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We welcome the Government's decision to put education at the heart of this year's Budget debate. Education shapes the nature of our society, the future of our children and our nation's potential. It is essential that we as a people, and as a Parliament, get education policy right. All of us in this House will doubtless want to join in paying tribute to the teachers, professors, lecturers, dons, teaching assistants, support staff, governors and heads who work so hard and with such dedication throughout UK education. Generally, they do so for little reward compared with other professions, and often in very difficult circumstances and with far too little public recognition. We will come later to the aspects of education on which the parties differ, but we surely can, and should, put on the record with absolute unanimity our collective congratulations, praise and thanks for what our nation's education professionals achieve, and inspire others to achieve.
We Conservatives are happy to acknowledge that important progress has been made since 1997—just as was made in the preceding years. I shall turn in a moment to several aspects of what the Chancellor had to say in the Budget about education which we are very happy to welcome. But although progress has undoubtedly been made in some elements of education in recent years, sadly, other elements have been going backwards. The National Association of Schoolmasters Union of Women Teachers says that there is an attack on a teacher every seven minutes in our schools. Truancy rose by 22 per cent. in the five years after 1997. Seventy-nine special schools have been closed, yet such schools often offer the very best education for the most disadvantaged children. The Government missed their 2002 targets for English and maths attainment at key stage 2, and they delayed their 2004 targets by two years. Now, they call them simply "aspirations". Teacher vacancies in secondary schools have risen by 282 per cent., while experienced teachers continue to leave the profession because of complaints about work load, targets and poor pupil behaviour.
Regrettably but clearly, things have got worse in all these areas since 1997, but let us consider another critical area: skills, productivity and vocational education, which is essential territory in any consideration of budgetary and educational issues. It is common ground between the parties that the UK lags behind our competitors in vocational training and education, and has done so for many years. This is in no way a new issue, and there are no magic wands or instant solutions. But given the priority that the Prime Minister, the Chancellor and successive Education Secretaries have given to this matter, and the huge sums of public money spent, after seven years things should be moving forward, at least. Sadly, the reverse is true.
The Engineering Employers Federation points out that
"only 9 per cent. of young people in the UK are starting Advanced Modern Apprenticeships across all sectors, compared with almost two thirds of young people completing an apprenticeship in Germany in 2001 and a rapidly escalating number in France".
Yet the numbers for modern apprenticeships and work-based learning are actually falling in the UK—in the former case by nearly 20 per cent. The proportion of level 2 and level 3 awards made in vocational qualifications dropped by nearly 10 per cent. in the last year for which records are available. The total number enrolled in adult education has slumped by 73,000 since 1997. And according to the CBI, the number of British firms reporting a skills gap has more than trebled since 2001.
Does my hon. Friend agree that there is a cultural problem within schools and further education colleges? One difficulty is that a number of courses teaching specialist construction skills are closing, and until we can encourage more youngsters into vocational training, such problems will remain.
My hon. Friend, as ever, makes an excellent point, which is backed by his detailed knowledge of the subject. As he says, this problem has been with us for long time, and sadly, the closure of existing courses indicates that things are getting worse, rather than better.
What has been the effect of these developments on the UK economy as a whole? In his very first Budget, the Chancellor said that his priority was to raise Britain's productivity performance dramatically. There has been a dramatic change all right—for the worse. In the first six and a half years of this Government, productivity growth averaged just 1.6 per cent. per year—barely half the 2.8 per cent. growth that was achieved in the previous six and a half years. "Things can only get better," they said. In the vital area of skills and productivity, things have only got worse.
There was, however, much that the Chancellor announced on education in his Budget that we Conservatives can warmly welcome. Indeed, it would be churlish not to happily offer such an endorsement, given that announcement after announcement constituted Government acceptance of Conservative policy. There are to be more city academies, which, in the form of city technology colleges, were a Conservative idea, so we welcome that announcement. More money is to be paid directly to head teachers. That policy is a direct extension of the Conservative policies of local management of schools and grant-maintained schools. There is a clear movement in the direction of free schools—the Conservative policy of 2001—and of pupil passports, which is Conservative policy for the next election. So we welcome that announcement.
We learn from page 147 of the Red Book that most specific grants to schools
"will be paid as a single schools improvement grant" in order "to streamline funding". That is a direct lift from Conservative pledges made at our recent party conferences to reduce the current absurdity of there being up to three dozen different funding streams for schools. That is Conservative policy, so we welcome that announcement, too.
We have heard many versions of the passport idea, which has led to great confusion both within and outside the House about how exactly the system will work. Can the hon. Gentleman explain it in more detail in his speech, or would he be prepared to attend a sitting of the Education and Skills Committee to provide us with more detail on his plans?
The hon. Gentleman is extremely generous. He will be delighted to hear that a substantial section of my speech deals expressly with pupil passports. I hope that he will feel by the end of my speech that I have answered his questions, but if he has further questions, we could talk about how best to answer them as well. If the hon. Gentleman would like to make the offer that he suggested closer to the general election, I would be delighted to accept it.
I was explaining why we were happy to welcome all the wonderful things that the Chancellor announced yesterday—because they were Conservative policy. I have to say that the list has not ended and I will continue with it. For example, there are to be far fewer civil servants working in the Department for Education and Skills, with the money saved to be distributed to the classroom instead. That was Conservative policy at the last general election, has remained Conservative policy throughout this Parliament and will be Conservative policy at the next election. We obviously welcome that announcement, too.
While the hon. Gentleman is regaling us with Conservative policy, will he congratulate the Government on the investment that they have made, especially in small rural schools, and pay particular tribute to the work of beacon schools such as Quernmore in my constituency?
I gladly welcome the money that has been invested in the state system. As I shall say later, there is evidence of improvement in several areas—the hon. Gentleman has doubtless touched on one of them—such as new and improved school buildings and facilities, more teacher recruitment, and so forth. All that is outstanding, but since the hon. Gentleman mentions small rural schools, I would mention Settlebeck school—not small, but very rural—in my own constituency. In the last 12 months for the first time ever—the school has been around for decades under Governments of both political colours—that school has had to write to parents to ask for a direct cash subvention to buy books. That never happened under a Conservative Government, but has happened six years into a Labour Government. The hon. Gentleman should not therefore assume that everything is good news.
At the moment, I am being positive, cross party and bipartisan in welcoming all the wonderful things that the Government have accepted from Conservative suggestions, so let us proceed to the next example—arguably the most important of them all. The Chancellor announced that he proposes to increase overall education spending to about £77 billion by the end of the next comprehensive spending round period. You may recall, Mr. Speaker, that some weeks ago, my right hon. Friend the shadow Chancellor set out in some detail the overall public spending envelope that would apply under the Conservative Government after the next general election. Funnily enough, the £77 billion that the Chancellor suddenly discovered yesterday as the appropriate amount to spend overall on education in 2007 is essentially the same figure implied for that year by what my right hon. Friend said some weeks ago. So even on the overall level of education spending, as on all those other things, the Chancellor and the Secretary of State are Johnny-Come-Latelies, once again embracing pre-existing Conservative policy—and once again we welcome that announcement.
Indeed, so frequently, so assiduously, so repeatedly did the Chancellor yesterday announce that he was adopting Conservative policy that I wondered what on earth Ministers would do without Conservative Members here to give them all their ideas? Sadly, however, many voters will choose to judge the Government not on their new-found conversion to Tory principles for the next Parliament, but on their seven-year record of what they have actually done in the last two Parliaments.
What is the good of the Government saying that they now see the case for greater financial management by head teachers, when their first act on taking office was to take financial independence away from grant-maintained schools? What is the good of saying that they are now converted to the need for simplified funding and a single grant, when their never-ending flow of initiatives and paperwork has snowed schools under with three dozen different routes to get money? Why should they be trusted to get rid of 31 per cent. of officials at the Department for Education and Skills, when they have increased those numbers by 25 per cent. since 1997?
Before the 1997 election, Labour pretended to embrace the Conservative approach to the economy—enterprise and low tax. That proved, sadly, to be an entirely false conversion. Now, in the run-up to the next election, they pretend to embrace the Conservative approach to education—putting power and spending decisions in the hands of schools and parents, not bureaucrats. I fear that that will prove to be an equally false conversion.
I shall now deal with higher education. The Red Book devotes precisely two sentences to the funding of universities and other higher education institutions. It states that the Government
"will maintain per student spending levels in real terms over the 2004 Spending Review period".
However, current spending per student is lower than it was in 1997. In fact, it has been lower in every single year of Labour Government than it was in any year of the previous Conservative Government, and it is lower today than it was before the Government introduced tuition fees in 1998. So maintaining those low levels in real terms for the foreseeable future is hardly an act of extraordinary political generosity. On the contrary, it means maintaining public investment in higher education at levels that the university sector has repeatedly called unsustainable and deeply damaging.
Then, of course, there are the Government's plans for top-up fees. We shall see whether, at the end of this month, the Higher Education Bill survives Report and Third Reading. Contrary to the impression given in advance to many potential rebels that further important concessions would be made if a Second Reading were granted, the Bill left Committee almost entirely unamended, so its passage is by no means guaranteed.
What yesterday's Budget showed was that universities are already losing, not gaining, from the proposed introduction of top-up fees. Almost every other sector in education is to get more taxpayers' money under the Government's plans. Overall spending goes up by 4.4 per cent. in real terms. Early years and Sure Start funding get 17 per cent. annual rises, and spending per pupil in schools is to rise by nearly 20 per cent.—but real spending per student in higher education is not to rise at all. That demonstrates that the Government are using top-up fees in precisely the way we predicted—not to provide extra money per student, but to substitute for extra money per student.
Even the guarantee of a real-terms freeze in Government grant per student runs out in 2007, just a year after top-up fees come in, and well before income from them has grown to significant levels. That is why increasing numbers of vice-chancellors are beginning to wonder if the Government speak with forked tongue, and that is why we are confident that our alternative proposals, which we will publish later this year, will be welcomed not only by students who are understandably fearful of the much higher levels of debt involved in the Government's plans, but by universities and taxpayers who will both get a better deal than they will under the Government's scheme.
The hon. Gentleman is discussing the future of higher education, so will he be kind enough to inform the House what percentage of our young people he envisages going into higher education under his party's plans?
I am happy to point out to the hon. Lady that my party has said for some time that it is not desirable for politicians to set targets for participation. We believe that people should go to university on the basis of their ability to learn rather than their ability to pay. That will be reflected in the policies that we put to the electorate at the next election, but sadly not in Labour's policies.
What about school funding, the centrepiece of the Government's education drive and their proudest boast? Was not the last election campaign fought, as Labour told us, to get a mandate to put more money into schools and hospitals? What has been the result? Yes, as I said earlier, the taxpayer has put a lot more into the top of the funnel. Yes, there are undoubtedly many very welcome new school buildings in many parts of the country. However, anyone talking to teachers, head teachers and governors all over the country will hear that many of them seriously dispute claims about huge increases in resources that can actually be used. For example, the head teacher of the Kingsway school in Cheadle points out:
"Our pupil-teacher ratio has risen year on year so that I have seven and half fewer teachers funded now than 10 years ago."
He went on to say:
"It is only our own fund raising, for example through lettings, which has helped us to survive."
That is the scale of the problem that such schools face. The head of Guildford's George Abbott school said:
"My feeling is that secondary schools like ours are likely to need between 6 and 7 per cent. in order to stand still in the next financial year."
That is not what the Chancellor announced yesterday. The head of Newbury's Trinity school and performing arts college said:
"We don't have a balanced budget. Even with the extra £130,000 that we got in emergency funding from the Government, we are still expecting a fiscal year '03 deficit in excess of £100,000."
Doug McAvoy, general secretary of the National Union of Teachers, says—[Interruption.] We shall come to the Government's attitude to the nation's largest teaching union in a moment. Ministers should put their groans on hold and hear what the general secretary has to say, which is that the increases announced yesterday are
"unlikely to make good the deficit and at the same time equip schools adequately to enable them to meet the demands made on them."
He went further. Pointing to the fiasco of funding for schools presided over by this set of Ministers just over a year ago, he said that
"in the past, what looked like an increase resulted in schools continuing to be underfunded."
I know that the Secretary of State and his Ministers do not like the NUT much. Indeed, for the second year running, the right hon. Gentleman has chosen not to speak at the union's conference. My hon. Friend Mr. Yeo will speak, but the Secretary of State will not. Ministers may therefore like to hear a near-identical warning from John Dunford of the Secondary Heads Association. He says:
"The last spending review, when early joy turned to later grief for many schools facing unprecedented budget cuts, taught us a lesson that we have to wait for the small print."
Is not that true of every aspect of every Budget under this Chancellor? I met representatives of the Association of Colleges earlier this week, and they are less than ecstatic about the Chancellor's proposals. The association's chief executive, Dr. John Brennan, said:
"There simply is not enough money in the system to meet the targets which government has set."
He warned that colleges would have to cut courses for adults that the Chancellor was "guaranteeing".
My hon. Friend will know that the real problems for schools and colleges in this Parliament were caused by the tax rises that the Chancellor imposed after promising that there would be none. The likelihood is that the same thing will happen in the next Parliament, with the same consequences.
This is now the Budget debate, not education questions. Labour Members do not seem to know the procedure.
On a point of order, Madam Deputy Speaker. I have never seen it happen before that an hon. Member who one minute is sitting on the Opposition Front Bench is the next minute allowed to address a question, from the Back Benches, to his own Front-Bench spokesman. That is absurd, and brings the House into disrepute.
I am grateful, Madam Deputy Speaker. There are alternative policies that offer a greater prospect for success. They include measures to improve discipline in schools, and legislation—which we have offered to support even if introduced by present Ministers—to protect teacher anonymity, and to restore the presumption of innocence when a teacher is the subject of a serious accusation levelled, all too often maliciously, by a child. Other measures would cut through the confusing alphabet soup of vocational qualifications, reduce paperwork burdens on teachers by reducing course work, and give much more financial leeway to schools and their governing bodies.
Yesterday, as in successive Budgets, the Chancellor made great virtue of paying money directly to head teachers. We agree, but he pays only a tiny percentage of school budgets in that way. We want to pay the vast majority of money via that route.
The Government say that they want more money to be paid to schools in one budget. We agree. We have campaigned for years against the excessive complexity that this Government have created. Once again, however, we would go further. We believe that most money should simply follow the pupil, and that is where the pupil passport comes in. It will make sure that schools are accountable—not as now, upwards to bureaucrats, but downwards, to their local parents and communities. It will give parents greater control and choice over schools. We will abolish the surplus places rule, enabling successful and popular schools to expand. We will encourage successful schools to take over the management of neighbouring schools that have not performed as well. It is a policy designed to improve schooling—not for some, not even for most, but for all pupils in all schools.
It is understandable that Labour Members are much more obsessed than we are with the implications of all that for fee-paying schools. After all, their leader went to such a school, while ours did not. The Secretary of State reflected that fascination when he wrote a letter to the Financial Times this morning—
Before the hon. Gentleman repeats the fact that the Leader of the Opposition went to a grammar school whereas the leader of the Labour party went to a public school, will he accept that none of us is responsible for the school to which our parents sent us? However—I am looking now at the shadow Secretary of State—we are responsible for where we send our children. I know that many Opposition Members have never had any intention of using the state sector for education.
I must say that I regret that intervention from the Chairman of the Select Committee on Education and Skills. Although they have party affiliations, Select Committee Chairmen usually attempt, in debates about the subject for which their Select Committees have responsibility, to strike a rather more non-partisan note. If the hon. Gentleman wants to engage in such attacks, I merely point out that the present Secretary of State for Constitutional Affairs sits in the House of Lords, and not in this House, because he refused to send his children—
Thank you, Madam Deputy Speaker. I was trying to get to a matter about which I imagined Labour Members would want to talk—the Secretary of State's very interesting letter to the Financial Times this morning. He set out what he would clearly like the difference to be between his approach and that of the Conservative party. He wrote:
"It is the difference between billions of pounds of taxpayers' money spent improving state schools or subsidising private schools that have surplus places".
So let me disabuse him. The pupil passport will be usable only at state-funded schools providing education solely to those who pay for it with the passport. It is a policy whose main purpose, and greatest virtue, is that it will not undermine publicly provided education but for the first time make publicly provided education work for every part of our society, not just for some. Not one penny of subsidy will be available for those who send their children to fee-paying schools.
I can tell from the look of shock and disappointment crossing the Secretary of State's face that he realises that I have shot his fox. Let me make it clear, however, that this fox has been not just shot, but shelled, napalmed and obliterated.
The Government, like the Opposition, will concentrate very substantially increased investment in the state schools to which the vast majority of people send their children. Unlike the Government, however, we will not say that choice and freedom should apply only to the wealthiest parents and the wealthiest schools. It has been the historic role of the Conservative Party to spread the privileges once enjoyed only by the few to every part of society, and we shall do that again.
Normally, Madam Deputy Speaker, I would not intervene from this position just behind my Front Bench, but I am trying to keep up with Chris Grayling. The hon. Gentleman talks about spreading wealth, so will the vouchers be regarded as taxable income? Will poorer families receive vouchers that are worth more, and will that money be taken away from richer families?
I can genuinely say to the hon. Gentleman that I have no idea what he is talking about. Of course there is no question that the voucher would be taxable. That proposition is truly absurd. What is very clear is that the hon. Gentleman is frightened that parents throughout the state system will be allowed to have control over the resources made available to support their children. The Government do not like that idea: they have pretended to throw aside their control freakery, but they have not done so for real.
Yesterday the Chancellor rattled off statistics to try to prove that everything in the nation's garden is rosy. Of course, some things are better than they were in 1997. My right hon. Friend the shadow Chancellor has congratulated the Chancellor on giving the Bank of England control over interest rates. It has taken far more sensible decisions on these matters than any Labour Chancellor ever has or ever could. The Chancellor was right to say that Britain was enjoying its longest period of economic growth in many years, but that is true only because the period in question commenced not in 1997 but in 1992. It started because the Conservative party ignored Labour's advice to stay in the exchange rate mechanism, and it continues only because the Chancellor ignores the Prime Minister's advice to join the euro.
What about some of the statistics that the Chancellor forgot to mention yesterday, and which I suspect the Secretary of State will omit today? The savings ratio—worse than in 1997; manufacturing output—worse than in 1997; business investment growth—worse than in 1997; productivity growth—worse than in 1997; the lowest level of manufacturing employment since records began; the biggest trade deficit in three centuries, and the highest levels of personal debt ever. And in education, teacher vacancies are up, attacks on teachers are up, truancy is up and we have the highest level of pupil drug usage ever.
These problems are not the fault of the teachers and governors any more than the economic setbacks are the fault of businesses. They are the responsibility of a Government who always claim credit when things get better but blame someone else when they get worse. These problems are real and serious, and growing by the day. That is why there is a real difference between the parties over education when the nation comes to vote. Those differences will not be the ones that Labour would have liked. The Labour party would like to be able to say that it would spend more than the Conservatives, but now it cannot. It would like to be able to say that the Conservatives would divert state money for education to subsidise fee-paying schools, but now it cannot. It will have to debate the area in which its record is weakest—not how much money one spends, but how one spends it.
Seven years of socialist centralisation, waste, bureaucracy and interference cannot be wished away just by mass plagiarism of Conservative policy for the future. Labour Members know that we have won the arguments. Now they should get ready for us to win the next election.
What an extraordinary speech!
Earlier today, I made a written statement on the education implications of the Budget statement made yesterday by my right hon. Friend the Chancellor of the Exchequer. I confess that I am surprised that Mr. Yeo has decided that it is beneath him to respond to the debate. He is the man in the shadow Cabinet who has to discuss with the shadow Chancellor the financial implications for education. I am candidly disappointed that he has not thought to give this subject the priority that most of the country will think that it deserves.
That is an extraordinary statement by the Secretary of State. In the time that I have been looking after the education portfolio in the shadow Cabinet, the Government have come closer to being defeated on a major aspect of policy than at any time in the past seven years. I invite the Secretary of State to reverse his decision to absent himself from the National Union of Teachers annual conference and join me on Easter Sunday to debate the issues that my hon. Friend Mr. Collins has raised in the past half-hour.
