Budget Resolutions and Economic Situation

– in the House of Commons at 9:35 am on 11th April 2003.

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Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills 9:35 am, 11th April 2003

I am delighted that we are having a debate within the Budget debate on the skills agenda, which has to be at the centre of the Government's economic activity. In everything that we are seeking to do in relation to developing productivity, increasing the competitiveness of our economy and promoting change in our society to ensure that we can compete with the best in the world, skills are central. I mean skills at every level of life.

In introducing our agenda I intend to go through the five key areas where skills are so important: in schools, in the entire 14–19 age range, in the adult learning agenda, in higher education and then in lifelong learning. The Government give such priority to skills because it is our belief and conviction that the economic success of the United Kingdom in future generations will depend on the skills and talents of the population. As throughout the world competitor economies develop their own strengths, we must be sure in turn that we develop our strengths and do not think that we can compete on low pay, natural resources or some other consideration. It is the skills and talents of our people that are our greatest strength.

We have to work to make that happen. At present, the truth is that in terms of the number of people staying on at the age of 16 in education or training, we have one of the lowest levels in the world. Many competitor OECD countries have a far better record than we do. If we are to succeed in the ways that we need to, that requires a determination to change.

My central thesis is that what we have to do, if we are to challenge the present situation, is qualitatively to change the relationship between employers and business on the one hand and the education system on the other. We must work together far more closely. There must be far greater mutual understanding and a far stronger common shared agenda. To that end I am working closely with my right hon. Friend the Secretary of State for Trade and Industry, my right hon. Friend the Chancellor of the Exchequer and other ministerial colleagues to develop a team approach to these matters so that we can develop the co-ordinated strategy that is so necessary.

I shall begin with schools. I do not intend to debate all the aspects of the Government's strategy on schools. I shall simply highlight two or three key points. We believe that it is important that, in school, children get a much earlier impression and understanding of the world at work than is currently the case. We reject the idea that some people in the education system appeared to have in the past that vocational work is for the less academically gifted and that somehow work-related learning is for people who cannot cut it academically. We think that that is fundamentally wrong. We think that at all levels of academic ability and talent it is important to develop work-related learning. That is why we have a series of projects to try to increase that learning.

In our specialist schools programme there is a strand that specifically encourages work-related learning and there are specialisms that particularly encourage a relationship with the world at work. We are in the process of implementing and carrying through the proposals in the Howard Davies review of enterprise and education. We have a substantial programme, which has been announced previously, and in the next few days we will be indicating how the pilots will operate best to provide pupils with five days of enterprise experience. The pilots will begin in September this year, and they will cover about 250 secondary schools.

I would welcome interventions from hon. Members of all parties on how best to address enterprise in education. It is not a straightforward matter of simply saying that more contact with the workplace is desired, because we must decide how to encourage children and young people to learn about enterprise and how things work. That does not happen at the moment and it should be achieved through the curriculum. That is why we have introduced the pilot programme, but I say as publicly and clearly as possible that we welcome ideas and contributions from all hon. Members.

That thinking informed my right hon. Friend the Chancellor's announcement in his Budget speech of the appointment of enterprise advisers to work with 1,000 secondary schools from September 2003. They will give advice to head teachers on the delivery of the enterprise initiative while working to improve the interaction of schools with businesses and schools' business behaviour. He made the announcement because it is important for schools to be fully part of that approach as an element of the enterprise areas agenda that he announced, which covers a range of different initiatives. We need to change the culture of communities in which that is necessary, and the role of schools is particularly important for that. I hope that my right hon. Friend's important announcement will be generally welcomed. In the same context, we have announced a new £1 million enterprise promotion fund to support private and voluntary sector creativity and to promote enterprise awareness throughout schools, businesses and the wider non-business community.

We want to change the state of affairs throughout schools' culture and agenda so that education is not seen as an ivory tower, but as engaging with all aspects of the economy in everything that it does. That represents a change of culture, and that is why we positively welcome ideas, thoughts and contributions from hon. Members.

The 14 to 19 age range is the second key area on which we need such a change of approach. We published our proposals on that in the document "14–19: opportunity and excellence" earlier this year and laid down clearly, for the first time, that the age range to which we should address the policy is 14 to 19—not 14 to 18, 14 to 16 or 16 to 19—from the end of key stage 3. A series of measures is required to do that. We must develop a curriculum for that age range that is far more focused on the individual needs of the individual learner. That explains the disapplications that we have discussed for that group, the development of specific individual work programmes for students and an approach to make the qualifications structure for the 14 to 19 age range more coherent. The programme of reform is substantial and I think that it has been broadly welcomed throughout the House—it has certainly been welcomed by the professions. Our coherent approach lays the foundation to attack many of the fundamental skills problems that are faced by the country.

We especially want to focus on the development of modern apprenticeships, and my right hon. Friend the Chancellor and I launched our task force on that a month or so ago. I am delighted to report substantial participation rates in the modern apprenticeships programme from a wide range of employers. The programme represents a central approach and it is important that over a quarter of 22-year-olds should have entered an apprenticeship by 2004. We estimate that 320,000 young people will participate by 2006. The programme requires a step change, which is why the task force is doing what it does.

My right hon. Friend the Chancellor also announced a review of financial support for young people in his Budget speech. We are committed to a cross-Government review, which will report in spring 2004, to consider the overall system of financial support. That will run alongside the Low Pay Commission's consideration of the case for introducing a minimum wage for 16 to 17-year-olds. The Government agree with the commission that implementing a minimum wage rate for 16 to 17-year-olds—it has hitherto not existed—is a serious idea that merits further consideration. It relates to educational measures, such as education maintenance allowances, and that is why we agree that the commission should examine the possible advantages and disadvantages of a minimum wage rate for 16 to 17-year-olds, with specific consideration of the impact of such a rate on education and training policy. The report produced by the commission this year marked a significant step forward on the consideration of young people's rights and how to avoid their exploitation. My right hon. Friend the Chancellor and I are utterly committed to getting the situation right, but we want to ensure that we work with the education system while we do that.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

On the education-work interface, would my right hon. Friend be interested in coming to New Addington in Croydon in which the education action zone has pioneered excellent work on seconding people into the workplace on time-based projects? They return from secondment to give presentations showing excellence in teamwork, time management and working in a work environment. The scheme gives a real taste of the value of work and its relationship with education.

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

I would be happy to accept the invitation and, perhaps, especially happy to travel by tram to New Addington. The range of measures that the Government have introduced, such as education action zones and specialist schools, are designed precisely to build partnerships with employers in the way in which my hon. Friend described. I look forward to seeing how that has developed in Croydon.

My right hon. Friend the Chancellor announced more support for volunteers in his Budget speech and the development of a programme that will provide a young volunteer challenge to enable young people to take on such activities for up to a year after they finish school.

Photo of David Wright David Wright Labour, Telford

Will my right hon. Friend consider using national vocational qualifications in the volunteer programme so that people who make progress through the year may gain formal qualifications?

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

I will consider my hon. Friend's good point. I talked about achieving a unified approach on qualifications for the 14 to 19 age range, and it is constructive to examine the role of NVQs and their relationship with GCSEs and other forms of activity that require accreditation in the way in which my hon. Friend outlined.

The young volunteer challenge was announced in last year's pre-Budget report. It will provide financial support to allow young people from low-income backgrounds to become volunteers. It will benefit 1,200 young people aged 18 to 19, and they will be eligible to participate in the scheme up to a year after they finish school. It will be a full-time initiative that will require young people to commit to working 30 hours a week over a sustained period of nine months. The pilot will start in May and will run in 10 education maintenance allowance areas—both rural and urban. Individuals will receive an allowance of £45 a week while they are on the scheme and a lump sum of £750 after they have completed the nine months, and various other costs will be met.

The Government are strongly committed to supporting volunteering in our communities. It is vital to give young people the opportunity to do voluntary work from a young age because it offers them unique learning experiences that stay with them throughout their lives. We appreciate that some young people may be put off from becoming volunteers due to their financial circumstances. The young volunteer challenge aims to change that by offering the right support to give more young people the chance to help their communities and to develop their skills through volunteering. My right hon. Friend the Home Secretary is especially active in the initiative as it forms part of his Department's community responsibilities.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

Liberal Democrats support volunteering. Would the Secretary of State consider extending the scheme to undergraduates? We know that the cost of staying at university is great for all undergraduates, although I do not want to debate that today. Extending opportunities for paid volunteering work in schools and other organisations to undergraduates would be an excellent way of getting money into their pockets while doing something incredibly useful for our communities.

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

That is a constructive suggestion. As I said, my right hon. Friend the Chancellor made his announcement to see how we could make positive development. The hon. Gentleman's suggestion is worth considering.

Let us consider skills generally. We will publish a White Paper in June on the matter. As I said earlier, we are working closely with the Department of Trade and Industry, including on its White Paper on innovation, which it will publish later this year. We view bringing together skills and innovation strategies as exceptionally important to increasing productivity in industry.

The two central themes of our approach are the establishment and development of sector skills councils, which will bring together major employers and educators for each major sector of the economy, and drive the commitment to skills at all levels throughout life. We have accelerated the process because it is so important. Several sector skills councils have been launched and established—for example, the e-skills council was launched earlier this week, with the participation of major companies. We view as essential the development of sector skills councils for all sectors of the economy—working with young people, working in the countryside, specific technologies or the automotive sector.

The potential impact has not been sufficiently widely understood so far: sector skills councils will make a major impact on the country's productivity. Local learning and skills councils, which are responsible for establishing the skills needs and their development in their areas, will effect the national sector skills council's strategic approach. They are therefore vital to our approach.

As my right hon. Friend the Chancellor said in his Budget speech, the employer training pilots, which started in September 2002 in six local learning and skills council areas in England, are interesting and worthwhile initiatives to extend. We announced in the Budget that we would extend them to Berkshire, east London, Kent, Leicester, Shropshire and south Yorkshire because they have already been successful. Early results are encouraging. In the first six months, more than 1,500 employers had signed up, and more than 5,500 employees had begun training.

It is vital to get employers to commit to education and training in the way in which the pilots take forward. We must bend educators to look more to employment needs, and bend employers to look more to the way in which they can work with the education and training service. Both elements are part of the same coherent and strong approach. My right hon. Friend the Chancellor therefore announced them in the Budget as important new developments.

The initiative that my right hon. Friend announced between high street banks and the Government to support small business development is related to those that I have described. It includes measures to stimulate training in small and medium-sized enterprises, to establish that SMEs understand the benefits of training and identify solutions that best meet their needs. We are especially positive about the initiative because of the involvement of the high street banks: HSBC, Barclays, Lloyds TSB, Royal Bank of Scotland, Abbey National, Alliance and Leicester, HBOS, Co-operative Bank and the National Australia Group have all agreed to participate in the scheme. Between them, they have access to more than 90 per cent. of the United Kingdom SME market. They are the bankers of the SMEs, and therefore a good source of advice to them about their business strategies. Through the steering group, the banks will help to develop and manage all aspects of the package. Again, the initiative is an extremely positive and constructive development.

The regional development agencies and local learning and skills council pilots, which have already started in the north-east, north-west, south-east and east of England, are trying to pool budgets for regional development agencies and training in those areas. All those initiatives focus on trying to get employers to commit themselves properly to training.

My penultimate point deals with higher education. Yesterday morning, my right hon. Friend the Secretary of State for Trade and Industry and I chaired an effective seminar. Digby Jones, the director general of the CBI, presented a survey that he had conducted of the 200 largest CBI members and their attitudes to universities. To be frank, it conveyed some strong messages to universities about the way in which they should operate when relating to business. We had a good discussion, which we have agreed to follow up in a variety of ways. Again, the same theme arises: how can we get universities not to be ivory towers but to work with their local economies and communities to build the strong economy that we need?

Richard Lambert is conducting a review of the work of universities. I have spoken to him about it and his approach is constructive. We announced the foundation degree programme, which brings employers and universities together to provide qualifications at degree level, in our higher education White Paper. That will make a genuine difference and is a central theme of our policy.

My right hon. Friend the Chancellor announced tax changes that are designed to encourage business to put more resources into research and development. Again, that is part of the coherent, strategic approach that we are trying to encourage.

My right hon. Friend also announced a relaxation of the rules for the existing highly skilled migration programme to create a new entitlement for graduates and students so that international students of science, engineering and technology subjects will be allowed to work in the UK for one year after graduation before undergoing the usual work permit process. That is intended to help tackle the overall undersupply of science, engineering and technology skills that Sir Gareth Roberts's reports identified last year. We hope that the proposal will help deal with the problem by getting more international students of those disciplines to stay and work in the UK. We are committed to consulting about the best way in which to do that and to address intermediate vocational skills shortages in sectors such as construction. Methods that we are considering include lowering the minimum skills requirements for work permits.

Photo of Brian Iddon Brian Iddon Labour, Bolton South East

I am sure that my right hon. Friend is aware of the report of the Select Committee on Science and Technology on science education for 14 to 19-year-olds. I hope that he will take note of its recommendations because it is important to get children of that age interested in science and engineering so that they pursue those skills at university. The current science curriculum for that age group is a little out of date.

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

My hon. Friend is right. I have not only studied the Select Committee's report, but given evidence to it with my right hon. Friend the Secretary of State for Trade and Industry on precisely the points that my hon. Friend raises. Unless we get science education in schools right, with proper resources and a proper curriculum, we simply will not be able to encourage young people to stay on. A set of initiatives on that is already making a difference but I take my hon. Friend's point about the curriculum for that age range. We must ensure that science is an attractive, exciting and engaging discipline for young people.

We have a substantial programme in higher education for bringing employers and education together in the interests of the economy.

My final point deals with lifelong learning. We need to attack the basic skills problem in this country: between 7 million and 8 million people do not have basic skills to level 2. That is scandalous, since the world of work cannot operate in the way in which it needs to function, and we will not be as competitive if that position continues. We have launched a significant programme that involves working with employers and trade unions.

We also need to attack level 2 plus. The world of work is changing so fast—technology is moving so quickly and ideas are developing so rapidly—that whatever the skills one has acquired at the age of 21, they will not be the same as those that are needed at the age of 60 at the end of one's working life. That is true for our generation and will be even more so for future generations. Lifelong learning, the role of universities in that and employers' allocation of time for their staff to undertake such learning are vital.

We were therefore delighted to announce the extension of the union learning fund, which has supported more than 350 projects, ranging from tackling basic skills needs to continuing professional development. I visited several projects and can speak of the genuine exhilaration that people feel about what needs to be done. The union learning fund has also helped to establish and train a national network of more than 4,500 union learning representatives, who promote learning in the work place, especially among those who have basic skills needs. We have announced in the Budget an increase of £3 million a year for those schemes because we believe that they are a critical way in which to engage people. There will also be a general benefit for the overall modernisation programme, because the more the trade union representatives engage with the issues that their companies have to deal with, the better they will be able to protect their members' interests as the necessary processes of change proceed. I believe that the Government can claim to have a coherent strategy for promoting skills throughout life.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

I wonder whether my right hon. Friend can allay the fears of my constituents who have read scare stories in the right-wing press and are concerned about the level of public borrowing. Will he describe the impact that a 20 per cent. cut would have on the work that his Department is doing? [Interruption.]

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

I am sorry to hear groans from the Conservative Benches, because my hon. Friend has put his finger on a critical point. In each area that I have described—schools, 14-to-19 provision, skills, higher education, lifelong learning—we need two things. First, we need the commitment of people in the education service, employers and the population as a whole; secondly, we need the resources to put that commitment into effect. I cannot believe that any political party could possibly intend to cut 20 per cent. out of each of those budgets.

Photo of Adam Price Adam Price Plaid Cymru, Carmarthen East and Dinefwr

I wonder whether the Secretary of State can allay the fears of my constituents who have read stories in the left-wing press—I refer, of course, to this morning's Financial Timesabout the proposals for regional pay scales in the public sector. Will the right hon. Gentleman reassure us that teachers in Wales, the north of England and Scotland will not be paid any less than teachers in the south of England?

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

The hon. Gentleman will be aware that the education system in Wales is devolved. He might want his friends in the Assembly to have something to say about this.

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

I am well aware that pay is not devolved, but education is. The fact is that we already have variable pay across the United Kingdom for public servants and for teachers. In London, the teachers pay review body, with the support of the Government, recently gave a significantly higher settlement to teachers in inner London—quite rightly, in my opinion—because of the clearly different cost of living here. That debate has to happen, but I want to return to the question of resources.

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

I will not give way just at this second, no.

I hope that Mr. Green will confirm in his response exactly what Conservative party policy is on cutting public spending by 20 per cent. His colleagues, the shadow Chief Secretary to the Treasury and the right hon. Gentleman the Leader of the Opposition, are both on record quite clearly and publicly speaking about cutting public spending by 20 per cent.

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The Secretary of State clearly does not wish to give way.

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

It was agreed earlier that we would try to speak for about 20 minutes each, and I want to keep to that because I know that many people want to speak. I shall come to my conclusion now, but I thought that it was important to establish that my hon. Friend Mr. Challen had made a correct observation earlier.

We have a coherent strategy for skills in the economy, and we believe that that is vital for the country as a whole. We have established the partnerships necessary to put it into effect, and we are revitalising the culture of the relationship between employment and education. We are also committing the resources to make it happen, and I hope that our proposals will command the support of the whole House.

Photo of Damian Green Damian Green Shadow Secretary of State for Education 10:03 am, 11th April 2003

The Secretary of State said, rightly, at the beginning of his 28-minute speech that it was appropriate to discuss his responsibilities as part of the Budget debate. They clearly affect the long-term economic prosperity of this country and our ability to enhance our civilised society. I want to deal with what he said and—perhaps equally importantly—with the hugely important matters that he left out of his speech. A number of crises are affecting British education and this debate provides a good opportunity to discuss them.

I shall start with what was in both the Secretary of State's speech and the Budget, making reference to skills. The measures announced by the Chancellor on Wednesday were partly welcome, but they are a wholly inadequate response to the skills gap in this country. We welcome the expansion of the employer training pilots, but I am sure that the Secretary of State will acknowledge that those measures only tinker at the edges of what is a massive, and apparently growing, problem. In 2001, the Government's performance and innovation unit said that 7 million adults did not have literacy and numeracy skills at NVQ level 2. On Wednesday, the Chancellor said that that figure had risen to 8 million. In his speech this morning, the Secretary of State put the figure somewhere between 7 million and 8 million. Given the amount of time that the Government spend getting information and showering the country with paperwork, it seems extraordinary that they do not know to within a million how many completely unskilled people there are.

I am glad that the modern apprenticeship programme is growing, although I hope that the Secretary of State will acknowledge that there are differences between the growth rates of the basic and advanced levels, and that there are severe problems at the advanced level. Warwick university's institution for employment research estimates that one in five job vacancies remains unfilled because of a shortage of skilled workers. The Learning and Skills Council has reported that 60 per cent. of all companies say that at least some staff are not fully proficient in basic skills—that figure is up from the 50 per cent. of firms that reported this in 2001.

The Secretary of State asked for constructive interventions on the links between schools and business, and I can only recommend that he does what we have done, which is to look at the way that this is done in those countries that do it better. We have visited Denmark, Germany, Holland and other European countries in which the level of links between business and schools and, in particular, the provision of vocational education, is markedly better than it is here, and also starts markedly earlier. I am sure that the right hon. Gentleman wants to go down that route—he has, after all, introduced a Green Paper on provision for 14 to 19-year-olds—but if he does, he will have to address the issues that have been addressed in those other countries.

The right hon. Gentleman will need to consider one particular sacred cow in his own party policy. In those countries that have much broader provision of vocational skills, one thing that happens universally is that, at the age of 12 or so, children are told, "This is your particular skill." There is an element either of compulsory streaming within comprehensive schools or of selection by different types of school. So if the Secretary of State wants to learn from the rest of Europe, I am afraid that he will have to address that issue head on, which I dare say will cause him some problems on his Back Benches.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Does the hon. Gentleman accept that those lessons can go both ways? The employment levels in those countries are far worse than the great experience of Britain, which now has an extra 1.5 million jobs. Before we go down the route of compulsory streaming and inflexibility, we need to think about flexible labour markets, regional variations and full employment—which is what we are succeeding in achieving here.

Photo of Damian Green Damian Green Shadow Secretary of State for Education

I entirely agree that, because of the reforms of the 1980s and 1990s, the British economy is significantly more flexible than the economies of other countries in the European Union. If the hon. Gentleman is saying that the deregulatory, low-tax economic policies that the Conservative party put in place in the '80s and '90s are good for employment, I completely agree with him. I hope that he is going to contribute to this debate later, and I suggest that he addresses his remarks to his own Chancellor of the Exchequer, who has spent the last five years raising taxes on British business and tying it up in red tape in a way that will increase unemployment in the long term.

If the Government were really serious about broadening skills, they would have done more for hard-pressed further education colleges. Further education offers the best opportunity for all our citizens to reach what we consider to be the acceptable minimum level of skills. Of course colleges must work with business; many do so already, with much success; it beggars belief, however, that the taster for this summer's skills strategy did not even mention colleges. That shows how low FE colleges come in the Government's pecking order.

The Secretary of State mentioned sector skills councils. He might have explained why it has taken so long to move from the old national training organisations to the creation of those councils. He knows that that is seen by many of those at the sharp end in trying to raise this country's skills levels as one of the significant policy failures over the past two years. We know why the Government have shied away from making radical change to address the skills problem: their last attempt—the individual learning accounts scheme—collapsed in such chaos that we are still awaiting a replacement 18 months later. Only last week, the Public Accounts Committee highlighted the extraordinary incompetence displayed by the Government in setting up and administering that scheme. Almost £100 million of taxpayers' money was wasted due to nothing more than the ineptness of the Department for Education and Skills, which is a fitting description of the Government's policy of taxing, spending and failing.

What was in the Budget was inadequate; it left out any attempt to deal with the growing funding crisis in our schools. The two are directly related—we will not achieve a highly skilled work force if millions of our children leave primary school unable to read, write and count to an acceptable level and if they leave secondary school without a single qualification. Those young people should not have to need schemes and initiatives after they have left school. They need a properly run school system with well-motivated heads and teachers.

We should look at what the Government have done to our schools. Notably, the Chancellor made a lot of use of comparisons in his Budget. He made geographical comparisons to consider countries whose economies are in an even bigger mess than the one to which he has reduced ours and he tried some comparisons over time, so I will do the same. The House should think back just nine months to the comprehensive spending review. What a contrast between the problems faced now by schools and colleges throughout the country and the jubilant words that surrounded last summer's spending announcements. The Chancellor had raised national insurance contributions and the record £12.8 billion increase promised for the next three years would, according to Estelle Morris, the then Secretary of State,

"deliver higher standards, better behaviour and more choice . . . Investment will be matched by radical reform."

