappointed many Tory Back Benchers.
The story of the Budget was told on the glum faces of Tory Back Benchers who filed out at the end of the Chancellor's speech. They had been led to expect flair and imagination; instead, they got a weary, dead-end, dead-beat, dead-loss Budget.
The hon. Member for Beverley sits there with a grin on his face. He denies that Tory faces were so glum at the end of the Budget statement. I recall their looking glum, but I bet those who did not realise that they had every reason to be glum did so when they read the Daily Mail and The Sun the next day.
The economic recovery is so precarious that the Chancellor had little room for manoeuvre. He ended up with a combination of 1p off income tax while putting £9.5 billion on borrowing next year. What price this Chancellor as a sound money man now? The public sector borrowing requirement forecast for 1995–96 has been revised upwards from £23.5 billion in the Treasury summer forecast and from £21.5 billion in the last Budget. It is now £6.5 billion higher than expected in 1995–96, at £25 billion. It will be £9.5 billion higher than expected in 1996–97 and £10 billion higher than expected in 1997–98. That is because the economy is in a mess. Throughout the past 16 years, the Conservatives have neglected investment, squandered the proceeds of North sea oil and, in a display of boom-and-bust economics, put us into the two worst recessions since the war. That in turn has damaged industry's ability to respond to recovery.
The Budget forecast for investment growth in 1995 is now just 1per cent. The recovery, such as we had, is now precarious and in danger. It was based on an export-led drive, fuelled by a 20 per cent. devaluation of the pound following our ignominious withdrawal from the exchange rate mechanism. But there is a limit to how long we can run the economy on devaluing our currency. This Budget has not dealt with some of the long-term problems of the British economy. It has simply put off resolving them until after the next election, when Labour will be there to deal with them.
It is the ordinary families of Britain whom the Government have really let down: the workers on the assembly line or in the office. For them, right-wing economics have too often meant little or no wage increases in the name of competitiveness, job insecurity to make labour flexible, and the fraying of the safety net. Middle and lower-income people spend more hours working and less time with their children, and they bring home an income that is inadequate to meet housing and other costs. In 1992, many of them voted Tory on promises of lower taxes and opportunities to get on in life. They now feel that the Government have failed them and betrayed their values. For them, Tory promises of opportunity have often meant increased opportunity to lose their jobs.
The failure to reduce unemployment since 1979 has left people paying for big welfare bills of £20 billion, the equivalent of £20 a week for each family. People have seen tax breaks for the very wealthy go unchecked. Their experience of the services that they use, such as schools and hospitals, is of increased commercialisation and financial restraint. They see the immorality of a Government who stand by while a tiny elite prosper and our economic base erodes. They question the fairness of sacrifices made by middle-income families, who must pay higher taxes while, at a time of high dividends, some corporations have paid little tax by taking advantage of tax loopholes that the Government have failed to plug.
The damage done to British families determines Labour's stand on the reduction by 1p of the basic rate of income tax. We cannot vote for it because it does not tackle the fundamental problems of the British economy: lack of investment and lack of jobs. It does nothing to create an incentive to move from welfare to work for the one in five non-pensioner households that have no wage earner. We shall not vote against it because the Tories have damaged British taxpayers enough. They have imposed the biggest tax hike this century—in the year after the 1992 election—beating even Geoffrey Howe's 1981 Budget when personal allowances were not indexed.
Even now, the overall tax burden will be 36.5 per cent. next year, up from 34.75 per cent. in 1992. That is more than when Labour left office. It is forecast to rise each year until the end of the century, reaching 37.5 per cent. by 2000. That is the Tory burden of failure paid by the British people. Labour will not vote to make it worse. Poorly aimed as it is in economic terms, the 1p off the 7p at least gives small relief from the Tory tax rises and broken promises of the past few years.
The Chancellor hoped that his Budget would give the Government the chance to start to build up momentum for the general election. In that judgment he was unsound. He has no clear view of where he is going. He has not addressed the fundamental problems of the economy and he presented no solution to them. The Government are still playing at the game of trying to extend the policies of the 1980s, the me decade, into the latter half of the 1990s. No matter that a crude free market policy and trickle-down economics, which were supposed to lift all the boats, have instead lifted only the yachts and damaged the harbour.