I stand second to no one in paying tribute to the activities of the hon. Gentleman as the golfing correspondent of the Financial Times, but he has to choose whether he is dealing with education or health. The explicit choice that he has made not to consider the education debate, in this Budget of all Budgets, as the one on which he should focus his attention is genuinely extraordinary, and people should observe that fact.
Yesterday, my right hon. Friend the Chancellor set out measures to ensure stability for education, children's services and skills training and continued progress across the Department's agenda, which is crucial to the economic and social well-being of the country. He made it clear that education spending in England would grow by an average of 4.4 per cent. across the spending review period—that is, by 6 per cent. in 2005–06, by 3.6 per cent. in 2006–07 and by 3.5 per cent. in 2007–08. As a result of this settlement, education spending in the UK will be 5.6 per cent. of GDP in 2007–08, up from 5.4 per cent. in 2004–05. This major and stable advance at every level of education—a point to which I shall return—is based on experience and the advice that we are receiving from teachers in our wide national consultations.
More than 1.6 million children have benefited from free part-time nursery education for three and four-year-olds, and 400,000 children and their families in deprived areas have been helped by 524 Sure Start centres. As a result of the settlement that the Chancellor announced yesterday, the number of children's centres will rise to 1,700 by 2008, covering all 20 per cent. of the country's most disadvantaged wards.
In due course, we will announce the details of an expansion of child care places, family support services and extended schools, which bring together education, health, children's social services and child care. This settlement will provide the funding necessary to address the agenda set out in our Green Paper "Every Child Matters" and, even more important, it offers us a once-in-a-lifetime opportunity to reverse the vicious cycle of decline that has kept people from the poorest parts of this country away from aspiration and hope for the future.
At the level of schools, as a result of the Government's class-size pledge, 350,000 five, six and seven-year-olds are no longer in classes of 31 or more. In 1997, half of all 11-year-olds went to secondary school unable to read, write or count at the necessary level. Now that figure has been reduced to a quarter. It is still too high, but it is a massive reduction from the position that we inherited. The settlement that my right hon. Friend announced yesterday will enable primary schools and teachers to continue to raise standards of literacy and numeracy, supported by work force reform and the recruitment of more teaching assistants.
In 1997, just 45.1 per cent. of pupils got five good grades at GCSE. Last year, that had increased to 52.9 per cent. and, most encouraging of all, the biggest increases were in the toughest areas. Pupils in excellence in cities areas are improving at more than twice the rate of pupils elsewhere in the country. Half of all secondary pupils are now taught in specialist schools. I was honoured to visit such a school two or three years ago in the constituency of the hon. Member for Westmorland and Lonsdale. They are getting better results—56.7 per cent. of pupils in specialist schools get five good grades at GCSE.
Does the Secretary of State agree that many of the improvements that he talks about took place in the early years of the Labour Government? Many young people, and even today's GCSE pupils, went through much of their education under the last Conservative Government, so will he pay tribute to that Government for their contribution to the development of those young people and the improvements in their performance to which he has just referred?
I do not wish to appear churlish, but I will not because the facts are at odds with what the hon. Gentleman has just said. The facts are that, with specialist schools and the GCSE statistics that I was giving in particular, the improvements have accelerated recently. That is the progress that has been made. It is a fact, and it is a big issue for the whole of the education service, that there has been a massive backlog of under-investment amounting to billions of pounds at all levels of education from which we have had to claw our way out. We have not done so as fast as all of us would have liked, I am sure, but we are continuing to make steady progress. I do not wish to appear churlish, but I cannot answer him in the way that he would wish. We have had a sea change in policy both in commitment and in resources, which is taking us forward in a substantial way.
The Secretary of State has just said—it is a perfectly reasonable position—that the longer the Government have been responsible for these matters, the greater share they wish to take of both the credit and the blame for what is working and what is not. Can he explain why progress towards literacy and numeracy at key stage 2 advanced up to 2000 and halted thereafter?
I am certainly prepared to take both credit and blame. As the hon. Gentleman rightly says, the more time goes on, the more can be stated in that way. I am prepared to acknowledge to the House, as I have before, that the flattening—particularly in literacy, but also in numeracy—in the past two or three years has been a serious problem. We are addressing it seriously, and I believe that the results this year will again show a continued improvement. I have to remind him that, in 1997, half of children were leaving primary school without achieving level 4 of key stage 2 whereas now only a quarter do. There has been a fantastic improvement, but he is right that there is a fantastic lot more to do. That is the point about the settlement that my right hon. Friend the Chancellor announced yesterday.
The settlement will continue the drive to achieve excellence and to narrow the gaps in attainment between schools. It will make a reality of our commitment that every school that meets the standard will have the opportunity to gain specialist status and allow continued expansion in the number of city academies.
Over the spending review period, total departmental capital spending will rise from £3.85 billion in 2004–05 to £6.78 billion in 2007–08—a massive increase. That will ensure that, by 2015, through our "building schools for the future" programme, every secondary school in the country can be refurbished or rebuilt, with world-class technology in every school and the best state-of-the-art learning in every classroom. To accompany that new investment, we shall develop a new relationship with schools to help deliver personalised learning tailored to the talents and needs of every pupil, underpinned by a strengthened accountability framework, a simplified school improvement process and improved information and data management.
In higher education, publicly planned funding has risen dramatically under the Labour Government. Expenditure on science and research—a major theme in the Chancellor's announcement yesterday—will have increased in 2005–06 by £1.25 billion a year compared with 2002–03, which is about 30 per cent. in real terms. The settlement will allow investment in the sector to continue to grow in real terms and enable the Government to maintain real-terms student funding per head and to progress towards our target of 50 per cent. participation in higher education. It will also provide the resources needed to deliver the reforms set out in our White Paper, "The Future of Higher Education".
On lifelong learning, 255,000 young people were in modern apprenticeships in December 2003, compared with only 75,800 in 1997. It is worth noting that the Conservatives may talk about vocational education but they made no commitment—as we did—to more than treble the number of people on modern apprenticeships over that period. In 1985, 10.5 million people of working age in England had no qualifications, but in 2003, the number was 4.6 million—a massive reduction. Between 2001 and 2002, more than 300,000 adults were helped to raise their numeracy and literacy skills.
My right hon. Friend's Budget settlement will provide for new measures, through the new deal for skills, to tackle the large number of adults in the UK work force who have low skills. In jobcentres, a one-stop skills service will be offered for the employed as well as the unemployed, with access to personal skills advisers and training. By 2007, 1.5 million adults will have improved their basic skills as part of our longer-term aim of ensuring that, by 2010, the number of adults in the work force who lack NVQ2 or equivalent qualifications is reduced by at least 40 per cent.
We shall take forward the measures set out in our skills strategy to meet the needs of employers, employees and individual learners, including a key role for the new sector skills councils.
Given the Secretary of State's remarks about expanding learning opportunities, can he comment on the problems in further education colleges? Because of the Government's focus on basic skills, colleges struggle to find finance for many level 3 courses, thus inevitably weakening the opportunity for certain people to move on to higher education. Can he give college principals an assurance that that situation will change in the current funding round?
I can and I have, when speaking to the Association of Colleges. However, the hon. Gentleman raises important issues and I shall comment on them in a second. The role of further education is central to the whole of our programme and we are utterly committed to it.
Our agenda is ambitious. As the Chancellor said yesterday, the long-term future of our country depends on investment in education, science and enterprise, so commitment must be long term. Labour is making that long-term commitment and the debate offers us the chance to clarify the alternatives set out by the Conservatives. In that spirit, I was glad that the hon. Member for Westmorland and Lonsdale mentioned some of his party's policies, to which I shall now turn.
In connection with the point on further education made by my hon. Friend Chris Grayling, many of us are concerned not only about the understandable need to increase basic literacy and numeracy but to ensure that people in their 40s and 50s are constantly reskilling, especially given all the outsourcing that is going on. Is not the Secretary of State concerned that too much attention is being paid to ensuring that a cohort of 40 or 50 per cent. of youngsters go to university? Does he agree that much more attention should be paid to the next quartile down—people who may not go to university, but who require constant retraining and reskilling if they are to have a long-term career in the marketplace?
I agree, but we give massive priority to the other 50 per cent., if I can describe them thus. Our policy and programme have been powerful in that respect. Our development of modern apprenticeships, on which I have already given the figures, has been impressive and will be even more impressive. Opposition Members criticised our higher education White Paper by saying that we should focus more on vocational education. When the White Paper was published, the Opposition promised that we would hear their policies on those matters but, so far, we have not heard a squeak—a point to which I shall return.
Earlier this year, when the Leader of the Opposition spoke immediately before me at the CBI conference, he said that his intention in leading his party was to have policies that were "clear, costed and credible". I have to say that the policies are neither clear, nor costed, nor credible and I shall clearly set out why.
Spending on education is at the core of the Budget. Under the Conservative education proposals outlined by the shadow Chancellor in February, expenditure on education, apart from schools but including further education, would be frozen in cash terms for two years. His speech was explicit. He said:
"that the baseline for spending across all of these departmental budgets"— outside the national health service and schools—
"will be 0 per cent. growth for the first two years".
That means real-terms cuts. That clear pledge means massive real-terms cuts in the field that we are debating, namely all non-school budgets. It will mean cuts to Sure Start, to children's services generally, to skills and further education and to higher education. A cuts policy has been set out by the shadow Chancellor.
Perhaps it is not surprising that the right hon. Gentleman's Front-Bench colleagues are unwilling to accept that state of affairs and are in a state of denial, or even non-participation, in relation to those matters. To be generous to him, I shall offer only one example. Less than two weeks after he published his plans, Tim Loughton argued at the Dispatch Box that
"Children's services would not be affected, so let us not hear any more nonsense."—[Hansard, 3 March 2004; Vol. 418, c. 973.]
That was untrue.
The Secretary of State has just gone through some arithmetical calculations. As my hon. Friend Mr. Collins pointed out when he opened the debate, the total departmental spending envelope proposed by my right hon. Friend the shadow Chancellor is precisely the same as that proposed yesterday by the Chancellor of the Exchequer. The Secretary of State has probably worked out—perhaps that is why he is not participating in the NUT annual conference on Easter Sunday—that, under the Government's policy, he is proposing to spend less on schools than the Conservative party.
That is the most incredible nonsense, but I am grateful to the hon. Gentleman for joining in the discussion, because we need clarity. We need to know exactly what the situation is. Indeed, it was in that spirit that, after the comments of the hon. Member for East Worthing and Shoreham, I wrote to the shadow Chancellor to ask,
"Would expenditure on non-school . . . services be frozen in cash terms for 2 years?
I asked him to confirm the effect of that on spending on non-school services. I further asked,
"Are you yet in a position to indicate the budget lines which you would cut to achieve these targets?"
The right hon. Gentleman did not respond to that set of questions, which I had hoped would inform public debate on those matters, until this morning, when I was extremely excited to receive a missive from him, in which he clearly confirms the position. He said:
"to ensure that all important front-line services are maintained".
That position is not sustainable. The whole point of the shadow Chancellor's speech in February was that hard choices had to be made and that certain things would have to go. He said that the NHS and schools would not be included, but that everything else would. I am asking about everything else. [Interruption.] The hon. Member for South Suffolk says, "Not go", but everything else would be cut in real terms and frozen in cash terms for two years. That was the clear statement, which, I am glad to say, has been confirmed again today.
How do those spending plans compare? As I have said, the Government have made a firm commitment to an average 4.4 per cent. increase per year in the period 2005 to 2008. Tory freeze policies could mean cuts by 2007–08 of around £900 million in spending on children's services, £1.1 billion on higher education and £131 million on modern apprenticeships. Chris Grayling raised modern apprenticeships, and over that two-year period such cuts would mean 48,000 fewer modern apprenticeships than under our proposals. It is okay for the Conservative party to have such a policy, but not to have such a policy and then proclaim a commitment to education and vocational training for people who leave school. It should come clean about what it is doing.
Given that all three political parties have identified substantial potential to remove unnecessary bureaucracy and waste from across Government, can the Secretary of State explain why, when the Government take that approach, it is a prudent reduction in central administration costs, but when the Opposition propose to do the same it magically turns into savage cuts to front-line services?
That is completely wrong. The cuts that we make in administration are necessary and right for a wide variety of different reasons. One of those reasons is the contribution such cuts make to Front-Bench services.
A mis-statement on my part. Perhaps those on the Conservative Benches could have a ballot to find out who wants to be on the Front Bench—four of them are on the Front Bench and two are on the Back Benches.
A cut in administration is not enough to deliver what we have to do. We have a whole set of measures, such as our stable management of the economy and reduction of the billions of pounds wasted on debt repayment and the costs of unemployment, which the Conservative party would return to by, for example, scrapping the new deal.
Each thinking a different thing. Those three magisterial brains came together, and the shadow Chancellor made a major keynote speech about the choice that the Conservative party is making about where he is going. That choice means cutting non-school spending. Does it mean cutting 48,000 modern apprenticeships? Does it mean 36,000 fewer social workers working with the most vulnerable children? Does it mean 1,200 fewer Sure Start centres, which would rob 1,000 of the poorest children of the right to life? Does it mean 24,000 fewer lecturers in higher education, which would deny university places to 220,000 students who have the ability to take them up?
The Conservative party should make its policy choices and come clean about them so that the whole country can debate them. The Government's position is that we want better public services; the Tories' position is to call public spending a waste. They say that less money means cuts to budgets and cuts in opportunities.
I shall turn to the famous passport policy. [Interruption.] I am not moving off the question of budget cuts. I am sorry to disappoint Conservative Front Benchers, but I and the whole of the Government will ask the Conservatives at every juncture in relation to every aspect of non-NHS, non-schools expenditure, "Where are the cuts falling? What will you do? How will you deal with it?" We have only to examine the debates in other non-educational fields such as police and defence to see how powerful the issues are. Conservative Members must consider carefully whether the shadow Chancellor has taken the most intelligent course given their party's political strategy.
Why are the Labour Government so opposed to spending as much as we propose on schools? Do they want fewer teachers, fewer classroom assistants, less capital spending on schools or lower salaries for teachers? Is that the reason why the Secretary of State will not participate in the NUT annual conference on Easter Sunday?
I shall be doing better things on Easter Sunday. I must confess that I have not yet decided what better things I shall be doing, but I am sure that they will be better than attending the NUT conference. I greatly admire the hon. Gentleman's courage in spending his Easter in that way.
There has been a to and fro on the serious questions about passporting. On
I have listened to the hon. Members for South Suffolk and for Westmorland and Lonsdale today, but I wonder what the policy will be tomorrow and what the shadow Chancellor will say tomorrow. Perhaps I can help. I shall ask one or two questions about passporting that the hon. Member for Westmorland and Lonsdale must face up to directly. [Interruption.] I prepared the questions earlier because it is important for the country to try to understand the Conservative party's policies, and a bit of preparation might have served Conservative Members better in this process.
I am sure that the hon. Member for Westmorland and Lonsdale can answer these questions. It is obvious that schools in London and the south-east cost more than those elsewhere. Will the voucher be less valuable in Manchester than in London and the south-east? I look forward to the answer. Will the parents of children with special educational needs or learning difficulties, who can be more expensive to educate, be entitled to a higher value voucher to account for those circumstances? Will parents of children for whom English is a second language be entitled to a higher value voucher? As was asked in an earlier intervention, will the voucher be treated as taxable income so that better-off families can be taxed on its value? Could independent schools refuse to accept a voucher as payment? If any child can take their money to any school, does that mean that admissions policies for schools would be abolished? Will there be open enrolment, however the scheme operates? If every child in an area wants to go to one particular school, how will it house the additional pupils? Will the most popular schools have to use portakabins? Perhaps the hon. Member for Westmorland and Lonsdale will clarify his party's position.
To put the matter in context, the Secretary of State went through a long list of discussions, and what I said earlier is the definitive, agreed position. If he really wants to get into a debate about consistency, education policy is not the right area to choose because the Government campaigned on a manifesto pledge not to introduce top-up fees, but they are legislating to do the opposite of what they promised.
I replied to the earlier intervention about children with special educational needs, which is an example that makes our point, not the Secretary of State's. Children who have a statement of special educational needs—the most vulnerable, disadvantaged and needy children in our society—already effectively have a statement with a value that entitles them to resources. In other words, if it is good enough for the most vulnerable children and it works for them, let us extend the same philosophical approach to all parents and all schools. Why are he and his colleagues afraid of giving parents choice?
A staggering intervention. If the hon. Gentleman had had a chance to read our White Paper on special education, which we published two or three weeks ago, he would have seen a detailed analysis of the many children who have special educational needs and learning difficulties, only a relatively small proportion of whom have statements. They are, as the hon. Gentleman rightly says, usually those who have the most serious learning difficulties, although not always. The implication of what he says is that all those children with a wide range of special educational needs should have a statement with money attached to it that follows them. That is an amazing development of policy and would go against everything that Members on both sides of the House are trying to achieve, in a bipartisan way, on special educational needs.
Given the fact that the Secretary of State is a member of a Government who will introduce a system of patient choice in health care that will allow patients to carry a block of money around the health service with them to use at a location of their choice, why is he opposed to extending the same principles to the education system?
We are not at all opposed to the principle that parents should choose their schools—[Hon. Members: "Oh!"] No, the overwhelming majority of parents get their first choice school now, and that is right. However, an important principle behind what we do—and I would hope that the Conservatives were ready to commit to it—is the provision of excellent extended schools, with children's centres, in every community and neighbourhood in Britain. That is the way forward.
We have had some partisan exchanges, but I wish to make it clear that through the settlement that my right hon. Friend the Chancellor announced yesterday, the Government will make a profound, long-term commitment to developing education from the cradle to the grave. That is what we are about—for children, for schools, for skills, for further education, for higher education—in the deep belief that that is the way towards economic strength for our country. We have major differences with the Conservatives, but the biggest difference is the complete lack of clarity with which they address the issue except on one point—they will not make the commitment to investment that this Government will make. That will be the choice facing the electorate at the general election. I am certain that at the general election we will be in a position to gain the support of the people of this country for the long-term investment that we all so strongly need.
It has been a fascinating debate so far. We have had a speech from the Conservative spokesman in which he was determined to prove that the Labour Government's policies were now identical to Conservative policies, followed by a speech from the Secretary of State in which he was determined to prove that those policies were rubbish. That leads to an interesting logical conclusion about the Government's policies and their view of them, but I shall move on.
I apologise sincerely on behalf of my hon. Friend Mr. Willis, who is sorry not to be here this afternoon. He would have liked to make the points that I shall make in due course, but those who attended Education and Skills questions will have realised that his voice has again almost disappeared. He sounds like a ghost, and I have had to act as his nursemaid and send him back to Harrogate to try to recover as quickly as he can.
This year's Budget statement as it affects education is unusual in that it has received a cautious but supportive response from almost all education commentators, with the exception of Conservative Front Benchers who, I assume, are deeply worried about how much additional cash they will have to find to give all students in private schools a £5,500 voucher. Indeed, I wonder how they intend to find the £2 billion extra to fund their free tuition policy in higher education—
On a point of order, Madam Deputy Speaker. I apologise to Mr. Rendel for interrupting him, but I wish to clarify a point with you. I noticed that when hon. Members rose to catch your eye, Chris Grayling also rose. My understanding is that he is the shadow higher education spokesman, as he certainly was when he and I took part in a debate the other evening. Is it in order for the Conservatives to use the shadow higher education spokesman in that way in this debate?
Further to that point of order, Madam Deputy Speaker. In the years that I have been in the House, I have never seen a performance like it by the Opposition. They have so few Members in the Chamber that they subject the House to the absurdity of people running, as if they were in a Feydeau farce, from Front to Back Benches. Conservative Front Benchers receive a large amount of Short money to pay for their private office. Is Short money now going to Back Benchers? If so, I would like some. [Interruption.]
If that carries on, this will be one of the longest speeches I have made, but I hope that we will have fewer interruptions from now on.
As I was saying, I would be interested to know how the Conservative party intends to fund the extra £2 billion that it will need for its free tuition policy. We have, of course, explained how we would do that. The Conservatives also need an extra £l billion to provide the skills training for the army of plumbers that they regularly promise us.