However, those promises of investment and reform have proved to be as empty as they were grandiose. There is no doubt that the Government are taxing and spending more than ever, but, at the same time, schools up and down the country face cuts.

Photo of Gregory Barker Gregory Barker Conservative, Bexhill and Battle

I want to give my hon. Friend a particular example. In East Sussex, the education budget is being slashed by £14.6 million, which represents a loss of perhaps 900 of the county's 3,700 posts as a direct result of the Government withdrawing funds from East Sussex county council. Those are shocking double standards.

Photo of Damian Green Damian Green Shadow Secretary of State for Education

My hon. Friend is right, and he is aware, as I am, that there is a problem not just in his part of the world, but all over the country, whatever the political colour of the council.

I want to refer to a letter from Westminster head teachers, who have written to all parents in Westminster:

"We . . . wish to make it clear that we will be unable to provide effective full-time education for pupils with the funds allocated in the financial year 2003/04. Consequently the targets set in the recent target setting round will no longer be valid and standards will inevitably suffer."

I shall now refer—[Interruption.] The Secretary of State chunters from a sedentary position. Perhaps he will accept this from Newcastle's The Journal, which does not necessarily reflect the views of the Conservative heartlands:

"The Government would do well to heed the warnings being given by Northumberland's head teachers today.

They paint a bleak picture of the future of the county's classrooms if rocketing costs are not met with fair levels of investment from Whitehall."

Labour Members may want to discuss a Labour council, and I am delighted that Geraint Davies is in his place. I have a letter from one of his constituents to him, which says:

"Seven months down the line"— from when her child started primary school—

"we have received information from the Head Teacher that most primary schools in the area"— which has a Labour council—

"are facing a difficult time resulting from a change in the national funding formula . . . most importantly—why are our children's education being damaged by what I can only now assume is an incompetent government, who seems to care more for people entering the country than it does for its own constituents?"

She continues:

"I have supported this government, I have lobbied for this government, I rejoiced when the labour government took power. . . Well, you've finally lost my vote. I put my children and the future of our country first. I cannot support a government who clearly have such different priorities. I never thought I would hear myself say it, but bring on the Conservatives."

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

It is worth mentioning that, since 1997, there has been a 30 per cent. increase in education funding in Croydon. There are an extra 1,000 teachers and teaching assistants, although this year we face a difficult budgetary situation. An extra £2 million has been put forward, but we hope to get a better deal next year.

Photo of Damian Green Damian Green Shadow Secretary of State for Education

The hon. Gentleman will have to be a lot more convincing when he addresses his constituents, whose votes he is losing.

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

Will the hon. Gentleman clarify whether he is committing the Conservative party to spending more on education than we spend or would he cut expenditure?

Photo of Damian Green Damian Green Shadow Secretary of State for Education

I am committing the Conservative party to ensuring that money that the public sector raises through taxes goes into schools. The Secretary of State's central failure is that he is taxing and spending more while failing to get the money into our schools. He does not need to take that from me; he can take it from head teachers, governors and parents all over the country.

Photo of Andrew Love Andrew Love Labour/Co-operative, Edmonton

The shadow Chief Secretary, Mr. Flight, tells us that there is waste in our public services of up to 20 per cent., so there would be a cut of that order. Where would that happen in education and how would such a cut assist the schools about which the hon. Gentleman is concerned?

Photo of Damian Green Damian Green Shadow Secretary of State for Education

The shadow Chief Secretary said that he would be looking to cut administrative waste. If Labour Members think that there is no administrative waste in the public sector, frankly, they should open their eyes. Our aim is to deliver improvements in public services through genuine reform to make them world class. The Government gave that promise to the British people, but teachers, parents and governors know that they have signally failed to carry it out. In both Labour and Conservative areas, it is clear that less money is going into our schools this year compared with last, and teachers and teaching assistants all over the country are threatened with redundancy.

Several hon. Members:

rose—

Photo of Brian Iddon Brian Iddon Labour, Bolton South East

I thank the hon. Gentleman for giving way. May I invite him to Bolton? We have never seen so many extensions to schools or new schools built. There are more teachers, more books and more equipment. Under the previous regime, there was nothing but cuts, cuts, cuts.

Photo of Damian Green Damian Green Shadow Secretary of State for Education

The second half of the hon. Gentleman's statement is complete nonsense. On the first half, I advise him to talk to his colleagues, and not just the hon. Member for Croydon, Central. If he had been here for education questions yesterday, he would have heard Mr. Dismore, a Government Back Bencher, attacking the Government for the cuts they have made. Whether Labour Members believe it or not, the Chancellor's tax on jobs is a tax on teachers. It will cost schools £170 million this year, not to mention the money that it will take from colleges, universities, non-teaching staff and local education authorities.

What the Government give with one hand, they more than take away with the other, because, on top of the national insurance increase, there has been an increase in employers' contributions to the teachers' pension fund and, of course, a monstrously unfair local government settlement.

The Secretary of State's former employer, Neil Kinnock, had his finest hour when he talked about his disgust at a Labour council sending taxis around Liverpool to make council workers redundant. What an irony that we now have a Labour Government sending redundancy notices around the whole country to teachers and teaching assistants. Things can only get worse. The local government settlement will bite over three years, getting tougher by the year, which threatens the so-called historic work load agreement of 15 January. Already, the National Union of Teachers has refused to sign it, but now, because of the funding crisis precipitated by this Government and this Chancellor, the National Association of Head Teachers is threatening to pull out as well. Last week its general secretary, David Hart, wrote to the Secretary of State saying

"It would not be an exaggeration to say that there is an unmanageable crisis in funding in a number of areas. Members are talking about this as the worst position they have faced for years."

He describes the teaching deal that the Government called historic as "unworkable".

The Government's incompetence and double-dealing over the financing of schools will cause damage in the long as well as the short term. It is not just that they have failed to make the money actually arrive in schools; they have failed to bring about the reforms that they promised—a pattern of failure that is repeated throughout the education system. The work load agreement is crumbling and schools face the worst funding crisis for years. One child in four leaves primary school unable to read, write or count properly, and more than 30,000 leave school with no qualifications at all.

Ten thousand children have been completely lost by the system. The gap between the best and the worst, the richest and the poorest, is growing. The number of teacher vacancies has doubled. Hundreds of thousands of children are trapped in failing schools. Nearly two thirds of companies report that their staff lack basic skills. That adds up to a picture of failure in which millions of young people are robbed of their opportunities and their chance to get on in life.

Photo of Damian Green Damian Green Shadow Secretary of State for Education

I am sorry, but I am trying to stick to the deal that I made with the Secretary of State in the interests of Members on both sides of the House.

There is an alternative to the way in which this Government run our education system—an alternative that offers better education for all, built on the twin pillars of trust in teachers and empowering parents. We need a complete reversal of direction. The modern centralisation of education was initiated in 1976 by Lord Callaghan's Ruskin speech, which set in train the reforms of the 1980s and 1990s and, indeed, much of what the present Government did during their first term. Many of those reforms were necessary, given the state of English schools in the 1970s. A national curriculum, the Office for Standards in Education, regular testing and the publication of performance results all helped to raise standards by shining a light into the walled garden that education had become, and letting parents know what was going on within the school walls.

That process of centralisation, however, has gone much too far. It is doing more harm than good. I do not blame the current Secretary of State—I suspect that his instinct is to give schools more freedom—but his hands are tied by those in the Treasury, notably the Chancellor himself, who cannot allow anyone else to make an important decision. One of the central failures of new Labour is over-centralisation. If we are to allow our schools to meet the challenges that they should be meeting, we must spend the coming decade setting them free and giving more choice to all involved in education, from teachers to parents.

The current system is broken, and a sea change is necessary. It is not possible to have excellent schools without well-motivated heads and teachers. If we do not give the professionals freedom to decide how best to get their pupils over the hurdles that parents and society demand that they jump, we will create a resentful profession that approaches each task wearily, in the spirit of "What does the Minister want this week?" rather than that of "What can I do for these children?". Too many members of the teaching profession are perilously close to that approach.

If parents are given some choice and some power, they will demand higher standards, and those demands will be as strong in the inner cities as they are in the leafy suburbs. That belief underpins the policies that we have announced. Our state scholarship scheme, starting in the inner cities, would give parents their first opportunity to break the cycle of underachievement and choose good schools for their children.

We will allow good schools to expand, to give more children the benefit of a high-quality education. We will not abandon schools that are in difficulty. It would be wrong to turn our backs on them, but when it is not possible to improve them we will encourage parents and organisations to set up publicly funded schools, as is done in many other countries. No child will be condemned to a poor education.

We will trust professionals to deliver high quality. We will slim down the curriculum, giving heads and teachers more power to judge what is in the best interests of their pupils. We will cut bureaucracy, and the number of funding streams. We will scrap the independent appeals panels that are undermining the ability of heads to set standards of behaviour in their schools. Legally backed home-school behaviour contracts for all schools that want them will receive our fullest support.

We will go much further than the half-hearted attempts at decentralisation to be found in existing legislation. If a school wants to become autonomous and meets transparent criteria for standards of performance, discipline and governance, it will be able to make that choice. Our guiding principle will be that schools run schools best. We will create a system in which once again the expertise of professionals, not the agenda of central Government, is the driving force behind improvement. Our system will be built on fairness and guided by accountability.

The Government's policy of investment and reform has been wrecked on the rocks of centralisation. The Government have increased spending, yet schools face funding cuts and students will pay higher fees to universities that will be under ever more Government control. More money is coming from the taxpayer, yet everyone in education feels worse off.

The test of any Budget is whether it leaves the country better or worse off. This Budget has left our education system weaker than it was, with demoralised teachers, angry parents and disillusioned children. For that reason, alone history will judge it harshly, and the House should vote against it.

Several hon. Members:

rose—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. I remind hon. Members that Mr. Speaker has imposed a 12-minute limit on all Back-Bench speeches.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North 10:26 am, 11th April 2003

I had hoped to make this speech yesterday, so it does not particularly concern the skills agenda. I hope that that is acceptable.

I want to make three main points in my brief speech. First, I want to consider the possible course of the economy, both national and international, in the near future. Economic forecasting is notoriously difficult, and despite Britain's relatively good performance and my right hon. Friend the Chancellor's cautious optimism, there is still a possibility that the worldwide economic downturn will be severe.

My right hon. Friend's forecasts may well be accurate, and I hope they turn out to be so. This morning's IMF news was certainly quite good. He will know, however, that there are many examples of hopelessly wrong forecasts from the recent past. In 1979, blinkered monetarist zealots were forecasting that the new economic strategy of Mrs. Thatcher and Geoffrey Howe would lead to faster growth and falling unemployment. In fact, we saw unemployment rise by 2 million in 18 months and one fifth of British manufacturing disappear before Nigel Lawson was installed as Chancellor to reflate the economy in the 1980s. The exchange rate mechanism was another calamitous story.

In his Budget speech, the Chancellor was right to contrast Britain's relatively successful performance in recent years with the performances of other developed countries, especially those within the eurozone. Many of the world's major economies now face serious economic difficulties, and there is a real possibility that Britain, despite its good performance, will be dragged down by the rest of the world. There is a serious deficiency of demand in Asia, the United States and, in particular, the European Union, the destination of 60 per cent. of British exports.

If Britain's economy were seriously affected by a world economic downturn, I would have no qualms about our Government's increasing borrowing substantially, both to fund the cyclical effects of recession and to pay for a substantial programme of public spending and investment to stimulate recovery and growth. The Chancellor has successfully avoided a repetition of the Tory "boom and bust" cycle, and I want him to retain his good reputation by borrowing and spending to sustain our economy in what may be difficult times ahead. The Institute for Fiscal Studies gives more pessimistic forecasts about the Government's likely fiscal deficit, but that should not worry us: the Chancellor has plenty of headroom.

At around 32 per cent. of gross domestic product, the Government's gross debt is far below that of other major economies, miles below the Maastricht limits and substantially lower even than the Chancellor's self-imposed ceiling of 40 per cent. In gross terms, the Chancellor therefore has at least £80 billion to play with, and his 40 per cent. ceiling is in any case simply an arbitrary level chosen by the "finger in the wind" method.

Domestic consumer demand will be hit by the pricking of the house-price bubble and the stock market slide. Consumers are already drawing in their horns, and the Government will need to use their own spending power to stave off recession. Monetary policy will also need to remain relaxed. I urge my right hon. Friend the Chancellor to remember his Keynesian youth and ignore the sirens of sound money who would lure us on to the rocks of deflation if they had their way.

Lower interest rates will also have a beneficial effect on the exchange rate, with a depreciation helping domestic manufacturing and to deflect demand away from imports towards the domestic economy. The Chancellor may need to be bold with both fiscal and monetary policy, and he has plenty of scope to do just that.

I hope, too, that if the Chancellor needs to relax fiscal policy still further, he should focus on spending rather than tax cuts. Boosting state pensions would help. Most pensioners have a high propensity to consume: that is to say, when they have extra money they spend it because they need to. That drives demand directly and immediately into the economy, whereas tax cuts tend to find their way into the bank accounts of the better-off, stimulating demand much less. That also has the benefit of helping the poor rather than the rich and it is socially just.

My second concern is in a way to help the Chancellor with his spending policies—to help him spend Government money more wisely and most effectively. Privatisation and private finance initiative schemes have largely failed, some disastrously. The railway privatisation has seen the cost of railway maintenance rise by more than three times and the cost of laying a mile of track increase by four times in the space of just nine years since privatisation. It has been a catastrophic failure and the railways are still in deep crisis. Taking the whole system back into public ownership in an integrated publicly accountable system would save the Exchequer billions and bring us better railways into the bargain. With more time I would be happy to speak in praise of British Rail, whose only real weakness was that it was starved of funds for decades.

In the education sector, of the 10 privatised education authorities, five have been rated as poor by the Office for Standards in Education, three unsatisfactory and only one satisfactory. In Southwark, W.S. Atkins is pulling out of a £100 million contract to manage the borough's schools because—surprise, surprise—it was not making anything like as much money as it had expected.

All the privatisation, PFI and public-private partnership schemes will cost the Exchequer more than would similar schemes funded by public expenditure. The reality is that private borrowing costs much more than public borrowing, and of course compromises have to be made because profits have to be made on top of borrowing costs.

The Chancellor has rightly drawn attention to Britain's long-term low interest rates.

Photo of Eric Joyce Eric Joyce Labour, Falkirk West

My hon. Friend just said that W.S. Atkins was pulling out because it was not making enough profits. Is that not the case?

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

There are other examples of PFI companies being concerned about not making enough money from the schemes, which suggests that they want more public funding rather than less.

Photo of Andrew Love Andrew Love Labour/Co-operative, Edmonton

Does my hon. Friend accept that there are occasions when PFI can deliver value for money? If he looks at the Public Accounts Committee reports on PFI schemes, he will see that there is innovation going on and that value for money is being provided in the public services.

Photo of Kelvin Hopkins Kelvin Hopkins Labour, Luton North

There are indeed one or two schemes that seem to be relatively successful but I draw my hon. Friend's attention to the enormous number of examples provided by Unison of schemes that are by and large failing and costing the public money. Even when they work, they cost more because private borrowing is more expensive than public borrowing and profits have to be made on top of that. I urge my right hon. Friend the Chancellor to abandon PFI and PPP schemes and to return to public investment.

The third and final theme of my speech is the alarming and deepening crisis in the eurozone. The Chancellor rightly contrasted Britain's economic strength with the desperate decline of the German economy. The Chancellor does of course have the advantage in the sense that in Britain we can choose monetary and fiscal policies appropriate to our national economic needs, a luxury denied to the Germans and others in the eurozone. Unemployment is rising month after month in Germany while it has continued to fall in Britain. The Germans need to reduce their interest rates, loosen fiscal policy and, ideally, engineer a little depreciation of their currency. All of that of course is impossible inside the eurozone.

As I said to the Chancellor at Treasury questions, I congratulate him on steering us clear of the eurozone for the past six years. Nevertheless, the looming economic disaster inside the eurozone will inevitably have a knock-on effect in Britain. Sixty per cent. of Britain's exports go to the European Union and if demand is plummeting there, our exports will be hit. An unravelling of the euro with member states again being free to reflate their economies would therefore be extremely beneficial, not just to eurozone members but to Britain and the world economy. The alternative is a kind of deflationary permafrost gripping Europe for the foreseeable future.

I do not imagine that making such suggestions at an early meeting of ECOFIN will go down well, but a rational case for such measures is easily made. It has been reported recently that even Jacques Delors, the arch-priest of European integration and economic and monetary union, has said that the euro is not working. I put it to the Chancellor that not only is there no case for Britain joining the euro, but there is a strong case for abandoning the euro project altogether and reverting to a system of national currencies.

In conclusion, I welcome a number of the measures announced by the Chancellor in his Budget and express the very strong hope that he will soon recommend that we do not proceed to join the eurozone.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education) 10:35 am, 11th April 2003

It is important that we have a wider debate on education and skills as part of the Budget debate, not least because it is a sector that the Chancellor failed to address adequately in his statement on Wednesday. We are grateful to the Secretary of State for Education and Skills for addressing one key area of the Chancellor's Budget—although it is interesting that he chose to avoid the key issue facing many of our schools at the moment.

Schools were genuinely expecting, as they have for the past two years, the Chancellor to demonstrate some largesse by giving them direct grants. In 2002, the right hon. Gentleman announced a boost in funding to improve school buildings and pupil behaviour worth £240 million. In 2001, the boost was worth £800 million, an average of £10,000 extra per school in direct revenue grants. Of course, that was an election year.

This year of all years, schools could have done with that boost. The salary and pension increases, combined with the implementation of the rise in national insurance contributions, have undoubtedly hit school budgets. Forty per cent. of the upper pay spine has not been funded. The Learning and Skills Council has given a flat 3 per cent. increase, which has meant many schools having to subsidise their sixth-form courses even more heavily. The changes to local government funding have left many schools facing stark financial choices.

The Liberal Democrats appreciate what the Government have tried to do in terms of the reform of local government finances and the grants system, which is ostensibly more transparent than it was before. [Interruption.] We happen to believe that it is more transparent than it was before but there are still enormous numbers of losers within the system.

Photo of Eric Pickles Eric Pickles Shadow Secretary of State for Communities and Local Government

In the interests of getting consistency among the Liberal Democrats, which hon. Members on both sides of the House would like, may I inform the hon. Gentleman that his spokesman on local government matters says that the formula is more obscure than it was before?

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

The local government spokesperson is talking about the overall settlement for local government whereas I am talking specifically about education budgets. In terms of schools budgets, there is clarity about the three areas in the Budget. We may disagree about the weighting in each of those categories but I believe that there is greater transparency than there was under the previous Government. Since 1974, there has been a fog over the way in which standard spending assessments have been distributed to schools. No one could understand it but the stark reality is that a significant number of schools, as Mr. Green said, will face massive crises.

I give as an example St. Saviours and St. Olaves school in Bermondsey, where the Labour manifesto for the last election was launched. It is a highly successful school. The head is regarded as one of the finest in the country. Her Majesty the Queen is visiting on 1 May to celebrate its centenary.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

I am sure the Queen recognises Mayday just the same as the hon. Gentleman. The head will have the joyous task of telling Her Majesty that the school's budget is nearly £200,000 short and that the school will have to send redundancy notices to a significant number of teachers. That cannot be right.

Photo of John Horam John Horam Conservative, Orpington

I should like to add to the hon. Gentleman's thoughts about St. Olaves in Bermondsey by mentioning St. Olaves in Orpington, to which the Solicitor-General used to send her child because it is such an excellent school. It faces similar cuts for exactly the same reasons that the hon. Gentleman mentions.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

I do not know the school in question, but I shall take it for granted that the hon. Gentleman is right. In fact, the only Member who has spoken in this House in support of the additional money going into school budgets is Dr. Iddon, because all the money is going to Bolton. At least we now know that that is the answer. We are obviously delighted for the Bolton schools, but elsewhere the situation is pretty dismal. However, the serious point is that this comes at a time when schools are being asked to implement the time and work load agreement. At the very time when they are being told to take on additional advanced teaching assistants as part of the education reforms, their budgets do not allow them to do so, and they are actually reducing staff and sacking classroom assistants. What sort of message does that send?

The Secretary of State is incredibly sincere about trying to get the vocational agenda working in our schools, but how on earth can we invest in that agenda when budgets are being cut by as much as £250,000? We have to revisit this issue; it is not good enough simply to say that for the next three years there will be a lot of pain. We cannot do that. Some 15 per cent. of schools without sixth forms and 19 per cent. of schools with sixth forms had deficit budgets last year. For all of them, the chances of implementing the work load agreement is virtually nil. That is a real issue not simply for the National Union of Teachers, which the Secretary of State will not speak to, but for every single school in the country.

To date, schools have been dazzled by the magic of the Harry Potter of British politics, young Miliband. However, the reality has now dawned that Hogwart's is a very different school from the local community comprehensive. One cannot magic resources if they are not there. The Chancellor could have used his Budget as an opportunity to throw those schools a lifeline, but he chose to do nothing. In many ways, this is a buck-passing Budget. Just as the right hon. Gentleman failed to accept any of the blame for the poor performance of the UK economy, he has laid the blame for this crisis firmly—and wrongly—at the door of local authorities.

Yes, there may be the odd Conservative-controlled council, such as Norfolk, that is hoarding schools' money, but I challenge the Secretary of State here and now to carry out an audit of all local authorities, and to publicly declare what money they are actually holding back in each of the categories mentioned yesterday. If the Secretary of State is right, there is a major problem and we have to tackle it. I should point out that the Liberal Democrats will support the Secretary of State in dealing with it, because it cannot be right to be crying wolf if significant resources are being hoarded elsewhere.

Photo of Charles Clarke Charles Clarke Secretary of State, Department for Education and Skills

I appreciate the hon. Gentleman's support. We are looking very closely at the funding settlements that are coming through. Reports are coming in from every local education authority about what is being spent where, how the local funding formula is being applied, what is being held back by the local authority, and so on. We will look very carefully at those issues and how to deal with them when those reports have come through, but I want to say publicly that in analysing the settlements very carefully, I appreciate the support being offered by the Liberal Democrats.

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

One concern that we all seem to share, irrespective of our political differences, is the apparent lack of transparency and honesty about the Budget process, which we find very confusing and difficult to get a handle on. There is a state of permanent instability within the education service, and turmoil is evident everywhere. As regards the 14 to 19 agenda, colleges, schools and training providers are trying to best-guess what Ministers want and what they will fund. In higher education, the White Paper has led to confusion and dismay, with Ministers openly contradicting each other in neighbouring venues. "Offtoff", one of the flagship reforms, has itself been reformed even before being introduced—as if it were possible to reform such a daft proposal.