Labour rejects all such economics. We want to move from the me decade policies and make the 1990s the we decade, where the whole country moves forward together. Unless the many prosper, none will really benefit. It is for that reason that the electorate will not be conned by the Tory promises in the Budget or at the next general election. The Government have got it wrong too many times. They have got it wrong this time, too and the electorate know it. That is why, when the time comes to make a decision, they will reject the Government.
First, I congratulate all those hon. Members who are still here late on Thursday night when Parliament is not sitting tomorrow. We certainly had some interesting contributions in the debate, some considerably more factual than others. I thank my hon. Friends for their factual contributions.
The Government's overall economic objective is to promote sustained economic growth and higher living standards. This Budget concentrates on securing Britain's healthy, lasting recovery. It reduces unemployment, continues to reduce borrowing, lets people keep more of the money that they earn and spends money on the things that are important to them. It looks particularly to the education of the young, the job prospects of the working population and security and safety in old age. It continues to offer the best prospect that British people have faced for decades, which is to enjoy the benefits of growth. It is a Budget of substance.
My right hon. Friends the Members for Worthing (Sir T. Higgins) and for Northavon (Sir J. Cope) and my hon. Friend the Member for Gravesham (Mr. Arnold) expressed concern about some of the headlines in the newspapers the day after the Budget. They should not worry about that. Headline writers will always have a field day. They have had one with this Budget, but a headline in the newspaper is like a soundbite from the Leader of the Opposition; it lasts 10 seconds, but for content we have to look elsewhere.
The debate was opened by the right hon. Member for Derby, South (Mrs. Beckett), with what I felt was a snippy little speech. She went through her normal arguments against privatisation. She argued against the £90 electricity rebate that customers will get. She forgot to tell people that when those industries were nationalised, they cost the taxpayers £50 million a week; now, they contribute £55 million a week into the public purse. She forgot to say that when British Steel was nationalised, it was one of the biggest loss makers of all time; now, in private hands, it is profitable and a world leader. She even gave us a harangue against North sea oil. She did not mention the fact that Rolls-Royce in Derby has won a contract for over £1 billion for engines.
The speech of the right hon. Member for Derby, South, I submit, in no way represented the views of industry. Let us look at some of the views of industry. Mr. Archie Norman of Asda said:
We are delighted. It is a bullseye.
One of the major construction companies said:
The Chancellor is on the right track and the measures he has put in place provide the best prospects for the UK building industry.
An assistant in a clothing and footwear shop said:
The Chancellor has listened to the small people …it's brilliant news.
The chairman of ICI said:
I welcome the direction of the Chancellor's policy in reducing public spending and cutting taxes in a fiscally responsible way.
That is what industry said of this Budget. It has given the Budget a very big thumbs-up.
We heard criticism in the Chamber tonight of the private finance initiative. However, Labour seems to have little knowledge of the PFI and does not know what to think about it. The hon. Member for Edinburgh, Central (Mr. Darling) said:
Labour believes that the initiative has to be given fresh impetus",
but the hon. Member for Peckham (Ms Harman) said that the PFI is
a raft for a sort of ramp for privatising".
The Leader of the Opposition says:
We would get public and private finance working together in transport, in housing, in health and education",
but the right hon. Member for Derby, South says:
Market testing represents creeping privatisation. As does the Private Finance Initiative.
Labour is one party with two faces and two voices, and it is facing in different directions at the same time. Before Labour Members say one word more about the private finance initiative, I suggest that they go and look it up, find out what it is and see the projects that have been signed up.
The hon. Member for Swansea, East (Mr. Anderson) made a thoughtful speech. One of his concerns was that council taxes would go up. There was something extraordinary about his argument, because he seemed to forget that he and so many members of his party are in favour of no capping at all on local government. His party's proposal would simply result in people paying far more than they do now for local services.
I enjoyed the speech of my right hon. Friend the Member for Northavon. He is an experienced accountant and we all found very interesting the convolutions that he highlighted. I look forward to his contributions to the report on tax simplification, which I am sure will serve the Government and other accountants well.