Let us get back to reality. The Liberal Democrats cautiously welcome what, on the surface, appears to be a good deal for the majority of the UK's education system. My hon. Friend made that point earlier. Certainly, the global figures showing a rise in total spending from £59 billion this year to £77 billion in 2007–08 are impressive, but what most sectors want to hear from the Secretary of State is how the resources will be allocated and what strings will be attached to spending. In the past, the strings have caused all the difficulty, especially for schools.
It is also important that alongside the seemingly dramatic reduction in the Department's staff—some 30 per cent. by 2008—we see a commensurate reduction in the targets, initiatives and ministerial interference that have bedevilled our education system since 1997. It would be a good start if the Secretary of State were to cancel his plans for the Office for Fair Access before they got off the ground. That is one expense that the HE sector could well do without.
The Liberal Democrats welcome the continued real-terms investment in education and broadly agree with the Government's priorities. The extension of pre-school education and the roll-out of children's centres to the 20 per cent. most deprived wards by 2008 are welcome, but 80 per cent. of the nation will still be without a centre. In particular, rural areas will be largely ignored. Indeed, given the high-profile speeches by the Prime Minister and the Secretary of State at last year's Labour party conference about the need to put early years education before further investment in higher education, the response in the Budget appears to lack the resources to match the rhetoric. We should compare the additional £669 million to be spent on early years education with the extravagant and ill-targeted funding of the children's trust fund. Scrapping that fund, as the Liberal Democrats would do, would save the £l billion to be spent on the Chancellor's gimmick between now and 2008. How many more children's centres could be established for that money, and how much greater would be the impact on our most vulnerable children, for whom we should care the most?
Talking of vulnerable children, where is the commitment in the Budget to support the outcomes from the Children Bill? Successive crises in child protection have pointed to severe resource deprivation, the failure to train and retain staff and the inability of local authorities to make appropriate physical support available when it is most needed. Child protection must not be compromised, as care for the elderly has been, by the fluctuation of local authority budgets. The scale of change envisaged by the Children Bill requires not one-off resources but secure funding from the Government in the longer term. Perhaps when he sums up, the Minister might say whether he envisages that the local safeguarding children boards proposed in the Bill will be funded directly through the Department for Education and Skills, like Ofsted, in order to give them independence and allow them to fulfil their scrutiny functions more effectively.
The Liberal Democrats welcome the continued investment in our schools. It would be unfair to ignore the considerable additional resources that have been promised for the coming comprehensive spending review, but it has to be said that schools have been here before. The current CSR was expected to provide riches beyond belief but, rather like the emperor's new clothes, many schools found that the increases were illusionary. Last year, many of the new resources simply went to fund Treasury or Department-inspired inflationary increases. The changes to pensions, national insurance and the standards fund all took money from baseline budgets, making it increasingly difficult to manage change at an individual school level, as many schools found to their cost.
The Budget, however, again makes much of Government-initiated spending despite the claim of getting more money to schools. Another 1,000 specialist schools will require revenue support to the tune of £500 million, which, when added to the current programme, means considerably less to distribute to the remaining non-specialist schools. There is no mention of how much is to be earmarked for the new academies movement or of the impact that publicly funded independent schools will have on the secondary school sector. There is no reference to the moves by the Secretary of State to allow for-profit schools to enter the marketplace. In winding-up, perhaps the Minister will tell the House what discussions there have been with Sunny Varkey about his plans to provide for-profit, independent school education at the cost of average state-funded education. Perhaps the Minister will explain what the difference would be between such a policy and that proposed by the Tories for vouchers to spend in the independent sector.
At this point my notes, which were calmly passed on by my hon. Friend the Member for Harrogate and Knaresborough, say:
"Having spent much of my time as a head teacher bemoaning the state of school buildings".
Unfortunately, I have not spent any time as a head teacher, so I shall pass over that.
If the hon. Gentleman moves to the next paragraph—I know the hon. Member for Harrogate and Knaresborough—he will probably find that it says, "Now, you're on your own."
Luckily, I have read through what my hon. Friend offered me, and I know that it does not say that. However, the hon. Gentleman may well have been right; it could have said that.
My hon. Friend said that, as a head teacher, he had often bemoaned the state of school buildings. He wanted to place on record—I echo this—his and our party's appreciation of the continued investment in refurbishment and in new school buildings. Many of us have seen that in our constituencies.
Does my hon. Friend agree that an awful lot of the pilot projects under the school building improvement scheme are now being undertaken in urban areas and that there is no rural equivalent? That is extremely unfortunate, and echoes his earlier comment about the extent to which deprived areas and rural communities do not seem to receive the same support as the major cities.
I assume that those on the Government Front Bench will have taken on board that remark with reference particularly to Cornwall. I have no doubt that it is true for a number of other rural areas.
It is fortunate that the hon. Gentleman allowed an intervention from his colleague, because I can disagree and say that rural schools in South Derbyshire have particularly benefited over the past few years. Does he accept that the considerable success that his colleague has prompted me to repeat was based on the new deal funding mechanism that the Liberal Democrats opposed?
As I remember it, my party opposed not the new deal but the way in which it was funded, which was through a special tax at the time. We certainly supported the new deal itself. I could also answer the hon. Gentleman's intervention by pointing out to Ministers that it appears that there is now a serious reason for moving some funding from South Derbyshire to Cornwall, which is clearly where the need now is. If Members from the south Derbyshire area feel that they have had plenty, perhaps some of the money could be moved to other areas. No doubt, that would be very welcome.
We continue to have reservations about the private finance initiative as the preferred and, sadly, often the only method of procurement. However, that should not diminish our support for the ambitious plans to rebuild or refurbish all our secondary schools by 2015. Our concerns, however, are that, by designing the schools of tomorrow to meet the needs of today, we may be in danger of building in obsolescence. The Tomlinson reforms, the 16-to-19 curriculum, the national skills strategy and the concept of lifelong learning should make us stop and ask, "What is the vision we are trying to accommodate?" We should not simply build on the basis of today's requirements. In 15 years' time, it will not be a case of removing surplus places; it will be a case of trying to decide what use redundant buildings locked into long-term PFI contracts can be put to. We will not be able simply to get rid of those buildings.
What surprised the Liberal Democrats about the Budget statement and the Secretary of State's comments today is the fact that our secondary schools continue to be viewed separately from the further education sector, the skills sector and the higher education sector. When Government policy is rightly demanding that all those come out of their silos and work together, why plan future secondary provision in isolation? When overall capital investment in education is to rise from £6 billion to £8.1 billion by 2008, why are we not seeking to look at investment in the FE sector alongside investment in secondary schools?
By 2008, some 200,000 14 to 16-year-olds will be using the training environment of our colleges as their classrooms, and those same facilities will be providing for the majority of the 16 to 18-year-olds in full-time or part-time education, as well as delivering the skills training for a significant proportion of the adult work force. How can the Secretary of State justify a capital investment programme in our schools that is 10 times more generous than that in our colleges? Surely the time has come to extend what some would describe as an "architectural adventure fund" from our schools to the FE colleges. Given that we are about to see a far closer interchange of staff between schools and the FE colleges teaching 14 to 19-year-olds, it is surely about time that the Secretary of State announced a timetable to close the unacceptable gap in funding between the sectors.
Will the hon. Gentleman clarify yet more spending commitments from the Liberal Democrats? He wants us not just to narrow but to close the funding gap between the pay of teachers in schools and the pay of teachers in colleges. He also wants us not only to invest significantly in capital for schools and colleges, but to go even further and dramatically expand the amount of capital spent on colleges. I thought that it was the whole basis of the position taken by the leader of the Liberal Democrats that they would make no additional spending commitments other than those that appear in the letters that he is exchanging with the Prime Minister. Can the hon. Gentleman clear up why the Liberal Democrats keep alluding to aspirations and pretending to people outside the House that they can deliver utopia?
I do not think that I was promising utopia; I do not remember using that word. I was suggesting that there should be a fairer allocation of the funds available between the different sectors. The Government seem to be preparing to give all the money to the school sector. They are not prepared to treat all the sectors as one and as part of education as a whole.
It is kind of the hon. Gentleman to offer, but I have dealt with that point.
We know that there has been an historic battle between the Department for Education and Skills and the Chancellor over who should deliver the new skills strategy. We welcome the extension of the employer training pilots, but surely the role of colleges also warrants a proper mention. After all, that sector educates or trains 4 million people each year, and more 16 to 18-year-olds study in it than in our schools. It provides 200 million training days to industry each year and, while helping 300,000 adults to gain basic literacy and numeracy skills, provides our universities with 43 per cent. of their higher education students. Therefore we have to ask why, compared with schools, it has been ignored in the Budget.
The Secretary of State is, of course, right to point to the new deal for skills announced in the Budget and the commitment to provide level 2 training to any adult in or out of work. However, that is an old promise, which the FE sector could deliver now, but is being prevented from doing so by Government restrictions. The Association of Colleges, which is hardly at the forefront of educational militancy, warned in November that 70,000 courses would have to go this year and that thousands of people would be denied the training and education that they needed and deserved. If the new deal for skills is to work, it must be backed by a cast-iron guarantee of resources. When the Secretary of State reveals the content of the Department for Education and Skills resource budget, I hope that the FE sector will receive that commitment.
It would be difficult for me to conclude my remarks without referring to the current problems being created by the Government in higher education. Given the huge investment in the education system and the £20 billion-worth of savings expected by 2008 through manpower reductions in Government Departments, why on earth are the Secretary of State and the Government still determined to push through their HE funding reforms? The amount needed is pitiful in comparison with the amount being spread around in the Budget. Of course I welcome the extra funding for higher education and the commitment that fee income will be genuinely additional; I only hope that the Government manage to stick to that, because that did not happen after tuition fees were introduced. Are we as a nation saying that we are so desperate for what will be less than £500 million of net additional income that it is worth plunging the whole sector into a divisive marketplace in which there will be few winners and possibly a great many losers? The variable fees that are expected to be introduced are guaranteed to make it more difficult for those from poorer backgrounds to go to the most prestigious universities—it will not be worthwhile for them to do that.
Are the Secretary of State and the Chancellor so consumed with their new market dogma that they are ignoring all the problems associated with the policy? The Secretary of State's advisers have warned him that fear of debt will deter students from entering higher education. He knows as well as I do that this year's figures for applicants already show that there are fewer applicants to university than would be expected in that cohort, even given the current level of fees.
The Secretary of State appears not to have calculated the impact on wider society of the actual debt that graduates will bear when they enter the workplace. I readily concede that the annual repayment of student debt—even at the income level of £21,000 that was conceded by the Minister for Lifelong Learning, Further and Higher Education—will be income contingent. It will be income contingent in terms of annual payments, but not in terms of what must be paid in the long run, of course. However, the total tax and national insurance take for even modest salaries in the low £20,000s will still be 42 per cent. The figure will climb to 50 per cent. for incomes over £35,000, despite the fact that the Government tell us that it would be irresponsible and unacceptable for such a rate to apply to incomes over £100,000.
Those same graduates will be attempting to enter the housing market, which, according to a recent International Monetary Fund report, is currently overvalued by between 30 and 35 per cent. Graduates represent the vast majority of first-time buyers, and they are entering the housing market some five years later than they did a decade ago. The only way in which teachers, nurses and other public sector graduates can purchase a home is by taking on mortgages that are several times greater than their annual salary. Given their disposable income, how does the Secretary of State expect the majority of graduates, especially those who live in the south-east, to purchase a home at all? Traditionally, they form the largest part of the first-time buyer market and recently, the number of first-time buyers has fallen rapidly. Last week, I asked the Prime Minister what effect he thought that would have on the housing market, but he did not even attempt to answer my question. When the Paymaster General winds up the debate, will she tell us what effect the fall in first-time buyers, which is caused by a change to the amount that they may borrow, will have on the housing market? There is a significant chance that a collapse in the housing market might begin in the next few years and that that will be caused by a rapid reduction in the number of first-time buyers.
There is a great deal for education in this week's Budget, and Liberal Democrats applaud the Government for ignoring the calls of other parties to abandon steady, prolonged investment in education. My party does not denigrate what is on offer, but we want better use of the resources available. We look forward to engaging in the debate when the comprehensive spending review is announced in the summer.
The debate has been interesting so far. One or two things have been said that touch on my role as Chairman of the Select Committee on Education and Skills—I had to say this during the previous debate on education in which Conservative Members raised the matter. I know of nothing in the Standing Orders, procedures or traditions of the House that suggests that an hon. Member should become a political neuter when taking over the chairmanship of a Select Committee. I take unkindly and badly to Opposition Members saying that I should not be partisan in my remarks about where former Ministers and shadow Ministers send their children for their education.
I have never believed that a Select Committee Chairman should be neutral. My job is to scrutinise the Executive and, with my Committee, to do a sound job of calling the Government to account. If anyone wants to scrutinise my role as a Select Committee Chairman or examine evidence such as the kind of questioning that Ministers get or the reports that my Committee makes, I hope that they will read the reports and then, perhaps, apologise. I apologise to no one in the House for having a strong opinion on this.
When the Select Committee conducts further analysis of the Higher Education Bill, I hope that its Chairman will make it plain that the Government should have absolutely no truck with the idea of discriminating against university students on the basis of which school they attended.
I shall come to that point a little later. If the hon. Gentleman reads the Select Committee's commentary on the White Paper on higher education, he will find strong criticisms of the Government's policy—not on top-up fees, but on their focus on investment in research at too few institutions. Will he please read the report before drawing conclusions?
Knowing the hon. Gentleman as I do, I would not suggest for one moment that he be non-partisan, but will he at least be fair? He made reference earlier to the number of Conservative Members in the Chamber. Is it not the case that he is currently the only Labour Back Bencher in the Chamber?
I believe that to be so. I think back to the wonderful debate that we had on top-up fees when the Chamber was absolutely packed and the atmosphere was electric. I wish that my colleagues and the right hon. Gentleman's colleagues were here. I must say in passing that the opening part of the debate looked rather like a Feydeau farce: people who were sitting on the Opposition Front Bench suddenly moved to the Back Benches; people were running about; and people who I have never seen on the Opposition Front Bench suddenly appeared there, meaning that my speech must be littered with congratulations to such people as Michael Fabricant on their appointments. I agree with Mr. Knight that we want more people to be present, on both sides of the Chamber.
May I get on with the main part of my speech? I have never made any criticism of the Government's passion for education and their commitment to that as a priority. This is the first time in the history of this country that we have a Government who ran on such a clear and simple manifesto: education three times. [Interruption.] It gets more interesting, Madam Deputy Speaker.
Shall we all start again, Madam Deputy Speaker?
Never in my time in the House has there been a Government with such a clear commitment to education as their highest priority over a four-year term. They repeated in 2001 that education was their highest priority. [Interruption.] I must say that I was very happy—[Laughter.] I was very happy yesterday when I heard the Chancellor's—
The remark was made in the same spirit of jest as that which we have had for several minutes since the start of the hon. Gentleman's speech.
We have a Government committed to education and it was good to hear in the Chancellor's Budget speech yesterday that science, education and enterprise will have priority in future Government spending.
I, like one or two other hon. Members, was at a recent seminar at the London School of Economics addressed by Larry Summers, a former Treasury Secretary in the previous American Administration, now the president of Harvard university. He was asked whether there was any particular ingredient in the relationship between the developed economies, such as Britain, France, Germany and the United States, and their future economic success in a world of great economic competition, which would allow us to maintain the creation of wealth and the lifestyle of our people. We were discussing the fact that the economies of China, India, Brazil and Mexico were growing much faster than we had thought, and world competition was much greater than ever before. Larry Summers' response was that all the research points to such success depending on the number of people who are educated and skilled to a high level and retained in the economy in appropriate clusters. Hon. Members should be conscious of those words. The decisions that we make in these few years will determine how qualified and expert our people are in meeting that international competition and creating the wealth that we need to create.
The hon. Gentleman makes an extremely serious point, but does he agree that on tertiary education, the Department's own figures show that Britain has a higher level of both participation and graduation in higher education than any other G7 country, but in the case of vocational skills and further education we fall down, and therefore the balance of resource and effort should go into strengthening that part of our education system rather than necessarily pushing for the 50 per cent. participation rate that the Government are pursuing?
Yes and no, and I shall come to that in a moment.
We have had some great education successes. The Government's expenditure during the past seven or eight years speaks for itself. There has been a massive investment in education at every level. I was surprised that in his opening speech Mr. Collins made no reference at all to early years education. Most Labour Members believe that the greatest injustice to our people historically has been the inability to give people from poorer backgrounds a fair chance of obtaining the education that their potential deserves. During more than 150 years of public education in Britain, such people have had less chance of a decent education and less opportunity to push their potential to the full. That is the reason for the anger and the passion—which we feel in equal measure—that motivates us. Some Opposition Members will share that feeling too. However, the fact is that many British citizens have never had the opportunity of an education and the acquisition of proper skills to make the most of their lives and their talents. That is usually what is at the heart of what the Labour Government believe in.
If we believe in research-driven policy, as most of the time the Government do, research shows that to break that cycle of underachievement and poverty the earlier we invest the better. Those who have visited the Sure Start programme, as members of the Select Committee and others have done, know what a difference that makes. We know what a good investment it is in terms of the national treasure. Billions of pounds are being focused on where it matters—getting through to the woman who is pregnant and her partner; getting through to people at an early age; and teaching people that stimulation in the first weeks and months of life is vital to the development of a child's potential.
Does my hon. Friend agree that investment in early years education is not only vital for the individual, but saves money in the school system, because many of the problems that we see later in the education system, particularly in secondary school, can be traced back to lack of intervention in the early years?
My hon. Friend is right. Any sensible person knows that a pound invested early on is much the best investment. Much more money has to be spent later on trying to make up for the deficiencies of the system. My hon. Friend serves on the Education and Skills Committee and she knows of the interesting seminar that we held on prison education only last week when that became startlingly clear. Prisons pick up the worst cases of those who have lost out on education and skills and the development of their potential. The evidence was that it costs £37,000 a year to keep someone in prison, which I believe is even more than the fees at Eton. Investment early on is crucial. Therefore, I was rather worried that the Opposition spokesman never mentioned early years education.
The Select Committee's first inquiry under my chairmanship was into early years education—nought to eight. All the evidence that we took showed that that was the area that deserved the most investment, and that is what we recommended. That is the area that has had the most investment, and that has to be applauded. That does not mean to say that everything in early years education has been right. It does not mean that everything that we have considered has been the best expenditure possible.
I would query the roll-out of the Sure Start programme only in the 20 per cent. of poorest wards in the country. That is not a sufficiently sophisticated way of identifying where poverty occurs. Poverty is not so simply tracked down. There can be deep pockets of poverty in wards that otherwise do not show in the national statistics, and the Government have dragged their feet in coming to terms with that challenge. That is one part of my disappointment in some of the reactions that they had to the recommendations in the Select Committee's report—but let us put that on hold for the moment. Early years education is a good investment. I would be churlish not to welcome the news that there will be children's centres in the 20 per cent. poorest wards, but I would still reiterate my plea to refine that identification of where poverty is at its worst.
I have something of a reputation for teasing, in a light-hearted way, Ministers who come before my Committee, and I sometimes refer to their headquarters, the education nerve centre, as the Eden project, so when I am told that there will be a 31 per cent. reduction in headquarters' staff by 2008, I am pleased. I believe that there can be slimming down. However, in all fairness I meet a wide range of civil servants from the Department and I am extremely impressed by their quality. Most people who have been in the House for some time and who deal with many departmental civil servants know that the quality does vary, but the quality of staff in the Department for Education and Skills usually impresses me.
At the time when I was a university teacher, a previous Conservative Administration who wanted to reduce the numbers of university teachers gave out generous redundancy payments in order to slim down their number. That was seen as an opportunity to weed out the weaker brethren. However, the result was that some of the brightest and the best in the academic community queued up for retirement at 50 and went off to become professors in the United States, highly paid consultants, or visiting professors going hither and thither, while some of its weakest members hung on to their jobs like grim death. It is all very well to suggest that 31 per cent. should go, but we must ensure that it is the right 31 per cent. and that good civil servants who have served this country well are redeployed in a positive way that enhances their live and professional contributions.