On top-up fees, we were treated yesterday to yet another pearl of wisdom from the Minister with responsibility for higher education. In answering Mrs. Campbell, she said that her reason for allowing differential fees, rather than imposing a flat-rate increase, was that they related to the earnings premium attached to the university and degree in question. Well, research from Warwick and York universities shows that graduates with arts degrees, including history and English, would have been better off quitting full-time education after A levels, because they have no graduate premium. They have a negative earning premium of between 2 and 10 per cent., so presumably, they should pay no fees at all, according to the Minister with responsibility for higher education, or be given a subsidy to study for their degree. That is the barminess of what was said here yesterday. [Interruption.] Does my hon. Friend Mr. Carmichael wish to intervene?

Photo of Phil Willis Phil Willis Shadow Spokesperson (Education)

I am sorry—I thought that he was getting excited. [Interruption.] He is an MP now.

To cap it all, in the one area that the Chancellor deigned to mention in his Budget statement—adult learning and skills—there are now more options for reform than there are Ministers at the Department for Education and Skills. The Under-Secretary, Mr. Lewis was characteristically confused yesterday when asked what he considered the main delivery vehicle for the skills strategy. He was confused because the Government are pushing ahead on too many fronts at once—if I might use that phrase—without explaining how each part of the education system fits into a coherent and progressive whole. I appreciate that the Secretary of State tried valiantly today to paint a coherent and progressive picture, but he failed to do so.

The Budget report and today's comments by the Secretary of State reinforce the silo approach to the education and skills policy, especially post-14. What is desperately needed is lateral policy making, which would lead to the emergence of a coherent and progressive post-14 education and skills system. Despite the Chancellor's back-slapping after six years of constant reforms, the productivity growth of the whole economy now stands at just 1.5 per cent. per year, which is lower than under the Conservative Government. The Secretary of State has put his finger on a significant reason why: the major skills deficit.

Liberal Democrats welcome the 14 to 19 strategy document that was published earlier this year, and the additional supporting steps announced in the Budget report. During the debate on the proposals, I reminded the Minister with responsibility for youth and adult skills that little progress has been made since this Government took office in reducing the proportion of 16 to 19-year-olds not in education, employment or training below the 9 per cent. figure reported in "Bridging the Gap". We called for a review of wider financial incentives for young people, including child benefit, the education maintenance allowance, training allowances, the benefits system, and the possible extension of the national minimum wage to young people. We are delighted that the Chancellor and the Secretary of State have heeded our advice and will implement such a review. We thank them for that.

Like many other Members with an interest in reviving our apprenticeship system, we Liberal Democrats are pleased that the Government intend to increase the number of young people participating to 320,000 by 2006. Participation is one thing, but retention and achievement is another, and both leave much to be desired. What the Secretary of State did not do is tell the House about the figures on retention and achievement. We must ensure that young people achieve a level 3 qualification, not simply a level 2, through the modern apprenticeship system. If we do not, we will fail to develop the very skills that the nation needs, which are post-level 2, rather than level 2.

We must recognise that by the age of 21, half of the nation's young people do not have a level 3 qualification; that, rather than insufficient people entering higher education, is the tragedy of our education system. To achieve our aim, we must increase employer participation—the Secretary of State said nothing about that today—particularly among small and medium-sized enterprises. What the Secretary of State did not tell the House was that only 6 per cent. of those companies are involved in the training schemes, and we heard not a single proposal—today or from the Chancellor on Wednesday—to increase that.

The Budget report confirms the establishment of a new employer-led national employer apprenticeship taskforce. The Liberal Democrats wish it well, but it must be the last ever taskforce on employment engagement in apprenticeships. We have had more than enough taskforces. If the Department for Education and Skills cannot persuade employers to engage in apprenticeships for young people, what chance will it have to engage them in the wider issue of adult learning and skills?

If any hon. Member understands what the Government are up to in respect of adult learning and skills, I wish they would tell the Ministers. In March, the Secretary of State published the national skills strategy progress report and a joint DFES/Learning and Skills Council document entitled "Funding adult learning". Those documents suggest that the £3.2 billion adult learning budget should be focused on adults, irrespective of age, without a first level 2; 19 to 30-year-olds without a first level 3; and adults wishing to train in skills shortage areas.

The documents identified at least six funding and delivery options: funding linked to college plans; our old friends the individual learning accounts; company development accounts; funding linked to the sector skill council plans; and funding linked to the framework of regional employment and skills action—the so-called FRESAs. On Wednesday the Chancellor added to the clarity with a sixth option—employer training pilots. I have much sympathy with right hon. and hon. Members if they are confused by those options. How can such a complex set of arrangements do other than create confusion? Crucially, they create confusion among adult education and training providers and employers—the very people we need to help to deliver the Government's agenda.

Where will those proposals leave our further education colleges? The main job of local colleges is to help individuals and businesses to succeed. They are at the heart of any UK skills strategy, but they received not a single mention from the Chancellor and not a single mention from the Secretary of State today. They deliver learning to more than 3 million adults every year and more than 200 million training days to companies, compared with only 60 million days provided by industry.

The average college provides assistance to more than 200 local businesses and offers training at every level—from basic skills to post-qualification training at the most sophisticated level. What is more, colleges have an essential role in helping young people to succeed, especially when they did not do so at school. Although only 50 per cent. of young people have achieved the equivalent of five GCSEs at 16, 75 per cent. have done so by the age of 19, largely with the help of local colleges.

What does the Secretary of State have against the FE sector when those colleges receive not even an honourable mention in the plans that he has announced today? The Chancellor champions his preferred skills delivery vehicles of training tax credits and time off for training with employer compensation, while the FE sector has huge burdens placed on its back.

Of course Liberal Democrats welcome the £1.2 billion comprehensive spending review settlement. It was long overdue, but, as ever with this much-neglected sector, that settlement came with huge strings attached. As with schools, significant additional costs of national insurance and pensions have to be factored in, and budget growth can be achieved only through unit funding, which will be subject to performance-related funding from 2004. The move from a national standard funding mechanism to potentially 450 different funding arrangements will be accompanied by a proliferation of targets set by individual learning and skills councils, which will be assessed by staff, many of whom may lack the necessary professional skills and knowledge to do the assessment. How will that highly complex and bureaucratic arrangement help to deal with the core issues of the education and skills training needs of our work force, or is it designed simply to break the back of our FE sector?

The proposals of the Learning and Skills Council set out in circular 03/01, which are due for implementation this September, could not only derail the Government's learning and skills strategy but expose colleges to undue risk, consequent financial destabilisation and a massive growth in bureaucracy as each sub-target is monitored and re-monitored. The circular contains some sound proposals, but I plead with the Minister to ask the Learning and Skills Council to defer the introduction of the new funding arrangements for at least a year, to allow proper modelling, trialling and training for funders and providers.The Secretary of State and I were around in 1992, so we know only too well about the problems caused by the hasty implementation of a politically driven policy—please let us not make the same mistake again.

Crucially, if FE colleges are, as I believe, at the heart of any learning and skills strategy, they must be responsive to employer needs. That means being able to offer the bite-sized learning that employers want. Most employers do not want their employees to be on long training courses: they want small, focused, bite-size bits that colleges are perfectly able to provide. However, I understand that the Learning and Skills Council is about to reject any growth bid for adult learners—a position that directly contradicts the Government's aspirations for a learning and skills agenda. For many colleges, that will undo their plans to extend the work with employers that they have already negotiated and it will break the link with local employers. Will the Minister confirm that it is the Government's intention to curtail that growth: if so, what can be done to minimise the impact on colleges and their local businesses?

We accept that one delivery vehicle should not be exclusive of others. There is a place for the vision of "Success for All" and the Chancellor's more industry-focused vision, but they need to be brought together as partners, not competitors. We must also consider how the embryonic policy for 14 to 19-year-olds and the confused adult learning strategy will underpin progression into higher education. Despite a focus on level 3 attainment by 16 to 19-year-olds and the proposed level 3 entitlement for 19 to 30-year-olds, nowhere in the national skills strategy is it explained how those policies will underpin progression into higher education.

For example, let us consider young people achieving an advanced modern apprenticeship who might want to progress into higher education, particularly for a foundation degree. I ask the Secretary of State, would a young person who is in work with an apprenticeship want to take up his offer of loans for tuition fees and living costs for a full-time foundation degree? The answer is no. Perhaps some will, but the vast majority will not. They would prefer to combine full-time earning with part-time learning. Where in the higher education White Paper, in what the Secretary of State said today or in what the Chancellor said on Wednesday is there even a hint of a comprehensive system of support for part-time higher education, let alone FE students? Certainly, the response of the Minister for Lifelong Learning and Higher Education yesterday to a question about the Open university showed a total lack of understanding of the realities of earning and learning.

We also need to support the achievement of level 3 qualifications by 19 to 30-year-olds who might want to enter higher education. It cannot be right that we spend more than £2 billion on the living costs of full-time students in higher education, but barely a tenth of that amount on adults in full-time further education. If ever there were a priority area for the introduction of grants, it is that one. We should not tolerate the fact that able 16 to 19-year-olds can get means-tested education maintenance allowances, whereas second-chance adults wanting a level 3 qualification are forced to take out a loan.

I have tried to be constructively critical of the Government in an area that the Chancellor recognises is key to the nation's future prosperity. We have had much change, many consultations and endless reviews, but we still have a system that is based on education for the best and skills for the rest. This week's figures on child literacy bear testimony to that sad fact. We may be one of the highest-performing countries in the world when it comes to reading, but we still have the greatest inequality between the best and the worst. Ten per cent. of our pupils still fall into the lowest achievement bracket for literacy. That two-tier system runs from primary school to university. It is time to stop the in-fighting and to focus on the real issues of inequality and to concentrate on providing an education and skills agenda for everyone.

Photo of Wayne David Wayne David Labour, Caerphilly 11:00 am, 11th April 2003

In examining this Budget it is all too easy to look at it in macro terms or even to see it as a kind of academic study, but I want to focus on Wales and, more particularly, on my constituency of Caerphilly.

For my constituents there are two headline-grabbing issues. First, there is the child trust fund, which has been warmly welcomed. In Wales, on average some 30,600 children are born every year, and obviously they will benefit. Secondly, there is the extra £100 winter fuel payment for the over-80s. In Wales, more than 0.5 million households already receive the £200 payment, of which some 117,600 will receive the additional benefit. Yesterday, I spoke to my good friend Mrs. Olga Langford of the pensioners in Bargoed, and she told me: "Pensioners have never been better off." People can see that that is the result of the Budget, miners' compensation payments and widows' payments. Also, the penny is beginning to drop that the pensioner credit will be introduced for pensioners in the autumn. All those developments have brought great benefits.

I want to focus on one of the big themes of the Budget—that is, employment opportunities for all and its essential link to the lifelong learning agenda. A great deal of progress is being made in fulfilling the welfare-to-work agenda all over the country, but I know for a fact that that is happening in my constituency. For example, in the period from 1997 until February this year, unemployment has fallen by 39.5 per cent., youth unemployment has been reduced by 80.2 per cent. and long-term unemployment is down by 78.5 per cent. That is all quite remarkable. It is fair to point out, too, that pockets of unemployment remain in the upper parts of some of the coalmining valleys in my constituency, particularly the Aber and Rhymney valleys. Those areas also have high levels of economic inactivity, which is a huge problem in the south Wales valleys. Some five out of the eight highest male benefit claimant areas in the United Kingdom are in south Wales. The highest benefit claimant area for incapacity benefit is in Merthyr Tydfil, and some wards in these areas have as many as one in four male claimants claiming that industrial benefit. One of the reasons why south Wales and west Wales are categorised as objective 1 is their low gross domestic product, and their high inactivity rates are a key factor in that.

I am pleased by the progress that the Government are making on the welfare-to-work agenda. The newly created Department for Work and Pensions is focusing on Jobcentre Plus, which brings together the Benefits Agency and the Employment Service. Last November, the Green Paper, "Pathways to work: Helping people into employment", was published. Pilot schemes are being established to take forward its ideas, of which one will be in Bridgend and one will be in Cynon Taf. Innovative and radical ideas that demonstrate the need for a holistic approach towards tackling worklessness are being developed. We recognise the need to link that agenda to tackling health issues and to provide more incentives for people to work. We recognise, too, the need for the agenda on tackling worklessness to be closely linked to the lifelong learning agenda.

I am particularly pleased with two developments in my constituency. First, in the heads of the valleys in the Caerphilly and Torfaen area, an employment zone that was established in April 2000 is developing innovative ways of getting the long-term unemployed into work. I am glad to see that the Budget extends the employment zone concept to include new deal returners and lone parents. Secondly, I am pleased with the action teams for jobs, which are being very successful. In Caerphilly, the team has concentrated, with great success, on the long-term unemployed and the economically inactive. They search for vacancies and bring them together with people who are unemployed or economically inactive. Their key word is flexibility, followed by responsiveness to local situations. In other words, they have abandoned the "one size fits all" concept and are tailoring policies specifically to the needs of individual clients. Significantly, those two examples are being run by a public-private partnership, Working Link, which has helped some 3,000 people into employment since April 2000. It has also helped many people into self-employment.

If welfare-to-work is to be truly successful, we have to ensure that work pays, and several measures, before the Budget and in the Budget, help to do precisely that. For example, the minimum wage has been increased, the new working tax credit has been introduced, housing benefit has been reformed—that was long overdue—and lone parents are receiving more help, especially with child care costs and provision. In addition, more assistance has been given to disabled people through the new deal for disabled people.

It is vital to recognise the importance of the lifelong learning and skills agenda in relation to long-term unemployment and economic inactivity in some of the poorest communities in my constituency and across south Wales. All the studies indicate that one of the features of people who are economically inactive for long periods is that they often do not have the necessary skills easily to get into work. It is not enough merely to provide job opportunities and additional skills training—we need a different, more innovative approach that is tailored to people's specific needs.

At one time, south Wales was characterised by its reliance on inward investment, which came in because of low wages, a compliant work force and, as they saw it, the drift towards deregulation. The situation in south Wales is changing significantly. The old economic base is being transformed into a new version that is based on higher added value. Good skills are being developed and high wages are being paid. A new indigenous economy is being developed through the creation of more and more small and medium-sized enterprises.

When I speak to representatives of the business community in my area, they tell me two things. They say that there is a need for better skills in general. They also say that there is a need for better basic skills, which underlines the fact that we are not talking simply about universities or colleges, but about schools. They also say—sometimes in passing, but the point should not be underestimated—that it is important to have the right attitudinal skills among the work force and among young people in particular. By that, they mean that they want to see evidence of workers and potential workers being able to operate in teams; that they want to see the ability to initiate; and that they want workers to be able to follow instructions but also to give leadership. Those kinds of skill are often not sufficiently addressed by our education system. We need schools to encourage entrepreneurship, in the broadest sense of that term, far more than they have done in the past. Our schools need to be linked closely with community regeneration. I welcome the suggestion of the Labour party in Wales that schools should become more of community institutions, to ensure that they provide a range of benefits for children—not least of which would be breakfasts.

It is important that our concept of lifelong learning places a strong emphasis on adult education. Adult educators have to work with groups of individuals in our communities who are seeking to create jobs and to link people to the labour market. Adult education is not simply about the traditional concept of a broadly based liberal education; it is also about helping people to gain confidence and skills.

If we can achieve all those things, we will truly move towards sustainable full employment in this country. That has been a traditional goal of the Labour movement and we have a real chance to bring it about permanently. To achieve it, the movement of labour, and market flexibility, will be essential. It will also be important to develop a strong skills base. Much of the education and skills agenda is a devolved responsibility but we have close co-ordination between central Government and the Welsh Assembly.

This Budget is good. It is good for people without work and it is good for people who are in work or who aspire to work. It is good for this country but, most importantly for me, it is excellent for the people of Caerphilly.

Photo of Michael Spicer Michael Spicer Chair, Conservative Party 1922 Committee 11:11 am, 11th April 2003

The Budget has variously been described as boring, a non-Budget and a Budget without a theme. I propose to be a little more charitable. I detect a subliminal theme, although that theme is not meant to be the subject of today's debate. The Chancellor mentioned the euro in his speech and he said that he would produce the results of the five economic tests by the beginning of June. The question of entry into the euro provides at least a backdrop to this Budget. It hovered like a ghost over much of what the Chancellor said. Oblique references to the euro came thick and fast. For a start, there was the proposed inquiry into long-term fixed mortgage rates, to put Britain on a par with the continental European housing market. That was followed by what now appear to be increasingly controversial references to making our labour markets more flexible by introducing greater regional and local variations in public sector pay, thus addressing the economic test of sufficient flexibility. That policy is already causing trouble for the Chancellor with his trade union friends and, indeed, with many of his so-called friends on his Back Benches.

More interesting perhaps than the specific policy announcements with a direct bearing on the five economic tests are the indirect implications of the Budget speech for the euro decision. For instance, the Budget raises the whole question of the likelihood of Britain's compliance with the Maastricht criteria that relate to public sector debt management. Take the Maastricht rule that debt may not exceed 60 per cent. of GDP. The Government's projections for the debt:GDP ratio are, of course, well below that limit. However, the question is: how believable are the projections, based as they are on GDP growth forecasts of more than 3 per cent. for most of the period involved? Two factors make that 3 per cent. GDP forecast highly improbable. First, Britain's economic growth has rarely ever touched the 3 per cent. mark. It certainly has not done so in recent years; and has not done so in a period that follows sustained economic growth such as the one that Britain has experienced over the past 10 years. The second reason for believing that the presumption of 3 per cent. growth is improbable is that this Government are saying it. As we know, the Government have an extremely indifferent track record on forecasting economic growth.

We now face the prospect, or the certainty, of public debt rising very fast. On the Government's own figures, it will rise by some £88 billion over the next five years. However, at the same time, we face the prospect of not being able to match the debt increase by the required growth in GDP. It is therefore not impossible that Britain will hit the Maastricht debt:GDP limit in the foreseeable future.

On this side of the House, we have some basic concerns about the rapid rise in debt, which, according to the Government, will be continuous. That has nothing to do with the contracyclical policy, as mentioned by other hon. Members, such as Mr. Hopkins, who is not in his seat now. The Government have said that we are coming out of what they claim has been a short-term recession. The policy of debt increase is therefore part of a straightforward, continuous and independent programme of high and rising spending, beyond the nation's means. That is despite the fact that the Government now openly admit—in chart C3 on page 261 of the Red Book, for instance—that taxes have been rising as a percentage of GDP, have been rising rapidly since 1993, and are projected to rise until 2008–09.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Does the hon. Gentleman accept that Britain is well within the stability pact, unlike France and Germany? In fact, our debt is so low that it would not matter if we breached the stability pact anyway.

Photo of Michael Spicer Michael Spicer Chair, Conservative Party 1922 Committee

If the hon. Gentleman believes that it would not matter, that raises a different question, which I shall come on to in a few moments.

The GDP forecasts on which the Budget is based are pretty dodgy in my view and several other people's views. How silly the Chancellor looks for having tried, in front of countless Treasury Committee meetings that I have attended, to argue that taxes were not rising. It was always clear that they were rising from the moment that the Government abandoned the sound policies that they inherited from the Conservatives. That is one reason why the rate of productivity has declined ever since this Government took office and one reason, therefore, why they have airbrushed productivity tables out of the relevant official publications.

The rise in spending, debt and taxes is, of course, desperately unfortunate. It will contribute towards the breakdown of the economy that has already been anticipated by the crash of the stock market. However, to come to the point that was raised by Geraint Davies, so long as we are outside the euro, all such matters are the subject of legitimate debate, in the sense that the electorate can take a view on them. When the electorate rumbles the Government's mismanagement of the public finances, they can, and no doubt will, choose to throw them out. That is what happens to sovereign Governments who bungle things in a democracy—policy, to that extent, is governed by the wishes of the electorate. However, it is not what happens under the rules governing membership of the European single currency. In that case, economic policy is run by the regulations and directions of bodies that are not accountable to the electorate.

The Government's financial policies, as outlined in the Budget and the accompanying Red Book, raise wider cost questions than those surrounding the Government's profligacy—serious though that is. They have a wider bearing on the nature of any proposed relationship with the European single currency and the accompanying monetary union.

Perhaps an even more fundamental euro question that arises from the Budget, and indeed the debate, relates to another euro test: convergence. When the Government publish the results of that test, it will be of critical importance that they define what they mean by convergence. For instance, it is more than probable that through a combination of rising taxes—taxes are rising by £8 billion in this year alone—and the strangulation of industry through the imposition of ever more regulations, most topically perhaps the Higgs recommendations, and their effect on small businesses, Britain's economy will begin to run down to the level experienced in continental European countries.

In particular, it is more than probable that unemployment rates in this country will begin to rise and that the gap between the British unemployment rate, currently about 5 per cent., and the continental rate, which is currently about 9 per cent., will narrow. If the conclusion drawn from that was that we had met the convergence test, it would be bizarre.

That is one example, and there are likely to be many more, of the subjective nature of the tests. As the Budget judgment has itself shown, the future is unpredictable. Who knows whether convergence will be sustainable; whether there will be sufficient flexibility in the British economy to cope with economic change; whether investment will be affected one way or the other; or what will be the impact on financial services or employment?

What we do know, however, is that, outside the euro, the British economy has been far more robust than that of most countries that are inside the euro. Furthermore, we know that membership of the euro inevitably creates for each country the wrong exchange rate, the wrong interest rate and higher taxes. There is no correct rate of exchange other than that determined by the comparative performance of one economy against another. A permanent exchange rate is wrong by definition, as the correct rate will vary from moment to moment, depending on market forces at any particular time. Presumably, that is why, when the Governor of the Bank of England was asked recently what the correct rate for British entry to the European single currency was, he answered, "Heaven knows".

Much the same point, as has been argued so often, applies to a single interest rate, which would be correct for all countries of the union only if they were on identical business cycles. That is manifestly not the case, as is shown by the relative economic performances of Eire and Germany.

Photo of Andrew Love Andrew Love Labour/Co-operative, Edmonton

As manufacturing industry is currently in recession and there has been a significant loss of manufacturing jobs in recent years, does the hon. Gentleman agree that to have a competitive exchange rate would need substantial devaluation?

Photo of Michael Spicer Michael Spicer Chair, Conservative Party 1922 Committee

What really counts is to have a competitive economy. One of the problems in this country has been that our competitiveness has declined constantly since the Labour Government took over—for reasons that I have mentioned already and do not have time to repeat. A competitive economy is crucial.

Taxes are important in that regard. In a European monetary union, taxes will rise not merely due to the burgeoning bureaucracy that would be involved but also because of the need, within a single price structure, to compensate countries that experience relatively low wages.