The hon. Member for North Devon (Mr. Harvey) made a number of points, and I should like to pick up on two of them. He expressed concern about social housing. I assure him, however, that housing continues to benefit from substantial public capital investment. We are planning to spend more than £1 billion a year through the Housing Corporation and on housing association properties and, indeed, through the private finance initiative, which will bring new opportunities to housing and the construction industry as a whole. The Government have a target of a further 1.5 million home owners in the next 10 years. I hope that he is satisfied by those comments.
The hon. Gentleman's second point related to education. Education is the cornerstone of much of the Budget, and spending on schools is a top priority. The additional cash will be channelled through local authorities. My colleagues and I expect the local authorities to pass the money into the schools.
Having spent some years in local government, I am well aware of the complexity of the formulae that many local authorities use and of how they use that complexity to frighten parents. Many parents have been greatly worried about their schools' budgets. Many local authorities talk about cuts, but to give an example, it works like this: the reality is that it is a cut in a wish list. Thus, Madam Deputy Speaker, if you, for example, wanted a salary increase of £500 and received only £250, you would have a pay increase of £250. A local authority, however, would say that it had a £250 cut. That is the fallacy of the local authorities' argument. That is why their language is so wrong and why parents get so upset. It is why every hon. Member must get all the parents to ask their local authorities how they propose to spend the extra money for schools on their children.
I know that the hon. Member for North Devon at least has a policy. His party has a policy for a 1p increase in taxation for education. However, we have looked at his shadow Budget, which contains about £6 billion of extra expenditure. That is apparently going to be paid for by tax changes—they are not called tax increases—of £1.1 billion. Another item is tax reform to the tune of £900 million. In his shadow Budget, the hon. Gentleman has £6 billion of extra spending, which is to be financed by £2 billion from extra taxes, all brought about by a 1p increase in the basic rate. It is as confusing a mess as I have described it. We therefore have to take what he had to say with a great pinch of salt.
My hon. Friend the Member for Bristol, North-West (Mr. Stern) spoke about the PSBR and made a number of detailed and complex points. Would he care to come and talk them over with me at a later date rather than in the Chamber tonight? I understand only too well his concerns about the need to reduce the borrowing requirement, and I agree that we should pull it back as fast as possible. He should not compare us too harshly with many of our European competitors, as we are the only country that has dealt with the pension problem properly. The finances of Germany and France show that if they do nothing about their pension schemes, their national debts will be about doubled. He should not have too many fears, as we are taking the right and prudent steps.
I apologise to the hon. Member for Sherwood (Mr. Tipping)—I nearly called him my hon. Friend, as more often than our respective Front-Bench teams would like, we agree with each other on our local radio station—for not being present when he made his speech. I understand that he talked at some length about green issues. The Budget contains a 15 per cent. reduction on duty on road fuel gases. I hope that that will at least go some way to meeting his concerns about green issues.
The hon. Member for Barnsley, West and Penistone (Mr. Clapham) spoke about unemployment. I looked at the figures for his constituency, where unemployment has fallen by 11 per cent. compared with this time last year and by more than 20 per cent. compared with the end of 1992. I am sure that he, too, welcomes the general fall in unemployment in this country and the fact that the number of people in employment is now higher than it was in 1979.
In an enthusiastic speech, my hon. Friend the Member for Beverley (Mr. Cran) touched on many important points, of which the housing market was one. I am grateful for his comments. Average mortgage repayments are now about £180 a month. I do not think that many people would be able to rent a similar property at that price. My hon. Friend also mentioned the considerable need to look at long-term care issues. I hope that he feels that the changes that we have introduced in the Budget relating to the increase in disregards, the assistance for elderly people in general and, specifically, the tax relief on care insurance will go a long way to meeting not just his concerns, but those of prudent, elderly savers.