I want to say a few words about school buildings. On the whole, I agree with Mr. Rendel, who worries that too much money is flowing into school rebuilding and refurbishment and wonders whether some of it could go into the further education sector. However, he did not mention the substantial increase—I think it is 19 per cent.—in its funding. By and large, those of us who care very much about the FE sector will be happy about yesterday's announcements and this afternoon's speech by the Secretary of State.
Although it is nice to hear that every school in the country can be refurbished or rebuilt, I am concerned that a recent Audit Commission report says that the standard of design of some new-build schools is not what it should be. I have a long-standing interest in design and good architecture, as well as a great interest in the environment. As we rebuild our nation's schools and hospitals, we should take this opportunity to do it well—to ensure that they are sustainable and of high quality. How many of us who live in this damp and rainy climate of ours have visited schools with flat roofs through which, usually about five years after they are built, water starts to pour? That makes one ask a number of questions. Who is the architect who built it? Which local education authority commissioned it? Why was it not built with a proper roof? Why was it not built sustainably so that it did not use up too much energy?
In that context, I recommend the work of the Sorrell Foundation. John Sorrell and his wife are doing a great deal of work on joined-up design by trying to involve children and staff in designing their own schools. The Select Committee recently visited several schools, not only in England but in Northern Ireland and the Irish Republic, where it was evident that early involvement of staff and students in the design process results in a much better design than one gets from leaving it all to some architect who takes it off the shelf as a standard, or slightly modified, design.
I urge the Minister to be conscious, at this period in our history, that when schools are being rebuilt they need to last for a long time. I am pleased that we will have schools that are fit for the 21st century and in which people can learn in a decent environment. We have waited a long time for that, so let us do it properly by emphasising good design and good build. As the Economic Secretary is in his place, I point out to him that the Audit Commission criticised public-private partnership design as being marginally worse than traditional public sector education authority build. We must learn from that and ensure that that problem is remedied.
The Government promise 1,000 specialist schools. The Select Committee's report on diversity and specialist schools, which was published about a year ago, was rather critical in that respect. We asked where, given that the Government are supposed to believe in evidence-based policy, was the evidence that specialist schools deliver higher achievement and better standards; we noted that all our research suggested that there was no such evidence, and that it was too early to tell whether there was a convincing case that specialism alone produces better results; and we asked the Government to look carefully at whether that was the case.
As the hon. Member for Westmorland and Lonsdale said, the policy has a history. It can be tracked through to the present day from the city technology colleges that were introduced by Kenneth Baker, now Lord Baker, when he was Education Secretary. There is nothing wrong in principle with cross-party agreement, which can often be achieved on education policy, in particular. We thought that we had all-party agreement, even from the Liberal Democrats, when we signed up to the recommendations of the Dearing committee, which we believed to be good news for the future of higher education. Later on, the Liberal Democrats changed their tune. I respect their position, although I disagree with it, but the change of view by the Conservatives revealed the bankruptcy of their higher education policy.
Having visited schools that have won specialist status—there are now many of them—the atmosphere seems to have improved in general, but there are more problems with some specialisms than others. I sometimes worry whether the Department is keeping a close enough eye on the mix in any given local education area. It is no good a large number of schools going for the same specialism. When the Select Committee visited Birmingham, we saw examples of collegiate schools that co-operate with each other. That system was the idea of Tim Brighouse, an adviser to the Department on schools in London. I hope that someone in the Department is ensuring that schools in, for example, a commuting area, or around some geographical focus, complement each other. We do not want them all to specialise in sports, IT or languages—they should offer a range of specialisms that give local students a much better choice.
I have some concerns about academies. I know that they are the Prime Minister's favourite thing. Of all the toys in the box, the little model of the academy is his favourite. He takes it out regularly and polishes it because he likes it so much. What worries me about academies—the Committee has not looked at them in depth, so this is a personal view—is the degree of public accountability that goes with them. As far as I can see, there is massive public expenditure on an academy, which is a school in the public sector but independent of the local education authority. At the same time, although that school has in the main been created with public money, the generous benefactor who perhaps puts in £3 million or £4 million of a total budget of £35 million has enormous influence on it. I am therefore concerned about the public accountability of academies, and I can tell my hon. Friend the Under-Secretary of State for Education and Skills and my hon. Friend the Economic Secretary to the Treasury that the Select Committee will return to that matter and scrutinise it.
That is not to say that some of the academies that I have seen, or that have been proposed, might not be marvellous agents of the regeneration of deprived communities. I am willing to be convinced that academies are the answer in certain situations and areas where other initiatives have failed, and I am happy to consider them.
To return to my opening remarks, a Select Committee Chairman, although not politically neutral, has with the Committee a responsibility to evaluate evidence fairly, objectively and pragmatically. I hope that I have given a fair impression of our work on specialist schools and academies, and we will keep a careful brief on them.
Turning to 16 to 18-year-olds, two matters have made me feel cheerful about education this week. One was yesterday's Budget statement, and the other was the Prime Minister's speech to the Labour party conference in Manchester, because I have been for a long time a one-person lobby for a real school leaving age of 18. It is a disgrace in Britain in the 21st century that children—I count 16-year-olds as children—are allowed to go to work in rotten, menial jobs with no training, education or guarantee of any further career development. In this day, that is a scandal. I have believed for a long time that the real school leaving age should be 18, although that is not to say that I want every child to be in a conventional school until they are 18.
I welcome what the Chancellor and the Prime Minister have said about a real school leaving age of 18. However, I have read the words of yesterday's statement carefully and they say that young people will be offered the opportunity to have education or training through to 18. I hope that we can push the Government to say that it will be against the law to employ any child aged 16 to 18 in this country without education or training being bound into the contract of employment. That is not wishing for too much. In a modern civilised society, in which we believe that the future lies in the education of our people, a Labour Government should give that guarantee to every child in the country. No more children should enter the labour market at 16 without a guarantee of further education and training. I am absolutely convinced that that is the right thing for the future. If the Ministers will go one step further on that, they will make me even happier than I have been during the past few days.
I want to finish by commenting on skills, and I shall tell the House a little story. I have said that there were very few people in the Chamber at the start of this debate, and that it would be lovely to have the numbers here that we had during our exciting debate on top-up fees. Was it not wonderful, however, that education—higher education, indeed—was at that time on the front page of every newspaper and the lead item on the news? As Chairman of the Education and Skills Committee, I thought that it was wonderful that we were having an intelligent debate on what higher education meant for our country and what Government and Opposition proposals would mean for the future of education in our country. I have never, during my time in the House or in politics, seen an education debate have such prominence, and it gladdened my heart.
However, things are different now that the Select Committee is having a major inquiry into skills. At every debate, discussion and interview session that we held during our higher education inquiry, the television was there, the Press Gallery was full, and after we had finished the journalists were waiting outside in the Committee Corridor. As soon as we turn to skills, however, there is no television and very often no radio present, and there is hardly a journalist to be seen. I know that my hon. Friend the Under-Secretary believes, as do I, that it is in skills that we are most deficient. I agree with the Liberal Democrat point on that. By and large, we have seen nice, steady progress in higher education, with more and more people entering it. We have seen some progress in skills, but not nearly enough. Too many people are still underskilled or unskilled, and it is appalling that they do not have the appropriate skills to survive in this country in the 21st century.
I shall give the House an example that I have given many times. We all get carried away with the idea of 50 per cent. of people entering higher education, but in the average constituency today, only 16 per cent. go into higher education. That leaves 84 per cent. to be other things: not only plumbers and electricians, but all the highly sophisticated technicians who run our local government and hospitals, right across the board, as well as our private sector industries. We need those people to be highly educated and trained, although not necessarily to degree level. That is where we have been lacking.
There have been some Government initiatives in that field, such as sector skills councils, and I can now see something positive shaping up in the Learning and Skills Council, after some disappointments in the early years. I hope that its new chairman will be as good as the outgoing one—I have a lot of time for what Bryan Sanderson did in the LSC in its early years. However, the fact of the matter is that it is in skills that we have a real challenge, because we have not done as well as we could.
The Select Committee is conducting a major inquiry into skills, and we are uncovering an enormous muddle, even today. I recently went with the Engineering Construction Industry Training Board to Thomas Broadbent, a 150-year-old small-to-medium engineering company in my constituency, to meet a group of other employers. They said that they found the complexity of our training and skills system in the Yorkshire and Humber region so complex that they did not want anything to do with it. That involves not only sector skills councils, which those employers have not yet come to terms with and do not really understand, but the regional development agency, which is involved in a whole number of working parties and working groups; the regional assembly, which already has two or three cross-cutting bodies working on skills; and the Government office for the region. There are so many groups with cross-cutting meetings that the representative from the training board said that if he went to half of the meetings that he was supposed to go to he would never do anything else, such as talk to the employers in the engineering industry—an important industry that, let us not forget, still employs 1.7 million people in our country.
When we really get our hooks into skills delivery in a region—I hope that I can persuade my colleagues that that region will be Yorkshire and Humber—we will have good evidence to give to Ministers on how to cut through some of that complex system, which does no one any good. I hope that the present proposals can be pared down so that everyone can understand just where we are going on skills.
Does the hon. Gentleman agree that there is a real problem getting young people to enter engineering and science? One of the great difficulties is motivating people to explore education in those fields. Will he join me in paying tribute to the Engineering and Technology Board, and will he invite it to give evidence to the Select Committee on its work in trying to persuade young people to enter engineering and science, and to become technicians, whom he also mentioned earlier?
I should be very happy to invite members of the board to give evidence.
I have spoken for some time, and I should like to conclude by making one more appeal to the Government. I am going to end on a high note by saying "thank you very much" for a proposal that I first saw emerging as a recommendation, and which I have seen being extensively evaluated because it is expensive. I am referring to the educational maintenance allowances. The Government have made the decision to spend the money where it counts: on pre-school, and on big increases right through infant, junior and secondary schools. They have made the hard decision that although they are going to expand higher education, it will not get as much as the earlier years provision. We know that 90 per cent. of those who get to the age of 18 and get their qualifications will go into higher education. It is too late then. Good research evidence shows that most kids from poorer backgrounds drop out between the ages of 16 and 18. Educational maintenance allowances have been properly evaluated and they are wonderful, but they are only available in one third of the country. I want them to be available in 100 per cent. of the country. As soon as we have an announcement that EMAs will be rolled out right across the country, I shall be delighted.
I am more than delighted to make the announcement today that we will be rolling out educational maintenance allowances for 16-year-olds from September and to 17 and 18-year-olds the following year. They will be available universally for young people from low-income families.
Well, there is nothing more copper-bottomed than that.
I have had a real opportunity today to range around some of the subjects that the Select Committee has looked at. There are issues on which we agree with the Government and others on which we disagree. I think that we have fairly pointed out the Government's deficiencies, and commented on the positive elements of their policies. In the true tradition of a Select Committee, we have tried to ensure that we scrutinise the Executive and hold them to account. That is our job, and it is a great pleasure for me to be doing that in the Education and Skills Committee during this Government.
Mention has been made today of the paucity of attendance on both sides of the House. In that context, I cannot resist putting it on record that the Liberal Democrats have had absolutely nobody on their Back Benches throughout the whole of our second debate on the Budget. I suppose that that is because making figures add up nationally is not their special interest.
I am not sure whether the hon. Gentleman was here when I started my speech, but I did point out that, unfortunately, our Front-Bench spokesperson was ill today and was therefore unable to be here.
I was here all the time. I was talking about the Liberals' Back Benches, which have been green and empty throughout. The hon. Gentleman has sat there like a palm tree in a desert for the whole debate.
No, the hon. Gentleman is on the Front Bench. But the fact is that there has been absolutely nobody from the Liberal party here to support him, which is very sad for him.
I want to make most of my remarks on the economy in general, and on the Chancellor's speech yesterday. Before I do that, however, as we are focusing on education, perhaps I could make a couple of points on education finance. I am amazed that the Government have not used the opportunity of the Budget to readjust the area cost adjustment formula, which provides money to local education authorities. This argument has carried on for many years. We were debating the issue even when I was at the then Department of the Environment. It is not new. Every time I have gone to see Ministers about it, I have said that it is a subjective formula. Attempts are sometimes made to attach some kind of spurious science to it, but it is subjective. That is why we get comparable authorities having very different area cost adjustments. That is particularly unfair in the case of Worcestershire, where we come out of it very badly. I would like to use this opportunity to make a plea to Finance and Education Ministers to think again. I know that they have been doing so, but nothing ever seems to come out of the thinking-again machine. As a matter of fairness, I would ask them really to address the issue this time and to examine the logic involved in the way in which the Government provide money to local education authorities.
The Conservative Front-Bench spokesman has spelled out our excellent position on parents' passports. One of the good things about that proposal which has not yet quite reached the public domain is that by giving money directly to people we are bypassing the bureaucracy of the local education authorities. In so doing, we would be addressing about 70 per cent. of the cost of local expenditure, and could, if we thought it through, therefore address the enormous rise in the burden of council tax and all its associated problems. This might possibly provide a way through the vexed question of council tax, to which I shall refer later.
A number of speakers in this short debate have said that, on the surface, the economy feels—to most people—as though it is in good shape. Interest rates are relatively low, though rising. Inflation is also low, though probably also rising—certainly above the Chancellor's projected 1.7 per cent. for next year. Both are rising because of significant increases in, and the hardening of, world commodity prices, and also because of lax domestic monetary and fiscal policies. Unemployment is low because public sector—not private sector—jobs are plentiful; jobs in manufacturing are falling.
Beneath this apparently calm surface, however, there are signs that the British economy is in an almost identical position to the United States economy's just before the dollar went into decline. This raises the question of whether pressure on sterling is around the corner. Certainly, sterling fell 4 cents to the dollar in one day last week, following the news of an appalling £4.6 billion trade deficit in January. People might be wise not to delay their buying sprees in the United States for too long.
As was the case with the United States, Britain is no longer paying her way in the world. For several years, she has been running a vast and growing balance of payments deficit, especially with the European Union. This fact was neatly skated over in the Red Book and went totally unmentioned in the Chancellor's speech yesterday. Britain is buying around £30 billion more goods and services abroad each year than she is selling. The value of Britain's visible and invisible exports actually fell between 2001 and 2002 by 5 per cent., which is a very large figure. During that year, as in previous ones, Britain made a surplus on her sales to the United States, but sadly, these did not make up for the vast losses that she made on her trade with continental Europe.
As was also the case in America before the dollar fell, this very significant trade gap has in the past been balanced by a heavy inflow of foreign funds, both in the form of direct investment and through the purchase by people abroad of UK Government bonds and securities. As was the case in America when the dollar began its plunge, the inflow of funds to the United Kingdom, which peaked in 2000, is drying up. In the American case, the result was a fall in the requirement for foreigners to hold dollars. There is absolutely no reason why the same principle should not apply to the willingness of foreigners to hold sterling if the present trend in both the balance of payments and the compensatory capital flows into the United Kingdom is maintained. The foreign account is therefore the first reason why pressure on sterling must be mounting.
The second, related, similarity with the American economy before the dollar went into its slide is the growing financial deficit in the United Kingdom—the continuing gap between public spending and the revenue raised to cover it. According to the Chancellor himself, that is running at an annual rate of well over £30 billion a year—currently about £40 billion—despite massive tax rises. On past form, the £37 billion he promised for the current year will be exceeded.
That financial gap has been caused, essentially, by a vast rise in public spending, set to reach well over £500 billion, or 42 per cent. of gross domestic product. All that must require one of two things: either a massive rise in tax rates or the Government substantially increasing their borrowing. In the context of what I am arguing today, the question then arises as to how successful the Government will be in raising the necessary loans, especially at current rates of interest.
It is arguable that, as with America, the appetite for British Government stock will begin to wane as more of it begins to flood the market. Again as in America, that will not only put pressure on long-term interest rates, but add to the vulnerability of the currency as foreigners begin to fear an interest rate rise and a fall in the value of Government stocks. I am saying that, contrary to the impression left yesterday by the Chancellor, the Government are dangerously gambling with the future of our country's economy and with its currency, the backing for which has been greatly weakened since the bulk of our gold reserves was sold.
What has caused those two major deficits in our trade and our finances? On the trade account, it is quite clear that since the Government took office the competitiveness of the British economy, relative to others, has declined. Productivity rates have fallen virtually continuously since Labour came to power. That is presumably why the Government no longer publish productivity rate tables in their general reports on productivity.
The reason for that decline in the competitiveness of the British economy is that from being one of the least restricted, lowest taxed western economies in the 1980s and 1990s, it has returned to being one of the highest taxed and most regulated. According to the Office for National Statistics, a further contributory factor to the decline in productivity has been the remarkable growth in non-productive public sector jobs. Whereas, for instance, the number of full-time teachers rose between 2000 and 2003 by 6.8 per cent., the number of full-time education administrators rose by 26 per cent. in the same period. A comparison between full-time nurses and administrators provides figures of 7.3 and 15 per cent. respectively.
In that context, it is of course to be welcomed that the Government have introduced a proposal in the Budget to amalgamate the Inland Revenue and Customs and Excise. I suppose I am bound to be enthusiastic about that, because I chaired the Treasury Committee that twice made such a recommendation. The amalgamation will undoubtedly create administrative savings.
The effect of the decline in the productivity rate has combined in our country with a switch from growth markets in north America and the far east to the sluggish markets of Europe. Far from benefiting the balance of payments, trade with the European Union has been to its detriment. It used to be said of the Germans and the French that the EU had an economic price for a political benefit, whereas Britain paid a political price for an economic benefit. For our trade account, the economic benefits are highly questionable.
As for the deficit in the financial account, this raises one of the central dilemmas facing British Governments of all political complexions: how to recreate for ourselves public services on a par with those of comparable countries while keeping taxes down to a level at which people are willing to invest and to work.
The problem is aggravated by the fact that certain taxes have begun to hit their ceiling in terms of public acceptance. Council taxes and much VAT are the most recent example of high taxes hitting the relatively poor hardest and becoming unacceptable. The resentment against local taxes is unlikely to be reduced by changing their form or name. People simply want to pay less tax, whether it is called council tax, local income tax, property tax or, for that matter, poll tax.
The answer to the conundrum of getting better public services and keeping taxes down is to pursue the path on which this Prime Minister's Government claimed to have set out under the label "new Labour": revitalising public services through a mixture of public and private money and management. Labour's attempt to do that failed in the starting blocks with, effectively, the dismissal of Mr. Field.
A good place to start the whole process would have been state pensions. Launching a properly funded, actuarially based pension scheme to which state funds were applied where premiums were beyond the reach of contributors, and paying pensions properly related to previous earnings, would have been an excellent start. That should have been followed by radical reforms to the management of the health and education system, on which we are basing today's debate.
It has become a proven fact that when patients, for instance, are given financial power to make their own choices, as in the case of most European countries, not only have more resources become available, but the whole system begins to respond with much greater effect and efficiency. In this country, it remains a privilege to visit a doctor and to receive treatment in hospital. When the patient is financially in charge of his own destiny, it becomes a right and an obligation on the health provider to give him or her the best possible service.
Will the hon. Gentleman answer one question? He knows a great deal about the health sector, but the US spends 15 per cent. of GDP on the health service while we spend 7.5 per cent. The figure for France is very high indeed. France delivers a good health service, but it is enormously expensive, as is America's, which is also very poor. Which example does he suggest we follow?
I am saying that, particularly in the health service, we need a mixture of private and public funds. We cannot do everything off the taxpayers' back for the reasons that, in a sense, are implicit in the hon. Gentleman's question. At 7.5 per cent., we are already straining taxpayers, so there has to be new thinking and a radical approach. I thought that new Labour, in the first instance, was about exactly that mixture of public sector management and finance combined with private sector management and finance.
That is what new Labour was to bring to the pot, if I may put it that way, but it has not happened. Ever since the right hon. Member for Birkenhead was thrown to the dogs, the momentum has gone out of that particular philosophy and that approach to government, which was an interesting one. I believe that it should be taken forward, because under such a system waiting lists become a thing of the past, but not because of Government edict.
