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.