Whatever the economic tests show, the decision to enter the single European currency will be political. That has always been recognised by continental European countries. The question as to whether it is desirable to sacrifice—irrevocably, if one enters the single currency—ultimate control over one's economic policy is purely political and, likewise, whether a country should be accountable to its electorate and indeed whether there should be democracy at all.

I know my answers to those questions. I think I know what the British people's answers will be if they are faced with those questions in a referendum. I think the Government know what the British people's answers will be; and it is because of that, and not because of the economic tests promised again in the Chancellor's speech, that whatever nods and winks the Budget has made in the direction of Europe and whatever commitments are made in June to "wait and see", there will be no referendum in this Parliament.

Photo of Albert Owen Albert Owen Labour, Ynys Môn 11:24 am, 11th April 2003

I welcome many of the measures set out in the Chancellor's Budget statement. The Budget has been well received by pensioners and families in my constituency. It was also well received by the business community in Wales and indeed by the CBI and the TUC.

Since my election, I have worked closely with the business community and trade unions in my constituency and within the wider region of Wales. It may surprise many hon. Members to learn that, despite the natural vested interests of their members, trade unions and the business sector often share the same objectives, which include investment in education and skills training.

Although some hon. Members may be surprised that labour and capital have shared interests and views, it is in fact a measure of a mature society. The mantra, "Education, education, education" must be matched by that of "Jobs, jobs, jobs". Both sectors realise that.

I must confess, however, that I was a little surprised to read the responses to the Chancellor's Budget statement in the Welsh press yesterday. The Welsh TUC, CBI Wales and, even more surprising, the Federation of Small Businesses all welcomed the Chancellor's statement. They were in unison in agreeing about the importance of my right hon. Friend's measures to assist innovation in small businesses and the extension of research and development tax credits. They attached particular importance to the one-year extension of the 100 per cent. first year information and communications technology capital allowances, which will potentially assist 155,000 small businesses in Wales until March next year. They also acknowledged the real incentive provided by raising the VAT exemptions to turnovers of £56,000 or less and the cutting of red tape. Despite the Opposition's constant complaint that there is too much red tape and that the Government do not take notice, those organisations acknowledge that that is not the case.

It is vital that we produce the conditions for growth and investment. To build a Britain with a strong economy, which gives social justice, requires investment in our most important asset: our people. We need skills training. The Chancellor was right to point out that it is in the national economic interest that every adult has basic skills and qualifications to level 2. My right hon. Friend the Secretary of State for Education and Skills endorsed that in his opening speech.

The business community in my constituency tells me that it is difficult to match vacancies with the right skills, even in areas of high unemployment like mine that has suffered from two decades of under-investment. In February 1997, almost 3,000 claimants in my constituency were seeking work. Although the number is now 1,300, a reduction of about 45 per cent., that is still twice the national UK and the Welsh average. There is a high percentage of long-term unemployed people, many of whom are over 50. Through no fault of their own, it is difficult for them to find work in the locality.

The one-size-fits-all employment policy has not succeeded in stimulating and innovating even economic development throughout Wales or the UK, so I welcome the Chancellor's proposal to give local jobcentres discretionary powers to be flexible so as to target the long-term unemployed and match their skills and needs to local employment opportunities. There is an onus on local training providers. Skills audits are important, but they need to take seriously the needs of business and, more important in underdeveloped areas such as mine, to get their economic plans right. Economic developers, training providers and schools must work in partnership.

I also welcome local discretion for jobcentres to award grants for travel to interviews and for bridging the transition to work. Working Link, which was mentioned by my hon. Friend Mr. David, has a certain degree of flexibility, but unfortunately it does not have the correct discretionary powers to enable it to do its job fully.

During my time as a welfare benefits adviser, I was aware of the problems for many long-term unemployed people who were moving into work. That is why I welcome housing benefit reform, which will have practical benefits for many people. The housing benefit system can be a great disincentive to people who are moving into work because of the time taken to reassess their claims during those important first weeks of work. The decision to simplify the system is welcome.

I have concerns, however, about widening areas of job search for those who are unemployed for 13 weeks or more if no support is available for those with transport needs: in rural areas such as mine, people moving into work or looking for jobs find that they have a heavy petrol bill and are financially unable to meet the jobcentre's requirements. Skills and training is the route to full employment. The right to lifelong learning is essential if we are to move into a highly skilled, highly competitive economy. I am pleased that my right hon. Friend the Secretary of State for Education and Skills dispelled the myth this morning that vocational qualifications are in some way second-class qualifications.

Our further education colleges and universities must be seen as incubators for industry serving their local communities as well as the national interest. That is especially true in areas on the periphery of the United Kingdom. For example, Bangor university, in my area, has an excellent school of oceanology, and is at the cutting edge of research and development in maritime studies. In spite of that success, however, and innovations announced by the Welsh Assembly Government, the area has poor ICT infrastructure, and is having difficulty in attracting industries that would benefit from the spin-off of the university's research and development. If we are to spread wealth throughout Wales and the United Kingdom, we need to roll out broadband, which is currently demand-led, suppressing business start-ups in new technologies in areas such as mine.

The irony is that many young people who leave the area and get qualifications, particularly in ICT, do not return to it because of lack of infrastructure and lack of opportunity to start their business. That is why I welcome the announcement about relocation of public sector jobs in the Chancellor's Budget statement. Highly skilled and qualified jobs in the public sector are often concentrated around the south-west of Wales. Indeed, it is true that Wales is very Cardiff-centric, and the benefits to the south-west of Wales are a long way from the north-west. Over-centralisation of the civil service and non-governmental bodies creates problems of overheating in the housing market in some areas, while areas in the north-west and north-east of Wales, for instance, are deserts in terms of such public sector investment. The desire to redistribute the key jobs to the regions and nations of the United Kingdom will create a one-nation economy. I am certain that my right hon. Friend the Secretary of State for Wales will fight hard to get Wales its fair share, and I shall certainly fight my corner to get north-west Wales its fair share.

There was good news for Pembroke recently when the Department for Work and Pensions announced the relocation of 200 jobs there. I am certain that the review to relocate a further 20,000 jobs will see advantages in the choice of areas such as north-west Wales. Again, however, skills training is needed to meet the requirements of such public sector jobs, which requires a strategic approach involving schools, colleges and training providers.

On the Chancellor's announcement in relation to employment areas, in the short term, steps to boost enterprise with 2000 enterprise areas across the United Kingdom and the exemptions from stamp duty for certain transactions as from yesterday will help. That will affect around 350 wards in Wales. Sadly, some 22—more than half—of the 40 wards in my constituency qualify as being deprived, so it is important that we get high-paid jobs into such areas so that new businesses can work alongside.

I am optimistic that the sustained investment of an extra £1.2 billion for 2005–06 compared with 2002–03 for the Assembly to spend on education, training, health and other public services will benefit Wales. Underlying that, however, must be the economic stability that the Chancellor has provided. Despite the doom and gloom spread by many opposition parties in Wales, we are already seeing results of the extra investment since 1999. The Labour-led Assembly, working with the Westminster Government, is bringing benefits in terms of public services and health to north-west Wales in particular.

According to The Sunday Times "Good Hospital Guide" analysis, the North West Wales NHS trust has been making excellent progress since 2001 towards meeting its targets for in-patient waiting lists, and is now the top-performing trust in Wales, with an improvement of some 11 per cent. While the ratio of doctors to beds remains low, the signs are that sustainable investment by the Government is producing results and that training of doctors and nurses is seeing results. That, too, is important training for high-skilled jobs. Public services are big employers in my area and major contributors to the economy, so the importance of linking training, jobs and services cannot be underestimated. A new initiative involving the university of Wales and schools, with students and health professionals acting as mentors to school pupils interested in medicine, is showing good results, and recruitment and retention is vital.

I take good heart from the Chancellor's Budget statement. It is not only a good Budget for pensioners and children throughout Wales and the United Kingdom but for small businesses, and for economic development in the regions and nations of the UK. It sets the groundwork for even development and for full employment. It sets out a road map for training providers to meet the needs of the business community and to plan for future economic growth. It gives hope to the unskilled and the unemployed that they, too, can be part of a strong British economy that has at its core real social justice. On 1 May, the people of Wales can enhance those measures by returning a majority Labour Government in Cardiff, which, in partnership with the Westminster Government, can deliver a better educated and more prosperous Wales.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change) 11:36 am, 11th April 2003

May I start with an apology, in anticipation, to the Minister who will reply and to the Conservative Front-Bench spokesman because, unfortunately, I have an important constituency engagement this evening? I hope that hon. Members will understand that logistics of travel between my constituency and the House are among the most involved of any. I shall read their comments in Hansard with some interest, however.

Like Mr. Hopkins, I, too, had hoped to contribute to yesterday's debate, although I am not convinced that my remarks would have been any more relevant to the Front-Bench contributions of yesterday than to those of today. I will raise issues of importance to my constituents, however, and I shall do my best to accentuate what I consider to be the positive aspects of this Budget. In fairness, this Budget was not the most inspiring or radical that the House has ever heard, but there was a smattering of the good and some of the not-too-damaging, about which I shall do my best to be positive, regardless of any barracking that I may receive from Labour Members.

First, may I conform to a national stereotype and give a particularly warm welcome to the decision to freeze the duty on spirits announced by the Chancellor? That will be particularly welcome in my constituency—many hon. Members know that I have a strong interest in the spirits industry, if only a political and academic one. My constituency includes the Highland Park distillery, which is a major plant in Orkney's local manufacturing base, and in Shetland, a company is currently trying to establish a whisky, vodka and gin distillery. I am sure that the freeze on duty, which is another step towards improving the historic position whereby we tax spirits, which we produce, more severely than wine, of which we do not produce much, will be warmly welcomed.

In continuing the duty regime as the Chancellor has done, however, he is slightly optimistic if he thinks that he will recoup the predicted £4 billion to £5 billion in duty by cracking down on alcohol and tobacco trafficking across frontiers. If that is to be an achievable target, I suggest that more front-line Customs staff will be needed. That will mean reinstating Customs officers to some of the more remote posts that suffered cuts throughout the 1980s and 1990s. I have told the House before that there are three full-time Customs officers in Shetland and none in Orkney, compared to a figure of 30 in the early 1980s.

I also welcome the abolition of the petroleum revenue tax. I hope that, as the Chancellor said, that will promote investment in the offshore oil and gas industry, which is of supreme importance to Orkney and Shetland. The measure will, at best, repair some of the damage done last year to oil and gas profits by the unexpected rise in corporation tax. It will provide cold comfort to many in the north-east of Scotland and in my constituency who have seen their jobs go with the downturn in the exploration and development sector offshore.

I welcome also the decision to defer the revalorisation increase in petrol duty. I note that the Chancellor said that if the international uncertainty continued, he might be minded not to proceed with the change at all.

Photo of Albert Owen Albert Owen Labour, Ynys Môn

The hon. Gentleman mentions the tax savings that companies will make in areas such as the North sea. Is it not a little disingenuous for those companies to pass on big rises at the petrol pumps? Would it not be helpful for them to withhold any such rises for a period, rather than blaming the Chancellor?

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change)

I wish life were that simple. I would suggest to the hon. Gentleman that there is a lot more that goes through the petrol pumps than that which comes out of the North sea. The economics of the oil industry are fairly complex—

Photo of Albert Owen Albert Owen Labour, Ynys Môn

I used to work in the industry.

Photo of Alistair Carmichael Alistair Carmichael Shadow Spokesperson (Energy and Climate Change)

The hon. Gentleman knows the situation; he may have been mischievous in suggesting that it was as simple as he made out.

I am disappointed that there has been no recognition of the difficulties caused in remote and island communities, where we constantly pay 15p a litre extra at the pumps for our petrol. For much of my constituency, public transport simply will never be a feasible option, leading to an increased dependence on the private car.

It is curious that the Chancellor, having gone to the trouble of announcing what he was not going to do with regard to fuel duty, did not feel it necessary to tell the House what he was doing. I refer to red diesel, rebated fuels for agricultural use and heating fuel oils. The Customs and Excise Budget note CE 31 indicates, as was confirmed in the Red Book, that there is to be a rise of 1p immediately, as of Budget day, over and above the revalorisation rise. I should add that that is Budget note number 31, adding to the series of 28 that the Government produced on Budget day. In fact, it was only yesterday that this was placed in the Vote Office and I had to get my copy from the Customs and Excise website.

Why is the agricultural sector being treated differently from other users of hydrocarbons? The profit margins under which farmers and crofters in my constituency operate—if there is any profit at all—are very tight. There is a suspicious voice at the back of my mind that says that revenge being a dish best eaten cold, the Chancellor is taking some revenge for the role that farmers played in the fuel tax protests of September 2000. [Hon. Members: "Never."] Perhaps I am being unnecessarily cynical.

On fuel, I shall give perhaps two cheers to the favourable rate of duty for bioethanols that the Chancellor announced. That is significant in the development of what will be an important substitute for hydrocarbons, and particularly in meeting our targets for carbon dioxide emissions. The operative date that the Chancellor put on that is 1 January 2005, which suggests that while the Government attach some importance to it, they do not see it as a matter of the greatest urgency. It is worth noting that although the Chancellor announced that the rate is to be set some 20p per litre lower than sulphur-free petrol, the Biofuels Alliance remains of the view that what was needed was something between 26p and 30p extra. That would not be a massive difference in relation to what has been offered.

It is significant that, as has been quoted in the press, some 20,000 jobs, more than £50 million of investments and markets for 1.2 million tonnes of bioethanol product are there for the asking if, in the view of the Biofuels Alliance, the Treasury had been prepared to provide that extra 6p to 10p needed to stimulate investment in development.

That leaves the lingering doubt that the Chancellor's primary consideration is how much take can be made for the Treasury, rather than the good of the environment and meeting our carbon dioxide emission targets. The fear is that for a ha'porth of tar, the ship is going to be spoilt.

Like many in this House and beyond, I had a feeling of unease listening to the Chancellor. While the whole picture may be fairly healthy, we have a boom in consumer confidence that stems in no small part from the buoyancy of the housing market. As one who practised as a solicitor before entering this House, I know that that is an exceptionally fragile basis for such confidence. I also know that when that confidence goes, it goes overnight.

The Budget seemed to do little for manufacturing, where we remain in recession. Very little is being done to stimulate the necessary growth to bring us out of that. It seems to me that the Chancellor took a deep breath, crossed his fingers and went for it. I hope that he is right and successful. If he is wrong, in the long term we will all suffer. The longer we go on without addressing the underlying problems, the harder will be the fall when the bubble eventually bursts.

Photo of Jon Cruddas Jon Cruddas Labour, Dagenham 11:48 am, 11th April 2003

There are two reasons why I want to speak today. First, I want to register my support for the Budget. Secondly, I want to make a few points about the growing discrepancy between the national and local debates on public services. Since I was elected, I have been learning the job at a local level for the past 21 months, which has been most instructive.

In Westminster, the Opposition talk about failing expenditure, black holes, irresponsibility, waste and spending on public services that will make no difference. Locally, the reality is one of profound change in the delivery of public services. I want to discuss the Budget and the Government's strategy in relation to my community of Dagenham.

The needs of my community are immense. It is the lowest-wage economy in Greater London and one of the most deprived communities. In education, 10 years ago my community was ranked as the worst performing local education authority in the country. Today, adult numeracy is the second lowest in the country; adult literacy is the fourth worst. The proportion of residents with higher education qualifications is the lowest in the country.

On health, heart and lung disease, infant mortality and life expectancy are among the worst in the capital. On the fight against crime, the fear of crime dominates all community surveys, and when I was elected there was acute concern about the number of police on the streets and their public profile. On transport, it has been generally acknowledged that road access, river crossings and rail networks in east London in general and Dagenham in particular are pretty much under-resourced. As I said, the overall public service needs of the community are immense.

Whatever our political bent or persuasion, the Government's general strategy vis-à-vis public services is pretty clear cut, as, indeed, are their general anti-poverty and anti-unemployment strategies. First, we have the search for efficient macro-economic management. To repeat some of the outcomes that we have heard already this week, we have the lowest interest rates for some 40 years, the lowest mortgage rates since the 1950s, the lowest inflation rates since the 1960s and structural debt estimates of between 31 and 33 per cent. until 2007–08—a very healthy situation.

Secondly, we have the strategy of reducing unemployment. We have an active labour market policy and a system of work subsidies. Thirdly, we have the strategy of attacking poverty, reincentivising work, helping pensioners, especially poorer ones, and helping young families. Fourthly—the subject of today's debate—we are refinancing public services by a strategy of debt repayment.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Does my hon. Friend agree that one of the reasons why it is difficult to recruit enough teachers, police officers and nurses in his constituency is the fact that the private sector pays an extra 30 or 40 per cent. in London weighting, while we pay those in the public sector nowhere near that in London?

Photo of Jon Cruddas Jon Cruddas Labour, Dagenham

Indeed, and I will return to that structural problem slightly later in dealing with the demand for housing in Greater London and regeneration across the Thames gateway. Now, I want to focus on the general strategy of refinancing the public services, which is based on earlier debt repayment and reductions in unemployment, plus today's borrowing and tax rises. There will be a £61 billion cumulative increase in the public services by 2005–06, and year-on-year real terms investment in health, education, transport and the fight against crime.

The only way to measure the relative effectiveness of such a strategy is to see how it is working on the ground. Take, for example, education provision in my constituency. Ten years ago, Dagenham had the worst performing local education authority in terms of the quantification of outputs; today, it ranks around the middle of the league tables. There has been a dramatic rate of change in the LEA's relative performance in the past 10 years, especially in the past six. We have some of the most improved schools in the country. They have developed pioneering work in literacy and numeracy, some of which pre-dates the Labour Government, but that has been taken on board, developed and appropriated by the Labour Government. Two weeks ago, the LEA achieved beacon status for secondary schools.

Adult residents are now grasping the increased opportunities for basic skills provision, given the general profile of numeracy and literacy in the community. We see queues of people trying to tap into some of that greater provision for basic education and training. Overall, there is a profound shift in educational provision in the community, and that translates into a literal redistribution of life opportunities for working-class people.

We are expecting a new hospital to be built just on the outskirts of my constituency by 2005–06. The local improvement financial trust, the lift programme, will provide a whole series of integrated community health centres—mini hospitals—across my constituency in the next 18 months. The primary care trust will receive 40 per cent. budget increases over the next three years, and the early front-loaded reforms over this Parliament, through the strategic health authority and the PCT, are now bedding down quite well.

The changes for the police are quite staggering. Some two weeks ago, additional police officers were announced, which makes a 47 per cent. increase in police numbers since the general election. That equates to a change from 280 to 410 officers since the general election, and 15 new community support officers and 20-odd street wardens have been announced. We see more police on the streets and police cars and rapid response vehicles on the roads. The borough commander has identified 12 targets in his policing plan, 11 of which are being met, but we are slightly missing the one on auto crime. Dagenham is now the fourth safest borough in the capital.

On transport, three new river crossings to the east of London have now been agreed. We are extending the docklands light railway into Barking and, probably, Dagenham dock, and we are systematically overhauling the A13, which is the main link road into London.

Overall, therefore, we are witnessing massive change. At times, it is uneven and it is not fast enough, but there is no doubt that profound change is occurring. I fully support that strategy; it is the agenda on which we were elected and people will be patient, so long as they know that things will happen—but they acknowledge that things will not happen overnight. I believe that they will be patient if we preserve the link between tax rises and the borrowing figures in the Red Book and, most importantly, the expenditure plans themselves.

Photo of Andrew Love Andrew Love Labour/Co-operative, Edmonton

My hon. Friend makes a powerful case for local public expenditure, but is there not an additional case? With a weak international economy and consumer confidence tailing off, public expenditure is one way to retain demand in the macro-economy.

Photo of Jon Cruddas Jon Cruddas Labour, Dagenham

I take the point; it is fairly orthodox element of mainstream Keynesian thinking on the counter-cyclical role of the state. I want to come to some of the international issues that my hon. Friend raises in a moment.

Our strategy could be derailed if we were to use tax receipts to finance less borrowing; if we were to break the implied contract that we have with the British people in relation to the revenue raising consequences being accepted if there is a material change in the public services that they consume. That could happen in one of two ways: either we lose our domestic political nerve by not safeguarding our expenditure plans, or we enter into a system whose rules, as presently constituted, would bring into question that strategy and imply spending cuts to restrict borrowing.

Under the stability and growth pact, the objective as stated until middle to late last year was to balance budgets by 2002–03. Late last year, the Commission changed that, with an objective of a 0.5 per cent. cut in borrowing for the next three years. This week's Red Book estimates show that that would amount to a cut of some £35 billion in health, education, transport and the fight against crime if we were to meet the Commission's stated objectives.

To preserve that compact with the electorate, the rational position, therefore, is to remain cautious about early euro entry. The excessive deficits procedure has been triggered for Portugal and Germany, as has the early-warning system for France, and it was reported last week that Italy is also in trouble. It is vital that we resist the internal and external pressures to compromise our strategy.

I want to make a couple of extra points while I can on our industrial and regional policy within the broader mix. Since the last election, we have generally seen a welcome shift in different Departments away from some ideological preoccupations with the so-called new economy and towards a return to manufacturing strategy. Historically, Dagenham sits at the centre of manufacturing for London, and we are seeking to rebuild that by moving from car assembly to engine production.

With that new emphasis on manufacturing comes a renewed Government emphasis on the need to invest in infrastructure, to develop work with the devolved economic agencies, to promote new skills, to develop greater links between industry and universities and to provide more help for research and development. That is encapsulated in the centre for manufacturing excellence that is soon to be opened on the Dagenham estate. It is a vivid example of an enduring manufacturing strategy that has been developed by the Government since the last general election, and it will assist medium-term growth. That growth will also be helped by a developing regional economic strategy alongside the public services agenda and the priorities attached to wealth generation in the Thames gateway sub-region. However, these approaches raise questions in terms of public services. Dagenham sits at the centre of the Thames gateway, and it is anticipated that the borough will provide homes for tens of thousands of people over the next 10 years.

I welcome the proposed urban development corporation that has been announced in the new communities plan. I welcome also the new provision of £460 million, over three years, for land remediation and clearance. However, the UDC must be based on a real partnership with local authorities and local people. It must not railroad through propositions and change.

The housing agenda must work alongside developing the social equation in terms of investments over and above those planned for the area in respect of education, health, transport and the fight against crime. Departmental plans must take into account dynamic changes in population and should not be based on static assumptions. I therefore welcome the speech that was delivered by my right hon. Friend the Deputy Prime Minister at The Guardian urban regeneration conference this week. He stated:

"I know that the growth areas must have the necessary infrastructure. So we are bringing forward the key decisions needed on transport, schools, hospitals and the potential for jobs".