The hon. Gentleman is painting a gloomy picture, but to pick up the point about the mixture of public and private funding for the health service, he says that it is a privilege to be able to go to a GP or to hospital. Under private financing of the kind that he is talking about, would not that become even more of a privilege and one based on the amount of money that someone could bring to bear to access the health service?
All I can do is give the hon. Gentleman an example. Because of France's largely state-funded insurance scheme, immediately people become ill, they get a fistful of what used to be francs but, unfortunately for the French, are now euros. They wander around the high street looking for a doctor. The doctors come out of their doors very rapidly, because those people have money in their hands. Suddenly, the boot is on the other foot and the whole emphasis shifts from subservience or dependence on the system, as the patient has the power and the ability to buy services. The attitude and approach of the provider would change overnight. That is exactly what has happened in France; I am not talking speculatively.
Order. I do not know whether the hon. Gentleman wishes to make the adjudication between the two, or whether he would like to leave it to the Chair.
I thank the hon. Gentleman for giving way a second time. In the case of France, the French are already looking at the gateway system operated by GPs to restrain the cost of the health system. The French health system is paid for through a tax on employment. How would he seek to pay for the private sector contribution?
The way the system is funded is, of course, an issue. In this country, funding is from taxpayers generally, and there is no reason why that should not continue. The issue is what happens to the money once it is raised, and how it is combined with other money, which the French have done very well. I totally accept the hon. Gentleman's point about the need for cost control, which is, of course, right. Were I a Frenchman, I would want much tighter controls in many ways on cost.
May I suggest to the hon. Gentleman that his earlier remarks about the number of bureaucrats and administrators within the NHS—it depends on how one counts them—could be applied to the French system, in which vast numbers of accountants and pen pushers shift around the various financial transactions generated by the high street shopper to whom he refers? Surely he recognises that there is a linkage between that and the overall cost of the system.
But surely the hon. Gentleman will recognise that the French system provides a far better health service than ours. [Hon. Members: "Oh."] Well, I would not have thought that anyone disputes that. Certainly, as I said, were I a French taxpayer I would be in the business of trying to control some of the expenditure. I do not intend to deny that at all. Basically, however, an effectively state-run insurance system has worked extraordinarily well in France and in other countries.
As my hon. Friend rightly says, Spain is one of those countries. The idea that our health system is a good system compared with other countries' systems is a figment of the Government's imagination.
Is my hon. Friend aware that as a proportion of GDP, about as much money is spent on health in Scotland as in Germany, and yet the biggest killer for men is prostate cancer? In the United Kingdom, the chance of being cured of prostate cancer is roughly 50:50, whereas in Germany it is 76 per cent. Does not that show that we have no room for complacency?
My hon. Friend makes a good point. An even better point—his point was good enough—would be provided by the example of Wales, where, I understand, the per capita expenditure is in some respects higher than in many other European countries, and yet the waiting lists are far longer than in England. It is a perfect example of how the system of delivery and the system of financing count. The Government used to believe that, when the right hon. Member for Birkenhead was in charge of thinking in the Labour party, but they have given up on it. The situation with this Government is now hopeless. In fact, they have been exhausted on these matters by their own Back Benchers, and the original objective has been destroyed. What remains is increasingly marginal though bitter in-fighting within the Labour party over a rump of policies on hospitals and further education. New Labour has lost its point.
Britain's twin deficits are serious. They have at their root the Government's failure to produce a truly competitive economy. They are bound in the end to create pressures on our currency, and instability for its future. Whether that turns eventually into a full-blown sterling crisis, or, as in the American example, results in a gradual but persistent slide in the value of the pound, is anyone's guess. One day, as always, a Conservative Government will have to pick up the pieces.
Let me say at the outset that the doom and gloom of Sir Michael Spicer does not reflect what is happening in the real world outside. I hope to say a little about the positive effect of the Budget on constituencies such as mine.
In his Budget, the Chancellor set out policies that would maintain a strong economy and allow our public services to grow and develop. It is interesting that the Opposition always present those two things as alternatives. That is nonsense in a modern economy. Good public services that support individual effort, provide the infrastructure that the economy needs and ensure that we create a cohesive society in which people are enabled to innovate and take risks are essential for the development of our economy. Public services have a moral function, but they also have an economic function. The twin track that the Government have pursued has borne, and continues to bear, fruit in areas such as the one that I represent.
It is worth reminding ourselves of the situation that we faced in 1997. We have heard a lot from the Opposition today about manufacturing industry. I must remind the House that, under the Conservatives, nearly 20 per cent. of the manufacturing industry in my area was wiped out. There were families in the middle of my constituency who, by 1997, were almost in their third generation of unemployment, and children who had never seen anyone in their house going out to work. The situation in my area has been transformed. The unemployment rate in Warrington is 1.7 per cent., which is below the 3 per cent. figure that Beveridge used to define full employment. Far from that being dependent entirely on public sector jobs, new businesses are being created every week in my area. It is a north-west success story. The reason for that, and the reason why the policies that the Chancellor is pursuing are right, is that Warrington has developed precisely because of that mixture of public sector innovation and private enterprise that has borne fruit. I will give way to Chris Grayling, because the voters of Warrington, South, resoundingly rejected him.
The hon. Lady is right that I was a candidate in Warrington, South at the 1997 general election. I simply ask her to reflect on the circumstances in Warrington in 1995 and 1996: by all measures, it was a boom town. Development and new businesses were appearing everywhere and there were huge pressures on infrastructure. Her memory and mine of the environment in Warrington at that time are very different. Warrington was doing pretty well under the Conservatives.
The hon. Gentleman' intervention is almost entirely wrong, because Warrington was not doing well. Large parts of Warrington had very high unemployment under the Conservatives. If he will permit me, I will give him the figures and the reasons why we managed to tackle that.
First, because Warrington was a new town—the hon. Gentleman may well have a point on this—it was fortunate enough to be at the heart of a very good motorway network. That was public infrastructure provided by public money. Warrington was also fortunate enough to have a council that actively promoted economic development and provided sites for new businesses in the town—a Labour council, looking forward.
The council was able to take advantage of the improvement of the economy under this Government because of many of the schemes that the Government introduced, such as the new deal, which the Tories opposed consistently, and modern apprenticeships. We hear a great deal of discussion about those, and the Tories try to talk them down, but they are providing good training for a number of young people in my constituency. The results can be seen very clearly. Long-term unemployment in Warrington has fallen by 83 per cent. since 1997, and long-term youth unemployment has fallen by 79 per cent. I can tell the hon. Gentleman in very simple terms what difference the Government have made in Warrington. They got people back to work, and everything else has followed from that.
I do not deny that there is much more to be done. There are still serious inequalities in the borough, and I represent many of the most deprived wards. We have surmounted the first challenge, which was to return people to work; the challenge for us now is to improve their skills and give them long-term careers in which they can develop those skills and earn a good living. I welcome the new deal for skills that was announced in the Budget statement, which I expect to benefit many of the people whom I represent. It must, however, be accompanied by ways of helping people to move on after gaining those skills.
If, as the debate suggests, we all agree that vocational skills are undervalued, we must ensure that the acquisition of such skills can lead to other things—further and higher education, for instance, according to how people want to develop. We cannot do that if we cap the number of people who can move on. That is why I am so worried about the Conservatives' refusal to tell us how many people they want to put into higher education. Talk is all very well, but if an artificial cap is imposed on numbers, those who suffer will be the very people who have been traditionally under-represented in higher education throughout history.
The Conservatives talk of making sure that people who are capable of undergoing higher education can do so, but that has never happened in this country. Only those who believe that ability is distributed according to income—which is complete nonsense—could imagine that it had. Working-class pupils are always, and have always been, under-represented in higher education. It is people from poorer families whom we must help to grow and develop.
My constituency needs that above all, because we hope to benefit from the recently proposed northern corridor. We are ideally placed to benefit from it. On the M62, we have Omega, the largest industrial development site in the north-west. I want—and I know that the local council wants—to attract high-tech, science-based jobs to the area. I hope that we shall be able to use both the new deal for skills and the investment in science and innovation that the Chancellor announced to attract such jobs to regions such as mine—not just the golden triangle of the south-east—so that we can turn the ideas developed in our north-western universities into employment opportunities. That is the way to enable our economy to prosper in the future.
The hon. Lady speaks of the need to give more opportunities to young people from less well-off backgrounds in her constituency. Following the passage of the Higher Education Bill, even given the new grants that it will provide, those young people will leave university £10,000 in debt. Does she support the Government's policy on introducing fees, and will she vote for the Bill's Third Reading?
My constituents and the hon. Gentleman know my views on the Bill, but let me say this. The Opposition's policies would benefit none of the people whom I represent, because they would prevent them from going to university at all. I will take no lectures from him on opportunities for members of lower-paid families.
Does my hon. Friend agree that the Budget statement said that the expansion of UK universities would be funded, and that the amount received by each student during that expansion would be maintained, whereas critics had said that the £1 billion from fees would be compensated for by the taking away of public money? Is that not a great relief for most of us?
I agree. It is also proper for the Government to tackle the scandalous underinvestment in universities that has continued for far too long.
If my constituency is to benefit from future development in the north, investment is needed in public transport as well as in skills and science. The corridor cannot be developed simply by blocking up the M62. The Government have already made some advances, with investment in buses, bus exchange and traffic management in my constituency. The upgrading of the west coast main line will bring particular benefits to my constituents but more needs to be done. Bank Quay station in Warrington is an absolute disgrace for a mainline railway station. The rail corridor from Liverpool to Manchester needs considerable work to upgrade local stations such as Birch Wood and Glazebrook, to ensure that more trains stop at smaller stations and that bus services link up, so that public transport can be used to get to work.
It a long-cherished wish of my hon. Friend Ian Stewart and myself that before long the Manchester tram system will be extended to Cadishead in his constituency and to the Birch Wood industrial area in mine. That is a long-term project but it has been a failure of Governments over time not to think long term about infrastructure and its contribution to developing the economy. I hope that the present economic stability will allow the planning of such projects in future.
If my constituency is to benefit from the Budget, projects are needed that tackle disadvantage in the most deprived areas and allow all to benefit. There is only one Sure Start project in my constituency—for a new children's centre at St. Stephen's. Although it provides the best possible start for youngsters in that area and spreads best practice elsewhere, more projects are needed. I am pleased about the Budget proposal to extend children's centres to the most deprived wards and then to every community.
Sure Start is one of the Government's most forward-thinking and innovative initiatives. I hope that it will be combined with improvements to child care. Warrington has more than 4,000 nursery education places for three and four-year-olds, which is a great improvement, but they are part-time places. Parents in work often find it a struggle to find appropriate child care. The new tax credits have helped, but parents on low incomes in particular have difficulty finding the nursery places that they need. Investment in child care fulfils all the criteria for good public services. It supports individual effort, looks after the most vulnerable, tackles disadvantage and ultimately saves money. As an ex-secondary school teacher, I believe that early-years investment ultimately saves the schools system a great deal of money because it prevents problems developing later.
The hon. Gentleman is right. The other advantage of Sure Start is that it is a universal service, so no stigma attaches to anyone in using it. That, too, is important in trying to tackle disadvantage.
We also need further investment in community policing. My constituency is lucky in that we have community action teams in various areas and 11 community support officers. The Budget was right to make it clear that there will be no cuts in policing. If we are to create a confident society in which people feel at ease, it is important to ensure that they feel safe and secure on our streets and in other public spaces.
The key for any politician is how we maintain support for investment in public services and how we tailor them to people's needs. The Opposition propose the parent's passport and vouchers. Such an approach has the merit, I suppose, of being simple, but it has the demerit of being absolutely wrong. Under the mantle of choice, it would actually deny choice to most people. We heard about the Opposition's school proposals—we can never be sure exactly what they are as they seem to change from day to day—but we need only to look at their proposals for the health service to see how misguided they are. Apparently, a patient would receive 60 per cent. of the NHS cost of an operation, but let us consider the example of an old lady waiting for a hip operation. Unless she could raise the rest of the money, she would have no choice whatsoever, while at the same time her local hospital would be being starved of funds. That is a classic example of "To them that have shall be given."
I see no merit in considering people's relationship with public services solely through the consumer model; the situation is much more complicated than that. It is right to say that people want public services to meet their needs quickly, but a consumer has no responsibility except to herself. She buys or does not buy, turns up or does not turn up, as she wishes. People think about public services in a way very different from that. They recognise a whole network of complex obligations that entail meeting not only their own needs, but the needs of others. The key for us is how we meet those needs and spread best practice in public services.
We need to define what people want when they talk about choice in public services. It is easy to do that when they talk about wanting to see a doctor near their home or place of work, or about wanting to book their hospital appointment at a time convenient to them. But much of what we hear about choice depends on improving access. I see no evidence to suggest that many people want to rush off to hospital at the other end of the country—unless they need a particular specialist service—or that they want to be able to change their child's school or child care arrangements in the same way as they switch between supermarkets. They have a much longer, two-way relationship with such services. What they want is for us to ensure that the service provided by their local hospital, school or child care facilities is as good as that found anywhere else.
In looking at funding, the question for us is how we spread best practice. A model that we should think seriously about is the one that was used for beacon schools. Best practice in schools was recognised and rewarded, but in a way that required schools to spread that best practice elsewhere. We need to do much more of that in public services and to find many more such models. My fear is that if we fragment our services too much, we will lose the chance to operate the virtuous circles that spread best practice. That is why I have some reservations about how we devolve services locally. It is true that many communities, particularly poorer ones, are not consulted enough about the services provided for them and that they are not involved in those services. Things are often done to them, rather than with them, so we must build funding mechanisms that involve people on the ground.
I enter a note of caution, however, about devolving ownership too far down, because two problems often follow. The first is that there is no evidence of loads of people wanting to go out and run the services. The experience of most Members in respect of finding school governors would confirm that. Even as governors have been accorded more and more powers, it has proved more and more difficult to find people who want to become governors.
It would gladden my heart if I thought that it would be repeated elsewhere, but sadly the evidence suggests that it will not.
The second problem is about funding. If we move towards a model in which local communities own their local park or library, for example, we face the danger of losing the current cross-subsidies. We try to allocate funding, through whatever mechanism, on the basis of need. We may disagree about which are the greatest needs, but we all try to operate on that basis. If, however, I part own my local library or park, why would I want any of my funding to be moved elsewhere in the borough? I suspect that it would not be long before wealthier communities were pressing to keep their local council tax—or whatever mechanism is used—in their own area rather than see it transferred elsewhere. That might lead to improved services in wealthier areas and a decline in services in others. We should be very wary of that.
Accountability is still another problem. If services are devolved to the locality, they would presumably have to be run by different boards, but how is it possible to be accountable if a body spends money without raising it? Conversely, how can a Government or local council be accountable for something that they do not control or own?
Those are the sorts of problems that need to be resolved, but it is encouraging that we can now discuss them on the basis that our local services are properly funded and improving. We are no longer firefighting, as we were throughout most of my career in the public services, but discussing ways of improving them. That is the real message of the Budget. It is an encouraging one for my constituents and for the country as a whole. In future years, I hope that we will continue to build on the progress that we have made in the last few years.
I wish to deal with several aspects of the Budget. Before your arrival, Mr. Deputy Speaker, there was great excitement among Government Members at the idea that a shadow education spokesman was going to participate in a debate about education. The fact that our debate is about much more than education is evinced by the presence on the Government Front Bench of two Treasury Ministers but only one education Minister.
We are debating a Budget that was, in my view, something of a nothing Budget. Had the Chancellor stood up and said that he had no speech to make this year, it would have passed by unremarked. Frankly, in respect of its content, his speech offered not a lot more than that. There was rather too much party politics and not enough substance. It did, however, have a pronounced sting in the tail about public borrowing—it emerged from the Chancellor in his usual way of speeding so fast over bad news that it is difficult to catch his words. The trend is alarming, to say the least, and certainly much worse than the picture that the Chancellor portrayed to the House 12, 24 and 36 months ago. Every year, the Government's borrowing position seems to get worse.
Beyond that, however, it was very much a nothing Budget. There was no mention of income tax or national insurance. Although there was a lot of party politics, there was no real analysis of the challenges that the nation faces. The Chancellor missed out some fundamental matters that are crucial to our international competitiveness and our ability to deliver high-quality, efficient public services.
I shall begin by talking about international competitiveness and our economy's efficiency and productivity. Those factors are crucial to our future success as a nation. The Chancellor continued his bombast about his successes of recent years. To his credit, there have been economic successes recently, although they have been achieved at serious cost to the public finances. However, my profound concern is that growing storm clouds overshadow the Chancellor's good headlines on our economy, on the success of enterprise and on our ability to compete in the world. I am alarmed at how little yesterday's Budget had to say about those matters.
We face an enormously challenging world in which manufacturing industry is moving at a rate of knots from the developed world to the developing world. In addition, different enterprises in the service sector are making the same move.
Eighteen months ago, when I was a member of the Select Committee on Transport, I took part in a visit to Japan and Hong Kong. The proprietors of a container port in Hong Kong told us that, whereas 10 years previously they would have bought their new cantilever crane from Japan, they now bought such items from China, where the quality was the same but the cost was massively lower. Countries in the west, and those such as Japan, will be unable to compete effectively with the bulk manufacturing capability of countries such as China.
I am following the hon. Gentleman's argument with care. One of the trends established under this Government has been a rising share of trade with the high-growth Asian economies such as China. That is a critical factor, and we must get to grips with it. Trade may have shifted to China, but does not the hon. Gentleman agree that the key is how well we support that country's infrastructure through trade from these shores?
I agree, and if the hon. Gentleman bears with me, I shall explain my concerns in that area.
Many of the traditional foundations of western economies are shifting because the cost differences—such as those that I described in connection with the cranes in Hong Kong—are fundamental, pronounced and unavoidable. In future, western economies will not be centres for mass manufacturing. Increasingly, the bulk service sector, which includes back-office operations, will move out of this country to other parts of the world.
To survive, compete effectively and flourish in the future, Britain must be a specialist, dynamic, innovative and entrepreneurial economy. We must offer a deregulated and competitive environment, so that companies will want to keep their business here. We must foster new business, attract international investment and offer the specialist components, products and innovations that will ensure the continuation of the flow of trade to which Mr. Todd referred.
Why am I so concerned? For all that the Chancellor painted a picture of unblemished blue skies, I believe that the trends and indicators in this country—the warning signals coming from industry—show that, step by step, the deregulated, lower-tax environment that we have had for the past 10 years, which enabled businesses to flourish and helped the economy to perform well, is being eroded on every front.
Is the hon. Gentleman therefore puzzled by the apparent support of both the Institute of Directors and the Confederation of British Industry for the approach taken in the Budget? It sounds as if those organisations do not share the hon. Gentleman's deep-seated concerns.
The hon. Gentleman is doing well in anticipating me. Let me pray in aid those very organisations and the concerns that they have raised. I suppose one could say that the fact that the Chancellor did not come up with another swathe of business regulations that would have caused even more problems for those running enterprises in this country is a positive step, but he did nothing to address the already substantial competitiveness issue that Britain faces—the burden of regulation.
There is a major storm cloud ahead, not just for individuals but for business. In the unfortunate and increasingly unlikely event—given the Government's performance—that Labour remains in office after the next election, the Chancellor's figures will, by every independent estimate, require substantial tax increases in the next Parliament. If that happens, given the Government's track record in the past seven or eight years, part of the burden will fall on business and make it even more difficult for our companies to compete.
The hon. Member for South Derbyshire talked about the CBI, which has specifically said that red tape and extra taxes are making the UK a less attractive place to do business. The hon. Gentlemen may be aware of a survey conducted by MORI for the CBI last November of 250 senior figures in industry. Some good points came out of it: 78 per cent. of business leaders said that they believe that the UK remains an attractive place to invest. But two thirds of respondents believed that the Government place a low priority on delivering a favourable business climate. Seventy five per cent. said that the Government were less business friendly, and 68 per cent. expected the situation to worsen. Sixty per cent. of those captains of industry—this is the key point; we are talking not about today, but about the future—expected the climate for investment in Britain to get worse in the next five years. That is the issue and the real challenge. Although things may be fine today, business leaders expect that, step by step, the regulatory environment and the growing burden of taxation will make life more problematic for them. As time goes by, our competitive position will be eroded.