I understand that my hon. Friend the Member for Bury St. Edmunds (Mr. Spring) is the owner of a vintage car, a betting man and no doubt likes a glass of whisky. I am therefore not too surprised that he had so much praise for the Budget. He rightly said that we are in a global economy, and he strongly supported Britain's aim to be the enterprise centre of Europe—a point also raised by my hon. Friend the Member for Croydon, North-East (Mr. Congdon). He also mentioned lower interest rates—his views will probably have been heard by my right hon. and learned Friend the Chancellor. But if my right hon. and learned Friend missed them, I shall pass them on to him later—I am sure that they will also be passed on to the Governor of the Bank of England.
Low inflation and sound public finances are not an optional extra; they are necessary for a successful, expanding economy. Low inflation is essential because when inflation was high, it was the saver's enemy, the silent thief who stole the value of the pension. High inflation closed factories and took away jobs. That is why we have the 2.5 per cent. target. Underlying inflation has not been so low for so long since I was 11 years old. Compare that with 20 years ago, when inflation was running at 26 per cent. and it wiped out my grandfather's pension. That is why it is essential that inflation is low, and that is why it is one of our overriding aims.
We have a strong economy. Exports are good, business investment has picked up, consumers' expenditure is on a steady upward trend and unemployment has decreased by more than 700,000. No wonder Opposition Members always appear so unhappy.
In its recent report, the Organisation for Economic Co-operation and Development praised the British economy. It spoke about the importance of the British economy and its strength. I compare that report with the so-called world prosperity league table that Opposition Members have been running round with. I can presume only that the reason why they go round with that bit of paper is that it is a fig leaf to cover the bareness of their economic policies.
We are the party which did a competitiveness audit, not last week or last month, but some time ago. We are the ones who have put in place measures such as those in the Budget, to ensure that our companies can compete better, that we get people back into work and that more people enjoy the fruits of their labour. However, when one considers the league table that the Labour party has been running round with, it is evident that it is one small corner of a much larger picture.
I return to the OECD report. It says that the UK's economic performance in 1994 was impressive. It says that our economy has been made more flexible and competitive and less inflation prone. It goes on to say that monetary policy is working well. It says that economic prospects are good.
If we are to continue discussing league tables, let us draw attention to the following facts. We are at the top of the G7 growth league table. We are at the top of the EU job creation league table. We are at the top of the European productivity league table. We are at the top of the European league table for exports. We are at the top of the European employment league table. That is where we are. When will the Labour party stop running the country down?
It is always interesting to note that, whenever we ask the Labour party what its policies are, we get no answers. My hon. Friend the Member for Gravesham reminded us of some of the questions that we asked yesterday and to which there was no reply.
Let us have another go now. When will Labour Members give us their inflation target? When will they decide what they will support in the Budget? When will they decide whether they support a 20p tax on savings? When will they finally confess that adoption of the minimum wage and the social chapter would destroy jobs and investment?
The Opposition are sitting tight today, exactly as they have sat day after day when we have asked them questions. Either they do not reply because they do not know, or they do not reply because they will not reply.
In a letter that the shadow Chief Secretary to the Treasury, the hon. Member for Oxford, East (Mr. Smith), sent to his colleagues, which was reported in the newspapers today, he told them that they must not imply that they will
manipulate public spending rules to smuggle through extra spending".
The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) said:
Gordon can say anything he likes if he thinks it is going to win the Election … when Labour is in power
will be looking for other priorities
from tax cuts.
There we have it. Labour smuggles through public expenditure, but does not tell anyone about it. In reality, Labour Back Benchers know what they want, and that is more spending, which means more taxation.
While the hon. Member for North Warwickshire (Mr. O'Brien) was studying for his law degree and lecturing in universities, I was working in industry. [HON. MEMBERS: "Hear, hear."] I worked in industry throughout the 1970s and 1980s, and during the 1970s Britain had a record that reads as follows. British industry was underinvested; we had an appalling strike record; we sold goods that no one wanted to buy at prices that rose weekly; the British Leyland work force was not buying the cars that it was making; inflation was rampant; in exports, we were losing our share of the world market. That was Labour's record. I say, "Never again!"
Interestingly, at that time when everything was wrong with the British economy, the political platitudes from the Labour party were exactly the same as they are today. That is the reality: it is an empty shell. As for the "7p up, 1p down" slogan, what nonsense! Not prepared to make difficult decisions—