I take that to mean that the new Thames gateway Cabinet Committee—Misc. 22—chaired by my right hon. Friend the Prime Minister will quickly make some unambiguous commitment on what economic and social infrastructure will be committed to by the Government to achieve the new communities strategy. I welcome those initiatives on behalf of my constituents.

I welcome the Budget, which is another staging post in our overall strategy. Massive and profound change is already under way at local level. We must keep our nerve politically and grind out the strategy. We must not let domestic or external forces trim that strategy. I welcome the significant shifts in industrial and regional strategy since the election, which will consolidate the overall agenda. The Labour party was created materially to change the conditions of working people, and I believe that we are on the right track and achieving that goal.

Photo of Mrs Virginia Bottomley Mrs Virginia Bottomley Conservative, South West Surrey 12:00 pm, 11th April 2003

One of the advantages of speaking on a Friday during the Budget debate is that we have had the opportunity to hear from our constituents their first reaction to the Budget announcements. Unlike Jon Cruddas, my constituents are appalled by the Budget, not least the many pensioners who had anticipated retiring with adequate means, but who now face a return of one half of what it would have been had they retired in 1997. The £5 billion tax raid on pension funds has had disastrous consequences. The pensions crisis is causing real fear among the population, and there was no comfort in the Budget for my constituents.

I was interested by the mirth and merriment of Labour Members when I said that people in South-West Surrey received no comfort from the Budget. An untruth is peddled by the Government that all people in Surrey are prosperous. They claim that there is no poverty, no deprivation and no disadvantage. I wish that Labour Members could have heard the evidence from the citizens advice bureau that I visited last Friday.

In Surrey, costs are extremely high. Early sociologists who studied relative deprivation will know that to be hard-up amidst prosperity is extremely difficult. More than that, when it comes to funding a homestart project, a citizens advice bureau or a care home for older people, there are inadequate resources in Surrey to match the targets that the Government announce time and again.

I will give a clear example because today's debate about education makes the point all too clearly. There is no suggestion from the comments of the Secretary of State for Education and Skills that a recent survey shows that one in three teachers expects to leave teaching within five years. Teachers are protesting about their work load, Government interference and—I think not in Surrey—poor pupil behaviour.

I have taken the opportunity provided by the UNICEF initiative to involve young people in democracy to visit all my secondary schools this year. I have been to Rodborough, Broadwater and Waverley Abbey, and I am about to go to Woolmer Hill and Heath End. I have received a letter from the head teacher of Weydon school. She says that she is extremely worried, with all the other secondary heads, that we will

"find ourselves with a deficit budget this year."

She says also that she will

"have to let teaching assistants go at the end of their contract, even though the National Agreement on teacher workload indicates that we should be appointing more . . . At a recent Headteachers' meeting, almost all of the Secondary Headteachers will be managing an 'in year' deficit."

That is according to their reports. She adds:

"Can anything be done to redress the change of funding arrangements which has so disadvantaged the South East of England?"

It is my belief that the duty of a Secretary of State is to act as fairly as he or she can for the entire country. It is noticeable that we have had no visit from a Secretary of State, to my knowledge, to a Conservative constituency in Surrey since 1997. I do not think that that represents an impartial or fair way of managing the responsibilities of Government. Time and again, the funding formula has been distorted so that as we discuss the Budget today, it is well understood that many resources will need to be paid for by local council tax payers, who are powerless to do anything about that in the light of changes introduced by the Government and the additional responsibilities given to local authorities.

I have received many letters from Chiddingfold, Farnham and Hindhead about the appalling council tax increases. Pensioners, who earlier caused such merriment among Labour Members, have said that they have worked throughout their lives, but are now unable to turn elsewhere. They ask how they will cope with the council tax that has been imposed.

Housing is perhaps the most difficult aspect for teachers because housing in Surrey is extremely costly. The Surrey teachers council has given me the latest figures that show that the average house in Waverley costs more than that in inner-London. Of course, teachers in Waverley and Surrey do not benefit from London allowances. They receive a marginal allowance, but that does not compensate in any way for their extra costs. The same is true for police officers, social workers and nurses. In fact, public services in Surrey are now in such a poor state that its police force provides private health cover for police officers because they cannot rely on the national health service to deliver an adequate service. That is an absolutely appalling state of affairs.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

I wonder where the right hon. Lady's argument is going, although I am sure that we will find out. Is she saying that conditions in her constituency call for more state intervention in areas such as the housing market? Of course, many of the problems with pensions are related to stock market conditions. Does she want state intervention in the stock market?

Photo of Mrs Virginia Bottomley Mrs Virginia Bottomley Conservative, South West Surrey

I made it clear that the Government are not entirely responsible for the pension crisis. However, they have made a substantial contribution to it and the Budget offers no comfort for pensioners. The £5 billion tax raid on pension funds is an outrageous attack for which people are still paying the price.

I am pleased that Mr. Challen has provoked me into elaborating further. Of course, the south-east pays the lion's share of tax. We belong to one nation and we accept that the better-off should pay more tax. However, the way in which that is translated to the council tax system is unacceptable because more again is taken from people in areas such as mine, although many are on extremely low incomes and have no disposable income. The cost of an average house in Waverley is £275,000, which is dramatically higher than elsewhere in the country, even Greater London. However, a teacher receives an additional allowance of only £870 a year. A teacher in inner London would receive an extra £6,000 a year.

Photo of Mrs Virginia Bottomley Mrs Virginia Bottomley Conservative, South West Surrey

I shall not because I know that the hon. Gentleman will have the chance to make his comments. I want to convey the points about which I feel strongly and deeply on behalf of my constituents.

My area faces a dilemma in providing housing for key workers, and especially teachers, because the Government have abolished the local authority housing grant. Much worse, the system of pooling capital receipts means that they plan to redistribute elsewhere 75 per cent. of the money that Waverley receives from selling council houses. My local authority has made every possible effort to invest in social housing and has more initiatives than anywhere in the south-east, but the Government's latest measures will damage its ability to provide for that key group in its population.

I want to move on to talk a little about universities, because the Secretary of State touched on that subject. They also face the tax hike through the national insurance contributions and, in my part of the world, they also face problems of accommodation. I am worried about how we are going to encourage people to come into the public sector if the effect of the Government's proposals is that students end up with higher and higher amounts of debt. I worry that that will distort their decisions.

Perhaps more crucial to the Government's point—a Government who tax and tax, spend and spend, and have simply failed to deliver results—is the question of how they are to crack the dilemma of achieving change and demonstrable results. Given that there has been a 22 per cent. increase in health spending and only a 1.6 per cent. increase in the number of patients treated, the Government are right to be alarmed. So what have they done? They have announced taskforces, tsars and think tanks. They have also introduced a great raft of productivity teams, set up by the Chancellor, the Prime Minister and all manner of other bodies.

What the Government fail to do, however, is to learn any lessons from the commercial world. It was interesting that, in his speech, the Chancellor mentioned Sir John Parker and Ben Verwaayen, and that, today, we have heard mention of Howard Davies. Time and again, we are told about captains of industry advising on taskforces and think tanks, but the Government do not learn the lessons from all those people about how to manage and to deliver results. Every time something goes right, Ministers take the glory, but every time something goes wrong, public servants get a kicking. That does not make the public sector a particularly inviting place to work. If the Government deliberately stoke up a blame culture, it causes resentment.

It was interesting that the Secretary of State did not mention a single head teacher or head of a university. I would like him to come to Surrey university to meet Professor Patrick Dowling and see what he is doing to integrate the university with the community. I would also like him to come and meet Mr. Latham at Rodborough school. He is an example of best practice, and a beacon of leadership, public service and commitment to young people. Why do the Government always mention captains of industry rather than the leaders in the field? I have refrained from talking about health today, but I feel this even more strongly about leadership in the health service. The managers always get a kicking; the leaders in the public sector never get the respect that they deserve and to which they are entitled. If the Government stood by public servants who are going through difficult times, it would do a great deal to improve morale.

Photo of Mrs Virginia Bottomley Mrs Virginia Bottomley Conservative, South West Surrey

I am grateful to the hon. Gentleman for saying that, because I did, indeed, stand by public officials. Nobody would gainsay that, and I am proud of it. I have spent most of my career in the public sector, and I believe that we are very fortunate to have people of such calibre, commitment and integrity in it. This is one of the issues closest to the heart of the Government's difficulty over delivery.

The Budget touched on another area about which I want to make a small point. Michael Queen's speech at the British Venture Capital Association's annual general meeting dealt with the factors that lead to economic growth. The elements that he identified included population growth, productivity, a fair approach to taxation and an efficient public sector. I have made it clear that, at the moment, we do not have a fair approach to taxation—particularly local taxation—and I am afraid that, for reasons that are all too clear, we have not yet managed to turn every pound of public money spent into a pound of value, in terms of improvements in our public services. Population growth is a key area—

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. The right hon. Lady's time is up.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell 12:14 pm, 11th April 2003

We could describe this as a consolidating Budget, so it is perhaps appropriate to take stock of what the Labour Government have achieved since 1997, particularly in education, which is the key driver of the growth and development not only of individuals but of the whole country.

We can look back on the past six years with considerable satisfaction, for the improvement in results has been marked. The schools in my constituency show consistent overall improvement. While that has not always been equal across the board every year for every school, it is clear that young people can now expect a better education. That is not a miracle or an accident. It reflects the hard work of teachers and the extra resources that they have been given to support their teaching. I am pleased that the Government have put such emphasis on improving every school. The previous Government were more interested in improving the lot of a select few at the expense of the many, as their ill-fated nursery voucher scheme showed.

This year has been another good one for my local schools. In the past 12 months, I have been to the openings of two brand-new primary schools, Hilltop and Asquith, as well as the openings of a new extension at Woodkirk high school and of the new teaching block at Rodillian high school. As one who remains sceptical about many aspects of the private finance initiative, may I say that it was most welcome in the case of Hilltop primary? People have been waiting for a replacement school since the 1940s. However, Leeds can now anticipate a huge £60 million investment in new school buildings if the bid from Education Leeds ultimately succeeds.

Despite my reservations about the PFI, I want the bid to succeed, for the sake of all the children who in too many cases are still taught in unacceptably poor and dilapidated classrooms. During my visits to local schools, I have often been shocked by the condition of the buildings. We cannot accept that situation any longer, and with this Government we are not doing so.

I congratulate the Government on dramatically increasing capital funding to address those problems. In 1996–97, when the Conservatives were last in power—I emphasise the word "last"—schools' capital funding was less than £700 million. By last year, it had risen to £3 billion. Next year, it will be £4.5 billion. If that does not show the Government's commitment to "education, education, education", I challenge anybody to tell us how they would cap it. I doubt that the Liberal Democrats would dare to. When the new teaching block at Rodillian high school was opened by a former pupil, he praised Labour's spending on education in the most glowing terms. That former pupil is now a Lib Dem peer, Lord Newby, and I recommend that his colleagues pay more attention to his words of wisdom, which for once avoided the usual Lib Dem flim-flam.

In this year alone, schools in my constituency are to receive revenue budget increases well above inflation. The average is 11 per cent. Most schools are receiving about that, but some are getting much higher increases of up to 20 per cent. We are getting to the stage where schools can be much more creative about how to go about their business. I praise the initiative of some of my local high schools, which, along with the Joseph Priestley college, local businesses and the brand-new library in Rothwell, have set up the South Leeds Partnership to work together to provide a broader curriculum for older students. They are collaborating to break down the barriers between schools and between schools and other places of education.

Some of those barriers relate to parental perceptions of how an individual school is performing and they can reflect "inner-city versus outer-city" prejudices, but by working to create a greater campus in which different establishments can contribute different strengths, we should see the beginnings of a new approach to education.

I want the strengths of schools to be enhanced, which is why I support schools developing specialisms and being recognised for that. Of course, all that has a cost attached, but at least we are moving into an era in which schools are at last getting budgets that reflect new demands and give them more choice on how to use their own income. However, one problem thrown up by that partnership approach is that varying pay scales between schools and colleges are causing problems with recruitment, retention and morale. College lecturers are paid less than teachers, but the extent to which we depend on what some describe as the Cinderella of post-16 education is only now becoming apparent.

We are seeing skill shortages in traditional areas. Indeed, we have heard how the shortages in certain trades mean that in some parts of the country plumbers are allegedly paid more than MPs. Some may say they deserve more, but I shall not pursue that line of argument.

There must be a great temptation for lecturers in various locations to go into trade on their own behalf. That scenario worries me. It reminds me of a short story by E. M. Forster called "The Machine Stops", in which a society obsessed with and dependent on new technology forgets how to maintain the basic functions that kept the wheels turning. Notwithstanding all our optimism about the knowledge-based economy, it will not be much use if additional skills are lost and we cannot flush our toilets.

I am pleased to learn from the Red Book that the Government are to ask Mike Tomlinson to review the question of how all post-14 educational options can be made more coherent and appealing to young people. I hope that the review will indeed address such issues. The emphasis that we have placed on meeting a target involving 50 per cent. of people attending university has in some ways made other forms of education look less appealing—as if the Government did not care as much about them. We need to correct that perception as soon as possible.

Let me now digress somewhat, and talk about the other end of the scale. I have referred to the concrete skills that the country needs to keep the wheels turning, but we must also ensure that universities are not prevented from engaging in what some might describe as esoteric research. We must resist the idea that some universities should separate teaching from research, and ditch the latter. I know that there are real fears that that is what the Government intend in the case of my degree subject, philosophy.

Those fears are based on the premise that some universities should generate more income by becoming, as it were, degree factories with no incentive to push the boundaries of knowledge. For me, going to university was not just about learning about the world as we found it but about exploring new ideas. If we truly want to be an innovative country, we must encourage pure research wherever we can. I do not want to debase philosophy, but that is how new products come into existence.

Photo of Eric Joyce Eric Joyce Labour, Falkirk West

Are not many who are wired up to be excellent researchers weak teachers, and are not some who are wired up to be good teachers weak researchers, at least potentially? There is not always a clear link between teaching and research. That applies particularly to research institutions where there is no well-known history of good teaching. Those are often the very institutions that produce excellent teaching—and the opposite also applies.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

I agree to some extent, but I believe that in universities teaching and research must go hand in hand. That is the traditional university model. We do not want to create a system in which universities are seen as second-class because they are involved only in teaching, churning out students, possible two-year degrees and so forth. We do not want such activity to be separated from the research function.

The child trust fund is an excellent idea that has my wholehearted support, although I question the wisdom of the Red Book's statement that

"there will be no restriction on the use of assets at maturity".

It seems that the trust's objective will be limited to little more than trying to get people into a saving habit. I do not disapprove of that ambition, but I wonder whether a few more strings should not be attached to public largesse. How many people, having reached the age of 18, will blow their trust funds on some frivolous item?

In 2021 there will probably be more temptations than there are now—temptations backed up by slick marketing campaigns and the fashion of the day—to wrench that money out of the hands of 18-year-olds. No doubt the Labour Government who will be in power then—[Hon. Members: "Hear, hear!"]—will be able to review how such potentially large nest eggs are used; but I hope that when the full proposals are published in the summer we shall see evidence that the matter has been considered. My own view is that the money should be used for educational purposes, among others.

I have so far focused on education, but I want to say a little about public services generally. Under this Labour Government public services have expanded, in terms of teacher numbers, new schools, and the thousands of extra police. Last week we read in the Yorkshire Evening Post that crime in west Yorkshire had been reduced by 17 per cent., which is unprecedented. We also have many more nurses and doctors.

My constituency is now seeing the fruits of a Labour Government. Only last week we had the pleasure of seeing the Secretary of State for Health's official opening of the £4.7 million St. George's health centre.

That facility is a marvellous example of how Leeds city council and the South Leeds primary care trust are working together to provide a range of services, including a new library, under one roof. It is testimony to what can be done in the public sector and how public services can work in partnership to deliver better services. In the not too distant future, that health centre will be linked to other parts of south Leeds by the new supertram, on which work has already started.

It takes time for these things to happen but I am confident that by 2005 another two new primary schools in my constituency will be completed or nearing completion and that the condition of existing schools that need repair will be improved.

With those measures, and with measures designed to tackle poverty such as the child and working tax credits, the huge reduction in unemployment and the increase in pensioners' income, we are fulfilling our core pledges and rolling back the old lie that a strong interventionist Government or indeed public borrowing are a bad thing.

I am delighted to be able to support a Chancellor who can stand at the Dispatch Box and defend public borrowing rather than apologising for it. I am delighted that we have now left behind those painful, philistine years of Conservative misery and miserliness, but I hope that as we celebrate the comparative strength of our economy and our Government, we will not take any steps that threaten to tie us up with some euro-fiscal Frankenstein that even its creators describe as stupid.

Photo of Michael Fallon Michael Fallon Chair, Treasury Sub-Committee 12:26 pm, 11th April 2003

I refer the House to the business interests recorded in the Register of Members' Interests.

I begin with a complaint about the Budget timetable. I understand that there are historical precedents for a Budget as late as this but it is bad practice to introduce a Budget after the tax year has begun. I hope that the Economic Secretary to the Treasury can assure us, given the changes in the parliamentary year, that the time afforded to the House to scrutinise the Finance Bill will not be lessened in any way by the late arrival of the Budget.

The Budget date should be more certain. The Treasury Committee, on which the Labour party has a majority, has recommended that the Chancellor should give at least two months' notice of the Budget. That is fair, and good practice, not least for those outside the House who are following the various changes that are in train.

On the macro-economic framework, the forecast for growth in the financial year just finished has been downgraded yet again. It was supposed to be between 3 and 3.5 per cent. In November it went down to 2.5 to 3 per cent. Now we are told that it is only between 2 and 2.5 per cent. Business investment in 2003 was supposed to be between 5.5 and 6.25 per cent. It has fallen well below that. Manufacturing output was supposed to be between 2.25 and 2.75 per cent. In fact, it is going to be only 0.75 per cent. We now know that manufacturing output fell by 4 per cent in 2002.

The Chancellor has too often been wrong in his forecasts. He has been proved wrong again and again. He has been proved wrong by the International Monetary Fund, whose record on forecasting our economy is better than his, and by the average of the independent forecasters last year and this year. In getting his forecasts wrong, he is continuing to mislead people, particularly those who have to fund the deficit. It is no excuse to say that there has been a recession or we are doing better than other countries in Europe. The right hon. Gentleman's judgment as a Chancellor is now in question.

When I hear the Chancellor on the subject of growth forecasts for next year, I am reminded of the rather hapless information Minister of the Iraqi regime, who told us that the American tanks were trapped. That matters for next year. The Chancellor is asking us to believe that growth in 2004 will be between 3 and 3.5 per cent. That is above his own trend rate of growth for the economy of 2.75 per cent. It is well above the IMF forecast of 2.5 per cent. and the Bank of England central projection of 2.3 per cent.. The right hon. Gentleman is in effect asking us to believe—if we are going to get 3 to 3.5 per cent. growth next year—that household consumption will go on growing at the same rate as it has been, that house prices will not settle backwards, that manufacturing output will magically jump from 0.75 per cent. this year to between 2.5 and 2.75 per cent. in a single year, and that there will be a huge post-war bounce-back in exports at a level of 8 per cent. If one believes that all those things are likely to be true, one is halfway to supporting his forecast.

If the Chancellor gets his forecast for next year wrong—as he got it wrong for this year—we will have a much more serious problem with the public finances. Borrowing for the year just finished was supposed to have been £12 billion; then, it became £20 billion; now we are told that it is £24 billion—twice the original forecast, and £4 billion more than was forecast as recently as November. Nothing in the Red Book explains to me where that additional £4 billion will come from in terms of further tax changes.

Of course, the £24 billion figure for next year depends on the Chancellor's securing the extra revenue that he needs through the tax avoidance measures he has set out; on some of the liabilities under the private finance initiative not maturing at a cost to the taxpayer; and on the tax receipts from his projected growth. If things go wrong, because he is locked into the spending plans announced in last year's comprehensive spending review, he will have to raise taxation all over again. So there are serious problems with the Chancellor's micro-economic forecast.

I want to touch on public service reform. Unlike any other large industrialised country in the west, we still have 1 million people waiting for operations in our health service. As we have heard from a number of speakers today, we have rising illiteracy, missed targets in our secondary schools, and so on. Why? Because all this extra money is simply not getting through to the front line. A supplement published by The Guardian on Budget day contained 127 pages of public sector vacancies, almost none of which were for teachers, nurses, doctors or policemen. On the contrary—almost all were for bureaucrats, who all of us must fund. The Government propose reforms, but GPs, consultants and the National Union of Teachers have yet to sign up to them. We have yet to see the introduction of reforms that could really make a difference in the public sector, such as much more local rather than regional pay bargaining, and performance-related pay that is properly linked to rigorous assessment. We need measures to make it easier to get rid of incompetent teachers and head teachers—ask any school governor how difficult it is to do that. We have yet to see real reforms.

I want to turn to some of the Budget's micro-measures. Of course, every year there are certain such measures that we can welcome. It is good to see further simplification of VAT and no serious rise in stamp duty, but there are other, less welcome measures tucked away. Personal allowances have been frozen. How many Labour Members will return to their constituencies this weekend to tell their constituents of a tax rise, in effect, of £400 million in additional personal taxation? I share the criticism of the children's trust fund expressed by Mr. Challen. It seems odd to allocate, in a completely unrestricted way, public money that could be blown at the age of 18 on a party, or whatever.

As regards measures for business, we have yet more schemes and yet more tinkering. The Government are even tinkering with the number of meals that an employer can provide on what are described as official "cycle to work" days. These should not be matters for government. Instead of all these different schemes, what business requires is less regulation and a more serious attempt to tackle productivity.

It is on productivity that I want to finish. The Budget bundle contains yet another document on the productivity challenge. The Library calculated a rather disconcerting figure for me. It is out of date, and is of course affected by movements in the exchange rate. However, if one ranks our gross domestic product per head in 1999—the last year for which figures are available—against that of each of the individual states of America, Britain comes 49th. Only the state of West Virginia is less wealthy than we are. Of course, that is because, for all its current difficulties, the United States remains an incredibly strong economy. It does not have national collective bargaining; it does not have Transfer of Undertakings (Protection of Employment) regulations; small businesses are exempt from most of the regulations; and the US does not impose regulations about paternity leave. I ask the House to reflect that we might be closer to the European, as opposed to the American, model than we care to admit. Instead of heaping social regulation on top of business, we should reduce it.

Six years after the present Government came to power, our productivity has not kept up with that of our competitors and our public services have not been properly reformed. Instead, we are back to tax and take, spend and bureaucracy. The Budget is yet another missed opportunity.

