Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 8:37 pm on 30th November 1995.

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Photo of Michael Clapham Michael Clapham , Barnsley West and Penistone 8:37 pm, 30th November 1995

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.

The Budget has once again widened social divisions. I wonder where the Prime Minister's stated objective of achieving a classless society has gone. It certainly was not referred to in the Budget.

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.