Does my hon. Friend recall that in that same survey, 6 per cent. of those FTSE 100 chief executives said that they were thinking of moving part of their operation offshore in the next four years?
My hon. Friend is right. That is the concern. The Chancellor's speech was very much about the here and now. What happens in the future? What about the trends that are becoming alarming and a genuine cause for concern? In the context of the increasingly difficult international climate, with real competition from parts of the world from which we have not faced competition before, business leaders are beginning to consider moving services offshore and talk about the climate in Britain becoming worse. If we are complacent and do not wise up to the challenge that we face, there will be a significant threat to our enterprise and competitiveness.
I pray in aid the director general of the CBI, who said last November:
"when top company decision makers start giving the kind of signals contained in our survey the government must sit up, listen and take action. There is widespread concern about the UK's declining competitiveness and this is starting to feed through to investment decisions. There is no room for any complacency by anyone anywhere."
That is a pretty stark message.
In search of a real drive to deal with those issues, I turned to the section of the Red Book marked "Enterprise culture" on page 54. I looked for the steps that the Government might be taking to address the problem. In January 2004, the Chancellor hosted a conference in London called "Advancing Enterprise: Britain in a Global Economy." We also have the Davies review of economy and enterprise in education and the Tomlinson review of the 14–19 curriculum. Then we have enterprise week in November. We have the £1 million enterprise promotion fund, the launch of a new competition to identify European centres of enterprise and an online summit of experts from the United Kingdom, the United States and Canada to be held in April. We have a new council for graduate entrepreneurship, a working group and a pilot programme of
The problem is simple and stark: those are not the issues that the Government should be addressing. The Government should be going step by step—the steps should be big—towards a more deregulated and more competitive environment, with lower taxes for businesses, which will encourage enterprise in this country to grow and develop.
"We are delighted to see the red tape agenda is now being taken very seriously. It's been a genuine impediment to British growth . . . the Government is now taking that forward."
The Federation of Small Businesses said:
"The Chancellor's announcements on red tape and tax administration are timely and welcomed"?
I shall not read out all the comments but, for example, William Sargent, chairman of the Small Business Council and joint chief executive of Framestore CFC, said:
"The ideas are exactly what I have been looking for and I look forward to them being effective."
Do not such statements address the point that the hon. Gentleman is making? The Government are taking the agenda forward and business welcomes that, which is more than his Government—
The Paymaster General prays in aid post-Budget comments, but she has been in power for seven or eight years and the comments about the need to improve our nation's competitiveness and to reverse some of the regulatory steps that have been taken are not new—they have been around for years and the Government have done precious little about them. Furthermore, the Government have quite a record for making announcements on dealing with competitiveness issues. For example, yesterday we heard announcements about the housing market. The Chancellor made yet another announcement about the need to take the brakes off development to allow massive expansion of housing across the south-east.
I have been a Member for nearly three years and have heard that announcement at least four or five times before. It seems to be seasonal, like the first cuckoo of spring; we reach a certain point of the year and the Chancellor makes yet another pronouncement about the need to improve the productivity of the nation by building lots of new houses. Shortly afterwards, the Deputy Prime Minister announces the building of lots of new houses. We wait another year and the same thing happens again. I shall believe the Government's commitment to remove red tape when we see in this place motions to repeal regulations rather than to add new ones to the statute book.
In reality, that repeal is not happening—nor will it happen. We have only to consider the changes in employment law that are due to come into force on
If the hon. Lady will bear with me for a moment, I may anticipate her point. No doubt she is about to ask me whether I am bitterly opposed to all those changes in employment law. It is difficult to argue that many of those changes, taken individually, are a bad thing; the point is that when we add them up for business, time after time and change after change, we are ultimately piling straws on a camel's back. Labour Members may be sincere in their belief that such things are necessary but they miss the point: if we have no wealth generators in future because we have over-regulated and been too ambitious about what we expect them to deliver, we shall all suffer. The hon. Lady's constituents who struggle in life will suffer, too.
The hon. Gentleman says that there are too many regulations and they are cumulative. I disagree, but can he tell us which ones he would get rid of: flexible working, leave for adoptive parents, enhanced maternity provision?
In due course, my hon. Friend Mr. O'Brien will publish a wide range of such regulations. The hon. Lady asks for a specific example of a regulation that will come into force this year and have a profound effect. Last week, I visited a retailer in a small village near Lewes in Sussex. The retailer is basically a herbalist who manufactures a small range of her own products, which she sells from a shelf in her shop. The hon. Lady will know that the traditional herbal and medicinal products directive is currently going through the European Parliament and the Commission in Brussels, and that it will ultimately be put before this House. As the directive is currently set out, the herbalist, who enjoys what she does but probably does not make a lot of money, must batch-test every single box of five or six products that she mixes up and puts on the shelf. Theoretically speaking, every one of those products must be registered—at a cost. That is one example of a regulation that the Government will enact and that will have a severely detrimental effect on a small business.
I have listened carefully to the hon. Gentleman's contribution. The last Conservative Government set up the Deregulation Committee, and this Government have reformed it to improve its powers—it is now the Deregulation and Regulatory Reform Committee. Can he explain why Conservative members of that Committee never turn up? Is it not another case of all talk and no delivery from the Opposition?
Helen Jones asked me for an example of a regulation that will have a severely damaging effect on a small business. If the example that I gave were isolated, it would not be a problem, but such regulations occur in sector after sector across our economy, which means that individual small businesses must take on extra administrators and work late nights doing paperwork. Many business men and women have decided that enough is enough; they are stopping employing people and are becoming sole practitioners.
Ultimately, the regulation that I described will make us uncompetitive and provide a disincentive to our entrepreneurs, and the economy will suffer. If we do not have the innovators and entrepreneurs of the future—people who invent and market things, set up and build businesses and allow our economy to compete effectively—we will not succeed and will sink into decline in the face of overwhelming competition from parts of the world where the cost base is cheaper. Yesterday's Budget was worrying because I heard nothing from the Chancellor about that challenge and no long-term strategy to reduce the regulatory burden.
I listened to what the Paymaster General said, but I shall start to take her remarks seriously when I see motions before the House to scrap regulations. As far as I can see, that has not happened yet. I shall stand corrected when I see those motions come through, but I have not seen them yet and do not believe that they are coming soon. Unless they start to come and unless we start to rationalise our regulations and think about creating a more flexible entrepreneurial environment for our people to operate in, the consequence for our competitive position in the world in the future will be extremely serious. We face an economic challenge of a kind that the developed world has not faced in 200 years. Unless we respond to it effectively, we will not flourish and survive in the future and will not be able to deliver the service improvements that we want for all our people. I listened in vain to yesterday's Budget for a clear strategy to deal with that problem.
I shall confine my remarks to three areas of the Budget. First, I shall talk about education, the subject of today's debate. I especially welcome the commitment to increase capital investment in schools, which should mean that the building schools for the future programme, which is intended to replace secondary schools that require replacement by 2015, will be completed in that time scale. Specifically, of course, I hope to ensure that the bids submitted by Derbyshire and Derby City local education authorities commend themselves to the Department when next it considers bids for that programme. Derbyshire LEA was disappointed not to feature in the list of local authorities selected in the first round, but it will have the opportunity in the near future to explain its concerns and to listen to any critique there might be of its bid, so that it can improve its efforts when it submits its next bid.
I shall briefly comment on the merits of the bids. The Derby City bid was an expression of interest in the scheme. One of the key features was the integration of special schools with the secondary school sector. The LEA makes a powerful point about the built environment of the small group of special schools in the city and the need for new facilities within the mainstream educational environment. The proposal has much to commend it.
Derbyshire LEA submitted a bid that focused on the former coalfield areas in the county, including the south Derbyshire coalfield, and the three excellent secondary schools that serve the town of Swadlincote and the immediate surrounding villages. The heads have met and put together a challenging approach to improving the school buildings in the town, and I hope that it will commend itself to the Department when it next considers the proposals. Derbyshire has an excellent track record. It is an excellent council, and is one of the small group of councils that already commands that badge. It has set high standards in developing its education services in the past few years. Among the exciting aspects of its proposal is the extension of online courses in secondary education. I hope very much that its bid will be successful in the future and I shall do my best to ensure that it is.
The other aspect of the Derbyshire bid that is especially strong is the proposal for cluster working. I mentioned that the three secondary schools in the Swadlincote area were working together, but it would be easy to find neighbouring schools that do not agree with each other on the future provision of secondary education in a town, especially if they include—as in this case—a former grant-maintained school. It is to the credit of the leadership of the three schools that they have been able to work together on an agreed solution.
The Budget will consolidate the track record of solid educational capital spending over the past six years. I sometimes feel like a market trader when I talk about the increase in capital spending in schools in south Derbyshire. I say, "Well, it's not double, it's not three times, not four times, but something like six times greater than the equivalent period under a Conservative Government." The result of that spending on the buildings in my community is now noticeable.
While we all welcome the extra expenditure on secondary education, does the hon. Gentleman agree that it is a pity that similar largesse has not been extended to colleges of further education, in Derbyshire and elsewhere? Those colleges produce results at approximately two thirds of the cost of secondary schools and could provide the improvement in vocational education that we desperately need.
I respond to that with some degree of agreement. There is no further education college in my constituency, so my views are second-hand, although many young people from the area travel to FE colleges in Burton, Coalville or Derby. The point is well made, but it is now being addressed by the Government. However, the hon. Gentleman's fair criticism could be directed at past choices.
The track record has been excellent. Only a month ago, in two separate announcements, John Port school in my constituency—it is one of the largest secondary schools in the country and one of the most successful in Derbyshire—received in two wedges £4.7 million for new buildings. The money will extend places for pupils, replace redundant temporary buildings and provide new buildings. I have referred to the excellent track record, and the Budget gave me confidence that we will continue to see that level of funding and, if anything, an acceleration in it in the future. Despite my intervention on Mr. Rendel, my expression of enthusiasm for what we have had in south Derbyshire was not meant to suggest that I wished that funding to be transferred to another part of the country.
I very much welcome the announcement on early years, to which much the largest increase in expenditure has been committed. I endorse all the points made by earlier speakers about the importance of early years provision. South Derbyshire is now a relatively prosperous area, so it has not benefited from Sure Start. It has one mini Sure Start, which is a slightly different programme, and exciting ideas about the development of children centre services. That will require innovation as the area is dispersed and has one smallish town and many villages. The provision of one building to run a service might not be as appropriate a model as it would be in a larger urban environment.
My right hon. Friend the Minister for Children met representatives from Derbyshire only recently. We discussed those issues and other funding matters, and I am sure that she must share my delight at the Chancellor's announcement, which indicated that we could confidently project future growth in this sector, which would benefit my constituency as well. That is excellent news.
I wish to make one other remark on education. We need to focus much more on skills retention and on raising the skills of existing workers. The focus has rightly been on the low-skill capabilities of school leavers and those joining the work force, but one of my critical concerns is the loss of high skills in companies such as Rolls-Royce, Toyota and other manufacturing businesses that operate in the Derby area. Those skills are sometimes lost when such companies go through the strategic change that is necessary to compete in the modern world. It is a tragedy if high-quality engineering skills are lost when people learn how to run a pub, become a taxi driver or teach people how to drive. We say goodbye to long-entrenched skills at our peril. We need to look harder at models that will allow us to retain them within the local economy where they are relevant.
I come now to an issue in which I have long taken an interest, but which is pretty dry. I refer to organisational change. I was delighted to see the emphasis that the Chancellor put on the need to transform aspects of our public services. I say that because I have made many comments in the Chamber on how that might be achieved and I have urged more radical approaches in the past. I am pleased to see the Gershon review, which indicates the scope for dramatic change, and the O'Donnell review on the Inland Revenue and Customs and Excise producing concrete proposals for change. I also welcome the fact that the Department for Education and Skills is looking hard at its core office functions and the way in which those skills may be utilised better.
I want to express some cautionary words while strongly endorsing what has been said. First, in projects of such scale and complexity, specific things must be got right from the very start. For example, there needs to be clear accountable leadership of any project of such a scale. Both political leadership and managerial leadership of the specific services are required. We have all learned from civil service change that is it often extremely difficult to achieve that key aspect. It is easy to justify confused agendas and complex accountabilities, but if one goes down that route in a project of such a scale, the result is inevitably failure. It is absolutely critical to establish the principle that when we set up a change programme of such a scale, one person should be in charge, and that person should be given a great deal of flexibility and freedom to act.
Secondly, we need a clear definition and quantification of the goals of the change process and the outcome that we want at the end of it. Thirdly—this is another key aspect associated with failure—we need clarity of communication with stakeholders and constant external reference so that we look outside at other experiences and learn from other people. After reading the O'Donnell review—I shall refer to some of the remarks in the appendix later—I was delighted by the quality of comments made about that process by external advisers.
Fourthly, we need an ongoing risk analysis. The projects are likely to be extremely high risk, and they will require constant awareness of their impact on ongoing service provision. One could not talk about a higher risk project than one involving the Inland Revenue and Customs and Excise, because if things go wrong there, the impact on the Government's cash flow would cause major difficulties in a short time. It is thus vital to work to ensure that there is continuity with legacy systems and processes while we engineer change.
Fifthly, beyond the leadership of a project, we must ensure that we have skilled technicians in project leadership who have considerable freedom. It is critical that politicians do not attempt to pre-empt a large number of answers. We must give people who are challenged in such a way a great deal of freedom to think out of the box and produce their own solutions to the problems that they face.
The final requirement is perhaps not quite as transparent as the others, given the way in which the Chancellor made his announcement yesterday. Clear financial provision is required. The process represents investment to save, rather than the idea of making immediate savings or saving in the short term. There are substantial additional costs during the first year or two of changing large organisations. Incidentally, I think that it is perfectly legitimate to borrow against such costs because they represent an investment to save that can be demonstrated. Nevertheless, I would want to ensure that such spending was provided for cautiously and prudently in our expectations.
I would like to draw attention to comments made by external advisers to the O'Donnell process. John Coombe, the chief financial officer of GlaxoSmithKline, identified the need for both a chair and chief executive. The Government have not endorsed that in their organisational approach, although they make a powerful argument for clarity and accountability over the critical mass of project leadership, which is suggested by John Coombe. Nevertheless, he emphasises that "top level action people" are required in the project, which has been my experience of projects in the private sector. He says that a
"big investment in taking a number of the very best people out of normal business activity" is needed if one is to achieve the change required.
Information systems will clearly be central to achievement and, to take another comment, Martin Taylor, one of the other advisers to the report, emphasised that this would require a very highly qualified chief information officer, and that the post would be one of the most important chief information officer jobs in the country. That is a substantial understatement. This is a post next to that of the chief information officer, as I would regard him, for the NHS, who has been recruited in the last year at a substantial salary, but still fairly modest in private sector terms. This is a critical post that I cannot imagine will be recruited from within the public sector. There are some large challenges within the project, and I give notice that I will certainly be watching its progress with considerable interest and some concern.
The last point that I want to dwell on is the importance of flexibility, which comes back to the speech made by Chris Grayling. The Government produced some interesting reading as part of the Budget pack this year, and I want to refer to two of the documents—first the discussion paper on the stability and growth pact, and secondly the paper on flexibility in the UK economy, which drew out some reinforcement of the Chancellor's reference to the British model of economic success. I think that he was quite deliberately drawing a distinction between the British and the European model, as many of us would understand it, and the United States model.
The key thrust of the document on the stability and growth pact was the importance of flexibility in economic management. For example, it highlights the inflexibility of the 3 per cent. GDP deficit and admits the need to take account of overall debt levels. The hon. Gentleman did not refer to the fact that the Government have been extremely successful overall in bringing down Government debt. The document notes the continuing high debt levels of many existing eurozone member states and highlights the challenges of maintaining long-term public investment if short-term limits are set instead. It points to the challenge of the absorption of the new member states, which have very different economies from the core group of eurozone members. For example, they have much lower public debt levels, but substantial infrastructure deficiencies that would suggest long-term investment requirements needing to be funded by debt. It highlights the modest progress made in addressing the challenges of an ageing population in states within the eurozone, and it notes the challenges in responding to business cycles and the evidence to date of the use of inappropriate fiscal policies within the eurozone core states.
I read the document as a warning of the need for significant reform, both in the way in which the stability and growth pact operates, and within the economies of the core eurozone countries if we are safely to enter into closer economic union with them. I have long been an enthusiast for that, but I take the view, based on hard analysis of the benefits, that a significant amount of listening is required by our European partners to some of the successful experiences in Britain of how to manage an economy—
I very much agree with the hon. Gentleman's last comments, but does he share my concern that all too often the process of harmonisation is not about deregulation, but about regulation that brings standards into line, and, in reality, in far too many areas of our economy we are moving in the direction of what he describes as the wrong model, rather than the other way?
I think that the evidence on that is mixed. There has been some well-founded resistance to some elements of European regulation that we believe are unhelpful to a competitive economy. There has also been misinformed consideration of some of the sectors—for example, health food and herbal remedies—in which convergence is taking place. As regards the small business cited by the hon. Member for Epsom and Ewell, the lady involved may well have more difficulty in running her business in that environment. However, I would pray in aid Peter Black Healthcare Ltd. in Swadlincote—a large company that is barred from much of the European marketplace by the rule sets that prevent certain members states from importing particular kinds of non-traditional remedies, whether alternative medicines, dietary supplements or various kinds of herbal remedies. We have to balance the advantages of the larger European market that we are prevented from breaching against the disadvantages experienced by the smaller consumer sectors. There is some misunderstanding of the balance between disadvantage and advantage in adopting single European market rules.
The paper on the stability and growth pact is essentially about the need for flexibility in economic management. The paper on flexibility in the UK economy re-emphasises the importance of regulatory reform. I am delighted that my right hon. Friend the Paymaster General was able to set out in some detail the Institute of Directors' support for the Chancellor's statement. The Government clearly recognise the need for ongoing regulatory reform. Several of the major European economies need to make progress on revised labour market policies. They could also usefully learn from our reforms of the tax and benefits system to improve work rewards and investment in skills.
It is increasingly clear that a UK economic model is emerging. I shall explain my definition of that. It combines the advantages of a broadly liberal regulatory framework—I accept that there is some disagreement about that, but it is hard to argue against if one measures it against those of other European economies—with a recognition that the cost of social provision should be shared between citizens and society at large. Wholly socialised or wholly privatised models carry major inefficiencies. Sir Michael Spicer talked about health care models. Although there are failings in our NHS—no one would claim that it is perfect—we tend to forget that the cost of public provision is offset by our private contributions. Most of us pay substantial sums for prescriptions, dentistry, opticians and other elements of health provision. That mix is rather more efficient than a decentralised system whereby the state provides support for insurance or a system of claiming after treatment, which carries huge administrative costs. There is plenty of evidence for the strengths of our system.
The UK model also embodies a simple framework to protect workers and to ensure that the value of work is consistently rewarded; a commitment to liberalised markets while recognising the social costs of raw market mechanisms; an emphasis on raising skill levels; and an emphasis on strengthening the infrastructure of innovation and increasing rewards for entrepreneurs.
Yesterday, the Chancellor set out the major tasks that lie ahead before we can participate in closer financial union with other European states. He drew an encouraging picture of growth and prosperity in this country, although we must always have some caution about the competitive environment in which our country and our businesses have to work. However, I was filled with substantial confidence that we have a strategy that should work—and that is working—much better than the European model or even, to some extent, the United States model, about which Opposition Members have made some negative comments.
Let us face facts: this is a rather dull Budget, although I hope that the Front-Bench spokesmen will agree that this debate has not been quite as dull. I shall touch on one or two education points later, but would first like to address other issues.
Among many economics experts, this will not go down as the most exciting or innovative Budget that there has ever been, although in many ways that might be regarded as a compliment to the Chancellor of the Exchequer. Certainly, there have never been so many post-Budget briefings, breakfasts or brunches prepared in vain, and never was there so little on which commentators could report.