Photo of Eric Joyce Eric Joyce Labour, Falkirk West 12:36 pm, 11th April 2003

The Government's commitment to increase spending on higher education by 30 per cent. over the next four years—a high level of investment—naturally requires the sector to adapt itself appropriately for the challenges of the 21st century. Some of the proposed changes, it is fair to say, have caused disquiet in some quarters. Today I should like briefly to address two issues hotly debated within the higher education sector at the moment. Some of the objections and arguments put by vested interests within the sector look, given the academic provenance of those putting them, to be based on surprisingly weak grounds.

The first issue is student funding. The Government intend to allow higher education institutions to charge top-up fees of up to £3,000 per year, subject to a number of caveats, including sound access arrangements. I attended a meeting the other day at which some higher education professionals argued that that would create an elitist system of education in the UK. That is an odd argument, since it is clear that our system is already elitist—certainly more elitist than that of the United States—in terms of access by less well-off students to what are considered the best universities. However, our system is pretty haphazard in its elitism.

Elitism based on high national standards is surely a good thing because it is only by such high standards that we will compete with the best in the world, but an elitism based on social class or simply being in the loop is regressive and corrosive. We all know people who attended public schools and achieved quite good A-level results: they were hardly the brains of Britain, but went on to Oxford and Cambridge. On the other hand, many of us also know people from less well-off backgrounds who attained equally good A-level results—in some cases, fine ones—who did not go on to any of our most famous institutions. It is certainly the case that people from state schools sometimes fail to set their sights high enough. That may sometimes be caused by a lack of confidence, but, equally, too few high-grade universities have done enough until now to widen access. It is good to see universities such as Bristol leading the way today.

It is worth noting that many people in the HE sector who complain about elitism per se are particularly good at getting their own children into the elite institutions. We should also be aware of the attempts by the Headmasters and Headmistresses Conference schools, which have given Bristol university such grief recently, to ensure that the current strong correlation between social class and access to elite institutions is maintained. It is touching that HMC schools have chosen to highlight the importance of structured interviews and transparent admission procedures over the last couple of months, especially as they have kept quiet about how successful they have been over the years at getting students into Oxbridge and elsewhere on the nod, by knowing how the system works.

What is panicking those schools is not any lack of fairness on the part of universities such as Bristol, but the reverse. The fact is that while the Etons and Harrows have traditionally produced—and still do produce—the academic goods, many of the schools further down the HMC pecking order are aware that their local state schools are now achieving better results than they are, so they face a potentially eroding client base. The fact is that the new access regulator, combined with the reintroduction of grants for the least well-off third of higher education students will, over time, transform the look of some of our best institutions. There will, of course, still be places for public school girls and boys who perform to the highest standard, but greater fairness means that there will also be far more kids from much less well-off backgrounds, which will in turn ensure that standards, even at the best institutions, continually get higher.

The second issue that I should like to cover is, to use the vogue term, mission. I was lucky enough to visit some higher education institutions in China a few months ago, and it is striking that the Chinese Government are investing an enormous amount in 10 or so research institutions. The US already has a higher education system that ensures that some higher education institutions have teaching missions and others have research missions. That is their focus—teaching on the one hand; research on the other. To a large extent, they have been decoupled. That pattern is being repeated across the world, and it is time for us to recognise that we have to go the same way.

The expansion of the HE sector during the 1990s was a great achievement, particularly given the declining per capita resource that institutions had to deal with. However, much of it was done under the assumption of a tight institutional linkage between teaching and research. Where that works, it can lead to great results, but where institutions lack the necessary capacity, but try to conduct research all the same, results can be very patchy. Conversely, only a small minority of academics in our higher education institutions have a formal teaching qualification, and while standards are now improving it is far from true that all institutions with excellent research reputations have equally good teaching reputations. Moreover, it is fair to say that many of our best researchers lack the potential to be particularly good teachers, and perhaps some of our best academic teachers are not personally designed to be world-class researchers. That is why we need to inject coherence into the system to enable some institutions—and departments, in larger institutions—to turn out fine professionals, and others to turn out research of the highest order that is able to compete with the best that is produced by the Americans, the Chinese and other nations who will press us so hard in the years ahead.

Above all, those of us with an interest in, or who work in, the HE system must have a sense of realism about the order of competition that we face from abroad and about how poor access arrangements to date have led to a broad system that is both insufficiently fair and extremely inefficient in terms of exploiting our national talent for best results. It is of the utmost importance that we aspire to all higher education institutions being fit, to world-class standards, for their respective purposes.

Photo of Hugo Swire Hugo Swire Conservative, East Devon 12:42 pm, 11th April 2003

I declare my interests in the Register in the usual manner.

Having sat through this morning's Budget debate, I am amazed by the complacency of some Labour Members. As my right hon. Friend Virginia Bottomley—who is no longer in her place—said, it is interesting to speak a few days after the Budget so as to have seen not only the reaction of one's constituents, but what the commentators on the news and in the broadsheets say. It is perfectly clear that the lustre has come off the Chancellor as far as they are concerned. They no longer describe him as a prudent Chancellor—indeed, there is some suggestion that he is taking a risk by gambling on growth, which sits uncomfortably with what he has been trying to achieve over the past six Budgets.

Whereas previously there was a credibility gap in what the Chancellor said, there is now, more worryingly, a fiscal gap. That is clear before one goes through the Red Book to examine the off-balance sheet accounting of private finance initiatives, which is an extremely worrying development. We know from the figures that borrowing this year is £27 billion—more than twice the £13 billion that the Chancellor forecast just 12 months ago. Over the next five years, the figure will be £118 billion. That is £88 billion more borrowing over the past five years than was originally planned. That cannot all be put down to the current war in Iraq or to the international situation in general. Of course, we have to make provision for the war, as we have to make provision for the UN's rebuilding of that country. I earnestly hope that any funds that we provide will be channelled through the UN and other agencies and not through the European Union, where so much overseas aid money has been spent wastefully.

People up and down the country are paying more and more tax. A typical family man pays £568 more than he did before. Judging from the groans of the hon. Members opposite, that point has been made before. However, as my hon. Friend Mr. Fallon said, one would need the unswerving conviction, or delusion, of Mohammed Saeed al-Sahhaf, the Iraqi information Minister, to believe that the Chancellor's pillars of prudence are still standing and that the economy is in good shape. A total of 78 per cent. of independent forecasters on the Treasury's own panel think that taxes will now have to rise by between £5 billion and £8 billion by 2006.

Where has all the money gone? Where is it disappearing? My right hon. Friend Mr. Redwood rightly referred on Wednesday to the boom and bust of the telecoms tax that was due to raise £22 billion. This morning, we have heard again about the £5 billion raid on pensions. The truth is that, from this April, £50 million an hour will be being spent by this Government—£14,412 a second. People are simply not seeing a corresponding improvement in the quality either of public services or of their lives.

Photo of Hugo Swire Hugo Swire Conservative, East Devon

I will make some progress, if the hon. Gentleman will allow me.

I was interested by what my hon. Friend Sir Michael Spicer said earlier about the euro and the five tests. If ever any evidence were needed that a one-size-fits-all interest rate is not suitable for this country, it is being seen now. We have seen weak demand and weak growth in the EU; the tight constraints imposed by the European Central Bank; high and rising unemployment; and the appalling costs of red tape and social regulation. There is growing evidence that the Chancellor at any rate now realises that to join euroland now would be sheer folly. It will be interesting to see the report when it comes out in June, but I cannot now believe that there will be a referendum on the euro in this Parliament.

We are told that every Budget is for someone. It may be a Budget for pensioners, for the young or for the unemployed. However, once one has spent some time wading through the Red Book, it is genuinely difficult to see whom this Budget is for. It is certainly not for small businesses. Any small advantage gained through the changes to VAT regulations is greatly overshadowed by red tape and the national insurance rises. For bigger businesses, I seriously urge the Chancellor to tread very warily in his dealings with overseas companies and overseas domiciles. Of course, ensuring that everybody in this country is subject to the same taxation fits with his vision of social justice. However, consider the Baltic Exchange, which has made successful representations to the Chancellor and the Treasury over successive years. It is commonly understood that, were the Baltic Exchange and those families who operate their shipping fleets from this country to move, more than 5,000 jobs would be lost and a minimum of £125 million a year would be lost. I suspect that that figure is a great underestimation of the real figure. We should not forget that such people are highly mobile and can move their business anywhere in the world. The Chancellor's proposals may make a good soundbite but they are bad economics.

The reannouncement of baby bonds as child trust funds is another soundbite. I rather agree with Mr. Challen who suggested that the idea has not necessarily been thought through. As the parent of a child born last August, I feel especially aggrieved that the scheme will be backdated only to last September.

In the remaining time for my speech, I want to talk about the prevalent group in my constituency: pensioners. The Government's proposals to relieve pensioners of the need to contribute to the cost of their accommodation in hospital are another good soundbite but, in reality, the Government had already decided to extend the period covered by the rules from six to 13 weeks. In my constituency, we are examining ways to make more use of our community hospitals, to expand them to provide beds for patients who need long-term care. What will happen to those people if they remain in hospital for more than a year? Has the Economic Secretary discussed with health authorities and primary care trusts the financial implications of losing that money?

The winter fuel allowance has been increased by £100 to £300. That is extremely welcome but, as everyone is aware, a worryingly large amount of such allowances are unclaimed. That is why the Opposition tabled a reasoned amendment to the Government's pension credit proposals, to provide that the money should go into the higher basic state pension for older people. That must be the right thing to do.

What practical steps are the Government taking to ensure that, as we create an increasingly dependent society, pensioners will be able to receive their entitlements? The pension credit can be claimed by single people with an income of less than £139 a week and by couples whose total weekly income is less than £203. They could receive average increases of £7 for a single pensioner and £9 for couples. In reality, however, two thirds of pensioners will be means-tested by 2020, thus extending the dependency culture in one of the proudest groups in society. They do not want to be dependent on the Government but to have a basic state entitlement.

Those ring-fenced pension increases pale into insignificance when we consider the transfer to local authorities of bills that were previously picked up by the Government. I am of course referring to council tax. It is unfair of the Government to claim that some councils are using the Government's new grant support system as a smokescreen to increase radically the amount of council tax levied this year. That is certainly not the case in Devon.

I shall explain the reality of the Budget to a pensioner in Devon—one of my constituents who lives in Sidmouth, in a typical band G property. His council tax is £2,244 a year. His state pension is £322.64 a month. In 1997–98, when Labour had just come into power, council tax accounted for 38.7 per cent. of his state pension. Three years later, in 2000–01, council tax accounted for 47.9 per cent. of his state pension. In 2003–04, it will account for 57.9 per cent. of his state pension. In other words, in seven years, the state pension has risen by 24 per cent. while council tax has risen by 85 per cent. Many of my constituents simply cannot understand how that can be, and others simply cannot afford to pay—

Photo of Mr Chris Pond Mr Chris Pond Labour, Gravesham 12:55 pm, 11th April 2003

The whole House will understand, of course, why Mr. Swire and other Opposition Members feel it necessary to use a speech during a debate on education to seek to undermine the credibility of the Government's economic policy and to seek to undermine the forecasts of the Chancellor. Their purpose is twofold. First, they know, as we know, that this Government's economic competence is their greatest strength. Secondly, they know, as we know, that the forecasts, which are bound to change—that is their purpose, as world circumstances change—have nevertheless been confirmed by many independent forecasters. Indeed, their predictions are within the range for most independent forecasters. The Institute for Fiscal Studies, before the Budget, said that the Chancellor is justified in suggesting that his borrowing forecasts were within the Government's tough fiscal rules.

The main theme of the Budget was the partnership between economic strength and social justice, with which Opposition Members find it very difficult, even now, to get to grips. We were told during the 1980s and the part of the 1990s during which the Conservatives were in office that one can have either economic strength or social justice but never the two together. What we have proved, Budget in, Budget out, is that social justice is the main driving force of economic strength. We have had sneering from Opposition Members about some of the real improvements that we have seen in the living standards not only of the poorest but of a large proportion of families, through the new tax credits—

Photo of Mr Chris Pond Mr Chris Pond Labour, Gravesham

No, we are limited on time.

The over-80s will now get the extra £100 in the winter fuel payment, year in, year out, throughout this Parliament, and pensioners will no longer be required to pay accommodation costs while in hospital. It is very difficult for Conservative Members to understand why all those things are important to people. Those things have been facilitated by the economic strength produced by a Chancellor who insisted on making tough decisions in the early years to eliminate debt and to enable us to have the underlying strength in the economy that can create social justice.

We know that, under previous circumstances, inequality was one of the major weaknesses of the British economy. At the sharp end, the number of children living in poverty trebled under Conservative Governments, and they were failed by an education policy that left half of 11-year-olds failing to meet basic standards in numeracy and literacy. I have been astonished to hear Opposition Members during this debate refer to the fact that there are children today who do not meet those basic standards: there are such children, but the proportion is about half what it was when this Government took over. We are determined, through investment and driving up standards, to make sure that those children get the best opportunity in life and that we reduce that proportion further.

I therefore welcome the fact that as well as maintaining our commitments in military terms, under the current difficult circumstances, and making sure that we are able to put aside resources to fight the war on terrorism, the Budget confirms that, through the new tax credits and extra help to pensioners, we are able to ensure a boost in living standards for the poorest households, that we will give additional help to business in these current difficult world circumstances, and, furthermore, that we will continue investment in the public services. Education spending alone will rise from 4.6 per cent. of gross domestic product at the beginning of the decade to 5.6 per cent. by the middle of the decade.

My local education authority in Kent will see a 6.6 per cent. cash increase in its education assessment. I should explain that that assessment takes account of the fact that Kent makes relatively poor provision at present for the under-fives. Compared with a target provision of 85 per cent. of the group, Kent makes provision for only 32 per cent. The cash increase overall per pupil is 3.2 per cent. That is less than many of us lobbied for; nevertheless, it is an above-inflation increase in the education settlement.

I hope that Kent county council will swiftly move towards the 85 per cent. target. I am pleased that nine new nurseries were announced last autumn, but I am distressed that the council now proposes to close one nursery in my constituency. I am looking forward to a clarification of what is happening to those extra resources; Kent county council is being funded as if it were making provision for 85 per cent. of under-fives when it is educating only 32 per cent. I am pleased that the funding is available, but I want to make sure that it goes to schools.

I am concerned that Kent county council is telling everyone—schools, parents and the public at large—that the settlement that it has received, which is above inflation, is insufficient to meet its needs. It has told schools in my constituency to batten down the hatches and prepare for cuts. I am concerned also that part of the resources available to Kent county council—some £690,000, exactly the same amount as the budget for learning support units for secondary schools—is spent, effectively, on a press office, telling people that Kent county council cannot manage because people's money has gone north. We have heard that same mantra from Opposition Members this morning. I should stress that we are talking about an education settlement that is above inflation. I hope that Education Ministers will look carefully at Kent county council's budget to see how much funding is going directly to schools, how much is retained by the LEA and how the overall budget for Kent is being distributed to schools of different types in different parts of the county.

In circumstances in which the county council is receiving funding in excess of inflation, why is Kent county council proposing the closure of schools such as Northcourt primary school in my constituency? That comes at a time when we are expecting record increases in population growth, and in the population of children, in my part of Kent, partly as a result of the developments referred to by my hon. Friend Jon Cruddas earlier this morning—the Thames gateway and Kent Thameside.

Northcourt primary school was described by Ofsted as being at the heart of the local community, a community with disproportionately high levels of deprivation and disadvantage and a particularly high proportion of children from traveller backgrounds. Ofsted found that the school's standards were not acceptable—none of us would tolerate that for our children—but that it had made improvements in key areas, despite a lack of leadership resulting from the fact that the head teacher had been on sick leave since last September.

Ofsted also acknowledged the commitment of staff, the governing bodies and parents to the school, and I echo that tribute to them this morning. I should like to pass a message to Education Ministers: such schools, which are at the heart of local communities, are essential to ensure that we improve standards. Schools must be part of their communities and be able to address the particular needs of the children in those communities. It is short-sighted for an education authority such as Kent to propose to close a school in the current circumstances. Rather than take that route, we should invest in our schools and make sure that we improve standards, rather than close schools.

One of the challenges facing schools throughout the country is, of course, that of more difficult and disruptive pupils. Another of my local schools, which may be required to take on many of the children from Northcourt primary school if it closes, had, until recently, a highly effective special unit for disruptive pupils. I am sorry to say that that was closed last year, and Kent county council has been unable to find the funds to keep such units open or to make provision across the borough for those pupils, as I have been urging it to do. One of the major reasons given for people leaving the teaching profession is the challenge that they face from disruptive behaviour in schools.

An additional challenge in our schools is loutish, antisocial behaviour on or near school premises, very often from people who are not members of the school community. Groups of people hang around school gates, intimidating children as they go in and out, and people bang on school windows during lessons. On one occasion, a head teacher had to lock parents and staff inside the building because of the threatening behaviour of individuals in the school grounds. All that has become a major problem in my constituency, and I ask Education Ministers to liase with the Home Secretary to find out how that can be addressed with the proposed antisocial behaviour measures.

Finally, I welcome the Chancellor's statement that the pay review bodies will be asked to look more carefully at the additional cost of employing people in the public sector in London and the south-east. We need to ensure that, while increasing the number of people employed, they are properly rewarded, which is particularly important in constituencies such as mine.

Photo of John Horam John Horam Conservative, Orpington 1:06 pm, 11th April 2003

I wish to say a few words about the expenditure side of the Budget equation because there is no doubt, as I am sure all hon. Members would all agree, that the Government have raised vast amounts of money from the long-suffering taxpayer and continue to do so. In those circumstances, it is imperative that they spend the money that is raised wisely—but, sadly, as we know, people do not think that they are spending it wisely. In fact, most people think that the Government are wasting a great deal of money. Opinion polls suggest that as many as three quarters of people think so.

Such is the cynicism about politics, with which we are all rather familiar, people might think that any politician would waste a great deal of the money raised from the taxpayer, but the fact is that that is not so. I looked at another opinion poll the other day that examined spending by local authorities. When asked, "Which party would spend your money most carefully?", 37 per cent. said that the Conservative party would spend their money the most carefully, and 19 per cent. said that the Liberal Democrats would do so. So Conservatives are reckoned to spend taxpayers' money twice as carefully as Liberal Democrats.

What was the percentage for the Labour party? Two per cent., so people clearly think that the Labour party does not spend their money carefully at local government level. We know from the scandals in numerous Labour-controlled local authorities in the past few years—not least in the Deputy Prime Minister's constituency—that Labour councils are notorious for their profligacy with public funds.

As my hon. Friend Mr. Fallon said, the fact is that much of the blizzard of public expenditure that is pouring from the Government, paid for by the taxpayer, is ending up on the ridiculous jobs in the back pages of The Guardian, and they do not know how to spend the money. That is a tragedy, because it is immoral to raise money, particularly from low-income people, and then spend it so poorly on jobs for the boys, or jobs for the girls, advertised in the back pages of The Guardian.

That is also bad because the Government are missing a major opportunity to improve our public services, and I want to take an example from the Home Office spending plans. The fact is that, as we all know—Mr. Pond referred to this—we have considerable problems with antisocial behaviour. I entirely agree with what he said on that point. It is a real worry. As we know, only this Tuesday the Government introduced a Bill on the subject. However, I do not believe that more and more laws are the answer to dealing with the problem. Equally, it is not only a matter of funding. For example, for some time my local council has had a community safety manager. She recently went to Boston and spent some time examining the system there, which is predicated on the well-known idea of zero tolerance. Boston has an effective police force and all sections of the community are involved in it. It is backed by the local council. That force has achieved astonishing results in reducing crime and antisocial behaviour, with which we are so concerned. That is a tribute to the Boston police force. The community safety manager has returned and she is contributing to local policy in my borough.

However, the number of police officers is a matter of consequence in trying to tackle these problems. Despite the blizzard of public spending, the number of police in the London borough of Bromley has fallen from 471 in December 1996 to 427 at the latest count. I took up the matter with the Home Secretary during Home Office questions recently. The right hon. Gentleman was good enough to say that he would take the matter up with Sir John Stevens, the Commissioner of Police of the Metropolis, to ascertain why Bromley had done so badly. That was a few weeks ago.

Photo of John Horam John Horam Conservative, Orpington

I shall carry on for a moment. I am about to blow my own trumpet.

We now have 12 extra police officers in Bromley. I am delighted about that. Having made my point I will give way briefly to the hon. Gentleman.

Photo of Colin Challen Colin Challen Labour, Morley and Rothwell

Is it not a fact that the Government had to go through the painful process of sticking with Conservative spending plans during 1997 and 1998? That led to a decrease in police numbers. I wonder whether the hon. Gentleman or any occupants of the Opposition Front Bench would describe what the total numbers of police are now compared with the situation in 1997. In Conservative Members' boroughs and constituencies police numbers are rising now year on year.

One small point: would the hon. Gentleman rather see jobs advertised in The Daily Telegraph rather than The Guardian?

Photo of John Horam John Horam Conservative, Orpington

The Times is trying to get into the market now.

I would point out to the hon. Gentleman that if we add the 12 new officers to the total force in Bromley, it is still below police numbers in 1996. In addition, two of the three police stations in Orpington have been closed down. Extra police officers are welcome, but they will not make a significant difference to the numbers of policemen who we can afford to deploy on the beat. People want to know about that.

My right hon. Friend Mr. Letwin, the shadow Home Secretary, made the point extremely well in a recent statement. He said:

"Neighbourhood policing will also require a step change increase in the number of police officers available. The Government, after allowing the number of officers to fall during their first five years of office"— that is the point referred to by Mr. Challen

"have begun to address this situation. As at 31 March 2002, there were 129,603 police officers and the Government has a target of 132,500 officers by 2004. We believe that this increase, whilst welcome, is inadequate. If we are to take the matter of proper neighbourhood policing seriously, which we must if we are to tackle criminality and disorder, we need far more police officers than are currently being proposed by the Government. To implement the vision we must police our cities as intensively as the Americans police theirs"—

I have referred to the example of Boston—

"and provide true neighbourhood policing throughout Britain. We have calculated that this will require 40,000 new officers in England and Wales."

I wholly agree with the point made by my right hon. Friend. That is the quantum leap that we need if we are to make any difference that will be perceptible to ordinary people in terms of antisocial behaviour and crime. If, for example, we extrapolated my right hon. Friend's calculations to London, we would have 8,482 extra policemen. My constituency would get 140 extra officers and the borough of Bromley would get an additional 342.

Photo of John Horam John Horam Conservative, Orpington

I shall not give way because I have done so already.

If those police officers were added to those that we already have, Bromley would have 769 policemen compared with the current number of 427. We need such an increase to deal with problems of antisocial behaviour and to allow policemen to patrol the beat. The policemen could also be deployed more effectively.

Government Members and Ministers will ask how we would fund the increase. My right hon. Friend pointed out that such an increase of police numbers would cost approximately £1 billion a year. However, we have suggested introducing a policy of receiving a strict quota of asylum seekers and genuine refugees—my right hon. Friend suggested 20,000 a year. We currently receive 12,000 real refugees a year, as part of a total of 110,000 illegal immigrants. We could make huge savings through all the apparatus and bureaucracy of the current system, such as in the immigration and nationality directorate. I was astonished that while we spent £300 million on immigration and nationality bureaucracy in 1994, we now spend £1.8 billion a year. If we accepted my right hon. Friend's suggestion, we could reduce spending on the asylum problem to £134 million a year, thus saving about £1.6 billion a year. That money could contribute to the £1 billion that would be needed to employ more policemen.

Obviously, that would not happen overnight and transitional costs would be incurred. Everyone knows that it could happen only over several years. However, such a change of policy would make a significant difference to the problem of immigration, about which many people are rightly concerned, and would help to deal with antisocial behaviour and crime effectively.

I believe, as do all hon. Members, that we could and should have more effective public services. We are devoting the money that could achieve that, but the problem is that the Government do not have a clue how to spend it effectively.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central 1:17 pm, 11th April 2003

The hon. Members for Sevenoaks (Mr. Fallon) and for East Devon (Mr. Swire), neither of whom are in the Chamber, said that the growth targets were over-optimistic, but, if anything, I think that they are cautious. Anyone who studies these things will know that the world oil price has fallen by a third in the past month from just under $40 a barrel to $28 a barrel, and it is on the way to $20 a barrel. That is not only because production in Iraq is likely to come on stream, but because about 28 million barrels of oil are produced a day when only 25 million barrels should be produced for current demand levels. Unless the meeting of the Organisation of Petroleum Exporting Countries on 24 April agrees to reduce production, there may be a major crash with oil prices coming down to as little as $10 a barrel.

There are several reasons why it might be difficult to reduce production. The Saudis want to maintain their production levels, although production has increased from about 8 million barrels a day in December to about 9.5 million barrels a day now. Saudi Arabia wants higher production to help to pay its people, who earn only about $7,000 a year each. Iran—and Nigeria and Venezuela, in which the strikes have ended—want to produce more oil, so there is reason to believe that the world price of oil will continue to decrease, which will speed up growth in the world economy. Consequently, I am comfortable with the growth targets announced by the Chancellor and I think that we will be pleasantly surprised by what happens.

Sir Michael Spicer mentioned the prospects for Europe. It is worth remembering, as the Chancellor did, that the overall package of growth, employment, interest rates and inflation rates is healthier in Britain than in the rest of Europe. We easily satisfy the stability pact criteria, which require borrowing to be less than 3 per cent. As I said in an intervention on the hon. Member for West Worcestershire, the problem with the pact is that Germany is not fulfilling the criteria and France is likely to ignore them. Our debt is so low because of our good stewardship of the economy, so if we broke the pact it would not really matter. The Europeans would be better off if they adopted our excellent models and the rules that the Chancellor follows, especially his golden rules. Let us consider the symmetrical inflation targets that the Chancellor introduced for the Bank of England. They are 2.5 per cent. inflation plus or minus 1 per cent.; in other words, we reflate if inflation is too low. However, the European Central Bank has a ceiling and no floor, which makes it inherently deflationary. That is another reason for our much better growth rates and perhaps for other nations to adopt our rules.

Finally, the European Central Bank's minutes are not transparent, whereas the Bank of England's are. That generates more confidence in the marketplace.

Photo of Eric Pickles Eric Pickles Shadow Secretary of State for Communities and Local Government

That was an interesting analysis. Is that the reason for his council's reduction of £500,000 in the money for children's services, old persons, the physically disabled and learning disability services?

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

That is completely irrelevant to the global situation. However, as the hon. Gentleman has made that irrelevant point, let me explain the reality. In Croydon, we are spending an extra £10 million on social services—an increase of 12.5 per cent.—and investing more in them and in environmental services. As well as making an irrelevant point, the hon. Gentleman is wrong and I shall obviously not give way to him again.

I welcomed the Chancellor's comments about trying to encourage people to take on fixed-rate mortgages so that there is less of a problem with the different interest rates that are needed for manufacturing and exchange rates and for the tackling the difficulties of the housing market.

Let us consider full employment. It is worth making the point that London simply cannot afford to increase the number of public servants due to an inadequate London weighting. The extra cost of employing someone in the private sector in London is between 30 and 40 per cent. The public sector has not kept up. That means that we do not retain and recruit enough public servants in London whereas the opposite problem exists in the regions, where the private sector cannot invest because the public sector prices it out. The Government must consider that carefully.

Professor Oswald of Warwick university and Professor Elliott of Aberdeen university prepared a couple of reports, which suggested that London weighting should be reviewed and uplifted. Many people who live in London experience problems through the need for more investment in transport, schools and the health service. Many journalists who live in London report that difficulties in London are replicated throughout the country. However, the experience of most people who live outside London is that schools and hospitals are improving and that things are going well. I hope that the Government will examine the differences carefully.

Some hon. Members have referred to local government settlements. I have sympathy with some of the comments. In London, the area cost adjustment between east and west is too great. Some boroughs might get 4 per cent. and others 8 per cent. Those issues are academic to some extent, but the bottom line is that we need enough funding.

Since 1997, Government money for Croydon has increased by approximately a third. We have therefore been able to employ many more teachers and teaching assistants. However, as has been said, we face difficulties this year and I hope that the position will significantly improve next year.

It is worth mentioning that a teacher in outer London gets £2,043 more than someone who does not live in London and that a new teacher gets 11 per cent. more. For a teacher who goes up to the middle ranks, that differential is about 7 per cent., and when she or he becomes a deputy head or a head teacher, it is about 4 per cent. I believe that the extra money given to teachers should not be a cash amount but a percentage amount, and that it should be more than this.

The reality is that we are recruiting young teachers from countries such as South Africa and Australia who stay for a couple of years, then go off into the regions, where they can get the same pay but a much higher real income, because they can afford to have a bigger house and to look after a bigger family. So we are recruiting people but they then leave. This raises two issues. One is the overall size of the London weighting; the second is the fact that it should be calculated on a percentage basis rather than a cash basis. I hope that the Government will look at that; the Chancellor referred to regional economies in his speech. The 40 per cent. pay claim by the firefighters seems ridiculous, but it is not so ridiculous in London. Public sector pay demands are being fuelled by the militancy of the unions based in London, because their members face such enormous costs. If such demands spread across the whole economy, it will pose a real threat to the macro-economic stability on which the Government rest.

I welcome the Chancellor's statement, both in terms of giving people in London a fair deal and of enabling the private sector to invest more readily in our regional economies with a view to achieving full employment. I realise that these are sensitive and difficult issues, but I expect the Government to grasp the nettle and to ensure that we achieve economic growth alongside making investment in public services in a more even way across the country.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs) 1:26 pm, 11th April 2003

As with all other public services, the Government have failed in this Budget to take stock of what really needs to be done to reform and improve the public sector. Unfortunately, they have instead inflicted a twofold punishment on taxpayers and workers alike, punishing staff with cumbersome, unnecessary and distracting targets, and punishing the taxpayer with ever-increasing demands for cash to burn.

I shall start with local government and conclude with education. This year, we are to witness the most phenomenal council tax increases imaginable. In this year's Budget, the Chancellor has yet again excelled himself in his ability to tax ordinary hard-working people into the ground. The Government are quite simply robbing hard-earned savings from middle England, and snatching money from well-run councils to give to their cronies on badly run councils. The recent report by the Audit Commission proved that higher taxes and higher spending do not make for better councils. Conservative councils with lower taxes and lower spending were deemed better run and more popular than their Labour and Liberal Democrat counterparts.

The Chancellor has ignored the implications of this extremely revealing report, however, and his obsession with spending is going to present the average family with a four-figure council tax bill this year. It will reach more than £1,000 in band D for the first time. This Government are effectively indulging in a policy of blackmail. They have rigged local funding, forcing councils either to ramp up council tax or to cut local public services. In my opinion, this is the ultimate stealth tax—engineered by the Government, but with local councillors taking the blame.

The Government do not stop there. Even more changes are planned to rig funding yet further, via a new system of grant distribution, new council tax bands and council tax revaluation. Taxpayers will witness their council tax bills soaring above the rate of inflation yet again, and hard-working families, particularly those on middle incomes, will be the hardest hit. It is perhaps worth mentioning that since 1997, average council tax bills have increased by more than 60 per cent., which is the equivalent of a 2 per cent. rise in income tax.

Yet again we see the Chancellor operating by stealth. Detailed figures in the pre-Budget report indicate that he plans to increase revenue from council tax by £3 billion more than he admitted in his 2002 Budget. While the last pre-Budget report declared that council tax revenues would be £16.6 billion for 2002–03 and £17.8 billion for 2003–04, the 2002 Budget had said that council tax revenues would be £14.9 billion and £16.1 billion respectively. It seems that this Chancellor simply cannot get his sums right. Indeed, while his estimate of £16.6 billion for 2002–03 was confirmed in Wednesday's Budget, the estimate for 2003–04 council tax receipts was increased further to £18.6 billion—a £2 billion rise on the 2002–03 estimate. I wonder by just how much those figures will rise again when the Chancellor makes his pre-Budget report in six months.

This year's dramatic council tax rise is the highest since it replaced the poll tax in 1993, and this is the sixth year in a row that it has risen by more than three times inflation. I look forward earnestly to the local council elections on 1 May, when I believe that the ordinary, hard-working people of this country, who are simply fed up with stealth taxes, will rebut Government policy through their ballot papers.

On Wednesday, the Budget revealed another important factor that will have dire consequences for ordinary, hard-working people—in this example, the youngest. Stamp duty hits hardest at the low end of the age spectrum, particularly according to the Council of Mortgage Lenders, whose spokesman said:

"House prices have more than doubled in the last decade but the threshold for stamp duty has remained unchanged at £60,000. This places a disproportionately heavy burden on first-time buyers because they tend to buy cheaper properties and might expect to be exempt to a higher level than £60,000."

In reality, stamp duty has been turned into yet another stealth tax. Stamp duty thresholds have not increased with the rise in property prices, so more and more people who were exempt now have to pay it. Indeed, since Labour came to power in 1997, stamp duty has increased by £5.4 billion. The Government's stamp duty increases have consequently made it a lot harder to get on the property ladder and have also hammered hard-working young couples, as well as families, with more massive tax bills.

Julie Westby, president of the National Association of Estate Agents, commented:

"The idea that the Chancellor has been benign in freezing stamp duty on house sales is nonsense. The last time you could find a property for £60,000 was in mid 2002 in Yorkshire and Humberside according to the Nationwide Building Society. Currently the average UK house price is £120,000 and hasn't been £60,000 since the middle of 1997."

In other words, the stamp duty freeze is really a tax rise that will affect many first-time buyers who will find themselves immediately having to pay tax on their property for the first time.

Photo of Albert Owen Albert Owen Labour, Ynys Môn

The hon. Gentleman talks about first-time buyers, but does he not acknowledge that the low mortgage interest rate is helping them? I recall that some 20 years ago, when I purchased my first property, I was paying either 14 or 16 per cent., depending on what month it was.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I am extremely grateful to the hon. Gentleman, who represents Anglesey, or Ynys Môn, as I should say in the spirit of bilingualism. It is a pleasure to have him intervene, because it is particularly important to recognise that if the Government want credit for low interest rates, they should stop trying to take credit for making the Bank of England independent. They cannot have it both ways: either make the bank independent and live with the results or take credit for the low interest rates. This Government would always want to have it both ways. Indeed, the very purpose of my speech is to show that they cannot have it both ways. They have tried that on council tax. They have been stealth taxing and, once again, trying to blame the councils. That applies to council tax, stamp duty and interest rates.

I must make a little progress. This year's Budget reads exactly the same as the old Labour story: more tax and yet less delivery. Is there no end in sight to this reckless Chancellor's desire to tax British business and the British taxpayer into the ground? After six years of a Labour Government, we have witnessed 53 tax rises, an increase in tax revenue of 50 per cent. in real terms, a dramatic increase in borrowing and the equivalent of an extra £44 a week in tax for every man, woman and child in the United Kingdom compared with the situation under the Conservative Government.

Perhaps the most astonishing figure of all is that showing that the cost to the nation for employing this Government has risen from the equivalent of £11,000 a year in tax terms to £16,500 a year per household—a £5,500 increase. That from a party whose leader pledged in 1995:

"We've no plans to increase tax at all".

That is yet another broken promise to the British people.

On Wednesday, the Chancellor spoke of building a Britain based on "economic strength". We see those words written everywhere: in every dossier, report, press release and bit of paperwork with which the Chancellor has felt it necessary to complement the Budget. I wonder how he intends to create such a strong economic base for a country whose business leaders feel that, as a result of this Government's fiscal policies, they have never been in a worse position in their lives.

Regulation and red tape for business continue unabated, driving the British spirit of enterprise further and further into the ground. The CBI, the Institute of Directors and The Economist have all criticised the Chancellor's tax-and-spend policies. The CBI estimates that the total cost to business of tax and red tape since 1997 could be up to £15 billion a year. On average, 15 new regulations have been introduced every working day, and that, combined with excessive fiscal policies such as the hike in national insurance, has meant almost a halving of productivity growth.

Less than two weeks ago, one of our most informed and respected business leaders, Digby Jones, said:

"The UK's reputation as the place to do business has never been under greater threat."

With a Chancellor who continues to inflict irreparable damage on the British economy, the threat would seem to become even larger.

The 2003 Budget confirms that this Government are both reckless and irresponsible when it comes to spending. The cost of running Government bureaucracy, the inevitable partner of such massive taxation, will reach £18 billion this year—£4.5 billion more than the cost when the Government came to power in 1997. Not only is the British taxpayer's money being thrown mercilessly at futile attempts to improve public services; it is being used to fund the nuts and bolts of a Government machine that continues to swindle and cheat the people of this country.

Photo of David Wright David Wright Labour, Telford 1:36 pm, 11th April 2003

This morning's debate has been very interesting. A number of Opposition speakers have demanded more spending in their constituencies, while also looking for tax reductions. They seem to be pursuing a "Don't breathe, stay alive" strategy. I shall say more about that shortly.

Many people tell me nowadays that there is very little difference between the two main political parties—that their agendas are fairly similar. The Budget debate, however, shows that the divide has never been greater. The difference between the two parties is indeed stark: a party of investment on this side, and a party of cuts on the other.

I thought we would take a bit of a canter down memory lane. Under the Conservatives, Britain was not well placed to withstand a global economic downturn. It was the first to experience difficulties and the last to emerge from recession, and it suffered deeper recessions than most countries. Let us remember the Conservatives' record in office. During their tenure, Britain suffered two of the deepest and longest recessions since the second world war. Unemployment rose to 3 million, and areas such as the west midlands—which contains my constituency—experienced a decimation of manufacturing and engineering industry. Inflation rose to nearly 10 per cent. Interest rates hit 15 per cent. for a whole year, and were in double figures for three years in the late 1980s and early 1990s. Negative equity was suffered by 1.5 million home owners.

Families, home owners, businesses and public services paid the price of the Tories' economic mismanagement as investment was cut. The costs of unemployment and benefit soared, and debt and interest rates paid for failure rather than investment in success.

The Tories' record since 1997 has been no better. Most of their responses to the Government's proposals, including Budgets, have opposed all that we have done to achieve long-term economic stability. They opposed Bank of England independence, and opposed our tough fiscal rules. They opposed the new deal, and continue to do so. They oppose the national minimum wage, and the tax credit system which helps people into work and makes work pay. Their record on trying to achieve growth in the economy and to support working people and working families is abysmal. They have opposed every spending review announcing investment in public services, including investment in the NHS through rises in national insurance. The rise in national insurance about which we have heard so much in recent days is purely to fund the national health service. The wealth of our nation depends on the health of our nation. It is important that all of us—individuals and business alike—contribute to ensuring that we have a successful and healthy work force.

Health care costs are rising around the world. In the United States, the average cost of health care cover rose by 13 per cent. last year. Mr. Fallon talked about the successes of the US economy. One of the things that the US does not have, of course, is a national health service. If we were to move to a system where we relied on insurance to cover the costs of health care, costs for individuals and working families in this country would go through the roof. Those are the most dangerous proposals emanating from the Opposition.

We have heard this morning that we can find new investment through reducing waste and bureaucracy. Frankly, that is ridiculous. The question confronting the modern Conservative party is this: does it want extra doctors, extra nurses, new hospitals, new schools and more operations carried out in our hospitals? The Conservatives are proposing a 20 per cent. cut in public spending. They refused point blank to rule it out. I can say that with some—

Photo of David Wright David Wright Labour, Telford

Not at the moment. [Hon. Members: "Ah."] The reason why I will not is that I can say that with some confidence. I was reading The Sunday Times[Interruption.] I cannot say that it is a Labour paper, but I remember reading it on 23 December with a bit of a headache because it is the day after my birthday. In an interview, the Leader of the Opposition said:

"There are two things I didn't get any credit for. One, we voted against the national insurance changes in the budget, and two, I explicitly on three separate occasions when asked said we will not match government spending plans."

On 28 December, the shadow Chief Secretary to the Treasury told The Daily Telegraph:

"I am digging through current spending, finding opportunities for cuts. It's too early to say how much but it could be up to 20 per cent."

Two days later, on the "The World at One", the Leader of the Opposition endorsed those commitments, saying that those cuts would be made "across the board", including

"in extra staff that don't deliver in the NHS and also costs and wasted consultants . . . he's looking at all of that area"—

"he" being the shadow Chief Secretary. So the cat is out of the bag. The agenda is there.

A 20 per cent. cut in the NHS budget would mean a cut of £13.6 billion, an enormous reduction in investment in health care across this country that will have an impact in every constituency. When the Tories talk of "reform" in public services, they mean cuts, charges and privatisation. They offer no economic policy except public spending cuts and a return to economic failure.

I turn to the Budget that the Chancellor has so ably announced. We must look at the choice between investments and cuts. I want to focus on two key features: pensioners and families. The introduction of the pension credit has been a massive boost for pensioners. Their incomes will rise dramatically. I was pleased to hear the Chancellor announce a £100 addition to the winter fuel payment for those aged over 80—another boost for people. Of course, the Conservatives have opposed the winter fuel payment root and branch over the years. It is an excellent strategy that we have pursued in government and an additional boost to the oldest people in our country. There is also the 52-week pension allowance for those in hospital. The Opposition can mock that as a minor issue but many people have come to my constituency advice surgeries and requested that change, which is positive.

Over the years, many people in the pension community have asked us to link pensions to earnings. By 2004–05, our Government will be spending £9.2 billion extra in real terms on pensioners, including more than £4 billion on the poorest third of pensioners. That is five and a half times more than an earnings link since 1998 would have given them. As a result of our tax and benefit reforms, pensioner households will, on average, be more than £1,250 a year better off in real terms, and the poorest third of pensioners will have gained more than £1,600 a year in real terms since 1997.

On families, I particularly welcome the children's trust fund, which my hon. Friend Mr. Challen mentioned. I hope that he is right, and that we will consult on how to commit that resource and establish what it will be spent on when people mature and reach the age of 18. I hope that we can target it on investment in education, skills and training, which would be an excellent legacy. Many people underestimate the importance of this policy. Many of the poorest people have no record of, or family tradition of, saving, so this is an excellent and very welcome strategy for us to pursue.The tax credit regime in general is helping those most in need, and is fulfilling our historical principles as a labour movement.

Nobody comes to my surgery and says, "Let's invest less money in public services", or "Let's cut investment in hospitals and schools." Everyone wants to boost investment, and I am proud that we are delivering that. The 2002 spending review set out the Government's plan for an extra £61 billion in spending on public services by 2005–06. More than 75 per cent. of additional spending will be directed at our key priorities of health, education, transport, housing and the fight against crime. This Budget describes how the extra national insurance contributions announced last year—they will be paid from this month—will fund a better NHS. UK spending on health will rise by 7.2 per cent. a year in real terms up to 2007–08, putting the NHS on a sound long-term financial footing. There will be significant increases in investment in IT, buildings and equipment, including the largest hospital building programme for many years. Reforms will ensure that the NHS delivers quality services, with a new independent regulator to inspect and report on NHS performance.

These figures are not simply national figures. Millions of pounds of additional investment has been put into the Princess Royal hospital, in Telford, and the primary care trust structure is now finding its feet. Investment proposals for the next few years for the Telford and Wrekin primary care group suggest funding increases of more than 30 per cent. in local health care expenditure.

The choices and the divide are stark: investment or cuts, Labour or Conservative. I am very proud of this Budget. The Chancellor commended it to the House, and on behalf of the people of Telford, I do the same.

Photo of Desmond Swayne Desmond Swayne Opposition Whip (Commons) 1:47 pm, 11th April 2003

The sketch writer for the Daily Mail characterised my gait during the Chancellor's speech as being so rigid as to resemble that of someone who had recently been rescued from a vat of starch. I have seldom been criticised for sitting up straight; my mother normally criticises me for slouching. The explanation for my peculiar gait—the reason why I was sitting so rigidly upright—is that I was making a desperate attempt to remain awake. The Chancellor spoke for an hour or thereabouts, but he did not take us through the important detail in the Red Book. He spent his time discoursing on what might reasonably have been released as a series of what we used to call planted questions, but which now go by another name.

One matter of substance that the Chancellor did dwell on, and which is generally true, is how well placed we are compared with our European partners in terms of any downturn. In many respects, he is right. We are much better off than France and Germany, in that they are over-taxed and over-regulated. However, the difficulty with which the Chancellor must wrestle is that by degrees, he is making our economy more, rather than less, like theirs. So as we proceed, we will be less advantaged.

I shall now dwell on some of the detail in the Red Book that the Chancellor avoided. It stretches credulity to the limit to believe that the Chancellor expects to be rescued next year by economic growth of some 3 per cent. I know of no independent analyst who takes such a forecast seriously. That will mean an increasingly big hole, and being rescued by growth is a diminishing prospect. If we examine the economy, we see that it is the unproductive, wealth-consuming sector that is growing. All the advertisements of vacancies in the newspapers are, by and large, in the public sector. As economic growth proceeds, the generation of tax receipts will not grow with it as it has in the past, because the entire economy is skewed by public sector growth, perhaps at the expense of the private sector. Certainly in my part of the world—the south—retail is already in recession. We have known for some time that manufacturing has been in recession, so I do not accept the recipe that growth will rescue us.

Photo of Hugo Swire Hugo Swire Conservative, East Devon

Does my hon. Friend agree that one of the main engines of the economy is our small business sector? One of the most dangerous problems facing that sector comes from the rise in national insurance contributions, which threatens to prevent them from taking on more people, in turn stifling their ability to grow as companies.