What is there to say, then, from this side of the House? As I am very much on-message, I should refer to the third-term Labour tax rises that are on their way, or the
I hope that that shows that, some 72 hours after leaving the Whips Office—I see that my Deputy Chief Whip is here—I am still very much on-message, at least so far as the Budget is concerned.
Let us make no mistake: this is a political Budget, and a Budget that is very much on hold. It is fair to say that the Chancellor and the Treasury Front-Bench team will be saying a silent little prayer that the economy remain in much the same state as it is in now for the next 14 or 15 months. It is with that in mind that so little has been done in the Budget to change the economic outlook. The key question, now that the Chancellor has reaffirmed his growth projections and they have been proved correct during past year—although many in my party had their doubts 12 months ago—is why there has been such a gap in his revenue. That augurs badly, not, I suspect, for the period this side of a general election, but for the medium term.
As a Member representing a capital city constituency, I shall focus on one or two issues close to the hearts of Londoners, especially the proposals to spend more public money on countering terrorism, which have important implications, and the much broader issue of housing here in the capital city. I suspect that that will be the subject of a much longer future debate, but it was made clear from the introduction of Kate Barker's paper on housing on the day of the Budget that it contained some pointers for the future of public finances.
If the Chancellor's words are to be believed, as I suspect that they are in this instance, this is a self-styled Budget for education, science and enterprise. I am tempted to suggest that the Government were, to a certain extent, making that up as they went along, because in their last manifesto, if that was to be believed, they claimed that Labour had legislated against the introduction of top-up fees. We all know what is likely to happen on that, if they are successful in getting their Higher Education Bill on to the statute book in the months ahead.
It is right for the Government to identify education and science as key. However, some complacency has been shown in a continued comparison of the UK's economic performance with that of the other G7 nations. The reality is that the world has moved on. This side of an election, there is little doubt that our economic performance will tower above that of France and Germany, as it has done since the mid-1990s. Surely, however, we should be aiming higher and more extensively. I was interested to hear the eloquent contribution of Mr. Todd. He made constant reference to the European and north American models, but economic models seem to me to go well beyond the region this side and just the other side of the Atlantic. I look far beyond Paris, Frankfurt and New York for the great competition.
For those of my age group—I am still, by a few months, in my 30s, as I am sure the Paymaster-General is. She certainly looks as though she is in that age group. I hope that I shall now get a good reception in Bristol, South the next time I am there—and for younger people entering the world of work, there is a realisation that the real economic capitals of the world will not just be those that we already know. They will also be places such as Shanghai and Bombay. Perhaps it is unfair to compare growth rates in those fast-growing young capitalist economies with those in the UK, but those economies are now the relevant competition. The growth rate in China is roughly 9 per cent.
The great debate that is taking place on outsourcing presupposes to a great extent that we have much to lose from our competitive relationships with India and China. It strikes me, however, that nothing could be further from the truth. These are our traditional longstanding trading partners, as they have been for many centuries. I represent the City of London, which has been the heart of our global trading arrangements, and I believe that we should be proud of continuing to foster those links with China and India, which will be the great economic powers of the second half of this century.
When I look at the strength of the United States of America, I feel that Europe is rapidly going downhill in the league table. I do not say that from a wildly Eurosceptic viewpoint, not least as I have European blood running through my very veins, but we as a nation must be proud to foster our longstanding links with China and India, and I hope that we shall continue to do so in the decades ahead. The relevant comparisons should not just be with the G7 nations; they must be with these other important global trading nations.
There is a paucity of ambition at the core of the Budget. The Chancellor's idea of enterprise seems all too often to be an academic exercise, rather than a practical one. Let us face it, compared with many G7 nations, our economy is in a good state. There seem to be few direct problems on the horizon, at least this side of May 2005.
What do businessmen in small or growing enterprises want? I was in that position before I entered the House less than three years ago. I was a businessman in an enterprise that I had set up from scratch in the mid-1990s and built up to a £2 million turnover and a dozen staff. That is a standard size for a small business. I personally have to thank the electoral deluge of 1997 for delaying my entry to this place. Had that not happened, I would not have had the benefit of seeing a business growing in that way. Let us be honest, a lot of the changes that have been introduced, particularly in regard to capital gains tax for owner-managers, are greatly to be welcomed. I admit that I personally benefited from those changes, as have many businessmen across the UK.
There are real problems ahead, however. There is more and more regulation and red tape. I know that that is a fanciful thing to say, and that we have to look at the specifics. I was a smallish businessman—as I have said, we had a dozen staff—and my co-director and I bore much of the burden on a day-to-day basis. We did not have a large human resources department or a payroll department. We had a lot of very young employees, many of whom had had graduate loans and therefore came within the scope of our payroll arrangements. I remember getting on a daily basis from the local authority all kinds of literature which had to be filled in. We also had bits of paper from the Office for National Statistics. There were more and more burdens. Obviously, the filling in of a VAT return filled our hearts with great gloom, not just because of the sums of money that we had to pay but because of the sheer logistics of filling in the return during the last week of every quarter.
There are more and more burdens, and if we are going to rely on smaller businesses getting larger—realistically, they have to be the vehicle for employment growth—there needs to be a lighter touch. I have a great fear that the Government, in following what the hon. Member for South Derbyshire might describe as the European model, have succeeded at times only in placing more burdens on small businessmen.
There seems little doubt that we will see and hear a lot more about the notion of light-touch regulation, and I think all of us were in the Chamber only a week or so ago when the Penrose report was introduced by the Financial Secretary. At least, we had her spin on the conclusions of that report in relation to the near collapse of Equitable Life, which was that an over-light regulatory regime before 1999 was responsible for some of its travails.
I suspect that the story is even more complicated than the one that I am presenting at this juncture, but we could learn some wrong lessons and I fear that, in the run-up to the next general election, we will hear much more from Conservative Members about too much red tape and too much regulation, while Lord Penrose's report on Equitable Life will be cited in opposition to that notion. Indeed, we are perhaps already starting that debate.
It is fair to say that the Chancellor has been a significant political figure in view not only of his longevity, but of how he has managed the economy. Many Conservative Members had great fears immediately after the 1997 election that have not come to pass, but I fear for the economy in the medium term and there are problems that will probably be for us to fix when we are in government. Above all, there seems to be little sign of the end of the great borrowing. Today's borrowing is, almost inevitably, tomorrow's taxes. That augers ill for the future.
There has been a particular rise in personal borrowing, whether it is to do with housing equity release or credit cards, and even the Chancellor accepts in the Red Book that the savings ratio cannot be expected to rise over the next year or two, so one has to ask just how sustainable the borrowing is, especially if interest rates go up.
My great fear is for my younger constituents—people in their 20s or 30s—many of whom are relatively well paid. Some work in financial services in the City of London, but very few see any value in investing for the future, at least in a pension. Many will perhaps invest in property, which might help only to ratchet up a property boom, especially in London and the south-east. There has to be a great fear that that will end in tears.
If consumer and Government-led consumption are the only means to continue the expansion of the economy, which seems to be suggested by many of the figures that we see, there is a real risk of overheating, not least, as has rightly been pointed out, because we have near full employment. If we rely on the rapid raising of interest rates to prevent that from happening, there will be worrying problems ahead.
I also have a concern, which a number of my hon. Friends have expressed and I guess will continue to express during our debates over the next few days, about the vast growth in public sector employment over the last two years. It is always rather invidious for those of us who have spent our working lives in the private sector suddenly to berate the public sector in such a way when we enter it. However, there are great concerns that much of the job growth of the last two years, even if not necessarily of the last six or seven, has been in the public rather than the private sector.
I also want to make a small but important point on the tax issue. Funnily enough, this is one of those opportune moments, as one of my constituents got in touch on the morning of the debate while I was sketching out a few notes. My constituent lives in Mayfair, which is not quite the untrammelled and affluent area that many might assume. It has a mix of accommodation. She complained that she finds herself in a higher tax band, although she works in the public sector. Of course, the number of people paying higher rate tax has increased massively over the last seven or eight years, especially here in London and the south-east, as tax bands have not risen in accordance with the relatively large increases in average pay.
That is a particular problem in London, although I accept that it is difficult to have entirely localised rules. The Chancellor, to this limited extent, should at least be congratulated in relation to the benefits system and on recognising the particular difficulties of the capital. As a result, there have been London-based allowances. In relation to much of public sector pay, I hope that there will be a more meaningful London weighting, which, I guess, will also have to apply to other hot spots in the south-east.
I want to make a couple of comments on the London issue as a whole. First and foremost, on the terrorist threat, all of us, particularly after the events exactly a week ago today in Madrid, have at the back of our minds a fear of a terrorist attack. It is important that life should go on, and as there are a number of other London Members present, let me say that we all know that we must try to instil a sense of confidence and optimism in our constituents about going about their everyday life. In many ways, failure to do so is almost allowing the terrorists to win their battle. But it is urgent that proper provision be made.
The Government have a clear understanding of the problem at stake, which has been at stake in London for the past two and a half years. Coupled with that is a clear understanding that more powers have been required. I, for one, have spoken up often in criticism of some of what appear to be the quite draconian powers introduced by the Home Office. None the less, it has recognised the threat—in my view, perhaps overstated it—and we have those powers on the statute book.
It seems to me that we need a proper civil contingency protection force in the capital city, and significantly more resource needs to be associated with that if we are to protect all our fellow citizens. For example, there are only 7,000 people in such a protection force in the UK as a whole, and London's is woefully short of what is required and heavily reliant on Territorial Army reservists. As far as London is concerned, the great problem with the TA is that our main London regiment finds itself stationed in Iraq. Were there to be a major incident, perhaps of a far more violent nature even than that in Madrid last week, it is difficult to see how our civil contingency force would be able to cope with that.
I therefore welcome the notion from the Chancellor that he is putting more money into this area, and I hope that it will be directed urgently towards some of the key targets in the capital city. It is a depressing state of affairs when both the Mayor of London and the chief of police, Sir John Stevens, refer, as they did earlier this week, to the inevitability of a London attack. If it is so inevitable, we must act urgently.
On the issue of housing, which will be subject to much broader debate in the months ahead, Miss Barker's watchwords seems to me to be "dictate and provide". If implemented, that has a worrying implication for much of this country. In London, however, the problem may be the converse, because the delivery of affordable housing targets in the Mayor's recently published London plan depends on grant being made available under planning agreements by private developers under section 106. The current policy of the Housing Corporation, however, is that such section 106 agreements should be self-funding and the grants would be available only in exceptional circumstances. It seems to me that London, under this Government, has failed to meet its obligations on new homes since 1997. Certainly, the new build rate is considerably lower than it was during the first half of the 1990s. I hope that Miss Barker's paper, although it offers little hope for London, will at least be the starting point of a debate on this important issue, which will obviously have an impact on the public finances.
The economy is likely to be in a relatively steady state this side of a general election. One of the difficulties about being in opposition is that often things need to go wrong for great advantages to flow towards one's party for purely electoral purposes. Certainly, as I represent the Cities of London and Westminster, the last thing on earth I want to see is a sustained downturn, and in so far as there was a slowdown in the last two years there are distinct signs from the City of London that the corner has been turned. Some major mid-term problems are mounting for this Government. They will have to arrest large-scale borrowing, both public and private, and if steps are not taken to arrest that problem this side of a general election, there is potential for a much more precipitate increase in interest rates in the second half of 2005 and the risk of much higher taxes to be paid.
I look forward to hearing what the Paymaster General has to say when she winds up the debate later. No doubt we will continue to debate these issues—me with my London hat on, and more specifically, representing the City of London—in the months ahead.
Yesterday, the Chancellor spoke of the need to smooth out the economy with Government intervention. I think that we all agree that it is important for a Chancellor to smooth out the variations and the stops and goes to which economies are prone by means of some form of intervention, from time to time.
I well remember when we were in the grip of the last world recession, at the time of the last Conservative Government. We borrowed extensively to cover the difficulties that the recession had caused our economy. As a result, the recession in the United Kingdom was both shorter and shallower than in any other part of the western world. What I consider a new departure is the Chancellor saying that a time when our economy is growing faster than most of its competitors is appropriate to increase borrowing at a faster, almost unprecedented rate. That strikes me as the reverse of the normally accepted discipline.
The Chancellor says that he is following his golden rule. He says that, in terms of percentage of gross domestic product, we are still within reasonable parameters. However, a large proportion of the growth in our GDP has been caused by public expenditure and public projects—what the Chancellor is keen to call investment in the public services, although he defines investment rather differently from most of us. Most of us see investment as capital expenditure on things that will produce benefit for the future. The Chancellor seems to apply the term to any payment for the public services, including the payment of current running expenditure. That is really rather different, and may not produce a yield for the future.
We put ourselves in great danger by extending public expenditure in that way, through borrowing, when it is not underpinned by tax revenues from the private sector. We are in danger of running into all sorts of trouble in the not-too-distant future. This is not just my view, but that of the Organisation for Economic Co-operation and Development and the International Monetary Fund. We should heed the warning given by my hon. Friend Sir Michael Spicer that trouble could be around the corner. At the very least, substantial tax increases could be around the corner if the Chancellor continues down his unusual chosen path.
Industrial performance in this country is not particularly good, and our international competitiveness is declining. All that suggests the need for much more caution than the Chancellor seems to have shown. His present borrowings will have to be repaid some time, and they will have to be repaid from taxation. They cannot be repaid from more borrowings: that process cannot continue indefinitely.
The Government's record for making savings, on which the Chancellor placed some emphasis, is not particularly good. In fact, it is not good at all. The Government have not made savings in the public services—or, at any rate, when it has been possible to make them, they have been very marginal. The idea that the Chancellor will be able to make savings of the scale required to meet the strategy upon which he has embarked is worrying. He seems to believe that he can make savings by tinkering with the number of people employed in Government Departments, which admittedly has grown out of all proportion. Making the real savings necessary requires substantial deregulation and restructuring of the way that public services are delivered. I heard nothing in his speech yesterday to indicate that he has fundamental restructuring in mind.
Education is a good example of the need for restructuring. Although the number of teachers has increased, there has been a much larger increase in the number of civil servants who supervise them. Surely it would be much better to give devolution to the providers of education and allow them to decide priorities, rather than have teachers permanently accountable to armies of local authority officials and civil servants who soak up a disproportionate share of the education budget.
Helen Jones made an articulate speech and I am sorry that she is not in her place. She asked to whom schools would be accountable in the circumstances that I have described. They would be accountable to some degree to the state and to the local authorities providing funding but fundamentally they should be accountable to their customers—parents and pupils. Unfortunately, the Government are still locked in a public sector mindset, believing that schools should be accountable only to ever-growing central Government. Going down that road will not achieve the savings that the Chancellor hopes and needs to make if he is to enjoy any success with his long-term economic policies.
Pensions were not dealt with to the extent that I would have liked. I was pleased that the announcement about the lifetime limit made some recognition of the universal opinion among the actuarial profession and others that the previously proposed limit of £1.4 million was inadequate and did not correspond to the real cost of the previous annual limit converted to a lifetime limit. The figure of £1.5 million rising to £1.8 million probably more accurately reflects reality. Despite the fact that that range has been given the imprimatur of the National Audit Office report, it is still at the lower end of the scale considered necessary by the actuarial profession and the industry, who suggest a figure nearer £2 million.
I am never sure where the figure of £1.4 million originated. In a previous speech to the House, I had presumed that it had been calculated by staff at the Government Actuary's Department and said that they were the guilty men. The Government Actuary wrote a rather irate letter to me, stating that he had not even been consulted on that figure and certainly did not agree with it. He believed that figure had been calculated by a private sector actuary consulted by the Government, whose identity no one knows. It is odd that the Government's own actuary, who would normally be expected to calculate such a figure, was not involved.
I am disappointed that the Government have not so far published much information in their own publications or in notes provided by the Inland Revenue and Customs and Excise about what is to happen to legacy systems. I know that the new procedures are supposed to sweep them all away, but it is not clear how that will be achieved. I hope that Ministers will explain.
I am concerned about a number of matters, but one of the most important is what will happen to the retained benefits regime. If we are to have a lifetime limit, we will not need the retained benefits regime, which causes enormous problems for the trustees and administrators of pension schemes and creates a great deal of work for civil servants. Similarly, if we are to have a lifetime limit we will not need an annual limit. In such a situation, I see no reason why a restriction should be placed on the time at which the huge amount of money that a person might be fortunate enough to earn at a particular point in their career—as a sports star, for example—is injected into their pension pot. Again, it would be interesting to hear what the Government have to say about that.
I was pleased to note the Government's willingness to establish real estate investment trusts. They will prove valuable not merely in assisting in the provision of housing—a desirable objective in itself, about which the Government have spoken—but as a much more flexible and convenient arrangement for general investment by pension funds. One problem for pension funds is that, when a secure form of investment is needed that matches the requirements of payments to their pensioners, such funds are forced increasingly into bonds rather than equities. But the bond market is very restricted, is producing very low yields and is nothing like as desirable a vehicle as it used to be.
The use of real estate investment trusts would overcome the problem of illiquidity in investing in property. One problem for trustees investing in property is that they cannot always readily sell the asset at a time of their choosing. Through a REIT, they would be able to sell what effectively amount to shares in a building simply and quickly, and the element of illiquidity would disappear. The advantage of such a secure investment over bonds is even greater than it may initially appear. There have been a number of academic studies on the prospect for REITs and the yields and stability of property investment. Members may be interested to know that, on average, the aggregate yields on property have been double those on bonds in the past 10 to 30 years, yet the price stability of property has actually been better. There have been fewer fluctuations in property values than in the capital value of bonds.
For all those reasons, REITs could perform a very useful function by making trustees' investment in pension funds far more attractive to those who will benefit. That might help the Government with their own protection scheme, while creating an alternative vehicle to bonds through the formation of annuities. If annuities could be underwritten by REITs rather than bonds, the current problem of very low bond yields—resulting in annuities being worth only half what people were expecting on retirement—could be solved very quickly. I hope that the Government will actively and speedily pursue their idea of introducing REITs.
I also welcome the Government's proposals to clarify the tax treatment of immediate needs annuities. Their tax status was in some doubt and the clarification is extremely helpful, particularly for the increasing number of elderly people who are living longer in our society and will need long-term care. The ability to fund long-term care in a tax-efficient way is an interesting and important issue.
What will be the position on lump sum payments made to care home operators? It is common in the United States that people pay an upfront sum to provide lifetime care, but what will be the taxation position here of the notional value of the care thereby provided? Will it be dealt with in the same way as immediate needs annuities or will it be necessary to purchase a specific annuity from an insurance company? It may provide better value for the older person to make US-style lump sum payments rather than pay amounts to an insurance company to provide a traditional annuity.
I shall now deal with the Government's proposals to encourage investment. I am a little disappointed that they have not been able to go further than they have, although the new incentives for venture capital trusts are indeed welcome.
The Paymaster General nods. She knows of my long-term interest in that matter, but I no longer have any declarable interest in that sector. I believe that encouraging venture capital trusts is good for the UK economy.
There are still problems with enterprise investment schemes, and here I must declare an interest. If a young and growing company that benefits from an EIS needs to broaden its base by merging with another company—either taking over a company in the same sector or being absorbed in a reverse takeover—one problem is that the tax status is lost. Very often it is in the interest of a small emerging company to have a merger with a similarly small and emerging company, but the fact that the tax status will be lost if that happens is a matter to which the Treasury should give consideration. The risk to the original investors remains just as apparent.
In respect of other savings and what can be done to create help for the real economy, I am terribly disappointed. There is almost nothing in the Budget to encourage saving in general. There is nothing to encourage more saving in traditional pensions—indeed, at the moment, quite the reverse—and even the limited vehicles that the Government have provided, such as individual savings accounts, are having their limits reduced. The Government say that they want to encourage pensions, so why on earth are they reducing the limits in tax-assisted savings schemes such as ISAs? I find that puzzling.
It is as a result of the Government's general approach to savings in the economy that we now have possibly the lowest savings ratio, which has gone down from 10 per cent. to 5 per cent. That is incredibly sad, because without a vibrant savings regime, the long-term capital for British industry and commerce cannot be available. Everything cannot be done by public investment and I hope that the Government will reflect further on that matter.