Photo of Desmond Swayne Desmond Swayne Opposition Whip (Commons)

I entirely accept that. It is even true of the wealth-consuming sector, which is also burdened by national insurance contributions. My hon. Friend is right that it places a large burden on small businesses. However, the biggest complaint that small business men bring to me is about the burgeoning regulation to which they are subjected. They view that as an even greater impediment to their prospects for growth.

Even if we accept the Chancellor's optimistic forecast for growth, what will happen to the tax burden? It is laid out for us. My hon. Friend Sir Michael Spicer drew our attention to chart C3 on page 261 of the Red Book, which shows the tax-GDP ratio from 1978–79 on to 2007–08—and the tax burden will rise and rise, despite the Chancellor's optimistic growth forecasts. What will happen if those optimistic forecasts prove wrong?

My constituents' difficulty is that they have paid their taxes and are now waiting for delivery. They want to know what has happened to their money. Expenditure on the health service has risen by a fifth in real terms, and I could not find anyone on the streets of New Milton who would oppose spending that money on the health service. The legitimate question for my constituents is why none of it is being spent in south-west Hampshire. That is their perception. Of course it is being spent there, but it is not providing any measurable benefit in output. We have spent all this money on the health service, but where has it gone? What benefits has it delivered? Hospital admissions fell by 0.5 per cent., despite a 20 per cent. real increase in spending.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

Spending has increased by at least 20 per cent., so how many extra operations and surgical procedures have taken place and how much more activity has the extra spending on the health service provided? Is it about 1.6 per cent?

Photo of Desmond Swayne Desmond Swayne Opposition Whip (Commons)

I am not an expert on these matters, but the measure of which I am aware is that hospital admissions have fallen by 0.5 per cent. Some might say that that is good, because it means people are getting healthier, but given the length of waiting lists that is a thoroughly implausible argument. David Wright should be careful before demonstrating his assent to such a ridiculous proposition. Nevertheless, my hon. Friend is right—there has been a fall of about 1.6 per cent. in completed consultant episodes. That is probably the best measure of activity.

Photo of Albert Owen Albert Owen Labour, Ynys Môn

Does the hon. Gentleman accept that it takes many years to train a doctor, a nurse or a consultant, and that after many years of under-investment in the health services, that process takes time to trickle through? In my area, waiting lists are falling because more doctors and nurses are now coming through the system.

Photo of Desmond Swayne Desmond Swayne Opposition Whip (Commons)

Because of the long lead time to which the hon. Gentleman draws attention, those doctors and nurses all began their training under the Conservative Administration. What has happened under this Government—the investment of which he speaks—is that the number of beds in the health service has fallen by 14,000 while the administrative estate has increased by something in the region of 28,000 jobs. That is where the money has gone. What has happened to the greatest bonanza for public expenditure in a generation—the product of 10 years of economic growth? Where has it gone? Anyone who wants to know should buy The Guardian and look through the jobs pages, where they will see page after page of advertisements by primary care trusts all over the country for jobs in gender management, equal opportunities and so forth, not one of which will be of any benefit to patient care. That is where the bonanza has gone—that is the waste that we want cut.

I turn finally to the tax increase that is most on the minds of constituents, and on which I have acquired an enormous correspondence. Many people write to me to complain about the increase in their council tax, because that is one tax that they perceive to be thoroughly unfair. I am somewhat reluctant to write back to say that my own council tax has leapt by £300, because they would justifiably point out to me that I am in a position to pay it, as indeed I am. The letters that I get are overwhelmingly from pensioners with no other source of income, who are faced with increased bills. There is no doubt in my mind as to why this has happened. Indeed, the Minister for Local Government and the Regions clearly spelled it out at questions to the Office of the Deputy Prime Minister last Wednesday, when, in responding to a question about capping from my hon. Friend Mr. Pickles, he rested his papers on the Dispatch Box, stepped back, and said, "This is about Conservative councils costing you more." The look of satisfaction on his face gave the game away, because for generations it has been a truism that Conservative councils cost less.

Photo of Desmond Swayne Desmond Swayne Opposition Whip (Commons)

Indeed, they still do. Capping was the Government's attempt to rig the system for public funding of local government in order to wrest that trophy from the Conservative party. They wanted to skew local government funding for the nation to capture that prize, which has always grated on Labour Members. So the southern counties, particularly the shire counties, are to be blighted by having this enormous tax levied on them. My county, Hampshire, is losing £45 million this year. That cannot be made up by cuts—in answer to the hon. Member for Telford and his fixation with a Conservative agenda of cuts. If Conservatives in Hampshire were interested in cutting, we would not have passed on such an exorbitant increase of some 16 per cent. to our council taxpayers: we would have made the cuts, which the hon. Gentleman would relish. However, Hampshire county council—which is excellent, and, as the Audit Commission has pointed out, well managed and controlled—uses council taxes to provide services for the vulnerable and the elderly, and to provide education for the young. We do that very well and there is no scope for cuts. That is why an enormous burden is now falling on the people of Hampshire—especially on the preponderance of old people who live there, who are the least able to pay. Let the blame for that lie precisely where it should—with the Treasury Bench.

Photo of Eric Pickles Eric Pickles Shadow Secretary of State for Communities and Local Government 2:00 pm, 11th April 2003

It is always a pleasure to follow my hon. Friend Mr. Swayne. He spoke with great passion about the twisting nature and the fiddled figures of the new settlement. I am sure that I can start on a point on which there will be consensus. When the history of this Parliament is written, there will be a substantial section on my hon. Friend's magnificent display of knowledge. When offered a multiple choice question by my hon. Friend Mr. Wiggin, he came up with the correct answer—that there has been a pitiful increase in operations—without a single cough from the public gallery.

During the past couple of days, a set of themes has emerged for this Budget. The Budget has more pilots than British Airways, more repeats than UK Gold, and more optimism than Saddam's communications Minister. It is amazing how quickly confidence in the Chancellor has dissipated. He has gone from iron Chancellor to paper tiger in a matter of moments. Reality bites. Over the past few days, we have heard about the effects of the Chancellor's stealth taxes on individuals, about the increase in national insurance, and about the massive and unprecedented increases in council tax. There have been 60 tax increases by this Government since 1997—an extra £26 billion. From April, a typical couple on average full-time earnings will be £568 a year worse off because of this Labour Government and because of tax hikes and Gordon Brown's triple tax whammy—income tax allowances have been frozen, national insurance has risen, and the national insurance threshold has been frozen.

We have heard a number of distinguished contributions in this debate. My hon. Friend Sir Michael Spicer gave a distinguished speech on the Chancellor's methodology and his inability to make a proper forecast. My hon. Friend Mr. Fallon built on that. My hon. Friend Mr. Swire talked about the Chancellor gambling on growth, and my right hon. Friend Virginia Bottomley talked with considerable knowledge about the plight of pensioners, about pension funds and about poverty in rural areas. One of the nastiest things in the new methodology is that the rural poor are not counted in the figures. If one is a poor person in a county area, one is forgotten by this Government.

My hon. Friend Mr. Horam showed his considerable skills as a diligent constituency Member by being able to get an extra 12 police officers for his constituency. He also demonstrated that, as this Government try to creep up to the levels of policing that they inherited, they have found that the Conservative party has moved the goalposts with the promise of an extra 40,000 officers.

Various hon. Members on the Labour Benches disputed with each other about the benefits of British entry into the euro. At times, it seemed that they were trying to defend cuts in their own constituencies. A special mention must be given to Mr. Willis, and it is wonderful to see him back in his place. In a matter of hours, he managed to contradict his party's spokesman on the benefits of the new system. We have become accustomed to hearing the Liberals contradict themselves street by street, but we tend to expect consistency within the Chamber.

Local authorities account for a quarter of public expenditure, so it is hardly surprising that they should be used in the Government's main and favourite money-raising method: stealth. Council tax is a stealth tax. Since 1997, the amount raised through council tax has increased by £8 billion. As my hon. Friend the Member for Leominster said, that is equivalent to a 3 per cent. increase in the basic rate of income tax.

Councils face problems because of the burdens placed on them by the Government. Local authorities in Great Britain are the most regulated in the world; they are more centralised than anything this side of the Ural mountains. The Government have introduced best value, comprehensive performance assessments and a whole raft of statutory plans. There has been an increase in ring-fencing. Every year brings increased responsibilities for local authorities without adequate funding from central Government. For example, the 1 per cent. increase in national insurance will cost local authorities an additional £280 million—roughly equivalent to an 8 per cent. rise in formula grant.

Today and yesterday, we have heard much criticism of the burdens placed on business by the Government. Those burdens are oppressive, stifling, overwhelming and unnecessary, but they are as nothing compared with the burdens on local authorities. Best value is probably the worst titled Government initiative of all time. It has become a bureaucratic, complex and costly system, which has a significant impact on councils in terms of budgetary resources and allocation of staff time. I shall give the House some examples.

Suffolk Coastal district council added £100,000 to its budget to implement best value, as well as employing an additional officer, at a cost of £15,000, to work full-time on the scheme. None of that money was used for front-line services. Bracknell Forest borough council allocated £120,000 for additional best-value audit work—the equivalent of £3 for every household in the borough. Again, that was money diverted from front-line services.

The local government information unit estimated that, overall, comprehensive performance assessment costs local authorities £1 billion. None of that money contributes to better services; it neither increases local accountability, improves the reputation of local government, helps people to engage with their local council or encourages more people to stand as councillors. The cost of the CPA would fund 52,206 new teachers or 63,678 places for elderly people in residential homes.

To put it another way: merely to fund the Government's form-filling, local government has to purchase the equivalent of two Jaguar cars every 22 minutes. It can truly be said that for local government the cost of two Jags is a cost too far.

There has been a huge increase in the number of statutory plans that the Government require local authorities to produce. Such plans consume officer time and have serious cost implications. Currently, there are 66 required plans. They range from mineral plans, improving information technology, local teenage pregnancy strategies, whole systems capability plans, pipeline safety plans, annual library plans, local cultural strategies and food enforcement plans. The Government want to control everything, yet they can manage nothing. They immerse themselves in the minutiae of each plan but fail to see the bigger picture. They fail to realise that they cannot second-guess local conditions from Whitehall. The Government do not have the capability or expertise to absorb or disseminate these plans.

Let me give one example. I recently talked to officers in a county council who had to provide two statutory plans. An enormous process was required to put them together, involving a lot of officer time, and they were sent off. Two months later, they realised that by mistake they had put the frontispiece on the wrong document. They waited, months passed, nobody rang, nobody said there was a mistake and nobody asked what was going on. Even now, nobody knows about it, as I have checked. The Government are collecting statutory plans that they do not read, that they do nothing with and that just gather dust on the official shelves.

My hon. Friend Mr. Green talked about the promise of last year and the reality of this year. He talked about the effects of national insurance contributions, pensions and pay increases in education. The Local Government Association has estimated that schools will have to find an extra £635 million to fund teachers' pensions, an extra £115 million to fund the 1 per cent. increase in national insurance contributions, and an extra £445 million for teacher pay increases ordered by the Government. That is a total of £1.195 billion. The Government claim to have increased local authority funding for schools by £1.4 billion, but more than half a billion of that is a result of simple double accounting, to which we have become accustomed: £513 million is a simple transfer from the standards fund in the school budget, meaning that in reality schools are left with a shortfall. With this Government, it always pays to read the small print.

What does that mean on the ground? Let us look at the constituency of the Secretary of State for Educations and Skills. As one first school head teacher, who does not want to be named, as she has not yet broken the news of possible redundancies to her staff, and has not slept since she has seen the figures—I think that she is breaking the news today—said:

"The situation really is not good . . . there just isn't enough money there. We're going to have to cut classroom support hours by half and this will definitely mean redundancies . . . I don't want to lose any of them. They do a fantastic job. We're also going to have to withdraw our subsidy for special needs so pupils with individual support will get the bare minimum hours."

In Labour-controlled Northumberland, Councillor Jim Wright, who is the Labour executive member for children's services, has said:

"The issue is that we were not adequately funded by government. There was not enough extra cash to compensate for the increases in costs for superannuation, pensions, insurance and the loss of the standards funds."

What we see in education is mirrored in social services. Social services will be the next big story in local government, because it is underfunded and has traditionally used a lot from this year's budget to fund last year's budget, and those times are rapidly coming to an end. We know from our colleagues in local authorities that, for example, in Hampshire, if services were funded at the level suggested by the Government, two day centres and two children's homes would have to be closed, and in Surrey, up to 10 per cent. of residential beds would be lost, three residential care homes would be closed, and all preventive measures in social care would have to go.

During the Conservative years, we enjoyed growth and prosperity, but now we have an economy that is browned-off and stumbling. There have been comments that, because of events in the Gulf, the Budget has not received the amount of coverage that we would see normally. It is certainly my view—I suspect it may be that of right hon. and hon. Friends—that the Budget got exactly the amount of coverage it deserved. This was the mouse that did not roar. It should be seen as what it truly is; the penultimate hurrah of a discredited Chancellor.

Photo of John Healey John Healey The Economic Secretary to the Treasury 2:15 pm, 11th April 2003

We have had an excellent and wide-ranging debate, and I have counted 21 contributions before mine. The tone was set by my right hon. Friend the Secretary of State for Education and Skills, who set out the significant philosophy underpinning the Government's and his Department's approach to education and skills. He stressed the crucial importance of skills at every stage of life, starting with schools and stretching through life to encourage lifelong learning. He rightly said that skills were central to the long-term economic performance and prosperity of this country.

Mr. Green underlined the scale of the challenge that we face on skills. He got his figures a little confused, but reminded us that 7 million adults in this country are without basic literacy and numeracy skills; half of those are in the work force. My right hon. Friend the Chancellor said on Wednesday that 8 million people in the work force were without level 2 qualifications. That challenge is a direct result of the education system, over decades and under both parties, letting too many students down; people who have had to go through life with a legacy of poor skills.

I was glad to hear the judgment of the hon. Member for Ashford that Britain had a more flexible economy than others in Europe. I point out to Mr. Wiggin that that is what business leaders say as well. The director general of the CBI said,

"I would much rather be doing business in Britain than anywhere else in Europe. We are still the most successful economy in Europe."

We need to combine fairness with flexibility in our economy.

Mr. Willis recognised the efforts that my right hon. Friend the Secretary of State for Education and Skills is making to bring coherence to education and skills. The hon. Gentleman stressed the importance of that, but he will have to wait in particular for the skills strategy in June, as the Budget is not the means by which to try to do the comprehensive job that is needed. However, I and colleagues at the DFES are strong supporters of further education. Indeed, my right hon. Friend the Secretary of State had dinner with the executive council of the Association of Colleges, precisely to discuss the part that further education can play in the future skills strategy.

Hon. Members—including the hon. Members for Sevenoaks (Mr. Fallon) and for New Forest, West (Mr. Swayne) and my hon. Friend Geraint Davies—have commented on the Chancellor's forecasts as set out in the Red Book and the Budget speech. I have three answers to those who accuse the Chancellor of over-optimism. First, Treasury predictions for growth this year are in line with those of the European Commission and the majority of independent experts. Secondly, we have the economic stability and the recent track record that can give us some confidence. Unlike the United States, Germany and Japan, the British economy has been growing uninterrupted, free of recession, in every single quarter for six years.Thirdly, it is true and inevitable that risks remain, but with low inflation and low interest rates, with independent forecasters confirming the credibility of our new macro-economic framework and with a world economy—especially that of the United States—poised to make what we believe will be a steady recovery, we expect British growth overall to rise as the economy returns to trend.

Photo of Michael Fallon Michael Fallon Chair, Treasury Sub-Committee

Will he explain why, when the Chancellor is predicting growth of between 3 and 3.5 per cent. next year, the Bank of England's central projection is only 2.3 per cent.? Why is the Bank wrong?

Photo of John Healey John Healey The Economic Secretary to the Treasury

The hon. Gentleman is experienced enough to know that there will always be a range of forecasts. I remind him that, in 1999, the independent forecasters about whom he spoke so warmly vastly overestimated the impact of the Asian crisis; the outturn was that the Treasury forecasts were much closer to what really happened.

My hon. Friend Mr. Hopkins set out views on the PFI, the euro and pensions to which he has held steadfast for many years, but I hope that he will accept that the Government will not focus all our efforts to support pensioners on the basic state pension; we can do much more for the poorest pensioners in other ways.

My hon. Friend Mr. David focused his speech on employment opportunity and stressed why our welfare-to-work programme is so important, as well as why individual action, flexible to meet the needs of local economic circumstances, is also so important. That theme was picked up by my hon. Friend Albert Owen, who also endorsed the economic sense of considering relocating civil service jobs to the regions.

Sir Michael Spicer treated the House to his own assessment of the five economic tests, but I am afraid that he will have to wait a little longer for the Government's own assessment to be published.

Mr. Carmichael curiously started by declaring how little relevance his comments would have to the Budget debate. He then went to welcome, on my count, five specific measures, including the freeze in spirits duty, which is the longest sustained freeze for 50 years, declaring both a constituency and a strong personal interest in that policy.

My hon. Friend Jon Cruddas interestingly and vividly drew attention to the gap between the national description of public services, as often expressed in the media and certainly by the Opposition, and the local knowledge of the improvements in public services that hon. Members on both sides of the House know in their heart of hearts are taking place in our constituencies. My hon. Friend saw, as do all Labour Members, the Budget as a further staging post in the process of improving public services.

My hon. Friend Mr. Challen did much the same—he detailed the impact that the increases in education funding are having on his constituency, and he noted in passing that that impact has not been lost even on the Liberals.

My hon. Friend Mr. Joyce gave a passionate outline, from his experience, of the importance of higher education to the knowledge, talent and economic base of this country.

Virginia Bottomley spoke passionately about her local schools, university and those who lead them, but she went on to ridicule our approach to productivity. I was recently talking to one of the regional development agency chairmen—a successful business man in his own right—and he said of the Government's productivity policies, "You are giving us meat and two veg." [Interruption.] He was a northerner, as Mr. Pickles would recognise.

I recognise the fact that improving British productivity is a long-haul challenge for this country, and we still have further to go, as the hon. Member for Sevenoaks rightly pointed out in referring to the United States.

Photo of John Healey John Healey The Economic Secretary to the Treasury

If my hon. Friend will forgive me, I will not give way; I need to make progress to recognise all the contributions that hon. Members have made.

The most recent productivity figures show that, since 1995, Britain has eliminated the productivity gap with Japan and is closing the gap with France and Germany.

I was sorry to hear Mr. Swire give such a grudging reaction to the pension credit and the extension to one year of the period before any deduction is made to the pensions of those in hospital. Many Labour Members and many members of the public will take a different view.

In contrast, my hon. Friend Mr. Pond welcomed the extra £100 winter fuel payment for those aged over 80 and the fact that the Budget confirms the Government's commitment to continue to invest record levels in public services, and I will draw the attention of my right hon. Friend the Secretary of State for Education and Skills to the points that he made about the school in his constituency.

The comments on council tax and spending made by the hon. Member for Leominster sounded more like a speech from the hustings in a local council election, as did many of the points made by the hon. Member for Brentwood and Ongar. We are not underfunding councils from central Government. Funding has gone up 25 per cent. in real terms since 1997—in contrast to four years of cuts in the run-up to that election. The 5.9 per cent. increase in the general grant this year represents what the Government think the national taxpayer can contribute to local government, and every council is receiving an above-inflation increase for the first time.

The hon. Member for Sevenoaks asked an important and serious question about the Budget timetable. He is concerned about the scrutiny that can be given to the measures contained in the Budget. The hon. Gentleman will know that it was provisionally announced yesterday that Second Reading of the Finance Bill will take place on 6 May. I can assure the hon. Gentleman that Treasury Ministers will be working closely with business managers to ensure that the Bill receives proper scrutiny during its passage through the House.

I congratulate Mr. Horam on his contribution to increasing policing resources in Bromley. My hon. Friend the Member for Croydon, Central presented a persuasive analysis of recruitment and retention problems in London and the south-east. He made the case for more local flexibility in delivering balanced economic growth throughout all regions. I see no reason why we cannot include local pay focus and delegation within a national framework.

My hon. Friend David Wright welcomed the child trust fund, which he rightly recognised as a concept with plenty of scope to develop further.

As my right hon. Friend the Chancellor outlined in the Budget speech, this is no ordinary time. There is military conflict in Iraq; we have seen a sharp global downturn in the last couple of years, and there is continuing uncertainty and instability in the world economy. However, Britain entered this period of uncertainty from a position of relative strength. Since 1997, our monetary policy and the independent Bank of England, supported by fiscal policy and our two golden rules, have established consistently low inflation and, crucially, low inflation expectations. We have established long-term interest rates that are lower now than those in Germany, the euro area and America. Together with the new deal, employment is at a record high. A quarter of a million jobs have been created since the previous Budget and unemployment is now lower in the UK than in the euro area, Japan and America together, for the first time in 50 years.

Whereas in previous downturns the UK entered first, exited last and suffered more, in this downturn we expect growth this year to be between 2 and 2.5 per cent. That is double the growth in the euro area and Japan and about the same level as in America.

The Budget is a restatement of the Government's capacity and commitment to meet our international obligations, to maintain our increasing investment in developing public services and to move still further in support for business and the drive for full employment. The Budget sets out policies that combine enterprise with fairness, together with the economic dynamism that we have come to associate with the United States and the social cohesion that is more characteristic of continental Europe. There is not one at the expense of the other. Britain is advancing on both fronts at the same time. Hence the theme of the Budget speech of my right hon. Friend the Chancellor and the title of this year's Red Book, "Building a Britain of economic strength and social justice".

Our policies on enterprise, innovation and investment, and on the liberalisation of capital, product and labour markets are not brought at the price of fairness. They are underwritten by policies for achieving full employment and tackling child poverty through tax credits. We have introduced the child trust fund; we are developing the national minimum wage; and we are investing substantially in the national health service. Given the tough decisions that we took during our first term to freeze public spending, to set monetary policy on an independent footing and to cut the public debt, our policies are affordable, even on the cautious case, across the cycle and within our fiscal rules. In France, debt is 41 per cent. of GDP. In Germany it is 49 per cent. and in Japan it is 75 per cent. In Britain, debt this year and in future years will be between 32 and 34 per cent. of GDP. That is comfortably meeting our sustainable investment rule over the cycle in each and every year.

This is my right hon. Friend's seventh Budget. It is a Budget that was built on the basis of hard-won economic stability. The Budget builds further on the policies that are already in place from earlier Budgets for tackling inequality, encouraging enterprise, investing in our public services and boosting employment.

Debate adjourned.—[Jim Fitzpatrick.]

Debate to be resumed on Monday 14 April.