I am pleased that the Government have increased the threshold for inheritance tax, though by far too little, given that most inheritance tax today is paid on the value of the property or the family home when people die. The increases in the threshold for inheritance tax have in no way kept up with increases in the value of property. That is true not just in London and the south-east. Of course, that rise is especially apparent in London and the south-east, and in the whole of the south of England. In my constituency of Bournemouth, and in Poole as well, property values are among the highest in the UK. People living in fairly ordinary properties are therefore caught by the inheritance tax regime, but I am not sure that that was the intention when the regime was introduced. It was intended to catch the really rich, who could afford to pay a proportion of their inheritance in tax—although the seriously rich always seem to find ways of avoiding that, and it is the modestly rich who tend to be the ones who have to pay.
I hope that the Government will consider the matter again. It has always seemed to me an anomaly that, once the threshold has been exceeded, inheritance tax is payable on the whole estate and not just on the excess. That seems to go against normal taxation procedures when a threshold is involved.
I turn now to the proposals for the planning gain supplement, about which I am puzzled. How will it interface with capital gains tax? A liability for CGT is normally created when planning permission is given for the development of a piece of land, be it a large acreage or just a small back-garden plot. I seek an assurance that the planning gain supplement will not be a double tax, on top of the CGT that will be payable.
The supplement is not new. I remember that, a long time ago, it was called development land tax and was introduced by Harold Wilson's Government. Its history was not auspicious, as one of its main effects was to discourage substantial landowners from getting planning consent to develop their properties. That was the opposite of what this Government intend, as they want to encourage more land to be developed.
The development land tax was so effective in persuading people not to develop their land that the whole idea was scrapped in the end. I warn the Government that the new proposal will go the same way if they do not structure the planning gain supplement so that it gives landowners the incentive to develop their properties. The development land tax was certainly not lamented, and a lot more land was made available for development after it was abolished.
What will the scope of the new tax be? Will it go right down to Mr. and Mrs. Bloggs when they sell a little piece off the side or back of their garden so that a single property can be built? If so, that would be a huge discouragement: not only would the value of their home be diminished because they had sold off part of their garden, but they might also have to pay both CGT and planning gain supplement. If that happened, I venture to suggest that most people would decide that the project would not be worth considering. That in turn might reduce the possibility that urban areas could be redeveloped to increase urban density, which is something that I think the Government wish to encourage. It may inhibit urban renewal as a whole. Perhaps the Government could think about introducing a de minimis rule for planning gain supplement to ensure that it does not create such a burden that people are discouraged from making land available for development.
I conclude by repeating that although the Budget contains some proposals that have merit, its overall economic strategy means that the Government are embarking on an extremely dangerous course. I therefore worry about the future of our economy, and in particular about the possibility that large and unforeseen tax increases will follow in the not-too-distant future.
I should like to talk about the Budget's impact on Wales and specifically my constituency. The announcements made yesterday will help us to build on the achievements made in my constituency in the past seven years. The Chancellor was right to spend the first 20 minutes of his speech yesterday outlining what the Government have brought about in the past seven years. We have had the longest period of sustained growth for 200 years, the lowest interest rates for the past 40 years and the lowest unemployment for the past 30 years. In the early 1990s, there were 4,500 people unemployed in my constituency; now we are down to 900. Unemployment has almost disappeared in the 32 council wards of Denbighshire. It is concentrated in two wards—the south-west and the west ward of Rhyl—which account for 40 per cent. of the overall unemployment. The Chancellor is right to target funding on specific wards so that we can tackle unemployment and poverty in those wards that have not gained as much as others in the past seven years.
Some 270,000 households in Wales include pensioners over 70. In my constituency, 17,000 pensioners will benefit from the additional £100 to help with council tax rises. That builds on the £200 that we have already allocated for winter fuel payments—£300 for those over 80. That is in marked contrast to the attitude of the former Conservative Minister who, when there was a cold snap and pensioners froze to death in their own homes, recommended that pensioners go to the second-hand shop and buy some extra woollens to keep themselves warm through the winter. That shows the contrast between the philosophies of the two parties. The extra help comes on top of the help that we have given in the past: the free bus service for pensioners in Wales; free television licences for those over 75; and free eye tests, dental tests and prescriptions for pensioners.
I believe that the allocation for higher and further education in Wales for 2006–07 will be £99 million and for 2007–08 will be £219 million. Tomorrow at 10 o'clock, I shall have a meeting at Rhyl FE college in my constituency to discuss finance. Finance is tight, but we have built on our successes in the past seven years and established colleges in my constituency—Rhyl college was established in 1998 and Denbigh college was established in 2000. They are outposts of the main Llandrillo college, which has 23,000 students and is one of the biggest FE colleges in the UK.
The colleges provide courses for people without proper literacy and for young people on the skill build programme, women's enterprise courses and a range of apprenticeships, such as in gas fitting. They are extending the ladder of opportunity into geographical areas where it has never existed. People are being given opportunities to improve their skills and make the most of the colleges in their communities.
The £8.5 billion increase in the education budget is most welcome. I was a primary school teacher for 15 years, in which time I only once taught a class of fewer than 30; that was a class of 26. The largest number of pupils I taught was 39. One knows the difference between 26 and 39. The extra funding for education will allow us to build on the successes in reducing class sizes in infant and junior schools over the past seven years.
I am also pleased that an extra £650 million will go into Sure Start. I had an Adjournment debate six weeks ago on the importance of education from nought to three. I am pleased that the budget for that has increased from £198 million in 1998 to £500 million now—it was due to increase to £1.5 billion. With the £600 million in the Budget, it will increase even further. That is money well spent. Fifty per cent. of what a child learns is learned before the age of five, and virtually 100 per cent. of linguistic ability is developed before the age of three.
In a long-term study in America, children were taped talking with their parents for one hour a week over a three-year period. The study included children from both professional and working-class families, and from families on benefit. The children from professional families had 50 million words spoken to them over the three-year period, while the children from families on benefit had only 12 million words spoken to them. The children from professional families received 700,000 encouragements during that period, with only 120,000 negative comments. However, the figures for the children from families on benefits were 120,000 negatives and only 60,000 positives.
As children develop and become adults, such factors have a fantastic impact on their self-perception and their ability to learn. We need to expand Sure Start to give fragile families in our communities the support that they need. That will benefit them as individuals and families and it will benefit us as a society. The expansion of Sure Start is most welcome and we should build on it.
I am especially interested in research and development. Again, I can report success in my constituency: the St. Asaph business park lay empty for seven years while the previous Conservative Government were in office—although I have to give them credit for building that £11 million project—but now there are 2,500 jobs at the park. The pièce de résistance is the £15 million objective 1 project for a research and incubation centre: OpTIC—the Optronics Technology and Incubation Centre—will be opened in two months' time. There will be 24 units at the centre and it will work on our existing optoelectronics strength in north Wales, where there are 35 optoelectronic companies, with 2,500 workers. We shall create ties between those companies and universities around the UK and the world, so that anybody with a good idea—whether from a university or the workplace—can find support at the incubation centre. The ideas can be checked out and finance arranged, with help available for two years. Every two years, an extra 24 high-tech companies will contribute to the north Walian economy. The research and grants that we have made available will allow us to expand.
As well as OpTIC, we have CAST—the Centre for Advanced Software Technology—a software project in the Bangor area. I should like the Welsh Development Agency and companies in Wales to look into developing more such techniums—research and incubation centres. We could thus draw on our existing strengths in north Wales, in sectors such as aerospace—at Broughton, we have the biggest aerospace factory in Europe—renewable energy and packaging. Those are the ideas that I want to take back to the WDA. The Chancellor has given us the tools and we should finish the job.
I am pleased that there were no cuts in the policing budget and that we shall be allowed to build on our strengths. Since 1997, an extra 200 officers have been appointed to the North Wales police force; the number has increased from 1,300 to 1,500. One hundred of those officers were financed from grants and funding from the Government, and 100 were financed from internal savings. The North Wales force is one of the most efficient in the UK and its savings have gone into front-line policing.
Only six community support officers are currently based in north Wales, all in the west ward of Rhyl—the poorest ward in Wales. I should like the number of CSOs to be expanded and I hope that the available finance can be used to do that.
All in all, the Budget was excellent. It will help my constituency to build on its strengths and I look forward to the money being spent wisely to benefit individuals, families and society in north Wales.
We have had an interesting, informative and stimulating debate, although it has not been over-attended by Members from either side of the House, due to the nature of the parliamentary diary. The debate was opened expertly with a great speech from my hon. Friend Mr. Collins. As Chris Ruane finished his speech slightly earlier than anticipated, my hon. Friend has not yet returned to the Chamber, but no doubt he will enjoy reading these comments.
My hon. Friend raised serious issues about education that had been left unanswered by the Budget. The enormous strengths of the approach and policies proposed by the Opposition were proved both by the list of our policies that my hon. Friend gave the House and by the fact that the Secretary of State for Education and Skills did not contest them. Indeed, the Government are adopting some of our policies, which, of course, we welcome—even if half of them have been re-branded by the Government, who are particularly good at re-branding and spin.
The Secretary of State followed the excellent speech by my hon. Friend the Member for Westmorland and Lonsdale, and he has done me the courtesy of explaining that he cannot be here for the winding-up speeches. Speaking of notable absences, he will not be at the NUT conference on Easter Sunday, unlike the shadow Secretary of State for Public Services, Health and Education, my hon. Friend Mr. Yeo, who will attend. As a result of the Secretary of State's response to my hon. Friend the Member for Westmorland and Lonsdale, my hon. Friend the Member for South Suffolk will have an opportunity to discuss Labour cuts to the schools budget, which became apparent during the debate, with the NUT. Those cuts contrast with the Conservative commitments detailed by my hon. Friend the Member for Westmorland and Lonsdale and, indeed, my right hon. Friend the shadow Chancellor.
When the Secretary of State was invited to attend the NUT conference, he said that he had something better to do on Easter Sunday, although he does not know what it is yet—when one digs a hole for oneself, how deep can one get? If that were not bad enough, he spent just seven minutes trying to justify his policies and 23 minutes discussing ours—proof, if proof were needed, that we are setting the education agenda with our policies to give control and choice to parents through pupil passports, which will give good schools the freedom and ability to expand. The Government want to choke off that choice and control.
Mr. Rendel spoke for the Liberal Democrats. He stood in for Mr. Willis, who has unfortunately lost his voice. I am sure that all Labour and Conservative Members wish him well in recovering his voice, which, every time he uses it, tends to remind us why we are not Liberal Democrats.
We heard from the Chairman of the Education and Skills Committee, Mr. Sheerman, who is not in his place. He forcefully asserted his right as Chairman of the Committee to be political if he wants to be. His contribution was characteristically partisan—having served on that Committee under his chairmanship, I did not doubt that it would be.
My hon. Friend Sir Michael Spicer made a clear speech on the genuine worry and concern within our economy about the severe decline in productivity rates since 1997. He also made an important point about the difficulty of holding the Government to account and of seeing a full picture of the economy when the Government will not publish the relevant tables of productivity rates.
Given the time, I must decline. The hon. Gentleman had a lot longer than I have to make his contribution.
I dispute the claim by Helen Jones that the whole world of Warrington began in 1997—I remember often being in Warrington, which is near where I live, before that year. However, I share her absolute determination that the west coast main line must be improved, because it is fundamental for both her constituents and mine up in the north-west.
In a characteristically well-crafted and wide-ranging speech, my hon. Friend Chris Grayling discussed the genuine burden of cumulative regulation. When the Government are charged with over-regulating and imposing burdens on business, they often use the defence of asking which regulations should be repealed. Of course, there are several candidates, but given the precedent that the Government have set of waiting for our proposals and then rebranding and using our good ideas, I am sure that we will reveal our candidates sufficiently close to the date of the next election—whenever that is—so that the Government do not have time to do that. The Government should look at the cumulative effect, and we will continue to hold them to account on that issue.
Mr. Todd focused on early years education. I listened carefully to what I thought was a good speech about the culture of organisational change, an area in which we have both been involved. It was a helpful contribution, as was the speech from my hon. Friend Mr. Field, who stood up ably for his constituents, especially those in the City of London. He was followed by my hon. Friend Mr. Butterfill, whose authoritative survey enabled the hon. Member for Vale of Clwyd to refer to the particular interests of Wales.
It is all too easy to lapse into considering only the broad sweep of the Budget, and the Chancellor is especially keen on doing so. However, we have to look at the detail and how it affects people's daily lives. It is an essential doctrine of democracy that there should be no taxation without representation. However, the Government appear to think—and more and more people feel the effect—that everybody is a crook or potentially a crook and has a duty to pay tax unless they can demonstrate that they do not owe it. Indeed, the Paymaster General and I discussed that issue in proceedings on last year's Finance Bill. That has meant a change in the burden of proof in terms of the payment of tax, as a result of the Government's desperation to levy money from the populace. The Government have moved away from the old and proven position that they have to prove that an individual owes a tax before they can seek to collect it.
One example is the 33,000 van drivers who will face a huge increase in their tax liabilities if they use their vans out of work time. Basic rate taxpayers will suffer an increase from £100 to £600. Higher rate taxpayers will see an increase from £500 to £3,000. The Paymaster General will doubtless seek to justify that increase, but the big question is, who will police it? The Government have already asked accountants and lawyers to act as snoopers. Will they now ask schoolteachers and school bus drivers to report parents who take their children to school in a van? The increasing tendency towards a snooper society is a grave danger.
It is a similar situation for small companies. More than 100,000 of them will now pay 19 per cent. tax on distributed dividends. Those sole traders and micro-businesses were encouraged by the Chancellor to incorporate, through his 2002 policy of nil rate corporation tax for the first £10,000 of profits. Thousands went to the expense and effort of doing just that. We debated the issue considerably in proceedings on the last Finance Bill and the year before, but the Government have decided to backtrack on their position. Those individuals and small businesses will have to pay for the Government's mistakes and miscalculations, and that should not be allowed to happen. There will be opportunities later in the debate on the Budget and in Committee for many of the details to be considered, but despite the rhetoric the Budget fails when it comes to small businesses.
The Government's borrowing is causing grave concern, not least because everybody recognises, with sheer common sense, that if the Government now put up the amount borrowed—effectively on each household's credit card—to £6,300, that has to be repaid. If the Government, in making any efficiency savings that they can deliver, then spend further on public services, that will have to come out of tax rises if there were to be a Labour third term. We have explained how that can be avoided without affecting the front-line public services that people deserve. I hope and very much wish that the Government will now listen to the much more sensible alternatives that would avoid Labour's third-term tax rises.
We have now had two days of debate on the Budget and more than 25 Members on both sides have contributed. It has been an interesting debate and many interesting points have been raised, as they have been this afternoon.
The key themes of Budget 2004, as announced yesterday by my right hon. Friend the Chancellor, is to lock in the economic stability of this country to ensure that this stability endures and to enable Britain to rise to the challenges of the future global economy. Mr. Field touched on that issue several times, as did other hon. Members, and I shall return to it.
We have to enable Britain to become a world economic leader in this new global age. We need to make the long-term commitments to invest in the drivers of future prosperity—education, science and enterprise. There is general agreement on both sides of the Chamber that that should be our objective. We are able to do this as a Government because of the existing strengths of our economy.
Since 1997, Britain has had sustained growth and, since 2000, our growth has outperformed the European Union area, Japan and even the United States. In the last year, the economy grew by 2.3 per cent., meeting all Treasury expectations and despite the reckoning of Opposition Members who are at it again today by trying to undermine those forecasts.
In addition, this sustained growth has been combined with the lowest inflation for 30 years. New employment figures show that, since 1997, more than 1.8 million jobs have been created, and the majority of them are in the private sector. Every working day, another 600 businesses start up. World trade is now strengthening and manufacturing—the industry worst hit by the global downturn—has grown for four successive quarters. The Treasury expects the British economy to continue to strengthen throughout 2004. It is fair to conclude that the United Kingdom has successfully weathered the global economic downturn. Now is the time to lock in this economic stability so that it endures and to focus on the priorities that will make the UK a global economic leader in the future.
The challenge is to combine that stability—and our new-found confidence in the future—with the resolve to make the right long-term choices and to initiate the reforms that will enable Britain to excel in education, science and enterprise. My right hon. Friend the Secretary of State for Education and Skills reinforced that point strongly in his opening remarks.
Yesterday, the Chancellor announced that we have met our fiscal rules. Debt this year is just 33 per cent. of national income, net borrowing is just 2.4 per cent. this year and our deficit is lower than that in all the major competitors of the industrialised world. Because of that, we are able to afford all our existing commitments abroad and at home and yet release extra resources for the nation's priorities in the years leading up to 2008.
Let me reiterate to the House those priorities. The first is to entrench the stability and growth that we have already achieved. The second is to ensure our security and to support our armed forces and police in these troubled times and to meet our commitments. The hon. Member for Cities of London and Westminster touched on that vital point. The third and most important, in the context of the debate opened by my right hon. Friend the Secretary of State for Education and Skills, is the need to invest in skills and education to enable the British population to meet the challenges of a science, education and enterprise-based economy. My hon. Friend Helen Jones graphically demonstrated that point in terms of the benefits achieved by her constituents, and those still to be achieved. The hon. Member for Cities of London and Westminster set the debate firmly in the dialogue of global challenges and emerging economies. We have to equip our citizens with the best of skills.
Several things that were said in the debate were simply not true, so let us make sure that we put those to one side. It was suggested that compared with other EU countries, the UK did not have a low-tax economy, but a high-tax economy. That is simply not true. Organisation for Economic Co-operation and Development figures show that the total tax take in Britain is lower than the European average, and lower than that in 10 member states.
Chris Grayling derided this country as a place to do business and said that the Government were not meeting the challenges required to take competitiveness forward. Let me give him two quotes. First, Digby Jones, 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."
Although I accept from Opposition Members that we should not be complacent, I will not take their persistent running down of the achievements of the British economy under this Government, who are undertaking the policies that their Government failed to implement.
Indeed, an International Monetary Fund article from March 2004 said:
"The UK economy has weathered the global slowdown well, supported by an appropriately countercyclical monetary policy and an expansionary fiscal stance . . . Crucial to this performance, macroeconomic policies have been expansionary without undermining confidence—owing to well established and transparent monetary and fiscal policy frameworks with a distinct medium-term orientation."
I am afraid that the shortage of time means that I cannot give way to the hon. Gentleman, but I know that I will have many opportunities to discuss such matters with him.
The hon. Members for Bournemouth, West (Sir John Butterfill), for Cities of London and Westminster and for Newbury (Mr. Rendel) touched on housing reform and the way in which the Government need to take that forward following the Barker report. The hon. Member for Bournemouth, West also mentioned property investment funds and pointed out how successful they have been elsewhere. He said that it was important to consult on all such matters, including the Barker proposals, so that we get the right mix of development to release land.
My hon. Friend Mr. Todd referred to the Gershon report and also the announced amalgamation of the Inland Revenue and Customs and Excise under the O'Donnell review. Like him, many hon. Members have commented on the formation of the new department over the past two days. It will be to the advantage of business to have one contact point, and it will be to the advantage of the Government to have one department so that we are able to achieve the very things that the hon. Member for Epsom and Ewell suggested on regulations. My hon. Friend the Member for South Derbyshire is absolutely right that we must have clear, accountable leadership rather than complex accountabilities that undermine where responsibility lies. We must ensure that the accountability is clear to Parliament. We need quantifiable goals, clarity of communication and ongoing analysis, and I believe that all those measures are in place.
As my right hon. Friend the Chancellor said yesterday,
"we cannot be a strong economy if we are weak in education and science."—[Hansard, 17 March 2004; Vol. 419, c. 333.]
Despite everything that Conservative Members said about education, my hon. Friend the Member for South Derbyshire highlighted the importance of child care, Sure Start, the development and expansion of nursery places and investment in our children to ensure that they make the best start.
I am unable to respond to many of the points made in the debate in my short winding-up speech. However, the Government intend to publish the Finance Bill on
Debate adjourned.—[Charlotte Atkins.]
Debate to be resumed